Trial Judge-Arbitrator Ping-Pong, followed by $200 Appeal

A recent case from Houston provides an interesting illustration of Court-Arbitrator Dynamics: Consumer dispute gets arbitrated and consumer wins. Trial judge sends case back to arbitrator for segregation of attorney's fees. Arbitrator apparently is none too pleased and shaves off no more than $190 of a fee award of $24,837.00, which was almost twice of the actual damages awarded on the underlying claim. Trial judge then confirms the modified award. Then comes another round in the appellate court over the $190 modification. Appeal from confirmation order, seeking reinstatement of the original award, fails because the grounds are not viable under the FAA. So says a panel of the 14th CoA in its opinion. Clearly, there must have been more at stake (at least from the plaintiff's/plaintiff's attorney's perspective) than just the $190. But the authoring justice on the appellate panel fails to acknowledge that possibility and writes in a footnote: "It is noteworthy that, for reasons not apparent from the record, LeFoumba, in an ill-advised attempt to recover an extra $190.00 beyond that awarded under the trial court's judgment, has spent multiples of that amount in additional fees and appellate costs. We note that the cost merely to prepare the clerk's record was $699.00, an amount more than three and one-half times the figure representing the difference between the original and modified arbitration awards." But an appellant would be entitled to recover the costs for the appeal if he prevailed. One-dollar nominal awards in Section 1983 actions, power struggle, vindication of one's position, and opportunity to set precedent come to mind as possible alternative motivational elements. Even if it is true that it all boils down to money, similar cases down the line may be affected in which more is at stake than a mere two hundred bucks. That alone may make an appeal worthwhile. Whatever the motives - and the wisdom of this appeal in dollar terms - the opinion is worth reading, along with others that address the grounds for vacature under the FAA in the wake of important recent decisions by the U.S. Supreme Court and the Fifth Circuit on that subject. Lefoumba v. Legend Classic Homes, Ltd (Tex.App.- Houston [14th Dist.] Sep. 17, 2009) (challenge to confirmation of amended arbitration award under FAA that slightly reduced attorney's fees rejected) AFFIRMED: Opinion by Justice Sullivan Before Justices Seymore, Brown and Sullivan 14-08-00243-CV Claude Lefoumba v. Legend Classic Homes, Ltd and Legend Home Corp. Appeal from County Civil Court at Law No 2 of Harris County (Houston) Trial Court Judge: Jacqueline Lucci-Smith M E M O R A N D U M O P I N I O N Appellant, Claude LeFoumba, prevailed in arbitration against the appellees, Legend Classic Homes, Ltd. and Legend Home Corp. (collectively, “Legend"). Legend successfully challenged LeFoumba's failure to segregate his attorney's fees, resulting in a modified arbitration award that reduced his recovery by only $190.00. Nevertheless, LeFoumba brought this appeal to challenge the trial court's confirmation of the slightly reduced award. Because LeFoumba's appellate complaints do not fit within any of the exclusive grounds available to challenge a federal arbitration award, we affirm the judgment.[1] Background LeFoumba agreed to purchase a home from Legend pursuant to an earnest-money contract containing an arbitration clause expressly governed by the Federal Arbitration Act.[2] After the deal fell through, LeFoumba sued Legend for breach of contract, fraud, and violations of the Texas Deceptive Trade Practices Act. The case was referred to arbitration, where the arbitrator found in LeFoumba's favor on the breach-of-contract claim but denied recovery for fraud or DTPA violations. Accordingly, on September 12, 2007, the arbitrator awarded LeFoumba $12,981.00 in actual damages and $24,837.00 for attorney's fees. However, the trial court vacated the award over LeFoumba's objection, and referred the matter back to the arbitrator because of LeFoumba's failure to segregate his attorney's fees between the contract claims, on which he prevailed, and the other, non-successful causes of action. On February 22, 2008, the arbitrator issued a modified award reducing LeFoumba's attorney's fees by $190.00, to $24,647.00. In response, LeFoumba filed two motions, one asking the trial court to confirm the modified award, and the other requesting that the court vacate the modified award and reinstate the original September 2007 award. The trial court confirmed the modified award. LeFoumba has now appealed the trial court's refusal to vacate the modified award, arguing (1) the modified award was procured by “undue means," (2) the arbitrator exceeded her authority, and (3) the modified award “violates law and public policy."