Royston, Rayzor, Vickery & Williams, L.L.P. v. Lopez

NUMBER 13-11-00757-CV

COURT OF APPEALS

THIRTEENTH DISTRICT OF TEXAS

CORPUS CHRISTI - EDINBURG

ROYSTON, RAYZOR, VICKERY
& WILLIAMS, L.L.P., Appellant,

v.

FRANCISCO “FRANK” LOPEZ, Appellee.

On appeal from the 148th District Court
of Nueces County, Texas.

NUMBER 13-12-00023-CV

IN RE ROYSTON, RAYZOR, VICKERY & WILLIAMS, LLP

On Petition for Writ of Mandamus.

OPINION

Before Chief Justice Valdez and Justices Benavides and Perkes
Opinion by Justice Benavides
 Royston, Rayzor, Vickery, & Williams, LLP (“Royston”), seeks to set aside an

order denying its motion to compel arbitration by appeal in appellate cause number 13-

11-00757-CV and by petition for writ of mandamus in appellate cause number 13-12-

00023-CV. We affirm the order of the trial court in the appeal and we deny the petition

for writ of mandamus.

I. BACKGROUND

Francisco “Frank” Lopez retained Royston to represent him regarding a common

law marriage and divorce and to pursue claims against Lopez’s alleged common law

wife after she won $11 million playing the lottery. The “Employment Contract” between

Lopez and Royston gave Royston a twenty percent contingency fee in any gross

recovery before expenses, provided that Lopez was responsible for all costs and

expenses regardless of outcome, and gave Royston the right to withdraw as counsel at

any time for any reason. The agreement contained the following arbitration provision:

While we would hope that no dispute would ever arise out of our
representation or this Employment Contract, you and the firm agree that
any disputes arising out of or connected with this agreement (including,
but not limited to the services performed by any attorney under this
agreement) shall be submitted to binding arbitration in Nueces County,
Texas, in accordance with appropriate statutes of the State of Texas and
the Commercial Arbitration Rules of the American Arbitration Association
(except, however, that this does not apply to any claims made by the firm
for the recovery of its fees and expenses).

Royston filed suit on behalf of Lopez against his common-law wife; however, the

suit was settled after court-ordered mediation. Lopez thereafter brought suit against

Royston for malpractice, gross negligence, fraud, breach of contract, and negligent

misrepresentation. Lopez asserted that Royston “provided alcoholic beverages” to him

at the mediation, told him the settlement was in his best interests, and encouraged him

2
to take a “meager” settlement, even though there was ample evidence that the parties

had a common law marriage and an electronic message from Lopez’s ex-wife showed

that she had agreed “to a much larger settlement amount.” Lopez asserted Royston

“failed to zealously assert and prove” that he had damage claims that entitled him to

either fifty percent of the lottery winnings as community property due to the then-existing

common law marriage, or in the alternative, the “$3,200,000.00 he was entitled to

pursuant to the text message from his ex-wife.”

Royston moved to compel arbitration under the Texas Arbitration Act (“TAA”)

and, by supplemental motion, for arbitration under the common law. See TEX. CIV.

PRAC. & REM. CODE ANN. § 171.001–.098 (West 2011). Lopez responded to the motion

to compel and supplemental motion raising numerous affirmative defenses to

arbitration. After a hearing where the trial court considered the motions to compel and

the responses thereto, which were supported only by the Employment Contract, the trial

court denied Royston’s motion to compel arbitration.

This appeal and original proceeding ensued. By orders previously issued in

these cases, the Court consolidated these two matters and ordered the underlying

litigation to be stayed pending further order of this Court, or until the cases are finally

decided. See TEX. R. APP. P. 29.5(b), 52.10(b). The matter has been fully briefed by

both parties, and the matter has been submitted to the Court at oral argument.

By five issues, which we have summarized and restated, Royston contends that:

(1) the trial court abused its discretion in denying the motion to compel arbitration; (2) a

legal malpractice claim should not be considered to be a personal injury claim, and

3
therefore subject to statutory requirements for arbitration agreements under the TAA;1

(3) the trial court abused its discretion in denying arbitration if its decision was based on

an advisory ethics opinion requiring that lawyers provide clients with information relative

to litigation and arbitration before entering an arbitration agreement; (4) the arbitration

agreement was not illusory; and (5) the arbitration agreement was not unconscionable.

