Abdolrahim Sharifan v. Lloyd Kelley

Reversed and Remanded and Memorandum Opinion filed April 14, 2022.

In The

Fourteenth Court of Appeals

NO. 14-20-00197-CV

ABDOLRAHIM SHARIFAN, Appellant

V.
LLOYD KELLEY, Appellee

On Appeal from the 215th District Court
Harris County, Texas
Trial Court Cause No. 2019-18502

MEMORANDUM OPINION

Appellant Abdolrahim Sharifan appeals the judgment against him upholding
the arbitration award in favor of appellee Lloyd Kelley. In two issues appellant
argues that we should vacate the arbitrator’s award on the ground of evident
partiality of the arbitrator and because the arbitration clause was unconscionable.
We reverse and remand.
 I. EVIDENT PARTIALITY

In his first issue, appellant argues that the arbitration award should be
vacated on the ground of evident partiality because the arbitrator, David West,
failed to disclose the prior attorney-client relationship between appellee and West
or West’s law firm. Appellee argues that appellant has failed to preserve error or
waived his argument on appeal because appellant did not (1) object in writing prior
to the first arbitration hearing pursuant to the agreement, (2) provide a full record,
(3) obtain a ruling on his motion to vacate, or (4) request or obtain findings of fact
and conclusions of law.

A. General Legal Principles

Review of an arbitration award is “extraordinarily narrow.” Amoco D.T. Co.
v. Occidental Petroleum Corp., 343 S.W.3d 837, 841 (Tex. App.—Houston [14th
Dist.] 2011, pet. denied). “Under the TAA, a trial court shall vacate an award if
the rights of a party were prejudiced by the ‘evident partiality of an arbitrator
appointed as a neutral arbitrator.’” In re Marriage of Piske, 578 S.W.3d 625, 628
(Tex. App.—Houston [14th Dist.] 2019, no pet.) (quoting Tex. Civ. Prac. & Rem.
Code § 171.088(a)(2)(A)). A party seeking to vacate an arbitration award bears the
burden of presenting a complete record that establishes grounds for vacatur. Id.
“Courts must vacate arbitration awards when ‘the rights of a party were prejudiced
by . . . evident partiality by an arbitrator appointed as a neutral arbitrator.’” Forest
Oil Corp. v. El Rucio Land & Cattle Co., 518 S.W.3d 422, 431 (Tex. 2017)
(quoting Tex. Civ. Prac. & Rem. Code § 177.088(a)(2)(A)).

We review a trial court’s legal decision of whether to vacate an arbitration
award de novo. Builders First Source-S. Tex., LP v. Ortiz, 515 S.W.3d 451, 455
(Tex. App.—Houston [14th Dist.] 2017, pet. denied). We review any factual
findings for legal and factual sufficiency. Marriage of Piske, 578 S.W.3d at 629.
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However, when there are no “material conflicts” in the evidence, then no deference
is required. Id.

“[A] prospective neutral arbitrator . . . exhibits evident partiality if he or she
does not disclose facts which might, to an objective observer, create a reasonable
impression of the arbitrator’s partiality.” Burlington N. R. Co. v. TUCO, Inc., 960
S.W.2d 629, 636 (Tex. 1997). “[T]his evident partiality is established from the
nondisclosure itself, regardless of whether the nondisclosed information
necessarily establishes partiality or bias.” Id. “While a neutral arbitrator need not
disclose relationships or connections that are trivial, the conscientious arbitrator
should err in favor of disclosure.” Id. at 637. “[T]o preserve the integrity of the
selection process, we hold that a party who could have vetoed the arbitrator at the
time of selection may disqualify the arbitrator during the course of the proceedings
based on a new conflict which might reasonably affect the arbitrator’s
impartiality.” Id.

B. Background

Appellee was appellant’s attorney in a litigation matter wherein appellant
was awarded a judgment (Underlying Litigation). A dispute arose between
appellee and appellant regarding how to calculate appellee’s attorney’s fees.
Appellee sought to have the matter arbitrated pursuant to the arbitration provision
in the fee agreement.

