Appeal Dismissed; Petition for Writ of Mandamus Conditionally Granted and Memorandum Opinion filed September 8, 2005.
In The
Fourteenth Court of Appeals
___________
NO. 14-04-00819-CV
_______________
UNIVERSAL COMPUTER CONSULTING HOLDING, INC.,
UNIVERSAL COMPUTER CONSULTING, LTD. AND
DEALER COMPUTER SERVICES, INC. Appellants
V.
HILLCREST FORD LINCOLN-MERCURY, INC., Appellee
On Appeal from the 12th District Court
Walker County, Texas
Trial Court Cause No. 22,416
NO. 14-04-01103-CV
IN RE UNIVERSAL COMPUTER CONSULTING HOLDING, INC.,
UNIVERSAL COMPUTER CONSULTING, LTD.
AND DEALER COMPUTER SERVICES, INC.
Relators
ORIGINAL PROCEEDING
WRIT OF MANDAMUS
M E M O R A N D U M O P I N I O N
Relators, Universal Computer Consulting Holding, Inc. (AUCCH@), Universal Computer Consulting, Ltd. (AUCC@), and Dealer Computer Services, Inc. (ADCS@), filed a petition for writ of mandamus and an interlocutory appeal from the trial court=s order denying their motion to compel arbitration. We conditionally grant the petition for writ of mandamus and dismiss the interlocutory appeal.
I. Background
DCS provides computer systems to automobile dealers nationwide. Real Party in Interest, Hillcrest Ford Lincoln-Mercury, Inc. (AHillcrest@), is an automobile dealer in Huntsville, Texas. In 1996, DCS and Hillcrest entered into two contracts for the sale, maintenance, and support of two computer systems: a Adealer management@ system and a Acomputerized parts display@ system.[1] Both contracts contain substantially similar arbitration provisions as follows:
. . . all disputes, claims, controversies and other matters in question between the parties to this Agreement, arising out of, or relating to this Agreement, or to the breach thereof, including any claim in which either party is demanding monetary damages of any nature including negligence, strict liability or intentional acts or omissions by either party, and which cannot be resolved by the parties, shall be settled by arbitration . . .
The arbitration provisions also include various rules applicable to the arbitration proceeding, which we will later discuss in more detail.
DCS and Hillcrest performed under the contracts for eight years, and the contracts were amended numerous times to add equipment to the systems. However, in 2004, Hillcrest sued DCS, UCCH, and UCC alleging violations of the Texas Deceptive Trade Practices Act and seeking to rescind the contracts.[2] In essence, Hillcrest alleges the equipment is not what it was represented to be, the contracts involve unconscionable prices and terms, and relators fraudulently induced Hillcrest to enter into the contracts. Relators filed a motion to compel arbitration and stay or dismiss the suit. After two hearings, the trial court entered an order denying the motion to compel arbitration. Specifically, the trial court found that the arbitration provisions in both contracts are procedurally and substantively unconscionable.
II. Standard of Review
All parties agree that the Federal Arbitration Act (AFAA@) governs this dispute because the contracts involve interstate commerce. See 9 U.S.C. ' 2 (West 1999); In re Halliburton Co., 80 S.W.3d 566, 568 (Tex. 2002); In re Media Arts Group, Inc., 116 S.W.3d 900, 905 (Tex. App.CHouston [14th Dist.] 2003, orig. proceeding [mand. denied]). To compel arbitration under the FAA, a party must prove the existence of an arbitration agreement and that the claims at issue fall within the scope of that agreement. In re FirstMerit Bank, N.A., 52 S.W.3d 749, 753 (Tex. 2001); Media Arts Group, Inc., 116 S.W.3d at 904. If the arbitration agreement encompasses the claims at issue, and the opposing party has failed to prove any defenses to its enforcement, the trial court has no discretion but to compel arbitration and stay its own proceedings. FirstMerit Bank, N.A., 52 S.W.3d at 753B54; Media Arts Group, Inc., 116 S.W.3d at 904. When a trial court erroneously denies a motion to compel arbitration under the FAA, the movant has no adequate remedy at law and is entitled to mandamus relief. FirstMerit Bank, N.A., 52 S.W.3d at 753; Media Arts Group, Inc., 116 S.W.3d at 904.[3]
In two interrelated issues, relators contend the trial court abused its discretion by refusing to compel arbitration because relators proved the existence of two arbitration agreements encompassing the claims at issue and Hillcrest failed to prove its defenses to their enforcement. In response, Hillcrest does not dispute the existence of an arbitration agreement encompassing the claims at issue. Instead, Hillcrest contends, and the trial court found, that the arbitration provisions are procedurally and substantively unconscionable. In addition, Hillcrest contends UCCH and UCC may not compel arbitration because they are not signatories to the arbitration agreements.