II. MANDAMUS

Mandamus is an “extraordinary” remedy. In re Sw. Bell Tel. Co., L.P., 235

S.W.3d 619, 623 (Tex. 2007) (orig. proceeding); see In re Team Rocket, L.P., 256

S.W.3d 257, 259 (Tex. 2008) (orig. proceeding). To obtain mandamus relief, the relator

must show that the trial court clearly abused its discretion and that the relator has no

adequate remedy by appeal. In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135–36

(Tex. 2004) (orig. proceeding); see In re McAllen Med. Ctr., Inc., 275 S.W.3d 458, 462

(Tex. 2008) (orig. proceeding). A trial court abuses its discretion if it reaches a decision

so arbitrary and unreasonable as to constitute a clear and prejudicial error of law, or if it

clearly fails to correctly analyze or apply the law. In re Cerberus Capital Mgmt., L.P.,

164 S.W.3d 379, 382 (Tex. 2005) (orig. proceeding) (per curiam); Walker v. Packer, 827

S.W.2d 833, 839 (Tex. 1992) (orig. proceeding). To satisfy the clear abuse of discretion

standard, the relator must show that the trial court could “reasonably have reached only

1
There is a split of authority among the Texas courts of appeals regarding whether legal
malpractice claims constitute personal injury claims for purposes of section 171.002. See TEX. CIV. PRAC.
& REM. CODE ANN. § 171.002 (West 2011) (excluding claims for personal injury from arbitration under the
TAA unless each party to the claim, on the advice of counsel, agrees in writing to arbitrate and the
agreement is signed by each party and each party's attorney). Several courts have held that legal
malpractice claims do not constitute personal injury claims for purposes of section 171.002. See
Chambers v. O'Quinn, 305 S.W.3d 141, 148 (Tex. App.—Houston [1st Dist.] 2009, pet. denied.); Taylor v.
Wilson, 180 S.W.3d 627, 630–31 (Tex. App.—Houston [14th Dist.] 2005, pet. denied); Miller v. Brewer,
118 S.W.3d 896, 899 (Tex. App.—Amarillo 2003, no pet.); In re Hartigan, 107 S.W.3d 684, 690–91 (Tex.
App.—San Antonio 2003, pet. denied). This Court has held to the contrary. In re Godt, 28 S.W.3d 732,
738–39 (Tex. App.—Corpus Christi 2000, no pet.). Our analysis of the instant case is governed by other
issues, and accordingly, we need not address this matter herein. See TEX. R. APP. P. 47.1, 47.4.

4
one decision.” Liberty Nat’l Fire Ins. Co. v. Akin, 927 S.W.2d 627, 630 (Tex. 1996)

(quoting Walker, 827 S.W.2d at 840).

Arbitration clauses may be enforced under Texas common law. In re Swift

Transp. Co., 311 S.W.3d 484, 491 (Tex. App.—El Paso 2009, orig. proceeding); In re

Green Tree Servicing LLC, 275 S.W.3d 592, 599 (Tex. App.—Texarkana 2008, orig.

proceeding); see L.H. Lacy Co. v. City of Lubbock, 559 S.W.2d 348, 351–52 (Tex.

1977) (common law arbitration and statutory arbitration are "cumulative" and part of a

"dual system"); Carpenter v. N. River Ins. Co., 436 S.W.2d 549, 553 (Tex. Civ. App.—

Houston [14th Dist.] 1969, writ ref'd n.r.e.) ("In the many other states having arbitration

statutes similar to our 1965 statute, it is almost uniformly held that the statutory remedy

is cumulative and that the common law remedy remains available to those who choose

to use it."). Mandamus is the appropriate procedure by which we may review the trial

court's ruling on a motion to compel arbitration under the common law. See In re Swift

Transp. Co., 311 S.W.3d at 491; In re Paris Packaging, 136 S.W.3d 723, 727 & n.7

(Tex. App.—Texarkana 2004, orig. proceeding).

III. APPEAL

Under the TAA, a party may appeal an interlocutory order that denies an

application to compel arbitration made under Section 171.021. See TEX. CIV. PRAC. &

REM. CODE ANN. § 171.098(a)(1) (West 2011). When reviewing an order denying

arbitration under the TAA, we apply a de novo standard to legal determinations and a

no evidence standard to factual determinations. PER Group, L.P. v. Dava Oncology,

L.P., 294 S.W.3d 378, 384 (Tex. App.—Dallas 2009, no pet.); Trammell v. Galaxy

Ranch Sch., L.P. (In re Trammell), 246 S.W.3d 815, 820 (Tex. App.—Dallas 2008, no

5
pet.); TMI, Inc. v. Brooks, 225 S.W.3d 783, 791 (Tex. App.—Houston [14th Dist.] 2007,

pet. denied). In reviewing the trial court’s factual determinations, we must credit

favorable evidence if a reasonable fact finder could and disregard contrary evidence

unless a reasonable fact finder could not. PER Group, L.P., 294 S.W.3d at 384;

Trammell, 246 S.W.3d at 820 (citing Kroger Tex. Ltd. v. Suberu, 216 S.W.3d 788, 793

(Tex. 2006); City of Keller v. Wilson, 168 S.W.3d 802, 807 (Tex. 2005)); TMI, Inc., 225

S.W.3d at 791. However, when the facts relevant to the arbitration issue are not

disputed, we are presented only with issues of law and we review the trial court’s order

de novo. PER Group, L.P., 294 S.W.3d at 384; Trammell, 246 S.W.3d at 820.

