Patriot Power Group, LLC v. Fasken Oil and Ranch, LTD.

• Court: Texas Court of Appeals, 8th District (El Paso)
• Decided: January 27, 2026
• Docket: 08-24-00410-CV
• Status: Published

Opinion

COURT OF APPEALS EIGHTH DISTRICT OF TEXAS EL PASO, TEXAS ————————————

No. 08-24-00410-CV ————————————

Patriot Power Group, LLC, Appellant v. Fasken Oil and Ranch, Ltd., Appellee

On Appeal from the 109th District Court Andrews County, Texas Trial Court No. 23,403

M E MO R A N D UM O P I N I O N Appellant Patriot Power Group, LLC (Patriot) and Appellee Fasken Oil and Ranch, Ltd.

(Fasken) entered into a contract containing an arbitration agreement. After Fasken sued Patriot,

Patriot moved to compel arbitration. Fasken opposed the motion, contending Patriot waived its

right to enforce the arbitration agreement because it failed to negotiate prior to moving to compel

arbitration. Fasken also argued there was no mutuality of obligation because of a carve-out

provision in the arbitration agreement. Finally, Fasken maintained that the court rather than the

arbitrator was tasked to decide whether the agreement was enforceable. Concluding that the issues pertaining to the agreement’s enforceability are for the arbitrator to decide, we reverse the trial

court’s order denying Patriot’s motion to compel arbitration.

I. FACTUAL AND PROCEDURAL BACKGROUND A. The parties’ agreement Patriot provides electrical power through “power generation equipment and related

services[.]” Fasken owns an oil and gas operation site in Andrews, Texas, which requires

supplemental electrical power. In October 2023, the parties entered into a service agreement in

which Patriot agreed to provide Fasken supplemental electrical power at its business site (the

service contract). The service contract’s “Dispute Resolution” provision states:

All disputes arising in connection with this Agreement shall be settled, if possible, by negotiation between the Parties. If settlement cannot be reached by negotiation, then the dispute shall be settled finally by arbitration to be conducted in accordance with the Rules of Arbitration of the American Arbitration Association, in effect on the date of the institution of arbitration by either Party. The service contract contained a paragraph labeled “Waiver of Right to Jury Trial” in

capital letters indicating that the parties had “FULLY DISCUSSED” the arbitration provisions and that,

without exception, “EACH PARTY HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR

CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT.” It also contained a “carve-

out” provision, stating that “[n]ot withstanding” the preceding arbitration agreement, Patriot was

allowed to file a lawsuit to recover any of its “[e]quipment or other chattel in which [it] holds or

claims title or other interest, which has been taken or detained by the Customer or any third

party[,]” and such filing “shall not be deemed incompatible with, or a waiver of, this agreement to

arbitrate.”

B. Fasken’s lawsuit

On May 13, 2024, Fasken sent Patriot a notice of default, claiming Patriot had breached

the service contract by, among other things, providing Fasken non-operational equipment. Fasken

2 demanded reimbursement for the fees and expenses incurred as the result of the alleged breach as

well as removal of Patriot’s equipment. Patriot removed its equipment, but the parties did not

resolve their dispute over damages outside of litigation.

On August 8, 2024, Fasken sued Patriot for breach of contract, common law fraud,

unilateral mistake, and unconscionability, alleging that prior to entering the contract, Patriot

misrepresented the type of equipment it would provide. Fasken alleged Patriot instead provided

used equipment that “could never meet the emissions standards applicable to Fasken’s use[.]”

According to Fasken’s petition, the parties had unsuccessfully spent months trying to make the

equipment work before Fasken filed suit. In addition to damages, Fasken sought a declaratory

judgment that the parties’ agreement was invalid due to a failure of consideration and lack of

mutual assent, or alternatively, that it was unenforceable due to “impossibility, impracticality, and

frustration of purpose” and/or “unilateral mistake.” Fasken also sought a declaration that the

arbitration agreement was unenforceable as procedurally and substantively unconscionable,

obtained by fraud or duress, and lacked “a mutuality of obligation.”