III. Unconscionability
Under Texas law, the basic test for unconscionability is whether, given the parties= general commercial backgrounds and the commercial needs of the particular trade or case, the arbitration clause is so one‑sided that it is unconscionable under the circumstances existing when the parties made the contract. FirstMerit Bank, N.A., 52 S.W.3d at 757; AutoNation USA Corp. v. Leroy, 105 S.W.3d 190, 198 (Tex. App.CHouston [14th Dist.] 2003, orig. proceeding).[4] The purpose of this principle is to prevent oppression and unfair surprise and not to disturb allocation of risks because of superior bargaining power. FirstMerit Bank, N.A., 52 S.W.3d at 757; AutoNation USA Corp., 105 S.W.3d at 198. Unconscionability in the context of arbitration agreements involves two aspects: (1) procedural unconscionability, which focuses on the circumstances surrounding adoption of the arbitration provision; and (2) substantive unconscionability, which focuses on fairness of the arbitration provision itself. Halliburton Co., 80 S.W.3d at 571; AutoNation USA Corp., 105 S.W.3d at 198. The party opposing arbitration bears the burden to prove unconscionability. See FirstMerit Bank, N.A., 52 S.W.3d at 756; AutoNation USA Corp., 105 S.W.3d at 198. We conclude Hillcrest failed to prove the arbitration provisions are procedurally or substantively unconscionable.[5]
A. Procedural Unconscionability
Hillcrest contends the arbitration provisions are procedurally unconscionable because DCS fraudulently induced Hillcrest to enter into the contracts by misrepresenting that DCS was an affiliate of Ford Motor Co.[6] Relators contend that this defense must be referred to arbitration pursuant to the Aseparability@ principle.
Arbitration provisions are Aseparable@ from the contracts in which they are included. Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 402B04 (1967); Dewey v. Wegner, 138 S.W.3d 591, 598 (Tex. App.CHouston [14th Dist.] 2004, no pet.). Under this principle, a court may only consider defenses to the arbitration agreement itself when deciding whether to compel arbitration. See Prima Paint Corp., 388 U.S. at 403B04; FirstMerit Bank, N.A., 52 S.W.3d at 756; Dewey, 138 S.W.3d at 598. Defenses, such as unconscionability and fraudulent inducement, to the contract as whole must be referred to arbitration as long as the arbitration provision is valid. See Prima Paint Corp., 388 U.S. at 403B04; FirstMerit Bank, N.A., 52 S.W.3d at 756; Dewey, 138 S.W.3d at 598.
Here, at most, Hillcrest raised a fraudulent inducement defense to the contracts as a whole. To oppose relators= motion to compel arbitration, Hillcrest relied solely on the contracts. Both contracts identify the seller as AFord Dealer Computer Services, Inc.@ In addition, the Adealer management@ system contract has the Ford Motor Co. logo on the first page. On appeal, Hillcrest also refers to Aadmissions@ by relators= counsel at the hearings on the motions to compel arbitration. At the hearings, relators= counsel stated that when the contracts were made, DCS was not part of Ford Motor Co. but was licensed to use its name and logo, and DCS later changed its name from AFord Dealer Computer Services, Inc.@ to ADealer Computer Services, Inc.@ According to Hillcrest, the contracts and Aadmissions@ establish that DCS fraudulently induced Hillcrest into Acontracting@ with DCS by misrepresenting that it was an affiliate of Ford Motor Co. However, this fraudulent inducement defense to the contracts as a whole must be referred to arbitration. See Prima Paint Corp., 388 U.S. at 403B04; FirstMerit Bank, N.A., 52 S.W.3d at 756; Dewey, 138 S.W.3d at 598.