The arbitration agreement provided in pertinent part that:

[Appellee] will send [appellant] a list of three retired or former Texas
court judges and justices. The parties will utilize the 30 days to
conduct their own diligence on the proposed arbitrators. [Appellant]
will then select a judge from the list and send it back to [appellee]. If
[appellant] does not return the list within 30 days, then [appellee] shall
select from the list and notify [appellant]. . . . If the judge selected is

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 unable or declines to serve, then the process will be repeated by
[appellee] supplying three names, . . . and then [appellant] or
[appellee] will select accordingly until an arbitrator is selected. Once
selected, the arbitrator shall establish the pre-arbitration procedures
and the arbitration procedure. All objections to the arbitrator must be
made in writing before the first hearing set by the arbitrator is held or
the parties agree that all objections to the arbitrator are thereby
waived. Any objection to the arbitrator selected or to the arbitrator’s
fee must be made before the arbitrator renders a decision or said
objection is waived. The Texas Rules of Evidence and Rules or
Procedure shall guide the process and proceedings until altered by the
arbitrator.
Pursuant to the arbitration provision, appellee submitted three names to
appellant, one of whom was David West. Appellant agreed to West as an
arbitrator but “conditioned” the agreement on his ex-wife’s participation in the
arbitration. Appellant’s ex-wife refused to participate. Appellant then alleged that
he found out that he hired West, on appellee’s recommendation, as an expert
witness in the Underlying Litigation. Appellant asked for a new arbitrator and
appellee refused to agree to a different arbitrator.

Appellant asked the trial court to intervene in the matter and appoint an
arbitrator due to appellant’s concerns with West due to his involvement in the
Underlying Litigation as an expert witness. After listening to arguments from the
parties the trial court appointed another arbitrator. However, this arbitrator had a
conflict and declined to serve. Thereafter, the trial court granted appellee’s motion
to compel West as arbitrator. Appellant objected to West’s appointment and
requested the trial court appoint another former judge as the arbitrator.

Within a few days West confirmed he would serve as the arbitrator for the
dispute and set a hearing for October 22. The day before the arbitration hearing,
appellant submitted written objections to West. In his objection appellant argued
that West could not serve as an impartial arbitrator on a matter in which he was an

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expert witness. Appellant also argued that West “has a duty to evaluate and recuse
himself.” Appellant also requested that West provide disclosures of any prior or
current financial dealings, including appellee’s “use or desire of West or any
member of West’s firm for any purpose be fully disclosed.” Attached to the
objection were two exhibits: (1) a 2015 email from appellee’s firm to appellant
requesting money to fund expenses for their expert witness, West; and (2) a March
2012 expert witness designation filed for appellant by appellee in the Underlying
Litigation designating West as an expert witness.

West rendered an order denying appellant’s motion to recuse. West then set
an arbitration hearing for November 12, 2019. In the afternoon on the day prior to
the hearing, West emailed the parties an affidavit “[i]n response to questions
regarding conflicts of interest.” Therein West disclosed that he had been paid
$5,000.00 by appellant for West’s services as an expert witness in the underlying
litigation and that appellant still owed $4,830.50 to West for such services. West
attested that he had also served as an expert witness on a legal malpractice case
with appellee in 2005. West concluded that “as I review these last fourteen years, I
had about the same amount of contact with [appellant] as I had with [appellee], and
I have no predetermined notions about either one of them.”

At the hearing, West and the parties discussed West’s disclosures. Appellant
argued that he believed the financial dealings to be an issue that could affect
West’s impartiality: “in this particular case, we do have a situation where the
financial expenses — the list of expenses as between [appellee] and [appellant] are
an issue and [West’s] actual expenses are part of that calculation.” West indicated
that the financial dealings “should be no concern . . . it may be amusing but it’s
not a concern” and “that’s a non-issue because I don’t - - it’s not an issue with
me.” Appellant requested confirmation that West had sworn that his disclosure

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affidavit contained all of West’s involvement with appellee over the prior fourteen
years. When West confirmed that it was, appellant confronted West with a filing
wherein West represented appellee as his attorney in a lawsuit (Undisclosed
Lawsuit). West indicated that his son was counsel for appellee in the Undisclosed
Lawsuit, but appellant pointed out that the signature line on the filings included
West’s name and bar number. West admitted that his name was included on the
filing and that it was his law firm but indicated that his son was the one in charge
of the case. West then remembered the case, stating, “We sued Metro plenty of
times. My son is the one who sues them.” West remembered that he would help
his son and remembered the general subject matter that was litigated. West could
not remember if appellee had paid his firm or if the firm was paid by the opposing
party as part of the judgment. West stated that appellee “was the instrument that
we used to . . . sue MTA. We sued him [sic] more than once.” West also stated
that he never appeared and never interviewed anybody in the Undisclosed Lawsuit.
Appellant then confronted West with a transcript indicating that West had appeared
as counsel for appellee at a hearing in the Undisclosed Lawsuit. In response West
stated, “You’re trying - - you’re just being - - I think you’re being silly and that’s -
- that’s how much - - much weight I’m putting in all this you’re asking me about.
It happened, what nine years ago. And I - - first off, I never remember
representing [appellee], . . . . I’ve heard your complaint and it does not impress
me.”

