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DAN MORALES
 ATTORSEY
      GENERAL                          June 17,1992

     Honorable Carl A. Parker                    Opinion No. DM-127
     Chairman
     Subcommittee on Insurance                   Re: Whether V.T.C.S. article 224 et seq.,
     Texas State Senate                          the Texas general arbitration statute,
     P. 0. Box 12068                             violates article I, section 13 of the Texas
     Austin, Texas 78711                         Constitution, the open courts amendment
                                                 (RQ-199)

     Dear Senator Parker:

            You have requested our opinion as to whether V.T.C.S. article 224 et seq.,
     the Texas general arbitration statute, violates article I, section 13 of the Texas
     Constitution, the “open courts” provision. Article 224, first enacted in 1965,
     provides:

                   A written agreement to submit any existing controversy to
              arbitration or a provision in a written contract to submit to
              arbitration any controversy thereafter arising between the
              parties is valid, enforceable and irrevocable, save upon such
              grounds as exist at law or in equity for the revocation of any
              contract. A court shall refuse to enforce an agreement or
              contract to submit a controversy to arbitration if the court finds
              it was unconscionable at the time the agreement or contract was
              made. Provided, however, that none of the provisions of this
              Act shall apply to:

                 (a) any collective bargaining          agreement    between   an
              employer and a labor union:

                  (b) any contract for the acquisition by an individual person
              or persons (as distinguished from a corporation, trust, partner-
              ship, association, or other legal entity) of real or personal
              property, or services, or money or credit where the total
              consideration therefor to be paid or furnished by the individual



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          is SSO,OOO or less, unless said individual and the other party or
          parties agree in writing to submit to arbitration and such written
          agreement is signed by the parties to such agreement and their
          attorneys;

               (c) any claim for personal injury except upon the advice of
          counsel to both parties as evidenced by a written agreement
          signed by counsel for both parties. A claim for workers’
          compensation shall n&t be submitted to arbitration under this
          Act.

With certain exceptions, the statute declares a prior written agreement to arbitrate
to be “valid, enforceable and irrevocable,” except where the agreement itself is
tainted, for example, by fraud, partiality on the part of the arbitrator, absence of an
effective arbitration agreement,’ or unconscionability.

       Article I, section 13 of the Texas Constitution provides in part:

          All courts shaIl be open, and every person for an injury done
          him, in his lands, goods, person or reputation, shall have remedy
          by due course of law.

The Texas Supreme Court has indicated that establishing an “open courts” violation
requires compliance with a two-pronged test. First, the litigant “must show that he
has a well-recognized common-law cause of action ,$at is being restricted.” In
addition, “he must show that the restriction is unreasonable or arbitrary when
balanced against the purpose . . . of the statute.” Momw v. Sterling Dmg, Inc, 787
s.w.2d 348,355 (Tex 1990).

       InitiaIiy, we note that every legislative act carries with it a presumption of
COllStitUtiOMIity.


          It is to be presumed that the Legislature has not acted
          unreasonably or arbitrarily; and a mere difference of opinion,
          where reasonable minds could differ, is not a sutEcient basis for
          striking down legislation as arbitrary or unreasonable.


       %‘.T.C.S.art.237.




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Honorable Carl A. Parker - Page 3         (DMy127 )




Sax v. Votteler,648 S.W.2d 661,664 (Tex. 1983) (quoting Smith v. Davir, 426 S.W.2d
827,831 (Tex. 1968)).

       Article J, section 13 “prohibits legislative bodies from arbitrarily withdrawing
all legal remedies from one having a cause of action well established and well
defined in the common law.” Canilb v. Hidalgo County Water Dirt. No. I, IT1
S.W.2d 633, 636 (Tex. App.-Corpus Christi 1989, no writ). The clause “does not,
however, apply to a statutory cause of action which expands the rights of an
individual beyond those granted by the common law.” Id

