In Smith v. Al Ross Luxury Homes LLC, the Court of Appeals of Texas, Houston (14th District), ruled on May 20, 2025, that when a mediated settlement agreement declares an earlier construction contract “null and void,” the arbitration clause inside that contract dies with it. A court, not an arbitrator, gets to make that call. The Smiths could not force arbitration under a contract their own settlement had nullified.1Findlaw. Smith v. Al Ross Luxury Homes LLC
How the Dispute Reached the Court
Melissa and Stacy Smith signed a construction contract with Al Ross Luxury Homes LLC on March 31, 2021 for a home remodeling project. The contract contained a broad arbitration clause covering “any dispute or claim arising under, or relating to” the agreement, along with a delegation clause giving the arbitrator authority over threshold questions of arbitrability.
When the project soured, the parties chose mediation instead of arbitration. The session, run by retired Harris County Senior District Judge Caroline Baker, produced a Mediated Settlement Agreement. The MSA required a mutual release of all claims and stated that the parties agreed to “a mutual walk away from the original construction agreement, which is hereby made null and void.”2Findlaw. Smith v. Al Ross Luxury Homes LLC
The MSA anticipated a follow-up “Final Settlement Release Agreement.” The parties could not agree on that document’s language, and a second mediation failed. The Smiths then moved to compel arbitration under the original contract. Al Ross Luxury Homes sued in the 190th District Court of Harris County to enforce the MSA and enjoin the arbitration.3Justia. Smith v. Al Ross Luxury Homes LLC The trial court denied arbitration and granted the injunction. The Smiths appealed.
“Null and Void” Is Not the Same as “Terminated”
The Fourteenth Court of Appeals drew a sharp distinction between two things that sound similar but operate differently. A terminated contract ends going forward but can leave certain provisions, including arbitration clauses, intact. A contract declared null and void is treated as having no legal effect at all.
Because the MSA used the specific phrase “null and void,” the court concluded the entire construction contract was extinguished, and the arbitration and delegation clauses went with it.1Findlaw. Smith v. Al Ross Luxury Homes LLC The Smiths had cited Texas cases like Greystone Multi-Family Builders, Inc. v. TES Electric, LP and Cleveland Construction, Inc. v. Levco Construction, Inc. for the severability principle, but those cases addressed termination, not nullification.2Findlaw. Smith v. Al Ross Luxury Homes LLC
Who Decides Whether an Arbitration Agreement Exists
The Smiths argued the delegation clause required an arbitrator to answer the threshold question of whether the arbitration agreement still existed. The court disagreed, relying on two decisions.
The first was the Texas Supreme Court’s 2022 decision in Transcor Astra Group S.A. v. Petrobras America Inc., which addressed the enforceability of a settlement agreement that superseded an earlier contract containing an arbitration clause.4Justia. Transcor Astra Group S.A. v. Petrobras America Inc. The second was the U.S. Supreme Court’s unanimous 2024 decision in Coinbase, Inc. v. Suski, which held that when parties sign two conflicting contracts, one sending disputes to arbitration and another sending them to court, a judge decides which one governs.5Supreme Court of the United States. Coinbase, Inc. v. Suski
That framework fit the Smith case. The MSA had no arbitration clause. It sent further disputes back to the mediator and referred to “litigation” as the enforcement mechanism. The original contract sent disputes to arbitration. Two agreements, two directions. Under Coinbase, the court had to resolve the conflict, and the MSA’s nullification language resolved it: no enforceable arbitration agreement remained.1Findlaw. Smith v. Al Ross Luxury Homes LLC
Why the Delegation Clause Didn’t Save Arbitration
A delegation clause is often treated as a mini-agreement inside the arbitration clause, giving the arbitrator power over gateway questions. The Smiths leaned on that idea. The court’s answer was structural: the delegation clause is part of the contract that houses it. Nullify the contract and the delegation clause goes too. It cannot lift itself out of an agreement the parties have voided by mutual consent.
What This Means for Settlement Drafting
Texas courts have long said arbitration clauses can survive a contract’s termination. Smith v. Al Ross Luxury Homes marks the limit of that survival. When a settlement uses language strong enough to render the earlier contract null and void, the arbitration provision does not survive, and neither does any delegation clause inside it.
For parties writing a settlement, the word choice matters. “Terminated,” “released,” “superseded,” and “null and void” are not interchangeable, and the phrase the drafters pick may decide who resolves the next dispute if the settlement itself breaks down. For parties on the receiving end of a settlement that voids an underlying contract, the takeaway from Smith is that a later attempt to invoke the old arbitration clause is unlikely to work, and the fight over whether it works belongs in court.