A party attempting to compel arbitration must first establish that the dispute in

question falls within the scope of a valid arbitration agreement. J.M. Davidson, Inc. v.

Webster, 128 S.W.3d 223, 227 (Tex. 2003); TMI, Inc., 225 S.W.3d at 791; Cappadonna

Elec. Mgmt. v. Cameron County, 180 S.W.3d 364, 370 (Tex. App.—Corpus Christi

2005, orig. proceeding). A court may not order arbitration in the absence of such an

agreement. Cappadonna, 180 S.W.3d at 370 (citing Freis v. Canales, 877 S.W.2d 283,

284 (Tex. 1994)). The parties’ agreement to arbitrate must be clear. Mohamed v. Auto

Nation USA Corp., 89 S.W.3d 830, 835 (Tex. App.—Houston [1st Dist.] 2002, no pet.)

(combined appeal & orig. proceeding). If the party opposing arbitration denies the

existence of an agreement to arbitrate, that issue is determined summarily by the court

as a matter of law. TEX. CIV. PRAC. & REM. CODE ANN. § 171.021(b); J.M. Davidson,

Inc., 128 S.W.3d at 227. If the movant establishes that an arbitration agreement

governs the dispute, the burden then shifts to the party opposing arbitration to establish

6
a defense to the arbitration agreement. McReynolds v. Elston, 222 S.W.3d 731, 739

(Tex. App.—Houston [14th Dist.] 2007, no pet.).

Courts may not order parties to arbitrate unless they have agreed to do so. See

Freis, 877 S.W.2d at 284 (“While courts may enforce agreements to arbitrate disputes,

arbitration cannot be ordered in the absence of such an agreement.”); Belmont

Constructors, Inc. v. Lyondell Petrochemical Co., 896 S.W.2d 352, 356–57 (Tex. App.—

Houston [1st Dist.] 1995, no writ) (combined appeal & orig. proceeding). Therefore,

despite strong presumptions that favor arbitration, a valid agreement to arbitrate is a

settled, threshold requirement to obtaining relief. See In re Kellogg Brown & Root, Inc.,

166 S.W.3d 732, 737–38 (Tex. 2005) (orig. proceeding); J.M. Davidson, Inc., 128

S.W.3d at 227.

Ordinary contract principles are applied to the determination of whether there is a

valid agreement to arbitrate. J.M. Davidson, Inc., 128 S.W.3d at 227; see In re Bunzl

U.S.A., Inc., 155 S.W.3d 202, 209 (Tex. App.—El Paso 2004, orig. proceeding). In

determining the scope of the arbitration agreement, we focus on the petition’s factual

allegations rather than the legal causes of action asserted. See In re FirstMerit Bank,

N.A., 52 S.W.3d 749, 754 (Tex. 2001) (orig. proceeding) (decided under Federal

Arbitration Act); PER Group, L.P., 294 S.W.3d at 386 (decided under TAA). Courts

resolve any doubts about an arbitration agreement’s scope in favor of arbitration. TMI,

Inc., 225 S.W.3d at 791 (applying TAA). When parties agree to arbitrate and the

agreement encompasses the claims asserted, the trial court must compel arbitration

and stay litigation pending arbitration. See TEX. CIV. PRAC. & REM. CODE ANN. §

7
171.021(b); Meyer v. WMCO GP, LLC, 211 S.W.3d 302, 305 (Tex. 2006); PER Group,

L.P., 294 S.W.3d at 384.

Texas law embraces arbitration. The Texas Supreme Court has recognized

arbitration as a potentially efficient, cost-effective, and speedy means of resolving

disputes. See In re Olshan Found. Repair Co., 328 S.W.3d 883, 893 (Tex. 2010) (orig.

proceeding) ("we also recognize that arbitration is intended as a lower cost, efficient

alternative to litigation"); In re Poly-America, L.P., 262 S.W.3d 337, 347 (Tex. 2008)

(orig. proceeding) ("arbitration is intended to provide a lower-cost, expedited means to

resolve disputes"); Jack B. Anglin Co., 842 S.W.2d at 268 & n.3, 269 ("the main benefits

of arbitration lie in expedited and less expensive disposition of a dispute").