Hillcrest presented no evidence that it was fraudulently induced to enter into the arbitration provisions. In fact, Hillcrest offered no evidence of the circumstances surrounding adoption of the arbitration provisions. In particular, Hillcrest presented no evidence that DCS made any misrepresentations with respect to the arbitration provisions. See FirstMerit Bank, N.A., 52 S.W.3d at 758 (rejecting home buyers= fraudulent inducement defense to arbitration agreement because they presented no evidence sellers made any material misrepresentations with respect to the arbitration agreement). Further, Hillcrest did not offer any evidence, such as affidavits or testimony from its own employees, to show that it believed DCS was a Ford affiliate, much less any evidence that it specifically agreed to the arbitration provisions because it believed DCS was a Ford affiliate. Hillcrest merely cites its counsel=s argument at the hearings, but argument of counsel is not evidence.[7] See Kern v. Gleason, 840 S.W.2d 730, 734 (Tex. App.CAmarillo 1992, no pet.).[8] Accordingly, Hillcrest failed to prove the arbitration provisions are procedurally unconscionable because they were induced by fraud.
B. Substantive Unconscionability
Hillcrest contends the arbitration provisions are substantively unconscionable because they (1) contain a Michigan forum selection clause and Michigan choice of law clause, (2) limit Hillcrest=s remedies while allowing DCS to pursue all remedies, (3) shorten the statute of limitations, and (4) potentially impose prohibitive arbitration costs. Hillcrest suggests that even if the arbitration provisions are not substantively unconscionable for any of these individual reasons, they are substantively unconscionable as a whole.
1. Forum Selection Clause and Choice of Law Clause
Primarily, Hillcrest asserts the arbitration provisions are substantively unconscionable because they contain a forum selection clause requiring that the arbitration proceeding be held in Detroit, Michigan and a Michigan choice of law clause. Hillcrest argues the forum selection clause and choice of law clause in tandem deprive Hillcrest of statutory consumer protection remedies because the Texas DTPA will not apply and Hillcrest lacks consumer status under Michigan consumer protection laws. However, contrary to Hillcrest=s assertion, only the forum selection clause is specifically contained in the arbitration provisions. The choice of law clause is written into the general provisions of each contractCnot the arbitration provisions. Therefore, the trial court could consider only Hillcrest=s challenge to the forum selection clause in the arbitration provisions when deciding whether to compel arbitration. See Prima Paint Corp., 388 U.S. at 403B04; FirstMerit Bank, N.A., 52 S.W.3d at 756; Dewey, 138 S.W.3d at 598.
The forum selection clause does not deprive Hillcrest of any statutory remedies; it merely requires that the arbitration proceeding physically take place in Michigan. See Accelerated Christian Educ., Inc. v. Oracle Corp., 925 S.W.2d 66, 74 n.11 (Tex. App.CDallas 1996, no writ) (rejecting argument that enforcing California forum selection clause would deprive party of rights under the Texas DTPA because enforcing a forum selection clause does not automatically determine the law applicable to the case).[9] If Hillcrest is deprived of any statutory remedies, it is solely by virtue of the Michigan choice of law clause. See id. Because the choice of law clause is contained in the general contract provisions, Hillcrest=s challenge to the application of Michigan law pertains to the contracts as a whole and, thus, must be referred to arbitration. See Prima Paint Corp., 388 U.S. at 403B04; FirstMerit Bank, N.A., 52 S.W.3d at 756; Dewey, 138 S.W.3d at 598.
