The Texas Supreme Court has issued an opinion giving guidance on when an arbitration agreement is unconscionable because of expense. Houston AN USA, LLC d/b/a AutoNation Houston v Walter Shattenkirk, No. 22-0214 (May 26, 2023). The issue arose in the context of an employment discrimination claim.
As stated by the Court, the issue in this case is whether an arbitration agreement is unconscionable , and thus enforceable, on the ground that the costs associated with arbitration are so excessive they would foreclose the employee from pursing his claims. Courts should not enforce a transaction so one-sided with so gross a disparity in the values exchanged, that no rational contracting party would have entered the contract.
The court observes a party opposing arbitration on the ground that the prohibitive cost of arbitration renders the agreement to do so unconscionable has the burden of proof. This burden can be met with some evidence that a party will likely incur arbitration costs in such an amount to deter enforcement of statutory rights in the arbitral form. Evidence might be in the form of invoices, expert testimony, reliable cost estimates or other comparable evidence.
Claimant failed to establish his burden in this case. An invoice from the American Arbitration Association for an unrelated employment discrimination case that included a three-day hearing is deemed not relevant. Also, there was no evidence whether Claimant would incur all, half, or no costs or expenses.
The Court left the door open for further proof stating Claimant had not met his burden “at this stage” and consequently any decision was “premature”. Further evidence could convert speculation into something more certain.
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