A Texas appellate court held that the Federal Arbitration Act (FAA) preempts Texas state law that would have precluded the enforcement of an employee’s arbitration agreement.

In In re Bison Building Materials, Ltd., Nos. 01-07-00003-CV, 01-07-00029-CV, 2008 WL 2548568 (Tex. Ct. App. June 26, 2008), Sambrano signed an at-will employment contract with Bison. The contract contained an arbitration agreement. Sambrano was subsequently injured on the job, and although Sambrano was receiving benefits from Bison under its welfare benefit plan, she sued Bison for negligence.

Bison moved for summary judgment based on a post-injury litigation waiver that Sambrano signed, but the trial court denied the motion. Bison subsequently moved to compel arbitration, and Sambrano opposed, arguing that Bison waived its right to compel arbitration by substantially invoking the litigation process. Without specifying the grounds for its ruling, the trial court denied the motion to compel arbitration.

On appeal, the Court reversed the trial court’s decision and compelled arbitration. The Court determined that both the FAA and the Texas General Arbitration Act (TGAA) could apply because the arbitration agreement did not specify which law applied. The Court determined that the employee welfare-benefit plan at issue was regulated by ERISA and affected both interstate commerce and the federal taxing power, so the FAA applied. But the Court also determined that the TGAA applied to the extent that it did not stand as an obstacle to the purposes of the FAA.

Consequently, the Court needed to determine whether the FAA preempted the TGAA with respect to the contract at issue. The Court held that the FAA preempts the TGAA where the TGAA precludes the enforcement of an arbitration agreement. Under the TGAA, claims for personal injuries are arbitrable only if the injured party, on the advice of counsel, agrees in writing to arbitrate, and the agreement to arbitrate is signed by each party and each party’s counsel.

In this case, Sambrano did not sign the arbitration agreement on the advice of counsel, nor did her attorney sign the arbitration agreement. As a result, the arbitration agreement was unenforceable under the TGAA, but it was enforceable under the FAA because the FAA requires neither a signature on the advice of counsel nor counsel’s signature. Accordingly, the Court held that the FAA preempted the TGAA and the arbitration agreement was enforceable.

The Court also addressed the issue of whether Bison waived its right to compel arbitration by "substantially invoking the litigation process." The Court held that Bison had not waived its right to compel arbitration because (1) it had not sought summary judgment on the merits of Sambrano’s claims, but rather based on the post-injury litigation waiver, and (2) Bison did not take depositions until after the trial court had already denied its motion to compel.