BEAUMONT – The Ninth Court of Appeals has reversed a trial court’s order denying a Sam Houston Electric Cooperative motion to compel arbitration in a budding class action lawsuit.
The opinion stems from what started as a wrongful death case, brought by plaintiff Joe Berry and filed against SHEC in Liberty County.
SHEC is a member-owned, not-for-profit electric cooperative organized under the Texas Electric Cooperative Corporation Act to provide electricity to its members in rural areas.
The cooperative is governed by its own bylaws, which includes using arbitration as a means for dispute resolution.
Berry’s father, Lester Berry, applied for membership with the cooperative in 1991, and he maintained his membership until the time of his death in late 2015. In early 2016, Berry, who was not a member, filed suit against the cooperative on behalf of Lester Berry’s estate and his surviving heirs, court records show.
His suit initially asserted wrongful death and survival causes of action, alleging that Lester Berry, who was elderly, in poor health, and required an oxygen concentrator, died after the cooperative terminated electricity service to his home due to an unpaid electric bill.
Berry later amended his pleadings to add the individual defendants and to assert several putative class action claims relating to SHEC’s management of its finances, such as claims that SHEC excessively compensated directors and failed to return unused revenues to members, court records state.
Citing the arbitration clause contained in its bylaws, SHEC filed a motion to compel arbitration of the putative class claims only and to stay the proceedings as to those claims pending arbitration.
In response, Berry amended his pleadings again to add Guillermo Cano, a member of the cooperative, to the suit as an additional representative of the putative class.
Berry and Cano opposed SHEC’s motion to compel, arguing that the arbitration clause was not valid and enforceable because:
- The arbitration provision was added to the bylaws after Lester Berry became a member and was not signed by him;
- The agreement is illusory because SHEC maintains a unilateral right to amend or remove the provision by amending its bylaws;
- The agreement is procedurally unconscionable because members of the cooperative have little or no choice of electrical service providers; and
- The claims are not arbitrable because the agreement does not expressly permit class arbitration.
Following a hearing, the trial court denied SHEC’s motion to compel arbitration, court records show.
On appeal, justices found where a claimant seeks to bring claims on behalf of a class, an otherwise valid arbitration provision must be enforced and the issue of class certification becomes one of contract construction appropriately left to the arbitrator.
“We therefore reject Berry and Cano’s argument that their attempt to achieve class certification nullifies an otherwise enforceable arbitration agreement,” the Ninth Court’s opinion states.
“Based on the foregoing, we reverse the trial court’s order denying SHEC’s motion to compel arbitration and remand for entry of an order compelling arbitration and staying further proceedings as to Berry and Cano’s class action claims pending arbitration.”
SHEC is represented by Holland & Knight attorneys Bradley Hancock, Christopher Johnsen and Mark Davis.
Berry is represented by Misty Hataway-Cone, attorney for the Humble law firm Spurlock & Associates.
Appeals case No. 09-16-00346-CV
Trial court case No. CV-15-10279