A Texas appellate court has held that bias and prohibitive cost challenges to the enforcement of an arbitration agreement fail when brought before any arbitrators are appointed or any costs are incurred.

In Lawson v. Archer, Nos. 14-07-00324-CV, 14-07-00429-CV, 2008 WL 2986390 (Tex. App. July 31, 2008), home purchaser Archer hired home inspector Lawson. The parties entered into a contract for the inspection service. The contract contained limitations on damages and a provision shortening the time in which to bring claims. Also, in a separate section, the contract contained a broadly-worded arbitration agreement.

A dispute arose after Archer purchased the house, and Archer sued Lawson. Lawson brought a motion to compel arbitration, which was denied by the trial court. Lawson filed an appeal and a petition for a writ of mandamus.

On appeal, the Court first determined that an arbitration agreement relating to a home inspection contract is not normally a transaction related to interstate commerce if the parties are domiciled in the same state. Therefore, it does not invoke the Federal Arbitration Act (FAA). The Court decided that the transaction did not fall within the Texas General Arbitration Act ("TGAA") either, because the transaction did not satisfy its amount in controversy requirement or fall within other statutory exceptions. Because neither the FAA nor TGAA applied, the Court held that a petition for writ of mandamus was the appropriate challenge to a denial of a motion to compel.

Reviewing the trial court's denial for abuse of discretion, the Court examined Archer's contention that the agreement was unconscionable and unenforceable. First, the Court found Archer's allegations that the arbitrators were biased and that costs were prohibitive to be wholly speculative. It noted that arbitrators were to be selected from a list that did not show any facial bias, and, in any case, no bias could be shown before the arbitrators were actually selected. Also, it observed that Archer did not present evidence that costs were prohibitive.

Finally, the Court left to the arbitrator the unconscionability arguments based on the time and remedy limitations for the arbitrator. The Court noted that the time and remedy provisions were clearly outside of the arbitration agreement. Therefore, to the Court, any challenge to these provisions was an arbitrable challenge to the contract as a whole.