"Gross mistake" challenge to arbitration award under TAA rejected in appeal from confirmation order

A few years ago the U.S. Supreme Court held that the statutory grounds provided in sections 10 and 11 of the Federal Arbitration Act (FAA) for vacating, modifying, or correcting an arbitration award are the exclusive grounds for vacature of an arbitration award. Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 584, 128 S. Ct. 1396, 1403 (2008). The Texas Supreme Court, by contrast, has yet to decide whether common law grounds for attacking an arbitration award under the Texas Arbitration Act (TAA) are viable. See E. Tex. Salt Water Disposal Co. v. Werline, 307 S.W.3d 267, 270 n.7 (Tex. 2010) ("We express no opinion on this issue [of whether an arbitration under the TAA can be set aside on common law grounds.]." In a case decided last week, the First Court of Appeals in Houston entertained a challenge on the basis of “gross mistake”, and rejected it on the merits. The appellate panel, which upon rehearing had shrunk from three to two, also rejected other common-law grounds for vacature in an opinion written by Chief Justice Radack. Justice Elsa Alcala, a member of the original panel, was no longer on the Houston Court to revisit the issues on motion for re-hearing due to her elevation to the Texas Court of Criminal Appeals by gubernatorial appointment.  

Ouzenne v. Haynes,  No. 01-10-00112-CV (Tex.App.- Houston [1^st Dist] April 12, 2012)(substituted opinion following motion for rehearing, which was denied)

MEMORANDUM OPINION

SHERRY RADACK, Chief Justice.

We deny appellant's motion for rehearing; however, we withdraw this Court's opinion of May 12, 2001, and issue this opinion in its stead. Our judgment of May 12, 2011 remains unchanged.

This is an appeal from an order confirming an arbitration award in favor of appellee, Carnell Haynes, on his claims against appellant, Paul Ouzenne, arising out of a construction contract. In seven issues on appeal, Ouzenne contends the trial court erred in confirming the award because the arbitrator (1) made a "gross mistake," (2) exceeded his powers, and (3) violated public policy and the law. We affirm.

BACKGROUND

According to his petition, Haynes approached Ouzenne about the possibility of Ouzenne building a four-plex apartment structure on Haynes's property. In December 2006, Haynes and Ouzenne signed a construction contract for the proposed four-plex. Unable to obtain financing for the project himself, Haynes alleged that Ouzenne told him that he would obtain the financing for Haynes. Thereafter, Haynes alleged that Ouzenne had him sign a contract of sale for the property from Haynes to Ouzenne. Haynes did so because he believed that it was necessary to obtain financing for the building project, but he did not realize that he would be transferring title to the property to Ouzenne. Thereafter, Ouzenne gave Haynes notice that he intended to evict Haynes from the property.

In response, Haynes sued Ouzenne in 2007, asserting common-law fraud, statutory fraud, breach of fiduciary duty, promissory estoppel, and violations of the Texas Deceptive Trade Practices Act. Ouzenne filed a motion to compel arbitration, which the trial court granted.

After an arbitration before C. Johnson at the Dispute Resolution Center of Harris County, the arbitrator issued an award in Haynes's favor for $136,410.60, plus pre and post-judgment interest. Haynes moved to enter judgment based on the arbitrator's award, and Ouzenne moved to vacate the arbitrator's award. On December 15, 2009, the trial court granted Haynes's motion, denied Ouzenne's motion, and entered a judgment confirming the arbitrator's award. After the trial court denied Ouzenne's motion for new trial, this appeal followed.

