Skidmore Energy, Inc. v. Maxus (U.S.) Exploration Company,
No. 05-09-00402-CV (Tex.App.- Dallas July 12, 2011)
Claim That Arbitrators Exceeded Their Powers
Appellants additionally contend the trial court erred by entering a judgment confirming the arbitration award because the panel majority exceeded its authority. Appellants claim the panel majority exceeded its authority by ruling that Skidmore breached the 1998 Agreement because that specific argument was not advanced by Maxus at the outset of the arbitration. [fact and background section moved to the bottom of this post]
Texas law allows for vacatur of an arbitration award if the arbitrators "exceeded their powers." Tex. Civ. Prac. & Rem. Code Ann. § 171.088 (a)(3)(A). An arbitrator's authority is limited to disposition of matters expressly covered by an arbitration agreement or implied by necessity. Gulf Oil Corp. v. Guidry, 327 S.W.2d 406, 408 (Tex. 1959); see also Nafta Traders, Inc. v. Quinn, 339 S.W.3d 84, 90 (Tex. 2011) (in arbitration conducted by agreement of the parties, rule is well established that an arbitrator derives his power from parties' agreement to submit to arbitration) (citing City of Pasadena v. Smith, 292 S.W.3d 14, 20 (Tex. 2009)); Townes Telecomms. Inc. v. Travis, Wolff & Co., 291 S.W.3d 490, 493 (Tex. App.-Dallas 2009, pet. denied) (arbitrator's authority to decide matters is derived from the arbitration agreement). Arbitrators therefore exceed their authority when they decide matters not properly before them. Travis, Wolff & Co., 291 S.W.3d at 493. When determining whether an arbitration panel has exceeded its powers, any doubts concerning the scope of what is arbitrable should be resolved in favor of arbitration. Id.
When we determine whether claims are within the scope of an arbitration agreement, we examine the terms of the arbitration agreement and the factual allegations pertinent to the claim. Graham-Rutledge & Co. v. Nadia Corp., 281 S.W.3d 683, 690 (Tex. App.-Dallas 2009, no pet.). Because of policy favoring enforcement of arbitration agreements, the ability to arbitrate claims should not be denied "unless it can be said with positive assurance that an arbitration clause is not susceptible of an interpretation which would cover the dispute at issue." Marshall, 909 S.W.2d at 899 (quoting Commerce Park at DFW Freeport v. Mardian Constr. Co., 729 F.2d 334, 338 (5th Cir. 1984)).
Here the arbitration agreement reflects the parties' desire to submit "all claims asserted in the Lawsuit" to binding arbitration. See Footnote 12 This phrase is broad and may encompass a wide range of issues. See Centex/Vestal, 314 S.W.3d at 685 (noting that "[a]ny claim arising out of or related to the Contract" was subject to arbitration was broad and encompassed a wide range of disputes). When an arbitration clause employs broad language such as the language in the arbitration agreement here, "it is construed as evidencing the parties' intent to be inclusive rather than exclusive." Id. Broad arbitration agreements like that at issue have been held to support awards rendered on a variety of grounds, including those not specifically argued to the arbitrators. See City of Baytown v. C.L. Winter, Inc., 886 S.W.2d 515, 518 (Tex. App.-Houston [1st Dist.] 1994, writ denied) (arbitrators did not exceed powers by awarding damages for changed conditions under contract even though issue of changed conditions was not specifically addressed in parties' briefing); J.J. Gregory Gourmet Servs., Inc. v. Antone's Import Co., 927 S.W.2d 31, 34-5 (Tex. App.-Houston [1st Dist.] 1995, no writ) (arbitrators did not exceed their powers in determining issue the resolution of which was not expressly demanded, because issue was actually discussed during arbitration proceedings).
In their motion to vacate the arbitration award, appellants stated that "at the arbitration and pursuant to the terms of the Arbitration Agreement, the arbitrators were to undertake a 'clarification of the issues.'" The arbitration agreement further provides that in exercising their discretion, the arbitrators "may direct the parties to focus their presentations on issues the decision of which could dispose of all or part of the case." Here, the parties were requested to advise the arbitrator whether either party took the position that the 1998 Agreement had been breached at the time of the closing of the lease assignments.