IV. ANALYSIS

Lopez does not dispute the existence of the Employment Contract or otherwise

dispute that he signed the agreement. In reviewing the text of the agreement and

considering that the parties signed it, we conclude that appellant has established an

agreement to arbitrate. See In re Kellogg Brown & Root, Inc., 166 S.W.3d at 737. We

further conclude that the claims at issue in this lawsuit fall within the scope of the

agreement. See In re First Tex. Homes, Inc., 120 S.W.3d 868, 870 (Tex. 2003) (orig.

proceeding) (per curiam) (examining the scope of an arbitration agreement that applied

to “all disputes between [the parties] . . . arising out of this Agreement or other action

performed . . . by [a party to the agreement]”); see also Emerald Tex. Inc. v. Peel, 920

S.W.2d 398, 403 (Tex. App.—Houston [1st Dist.] 1996, no writ) (“If . . . the [arbitration]

clause is broad, arbitration should not be denied unless it can be said with positive

assurance that the particular dispute is not covered.”). The agreement requires

8
arbitration of “any disputes arising out of or connected with this agreement (including,

but not limited to the services performed by any attorney under this agreement),” and

this provision squarely encompasses the malpractice claims raised against Royston.

Having concluded that the arbitration agreement was valid and the claims at

issue were within the scope of the arbitration agreement, we turn our consideration to

appellee’s defenses to the arbitration agreement. See J.M. Davidson, Inc., 128 S.W.3d

at 227 (stating that if the trial court finds a valid agreement, the burden shifts to the party

opposing arbitration to raise an affirmative defense to enforcing arbitration); In re H.E.

Butt Grocery Co., 17 S.W.3d 360, 367 (Tex. App.—Houston [14th Dist.] 2000, orig.

proceeding); City of Alamo v. Garcia, 878 S.W.2d 664, 665 (Tex. App.—Corpus Christi

1994, no writ). Lopez raised several affirmative defenses to arbitration. Specifically,

Lopez asserts, inter alia, that the arbitration agreement is substantively unconscionable.

We address this issue first because we conclude that it is determinative of this

proceeding.

Arbitration agreements are not inherently unconscionable. In re Palm Harbor

Homes, Inc., 195 S.W.3d 672, 678 (Tex. 2006) (orig. proceeding). “Unconscionable

contracts, however, whether relating to arbitration or not, are unenforceable under

Texas law.” In re Poly-America, L.P., 262 S.W.3d at 348–49. The TAA specifically

acknowledges this defense and provides that a court may not enforce an arbitration

agreement “if the court finds the agreement was unconscionable at the time the

agreement was made.” TEX. CIV. PRAC. & REM. CODE ANN. § 171.022 (West 2005); see

In re Palm Harbor Homes, Inc., 195 S.W.3d at 677; In re Weeks Marine, Inc., 242

S.W.3d 849, 860–61 (Tex. App.—Houston [14th Dist.] 2007, orig. proceeding).

9
 According to the Texas Supreme Court, “[u]nconscionability is to be determined

in light of a variety of factors, which aim to prevent oppression and unfair surprise; in

general, a contract will be found unconscionable if it is grossly one sided.” See In re

Palm Harbor Homes, Inc., 195 S.W.3d at 677 (citing DAN B. DOBBS, 2 LAW OF REMEDIES

703, 706 (2d ed. 1993); RESTATEMENT (SECOND) OF CONTRACTS § 208, cmt. a (1979)).

Unconscionability is not subject to precise doctrinal definition and is instead determined

in light of a variety of factors. In re Poly-America, L.P., 262 S.W.3d at 348–49. The

determination regarding whether a contract or term is unconscionable is made in the

light of its setting, purpose, and effect. Id. Relevant factors include weaknesses in the

contracting process, fraud, and other invalidating causes, and the policy overlaps with

rules which render particular bargains or terms unenforceable on grounds of public

policy. Palm Harbor Homes, Inc., 195 S.W.3d at 677 (citing RESTATEMENT (SECOND) OF

CONTRACTS § 208, cmt. a (1979)). In considering an arbitration clause, allegations of

unconscionability “must specifically relate to the [arbitration clause] itself, not the

contract as a whole, if [unconscionability is] to defeat arbitration.” In re FirstMerit Bank,

N.A., 52 S.W.3d at 756.

The party asserting unconscionability bears the burden of proof. In re Turner

Bros. Trucking Co., 8 S.W.3d 370, 376–77 (Tex. App.—Texarkana 1999, orig.

proceeding). Whether a contract is contrary to public policy or unconscionable at the

time it is formed is a question of law. In re Poly America, L.P., 262 S.W.3d at 348–49;

Hoover Slovacek LLP v. Walton, 206 S.W.3d 557, 562 (Tex. 2006). Because a trial

court has no discretion to determine what the law is or apply the law incorrectly, its clear

failure to properly analyze or apply the law of unconscionability constitutes an abuse of

10
discretion. In re Poly-America, L.P., 262 S.W.3d at 349; Walker, 827 S.W.2d at 840; In

re Green Tree Servicing LLC, 275 S.W.3d at 602–03.

