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Where an arbitration agreement stands alone and is based solely on the parties' mutual promise to arbitrate disputes, the agreement is illusory if it binds one party to arbitrate, while allowing the other to choose whether to arbitrate. But when an arbitration provision is part of a larger, underlying contract, the consideration supporting the underlying contract may also support the arbitration clause.
Appellee Mary Ruiz filed this suit against the appellant Service Corporation International. According to her petition, appellant SCI Texas Funeral Services did business as a funeral home and a cemetery. Appellee alleged that the appellant committed fraud in handling the funeral services and burial of appellee’s deceased brother, Ernesto Eguia. The events were described by the appellee as follows. After her brother’s unexpected death, an autopsy was performed by the medical examiner. The medical examiner put Ernesto's organs in a plastic bag and then placed the bag back into the body cavity, stitched up the incision, and released the body to the appellant’s funeral home business where her brother’s remains were embalmed. Appellee asserted that she never consented to the embalming. Three days after the funeral service, an appellant’s employee contacted the appellee to arrange a meeting with the appellant’s general manager. At the meeting, the latter revealed that, by mistake, the bag containing her brother’s organs had not been buried with his remains. The general manager then explained that there were two options: first was to disinter the remains, place the organs next to his body, and re-inter the casket; or second, cremate the organs and inter them near her brother’s burial plot. Appellee alleged that the actions of the defendant’s employees constituted fraud by nondisclosure. She alleged that the appellant breached its duty to disclose material facts related to the funeral which were known only to the appellant. The appellant filed a motion to compel arbitration and to abate proceedings in the trial court. The appellant relied on the arbitration clauses in two contracts between the parties referred to as the Agreements. Both agreements include arbitration provisions in which the appellee agreed that any claims she had relating to the respective agreement, including any dispute about the interpretation of its arbitration clause, would be submitted to arbitration under the rules of the American Arbitration Association (AAA). Based on these agreements and the arbitration clauses they contained, the appellant moved to compel arbitration. Appellee opposed the appellant’s motion, claiming the agreements and their arbitration clauses were not enforceable for multiple reasons. The trial court denied the appellant’s motion to compel arbitration. In its order, the trial court agreed with and relied upon the appellee’s theory that her fraud claim did not fall within the scope of the arbitration clauses. The appellant then filed this interlocutory appeal challenging the denial of its motion to compel arbitration.
Was the trial court’s denial of the appellant’s motion to compel arbitration proper?
The court held that in the appellee’s claim against the appellant funeral home operator alleging fraud in handling the funeral services and burial of her deceased brother, the trial court erred in denying the appellant’s motion to compel arbitration in accordance with the parties' two agreements. The court ruled that the Federal Arbitration Act applied to the agreements based on evidence that the operator sold goods that were purchased or manufactured out of state and that its parent operated more than 1,500 funeral homes and 400 cemeteries in 43 states and foreign countries. That although neither arbitration clause showed a mutual promise to arbitrate disputes, they were supported by valid consideration in the form of mutual, binding promises. Thus, the court reversed the order denying arbitration and remanded the case to the trial court for further proceedings, including the resolution of the appellee’s unconscionability defense.