Appellant then confronted West with his firm’s website that promotes its
representation of appellee in the Undisclosed Lawsuit. Appellant also questioned
whether West had diligently searched his records to uncover any other potential
conflicts. West stated it was an inadvertent error on his part and agreed that his
disclosure affidavit was inaccurate but not intentionally so. Appellee denied that

6
West ever represented him but admitted that West’s son had. Appellant indicated
that he “did not want to proceed with arbitration with inaccurate disclosures.”
West denied appellant’s motion to recuse and continued to hear the merits of the
dispute. Appellant refused to participate in the arbitration and left after West made
his ruling on recusal.

Shortly thereafter West rendered a final award in the arbitration to appellee.
Appellee filed a motion to confirm the arbitration award in the trial court and set it
for an emergency hearing. Four days later and before the trial court rendered
judgment for appellee, appellant filed a motion to vacate the arbitrator’s award and
response in opposition to appellee’s motion to confirm, attaching as exhibits a
reporter’s record of the November arbitration hearing, West’s disclosure affidavit
and attachments, the petition filed in the Undisclosed Lawsuit on behalf of appellee
by West’s law firm, a reporter’s record from a hearing in the Undisclosed Lawsuit,
and a printed version of the web page for West’s law firm. Appellee filed a
response to appellant’s motion to vacate but did not attach any exhibits or further
evidence.

On December 13, 2019, the trial court rendered a final judgment and
confirmed the arbitration award in favor of appellee. The final judgment states that
the trial court considered the motion to confirm the arbitration award and “any
timely filed responses to same, if any.”

C. Analysis

It is undisputed that West’s law firm represented appellee in a lawsuit
approximately nine years before the arbitration in this case. It is undisputed that
West did not disclose this representation in his disclosure affidavit or attachments.
A prior attorney-client relationship is one that might, to an objective observer,
create a reasonable impression of the arbitrator’s partiality. See Tex. Commerce
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Bank v. Universal Tech. Inst. of Tex., Inc., 985 S.W.2d 678, 681 (Tex. App.—
Houston [1st Dist.] 1999, pet. dism’d w.o.j.) (failure to disclose prior attorney-
client relationship between neutral arbitrator and party to arbitration might create a
reasonable impression of partiality); J.D. Edwards World Sols. Co. v. Estes, Inc.,
91 S.W.3d 836, 843–44 (Tex. App.—Fort Worth 2002, pet. denied) (same); see
also TUCO, Inc., 960 S.W.2d at 636.

Appellant was not required to prove that West was actually biased or
prejudiced in order to establish evident partiality. See Tenaska Energy, Inc. v.
Ponderosa Pine Energy, LLC, 437 S.W.3d 518, 527 (Tex. 2014); Tex. Commerce
Bank, 985 S.W.2d at 681. Instead, the nondisclosure itself establishes the evident
partiality. TUCO, Inc., 960 S.W.2d at 636; see also Tenaska Energy, Inc, 437
S.W.3d at 527 (“[A]lthough intent may be relevant to establishing actual bias or
partiality, we made clear in TUCO that evident partiality is established from the
nondisclosure itself.”). Because appellant had the right to veto West at the time of
selection, appellant maintained that right based on the new conflict revealed during
the course of the proceedings that might reasonably have affected West’s
impartiality to an objective observer. See TUCO, Inc., 960 S.W.2d at 636. West’s
failure to disclose information that might lead an objective observer to question his
partiality establishes his evident partiality. See Tenaska Energy, Inc., 437 S.W.3d
at 527.

D. Objection in Writing

Appellee argues that appellant failed to object in accord with the arbitration
provision and, therefore, waived his argument regarding evident partiality.
Appellee argues that because appellant failed to submit his complaints regarding
West’s nondisclosure in writing prior to the hearing, appellant has waived his

8
complaint. Appellant argues that a contractual waiver provision cannot be used to
circumvent disclosure requirements.

A party who learns of a conflict prior to the arbitrator’s decision must
promptly object to avoid waiving the complaint. TUCO, Inc., 960 S.W.2d at 637
n.9. While a party cannot waive an objection based on a conflict that they knew
nothing about, there could be waiver if the complaining party knew all of the facts
and did not complain prior to the conclusion of the arbitration. See Mariner Fin.
Grp., Inc. v. Bossley, 79 S.W.3d 30, 36 (Tex. 2002) (Owen, J., concurring). While
appellant clearly objected to West’s nondisclosure at the hearing, he did not file a
written objection. Thus, we must determine whether such a failure, per the parties’
agreement, constitutes a waiver of the objection.