Hillcrest also suggests that the forum selection clause alone renders the arbitration provisions substantively unconscionable because DCS and Hillcrest are both currently located in Texas, and, thus, arbitrating in Michigan will be unduly burdensome.[10] We disagree. The Texas Supreme Court recently recognized the validity of forum selection clauses in general, adopting the ABremen standard@ set forth by the United States Supreme Court. See In re AIU Ins. Co., 148 S.W.3d 109, 111B14 (Tex. 2004) (citing The Bremen v. Zapata Off‑Shore Co., 407 U.S. 1, 13B17 (1972); Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 595B96 (1991)); see also In re Automated Collection Techs., Inc., 156 S.W.3d 557, 559 (Tex. 2004) (per curiam). A forum selection clause must be enforced unless the party opposing enforcement A>clearly show[s] that enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or overreaching.=@ See AIU Ins. Co., 148 S.W.3d at 112 (quoting The Bremen, 407 U.S. at 15); see also Automated Collection Techs., Inc., 156 S.W.3d at 559. A clause would come within these exceptions if enforcement would contravene a strong public policy of the forum in which suit was brought, or when the contractually selected forum would be seriously inconvenient for trial. AIU Ins. Co., 148 S.W.3d at 112 (citing The Bremen, 407 U.S. at 15B17). When inconvenience in litigating in the chosen forum is foreseeable at the time of contracting, the party opposing enforcement bears a A>heavy burden=@ to show A>trial in the contractual forum will be so gravely difficult and inconvenient that he will for all practical purposes be deprived of his day in court.=@ See id. at 113 (quoting The Bremen, 407 U.S. at 17B18).
Although the Texas Supreme Court upheld the validity of forum selection clauses in general, the Fifth Circuit has upheld the validity of forum selection clauses in arbitration agreements as well. See, e.g., Carter v. Countrywide Credit Indus., Inc., 362 F.3d 294, 298B301 (5th Cir. 2004); Sam Reisfeld & Son Import Co. v. S. A. Eteco, 530 F.2d 679, 680B81 (5th Cir. 1976). However, it is unclear whether the ABremen standard@ applies when determining the validity of an arbitration provision containing a forum selection clause. Recently, the Fifth Circuit effectively applied the ABremen standard@ by holding that a forum selection clause did not invalidate an arbitration agreement because the party opposing arbitration failed to show the forum selection clause was unreasonable. See Carter, 362 F.3d at 298B301. In contrast, the court earlier held that a party may not invoke the Bremen exceptions to vitiate an arbitration provision containing a forum selection clause. See Sam Reisfeld & Son Import Co., 530 F.2d at 680B81. The court reasoned that a party must meet a stricter standard to avoid an arbitration provision than simply proving the chosen forum is unreasonable or inconvenient because the FAA allows a party to avoid an arbitration agreement only by proving a defense sufficient to revoke any contract. See id. (citing 9 U.S.C. ' 2).
Here, Hillcrest asserts Ainconvenience@ of the chosen forum as part of its substantive unconscionability defense, and substantive unconscionability is a valid defense to an arbitration provision. Regardless, we need not decide whether the ABremen standard@ applies to a forum selection clause in an arbitration agreement because Hillcrest cannot meet the ABremen standard,@ much less its burden to prove unconscionability as a whole. Specifically, Hillcrest offered no evidence that arbitrating in Michigan will be so inconvenient or burdensome that it will effectively be Adeprived of its day in court.@ Further, Hillcrest offered no evidence of the parties= general commercial backgrounds and the commercial needs of the particular trade or case to show that requiring Hillcrest to arbitrate in Michigan is unconscionable in light of the circumstances existing when the parties made the arbitration agreements. See FirstMerit Bank, N.A., 52 S.W.3d at 757; AutoNation USA Corp., 105 S.W.3d at 198. Accordingly, Hillcrest failed to prove that the Michigan forum selection clause renders the arbitration provisions unconscionable.
