AAA Commercial Rules are a “clear and unmistakable” delegation of arbitrability to the arbitrator

The Texas Supreme Court has found that parties clearly and unmistakably delegated arbitrability issues to the arbitrator by agreeing to arbitrate their controversies in accord with the AAA Commercial Rules. TotalEnergies E&P USA, Inc., v MP Gulf of Mexico, LOLC, No. 21-0028 (Tex. April 15, 2023).

While the general rule is when a party challenges the validity or scope of an arbitration agreement contained within a broader contract, courts must resolve that challenge to determine whether the parties agreed to arbitrate their controversies regarding the contract.

Because arbitration is a matter of contract, the Texas Supreme Court recognized an important exception that the parties can agree that arbitrators, rather than courts, must resolve disputes over the validity and scope of their arbitration agreement. As long as the agreement is “clear and unmistakable”, courts will enforce an agreement to delegate arbitrability to the arbitrator.

While a mere reference to AAA rules is insufficient, the Agreement in issue expressly stated that arbitrator must be conducted “in accordance with the rules of the AAA” and that the “procedure of the arbitration proceedings shall be in accordance with the Commercial Rules of the AAA”. AAA Rule 7(a) in turn provides that the arbitrator “shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement or to the arbitrability of any claim or counterclaim”.

The Texas Supreme Court noted the vast majority of federal circuit courts and other state supreme courts have reached the same conclusion.

Total E&P argued delegation did not occur in this case because the Agreement did not provide the entire Agreement was subject to arbitration rather only a narrow subset of issues was subject to arbitration and therefore a court must make the initial determination whether the dispute falls within those issues subject to arbitration. The Texas Supreme Court observed, nevertheless, that any limitation contained within the parties’ arbitration agreement does not affect the agreement’s clear and unmistakable delegation of arbitrability issues to the arbitrator.

In a footnote, the Court observed it has previously held the AAA rules did not clearly and unmistakably demonstrate an agreement to delegate arbitrability of claims against a non-signatory to an arbitratino agreement because parties “cannot be forced to arbitrate absent a biding agreement to do so”, it stated there are no non-signatories in the present case and therefore that holding is not under reconsideration in this matter.