MARCH 2025 | 7 THE OKLAHOMA BAR JOURNAL Alternative Dispute Resolution Arbitration When You Least Expect It By Michael W. Johnston HISTORICALLY, PREDISPUTE ARBITRATION AGREEMENTS were frowned upon by courts and legislatures. Some states enacted statutes/regulations that severely limited predispute arbitration agreements. For example, Texas required predispute arbitration agreements to be in writing and signed by all parties and attorneys who represented them. If these requirements were not met, the arbitration agreement was unenforceable as a matter of public policy. Then, along came the Federal Arbitration Act, which not only encouraged arbitration in federal court disputes but also in state court matters. The Federal Arbitration Act effectively preempted the state laws/regulations that inhibited predispute arbitration agreements. However, there was still a requirement that there actually be an agreement to arbitrate. Typically, this meant the arbitration agreement was to be in writing and signed by the parties to be bound. In today’s digital world of consumer transactions, one may be faced with a motion to compel arbitration when arbitration is nowhere to be found and when least expected. The purpose of this article is to make the reader aware of the existence of “hidden” arbitration requirements in consumer transactions and where to look for them. ENFORCEABILITY OF ARBITRATION CLAUSES ON SUBSEQUENT PURCHASERS A basic tenant of arbitration law has been that predispute arbitration clauses are enforceable only if agreed to by the parties. The concept of “agreed to” has been expanded to include consent by action1 and implied consent.2 The Texas Supreme Court in Lennar Homes v. Whiteley3 seems to have gone a step further in the concept of agreement. Kara Whiteley purchased a home in Galveston, Texas, from a previous homeowner who had entered into a home construction contract with Lennar Homes. The construction contract between Lennar and the original homeowner contained arbitration provisions. Ms. Whiteley filed suit in state court against Lennar Homes, claiming there were construction defects that resulted in mold growth and other damages. Lennar asserted that the arbitration clause in its contract with the original homeowner precluded the state court action. The matter was arbitrated, and an award was entered in favor of Lennar. Lennar then filed a motion in state court to confirm the arbitration award, and Ms. Whiteley filed a cross-motion seeking to vacate the award. Ironically, the state court agreed with Ms. Whiteley and vacated the arbitration award. The Court of Appeals affirmed the vacatur, and the matter was appealed to the Texas Supreme Court. The Texas Supreme Court reversed and held that even though Ms. Whiteley had not specifically agreed to the arbitration provision in the original contract, she was nevertheless bound by it by virtue of “direct-benefits estoppel.” The Texas Supreme Court asserted that Ms. Whiteley’s construction defect claims arose out of the original Statements or opinions expressed in the Oklahoma Bar Journal are those of the authors and do not necessarily reflect those of the Oklahoma Bar Association, its officers, Board of Governors, Board of Editors or staff.
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