CONFIRMATION OF ARBITRATION

Standard of Review

Review of a trial court's decision as to vacatur or confirmation of an arbitration award is de novo and an appellate court reviews the entire record. In re Chestnut Energy Partners, Inc., 300 S.W.3d 386, 397 (Tex. App.-Dallas 2009, pet. denied); see also Statewide Remodeling, Inc. v. Williams, 244 S.W.3d 564, 567-68 (Tex. App.-Dallas 2008, no pet.) (discussing standard of review for confirmation of award). Because Texas law favors arbitration, however, our review is "extremely narrow." See Hisaw & Assocs. Gen. Contractors, Inc. v. Cornerstone Concrete Sys., Inc., 115 S.W.3d 16, 18 (Tex. App.-Fort Worth 2003, pet. denied); IPCO-G. & C. Joint Venture v. A.B. Chance Co., 65 S.W.3d 252, 256 (Tex. App.-Houston [1st Dist.] 2001, pet. denied). An arbitration award has the same effect as a judgment of a court of last resort; accordingly, all reasonable presumptions are indulged in favor of the award and the award is conclusive on the parties as to all matters of fact and law. CVN Group, Inc. v. Delgado, 95 S.W.3d 234, 238 (Tex. 2002). Review of an arbitration award is so limited that even a mistake of fact or law by the arbitrator in the application of substantive law is not a proper ground for vacating an award. Crossmark, Inc. v. Hazar, 124 S.W.3d 422, 429 (Tex. App.-Dallas 2004, pet. denied). Here, the parties agree that the Texas Arbitration Act governs their case. See TEX. CIV. PRAC. & REM. CODE ANN. §§ 171.001-.098 (Vernon 2001).

Gross Mistake

In issues one, two, four, and seven, appellant contends the trial court erred in failing to vacate the arbitration award because the arbitrator committed a "gross mistake"[1] by (1) entering an award that relied on tax appraisals for determining fair market value (issues one and two), (2) failing to consider evidence that Haynes was aware and fully intended to sell his property to Ouzenne (issue four), and (3) failing to properly apply the parol evidence rule (issue seven).

Gross mistake is a Texas state common law standard that has been used to attack arbitration awards. Callahan & Assocs. v. Orangefield Indep. Sch. Dist., 92 S.W.3d 841, 844 (Tex. 2002). A "gross mistake" is a mistake by the arbitrator that implies bad faith or failure to exercise honest judgment. Anzilotti v. Gene D. Liggin, Inc., 899 S.W.2d 264, 266 (Tex. App.-Houston [14th Dist.] 1995, no writ) (quoting Carpenter v. N. River Ins. Co., 436 S.W.2d 549, 551 (Tex. App.-Houston [14th Dist.] 1968, writ ref'd n.r.e.)). Ouzenne argues that relying on the tax rolls to determine value was a gross mistake because tax rolls are no evidence of actual value. In support, Ouzenne relies on Housing Auth. of Dallas v. Brown, 256 S.W.2d 656, 659 (Tex. Civ. App.-Dallas 1953, no writ), which held that error, if any, in refusing to admit evidence of tax value was harmless because "tax rolls do not reflect actual value," but an "approximate percentage of actual value." Id. Brown, however, does not state that the value as reflected on the tax rolls is of no probative value.

Ouzenne also relies on In re Marriage of Scott, 117, S.W.3d 580, 585 (Tex. App.-Amarillo 2003, no pet.), which we also find distinguishable. In Scott, the wife in a divorce case presented evidence that the marital home was valued at $35,610. Id. at 583. She reached this value by relying on the tax appraisal from Hutchison County Appraisal District. Id. at 585. The court of appeals held this evidence of value was factually insufficient because the tax appraisal was over three years old on the date of trial and two experts, including the wife's own expert, valued the property at much more. Id. Scott, however, does not stand for the proposition that tax appraisals are no evidence, i.e., legally insufficient evidence, of fair market value.[2]

Thus, we conclude that the arbitrator's reliance on tax rolls to determine value does not rise to a level that implies the bad faith or failure to exercise honest judgment required to show gross mistake.

Ouzenne also argues that the arbitrator committed gross mistake by disregarding testimony indicating that Haynes knew that he was selling the property to Ouzenne. However, contentions that an arbitrator disregarded even uncontroverted testimony may show a mistake of fact or law, but do not rise to the level of gross mistake. See Graham-Rutledge & Co. v. Nadia Corp., 281 S.W.3d 683, 689 (Tex. App.-Dallas 2009, no pet.). Furthermore, as fact-finder, the arbitrator could judge the credibility of the witnesses and choose who to believe or disbelieve. See Xtria L.L.C. v. Intern. Ins. Alliance, Inc., 286 S.W.3d 583, 597 (Tex. App.-Texarkana 2009, pet. denied).

Thus, we conclude that the arbitrator's decision to believe Haynes's evidence over Ouzenne's, even if erroneous, does not rise to a level that implies the bad faith or failure to exercise honest judgment required to show gross mistake.