The arbitration provision has two sentences regarding objections:

All objections to the arbitrator must be made in writing before the first
hearing set by the arbitrator is held or the parties agree that all
objections to the arbitrator are thereby waived. Any objection to the
arbitrator selected or to the arbitrator’s fee must be made before the
arbitrator renders a decision or said objection is waived.
Here, appellant complied with the second sentence by objecting at the hearing on
the record because the objection was made prior to the arbitrator’s decision.
Applying the first sentence to the facts herein, appellant cannot be held to waive an
objection that he was unaware of and that was not disclosed prior to the first
hearing. See Bossley, 79 S.W.3d at 33 (majority op.). The disclosures were
provided less than a day before the first hearing. At the beginning of the hearing,
appellant raised the objection and issues with West’s disclosures. These actions
are not consistent with waiver.1

1
Under the facts herein waiver would incentivize nondisclosure and punish counsel for
proactively reviewing and investigating disclosures, and it would be contrary to our directive to
“be scrupulous in safeguarding the impartiality of arbitrators.” TUCO, Inc., 960 S.W.2d at 633.
9
 Further, we have found no case in which a Texas court determined whether
an arbitrating party waives an arbitrator’s conflict if the party fails to investigate
the arbitrator’s background. See Amoco D.T. Co., 343 S.W.3d at 845; Estes, Inc.,
91 S.W.3d at 843–44 (rejecting argument that party seeking vacatur should have
discovered nondisclosure sooner because information was in a Martindale-Hubble
listing); see also Bossley, 79 S.W.3d 30, 33–34 (declining to adopt review of
whether nondisclosure was discoverable).

E. Reporter’s Record of Hearings

Appellee argues that appellant failed to preserve error because appellant did
not provide a complete record of the arbitration proceeding or provide or obtain a
record of the hearing before the trial court on appellee’s motion to confirm and
appellant’s motion to vacate.

Appellee cites to numerous cases supporting his argument that appellant has
waived his argument because of this failure, but those cases involved vacating an
arbitration award based on arbitrator misconduct or mistake during the arbitration
proceedings, wherein the parties would generally need the entire record to establish
their vacatur ground. See Statewide Remodeling, Inc. v. Williams, 244 S.W.3d
564, 569 (Tex. App.—Dallas 2008, no pet.) (seeking vacatur based on arbitrator
mistake); GJR Mgmt. Holdings, L.P. v. Jack Raus, Ltd., 126 S.W.3d 257, 263 (Tex.
App.—San Antonio 2003, pet. denied) (seeking vacatur based on arbitrator
misconduct). But see Centex /Vestal v. Friendship West Baptist Church, 314
S.W.3d 677, 684 (Tex. App.—Dallas 2010, pet. denied) (considering issue of
whether arbitrator exceeded his power or scope of authority without complete
record of arbitration hearing); Grand Homes 96, L.P. v. Loudermilk, 208 S.W.3d
696, 706 (Tex. App.—Fort Worth 2006, pet. denied) (noting lack of record of the

10
arbitration proceeding but considering pleadings and agreement in concluding
arbitrator did not exceed his authority). Thus, appellee’s cases are distinguishable.

It is unnecessary for purposes of this appeal for appellant to bring forth the
entire reporter’s record of the arbitration proceedings because the only relevant
inquiry is whether West disclosed the former attorney-client relationship with
appellee to appellant, not whether the arbitrator was actually biased or prejudiced
in favor of appellee. See Tenaska Energy, Inc., 437 S.W.3d at 527; TUCO, Inc.,
960 S.W.2d at 636; Tex. Commerce Bank, 985 S.W.2d at 681.

Appellee next argues that appellant was required to provide a record of the
trial court’s hearing on confirmation of the arbitration award. We disagree. “A
reporter’s record is necessary only for evidentiary hearings; ‘for nonevidentiary
hearings, it is superfluous.’” Crawford v. XTO Energy, Inc., 509 S.W.3d 906, 910
(Tex. 2017) (quoting Michiana Easy Livin’ Country, Inc v. Holten, 168 S.W.3d
777, 782 (Tex. 2005)). There is no indication in the record or in the briefs that at
the hearing the parties presented evidence, the trial court received evidence at the
hearing, or that the trial court did anything but listen to arguments from counsel.
Appellee does not contend that the hearing was evidentiary, and appellant denies
that it was. See Tex. R. App. P. 38.1(g) (may presume true uncontroverted
statements of fact); see also Holten, 168 S.W.3d at 783 (“Either party . . . may
allege that a hearing was evidentiary, but that allegation must be specific. Merely
asserting that the trial court ‘considered evidence at the hearing’ is not enough–
trial courts do that when a hearing is conducted entirely on paper, or based solely
on affidavits and exhibits filed beforehand.”). In the final judgment, the trial court
indicates that it considered the motion, response, and argument of counsel, if any.
See Crawford, 509 S.W.3d at 910 (reviewing language of order and what trial
court indicated it considered in making its ruling to determine whether the trial

