A recent Texas Lawyer story, “Is a ‘One-Sided’ Attorney-Fee Provision in an Arbitration Agreement Unconscionable?,” reports that the Texas Supreme Court held that allowing one party to an arbitration agreement—but not the other—to recover attorney fees in Texas for a breach of contract doesn’t make an arbitration per se unconscionable.  The case is Venture Cotton Cooperative and Noble Americans Corp. v. Shelby Alan Freeman (pdf).

“Parties are generally free to contract for attorney fees as they see fit,” wrote Justice John Devine for a unanimous court.  “Thus, a contract that expressly provides for one party’s attorney fees, but not another’s is not unconscionable per se.  Although perhaps relevant to a broader inquiry into contractual oppression or an imbalance in bargaining power, the attorney fee provision here is not, standing alone, decisive proof of an unconscionable bargain.”

Despite holding that a “one-side” attorney fee agreement is not “unconscionable per se” in Venture Cotton, the high court remanded the case to the Eastland’s Eleventh Court of Appeals to take a broader look at whether the agreement at issue is indeed unconscionable.

The trial court concluded that the parties’ agreement to arbitrate should not be enforced because it was unconscionable.  The Eleventh Court affirmed the trial court’s ruling denying arbitration, upholding the trial court’s finding that the agreement was unconscionable because it prevented the farmers from pursuing the statutory attorney fees they sought.  Specifically, the farmers alleged that the agreement was ‘one-sided” because it “allowed Venture to recover attorney fees if the farmers breached the contract, but did not provide reciprocal rights to the farmers.”

Venture appealed the ruling to the Texas Supreme Court, which reversed the court of appeals’ judgment, concluding that the elimination of statutory remedies was insufficient to defeat the Federal Arbitration Act’s presumption in favor of arbitration.  Devine noted that the Texas Deceptive Trade Practice Act (DTPA) spells out permissible contractual waiver of statutory rights to attorney fees.  The Eleventh Court should not have used “the contract’s ‘one-sided’ attorney fees provision as an independent reason to hold the arbitration agreement unconscionable,” Devine held.