Unconscionability may be either procedural or substantive in nature. See In re

Palm Harbor Homes, Inc., 195 S.W.3d at 678. Generally speaking, procedural

unconscionability refers to the circumstances surrounding the adoption of the arbitration

provision, and substantive unconscionability concerns the fairness of the arbitration

provision itself. Id.; In re Halliburton Co., 80 S.W.3d 566, 571 (Tex. 2002) (orig.

proceeding). More specifically, procedural unconscionability relates to the making or

inducement of the contract, focusing on the facts surrounding the bargaining process.

TMI, Inc., 225 S.W.3d at 792; see Labidi v. Sydow, 287 S.W.3d 922, 927 (Tex. App.—

Houston [14th Dist.] 2009, no pet.) (stating that the success or failure of an argument

regarding procedural unconscionability is dependent upon the existence of facts which

allegedly illustrate unconscionability). The test for substantive unconscionability is

whether, “given the parties’ general commercial background and the commercial needs

of the particular trade or case, the clause involved is so one sided that it is

unconscionable under the circumstances existing when the parties made the contract.”

In re FirstMerit Bank, 52 S.W.3d at 757; see In re Palm Harbor Homes, Inc., 195

S.W.3d at 678. The principles of unconscionability do not negate a bargain because

one party to the agreement may have been in a less advantageous bargaining position,

but are instead applied to prevent unfair surprise or oppression. In re Palm Harbor

Homes, Inc., 195 S.W.3d at 679; In re FirstMerit Bank, 52 S.W.3d at 757.

As an initial matter, we note that Royston contends Lopez must show both

procedural and substantive unconscionability, and, because he did not contend that the

11
agreement was procedurally unconscionable, his argument must fail. We disagree.

The Texas Supreme Court has expressly held that “courts may consider both

procedural and substantive unconscionability of an arbitration clause in evaluating the

validity of an arbitration provision.” In re Halliburton Co., 80 S.W.3d at 572. The two

types of unconscionability are distinct. See In re FirstMerit Bank, N.A., 52 S.W.3d at

756.

Agreements to arbitrate disputes between attorneys and clients are generally

enforceable under Texas law; there is nothing per se unconscionable about an

agreement to arbitrate such disputes and, in fact, Texas law has historically condoned

agreements to resolve such disputes by arbitration. Cf. In re Poly-America, L.P., 262

S.W.3d 337, 348 (Tex. 2008) (discussing arbitration agreements between employers

and employees); see, e.g., In re Pham (Pham v. Letney), 314 S.W.3d 520, 526 (Tex.

App.—Houston [14th Dist.] 2010, no pet.) (combined appeal & orig. proceeding);

Chambers v. O'Quinn, 305 S.W.3d 141, 149 (Tex. App.—Houston [1st Dist.] 2009, pet.

denied); Labidi, 287 S.W.3d at 929; In re Hartigan, 107 S.W.3d 684, 692 (Tex. App.—

San Antonio 2003, orig. proceeding); Henry v. Gonzalez, 18 S.W.3d 684, 688–89 (Tex.

App.—San Antonio 2000, pet. dism'd); Porter & Clements, L.L.P. v. Stone, 935 S.W.2d

217, 219–22 (Tex. App.—Houston [1st Dist.] 1996, no writ). The Houston Courts of

Appeals have issued several opinions regarding attorney-client arbitration agreements

and have taken a strong position in favor of such agreements. Pham, 314 S.W.3d at

526; Chambers, 305 S.W.3d at 149; Labidi, 287 S.W.3d at 927–28. Under this line of

opinions, a fiduciary relationship between attorney and client does not exist before the

client signs the employment contract containing the arbitration agreement, and therefore

12
attorneys are not required to fully explain all implications of the arbitration clause. See,

.e.g., Pham, 314 S.W.3d at 526.2 Further, courts should defer to the Legislature with

regard to the imposition of any conditions on arbitration provisions between attorney

and client. See id. at 528; Chambers, 305 S.W.3d at 149. We note that cases

upholding attorney-client arbitration proceedings have engendered passionate and

articulate dissenting opinions:

Notwithstanding the application of settled contract law and public policy
favoring alternate dispute resolution, many respected jurists and lawyers
oppose arbitration because it is not cost effective, disgorges unwary
consumers of the right to a jury trial, and eliminates appellate review for
errors of law. I remain a proponent of arbitration. However, when the
legislature and rule-making authority in the legal profession fail to protect
consumers of legal services, I believe the courts have an obligation to act
because public perception of the legal profession's ability to self-police is
not favorable.

Pham, 314 S.W.3d at 528–29 (Seymore, J., dissenting); see also Henry, 18 S.W.3d at

692 (Hardberger, C.J., dissenting).