C. Patriot’s motion to compel arbitration

On September 16, 2024, Patriot moved to compel arbitration and stay the proceedings

pending the resolution of its motion. Patriot argued that the question of whether the parties’ dispute

was subject to arbitration was for the arbitrator to decide, since the parties’ agreement provided

that arbitration was to be governed by the “Rules of Arbitration of the American Arbitration

Association[] in effect on the date of the institution of arbitration by either Party.” In turn, Patriot

asserted that the relevant AAA rules provide that issues of arbitrability—including the existence,

scope, and validity of an arbitration agreement—are generally for the arbitrator rather than the

court to decide. In the alternative, Patriot urged the court to determine that the arbitration

3 agreement was valid and enforceable, was not unconscionable, was supported by sufficient

consideration, and that Fasken’s claims all fell within its scope.

Fasken opposed the motion on three grounds. First, it contended the court should decide

whether a valid arbitration agreement existed, as the 2022 AAA rule revisions provide that the

rules apply only to cases in which arbitration is already underway. By agreeing to apply the AAA

rules, Fasken argued, the parties did not intend to take away the court’s right to determine whether

a valid and enforceable arbitration agreement existed. In turn, it maintained the agreement was not

valid due to “certain contract formation defenses,” including: “Unconscionability”; “Lack of

consideration”; “Lack of mutuality”; “No meeting of the minds”; “Fraud and/or fraudulent

inducement”; and “Duress.” Second, Fasken argued the arbitration clause was unenforceable

because of the carve-out provision, i.e., because Patriot could unilaterally opt out of arbitration “at

any time under other provisions of the Agreement.” Third, it argued Patriot “waived its right to

invoke arbitration by failing to negotiate toward a resolution, as is required by the plain language

of the arbitration clause[.]” Fasken also asserted that, although Patriot was working on a settlement

offer as late as June 2025, it filed suit on August 8, 2025, due to a provision in the service contract

requiring the parties to file a lawsuit “within one (1) year after the date the cause of action occurs

or reasonable discovery.”1

Fasken provided an affidavit from Taylor Billingsley, the individual who signed the service

contract as its “Oil and Gas Operations Manager.” Billingsley first testified to the contract

formation issues, claiming Patriot had represented it would provide Fasken a new gas turbine that

would meet both Fasken’s supplemental power needs and the “air emission standards and other

regulatory requirements applicable to operating the Equipment as intended on Fasken’s property.”

1 Fasken explained that while it believed the provision was void, it nevertheless filed its suit within the one-year period to avoid any claim that it waived its right to file suit.

4 Billingsley attested that Fasken entered into the service contract based on those representations,

but Patriot failed to deliver.

Billingsley also attested to the parties’ interactions over the issue prior to Fasken filing suit.

He explained that while “Fasken spent months working with [Patriot] trying to get the Equipment

to work,” Patriot required Fasken to make payments during that time. Fasken then obtained

supplemental power from a different vendor and sent a default notice asking Patriot to remove its

equipment and compensate Fasken for its fees and expenses. According to Billingsley, the parties

“worked together to coordinate the process of removing PPG’s equipment from Fasken’s property,

which occurred in or about early July 2024.” In addition, he averred that Patriot represented it was

working with the turbine owner and would present a settlement offer “to see if there was a way to

resolve the dispute absent litigation.” He acknowledged that as late as June 2025, Patriot informed

Fasken that “its attempts to come up with a solution were not dead.” Billingsley asserted, “despite

those assurances” and Fasken’s attempts to obtain the promised settlement offer, Patriot did not

provide the offer. According to Billingsley, Patriot “never engaged in any sort of settlement

negotiations with Fasken to resolve the dispute” before Fasken filed suit.

In Patriot’s reply, it argued the AAA rules applied, the current version of which still made

the arbitrator responsible for determining the validity and enforceability of an arbitration

agreement. Patriot further argued that even if the court were to decide whether the agreement was

enforceable, Fasken’s “waiver” argument was both legally and factually deficient. Specifically,

the negotiation provision was a covenant rather than a condition precedent, and in any event,

Billingsley’s affidavit established that the parties did engage in settlement negotiations before

Fasken prematurely filed suit. Patriot argued the carve-out provision was not appliable to the

parties’ current dispute and therefore did not render the remainder of the arbitration agreement

invalid.

5 Following a non-evidentiary hearing, and without issuing any findings of fact or

conclusions of law, the trial court denied the motion to compel arbitration. This interlocutory

appeal followed.

