Saturday, October 27, 2007
In Re: Energy Maintentance Services Group LLC, No. 14-06-01085-CV (Tex.App. - Houston, Feb. 27, 2007)(Per Curiam)(mandamus to compel arbitration denied)(Before Justices Anderson, Hudson and Guzman) Appeal from 400th District Court of Fort Bend County (Hon. Vacek) ORIGINAL PROCEEDING WRIT OF MANDAMUS M E M O R A N D U M O P I N I O N On December 5, 2006, relator Energy Maintenance Services Group, L.L.C. filed a petition for writ of mandamus in this court. See Tex. Gov't Code Ann. ' 22.221 (Vernon 2004); see also Tex. R. App. P. 52. On December 7, 2006, relator also filed a motion for temporary relief seeking a stay of proceedings in the district court. In the petition and stay, relator asked this court to compel the Honorable Clifford Vacek, presiding judge of the 400th Judicial District Court of Fort Bend County, to stay all proceedings in the trial court, to set aside the ruling denying arbitration, and to compel arbitration of the claims of real parties Jim Sandt and Roxanne Sandt. Relator has not established that real parties have a duty to arbitrate the claims asserted in this case. We accordingly deny relator's petition for writ of mandamus and relator's motion for temporary relief. PER CURIAM Petition Denied and Memorandum Opinion filed February 27, 2007. Panel consists of Justices Anderson, Hudson, and Guzman.
Fourteenth Court of Appeals affirms arbitration award, overrules due process challenge predicated on defective notice of hearing. Ying Chun Tan v. Hung Pin Lee, No. 14-06-00319-CV (Tex.App. - Houston [14th Dist.] Feb. 27, 2007)(Opinion by Chief Justice Hedges)(suit to confirm arbitration award) Full style of case: Ying Chun Tan v. Hung Pin Lee Appeal from 55th District Court of Harris County (Hon. Jeff Brown, District Judge) Disposition: Trial court's confirmation of arbitration award affirmed MEMORANDUM OPINION BY CHIEF JUSTICE HEDGES Ying Chun Tan appeals from the trial court's final judgment confirming an arbitration award favoring Hung Pin Lee. In her sole issue, Tan contends that the trial court erred in confirming the award because she did not receive notice of the arbitration hearing. We affirm. Background Lee brought his arbitration action against Tan and several other defendants asserting securities fraud and related claims. He filed the action with the National Association of Securities Dealers, Inc. (NASD) by filing a Statement of Claim on July 11, 2001. All parties, including Tan, signed a Uniform Submission Agreement, which stipulated that the arbitration was to be conducted under the NASD Code of Arbitration Procedure. Tan subsequently filed a Statement of Answer on September 5, 2001. Three pre-hearing conferences were held before either the whole panel or the chairperson. Tan averred that these were telephone conferences and acknowledged participating in them. She stated that during the final pre-hearing conference, she was told that the arbitrators would be in touch with her to let her know when the arbitration hearing would take place. The record contains two letters, dated April 17, 2003, and August 28, 2003, from a NASD staff attorney to Tan stating that the arbitration hearing would commence on September 30, 2003, and that additional sessions may occur on October 1 and 2, 2003. Also in the record is a separate letter from a different NASD staff attorney, stating that a hearing notification letter was mailed to Tan on August 28, 2003, and that the letter was not returned as undelivered. The arbitration award states that hearing sessions occurred on September 30 and October 1, 2003. The arbitrators found that although Tan was properly served with the Statement of Claim and with due notice of the hearing, she failed to appear at the hearing and, pursuant to the NASD Code of Arbitration Procedure, the hearing proceeded without her. The arbitrators determined that Tan and one other defendant were liable to Lee and ordered them, jointly and severally, to pay him $100,265.68 in compensatory damages and $22,925 in attorney's fees, witness'fees, and costs. Lee subsequently filed his application for confirmation of the award with the district court. Tan answered, alleging, among other things, that the lack of notice of the arbitration hearing: (1) violated NASD rules, (2) violated her right to due process under the United States and Texas constitutions, and (3) runs counter to the concept of notice embodied in the Texas Rules of Civil Procedure. Tan then filed a Motion for Summary Judgment, raising the same notice arguments as raised in her answer. The only evidence attached to Tan's motion was an excerpt from the NASD Code regarding notice and Lee's responses to the requests for admissions, wherein Lee admitted that he did not give notice to Tan of the arbitration hearing. Lee meanwhile filed a Motion to Confirm Arbitration Award. In its final judgment, the trial court denied Tan's Motion for Summary Judgment and granted Lee's Motion to Confirm the Arbitration Award. The trial court awarded damages to Lee precisely as the arbitration award had: $100,265.68 in compensatory damages and $22,925 in attorney's fees, witness' fees, and costs. In her Motion for New Trial, Tan repeated her summary judgment arguments, and she again attached the NASD Code excerpt and Lee's responses to the requests for admissions. She additionally attached her own affidavit, stating that she never received notice of the arbitration hearing date from either NASD or Lee's attorney. She said that she "would not have defaulted on the arbitration hearing if she had known about it." At a hearing on the motion, Tan further testified that she moved five or six months before the hearing date. She said that she left a forwarding address with the post office to have her mail sent to a P.O. Box. She further asserted that she knows that some of her mail was not forwarded because certain bills she did not receive became past due. She acknowledged that she never informed NASD of her move or her new address. At the close of the hearing, Tan's