Appellants contend Maxus stipulated that no party to the arbitration argued a breach of contract occurred when the lease agreements were executed. Appellants argue that the stipulation is dispositive on the question of whether the panel majority exceeded its powers. We disagree. The arbitrator was attempting to clarify a dispositive legal issue and the statement of Maxus regarding its position on that legal issue was not binding on Maxus or the arbitrators. See Footnote 13 The question of when a cause of action accrues is a question of law, not fact. Holy Cross Church of God in Christ v. Wolf, 44 S.W.3d 562, 567 (Tex. 2001). Stipulations as to legal conclusions, as opposed to facts, are not binding on courts or parties. Caprock Inv. Corp. v. Fed. Deposit Ins. Corp., 17 S.W.3d 707, 713 (Tex. App.-Eastland 2000, pet. denied); see also Fid. & Cas. Co. of N.Y. v. Horton & Horton Custom Works, Inc.. 462 S.W.2d 613, 618 (Tex. Civ. App.-Fort Worth 1971, writ ref'd n.r.e.) (since question of law would be involved, stipulation could not have operated to control the court and prevent finding on facts which might, when applicable law and legal principles were applied, compel conclusion); Humble Oil & Refining Co. v. Sun Oil Co., 191 F.2d 705, 714 (5th Cir. 1951) (citing Reynolds v. McMan Oil & Gas Co., 11 S.W.2d 778, 785 (Tex. Comm'n App. 1928)) (adoption of the principle by Supreme Court of Texas "that expressions of opinions as to the law of the case by counsel are not binding upon either his client or the court"). See Footnote 14
Skidmore's claim is that Maxus breached the parties' 1998 Agreement by surrendering five oil and gas leases without first giving Skidmore notice and an opportunity to request reassignment of the leases. See Footnote 15 In its answer, Maxus denied the claim and contended Skidmore's claims were barred by waiver, estoppel, and limitations. The parties' arbitration agreement encompassed the question of whether Skidmore breached the parties' agreement and was thereby estopped from pursuing its claim against Maxus. The matter was raised as an affirmative defense in Maxus' pleadings and discussed during the actual arbitration proceedings. In its statement of the case submitted in advance of the arbitration hearing, Maxus stated that whether Skidmore's claims are barred, in whole or in part, by the affirmative defenses of waiver, estoppel and the statute of limitations were issues in the case.
The arbitrators stated the arbitration proceeding would not be closed until the parties provided their closing memoranda. Arbitrator Ratliff, again, raised the legal issue of whether a breach occurred at the time of the closing of the lease assignments when non-conforming assignments were delivered, a matter the parties could address in their closing memoranda. In its closing memorandum to the arbitrators, Maxus addressed the issue of whether a breach of the 1998 Agreement occurred at closing:
Maxus contends that there was no breach at the August 21, 1998, closing because . . . each party had the option at closing of either (i) insisting that the other party present an assignment of the lease(s) using the Exhibit B form, failing which that party could refuse to close, or (ii) waiving the condition and accepting the tendered Assignments. Because the parties closed without insisting on delivery of the Exhibit B form of Assignment, Maxus contends that the use of that form was waived and that the failure to deliver Assignments on that form was therefore not a breach of the Agreement.
If, as Skidmore and Intervenors contend, however, the parties did not waive the use of the Exhibit B form of assignment, then the alternative is that they were still insisting on the use of that form, and since neither party delivered assignments on the Exhibit B form, the Agreement was breached at that point.
* * *
Appellants asserted in the lawsuit against Maxus that Maxus breached the 1998 Agreement and that Skidmore performed its obligations under the agreement. The affirmative defenses asserted by Maxus-waiver, estoppel, and limitations-were before the arbitration panel. The questions of whether and when there was a breach of the 1998 Agreement were before the arbitration panel. See Centex/Vestal, 314 S.W.3d at 686 (party cannot submit issue to arbitration panel and then, when unfavorable result occurs, claim arbitrators exceeded their authority in deciding the issue).
