Texas Supreme Court building.

The Supreme Court of Texas has ruled that a court – and not an arbitrator – must decide whether class action claims against a home warranty company must be arbitrated.

The Case

Nathan and Misti Robinson purchased a newly constructed residential home that was enrolled in a limited warranty program operated by Home Owners Management Enterprises, Inc. d/b/a HOME of Texas, and Warranty Underwriters Insurance (together, "HOME").

The Robinsons subsequently sued HOME, alleging that construction-related defects had not been promptly or properly resolved. Over the Robinsons' opposition, the trial court abated the case and compelled arbitration in accordance with the terms of the limited warranty and its addendum.

Less than a month before the scheduled arbitration, the Robinsons filed an amended statement of claims seeking to add class action claims against HOME to the arbitration proceeding. The new, and entirely independent, claims alleged that HOME routinely demanded overbroad releases as a precondition to fulfilling its warranty obligations.

HOME objected to the amended statement and moved to strike the class claims from the arbitration proceeding.

The following week, the arbitrator denied HOME's objections and motion to strike in its entirety, but bifurcated the class claims from the Robinsons' construction-defect claims.

After arbitration on the Robinsons' individual claims had concluded, but before the arbitrator had issued a decision, HOME asked the trial court to clarify the "scope of the issues" referred to the arbitrator and, in the alternative, to strike the Robinsons' class claims.

While HOME's motion was pending in the trial court, the arbitrator ruled against HOME on the warranty claims and awarded the Robinsons damages, costs, and fees. Further, and in accordance with the arbitration agreement's terms, the arbitrator awarded HOME the costs and fees it had incurred compelling arbitration over the Robinsons' resistance.

With the arbitrator's award in hand, the Robinsons returned to the trial court to file a "Statement of Claims, Individually and as the Representatives of All Persons Similarly Situated." Once again, the Robinsons' putative class action alleged that HOME had refused to pay for home repairs unless the homeowners executed overbroad releases. This time, the Robinsons did not resist arbitration; they demanded it, asserting that HOME was required to arbitrate the class claims under the broad arbitration provisions in the limited warranty and addendum.

HOME responded with a motion to dismiss, disputing that the arbitration agreement authorized class arbitration and arguing that only the court, not the arbitrator, could make that determination.

The trial court ruled in HOME's favor, the court of appeals affirmed, and the dispute reached the Supreme Court of Texas.

The Texas Supreme Court's Decision

The court affirmed, holding that (1) arbitrability of class claims is a "gateway" issue for the court unless the arbitration agreement "clearly and unmistakably" expresses a contrary intent; (2) a contract that is silent on a matter cannot speak to that matter with "unmistakable clarity"; and (3) an agreement to arbitrate class claims cannot be inferred from silence or ambiguity – an express contractual basis is required.

In its decision, the court explained that, considering the "obvious," "structural," and "fundamental" differences between bilateral and class arbitration, the question of class arbitration was more akin to the type of controversy that should be arbitrated – a question for the courts – than a procedural question presumptively for the arbitrator. In the court's view, the distinctions between bilateral and class arbitration implicated the primary characteristic of "gateway issues" – namely, the expectation that a judge ordinarily would decide arbitrability of such matters.

The court added that although the arbitrability of class claims was "presumptively for the court," it ultimately depended on what the parties' contract said about the matter. Thus, the court said, when the parties' contract delegated the arbitrability question to an arbitrator, a court "may not override the contract [and it] possesses no power to decide the arbitrability issue."

Here, the court found, the limited warranty and addendum both were "entirely silent on the topic." After stating that "[m]agic words" were not necessarily required to commit class arbitrability decisions to the arbitrator, the court rejected the Robinsons' contention that the broadly worded arbitration clauses "clearly and unmistakably" committed all disputes about class arbitrability to the arbitrator. The court reasoned that the presumption favored judicial determination, so contractual silence about "who decides" arbitrability questions did "not delegate those gateway questions to the arbitrator with unmistakable clarity."

Therefore, the court declared, with not a word about arbitrating arbitrability issues in the limited warranty or addendum, any question about whether the parties agreed to arbitrate class claims was for the court to answer.

Accordingly, the court said, considering the "fundamental differences between bilateral and class arbitration," as well as the "bedrock principle" that a party cannot be forced to arbitrate any dispute absent a binding agreement to do so, a court must determine, as a gateway matter, whether an arbitration agreement permits class arbitration unless the parties have clearly and unmistakably agreed otherwise. Because the arbitration agreements in this case were "silent as to arbitrability" and did not mention class claims at all, the lower courts correctly determined that HOME was not bound to arbitrate the Robinsons' putative class claims, the court concluded.

The case is Robinson v. Home Owners Management Enterprises, Inc., No. 18-0504 (Tex. Nov. 22, 2019). Attorneys involved include: For Misti Robinson, Nathan Robinson, Petitioners: Mark A. Ticer, Lead Attorney, Law Office of Mark A. Ticer, Dallas TX; Evan "Van" L. Shaw, Law Offices of Van Shaw, Dallas TX; Jennifer W. Johnson, Law Office of Mark A. Ticer, Dallas TX. For Home Owners Management Enterprises, Inc., Respondent: Curt M. Covington, Lamberth Ratcliffe Covington, PLLC, Rockwall TX; Edward J. Baines, Saul Ewing, LLP, Baltimore MD.