Forest Oil Corporation and Daniel B. Worden v. James Argyle McAllen, El Rucio Land and Cattle Company, Inc., San Juanito Land Partnership, and McAllen Trust Partnership

Summary

The Supreme Court of Texas held that a clear and broad waiver-of-reliance provision in a settlement agreement barred a fraudulent-inducement challenge to the agreement's arbitration requirement. The Court reversed and remanded for the trial court to compel arbitration, with arbitrators to determine the scope of arbitrable issues before the trial court addressed severance of claims brought by nonsignatories. Two justices dissented, arguing that the disclaimer did not preclude a fraudulent-inducement claim concerning matters outside the settled dispute.

Holdings

1. A clear and broad waiver-of-reliance provision in a negotiated settlement agreement precluded McAllen from establishing reliance, as a matter of law, on alleged extra-contractual representations concerning the commitment to arbitrate future environmental and personal-injury disputes.
2. Once a valid arbitration agreement was established and the fraudulent-inducement challenge failed, the trial court had no discretion but to compel arbitration and stay the litigation.
3. The arbitrators must determine the scope of the arbitration clause before the trial court determines whether and how to sever the nonsignatory plaintiffs' nonarbitrable claims.

Questions Presented

1. Whether the settlement agreement's clear and broad waiver-of-reliance provision conclusively negated the reliance element of McAllen's fraudulent-inducement claim.
2. Whether McAllen's claims fell within an arbitration provision that delegated scope determinations to the arbitrators.
3. How the trial court should handle claims brought by nonsignatory plaintiffs after arbitration is compelled.

Disposition

reversed_and_remanded