11
court conducted an evidentiary hearing). Further, evidentiary hearings on
confirmation or vacatur of an arbitration award are only held when necessary. See
Broemer v. Houston Lawyer Referral Serv., 407 S.W.3d 477, 481 n.12 (Tex.
App.—Houston [14th Dist.] 2013, no pet.). Because there is no allegation or
indication that the hearing before the trial court was evidentiary, appellant has not
waived his issue by not bringing forth a reporter’s record of that hearing. See
Crawford, 509 S.W.3d at 910 (holding no waiver of issue and that the record was
adequate despite lack of reporter’s record for non-evidentiary hearing).

F. Ruling on Motion to Vacate

Next appellee argues that appellant failed to obtain a ruling on his motion to
vacate and, as a result, has failed to preserve this issue for appeal. We have
previously held that a trial court implicitly denies an application to vacate by
rendering a final judgment on the award. See Ctr. Rose Partners, Ltd. v. Bailey,
587 S.W.3d 514, 531 (Tex. App.—Houston [14th Dist.] 2019, no pet.); Kreit v.
Brewer & Pritchard, P.C., 530 S.W.3d 231, 236 n.6 (Tex. App.—Houston [14th
Dist.] 2017, pet denied). Here the final judgment references the vacatur motion
indirectly:

After considering [appellee’s] Motion and the Arbitrator’s Final
Award on the Merits, as well as any response and/or argument of
counsel pertinent to this dispute, if any, the Court is of the opinion and
finds that [appellee’s] Motion should be GRANTED and final
judgment should be entered accordingly disposing of all remaining
issues and all parties in this lawsuit.
...
This judgment disposes of all parties and all issues in this case and is
an appealable decision. All relief not granted herein is denied.
This general language is sufficient to constitute a ruling on appellant’s vacatur
motion. See Ctr. Rose Partners, 587 S.W.3d at 530 (language “all claims not

12
expressly granted herein are hereby denied” sufficient to constitute a ruling on
affirmative defense of party).

G. Findings of Fact and Conclusions of Law

Appellee next argues that because appellant failed to request or obtain
findings of fact or conclusions of law, we must imply certain fact findings. To the
extent disputes about material facts exist in the context of an evident partiality
claim, we review the trial court’s resolution of those disputes for legal and factual
sufficiency. Marriage of Piske, 578 S.W.3d at 629. Where, as here, no findings of
fact or conclusions of law have been issued by the trial court, we infer all facts
supported by the evidence and necessary to support the judgment. Id. But if an
evident-partiality determination did not require the resolution of material conflicts,
there are no factual findings to which we must defer. Id. Here, no material facts
were in dispute regarding West’s nondisclosure. Appellee and West both admitted
that West’s law partner, Michael West, represented appellee in the Undisclosed
Lawsuit. West admitted that he had failed to disclose this prior relationship in his
disclosure affidavit.

Appellee argues that we should imply certain findings, namely that (1) any
relationship between appellee and West was disclosed prior to the agreement to use
West as an arbitrator; (2) that West did not have an improper motive and could be
fair; and (3) any relationship between appellee and West was trivial. However,
none of these implied findings are supported by the evidence. See Retamco Op.,
Inc. v. Republic Drilling Co., 278 S.W.3d 333, 337 (Tex. 2009) (“When, as here,
the trial court does not make findings of fact and conclusions of law in support of
its ruling, ‘all facts necessary to support the judgment and supported by evidence
are implied.’” (quoting BMC Software Belgium, N.V. v. Marchland, 83 S.W.3d
789, 795 (Tex. 2002)). There is no evidence to show that the prior attorney-client

13
relationship was disclosed prior to the parties’ agreement to use West as the
arbitrator, and the evidence demonstrates that it was not disclosed. There is also
no evidence to support that the relationship between West’s firm and appellee was
trivial. The fact that West’s firm used appellee’s case as a representative client on
its public website belies the claim that the relationship and representation was
“trivial.” See Estes, Inc., 91 S.W.3d at 844 (“The fact that [arbitrator’s] law firm
included [party to arbitration] as a representative client in its Martindale-Hubble
listing belies [arbitrator’s] claims that his relationship with [party to arbitration]
was trivial.”).