2. Limitation of Remedies
Hillcrest also argues that the arbitration provisions are unconscionable because they limit or bar Hillcrest=s remedies while allowing DCS to pursue all remedies. In particular, the contracts disclaim certain warranties, limit DCS=s liability, and limit damages. The contracts also contain a ADefault@ section that allows DCS to A[p]ursue any additional or alternative remedies available at law or in equity@ in the event of Hillcrest=s default. Further, the ADefault@ section gives DCS the right to recover attorneys= fees. However, these clauses limiting Hillcrest=s remedies and allowing DCS to pursue all remedies are contained throughout the contract and are not particular to the arbitration provisions. Accordingly, Hillcrest=s complaint pertains to the contracts as a whole and is, thus, subject to arbitration.[11] See Prima Paint Corp., 388 U.S. at 403B04; FirstMerit Bank, N.A., 52 S.W.3d at 756; Dewey, 138 S.W.3d at 598.
3. Shortened Statute of Limitations
Hillcrest also contends the arbitration provisions are unconscionable because they shorten the statute of limitations applicable to DTPA claims from two years to one year. See Tex. Bus. & Com. Code Ann. ' 17.565 (Vernon 2002) (establishing two-year statute of limitations for DTPA claims). The arbitration provisions state, A[i]n no event shall the demand for arbitration be made more than one (1) year after the claim or cause of action arises.@[12]
Initially, we question whether this time limit can be construed as a statute of limitations. In particular, we question whether this time limit bars any claims accruing more than one year before arbitration is demanded or merely ensures that arbitration is promptly demanded. Nonetheless, the interpretation and application of a clause requiring that arbitration be initiated within a certain time period is a question for the arbitrators. See Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 81B86 (2002); see also Bowie v. Edison Sec. Corp., No. Civ. 300CV2700H, 2001 WL 1076128, at *3 (N.D. Tex. Sept. 11, 2001) (not designated for publication) (referring to arbitrators the issue of whether arbitration clause=s requirement that arbitration be initiated within one year of the claim giving rise to the dispute acted as a time bar or as a means of encouraging quick claim resolution). We need only consider whether this time limit renders the arbitration provisions unconscionable. We conclude that even if this time limit can be construed as a statute of limitations, it does not render the arbitration provisions unconscionable.
Hillcrest cites no Texas law holding that an arbitration provision which shortens a statute of limitations is per se unconscionable. Further, we have found very little Texas law addressing the enforceability of an arbitration provision which shortens a statute of limitations. In EZ Pawn Corp. v. Mancias, the Texas Supreme Court upheld an arbitration agreement in which an employer and employee mutually agreed to initiate arbitration no later than 180 days after a cause of action accrues. 934 S.W.2d 87, 88B91 (Tex. 1996) (per curiam). However, the court considered this time limit when determining whether the employer waived its right to compel arbitration. See id. at 89B90.[13] Although the court later determined the arbitration provision was not unconscionable, the court did not consider the time limit with respect to the unconscionability issue. See id. at 90B91. Nevertheless, the court acknowledged the time limit when requiring the employee to arbitrate a statutory claim. See id. at 89B90.