We conclude the arbitrators decided matters that were properly before them and did not exceed their powers. We overrule appellants' argument to the contrary.
At arbitration, it was undisputed that, although the parties had agreed that prior notice of an intention to relinquish an assigned lease and an opportunity to request reassignment of the lease would be given, the actual assignments that were prepared by Maxus and executed by Maxus and Skidmore did not contain a notice and reassignment provision. At the conclusion of the first day of the four-day arbitration hearing, arbitrator Ratliff asked if any party was contending that the preparation, execution, and delivery of assignments without the required notice and reassignment provision was a breach of contract. Counsel for the parties confirmed that no party was making the contention that a breach of contract occurred at the time of execution of the lease assignments.
In its arbitration award, the panel majority concluded that by delivering at the August 21, 1998 closing the lease assignments that omitted the notice and reassignment provision, Skidmore and Maxus breached the 1998 Agreement. The panel majority noted that it was uncontroverted that Skidmore did not file the breach-of-contract suit against Maxus within four years of the closing. See Tex. Civ. Prac. & Rem. Code Ann. § 16.051 (West 2008) (residual four-year statute of limitations); Stine v. Stewart, 80 S.W.3d 586, 592 (Tex. 2002) (statute of limitations for breach of contract is four years and breach of contract claim accrues when contract is breached). The panel majority found that Skidmore committed a material breach of the 1998 Agreement, and that Skidmore was estopped from enforcing the 1998 Agreement. See Footnote 10
Appellants contend that in their pleadings neither Skidmore nor Maxus asserted, as a claim or as an affirmative defense, that a breach of contract occurred on the closing date when the lease assignment forms were executed in a form different from that agreed upon in the 1998 Agreement. Appellants argue that because the issue of when the breach of contract occurred was not a claim or defense asserted in the lawsuit, and the arbitration award is at odds with the statements by counsel on the record that no one contended a breach of contract occurred at the closing of the lease assignments, the panel majority exceeded its authority in ruling on the matter.
Findings of the Trial Court
The trial court found that in the litigation underlying the arbitration, "Skidmore alleged that Maxus breached [the notice and reassignment] requirement with respect to six leases. By alleging that Maxus breached the Agreement and that Skidmore performed its obligations under the Agreement, Plaintiff and Intervenors placed Skidmore's performance of that Agreement at issue." Further, the trial court signed the following specific findings of fact:
19. In this case, the parties' written Arbitration Agreement encompassed "all claims asserted in the Lawsuit." Plaintiff and Intervenors claim on the merits was that Maxus breached the parties' 1998 Agreement by surrendering certain Federal Oil and Gas Leases without first giving Skidmore notice and an opportunity to request reassignment. In its Answer, Maxus denied the claim and further contended that Plaintiff and Intervenors' claims were barred by waiver, estoppel and limitations.
20. The parties Arbitration Agreement encompassed the question of whether Skidmore first breached the parties' agreement and had waived or was thereby estopped from pursuing its claims against Maxus. The matter was raised as an affirmative defense in Maxus' Answer and was discussed during the actual arbitration proceedings.
21. The Panel Majority concluded that by delivering Assignments at closing that omitted the notice and reassignment clause, Skidmore had itself breached the Agreement by failing to deliver Assignments on the proper form. Having committed a material breach of the Agreement, the Panel Majority held that Skidmore was estopped from enforcing the Agreement. In the alternative, the Panel Majority found that by closing on Assignments that did not contain the notice and reassignment provision, Skidmore waived any right to insist on Maxus' compliance with that provision. Estoppel and waiver were both pleaded by Maxus.
As indicated previously in this opinion, appellants have not raised specific challenges to the trial court's findings of fact. See McGalliard v. Kuhlmann, 722 S.W.2d 694, 696 (Tex. 1986). Appellants assert, however, that action by the arbitration panel majority exceeded the panel's powers. We will construe that argument as attacking the trial court's findings of fact that the panel majority did not exceed its powers. See Footnote 11
[see Analysis section, which was moved to the top of this post]
We overrule appellants' sole issue. We affirm the trial court's judgment.
We overrule appellants' sole issue. We affirm the trial court's judgment.