In the instant case, Lopez contends that the arbitration agreement is

unconscionable because it requires him to arbitrate all of his claims but allows Royston

to litigate its claims regarding costs and expenses. The agreement provides that the

parties are required to arbitrate “any disputes arising out of or connected with this

2
These Texas cases stand in contrast to cases from other jurisdictions which reach the opposite
conclusion regarding balancing public policies favoring arbitration and those policies which underlie the
attorney-client relationship. See, e.g., Hodges v. Reasonover, 103 So.3d 1069, 1071 (La. 2012) (“[W]e
hold there is no per se rule against arbitration clauses in attorney-client retainer agreements, provided the
clause is fair and reasonable to the client. However, the attorneys' fiduciary obligation to the client
encompasses ethical duties of loyalty and candor, which in turn require attorneys to fully disclose the
scope and the terms of the arbitration clause. An attorney must clearly explain the precise types of
disputes the arbitration clause is meant to cover and must set forth, in plain language, those legal rights
the parties will give up by agreeing to arbitration. In this case, the defendants did not make the necessary
disclosures, thus, the arbitration clause is unenforceable.”); Averill v. Cox, 145 N.H. 328, 338 (N.H. 2000)
(superseded by statute on other grounds) (holding that an attorney seeking to enforce an arbitration
clause in a fee agreement entered into after the commencement of the attorney-client relationship has the
burden of proving that it is fair and reasonable and that the client had full knowledge of the facts and of
his legal rights with relation thereto).

13
agreement (including, but not limited to the services performed by any attorney under

this agreement), except, however, that this does not apply to any claims made by the

firm for the recovery of its fees and expenses.” Royston concedes that “it is true that it

is unlikely that Royston would ever have a claim against Lopez that was not a claim for

fees.”

The Texas Supreme Court has specifically addressed the concept of

unconscionability where the terms of the arbitration agreement allow one party to litigate

but force the other party to arbitrate:

The de los Santoses also argue that the agreement's terms are
unconscionable because they force the weaker party to arbitrate their
claims, while permitting the stronger party to litigate their claims. They
point us to decisions in other jurisdictions that have found this type of
clause to be unconscionable. Most federal courts, however, have rejected
similar challenges on the grounds that an arbitration clause does not
require mutuality of obligation, so long as the underlying contract is
supported by adequate consideration. In any event, the basic test for
unconscionability is whether, given the parties' general commercial
background and the commercial needs of the particular trade or case, the
clause involved is so one-sided that it is unconscionable under the
circumstances existing when the parties made the contract. The principle
is one of preventing oppression and unfair surprise and not of disturbing
allocation of risks because of superior bargaining power. Here, the
Arbitration Addendum allows the bank to seek judicial relief to enforce its
security agreement, recover the buyers' monetary loan obligation, and
foreclose. Given the weight of federal precedent and the routine nature of
mobile home financing agreements, we find that the Arbitration Addendum
in this case, by excepting claims essentially protecting the bank's security
interest, is not unconscionable. We also recognize that the plaintiffs are
free to pursue their unconscionability defense in the arbitral forum.

In re FirstMerit Bank, N.A., 52 S.W.3d at 757 (internal citations and footnotes omitted).

see also In re Poly-America, L.P., 262 S.W.3d at 348; In re Halliburton Co., 80 S.W.3d

at 571.

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 Applying the basic test for unconscionability to the instant case, and examining

the relevant factors, we conclude that the specific agreement before the Court is so

one-sided that it is unconscionable under the circumstances existing when the parties

made the contract. Significantly, neither In re FirstMerit Bank nor In re Poly-America

involved the construction of a one-sided arbitration clause in the context of the creation

of an attorney-client relationship. We further note that none of the cases proffered by

the parties regarding the enforceability of arbitration clauses in attorney-client contracts

concerned a clause allowing the attorneys to litigate but prohibiting their clients from

doing so. Given the relationship between attorney and client, the relative expertise of

lawyers in understanding the differences between arbitration and litigation and the

relative costs thereof as compared to their clients, we find, under the specific facts of

this case, that the arbitration agreement, by specifically excepting claims protecting

Royston’s fees and costs, is unconscionable. The terms of the arbitration provision are

very unusual and, on their face, distinctly favor Royston over its relatively

unsophisticated client, Lopez. See Sidley Austin Brown & Wood, LLP v. J.A. Green

Dev. Corp., 327 S.W.3d 859, 865 (Tex. App.—Dallas 2010, no pet.). The arbitration

agreement is not a “bilateral agreement to arbitrate” and is most definitely one-sided

and oppressive. See In re Poly-America, 262 S.W.3d at 348–49; Labidi, 287 S.W.3d

922.