attorney argued that notice of the hearing was improper under the Texas Arbitration Act ("TAA"). Tex. Civ. Prac. & Rem. Code Ann. ' 171.001-.098 (Vernon 2005). Defense counsel objected that this argument had not been previously made. The trial court indicated that it would take the issue under advisement. The court denied the Motion for New Trial. Analysis In her single issue on appeal, Tan contends that the trial court erred in confirming the arbitration award because she did not receive notice of the hearing date as required by the TAA and the NASD Code of Arbitration Procedure. She further argues that the lack of notice violated her due process rights under the 14th Amendment to the United States Constitution. U.S. Const. amend. XIV. We review a trial court's order confirming an arbitration award under a de novo standard. GJR Mgmt. Holdings, L.P. v. Jack Raus, Ltd., 126 S.W.3d 257, 262-63 (Tex. App.-San Antonio 2003, pet. denied). The scope of our review is extraordinarily narrow, and we indulge every reasonable presumption in favor of upholding the arbitration award. Id. We begin by noting that because the parties entered into the Uniform Submission Agreement, thereby agreeing to proceed under NASD procedures, the hearing notice provision of the TAA, section 171.044, does not apply to this case. The section itself begins: "Unless otherwise provided by the agreement to arbitrate, the arbitrators shall set a time and place for the hearing and notify each party." Tex. Civ. Prac. & Rem. Code Ann. ' 171.044(a). Additionally, section 171.001 provides generally that written agreements to arbitrate are valid and enforceable. Id. ' 171.001(a). Indeed, courts have consistently held that when parties agree to arbitrate under certain rules, they are bound by those rules. See, e.g., In re Oakwood Mobile Homes, Inc., 987 S.W.2d 571, 574 (Tex. 1999) (orig. proceeding) (holding that by agreeing to arbitrate under certain rules the parties were bound by those rules); In re Scott, 100 S.W.3d 575, 579 (Tex. App.-Fort Worth 2003, orig. proceeding) (holding that agreement to abide by NASD arbitration rules obligated party to arbitrate under those rules); In re Neutral Posture, Inc., 135 S.W.3d 725, 729 (Tex. App.-Houston [1st Dist.] 2003, orig. proceeding) ("The choice of particular arbitration rules by the parties in an agreement to arbitrate binds the parties to the provisions of those rules . . . ."); In re John M. O'Quinn, P.C., 155 S.W.3d 195, 201 (Tex. App.-Tyler 2003, orig. proceeding) ("Once the parties specify which rules govern arbitration, they are bound by those rules. Furthermore, the trial court has no discretion to modify or otherwise contravene the specified rules."). Here, the parties all signed the Uniform Submission Agreement, thereby agreeing to arbitrate under the NASD Code of Arbitration Procedure. As will be discussed below, the NASD Code contains its own rules regarding notice. Accordingly, the hearing notice issue was not governed by the TAA. We next turn to the NASD Code of Arbitration Procedure. Tan contends that section 10315(a) of the NASD Code requires notice of hearing by personal service, registered mail, or certified mail. We read the section in question as more specific. It states in relevant part: The Director shall determine the time and place of the first meeting of the arbitration panel and the parties, whether the first meeting is a pre-hearing conference or a hearing, and shall give notice of the time and place at least 15 business days prior to the date fixed for the first meeting by personal service, registered or certified mail to each of the parties unless the parties shall, by their mutual consent, waive the notice provisions under this Rule. The arbitrators shall determine the time and place for all subsequent meetings, whether the meetings are pre-hearing conferences, hearings, or any other type of meetings, and shall give notice as the arbitrators may determine. Attendance at a meeting waives notice thereof. NASD Code of Arbitration Procedure ' 10315(a). In her affidavit, Tan acknowledged that she participated in the first three meetings, which were apparently pre-hearing conferences conducted by telephone conference call. Thus, under section 10315(a), notice of the hearing itself was to be given as determined by the arbitrators. Lee contends - and the record supports the conclusion - that the arbitrators determined to give notice by regular mail. The record further supports the conclusion that such notice was given. Specifically, the record contains not only the aforementioned language in the award but also two letters from NASD to Tan informing her of the hearing dates and a third letter from NASD explaining that a hearing notification letter was mailed to Tan and was not returned as undelivered. In the award, the arbitrators found that Tan "received due notice of the hearing." See Brozo v. Shearson Lehman, Hutton, Inc., 865 S.W.2d 509, 511 (Tex. App.-Corpus Christi 1993, no pet.) (deferring to arbitrators' finding regarding whether notice was sufficient under New York Stock Exchange arbitration rules). Accordingly, we find that notice was properly provided under the NASD Code. Tan additionally argues that the evidence regarding notice being sent by regular mail creates only a rebuttable presumption of notice. She asserts that once she denied ever having received notice, the presumption vanished. In making this argument, she references two cases discussing Rule 4(a)(6) of the Federal Rules of Appellate Procedure; (Nunley v. City of Los Angeles, 52 F.2d 792 (9th Cir. 1995), and Cote v. Chase, 914 F. Supp. 739 (D.N.H. 1996)); a case involving mailed notice of a product defect (Warfield v. Byron, 436 F.3d 551 (5th Cir. 2006)); and a case involving a cancellation notice from an insurance company (Anchor Cas. Co. v. Crisp, 346 S.W.2d 364 (Tex. Civ. App.CAmarillo 1961, no writ)). We do not believe these cases to be sufficiently on point to be persuasive. Other authority, more directly on point, holds that notice of an arbitration hearing by regular mail is sufficient to demonstrate that due notice was given when the arbitration rules permit such service, even in light of a party's denial that notice was received. See Gingiss Intern'l, Inc., v. Bormet, 58 F.3d 328, 332-33 (7th Cir. 1995); see also Brozo, 865 S.W.2d at 511 (rejecting claim that notice to attorney was insufficient even in light of claim that party did not receive notice); Gen. Universal Sys., Inc. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., No. 14-01-00509-CV, 2003 WL 1884198, at *1-2 (Tex. App.-Houston [14th Dist.] 2003, no pet.) (rejecting claim that notice by regular mail was insufficient under applicable arbitration rules, but it is unclear whether party received actual notice). Furthermore, the notion that service under the chosen rules creates only a rebuttable presumption of notice runs counter to the widely cited principle that once parties choose certain arbitration rules, they are bound by those rules. See, e.g., In re Oakwood Mobile Homes, 987 S.W.2d at 574; In re John M. O'Quinn, P.C., 155 S.W.3d at 201. Accordingly, we hold that Tan's denial of receipt did not render service by regular mail insufficient. Lastly, we address Tan's assertion that the manner of notice violated her constitutional rights to due process. We recognize that "[a]n elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under the circumstances, to apprise interested parties of the pendency of the action and afford them the opportunity to present their objections." Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950). However, we do not believe that this general statement of legal principles applies to this notice of an arbitration hearing; the parties agreed to be bound by a particular set of rules, and notice was effected according to those rules. See Brozo, 865 S.W.2d at 511. Tan does not make any specific arguments regarding whether the notice in this case was reasonably calculated to apprise her of the suit. Instead, she appears to rely on her contention that because the notice did not satisfy the requirements of the TAA and the NASD Code, her due process rights were violated. Because we hold above that the TAA does not apply to this case and notice was sufficient under the NASD Code, we find Tan's due process arguments to be without merit. Accordingly, we overrule Tan's sole issue. We affirm the trial court's judgment. /s/ Adele Hedges Chief Justice Judgment rendered and Memorandum Opinion/Opinion filed February 27, 2007. Panel consists of Chief Justice Hedges and Justices Fowler and Edelman.  The arbitration award reflects that these conferences occurred on March 20, 2002, October 10, 2002, and April 16, 2003.  Tan made these statements in an affidavit attached to her Motion for New Trial.  The arbitration co-defendant, who was also held liable, also answered in the trial court but is not a party to this appeal.  In the motion, Tan argued that under NASD rules, plaintiff's counsel is responsible for notifying the defendants of the continuation of a hearing. Tan does not make this argument on appeal.  The majority of the sections of the TAA governing arbitration procedures-as opposed to governance of trial court proceedings to compel or stay arbitration or to confirm, modify, or vacate an arbitration awardCcontain similar language deferring to the parties' agreement in the event that it references different procedures. See Tex. Civ. Prac. & Rem. Code Ann. ' 171.041, .042, .043, .045, .046, .047, .053, .055. The remaining sections governing arbitration procedure primarily either grant certain power to the arbitrators (see sections 171.049 (arbitrators may administer witness oaths), 171.050 (arbitrators may authorize depositions), 171.051 (arbitrators may issue subpoenas), and 171.054 (arbitrators may modify or correct an award)); or protect certain rights (see sections 171.048 (ensuring a party's right to be represented by an attorney) and 171.052 (requiring fees for third-party witnesses)). This statutory scheme evidences a clear legislative intention to defer to the parties' agreement in matters of arbitration procedure, with parties free to choose the TAA as controlling, to choose other law as controlling, or to not choose and allow the TAA (or other law) to control by default.  Lee suggests that because this case involves securities transactions, the arbitration was governed by the Federal Arbitration Act ("FAA") instead of the TAA. 9 U.S.C.A. ' 1-16 (West 1999). However, federal courts are consistent in holding that FAA procedures do not apply when the parties have agreed to arbitrate under other rules. See, e.g., Volt Info. Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 479 (1989) ("[P]arties are generally free to structure their arbitration agreements as they see fit. . . . [They may] specify by contract the rules under which that arbitration will be conducted."); Gingiss Intern'l, Inc., v. Bormet, 58 F.3d 328, 332-33 (7th Cir. 1995) (holding that notice of hearing sent via regular mail was sufficient under American Arbitration Association=s Commercial Arbitration Rules, which the parties had agreed to be bound by, despite the fact that state law required notice by registered mail or personal service).  The NASD Code expressly permits pre-hearing conferences to be conducted by conference call. See NASD Code of Arbitration Procedure ' 10321(d)(1).  Tan argues that Gingiss is distinguishable from the present case because, according to Tan, the appellants in Gingiss argued that they did not receive proper notice while Tan asserts that she did not receive any notice at all. However, the court in Gingiss clearly points out that the appellants claimed to have not received "actual notice"; thus, Tan is incorrect about the facts of the case. 58 F.3d at 332. Tan further asserts that Gingiss is distinguishable because four mailings were sent to the appellants in that case and Tan asserts here that only one mailing was attempted. We are unpersuaded by this distinction. First, the record reflects that two letters were sent to Tan regarding the hearing date. Second, the court in Gingiss does not rely on the number of attempts in holding that sufficient notice was undertaken.  