II. ISSUE ON APPEAL

On appeal, Patriot contends the trial court erred in denying the motion to compel arbitration

because none of Fasken’s arguments support the trial court’s decision. In response, Fasken only

addresses the question of whether Patriot waived the right to go to arbitration by failing to comply

with the negotiation provision. We agree with Patriot that none of the three reasons Fasken gave

the trial court to deny arbitration support the trial court’s decision.

III. APPLICABLE LAW AND STANDARD OF REVIEW

Arbitration is a contractual proceeding by which the parties, to obtain a speedy and

inexpensive final disposition of disputed matters, consent to submit the controversy to an arbitrator

for resolution. See In re Phelps Dodge Magnet Wire Co., 225 S.W.3d 599, 605 (Tex. App.—

El Paso 2005, orig. proceeding) (citing Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 268

(Tex. 1992) (orig. proceeding)). Because arbitration is a matter of contract rather than coercion,

“parties cannot be compelled to arbitrate a controversy unless they have contractually agreed to do

so.” TotalEnergies E&P USA, Inc. v. MP Gulf of Mexico, LLC, 667 S.W.3d 694, 701 (Tex. 2023)

(citing Robinson v. Home Owners Mgmt. Enters., Inc., 590 S.W.3d 518, 521 (Tex. 2019)).

Ordinarily, a court decides whether an arbitration agreement is valid and whether the

parties’ claims fall within the agreement’s scope; but because arbitration agreements are contracts,

the parties can agree that the arbitrator, rather than the court, is required to make those

determinations. See Cerna as Next Friend of R.W. v. Pearland Urban Air, LLC, 714 S.W.3d 585,

589–90 (Tex. 2025); TotalEnergies, 667 S.W.3d at 702 (“Because arbitration is a matter of

6 contract, parties can agree that arbitrators, rather than courts, must resolve disputes over the

validity and scope of their arbitration agreement.”). Thus, when parties have a dispute over whether

they agreed to resolve their controversies through arbitration, which is referred to a dispute over

arbitrability, the first question we must answer is “who (a court or the arbitrator) decides” the

question of arbitrability. TotalEnergies, 667 S.W.3d at 701. “When an agreement unmistakably

delegates questions of the applicability of the agreement to the parties’ claims, a court must compel

arbitration on the matters the parties delegated . . . [including] questions about the scope or validity

of the arbitration clause in a given context.” Cerna as Next Friend of R.W., 714 S.W.3d at 590.

Stated otherwise, “[a] delegation provision removes the court’s power to decide such challenges.”

Id.

“We review the trial court’s denial of a motion to compel arbitration for an abuse of

discretion.” Truly Nolen of Am., Inc. v. Martinez, 597 S.W.3d 15, 21 (Tex. App.—El Paso 2020,

pet. denied). When, as here, the trial court denies a motion to compel arbitration without making

findings of fact or conclusions of law, we will imply “all necessary findings of fact to support its

ruling.” In the Estate of Guerrero, 465 S.W.3d 693, 701 (Tex. App.—Houston [14th Dist.] 2015,

pet. denied) (citing Holt Atherton Indus., Inc. v. Heine, 835 S.W.2d 80, 83 (Tex. 1992)); and we

will construe the record “in a light favorable to supporting the trial court’s ruling.” Id.; see also

Lassiter v. Bliss, 559 S.W.2d 353, 358 (Tex. 1977) (when “[n]o findings of fact or conclusions of

law were requested of or filed by the trial court . . . all questions of fact will be presumed and found

in support of the judgment.”). We will uphold the trial court’s ruling on any legal theory urged in

the trial court that is supported by the evidence. See F.T. James Constr., Inc. v. Hotel Sancho

Panza, LLC, 657 S.W.3d 623, 629 (Tex. App.—El Paso 2022, no pet.).

7 IV. ANALYSIS

We consider in turn each of the three grounds Fasken presented in the trial court to support

its opposition to Patriot’s motion to compel arbitration and conclude that none supports the trial

court’s decision to deny the motion.

(1) Who is to decide arbitrability issues?

