This case presents the common issue whether the court or an arbitrator should decide the dispute.
There has been ongoing litigation among multiple parties with multiple claims concerning a family trust and business entities. One of the agreements in dispute was the Moncrief Family Partnership, L.P. (MFP) agreement. The MFP had a broad arbitration clause providing in part that any partner could cause any question, disagreement, difference, or controversy to be submitted to arbitration through the American Arbitration Association.
The Fifth Amendment to the agreement provided for successor general partners in the event of one party’s (Tex’s) death, disability, or legal incapacity.
The Appellants contended that the Fifth Amendment to the Partnership is unenforceable because Tex lacked the mental capacity to execute it or it was procured it through undue influence.
Citing precedent, the Forth Worth Court of Appeals analyzed the case in three steps.
First, the majority found the MFP was a contract since the elements for contract formation regarding the MFP agreement were present and no party contests the validity of the MFP agreement.
Second, the majority found the arbitration covenants in the contract delegated “contract validity issues” to the arbitrator.
Finally, the majority found that the Appellants objected to the enforceability of the terms of the Fifth Amendment to the MFP Agreement, not to the arbitration agreement itself and concluded therefore this issue should go to the arbitrator.
A dissent opined that since the issue of mental capacity is raised, “the contract’s very existence is at issue” which it is an issue for the court, not an arbitrator, to decide. Richard W. Moncrief et al v Tom Oil Moncrief et al, No. 02-22-00077-CV, Fort Worth, May 18, 2023.
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