None of the due process cases cited by Tan are particularly relevant to the issues in the present case. See Villareal v. San Antonio Truck and Equip., 994 S.W.2d 628, 630-33 (Tex. 1999) (reversing dismissal for want of prosecution where notice of hearing did not adequately apprise party of intent to dismiss); LBL Oil Co. v. Int'l Power Serv., Inc., 777 S.W.3d 390, 390-91 (Tex. 1989) (reversing default judgment because party had no actual or constructive notice of trial setting); Hubert v. Ill. State Assistance Comm'n, 867 S.W.2d 160, 163 (Tex. App.-Houston [14th Dist.] 1993, no writ) (reversing dismissal for want of prosecution where record did not reflect notice and party denied receipt of notice without contradiction).  Because of our holding on Tan's substantive issue, we need not consider Lee's appellate contention that Tan failed to timely apply to vacate the arbitration award.
Sunday, October 14, 2007
In Re U.S. Home Corp., Lennar Corp. et al, No. 03-1080 (Tex. Oct. 12, 2007)(per curiam)(arbitration home owners, builder, contractors, residential construction defect) 03-1080 IN RE U.S. HOME CORPORATION, LENNAR CORPORATION, DAVID GARCIA, FABIAN DIAZ AND SHELDON MOORE; from Cameron County; 13th district (13-03-00598-CV, ___ S.W.3d ___, 11/10/03). Pursuant to Texas Rule of Appellate Procedure 52.8(c), without hearing oral argument, the Court conditionally grants the petition for writ of mandamus. Per Curiam Opinion In Re U.S. Home Corporation, Lennar Corporation, David Garcia, Fabian Diaz and Sheldon Moore, Relators ════════════════════════════════════ On Petition for Writ of Mandamus ════════════════════════════════════ Two couples brought claims on behalf of themselves and others similarly situated alleging their homes were built without shower pans. They concede their contracts contained broad arbitration clauses governed by the Federal Arbitration Act, and do not dispute that their claims fall within the scope of those clauses. Instead, they raise seven contract defenses to enforcement, five of which the trial court cited in refusing to compel arbitration. As there is no evidence to support any of the seven grounds, we conditionally grant mandamus relief. See In re Weekley Homes, L.P., 180 S.W.3d 127, 130 (Tex. 2005) (“Mandamus relief is proper to enforce arbitration agreements governed by the FAA.”). In the sales contracts Luis and Norma Cano and Mark and Gloria Schlatter signed with U.S. Home Corporation, the parties agreed to mediate and arbitrate all controversies that might arise related to the agreement: Any controversy or claim arising under or related to this Agreement . . . shall be determined by mediation or by binding arbitration as provided by the Federal Arbitration Act (9 U.S.C. Sections 1–14) and similar state statutes and not by a court of law. The claim will first be mediated in accordance with the Commercial or Construction Industry Arbitration Rules, as appropriate, of the American Arbitration Association. If not resolved by mediation, the claim will be settled in accordance with the Commercial or Construction Industry Arbitration Rules, as appropriate, of the American Arbitration Association . . . . Written warranties for both homes also provided for arbitration (but not mediation) of any disputes about whether warranty repairs were necessary. Several years after closing, the buyers asserted that a shower in each home had no pan or lining, and alleged claims for repairs, mold remediation, medical bills, and mental anguish. Finding U.S. Home’s remediation plan inadequate, they filed suit in Cameron County against U.S. Home, Lennar Corporation, and three U.S. Home employees. The defendants moved to compel arbitration, and the plaintiffs moved to certify their class claims. The trial court denied the former and granted the latter in a half-day hearing. First, the trial court found the arbitration clauses were contracts of adhesion and thus procedurally unconscionable. “Adhesion contracts are not automatically unconscionable, and there is nothing per se unconscionable about arbitration agreements.” In re AdvancePCS Health L.P., 172 S.W.3d 603, 608 (Tex. 2005) (per curiam); see also In re Palm Harbor Homes, Inc., 195 S.W.3d 672, 678 (Tex. 2006). Here, the plaintiffs proved only that U.S. Home refused to contract with them unless they agreed to arbitration. This is not enough. Palm Harbor, 195 S.W.3d at 678–79; AdvancePCS, 172 S.W.3d at 608; In re Halliburton Co., 80 S.W.3d 566, 572 (Tex. 2002); In re FirstMerit Bank, N.A., 52 S.W.3d 749, 758 (Tex. 2001). Second, the trial court found the arbitration agreements were procured by fraud. The plaintiffs pointed to no evidence of misrepresentations, scienter, or reliance, instead arguing only that the arbitration clause was on the back of their single-sheet contract. As they concede no one prevented them from reading both sides, this is not fraud. Like any other contract clause, a party cannot avoid an arbitration clause by simply failing to read it. In re Merrill Lynch Trust Co. FSB, ___ S.W.3d ___, ___ (Tex. 2007); AdvancePCS, 172 S.W.3d at 608; EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 90 (Tex. 1996). Third, the trial court found the arbitration clauses were not supported by mutual consideration. As both parties agreed to arbitration, this is again simply wrong. Palm Harbor, 195 S.W.3d at 676; AdvancePCS, 172 S.W.3d at 607. The plaintiffs point to two contractual provisions allowing U.S. Home to terminate the agreement if their home was damaged before closing, or if the buyers failed to pay. Neither of these provisions allowed U.S. Home to cancel the contracts at will, or to opt out of arbitration if there was a dispute regarding whether it had properly done so. See Halliburton, 80 S.W.3d at 569 (noting that even if employer terminated contract, it would be bound to arbitrate resulting disputes). Fourth, the trial court found arbitration would be unduly burdensome and costly. To sustain such a defense, both the United States Supreme Court and this Court require specific evidence that a party will actually be charged excessive arbitration fees. Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79, 90–91 (2000); FirstMerit Bank, 52 S.W.3d at 757. Here, the plaintiffs presented no evidence other than a schedule of the American Arbitration Association’s usual fees. This is not enough. Green Tree, 531 U.S. at 90 n.6; FirstMerit Bank, 52 S.W.3d at 757. Fifth, the trial court found that mediation was a condition precedent to arbitration, and the former having yet to occur the latter could not be compelled. But while the parties’ agreements clearly contemplated mediation before arbitration, there is no indication they intended to dispense with arbitration if mediation did not occur first. To the contrary, the warranty agreements that form part of the same transaction require arbitration without any mention of mediation, indicating the parties intended to arbitrate regardless. The plaintiffs allege no damage from U.S. Home’s failure to invoke mediation first, and are hardly in a position to do so as (1) they too did not bother with mediation before seeking class certification, and (2) they concede mediation has taken place while this case was under review. Although the plaintiffs could have asked the trial court to delay arbitration pending mediation, there was no basis for asking the trial court to cancel it entirely. On appeal, the plaintiffs claim arbitration was not mandatory because while the sales agreements required arbitration, the Canos’ warranty book said only that either party “may request” arbitration. We disagree that this renders the contracts ambiguous. We must construe the parties’ contracts together if we can, rather than allowing one to cancel the other as the plaintiffs suggest. In re AdvancePCS Health L.P., 172 S.W.3d 603, 606 (Tex. 2005) (per curiam) (holding series of agreements must be construed together in determining whether parties agreed to arbitration). While the warranty’s clause allowed either party to request arbitration, nothing in it suggests arbitration was optional if either did; to the contrary, the clause constituted a binding promise to arbitrate if either party requested it. See Local 771, I.A.T.S.E., AFL-CIO v. RKO Gen., Inc. WOR Div., 546 F.2d 1107, 1115–16 (2d Cir. 1977) (holding contract that provided “parties may submit to arbitration . . . upon written request of either party” did not make arbitration optional). U.S. Home having done so, the Canos could not opt out thereafter. Additionally, on appeal the plaintiffs argue they do not have to arbitrate with the individual defendants, as only U.S. Home signed the agreement. Assuming this argument can be raised for the first time on appeal, we find it without merit. None of these individuals had a duty to supply shower pans but for the plaintiffs’ contracts with U.S. Home. “[A] litigant who sues based on a contract subjects him or herself to the contract’s terms.” In re FirstMerit Bank, N.A., 52 S.W.3d 749, 755 (Tex. 2001). As the nonsignatories’ liability arises from and must be determined by reference to the parties’ contract rather than general obligations imposed by law, the suit is subject to the contract’s arbitration provisions. In re Weekley Homes, L.P., 180 S.W.3d 127, 131–32 (Tex. 2005); see also In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 762 (Tex. 2006) (“When contracting parties agree to arbitrate all disputes ‘under or with respect to’ a contract (as they did here), they generally intend to include disputes about their agents’ actions . . . .”). Finally, the defendants request that we reverse the trial court’s class certification order as well, pointing out that the United States Supreme Court has expressly held an arbitration clause covering “all disputes relating to a contract” includes disputes about class certification. See Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444, 451 (2003). As the certification order is apparently pending but abated in the Thirteenth Court of Appeals, we decline the invitation as premature. Accordingly, without hearing oral argument, Tex. R. App. P. 52.8(c), we conditionally grant relators’ petition for writ of mandamus and direct the trial court to grant their motion to compel arbitration. We are confident the court will comply promptly, and our writ will issue only if it does not. OPINION DELIVERED: October 12, 2007  The individual defendants are David Garcia, Fabian Diaz, and Sheldon Moore. The plaintiffs also sued Bill Armstrong and Adalberto Gutierrez, neither of which has apparently answered, and thus are not parties in this proceeding.
Sunday, September 30, 2007
CITY OF WESLACO, TEXAS v. BAUDELIO CASTILLO, ET AL, No. 13-06-00023-CV (Tex.App.- Sep. 27, 2007)(Opinion by Justice Yanez)(Before Justices Yanez, Rodriguez and Garza) Appeal from 332nd District Court of Hidalgo County Dsposition: Affirmed as modified Memorandum Opinion by Justice Yañez Appellant, the City of Weslaco, Texas ("the City"), appeals from the confirmation of an arbitration award in favor of appellees, Baudelio Castillo, David Gamez, Jose Angel Rodriguez, Brent Kennedy, and Adan Sanchez. (1) In two issues, the City contends the trial court erred in (1) confirming the award because the arbitration panel exceeded its authority under the collective bargaining agreement ("CBA"), and (2) awarding attorneys' fees to appellees. We modify the judgment and, as modified, affirm. Background In 1998, appellees presented numerous complaints to the City regarding alleged acts of harassment, official oppression, retaliation and discrimination against them by then-Police Chief, J. D. Martinez, and other senior police department personnel. Appellees alleged that certain actions taken against them by Chief Martinez and others were in violation of the CBA between the parties. (2) On February 25, 1999, the parties signed an agreement to arbitrate the claims under