Last appellee argues that a “material fact” exists as to when appellant knew
about the Undisclosed Lawsuit and that “if appellant had knowledge of these facts
then he either waived the issue or he was sitting in ambush waiting to see the
results of the arbitration award and then pull out his ‘do-over’ card.” We find this
argument uncompelling. Appellant raised the issue of West’s prior relationship
with appellee during the first arbitration hearing and prior to the final award.
Further, it was West’s duty to disclose the prior relationship between his firm and
appellee. See Bossley, 79 S.W.3d at 35 (“[T]he concurrence would excuse even an
arbitrator’s knowing concealment of a relationship evidencing partiality as long as
there are facts from which the arbitrator can presume the complaining party knew
it too. But the whole purpose of an arbitrator’s duty to disclose is to avoid this
very type of speculative presumption and let the parties to the arbitration make the
call.”); see also id. at 36 (Owen, J., concurring) (“What the losing party to an
arbitration knew or should have known does not answer the question of whether an
arbitrator’s nondisclosure exhibits evident partiality.”); Houston Vill. Builders, Inc.
v. Falbaum, 105 S.W.3d 28, 35 (Tex. App.—Houston [14th Dist.] 2003, pet.
denied) (“[R]egardless of whether the [party] knew or should have known of the

14
Arbitrator’s attorney-client relationship with GHBA, the Arbitrator’s failure to
disclose this relationship is evidence of his partiality.”).

We sustain appellant’s first issue.

II. UNCONSCIONABILITY

Appellant next argues that the arbitration agreement is unconscionable
because it allows appellee to “create a hand-picked list of arbitrators and forces
[appellant] to choose among them.”

A. General Legal Principles

A party seeking to compel arbitration bears the burden that an arbitration
agreement exists and that the claims presented fall within its scope. Henry v. Cash
Biz, LP, 551 S.W.3d 111, 115 (Tex. 2018); Nationwide Coin & Bullion Reserve,
Inc. v. Thomas, 625 S.W.3d 498, 503 (Tex. App.—Houston [14th Dist.] 2020, pet.
denied). Here, there is no dispute that an arbitration agreement exists. Thus, the
burden shifts to the party opposing arbitration to prove an affirmative defense to
the provision’s enforcement, such as unconscionability, to avoid arbitration. See
Henry, 625 S.W.3d at 115. “If there is conflicting evidence as to the material facts
necessary to determine the issues, the trial court is to conduct an evidentiary
hearing to resolve the dispute.” Thomas, 625 S.W.3d at 503.

“The ultimate issue of whether an arbitration agreement is against public
policy or unconscionable is a question of law for the court.” Royston, Rayzor,
Vickery, & Williams, LLP v. Lopez, 467 S.W.3d 494, 499 (Tex. 2015). We defer to
the trial court’s factual determinations if they are supported by the evidence and
review the legal determinations de novo. Thomas, 625 S.W.3d at 503. If there are
no factual disputes, the standard of review is de novo. Lopez, 467 S.W.3d at 499.

15
 Unconscionability is a defense to an arbitration agreement. Lawson v.
Archer, 267 S.W.3d 376, 382 (Tex. App.—Houston [14th Dist.] 2008, no pet.).
Unconscionable contracts are unenforceable. In re Olshan Foundation Repair Co.,
LLC, 328 S.W.3d 883, 892 (Tex. 2010) (orig. proceeding). Texas law recognizes
both substantive and procedural unconscionability. Id. “Substantive
unconscionability refers to the fairness of the arbitration provision itself, whereas
procedural unconscionability refers to the circumstances surrounding adoption of
the arbitration provision.” In re Palm Harbor Homes, Inc., 195 S.W.3d 672, 677
(Tex. 2006). “Generally, a contract is unconscionable if, ‘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.’” Olshan, 328 S.W.3d
at 892 (quoting In re FirstMerit Bank, 52 S.W.3d 749, 757 (Tex. 2001) (orig.
proceeding)).

Here, appellant complains that the arbitration clause is substantively
unconscionable or unfair because appellee controls the composition of the list from
which the potential arbitrator is drawn. See Bonded Builders Home Warranty
Assoc. of Tex. v. Rockoff, 509 S.W.3d 523, 535 (Tex. App.—El Paso 2016, no
pet.); Lawson, 267 S.W.3d at 383. Appellant did not submit any additional
evidence to prove his unconscionability defense but instead relied on the language
of the arbitration provision to support his defense. See Lopez, 467 S.W.3d at 500
(noting reliance solely on language of the contract to support unconscionability
defense to arbitration).