First, we consider whether the arbitrator, rather than the court, was tasked with determining

whether a valid arbitration agreement existed, and whether the agreement failed due to contract

formation issues. In general, a court is tasked with determining substantive questions of

arbitrability, such as whether a valid and enforceable arbitration agreement, and whether the

parties’ dispute fits within the scope of that agreement. See G.T. Leach Builders, LLC v. Sapphire

V.P., L.P., 458 S.W.3d 502, 520–21 (Tex. 2015); In re Labatt Food Serv., L.P., 279 S.W.3d 640,

643 (Tex. 2009) (orig. proceeding) (recognizing that “gateway matters” include whether the

parties agreed to arbitrate and whether a claim or dispute is encompassed in the agreement to

arbitrate). However, because arbitration is a matter of contract, the parties may decide that such

issues are to be resolved by the arbitrator rather than the court. See TotalEnergies, 667 S.W.3d at

702; Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002) (recognizing that parties may

agree to submit matters of substantive arbitrability to the arbitrator). However, “[c]ourts should

not assume that the parties agreed to arbitrate arbitrability unless there is ‘clear and unmistakable’

evidence that they did so.” First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995);

see also TotalEnergies, LLC, 667 S.W.3d at 702 (recognizing that “courts will only enforce an

agreement to delegate arbitrability to the arbitrator if that agreement is “clear and unmistakable”).

In TotalEnergies, the Texas Supreme Court held that the parties’ agreement to conduct

arbitration in accordance with the AAA rules is clear and unmistakable evidence that they agreed

to delegate the issue of substantive arbitrability to the arbitrator. TotalEnergies, 667 S.W.3d at

8 709. Specifically, the court recognized that the AAA rules applicable to the parties’ dispute in that

case, which were adopted in 2013, required the arbitrator rather than the court to determine

arbitrability issues. Id. (recognizing that AAA rules provide that the “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’”)

(citing AM. ARB. ASS’N R-7(A) (2013)). The court further recognized that when the parties agree

arbitration will be conducted in accordance with the AAA rules, those rules are incorporated into

the parties’ contract and are binding on them absent any conflict between the rules and the language

in the parties’ agreement. Id. at 709 (where parties’ agreement “expressly states that arbitration

must be conducted ‘in accordance with the rules of the AAA’ and that the ‘procedure of the

arbitration proceedings shall be in accordance with the Commercial Rules of the AAA[]’ . . . the

parties incorporated the AAA rules into their arbitration agreement, and thus the rules are binding,

at least absent any conflict between the two”) (citing Americo Life, Inc. v. Myer, 440 S.W.3d 18,

24 (Tex. 2014)).

Fasken does not deny that the parties agreed to conduct arbitration in accordance with the

AAA rules, and it does not argue that there is any conflict between the AAA rules and the terms

of the arbitration agreement. To the contrary, on appeal, Fasken appears to concede that the AAA

rules apply. In the trial court, however, Fasken asserted that the AAA rules applicable to this

dispute, which were amended on September 1, 2022, no longer require the arbitrator to decide

issues of arbitrability. Fasken does not address this issue in its appellate briefing. Patriot points out

that the 2022 revisions to the AAA rules do not appear to change the rule’s requirements that the

arbitrator must determine questions of arbitrability. The relevant AAA rule provides: “The

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

9 claim or counterclaim, without any need to refer such matters first to the court.” See COMMERCIAL

ARBITRATION RULES AND MEDIATION PROCEDURES R-7(a) (Am. Arb. Ass’n 2022). 2 The 2022

amendment’s only change was to add the last phrase, “without any need to refer such matters first

to a court.” DiTucci v. First Am. Title Ins., No. 21-4120, 2023 WL 382923, at *1 n.2 (10th Cir.

Jan. 25, 2023) (recognizing that the sole change to Rule 7(a) is the addition at the end of the

sentence of the language “without any need to refer such matters first to a court”).

Our sister courts have recognized that Rule 7(a), as amended, continues to delegate issues

of arbitrability to the arbitrator. See Masterson v. SCI Texas Funeral Services, LLC, No. 01-23-

00496-CV, 2025 WL 2165176, at *7 (Tex. App.—Houston [1st Dist.] July 31, 2025, no pet.)