        Many of the causes of action covered by article 224, et seq., are stafuto~
rather than common-law causes of action, and therefore fall outside the ambit of
article I, section 13. See. e.g., Bus. & Com. Code 0 17.41 et seq., (Deceptive Trade
Practices - Consumer Protection Act); Ins. Code arts. 21.21 (Unfair Competition
and Unfair Practices), 21.21-2 (Unfair Claim Settlement Practices Act).
Furthermore, article 224, ef seq., does not itself deprive a litigant of a remedy for any
wrong he has suffered. Eather, it &nits his choice of remedy to one that he himself
has pre-selected. Even in those instances in which arbitration is mandatory, an
aggrieved party may still bring a cause of action to show that the arbitration
agreement itself is tarnished by fraud, unconscionability, or invalidity. To the
extent, however, that article 224, et seq., does impose restrictions on the common-
law right to litigate those disputes which cominue to be covered by article J, section
13, we do not believe that a court would find that those restrictions are either
nnreasonable or arbitrary.

        Although the Texas general arbitration act has been in effect since 1965,
common-law arbitration continues to exist in this state. L. H. Lay Co. v. Ci@ of
Lubbock, 559 S.W.2d 34&3Sl-52 (Tex. 1977). Prior to L H. Lacy Company, “the
Texas common law rule was that either party could revoke the agreement to
arbitrate at any time” prior to the actual award WZie Indq~. School Disk v. TMC
Found, Inc, 770 S.WZd 19, 21 (Tex. App.-Dallas 1989, writ dism’d w.0.j.). In
L. H. Lucy Company, the court, while finding it unnecessary to actually overturn the
common-Iaw rule, made clear that it bad no future in Texas. BVie Independent
School D&&t, 770 S.W.2d at 21. Chief Justice Greenhill took the opportunity to
extol the virtues of arbitration:

              Under the traditional common law, courts have refused
          specific enforcement to agreements to arbitrate @ruz disputes.
          [Emphasis in original.] Either party to an executory agreement



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Honorable Carl A. Parker - Page 4       (DM-127)




         providing for arbitration of future disputes has been allowed to
         revoke the agreement at any time before the arbitration
         proceeding resulted in an award. The only penalty for such
         revocation consisted of damages, if any, for breach of
         contract.. . .The rationale behind these rules rested on a “public
         policy” argument against allowing private persons to oust the
         courts of their jurisdiction to determine the rights and liabilities
         of parties to a contract. This notion was a result of early English
         precedent which was transferred to the United States and to
         Texas through our adoption of the common law. The doctrine
         has long since been abandoned in England by case law and by
         statute, and an increasing number of American jurisdictions
         have rejected the rationale by adopting modem and
         comprehensive arbitration statutes. . . . The doarine ws evolved
         in~e~whencourtcongestionwarnotamajorp~b~aritir
         today, and in modem tbnes a policy encowtzgbagagteements to
         arbitrateis p@kmbk In addition to alkvk&g some meavue of
         rhebwdenonthecourtr,arbitmtioninacommercialcontextisa
         valuable tool whichpiwides buiness people, and all ulizem, with
         greata jlexibility, efficient, and privaq....While        it is
         unnecessary in this case to alter common law arbitration rules,
         the policy of refusing specific enforcement to executory
         arbitration agreements is not justifiable wheri the case fits within
         the common mold

L H. Lucy Compwy, 559 S.W.2.d at 352 (emphasis added, footnotes omitted ).2




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Honorable Carl A. Parker - Page S        (DM-127 )




suggesting that the easy revocation of arbitration agreements under common law
was based on an outmoded idea of public policy. When such sentiments are coupled
with the presumption of constitutionality which every statute commands, we believe
that it is even more clear that the court would find that article 224, er seq., does not
impose any restrictions upon a litigant’s right to judicial redress which are
“unreasonable or arbitrary when balanced against the purpose of the statute.”
Accordingly, we conclude that article 224, er seq., does not contravene article I,
section 13 of the Texas Constitution.

                                   SUMMARY

               V.T.C.S. article 224 et seq., the Texas general arbitration
          statute, does not contravene article I, section 13 of the Texas
          Constitution, the “open courts” provision.




                                                    DAN      MORALES
                                                    Attorney General of Texas

WILL PRYOR
First Assistant Attorney General

MARYKELLER
Deputy Assistant Attorney General

RENEAHIcKs
Special Assistant Attorney General

MADELEINE B. JOHNSON
Chair, Opinion Committee

Prepared byRick Gilpin
Assistant Attorney General




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