In In re Luna, the First Court of Appeals considered an arbitration provision which shortened the limitations period for an employee to assert a statutory wrongful discharge claim from two years to one year. No. 01‑03‑01055‑CV, 2004 WL 2005935, at *7 (Tex. App.CHouston [1st Dist.] Sept. 9, 2004, orig. proceeding [mand. pending]). The court stated that the shortened limitations period did not render the arbitration provision substantively unconscionable although the court ultimately found the arbitration provision was substantively unconscionable for other reasons. See id. The court interpreted EZ Pawn Corp. as allowing Athe statute of limitations to be modified in an arbitration agreement involving a claim of wrongful discharge.@ Id. (citing EZ Pawn Corp., 934 S.W.2d at 89).[14]
Consequently, the limited Texas authority on this issue supports a conclusion that a shortened statute of limitations will not necessarily render an arbitration provision unconscionable. Again, here, Hillcrest presented no evidence that this one-year time limit is unconscionable in light of the parties= general commercial backgrounds, the commercial needs of the particular trade or case, or the circumstances existing when the parties made the arbitration agreements. See FirstMerit Bank, N.A., 52 S.W.3d at 757; AutoNation USA Corp., 105 S.W.3d at 198.[15]
4. Arbitration Costs
Finally, Hillcrest suggests the arbitration provisions are substantively unconscionable because Hillcrest will potentially incur exhorbitant arbitration costs. Excessive arbitration costs could preclude a litigant from vindicating its statutory rights. FirstMerit Bank, N.A., 52 S.W.3d at 756 (citing Green Tree Fin. Corp. v. Randolph, 531 U.S. 79, 90 (2000)). Nonetheless, an arbitration agreement=s mere silence with respect to costs is a A>plainly insufficient=@ basis for invalidating the agreement. Id. (quoting Green Tree Fin. Corp., 531 U.S. at 91). Instead, the party opposing arbitration must prove the likelihood of incurring such substantial costs. Id. (citing Green Tree Fin. Corp., 531 U.S. at 92). Although it is not established how detailed the evidence must be, some specific information of future costs is required. See id. (citing Green Tree Fin. Corp., 531 U.S. at 92).
Here, the arbitration provisions are silent as to the costs of arbitration.[16] Hillcrest presented no evidence of the potential arbitration costs or its ability to pay the arbitration costs. Accordingly, Hillcrest failed to prove that potentially exhorbitant arbitration costs render the arbitration provisions substantively unconscionable. See id. at 756B57 (holding possibility that arbitration could subject home buyers to substantial costs did not make the arbitration agreement unconscionable without specific evidence buyers would be charged excessive costs); see also Bloxom v. Landmark Publ=g Corp., 184 F. Supp. 2d 578, 584B85 (E.D. Tex. 2002) (refusing to invalidate arbitration provision where opposing parties presented no evidence of likelihood they would incur prohibitive costs).
In sum, the arbitration provisions are not substantively unconscionable for any of the individual reasons urged by Hillcrest. Moreover, without any evidence of the extant circumstances when the parties made the arbitration agreements, we cannot conclude they are substantively unconscionable as a whole. See Pony Express Courier Corp. v. Morris, 921 S.W.2d 817, 822 (Tex. App.CSan Antonio 1996, no writ) (stating court could not ascertain whether portions of arbitration agreement which excluded other remedies, eliminated discovery, limited damages, limited choice of arbitrators, and allocated costs equally between parties, together rendered agreement unconscionable without any evidence of circumstances surrounding the agreement).
IV. Non-Signatories= Right To Compel Arbitration
Hillcrest also contends that UCCH and UCC may not compel arbitration because they are not signatories to the contracts.[17] We disagree. Equitable estoppel allows non‑signatories to compel arbitration in two circumstances: (1) when the signatory to the contract containing an arbitration clause raises allegations of substantially interdependent and concerted misconduct by both the non‑signatories and a signatory, or (2) when the nature of the underlying claims requires the signatory to rely on the terms of the written agreement containing the arbitration clause in asserting the signatory=s claims against the non‑signatories. McMillan v. Computer Translation Sys. & Support, 66 S.W.3d 477, 482 (Tex. App.CDallas 2001, orig. proceeding) (citing Grigson v. Creative Artists Agency, L.L.C., 210 F.3d 524, 527 (5th Cir. 2000)); see In re EGL Eagle Global Logistics, L.P., 89 S.W.3d 761, 764B65 (Tex. App.CHouston [1st Dist.] 2002, orig. proceeding).