(mem. op.) (concluding that the current version of Rule 7(a) of the AAA Rules delegates questions

of arbitrability to the arbitrator); Caprocq Core Real Estate Fund, LP v. Essa K. Alley Revocable

Tr. No. 2, No. 05-22-01021-CV, 2024 WL 4579064, at *10 (Tex. App.—Dallas Oct. 25, 2024, no

pet.) (mem. op.) (concluding same); see also Reid v. Tandym Group, LLC, 697 F.Supp.3d 62, 77

(S.D.N.Y. 2023) (comparing the 2022 version of Rule 7(a) to the prior version and concluding that

the current version continues to delegate questions of arbitrability to the arbitrator).

We therefore conclude that because the parties’ arbitration agreement expressly

incorporated the AAA rules, the trial court could not have denied Patriot’s motion to compel

arbitration based on Fasken’s contract formation defenses, as those defenses were for the arbitrator

to consider and resolve.

(2) Does the carve-out provision void the arbitration agreement?

Next, we consider Fasken’s argument that the carve-out provision allowing Patriot to sue

to recover equipment gave Patriot the ability to unilaterally opt out of arbitration, thereby rendering

2 https://www.adr.org/media/qielmf0g/2025_commercialrules_web.pdf

10 the agreement “illusory” or void for lack of mutuality of obligation. See Whataburger Restaurants

LLC v. Cardwell, 545 S.W.3d 73, 81 (Tex. App.—El Paso 2017, no pet.) (recognizing that “[a]n

arbitration agreement is illusory if it binds one party to arbitrate, while allowing the other to choose

whether to arbitrate” (citing Royston, Rayzor, Vickery, & Williams, LLP v. Lopez, 467 S.W.3d 494,

505 (Tex. 2015)).

On appeal, Patriot notes that although the carve-out provision allowed it to sue to recover

equipment—which was not the basis of Fasken’s lawsuit—the arbitration agreement expressly

stated that the carve-out provision “shall not be deemed incompatible with, or a waiver of, this

agreement to arbitrate.” Such carve-out provisions do not render the remainder of an arbitration

agreement illusory or void for lack of mutuality. See, e.g., In re People’s Choice Home Loan, Inc.,

225 S.W.3d 35, 46 (Tex. App.—El Paso 2005, orig. proceeding) (rejecting argument that

arbitration agreement was unconscionable or void for lack of mutuality because party “retained

judicial remedies” relating to certain claims (citing In re FirstMerit Bank, N.A., 52 S.W.3d 749,

757–58 (Tex. 2001) (orig. proceeding) (concluding that an arbitration agreement that excepted

certain claims from arbitration was supported by mutual consideration and was not otherwise

unconscionable)).

More importantly, the Texas Supreme Court has held that carve-out provisions do not

affect the broader arbitration agreement’s delegation to the arbitrator to decide issues of

arbitrability and scope. In TotalEnergies, the court held “to the extent that the arbitration

agreement carves out certain claims from arbitration, it does so from the [arbitration] agreement

in general, not from the provision that incorporates the AAA Rules.” TotalEnergies, 667 S.W.3d

at 718–19. It therefore observed that “the carveout goes to the scope of the [arbitration]

agreement—a question that the agreement otherwise delegates to the arbitrator—not the scope of

the arbitrator’s authority to decide questions of “arbitrability.” Id. (emphasis in original) (citing

11 Blanton v. Domino’s Pizza Franchising LLC, 962 F.3d 842, 848 (6th Cir. 2020)). Accordingly, the

court concluded, the fact that “the parties’ arbitration agreement may cover only some disputes

while carving out others does not affect the fact that the delegation agreement clearly and

unmistakably requires the arbitrator to decide whether the present disputes must be resolved

through arbitration.” Id. at 719.

As such, we agree with Patriot that the carve-out provision in the arbitration agreement did

not alter the fact that the parties delegated to the arbitrator the responsibility to determine issues of

arbitrability. Therefore, the trial court could not have relied on the carve-out provision to deny

Patriot’s motion to compel arbitration.

(3) How do we treat the negotiation provision?

Third and finally, we examine Fasken’s argument that because Patriot allegedly did not

comply with the arbitration agreement’s negotiation provision, it was barred from seeking

arbitration because complying with the negotiation provision was a condition precedent to

arbitration.

