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A party seeking to challenge an arbitration agreement’s appellate procedures as unconscionable must do so prior to fully participating in the arbitration proceedings, and cannot do so once an award has been rendered, according to the Texas Court of Appeals.
In In re Hospitality Employment Group, LLC, No. 05-07-01027-CV, 2007 WL 2757797 (Tex. App. Sept. 24, 2007), Moreno filed suit against Hospitality Employment Group (HEG) for an alleged on-the-job injury. HEG filed and was granted a motion to compel arbitration of the claim in accordance with an arbitration agreement within Moreno’s employment benefit plan. The arbitrator later issued an award for Moreno in the amount of $600,000.
HEG then filed a notice of appeal with the arbitration administrator as provided for in the agreement. Moreno filed a motion with the administrator to dismiss the appeal, and filed a motion for partial summary judgment with the trial court. The trial court granted the motion and declared the appeals provision in the agreement unconscionable due to certain cost-shifting provisions. HEG appealed, claiming abuse of discretion by the trial judge.
The Court held that the order granting Moreno’s motion for partial summary judgment was an abuse of discretion, and ordered the trial court to vacate the order. The Court found that Moreno had improperly challenged the arbitration agreement as unconscionable after fully participating in the initial proceedings and receiving an award. According to the Court, Moreno’s failure to initially challenge the arbitration agreement as unconscionable, as well as the trial judge’s finding on the earlier motion to compel that the agreement was valid and enforceable, estopped Moreno from challenging the appeals portion of the agreement after the rendering of her award.
“Had Moreno intended to challenge the appellate arbitration provision on the grounds of unconscionability,” said the Court, “she should have done so prior to participating in the arbitration proceedings.”
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