We find that at least the first circumstance is satisfied here. In its petition, Hillcrest raises allegations of Asubstantially interdependent and concerted misconduct@ by DCS, UCCH, and UCC. Although Hillcrest occasionally makes some factual allegations against DCS only, Hillcrest makes no independent factual allegations against UCCH and UCC. Further, Hillcrest asserts all its legal causes of action against the ADefendants@ collectively and asserts no independent legal causes of action against UCCH and UCC. Consequently, UCCH and UCC may compel arbitration although they are not signatories to the arbitration agreements. See Jureczki v. Banc One Texas, N.A., 252 F. Supp. 2d 368, 375B78 (S.D. Tex.), aff=d, 75 Fed. Appx. 272 (5th Cir. 2003) (ruling nonsignatories could compel arbitration because plaintiffs= factual and legal allegations were asserted against nonsignatories and signatories collectively as Adefendants@ and did not distinguish between signatories and nonsignatories); In re Educ. Mgmt. Corp., 14 S.W.3d 418, 424B25 (Tex. App.CHouston [14th Dist.] 2000, orig. proceeding) (holding non-signatories could compel arbitration where plaintiffs alleged claims against signatory and nonsignatories collectively, alleged alter ego claims against signatory and nonsignatories, and raised no independent basis for liability against nonsignatories).
V. Conclusion
In sum, relators proved the existence of two arbitration agreements that encompass Hillcrest=s claims, and Hillcrest failed to prove any defenses to their enforcement. Therefore, the trial court abused its discretion by refusing to compel arbitration, and mandamus relief is appropriate. See FirstMerit Bank, N.A., 52 S.W.3d at 753B54; Media Arts Group, Inc., 116 S.W.3d at 904. Accordingly, we sustain relators= first and second issues. We are confident the trial court will vacate its order denying Relators= motion to compel arbitration and will compel arbitration of this suit and stay its own proceedings. If the trial court fails to do so, the writ will issue. Because we conditionally grant relators= petition for writ of mandamus, we dismiss their interlocutory appeal.
/s/ Charles W. Seymore
Justice
Appeal Dismissed; Petition for Writ of Mandamus Conditionally Granted and Memorandum Opinion filed September 8, 2005.
Panel consists of Justices Edelman, Seymore, and Guzman.
[1] DCS originally entered into the contracts with Moore-Henry Motors, Inc., Hillcrest=s predecessor- in-interest. In 1996, Moore-Henry Motors, Inc. assigned both contracts to Hillcrest, and Hillcrest assumed Moore-Henry=s obligations under the contracts.
[2] The record does not establish the relationship between DCS and the other relators, UCCH and UCC. However, Hillcrest alleges the same causes of action against all the relators.
[3] In contrast, interlocutory appeal is allowed from an order denying arbitration under the Texas Arbitration Act. See Tex. Civ. Prac. & Rem. Code Ann. ' 171.098(a)(1) (Vernon Supp. 2004B05). Relators have alternatively filed an interlocutory appeal in the event the Texas act applies. Because the FAA governs this dispute, we will review the trial court=s order via the mandamus proceeding.
[4] The contracts contain a Michigan choice of law clause. As we will discuss, Hillcrest cites Michigan consumer protection statutes to support its claim that the arbitration provisions are unconscionable because application of Michigan law will deprive Hillcrest of statutory remedies. However, neither party asked the trial court to apply, or take judicial notice, of Michigan law on unconscionability in general. Therefore, we will apply Texas law. See Burns v. Resolution Trust Corp., 880 S.W.2d 149, 151 (Tex. App.CHouston [14th Dist.] 1994, no writ) (recognizing that absent request to take judicial notice, or proper proof of laws of another state, Texas courts presume the sister state=s law is the same as Texas law); see Media Arts Group, Inc., 116 S.W.3d at 906 (recognizing generally applicable state contract defenses may invalidate an arbitration agreement without contravening the FAA).
[5] Hillcrest argues that we may not disturb the trial court=s ruling because we may not decide factual disputes in a mandamus proceeding. See Brady v. Fourteenth Court of Appeals, 795 S.W.2d 712, 714 (Tex. 1990). However, there were no factual disputes because Hillcrest presented no evidence other than referring to the contracts. Therefore, whether Hillcrest proved the arbitration provisions are unconscionable is a question of law. See In re Turner Brothers Trucking Co., 8 S.W.3d 370, 377 (Tex. App.CTexarkana 1999, orig. proceeding). Our review of the trial court=s legal conclusions is less deferential because a trial court has no discretion to misapply the law to the facts. See Walker v. Packer, 827 S.W.2d 833, 840 (Tex. 1992).
