Willett Concurrence in
In Re Morgan Stanley & Co. Inc. (Tex. 2009)
No. 07-0665 (Tex. Jul. 3, 2009)(Majority Opinion by Justice Medina) (arbitration mandamus denied) (legal
(in)capacity of purported party to arbitration agreement; is the issue for court to decide, or for the
arbitrator?)
A mental-incapacity defense goes to whether the parties reached an
agreement in the first place, while defenses like fraudulent inducement
attack the validity of an agreement actually made. That is, the former says no
agreement exists; the latter concedes existence but contests enforcement.
... Since a mental-incapacity defense goes to whether an agreement was
made, the court must decide it.
IN RE MORGAN STANLEY & CO. INC., SUCCESSOR TO MORGAN STANLEY DW, INC.;
from Dallas County;
5th district (05-07-00590-CV, ___ SW3d ___, 07-17-07 Opinion by the Dallas CoA)
The petition for writ of mandamus is denied.
Justice Medina delivered the opinion of the Court, in which Chief Justice Jefferson, Justice Wainwright,
Justice Green, Justice Johnson, and Justice Willett joined.
Justice Brister delivered a concurring opinion (suggesting direct benefits estoppel as an alternative theory
to enforce arbitration clause in the underlying agreement)
Justice Willett delivered a concurring opinion.[2 page pdf opinion] (reading that FAA as clearly requiring
that the court decide the mental-incapacity issue)
Justice Hecht delivered a dissenting opinion. (would have the arbitrator decide the issue of capacity to
contract, analogously to a fraudulent inducement defense asserted to avoid enforcement of a contract)
(Justice O'Neill not sitting)
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In Re Morgan Stanley & Co. Inc. (Tex. 2009)(Willett, concurring)
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[Note: highlights and hyperlinks have been added to the text of the opinion below; to view the opinion in its
original format (pdf), follow the appropriate hotlink above]
Argued October 15, 2008
Justice Willett, concurring.
Like the Court, I believe the Federal Arbitration Act (FAA) reserves signatory-power issues like
this to judges, not to arbitrators. A mental-incapacity defense goes to whether the parties
reached an agreement in the first place, while defenses like fraudulent inducement attack the
validity of an agreement actually made. That is, the former says no agreement exists; the latter
concedes existence but contests enforcement.
Like Justice Brister, I dislike the murky line between contract formation and contract validity.1 And
while I have no quarrel with the Court’s application of the relevant caselaw, I wish such a
discussion were unnecessary. Judicial decisions often embroider statutory text with more
complexity than is necessary. Sometimes legislative language is clear enough on its own and
leaves no room for judicial parsing or sprucing. This case is governed by the Federal Arbitration
Act, and Section 4 provides a rather straightforward answer, declaring that disputes relating to the
“making” of an arbitration agreement are gateway matters for the court.2
Since a mental-incapacity defense goes to whether an agreement was made, the court must
decide it. (Indeed, it’s difficult to see how an incompetent person can “make” a contract since a
“meeting of the minds” cannot happen if one of the minds is incapable of meeting.) The statute is
free of nuance and merits a nuance-free interpretation: The FAA itself declares this issue a judicial
one.
______________________________
Don R. Willett
Justice
OPINION DELIVERED: July 3, 2009
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1 __ S.W.3d __ (Brister, J., concurring).
2 9 U.S.C. § 4 (the court shall order the parties to arbitration “upon being satisfied that the making of the
agreement for arbitration or the failure to comply therewith is not in issue”).