Here, the arbitration clause provides, in relevant part, that:

Said binding arbitration shall be by a retired or former Texas
judge selected according to this section. . . . [T]he Firm will send the
Client a list of three retired or former Texas court judges or justices. . .
16
 . The client(s) will then select a judge from the list and send it back to
the Firm.
Appellant contends that the arbitration selection method is unconscionable because
the “provision allows [appellee] to create a hand-picked list of arbitrators and
forces [appellant] to choose among them.”

There is legal support for this contention, but no such case has been decided
on this basis in Texas, although two have come close. See Lawson, 267 S.W.3d at
384; Rockoff, 509 S.W.3d at 536.

In Lawson, the arbitration provision provided that the parties were to agree
mutually on three neutral arbitrators, that the arbitrators must be “knowledgeable
in, and familiar with, the home inspection profession,” and that the arbitrators
belong to specified professional organizations. Lawson, 267 S.W.3d at 383. This
court concluded that because the arbitration provision did not allow one party to
“create a list of a limited number of specific arbitrators from which the parties
select a panel” but instead “it chose three organizations, none of which, on its face,
is necessarily biased,” and because the three appointed arbitrators were to be
“neutral” and selected by “mutual agreement” of the parties, the provision was not
unconscionable. Id. at 384.

In Rockoff, the court rejected the argument that the arbitration provision
therein was unconscionable on its face. Rockoff, 509 S.W.3d at 536. The court
came to the conclusion because the provision provided that arbitration be
conducted before a “neutral third party,” thus precluding one side from
“designating a captive arbitration company as a potential source of arbitrators.”
The court further found it compelling that the agreement provided for one party to
designate potential arbitration companies as opposed to “specific arbitrators.” Id.
“That distinction places an important step between BBWG and the actual

17
arbitrator, because whatever company Rockoff selects will then present some list
of potential arbitrators from which the parties will designate the actual decision
maker.” Id. (citing Lawson, 267 S.W.3d at 384).

Here the arbitration provision lacks that “important step” in place in both
Lawson and Rockoff. Under the provision at issue, appellee picks three names
from a group of retired or former Texas judges and submits this short list to
appellant. Appellant then chooses the arbitrator from this shortlist created by
appellee. There is also no requirement in the provision that the selected arbitrator
be “neutral.” That said, appellant asks this court to declare the portion of the
arbitration provision that provides for selecting the arbitrator unconscionable as a
matter of law. Two of the cases cited by appellant for this proposition had much
more evidence than this court in support of unconscionability. See McMullen v.
Meijer, Inc., 355 F.3d 485 (6th Cir. 2004); Hooters of Am. v. Phillips, 173 F.3d
933 (4th Cir. 1999).

In Hooters of America v. Phillips, the court analyzed the many ways the
arbitration provision favored the employer over its employees. 173 F.3d at 938.
For example, employees were required to file a written statement of claims that
would later limit the basis on which they could raise issues against the employer,
while the employer was not required to file or provide anything in writing to the
employee and could add new issues whenever it wanted to. Id. at 938–39. The
employer would also choose a list of potential arbitrators, without restriction as to
who the employer could pick. Id. From the employer’s chosen list, the employee
would pick one arbitrator, the employer would pick one, and the two chosen
arbitrators would pick a third arbitrator. Id. at 938. The employee presented
evidence that the arbitration provision as a whole was so one-sided that no
reputable arbitration firm would participate. Id. at 939. Because the arbitration

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provision as a whole was “egregiously unfair” the court concluded the agreement
was unenforceable. Id. at 940.

In McMullen v. Meijer, Inc., the arbitration provision provided that the
employer would select a pool of five arbitrators, each of whom must be (1) an
attorney, (2) unemployed by and unaffiliated with the employer, (3) generally
recognized as a neutral and experienced labor and employment arbitrator, and (4)
listed on the rosters of the Federal Mediation and Conciliation Service or the
American Arbitration Association, as well as other arbitration rosters. 355 F.3d at
488. The court was concerned of the risk of a “symbiotic relationship” developing
between the arbitrators and the employer but noted that the overall plan and
selection criteria was more “even-handed” than that in the Lopez case. Id. at 493–
94 (noting “patently one-sided” nature of the arbitration provision in Lopez).
However, the “risk of bias inherent” in the selection procedure was demonstrated
by evidence that the employer used the same panel of five to seven arbitrators in
each arbitration hearing in which it participated in the state of Michigan. Id. at
494. The court concluded that this method for selecting arbitrators “prevents [the
employer’s procedure] from being an effective substitute for a judicial forum
because it inherently lacks neutrality.” Id.

