The Texas Arbitration Act's (TAA) exception to enforcement of consumer arbitration agreements is preempted by the Federal Arbitration Act when the transaction affects or involves interstate commerce, according to a Texas state appellate court.

In In re MP Ventures of South Texas, Ltd., No. 04-08-00620-CV, 2008 WL 4862518 (Tex. App. Nov. 12, 2008), Oggoian contracted with MP for the construction of a greenhouse. After the greenhouse allegedly failed to maintain a constant temperature, Oggoian brought suit against MP for breach of contract. MP moved to compel arbitration under the TAA in accordance with an arbitration agreement in the parties' contract.

Oggoian challenged the motion, arguing that the TAA exception for the enforcement of consumer arbitration agreements prohibited arbitration of the dispute. MP then amended its motion to compel arbitration under the Federal Arbitration Act (FAA). The trial court denied the motion, citing the TAA's consumer exception.

The Court granted MP's petition for mandamus relief, holding that the trial court erred in refusing to compel arbitration. The Court noted that Oggoian admitted to the trial court that a valid agreement existed and that the claims were within the agreement's broad scope. Furthermore, the Court held that uncontroverted testimony at the trial court established that materials for the greenhouse were transported from South Carolina, which indicated that the transaction affected interstate commerce and therefore came within the scope of the FAA.

Finally, the Court noted that the FAA, when applicable, preempts any contrary provision within state arbitration law. See Southland Corp. v. Keating, 465 U.S. 1, 16 (1984). Because the TAA's consumer exception was contrary to the broad enforcement of agreements under the FAA, it was preempted and did not serve as a defense to enforcement of the arbitration agreement in the parties' greenhouse construction contract.