In general, the question of whether a party has complied with a procedural requirement in

an arbitration agreement, referred to as “procedural arbitrability,” is for an arbitrator to decide. As

the Texas Supreme Court has recognized, while a court is typically tasked with determining issues

of substantive arbitrability, such as the existence and enforceability of an arbitration agreement

(unless the parties have agreed otherwise), “issues of procedural arbitrability, i.e., whether

prerequisites such as time limits, notice, laches, estoppel, and other conditions precedent to an

obligation to arbitrate have been met, are for the arbitrators to decide.” G.T. Leach Builders, 458

S.W.3d at 520 (citing Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 81 (2002)); see also

APC Home Health Services, Inc. v. Martinez, 600 S.W.3d 381, 398 (Tex. App.—El Paso 2019,

no pet.) (recognizing same). “[D]isputes about the meaning and application of particular

12 procedural preconditions for the use of arbitration” are also for the arbitrator to decide. See G.T.

Leach Builders, 458 S.W.3d at 521 (citing BG Group, PLC v. Republic of Argentina, 572 U.S. 25,

34 (2014)); see also Slaymaker v. Ballow, No. 12-02-00381-CV, 2003 WL 21356034, at *2

(Tex. App.—Tyler June 11, 2003, no pet.) (mem. op.) (holding that “the issue concerning whether

there existed any condition precedent under the contract was a matter to be determined by the

arbitrator”).

However, a narrow exception to this rule exists in cases in which “no rational mind” could

question (1) whether the parties intended for a procedural provision to preclude arbitration, and

(2) whether the provision was not fulfilled. See, e.g., Bonsmara Nat. Beef Co. v. Hart of

Texas Cattle Feeders, LLC, 603 S.W.3d 385, 398–99 (Tex. 2020) (citing Gen. Warehousemen &

Helpers Union Local 767 v. Albertson’s Distribution, Inc., 331 F.3d 485, 488 (5th Cir. 2003)

(interpreting “this rare exception to mean that a court will not order arbitration if ‘no rational mind’

could question [(1)] that the parties intended for a procedural provision to preclude arbitration and

[(2)] that breach of the procedural requirement was clear”) (emphasis added) (cleaned up)); see

also Seven Hills Commercial, LLC v. Mirabal Custom Homes, Inc., 442 S.W.3d 706, 722

(Tex. App.—Dallas 2014, pet. denied) (recognizing same) (citing Amir v. Int’l Bank of Commerce,

419 S.W.3d 687, 692 (Tex. App.—Houston [1st Dist.] 2013, no pet.)). Stated otherwise, as our

sister court has recognized, “[t]he exception may apply and a court may determine procedural

arbitrability questions when the issues are factually undisputed.” Seven Hills Commercial, LLC,

442 S.W.3d at 722 (citing In re Pisces Foods, L.L.C., 228 S.W.3d 349, 352–53 (Tex. App.—Austin

2007, orig. proceeding)).

Fasken contends this narrow exception applies, pointing to the negotiation provision in the

parties’ arbitration agreement, which states, “[a]ll disputes arising in connection with this

Agreement shall be settled, if possible, by negotiation between the Parties,” but “[i]f settlement

13 cannot be reached by negotiation, then the dispute shall be settled finally by arbitration to be

conducted in accordance with the [AAA Rules].” According to Fasken, this provision clearly made

negotiation a “condition precedent” to arbitration, i.e., “an event that must happen or be performed

before a right can accrue to enforce an obligation.” See Solar Applications Eng’g, Inc. v. T.A.

Operating Corp., 327 S.W.3d 104, 108 (Tex. 2010) (defining the nature of a condition precedent).

And Fasken maintains that the record contains undisputed evidence, in the form of Billingsley’s

affidavit, that the negotiation requirement was not met. In support, Fasken cites cases in which

courts have applied the narrow exception in denying arbitration when the parties’ arbitration

agreement provided that mediation was a condition precedent to arbitration and the record clearly

established mediation did not take place.3

But unlike the cases upon which Fasken relies, Patriot counters, the negotiation provision

in the parties’ arbitration agreement was not a condition precedent that would bar arbitration;

rather, it was a covenant, i.e., a promise to act or refrain from acting in a certain way, the breach

of which only supports a finding of damages and does not affect the enforceability of the agreement

itself. Solar Applications Eng’g, Inc., 327 S.W.3d at 108 (recognizing that “[a] covenant, as

distinguished from a condition precedent, is an agreement to act or refrain from acting in a certain

way”). In the alternative, Patriot maintains that even if the negotiation provision was a condition

precedent to arbitration, Billingsley’s affidavit did not clearly establish that it failed to fulfill any