The federal cases referenced by appellant also involve a parameter not
addressed by the parties in their briefs. Both Lopez and McMullen dealt with
employee statutory rights under Title VII. While it is acknowledged that
employees can be required to arbitrate such statutory claims, “[t]he Supreme Court
has made clear that statutory rights, such as those created by Title VII, may be
subject to mandatory arbitration only if the arbitral forum permits the effective
vindication of those rights.” Morrison v. Circuit City Stores, Inc., 317 F.3d 646,
658 (6th Cir. 2003) (emphasis added). “Under Gilmer, the arbitral forum must

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provide litigants with an effective substitute for the judicial forum . . . .” Id. at 659.
This is due to the concerns regarding the “potential inequities and inadequacies of
arbitration in individual employment cases, as well as . . . the competence of
arbitrators and the arbitral forum to enforce effectively the myriad of public laws
protecting workers and regulating the workplace.” Cole v. Burns Int’l Sec. Servs.,
105 F.3d 1465, 1467 (D.C. Cir. 1997); see also In re Poly-Am., L.P., 262 S.W.3d
337, 352 (Tex. 2008) (orig. proceeding) (holding employer cannot contractually
absolve itself from statutory remedies designed to deter Workers’ Compensation
Act’s anti-retaliation provisions; “Were we to endorse [employer’s] position and
permit enforcement of these remedy limitations, a subscribing employer could
avoid the Act’s penalties by conditioning employment upon waiver of the very
provisions designed to protect employees who have been the subject of wrongful
retaliation.”); Walker v. Ryan’s Family Steak Houses, Inc., 289 F.Supp.2d 916, 923
(M.D. Tenn. 2003) (noting not all statutory rights suitable for arbitration and in
determining whether “specific arbitral fora have provided from proper vindication
of statutory claims, the Sixth Circuit has considered such factors as the neutrality
of the forum, evidence of bias, parties’ opportunities for discovery, cost-splitting
provisions, limitations on remedies, and the arbitrator selection process.”) aff’d,
400 F.3d 370 (6th Cir. 2005); see also Floss v. Ryan’s Steakhouses, Inc., 211 F.3d
306, 314 (6th Cir. 2000) (process of picking arbitrators appeared facially
reasonable but expressing “serious reservations as to whether the arbitral forum
provided under the current version of the EDSI Rules and Procedures is suitable
for the resolution of statutory claims.” (emphasis added)).

Here, the dispute between the parties is contractual in nature and involves
appellee’s claim for attorney fees and expenses. There are no statutory rights
being litigated and no evidence regarding the circumstances of the parties at the

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time the agreement was executed. See In re FirstMerit Bank, N.A., 52 S.W.3d at
757 (“[T]he 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.” (emphasis added));
see also Cole, 105 F.3d at 1476 (“The fundamental distinction between contractual
rights, which are created, defined, and subject to modification by the same private
parties participating in arbitration, and statutory rights, which are created, defined,
and subject to modification only by Congress and the courts, suggests the need for
a public, rather than private mechanism of enforcement of statutory rights.”).

Additionally, appellant has not submitted any evidence of appellee’s prior
arbitrations and the pool of retired or former Texas judges he has selected to serve
as arbitrators in those matters. There is no evidence of the “symbiotic
relationship” feared in Meijer, though we are cognizant of the potential for one to
develop. As further evidenced herein, appellant has recourse in invalidating an
arbitration award on the basis of evident partiality, as well as arbitrator misconduct
or mistake. We are not prepared to declare this arbitration provision
unconscionable as a matter of law. We overrule appellant’s second issue.

III. CONCLUSION

The fact that a reasonable person could conclude that the prior attorney-
client relationship between West’s law firm and appellee might affect West’s
impartiality triggers the duty of disclosure. West’s failure to disclose the
relationship thus constitutes evident partiality under section 171.088. See Tex. Civ.
Prac. & Rem. Code § 171.088; see also TUCO, Inc., 960 S.W.2d at 639. For the
foregoing reasons, we remand this cause to the trial court with instructions to
vacate the arbitration award and, barring further evidence of unconscionability, to

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refer the dispute for further arbitration under the agreement of the parties. See
TUCO, Inc., 960 S.W.2d at 639–40.

/s/ Ken Wise
Justice

Panel consists of Justices Wise, Bourliot, and Zimmerer.

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