the Uniform Arbitration Act. The agreement provides that the written decision of the two arbitration judges "shall be binding upon the sides." (3) The arbitration panel heard sworn testimony from approximately thirty witnesses in seventeen days of hearings held over several months, from February to June 1999. On August 30, 1999, the panel issued its decision. Among other things, the panel found that senior police officers had engaged in "intentional, oppressive and harmful acts" against appellees, that Chief Martinez "knew or should have known" of the senior officers' misconduct, and that by "fail[ing] to stop" the officers' abuse of their authority, Chief Martinez sanctioned the misconduct. The arbitration award also (1) awarded monetary damages to appellees, (4) (2) awarded appellees $20,000.00 in attorneys' fees, and (3) ordered the removal of certain written reprimands or charges from appellees' personnel files. On September 14, 1999, the City filed suit, seeking a declaratory judgment that the arbitration panel had exceeded its authority under the CBA and chapter 143 of the local government code. (5) Appellees answered and filed a counter-claim, seeking confirmation of the arbitration award. On November 20, 2000, appellees filed a motion for summary judgment, contending that the City, as the losing party seeking to vacate the arbitration award, had the burden to bring forth a complete record that would warrant vacating the award, and noting that it is undisputed that no complete record of the arbitration proceedings exists. On March 11, 2004, the City filed a motion for summary judgment, contending that the arbitration panel exceeded its authority under the CBA and chapter 143 of the local government code. The parties filed several supplemental answers and responses. On May 25, 2004, the trial court granted appellees' motion for summary judgment and affirmed the arbitration award. The May 25, 2004 order did not address the City's claims or the issues of attorneys' fees and interest. On December 13, 2005, the trial court issued an order, in which it (1) took notice that appellees had established attorneys' fees and expenses in the amount of $47,652.77, and (2) awarded appellees attorneys' fees in the amount of $40,000 (plus attorneys' fees in the event of appeal), plus pre- and post-judgment interest. This appeal ensued. Standard of Review and Applicable Law Where a party appeals a grant of summary judgment in a suit to vacate an arbitration award, we review the district court's ruling de novo. (6) As "long as the arbitrator's decision draws its essence from the collective bargaining agreement and the arbitrator is not fashioning his own brand of industrial justice," we will decline to vacate the award. (7) In applying the "essence" test, an arbitration award "must have a basis that is at least rationally inferable, if not obviously drawn, from the letter or purpose of the collective bargaining agreement. . . . The award must, in some logical way, be derived from the wording or purpose of the contract." (8) Although we accord an arbitrator's decision considerable deference regarding the merits of the controversy, the CBA circumscribes his jurisdiction. (9) An arbitrator may look beyond the written contract when interpreting a collective bargaining agreement if the instrument is ambiguous or silent upon a precise question. (10) Where the arbitrator exceeds the express limitations of his contractual mandate, judicial deference ends and vacatur or modification of the award is an appropriate remedy. (11) Jurisdiction Initially, we address appellees' "motion to determine jurisdiction," in which they seek dismissal of the City's appeal, contending that: (1) the trial court's May 25, 2005 order disposes of all parties and issues and is therefore a final order, (2) the December 13, 2005 order is a nullity because the court's plenary power had expired, and (3) therefore, the City's filing of its notice of appeal was untimely. The City argues that the May 25, 2005 order "addressed the merits of the case but did not resolve the issue of attorneys['] fees and interest," and that the December 13, 2005 order "disposed of all issues as to all parties" and became the court's final judgment, from which the City timely appealed. A judgment is not final unless it disposes of all pending parties and claims in the record. (12) There can be no presumption that a motion for summary judgment addresses all of the movant's claims. (13) In cases in which only one final and appealable judgment can be rendered, a judgment issued without a conventional trial is final for purposes of appeal if and only if it either states with unmistakable clarity that it is a final judgment or actually disposes of all claims and parties then before the court, regardless of its language. (14) The law does not require that a final judgment be in any particular form. (15) Therefore, whether a summary-judgment order is a final judgment must be determined from its language and the record in the case. (16) Here, the May 25, 2005 order, entitled "Judgment Confirming Award," (1) states that appellees "are entitled to Summary Judgment and a judgment confirming the award of the arbitrator," and (2) orders that appellees "have judgment as specified in the Arbitrator's Order of August 30, 1999." It neither addresses the City's request for declaratory relief and attorneys' fees, nor does it contain a "Mother Hubbard" clause, stating that "all relief not expressly granted is denied." The December 13, 2005 order, entitled "Order Granting Defendants' Attorney's Fees and Interest on Judgment," (1) notes that both the City and appellees sought attorneys' fees under the Declaratory Judgment Act, (17) and (2) awards appellees attorneys' fees (including attorneys' fees on appeal) and pre- and post-judgment interest. The order further states that "[a]ll writs and processes for the enforcement and collection of this judgment or the costs of court may issue as necessary" and "[a]ll further relief not expressly granted in