3 See, e.g., In re Pisces Foods, L.L.C., 228 S.W.3d 349, 353–54 (Tex. App.—Austin 2007, orig. proceeding) (based on the “undisputed record” before it, court held that trial court did not err in denying arbitration, where the parties’ arbitration agreement expressly required mediation as a precondition for requesting arbitration, and where there was “no allegation or proof that either party requested mediation [or] that they held a mediation”); Nordling v. Haake, No. 14-20-00300-CV, 2022 WL 30056, at *3–4 (Tex. App.—Houston [14th Dist.] Jan. 4, 2022, no pet.) (mem. op.) (trial court did not err in denying motion to compel arbitration on plaintiff’s claims, where, among other things, the arbitration agreement only provided for arbitration of claims that were “submitted to, but not resolved by, mediation,” and there was no evidence that the claims in question were submitted to mediation) (citing Southwinds Express Constr., LLC v. D.H. Griffin of Texas, Inc., 513 S.W.3d 66, 78 (Tex. App.—Houston [14th Dist.] 2016, no pet.) (trial court decides as a matter of law the issue of whether arbitration can be compelled in light of a condition precedent when there is no factual dispute about whether the condition precedent has been satisfied); Amir v. Int’l Bank of Commerce, 419 S.W.3d 687, 692 (Tex. App.—Houston [1st Dist.] 2013, no pet.) (same)).

14 duty it had to negotiate under the terms of the arbitration agreement. Patriot therefore concludes

that the “narrow exception” to the rule that an arbitrator is to decide procedural arbitrability issues

does not apply.

We agree with Patriot that the narrow exception does not apply in this instance. Even

assuming for purposes of the appeal that the negotiation provision constitutes a condition precedent

to arbitration—an issue we do not decide—the record does not clearly establish that the provision

was not fulfilled. In other words, the evidence is not such that “no rational mind” could conclude

that the requirement to negotiate, if any, was not met. See Bonsmara, 603 S.W.3d at 398–99

(discussing the “no rational mind” standard). In reaching this conclusion, we find two important

distinctions between the present case and the cases upon which Fasken relies.

First, those cases all involve arbitration agreements expressly requiring the parties to

mediate their disputes as a condition precedent to arbitration. In contrast, here, the arbitration

agreement calls for the parties to attempt to settle their disputes “if possible, by negotiation.” While

a court may determine with certainty whether the parties to a lawsuit went to mediation prior to

arbitration, the question of whether the parties attempted to negotiate their disputes prior to

arbitration presents more of a gray area. As Patriot points out, mediation is a formal, objective

alternative dispute resolution process with a third-party facilitator, while negotiation is an

informal, subjective process between the parties without any such facilitator. See Abbott v.

GameTech Int’l, Inc., No. 03-06-00257-CV, 2009 WL 1708815, at *4 (Tex. App.—Austin

June 17, 2009, pet. denied) (mem. op.) (recognizing that the alternative dispute resolution

procedures in Chapter 154 of the Government Code, including mediation, “contemplates the

participation of an impartial third party to facilitate the resolution of the dispute . . . [but does] not

include informal settlement negotiations between the parties conducted without an impartial third-

party facilitator”) (citing Tex. Civ. Prac. & Rem. Code Ann. § 154.023–.027); The Orchards on

15 the Brazos, L.L.C. v. Stinson, No. 02-14-00172-CV, 2015 WL 1262641, at *5 (Tex. App.—

Fort Worth Mar. 19, 2015, pet. denied) (mem. op.) (recognizing same); see also Tex. Civ. Prac. &

Rem. Code Ann. § 154.023(a) (“Mediation is a forum in which an impartial person, the mediator,

facilitates communication between parties to promote reconciliation, settlement, or understanding

among them.”). Thus, while a “rational mind” may be able to determine with certainty whether

mediation occurred or not prior to arbitration, it may not always be possible to know with any

degree of certainty whether parties satisfactorily engaged in informal settlement negotiations prior

to arbitration.