Finally, Ouzenne contends that the arbitrator committed a "gross mistake" by failing to properly apply the parol evidence rule. The arbitrator's evidentiary ruling, even if erroneous, does not rise to a level that implies the bad faith or failure to exercise honest judgment required to show gross mistake. See Anzilotti., 899 S.W.2d at 266 (holding that mistake of law is insufficient to set aside arbitration award).

To the extent that points of error one, two, four, and seven claim that the arbitrator failed to give an honest consideration resulting in a gross mistake, they are overruled.

Exceeds Powers

In issue three, Ouzenne contends the arbitrator exceeded his powers, which is a statutory ground for vacating an arbitration award under section 171.088(a)(3)(A) of the Civil Practices and Remedies Code. TEX. CIV. PRAC. & REM. CODE ANN. § 171.088(a)(3)(A). The authority of arbitrators is derived from the arbitration agreement and is limited to a decision of the matters submitted therein either expressly or by necessary implication. Gulf Oil Corp. v. Guidry, 160 Tex. 139, 327 S.W.2d 406, 408 (1959); see also Allstyle Coil Co., L.P., v. Carreon, 295 S.W.3d 42, 44 (Tex. App.-Houston [1st Dist.] 2009, no pet.) (stating scope of authority depends on the agreement). Arbitrators exceed their powers when they decide matters not properly before them. Ancor Holdings, LLC v. Peterson, Goldman & Villani, Inc., 294 S.W.3d 818, 829 (Tex. App.-Dallas 2009, no pet.); Barsness v. Scott, 126 S.W.3d 232, 241 (Tex. App.-San Antonio 2003, pet. denied).

Ouzenne argues that the arbitrator exceeded his powers because the arbitration agreement requires that all disputes "be resolved by binding arbitration in accordance with the rules of the American Arbitration Association ["AAA"]," and the arbitrator was not selected in accordance with those rules. Instead, Ouzenne complains that the "parties were ordered to binding arbitration at the Harris County Dispute Resolution Center," which "unilaterally selected the Arbitrator, without providing a selection process."

However, the record shows that Ouzenne did not object to the method of appointing the arbitrator until after the arbitration was completed. In fact, Ouzenne did not complain about the method for appointing the arbitrator until he filed his motion for new trial after the trial court confirmed the award.

The AAA rules upon which Ouzenne rely provide that a party must object to the jurisdiction of the arbitrator in a timely manner. See Thomas Petroleum, Inc. v. Morris, No. 01-09-01065-CV, 2011 WL 742651, at *3, (Tex. App.-Houston [1st Dist.] Mar. 3, 2011, no pet.) (citing EMPLOYMENT ARBITRATION RULES AND MEDIATION PROCEDURES, Rule 6(c) (formerly known as NATIONAL RULES FOR RESOLUTION OF EMPLOYMENT DISPUTES)). The same is true under Texas common law. Id. (citing L.H. Lacy Co. v. City of Lubbock, 559 S.W.2d 348, 352-53 (Tex. 1977) (holding that, when both parties participate in arbitration proceedings, neither unequivocally withdraws its consent to arbitrate, and arbitration proceedings result in award, award is valid and enforceable)).

Thus, Ouzenne's right to complain about the method by which the arbitrator was selected is waived. See Slaughter v. Crisman & Nesbit, 152 S.W. 205, 207-08 (Tex. Civ. App-San Antonio 1912, no writ) (holding that when party to arbitration appeared and offered testimony before and after appointment of third arbitrator, he waived any irregularity in procedure occurring before the appointment of third arbitrator as required by agreement).

Because Ouzenne participated in the arbitration without complaining about the method by which the arbitrator was selected until after the arbitration was concluded and a judgment thereon was confirmed, the trial court did not err by concluding that the arbitrator did not exceed his authority by deciding matters not properly before him.

We overrule issue three.

Violates Public Policy and the Law

In issues five and six, Ouzenne contends the trial court erred in failing to vacate the arbitration award because it "violates public policy and the law." Specifically, Ouzenne complains that (1) the arbitration award did not specify a "laundry list" DTPA violation, and (2) was not based on a good or service as defined by the DTPA.