this judgment is hereby DENIED." We conclude that because the May 25, 2005 order did not dispose of the City's claims for declaratory judgment or attorneys' fees, it was not a final appealable order. In addition, although we recognize that a "Mother Hubbard" clause alone does not indicate that a judgment rendered without a conventional trial is final, (18) we nonetheless conclude that based on the language of the order and the record in this case, the December 13, 2005 order is a final, appealable order. Accordingly, we hold the City's notice of appeal was timely filed. Appellees' Motion for Summary Judgment In its first issue, the City complains the trial court erred in confirming the arbitration award because the arbitrators exceeded the scope of their authority under the CBA. Article I of the CBA states that the purpose of the agreement is "to provide for an equitable and orderly process that addresses salaries, working conditions, and employee-employer working relations that may arise" during the term of the agreement. Article XXII, section 7 of the CBA provides, in pertinent part, "[n]o police officer shall be discriminated against in any way because of activity on behalf of the Union." Article XXVII, entitled "Grievance Procedures," provides for arbitration of grievances. Subparagraph (2) of this section provides: The hearing on the grievance shall be informal and the rules of evidence shall not apply. The Arbitrator shall not have the power to add to, subtract from, to modify, the provisions of this agreement in arriving at a decision on the issue or issues presented; and shall confine his decision solely to the precise issue or issues submitted for arbitration, and shall have no authority to determine any other issues not directly presented in the grievance. The decision of the Arbitrator shall be final and binding upon the grievant and the City. Paragraph II of the arbitration award states that from November 1997 to August 1999, appellees were "harassed, intimidated, embarrassed, cajoled, denied advancement, suspended, removed from work positions within the Police department, forced to suffer monetary damage, suffered violations of their civil rights, and were publicly humiliated" by Chief Martinez and other senior police officers. In Paragraph VI(A), in which the arbitration panel offers its "Conclusion[s]," the award states that the City, through its senior police officers, engaged in "official oppression, discrimination, and punitive retaliation" against appellees in violation of section 7 of the CBA. As noted above, section 7 of Article XXII of the CBA prohibits discrimination against officers because of Union activity. We find no other reference in the arbitration award to a specific section of the CBA. Accordingly, we conclude that the award is based on the arbitrators' conclusion that the City and its senior officers discriminated against appellees because of their Union activities. In their motion for summary judgment, appellees contend they are entitled to judgment because as the losing party seeking to vacate the award, the City has the burden to produce a complete record establishing a basis for modifying or vacating the award, and no such record exists. Appellees note that in Article XXIV of the CBA, providing for arbitration of disciplinary actions against police officers, paragraph six of section three provides: A stenographic transcription of the [arbitration] proceeding shall be made only upon written agreement of the parties prior to commencement of the hearing. Should there be no agreement, the party desiring the transcript may have the transcript made at its sole expense. Hearings may be recorded by audio tape by either party and a copy of the audio recording shall be made available to the other party upon request. In support of their motion, appellees presented the following summary judgment evidence: (1) a copy of the City's Motion to Continue (in which the City admits that it has the burden to bring forth a complete record of the proceedings giving rise to the adverse award); (2) affidavits of the arbitrators, appellees' counsel, and one of the appellees, all of which state that no complete record of the arbitration proceedings exists; and (3) a copy of the CBA. In support of its argument, appellees cite Eurocapital Group Ltd. v. Goldman Sachs & Co., 17 S.W.3d 426, 429 (Tex. App.-Houston [1st Dist.] 2000, no pet.); Kline v. O'Quinn, 874 S.W.2d 776, 790-91 (Tex. App.-Houston [14th Dist.] 1994, writ denied) (op. on motions for reh'g); and Atrium Westwood VIII Venture v. Barrick Westwood Ltd. P'ship, 693 S.W.2d 699, 700-01 (Tex. App.-Houston [14th Dist.] 1985, no writ). We agree that these cases support appellees' argument that the City had the burden to bring forth a complete record establishing a basis for vacating or modifying the award. (19) Without a record, we presume that adequate evidence was presented to support the arbitrator's award. (20) The burden is on the City to establish that the arbitrators exceeded their authority; the City has not met its burden. The record before us does not include any evidence that the arbitrators exceeded their authority. We overrule the City's first issue and affirm the trial court's order confirming the arbitration award. Attorneys' Fees In its second issue, the City contends the trial court erred in awarding attorneys' fees to appellees because the CBA contains no provision authorizing the award of attorneys' fees. Appellees argue that "[w]here the CBA is silent, the arbitrator is presumed to have authority if it is necessarily implied by the authority to address the subject matter." The trial court's December 13, 2005 order granting appellees attorneys' fees notes that the City requested relief under the Declaratory Judgment Act and that appellees' request for attorneys' fees was also based on the Declaratory Judgment Act. (21) The order notes that the following cases "concerning the Declaratory Judgment Act" support appellees' request for attorneys' fees: Tex. Educ. Agency v. Leeper, 893 S.W.2d 432 (Tex. 1995); Farnsworth v. Deaver, 147 S.W.3d 662 (Tex. App.