Texas Business Court Decision – February 24, 2026

No. 25-BC01A-0025  BNSF Railway Company v. Level 3 Communications, LLC (Div. 1, Judge Bouressa) 25-bc01a-0025-bnsf-railway-v-level-3-communications-2026-tex-bus-8.pdf

Motion to Confirm Arbitration Award. In 1998, BNSF and Level 3 signed a right-of-way agreement to permit Level 3 to install fiber optic facilities along BNSF’s right-of-way; the agreement gave Level 3 the right to extend the agreement for two renewal periods and provided the parties would negotiate a new rate upon extension; it also provided an appraisal process if the parties could not agree on the new rate. In 2023 Level 3 exercised its right to renew, but the parties could not agree on the new rate. Level 3 then filed a demand for arbitration with the American Arbitration Association (AAA), relying on the formal dispute resolution procedures set out in the right-of-way agreement; the arbitration clause did not expressly reference renewal rate disputes or the appraisal process; BNSF opposed the motion, and asked that it be dismissed so that the appraisal process could continue. After further motion practice before the AAA and discovery, the AAA panel found BNSF had failed to negotiate in good faith, rendering further negotiations and the appraisal process futile or impossible; the panel found BNSF thereby waived its right to pursue  further negotiations and appraisal, and it ordered the parties to abide by a rate negotiated by the parties’ lead negotiators earlier in the dispute resolution process.

In this action before the Business Court, BNSG filed an application to vacate the arbitration award, arguing the panel exceeded its authority when it replaced a contractually-mandated appraisal process with arbitration, and Level 3 counterclaimed with an application to confirm the award.

Held: (1) the court would review the motions under both the Texas Arbitration Act and the Federal Arbitration Act;

(2) in determining whether the panel exceeded its authority, the proper inquiry is not whether the panel decided the issue correctly but, rather, whether the panel had authority to decide the issue at all;

(3) the panel did not err in deciding it had authority to determine whether the renewal rate was subject to arbitration, and thereafter, to enter an award resolving the dispute;

(4) while questions of substantive arbitrability are normally decided by the courts, here, the parties agreed in their right-of-way agreement that any arbitration under the agreement would be conducted in accordance with the AAA’s Commercial Rules, and Rule 7 of the Commercial Rules grants to the arbitrator the power to rule on his or her own jurisdiction, including the arbitrability of any claim or counterclaim, without any need to refer such matters first to a court;

(5) the parties are bound by the Commercial Rules and their adoption of those rules removed questions of substantive arbitrability from the courts and placed them “squarely in the hands of the arbitration panel;” the court thus rejects BNSF’s claim that the award should be vacated because the Panel exceeded its authority in determining that the renewal rate dispute was arbitrable or in rendering an award resolving the dispute;

(6) BNSF’s alternative argument – that the panel exceeded its authority by allowing arbitration prior to the completion of a condition precedent (the appraisal process) –  is a procedural arbitrability question, and Texas law is clear that arbitrators – and not the courts – have authority to decide procedural arbitrability questions;

(7) Level 3 presented no evidence concerning fees and costs to the Panel, and, in the absence of such evidence, its claims for fees and costs must be denied.

The Panel’s arbitration award is confirmed.