[6] We note that fraudulent inducement is typically a separate defense from procedural unconscionability. See, e.g., FirstMerit Bank, N.A., 52 S.W.3d at 756B58; In re Oakwood Mobile Homes, Inc., 987 S.W.2d 571, 573B74 (Tex. 1999). However, Hillcrest incorporates its fraudulent inducement defense into its procedural unconscionability defense.
[7] Hillcrest asserts that it presented evidence of the parties= Adealings@ but merely cites to the transcript of the hearings. At the hearings, Hillcrest=s counsel repeatedly argued that Hillcrest thought DCS was a Ford affiliate.
[8] Hillcrest also asks us to take judicial notice of a jury verdict in a different case finding that another Ford dealership was fraudulently induced into an arbitration agreement by DCS. We decline to do so because unconscionability must be determined on a case-by-case basis. See Pony Express Courier Corp. v. Morris, 921 S.W.2d 817, 821 (Tex. App.CSan Antonio 1996, no writ.).
[9] Hillcrest cites In re Luna, in which the court found that an arbitration agreement which precluded punitive damages and remedies allowed by workers compensation law was unconscionable. See No. 01‑03‑01055‑CV, 2004 WL 2005935, at *5B7 (Tex. App.CHouston [1st Dist.] Sept. 9, 2004, orig. proceeding [mand. pending]). However, Luna is distinguishable because there the preclusion of remedies was specifically contained in the arbitration agreement. See id. Further, the Luna court found the arbitration agreement unconscionable as a whole based on the circumstances of the particular case. See id. at *9B11.
[10] Hillcrest also asserts that Aevery aspect@ of performance under the contracts occurred in Texas, and Michigan has Aabsolutely no connection to this case.@ To the contrary, DCS was located in Michigan when the contracts were first executed, when they were assigned to Hillcrest, and when some amendments were executed. However, several years after the contracts were executed, the amendments began showing that DCS is located in Houston. DCS=s counsel confirmed at the hearings that DCS=s principle place of business is now in Houston.
[11] We note that each arbitration provision provides that the Aarbitration procedure shall in no way limit [DCS=s] remedies as provided in@ the ADefault@ section of the contract. Nonetheless, Hillcrest=s complaint is not an attack on the arbitration provisions specifically. Although the arbitration provisions recognize DCS=s remedies in the event of default, DCS=s right to pursue all remedies is not unique to the arbitration provisions. More importantly, there are no limitations on Hillcrest=s remedies in the arbitration provisions.
[12] We question whether this argument pertains to the arbitration provisions specificallyCas opposed to the contracts as a whole. The contracts contain a general provision stating that A[n]o action, regardless of form, arising out of transactions under [the contracts], may be brought by either party more than one year after the cause of action has occurred.@ Consequently, the contracts impose a one-year time limit for raising claims, regardless of how they are resolved. Nonetheless, because there is a time limit for specifically demanding arbitration, we will address Hillcrest=s argument.
[13] The court rejected the employee=s contention that the employer=s delay in seeking to compel arbitration prejudiced the employee by causing him to miss the 180-day deadline for requesting arbitration. See id. at 89B90.
[14] However, Luna has not yet been published, and a mandamus has been filed in the Texas Supreme Court. See generally 2004 WL 2005935.
[15] Further, we note that the time limit applies to both parties= demand for arbitration; thus, the requirement is not one-sided.
[16] The provisions mention only that if a party=s delay in scheduling arbitration causes increased costs, that party will bear those costs. Otherwise, the provisions are silent as to ordinary arbitration costs.
[17] On one hand, Hillcrest asserts the trial court did not address this issue, and, thus, it is not ripe for our consideration. On the other hand, Hillcrest suggests we may uphold the trial court=s ruling notwithstanding the unconscionability finding because UCCH and UCC are not signatories to the arbitration provisions; therefore, we will consider this issue.