We recently blogged with Rick Freeman about the important distinctions between consumer (“take it or leave it”) arbitration agreements and agreements to arbitrate between sophisticated commercial parties. We’ve just skimmed HB 3091 (link is to .pdf file), which if passed would severely restrict or outlaw the widespread use of arbitration agreements in consumer contracts in Texas.
We will, of course, keep our eye on this. However, at first blush I would think it would be pre-empted by the FAA almost all the time as a practical matter, given that many contracts, like credit card contracts, involve interstate commerce so far as FAA v. TAA analysis is concerned. Remember that the TAA (Texas Arbitration Act) currently more or less prohibits the arbitration of personal injury cases, but that courts have held this prohibition is pre-empted by the FAA in cases involving interstate commerce. I would think the same preemption would apply in a dispute between a Texas consumer and a credit card company over a supposed agreement to arbitrate.
The bill is interesting in and of itself, however, in that its existence reflects a growing backlash against the myriad arbitration clauses most of us have agreed to without even really realizing it. Representative Stephen Frost from East Texas authored the bill. We’ll keep you posted.
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arbitration, ADR, law, politics
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