Where Parties Invoked Only AAA Rules, AAA Must Be the Arbitration Administrator

According to a Texas appellate court, parties that contractually adopt arbitral rules requiring the administration of proceedings by a particular organization must submit their disputes to that designated administrator.

In In re Crosstex CCNG Processing Ltd., No. 05-08-01091-CV, 2008 WL 4823229 (Tex. App. Nov. 7, 2008), Crosstex and Denbury entered into a gas processing contract. The contract included an arbitration agreement that invoked the Federal Arbitration Act and the Patent Arbitration Rules of the American Arbitration Association (“AAA”).

A dispute arose, and Denbury filed a petition to compel arbitration of the dispute, alleging that Crosstex refused to participate in arbitral proceedings. Crosstex represented its willingness to arbitrate under the rules adopted in the agreement, but maintained that Denbury was attempting to avoid its obligation by demanding arbitration with another administrator. The trial court granted the motion to compel, but specified that arbitration would not be administered by the AAA or any other administrator.

On appeal, Crosstex argued that the parties agreed to arbitrate under AAA rules, and, by implication, agreed that the AAA must administer the proceedings. The Court agreed, finding that AAA’s Patent Arbitration Rule 3 clearly stated that parties “authorize the AAA to administer the arbitration” if the “parties agree to arbitrate under these rules.” Because the parties clearly invoked these rules in their agreement, the Court held that the trial court erred in compelling a non-AAA administered arbitral proceeding. The Court granted the writ with instructions to compel arbitration with the AAA as administrator.