In reaching this conclusion, we note that Royston contends that the trial court

abused its discretion in denying arbitration if its decision was based on an advisory

ethics opinion requiring that lawyers provide clients with information relative to litigation

and arbitration before entering an arbitration agreement. The opinion rendered by the

15
Texas Ethics Commission suggests that it would be permissible under the Texas

Disciplinary Rules of Professional Conduct to include an arbitration clause in an

attorney-client contract only if the client was made aware of the advantages and

disadvantages of arbitration and had sufficient information to make an informed decision

as to whether to include the clause:

In order for the client’s agreement for arbitration to be effective, the
Committee believes that the client must receive sufficient information
about the differences between litigation and arbitration to permit the client
to make an informed decision about whether to agree to binding
arbitration. While most of the duties flowing from the lawyer-client
relationship attach only after the creation of the lawyer-client relationship,
some duties may attach before a lawyer-client relationship is established.
See paragraph 12 of the Preamble to the Texas Disciplinary Rules of
Professional Conduct. Rule 1.03(b) provides that “[a] lawyer shall explain
a matter to the extent reasonably necessary to permit the client to make
informed decisions regarding the representation.” The Committee is of the
opinion that this Rule applies when a lawyer asks a prospective client to
agree to binding arbitration in an engagement agreement. In order to
meet the requirements of Rule 1.03(b), the lawyer should explain the
significant advantages and disadvantages of binding arbitration to the
extent the lawyer reasonably believes is necessary for an informed
decision by the client. The scope of the explanation will depend on the
sophistication, education and experience of the client. In the case of a
highly sophisticated client such as a large business entity that frequently
employs outside lawyers, no explanation at all may be necessary. In
situations involving clients who are individuals or small businesses, the
lawyer should normally advise the client of the following possible
advantages and disadvantages of arbitration as compared to a judicial
resolution of disputes: (1) the cost and time savings frequently found in
arbitration, (2) the waiver of significant rights, such as the right to a jury
trial, (3) the possible reduced level of discovery, (4) the relaxed application
of the rules of evidence, and (5) the loss of the right to a judicial appeal
because arbitration decisions can be challenged only on very limited
grounds. The lawyer should also consider the desirability of advising the
client of the following additional matters, which may be important to some
clients: (1) the privacy of the arbitration process compared to a public
trial; (2) the method for selecting arbitrators; and (3) the obligation, if any,
of the client to pay some or all of the fees and costs of arbitration, if those
expenses could be substantial. Although the disclosure should vary from
client to client, depending on the particular circumstances, the overriding

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 concem is that the lawyer should provide information necessary for the
client to make an informed decision.
....
It is permissible under the Texas Disciplinary Rules of Professional
Conduct to include in an engagement agreement with a client a provision,
the terms of which would not be unfair to a typical client willing to agree to
arbitration, requiring the binding arbitration of fee disputes and malpractice
claims provided that (1) the client is aware of the significant advantages
and disadvantages of arbitration and has sufficient information to permit
the client to make an informed decision about whether to agree to the
arbitration provision, and (2) the arbitration provision does not limit the
lawyer’s liability for malpractice.

See OP. TEX. ETHICS COMM'N No. 586 (2008). In the proceedings below, Lopez

contended that this opinion supports the notion that for an arbitration clause in an

attorney-client contract to be considered valid, an attorney must make sure that the

client is fully informed regarding the clause's implications. However, as correctly noted

by both the Ethics Commission and Royston, ethics opinions are concerned with

matters of attorney discipline and are advisory rather than binding. Id. (“It is beyond the

authority of this Committee to address questions of substantive law relating to the

validity of arbitration clauses in agreements between lawyers and their clients.”); see

Sidley Austin Brown & Wood, LLP, 327 S.W.3d at 866; Pham, 314 S.W.3d at 527–28;

Labidi, 287 S.W.3d at 929. Accordingly, the trial court would have abused its discretion

if it found the arbitration provision was unconscionable on this basis alone. We

nevertheless conclude that the preceding ethics opinion, the disciplinary rules, and the

public policy considerations surrounding the attorney-client relationship are some of the

factors that can be considered when determining whether or not a contract is

unconscionable. See In re Palm Harbor Homes, Inc., 195 S.W.3d at 677; see, e.g.,

Cruse v. O'Quinn, 273 S.W.3d 766, 775 (Tex. App.—Houston 14th Dist. 2008, pet.

denied) (stating that the disciplinary rules do not give rise to private causes of action;

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however, a court may deem these rules to be an expression of public policy). In this

regard, we agree with the recent analysis of Texas Supreme Court authority on the

attorney-client relationship as expressed by the Dallas Court of Appeals:

When interpreting and enforcing an attorney-client agreement, the Texas
Supreme Court has admonished us to be mindful of the ethical
considerations overlaying the contractual relationship between an attorney
and client. Hoover Slovacek LLP v. Walton, 206 S.W.3d 557, 560 (Tex.
2006). An attorney has a special responsibility to maintain the highest
standards of conduct and fair dealing when contracting with a client or
otherwise taking a position adverse to the client's interests. Id. To place
the burden of clarifying attorney-client agreements on the attorney is
justified, not only by the attorney's greater knowledge and experience with
respect to such agreements, but also by the trust the client has placed in
the attorney. Levine v. Bayne, Snell & Krause, Ltd., 40 S.W.3d 92, 95
(Tex. 2001). According to the Restatement of the Law Governing
Lawyers, contracts between an attorney and client should first be
construed from the standpoint of a reasonable person in the client's
circumstances. See RESTATEMENT (THIRD) OF THE LAW GOVERNING
LAWYERS § 18 cmt. h. The lawyer thus bears the burden of ensuring that
the contract states any terms diverging from a reasonable client's
expectations. Id. Although much of the case law illustrating this
construction principle addresses disputes over fee terms, the principle is
applied to other terms as well. Id.