[3] All of these arguments are premised upon his claim that Legend's objection to the failure to segregate attorney's fees was untimely and therefore should have been disregarded by the trial court and arbitrator. Analysis The arbitration agreement expressly recites that “arbitration shall be governed by the U.S. Arbitration Act, 9 U.S.C. § § 1-16, to the exclusion of any provisions of state law that are inconsistent with the federal act."[4] We review a trial court's confirmation of an arbitration award under the Federal Arbitration Act (the “FAA") de novo. Tanox, Inc. v. Akin, Gump, Strauss, Hauer & Feld, L.L.P., 105 S.W.3d 244, 250 (Tex. App.-Houston [14th Dist.] 2003, pet. denied). All reasonable presumptions must be indulged in favor of the award, and none against it. CVN Group, Inc. v. Delgado, 95 S.W.3d 234, 238 (Tex. 2002). We treat an arbitration award the same as a judgment by the court of last resort and may not substitute our judgment for the arbitrator's merely because we might have reached a different decision. See id. at 238-39; Crossmark, Inc. v. Hazar, 124 S.W.3d 422, 429 (Tex. App.-Dallas 2004, pet. denied). Instead, because judicial review of an arbitration award adds expense and delay, thereby diminishing the benefits of arbitration as an efficient, economical system to resolve disputes, our review of the arbitration award must be “extraordinarily narrow." See CVN Group, Inc., 95 S.W.3d at 238; Tanox, 105 S.W.3d at 250. In fact, under this standard that governs our review, we may not vacate an award even if the arbitrator committed a mistake of fact or law. See Crossmark, Inc., 124 S.W.3d at 429 (citing Anzilotti v. Gene D. Liggin, Inc., 899 S.W.2d 264, 266 (Tex. App.-Houston [14th Dist.] 1995, no writ)). The FAA itself clearly defines the only circumstances under which an arbitration award may be vacated or modified. See 9 U.S.C.A. § § 10(a), 11; Citigroup Global Mkts., Inc. v. Bacon, 562 F.3d 349, 353 (5th Cir. 2009) (citing Hall St. Assocs., L.L.C. v. Mattel, Inc., 128 S. Ct. 1396, 1403 (2008)). The grounds for vacatur are limited to the following claims: (1) where the award was procured by corruption, fraud, or undue means; (2) where there was evident partiality or corruption in the arbitrators, or either of them; (3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or (4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made. 9 U.S.C.A. § 10(a). Thus, we must overrule LeFoumba's complaint that the modified arbitration award violates public policy, because that argument is not viable under section 10(a) of the FAA. See id.; Ancor Holdings, LLC v. Peterson, Goldman & Villani, Inc., ___ S.W.3d ___, No. 05-08-00739-CV, 2009 WL 2596120, at *5 n.3 (Tex. App.-Dallas Aug. 25, 2009, no pet. h.) (recognizing that, under Citigroup and Hall Street, public-policy ground for vacating FAA award does not exist). Accordingly, we turn our attention to LeFoumba's two remaining arguments that (1) the modified award was procured through “undue means," and (2) the arbitrator exceeded her authority. See 9 U.S.C.A. § 10(a) (1), (4). Both arguments arise from LeFoumba's claim that the arbitrator erred by requiring segregation of attorney's fees on the basis of Legend's untimely, and therefore waived, objection to the lack of segregation.[5] However, a mere mistake of law is insufficient to vacate an arbitration award on the basis of “undue means." See Jamison & Harris v. Nat'l Loan Investors, 939 S.W.2d 735, 737 (Tex. App.-Houston [14th Dist.] 1997, writ denied); Crossmark, 124 S.W.3d at 429. Instead, a party who seeks to vacate an award allegedly procured by “undue means" must show immoral, illegal, or bad-faith conduct. In re Arbitration Between Trans Chem. Ltd. and China Nat'l Mach. Imp. & Exp. Corp., 978 F. Supp. 266, 304 (S.D. Tex. 1997) (citing A.G. Edwards & Sons, Inc. v. McCollough, 967 F.2d 1401, 1403-04 (9th Cir. 1992)). LeFoumba has produced no proof of any such conduct by the arbitrator. Similarly, an arbitrator does not exceed her authority by committing a mistake of law, but instead by deciding a matter not properly before her. See Pheng Invs., Inc. v. Rodriguez, 196 S.W.3d 322, 329 (Tex. App.-Fort Worth 2006, no pet.); Barsness v. Scott, 126 S.W.3d 232, 241 (Tex. App.-San Antonio 2003, pet. denied). Thus, the appropriate inquiry is not whether the arbitrator decided an issue correctly, but instead whether she had the authority to decide the issue at all. See Saqer v. Ghanem, No. 09-07-519-CV, 2008 WL 5263359, at *5-6 (Tex. App.-Beaumont Dec. 18, 2008, no pet.) (mem. op.). Here, LeFoumba does not contend the arbitrator lacked the authority to decide upon the appropriate amount of attorney's fees to compensate him for Legend's alleged breach of contract. Therefore, LeFoumba has not established his entitlement to a vacatur under section 10(a) of the FAA, the exclusive means by which a party may overturn a federal arbitration award. See Citigroup, 562 F.3d at 353. Accordingly, we overrule appellant's remaining two issues. CONCLUSION Finding no merit in the issues presented, we affirm the trial court's judgment.[6] /s/ Kent C. Sullivan Justice Panel consists of Justices Seymore, Brown, and Sullivan. [footnotes omitted]