Unconscionable Provisions in Arbitration Agreement Could Be Severed so As Not to Deprive Parties of Agreement to Arbitrate.

The cotton cooperative-marketing association operated a pool for the exclusive sale and marketing of its members' cotton production. The association solicited farmers to join this pool and sign marketing and membership agreements, which required farmers to designate the acreage committed to the pool. After the price of cotton rose significantly, a dispute arose over the number of acres committed to the pool, and two large farming operations filed an action against the association alleging fraud, negligent misrepresentation, and other claims. The association filed a motion to stay the litigation and compel arbitration under the Federal Arbitration Act, alleging that the agreements compelled arbitration. The farmers asserted that the agreement was unconscionable and should not be enforced because it deprived the farmers of statutory remedies and provided only the association with the right to recover attorney fees. The trial court and court of appeals agreed, denying the motion, but the Texas Supreme Court reversed. The Court ruled that court of appeals erred in declining to sever any objectionable limitation on the farmers’ statutory rights. Unconscionable provisions in a contract can generally be severed so long as they do not constitute the essential part of the contract. Because the agreement’s central purpose was to provide for a speedy and efficient resolution of disputes, the agreement’s peripheral impact on statutory rights and remedies were of peripheral concern. The Court also found that the agreement was not unconscionable per se because it failed to provide the farmers with reciprocal rights to attorney fees. The Court remanded to the Court of Appeals for further consideration. Texas Venture Cotton Coop. v. Freeman, 7 Tex. Sup. Ct. J. 730 (June 13, 2014).

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