Second, and relatedly, contrary to Fasken’s argument, the record before us does not contain

undisputed factual evidence that would allow us to determine with certainty that Patriot failed or

refused to engage in settlement negotiations before it moved to compel arbitration. The only

evidence presented in the trial court on this issue was Billingsley’s affidavit. Fasken asserts that

because Patriot did not present any countervailing evidence to contradict the affidavit, the trial

court could have denied arbitration based on Patriot’s failure to comply with the negotiation

provision.

We disagree with Fasken’s assessment of Billingsley’s affidavit. His affidavit did not

clearly establish that Patriot failed to engage in settlement negotiations. Billingsley attested that

after receiving Fasken’s default notice requesting both equipment removal and damages, the

parties informally resolved the issue of the equipment removal. In addition, he acknowledged

Patriot informed Fasken on at least two occasions that it was preparing a settlement offer and was

speaking with the equipment’s owner to determine if they could “resolve the dispute absent

litigation.” While Billingsley observed that no settlement offer was forthcoming, Fasken has not

provided us with any authority to support a finding that the failure to present a settlement offer

16 constitutes a failure to negotiate as a matter of law. Nor does the arbitration agreement itself

expressly require a party to present a settlement offer as a condition precedent to arbitration.

Thus, even without countervailing evidence, Billingsley’s affidavit did not provide clear

or undisputed evidence that Patriot failed to fulfill the negotiation provision prior to moving to

compel arbitration.4

Given the lack of clear and undisputed evidence, we decline to apply the narrow exception

to the rule that the arbitrator rather than a court has the responsibility to decide whether conditions

precedent, if any, to arbitration have been met. See Seven Hills Commercial, LLC, 442 S.W.3d at

722–23 (finding that the “narrow exception” to the rule that an arbitrator rather than a court was

tasked with determining if the party moving for arbitration did not comply with a “strictly

procedural requirement” did not apply absent “clearly established proof” of such); Omoruyi v.

Grocers Supply Co., No. 14-09-00151-CV, 2010 WL 1992585, at *8 (Tex. App.—Houston

[14th Dist.] May 20, 2010, no pet.) (mem. op.) (where parties disputed whether a purported

condition precedent to arbitration was met, the question of whether the failure to fulfill the

condition was a procedural bar to arbitration was for the arbitrator, not the court, to decide).

4 Patriot further points out that Fasken was the first to file its lawsuit thereby waiving its right to assert that the negotiation provision was not fulfilled. In support, Patriot cites opinions that have held, “even when [an arbitration] agreement requires the parties to mediate before arbitration” if the party opposing arbitration is the first to file a lawsuit, it “waives the right to mediation and cannot assert the mediation provision as a condition precedent to arbitration.” Nordling v. Haake, No. 14-20-00300-CV, 2022 WL 30056, at *3–4 (Tex. App.—Houston [14th Dist.] Jan. 4, 2022, no pet.) (mem. op.) (citing Rodriguez v. Texas Leaguer Brewing Co., 586 S.W.3d 423, 430 (Tex. App.— Houston [14th Dist.] 2019, pet. denied) (compelling party to arbitration, even though condition precedent of mediation had not been fulfilled, because party filed suit without first seeking mediation); Nw. Constr. Co. v. Oak Partners, L.P., 248 S.W.3d 837, 852 (Tex. App.—Fort Worth 2008, pet. denied) (same). Fasken counters that we should not conclude it waived its right to assert the negotiation provision by filing its lawsuit when it did, contending it was effectively forced to file suit within one year of Patriot’s alleged breach as required by the service contract. We conclude that the question of whether Fasken waived its right to raise the negotiation provision under these circumstances constitutes yet another question of procedural arbitrability, which is for the arbitrator rather than the court to decide.

17 We conclude that the trial court could not have denied Patriot’s motion to compel

arbitration on this or any other ground Fasken raised. Therefore, the trial court abused its discretion

in denying Patriot’s motion to compel arbitration. Patriot’s sole issue on appeal is sustained.

V. CONCLUSION

We reverse the trial court’s order denying arbitration and remand the matter to the trial

court to refer the parties’ dispute to arbitration in accordance with their agreement.

LISA J. SOTO, Justice

January 27, 2026

Before Salas Mendoza, C.J., Palafox, and Soto, JJ.