Falk & Fish, L.L.P., v. Pinkston's Lawnmower & Equip., Inc., 317 S.W.3d 523, 528–29

(Tex. App.—Dallas 2010, no pet.); see also Rawhide Mesa-Partners, Ltd. v. Brown

McCarroll, L.L.P., 344 S.W.3d 56, 60 (Tex. App.—Eastland 2011, no pet.) (“A fiduciary

duty is the highest duty recognized by law.”); Perez v. Kirk & Carrigan, 822 S.W.2d 261,

265 (Tex. App.—Corpus Christi 1991, writ denied) (“[T]he relationship between attorney

and client has been described as one of uberrima fides, which means, ‘most abundant

good faith,’ requiring absolute and perfect candor, openness and honesty, and the

absence of any concealment or deception.”); Chien v. Chen, 759 S.W.2d 484, 495 n. 6

(Tex. App.—Austin 1988, no writ) (observing that the attorney client relationship is a

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fiduciary relationship where the law demands of one party an unusually high standard of

ethical or moral conduct with reference to another).

V. RESPONSE TO DISSENT

We have fully reviewed and carefully considered the dissenting opinion in this

case. As an initial matter, we note that we do not disagree with the dissent as to the

controlling law regarding unconscionability generally or its specific application in the

context of attorney-client arbitration clauses. See, e.g., In re FirstMerit Bank, N.A., 52

S.W.3d at 757. The dissent posits, however, that Lopez’s arguments can be restated

as “the fact that the arbitration agreement arose between a lawyer and prospective

client makes the contract unconscionable at the outset.” The dissent further contends

that “a fiduciary relationship may arise prior to the creation of an attorney-client

relationship,” but Lopez failed to carry his burden to prove that the arbitration clause

was unconscionable because he failed to present evidence regarding unconscionability

and “evidence regarding the discussions or negotiations to show what occurred in this

case.” In short, the dissent misinterprets the majority opinion to hold that the agreement

was unconscionable despite the lack of evidence to show or establish a fiduciary

relationship between Lopez and Royston.

The dissent’s interpretation of the majority opinion is incorrect. First, as noted

previously, arbitration clauses in attorney-client employment contracts are not

presumptively unconscionable. See Pham, 314 S.W.3d at 526 (rejecting the “notion

that arbitration provisions in attorney-client contracts are inherently unconscionable

without additional restrictions.”). Second, and more fundamentally, the majority’s

opinion is not premised on a fiduciary relationship, if any, between a prospective client

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and lawyer. See, e.g., id. at 526–27 (discussing the potential for a “special, fiduciary, or

attorney-client relationship to arise prior to entering a formal agreement”). Rather,

under the majority’s analysis, the arbitration clause at issue in this case is so one-sided

that it is unconscionable as a matter of law given the circumstances existing when the

parties made the contract, that is, the inception of an attorney-client relationship, when

the contract gave Royston the right to withdraw as counsel at any time for any reason,

exclusively favored Royston with the right to litigate “any claims made by the firm for the

recovery of its fees and expenses,” compelled Lopez to arbitrate all of his disputes with

Royston, including any malpractice claims, and provided that Lopez was responsible for

all costs and expenses regardless of the outcome of the dispute for which Royston was

retained. Third, Lopez had no evidentiary burden with respect to his contention that the

arbitration agreement is substantively unconscionable as a matter of law. See Hoover,

206 S.W.3d at 562; Sec. Serv. Fed. Credit Union v. Sanders, 264 S.W.3d 292, 298

(Tex. App.—San Antonio 2008, no pet.).

Based on the foregoing, we respectfully disagree with the dissent’s analysis of

this case.

VI. CONCLUSION

The Court, having examined and fully considered the matters in these causes, is

of the opinion that the trial court’s order denying Royston’s motion to compel arbitration

should be affirmed. Accordingly, we lift the stay that was previously imposed in these

matters and we affirm the order of the trial court. Having affirmed the order in the

appeal, we need not further address the identical issues raised by mandamus, and we

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deny the requested relief in the original proceeding. Any pending motions are

dismissed as moot.

__________________________
GINA M. BENAVIDES,
Justice

Dissenting Opinion by
Justice Gregory T. Perkes.

Delivered and filed the
27th day of June, 2013.

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