In what I’ll call its Quantum of Evidence decision issued this month, not to be confused with the 2008 James Bond flick, Quantum of Solace, the Fifth Circuit tackled the issue of the “quantum of evidence required to prove or disprove the existence of an agreement to arbitrate” in the Fifth Circuit. More specifically, it addressed the appropriate standard for a district court to apply when considering a motion to stay or compel arbitration where the formation of an agreement is disputed.
In Gallagher v. Vokey, No. 20-1100 (5th Cir. July 1, 2021), the Court found that the district court erred in denying an attorney’s motion to compel arbitration of claims related to his retired Navy Seal client’s refusal to pay legal invoices.
Under existing Fifth Circuit precedent, a party resisting arbitration:
- bears the burden of showing he is entitled to a jury trial;
- must make some showing that under prevailing law, he would be relieved of his contractual obligation to arbitrate if his allegations prove to be true;
- must produce at least some evidence to substantiate his factual claim; and
- must unequivocally deny that he agreed to arbitrate and produce “some” evidence of this.
In this case, the attorney provided a signed copy of the engagement letter containing the arbitration agreement, two of his own declarations, and a declaration from a disinterested party who witnessed the client’s execution of the engagement letter to prove the existence of a valid arbitration agreement. In contrast, the client never “plainly denied” he signed or executed the contract, claimed the declarations were self-serving, and argued he had no recollection of signing the engagement letter.
The Court made short work of the client’s arguments, noting that the client never flatly denied signing the agreement and that under Texas law, a party’s signature on a written contract is strong evidence that the party unconditionally assented to its terms. It also reiterated that a party’s inability to remember signing a contract is not sufficient to raise a material issue as to the validity of the agreement.
Finally, the client claimed he was fraudulently induced to enter into the agreement, yet was unable to state with particularity the circumstances constituting fraud or mistake.
In short, the attorney’s evidence was adequate to establish that he and the client had entered into an enforceable arbitration agreement and their billing dispute fell within the scope of that agreement. The client, on the other hand, produced no evidence to contradict the enforceability of the agreement or put the formation of an agreement in issue.