TotalEnergies E&P USA, Inc. v. MP Gulf of Mexico, LLC

Supreme Court of Texas, No. 21-0028 (April 14, 2023)
Opinion by Justice Boyd (linked here), Concurrence by Justice Bland (here), Dissent by Justice Busby (here)

AAA Commercial Rule 7(a) provides that an arbitrator “shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement or to the arbitrability of any claim or counterclaim.” Relying on that passage, the Supreme Court of Texas confirmed what most of us thought we already knew, holding that, “as a general rule, an agreement to arbitrate in accordance with the AAA or similar rules constitutes a clear and unmistakable agreement that the arbitrator,” not a court, “must decide whether the parties’ disputes must be resolved through arbitration”—i.e., questions of arbitrability. The Court buttressed its pronouncement with a comprehensive review of other courts’ decisions on the issue, which revealed that “the vast majority of federal circuit courts and other state supreme courts have reached this same conclusion.”

But the TotalEnergies arbitration agreement came with a wrinkle. It said:
If any dispute or controversy arises between the parties out of this Agreement, the alleged breach thereof, or any tort in connection therewith, … the same shall be submitted to arbitration . . . in accordance with the rules of the AAA and the provisions in this Article.
Justice Busby contended in dissent that the “if” took the agreement out of the “general rule” recognized by the majority. “As a matter of text and logic,” he argued, “the ‘if’ clause is a substantive condition precedent to arbitrators acquiring the power to decide anything at all .…, including any issues … regarding [their] jurisdiction.” At the very least, he concluded, this “if” precondition precluded a determination that the parties had “clearly and unmistakably” agreed to delegate questions of arbitrability to the arbitrators unless and until a court first found the precondition to have been met. And, as both he and the majority acknowledged, it appears the Second and Fifth Circuits agree with that analysis.
The majority, however, rejected that argument. Just as an arbitration provision is “severable” and to be evaluated separately from the overall contract in which it appears, so also, the Court said, should a delegation clause be considered severable and evaluated separately from the overall arbitration agreement. Viewed through this lens, the delegation clause here—incorporating the AAA rules—was absolute and not subject to the “if” precondition. Consequently, the Court held, even under the language of the TotalEnergies arbitration agreement, the parties “clearly and unmistakably” delegated questions of arbitrability to the arbitrator.