-Amarillo 2004, no pet.); Agan v. Comm'rs Court of Titus Co., 922 S.W.2d 640 (Tex. App.-Texarkana 1996), aff'd in part, rev'd in part, 940 S.W.2d 77 (Tex. 1997); City of El Paso v. Crum Const. Co., 864 S.W.2d 153 (Tex. App.-El Paso 1993, writ denied); and Knighton v. Int'l Bus. Machs. Corp., 856 S.W.2d 206 (Tex. App.-Houston [1st Dist.] 1993, writ denied). Although the cases cited in the trial court's December 13, 2005 order "concern" the Declaratory Judgment Act, the only case that involves arbitration is City of El Paso, and it is inapposite. (22) This Court has held that there is "no basis for recovery of attorneys' fees in a successful defense against an action to vacate an arbitration award." (23) In Int'l Bank of Commerce-Brownsville, we also rejected the argument (apparently relied on by the trial court in this case) that a party is entitled to attorneys' fees because it sought a declaratory judgment from the trial court. (24) Because we conclude the trial court erred in awarding appellees attorneys' fees, we sustain the City's second issue. (25) Conclusion We modify the trial court's judgment to delete the trial court's award of $40,000.00 in additional attorneys' fees for enforcing the arbitration award, plus the additional attorneys' fees for appealing to this Court, and for potentially appealing to the supreme court. (26) As modified, we affirm the trial court's judgment confirming the arbitration award. LINDA REYNA YAÑEZ, Justice Memorandum opinion delivered and filed this the 27th day of September, 2007. 1. Appellees are police officers (or former officers) for the City of Weslaco. At the time of the arbitration, they were members of the Weslaco Municipal Police Union ("the Union"), then the bargaining agent for Weslaco police officers. 2. The applicable CBA was in effect from October 1, 1997, through September 30, 1999. 3. Emphasis in original. 4. The arbitration panel awarded monetary damages to appellees in the following amounts: (1) $10,170 to Baudelio Castillo, (2) $4,000 to Adan Sanchez, (3) $2,500 to Jose Angel Rodriguez, (4) $2,500 to David Gamez, and (5) $4,000 to "Bruce" [Brent] Kennedy. 5. See Tex. Loc. Gov't Code Ann. §§ 143.001-.363 (Vernon 1999 & Supp. 2006). 6. Houston Lighting & Power Co. v. Int'l Bhd. of Elec. Workers, Local Union No. 66, 71 F.3d 179, 181 (5th Cir.1995). 7. Id. at 182 (quoting Delta Queen Steamboat Co. v. Dist. 2 Marine Eng'rs Beneficial Ass'n, 889 F.2d 599, 602 (5th Cir. 1989)). 8. Executone Info. Sys., Inc. v. Davis, 26 F.3d 1314, 1325 (5th Cir.1994) (citation omitted). 9. Delta Queen Steamboat Co. v., 889 F.2d 599 at 602. 10. Id. 11. Id. 12. Cartwright v. Cologne Prod. Co., 182 S.W.3d 438, 443 (Tex. App.-Corpus Christi 2006, pet. denied) (citing Guajardo v. Conwell, 46 S.W.3d 862, 863-64 (Tex. 2001) (per curiam); Garcia v. Comm'rs Court, 101 S.W.3d 778, 784 (Tex. App.-Corpus Christi 2003, no pet.)). 13. Id. (citing McNally v. Guevara, 52 S.W.3d 195, 196 (Tex. 2001) (per curiam)). 14. Id. (citing Lehmann v. Har-Con Corp., 39 S.W.3d 191, 204 (Tex. 2001); Garcia, 101 S.W.3d at 784). 15. Id. (citing Lehmann, 39 S.W.3d at 195; Garcia, 101 S.W.3d at 784). 16. Id. (citing Lehmann, 39 S.W.3d at 195; Garcia, 101 S.W.3d at 784). 17. See Tex. Civ. Prac. & Rem. Code Ann. § 37.009 (Vernon 1997). 18. See First Nat'l Bank v. DeVillagomez, 54 S.W.3d 345, 348 (Tex. App.-Corpus Christi 2001, pet. denied). 19. See GJR Mgmt. Holdings, L.P. v. Raus, 126 S.W.3d 257, 263 (Tex. App.-San Antonio 2003, pet. denied); Anzilotti v. Gene D. Liggin, Inc., 899 S.W.2d 264, 267 (Tex. App.-Houston [14th Dist.] 1995, no pet.). 20. Anzilotti, 899 S.W.2d at 267; Kline v. O'Quinn, 874 S.W.2d 776, 783 (Tex. App.-Houston [14th Dist.] 1994, writ denied) (holding that without a transcription of the arbitration proceedings, we must presume adequate evidence to support the award); House Grain Co. v. Obst, 659 S.W.2d 903, 906 (Tex. App.-Corpus Christi 1983, writ ref'd n.r.e.) (same). 21. See Tex. Civ. Prac. & Rem. Code Ann. § 37.009 (Vernon 1997) (providing that a court may award costs and reasonable and necessary attorneys' fees in proceeding under Declaratory Judgment Act). 22. The court in City of El Paso held that municipal corporations may be held liable for attorneys' fees in declaratory judgment actions. City of El Paso v. Croom Const. Co., Inc., 864 S.W.2d 153, 155 (Tex. App.-El Paso 1993, writ denied). 23. Int'l Bank of Commerce-Brownsville v. Int'l Energy Dev. Corp., 981 S.W.2d 38, 54 (Tex. App.-Corpus Christi 1998, pet. denied) (rejecting trial court's award of additional attorneys' fees in arbitration award under the FAA); see also Perry Homes v. Cull, 173 S.W.3d 565, 574 (Tex. App.-Ft. Worth- 2005, pet. granted) (noting a trial court may not add post-arbitration attorneys' fees to the arbitration award); Crossmark, Inc. v. Hazar, 124 S.W.3d 422, 436 (Tex. App.-Dallas 2004, pet. denied) (noting, in reviewing arbitration award under TAA, that "If an arbitration award includes an award of attorneys' fees, a trial court may not award additional attorney fees for enforcing or appealing the confirmation of the award, unless the arbitration agreement provides otherwise."); Cooper v. Bushong, 10 S.W.3d 20, 26 (Tex. App.-Austin 1999, pet. denied) (noting, in challenge to arbitrator's decision pursuant to the TAA, that absent evidence to support modification of arbitrator's award, a court must confirm the award). 24. See Int'l Bank of Commerce-Brownsville, 981 S.W.2d at 54. 25. We note that although the arbitration award is silent as to pre- and post-judgment interest and costs, appellees' pleadings include a request for the award of interest and costs. The trial court's December 13, 2005 order awards pre- and post-judgment interest to appellees and adjudges all costs against the City. The City does not challenge the trial court's award of interests and costs, and accordingly, those elements of the trial court's judgment remain intact. 26. See Crossmark, 124 S.W.3d at 437.