Ouzenne's claim, however, is not that the award should be vacated because it is unlawful,[3] but that the trial court committed an error of law. And, although Ouzenne claims that the award violates public policy, he cites no way in which the award violates "carefully articulated, fundamental policy." CVN Group, 95 S.W.3d at 239.

"[A]lleged errors in the application of substantive law by the arbitrators during the proceedings in arbitration are not reviewable by the court on a motion to vacate an award." Jamison & Harris v. Nat'l Loan Investors, 939 S.W.2d 735, 737 (Tex. App.-Houston [14 Dist.] 1997, writ denied). A mistake of fact or law is insufficient to set aside an arbitration award. Anzilotti, 899 S.W.2d at 266.

We overrule issues five and six.

CONCLUSION

We affirm the judgment of the trial court.[4]

For footnotes, click below:

Vacatur of Arbitration Awards under the FAA after SCOTUS Decision in Hall St. Assocs., L.L.C. v. Mattel, Inc., 128 S. Ct. 1396 (2008)

WHAT ARE THE REMAINING VIABLE GROUNDS TO CHALLENGE ENTRY OF JUDGMENT ON ARBITRATION AWARD? In a recent a appeal from an order confirming an arbitration award entered under the FAA, the Dallas Court of Appeals sums up the state of the law on the issue, following recent Supreme Court and Fifth Circuit decisions contrary to common-law grounds for vacating an award based on the arbitrator's manifest disregard of the law: Judicial Confirmation and Vacatur of Arb Awards under the FAA Under the terms of the FAA, an arbitration award must be confirmed unless it is vacated, modified, or corrected under one of the limited grounds set forth in sections 10 and 11 of the Act. See 9 U.S.C. §§ 9-11. Section 10(a) permits a court to vacate an arbitration award -(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.Id. § 10(a). Although the courts have recognized certain common law exceptions for vacating an arbitration award, See Footnote 3 the United States Supreme Court recently held that the grounds listed in the statute are the exclusive grounds for vacating an arbitration award under the FAA. Hall St. Assocs., L.L.C. v. Mattel, Inc., 128 S. Ct. 1396, 1403 (2008) (holding that statutory grounds for vacating or for modifying or correcting arbitration award are exclusive grounds for expedited vacatur and modification of award pursuant to FAA); see also Citigroup Global Mkts., Inc. v. Bacon, 562 F.3d 349, 350 (5th Cir. 2009) (concluding Hall Street restricts grounds for vacatur to those set forth in section 10). Of the issues Ancor presents for review, only two - that the arbitrator exceeded her powers by ignoring the law and by rendering an award that violates the essence of the Guaranty - arguably fall within the statutory grounds for vacatur under the FAA. See 9 U.S.C. § 10(a)(4). Ancor's remaining grounds - that the arbitrator manifestly disregarded the law and committed gross mistake implying a failure to exercise honest judgment - are common law grounds for vacating an arbitration award. See Crossmark, 124 S.W.3d at 430 n.6; Tanox, 105 S.W.3d at 252. The parties dispute whether the Supreme Court's decision in Hall Street forecloses our review based on Ancor's non- statutory grounds. We conclude it does. In Hall Street, the parties to the underlying lease dispute agreed to submit an indemnification claim to arbitration. Hall St., 128 S. Ct. at 1400. The arbitration agreement, which was negotiated by the parties and approved by the district court, required the court to “vacate, modify or correct any award: (i) where the arbitrator's findings of facts are not supported by substantial evidence, or (ii) where the arbitrator's conclusions of law are erroneous.” Id. at 1400-01. These contractually agreed grounds deviated from those prescribed in the FAA, and the Supreme Court granted review to determine “whether the grounds for vacatur and modification provided by §§ 10 and 11 of the FAA are exclusive.” Id. at 1401. Reviewing the purpose and text of the FAA, the Supreme Court held that sections 10 and 11 “provide the FAA's exclusive grounds for expedited vacatur and modification.” Id. at 1403. In so holding, the Supreme Court expressly rejected the argument that its use of the phrase “manifest