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A Texas Appellate Court held that where there is an express agreement to arbitrate under the Federal Arbitration Act (FAA), such a choice-of-law provision is valid and enforceable even if the dispute does not involve interstate commerce.
In Teel v. Beldon Roofing & Remodeling Co., No. 04-06-00231-CV, 2007 WL 1200070 (Tex. App. Apr. 25, 2007), Teel sued Beldon Roofing & Remodeling (Beldon), alleging that Beldon's failure to properly complete roof repairs led to mold in her home. Beldon sought, and was granted arbitration, and the trial court eventually confirmed an arbitration award of nearly $30,000 for Teel.
Unsatisfied with her award, Teel tried to have overturned the trial court's decision to compel arbitration in the first place. Teel claimed that because Beldon had not established that the transaction involved interstate commerce, reliance on the FAA made the arbitration agreement unenforceable.
The Court disagreed. The Court noted that in cases were there is no express agreement to arbitrate under the FAA, a party may establish its applicability by showing that the transaction affects or involves interstate commerce. However, when such an express agreement exists, courts have upheld these "choice-of-law" provisions whether or not such an affect is proven.
Because Teel and Beldon freely signed a contract to arbitrate under the FAA, they were "bound to their agreement," whether or not the roof repair project involved interstate commerce.
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