disregard of the law” in Wilko v. Swan, 346 U.S. 427 (1953), expanded the grounds for vacatur beyond those listed in section 10. Hall St., 128 S. Ct. at 1403. The Supreme Court instructed that the text of the FAA “compels a reading of the §§ 10 and 11 categories as exclusive” because even assuming these sections could be supplemented, “it would stretch basic interpretive principles to expand the stated grounds to the point of evidentiary and legal review generally.” Id. at 1404. The Supreme Court further explained:[I]t makes more sense to see the three provisions, §§ 9-11, as substantiating a national policy favoring arbitration with just the limited review needed to maintain arbitration's essential virtue of resolving disputes straightaway. Any other reading opens the door to the full-bore legal and evidentiary appeals that can “rende[r] informal arbitration merely a prelude to a more cumbersome and time-consuming judicial review process,” and bring arbitration theory to grief in post-arbitration process. Id. at 1405 (quoting Kyocera Corp. v. Prudential-Bache Trade Servs., Inc., 341 F.3d 987, 998 (9th Cir. 2003)) (internal citations omitted). The Supreme Court also noted that expanding sections 10 and 11 is inconsistent with the language of section 9, which directs a court to grant an order confirming an arbitration award “unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of this title.” Id. (quoting 9 U.S.C. § 9). The Supreme Court emphasized that this language “carries no hint of flexibility.” Id. Following Hall Street, the Fifth Circuit, in Citigroup Global Markets, Inc. v. Bacon, overruled its precedent holding that non-statutory grounds may support vacatur of an arbitration award under the FAA. 562 F.3d at 358. Ancor urges us to disregard Citigroup and argues the Supreme Court “has not expressly ruled that 'manifest disregard' is no longer a valid ground for vacating an arbitrator's award.” We disagree. We find the analysis and holding in Citigroup persuasive and conclude the Supreme Court made clear that sections 10 and 11 are the exclusive grounds for vacating and modifying an arbitration award under the FAA. See Hall St., 128 S. Ct. at 1403. Thus, our review of an arbitration award under the FAA is limited to the statutory grounds. See Footnote 4 FOOTNOTE 4: Indeed, this Court has previously stated that under the FAA, attacks on arbitration awards are limited to the grounds set forth in sections 10 and 11. See, e.g., Roehrs v. FSI Holdings, Inc., 246 S.W.3d 796, 805-06 (Tex. App.-Dallas 2008, pet. denied) (“'Under the FAA, the validity of an arbitration award is subject to attack only on grounds listed in sections 10 and 11 of the Act.'”) (quoting Thomas James Assocs., Inc. v. Owens, 1 S.W.3d 315, 319-20 (Tex. App.-Dallas 1999, no pet.)); Antenna Prods. Corp. v. Cosenza, No. 05-05-00701-CV, 2006 WL 1452102, at *2 (Tex. App.-Dallas May 26, 2006, no pet.) (mem. op.) (rejecting appellant's non-statutory grounds for vacating arbitration award because these grounds not listed in section 10 of FAA). In the wake of Hall Street, several Texas courts agree. See, e.g., Allstyle Coil Co., L.P. v. Carreon, No. 01-07-00790- CV, 2009 WL 1270411, at *2 (Tex. App.-Houston [1st Dist.] May 7, 2009, no pet.) (holding that non-statutory grounds for vacatur are “no longer legally recognized grounds for vacating an arbitration award”); Cameron Int'l Corp. v. Vetco Gray Inc., No. 14-07-00656-CV, 2009 WL 838177, at *8 (Tex. App.-Houston [14th Dist.] Mar. 31, 2009, no pet. h.) (mem. op.) (following suggestion of Hall Street and declining to accept appellant's request for legal and factual sufficiency review of arbitration award); Chandler v. Ford Motor Credit Co., LLC, No. 04-08-00100-CV, 2009 WL 538401, at *3 (Tex. App.-San Antonio Mar. 4, 2009, no pet. h.) (mem. op.) (adopting Hall Street and holding that appellants failed to demonstrate statutory basis for vacating arbitration award); see also Saipem Am. v. Wellington Underwriting Agencies Ltd., No. 08-20247, 2009 WL 1616122, at *2 (5th Cir. June 9, 2009) (per curiam) (holding that court may vacate arbitration award only if statutory ground supports vacatur); Nat'l Resort Mgmt. Corp. v. Cortez, No. 08-10805, 2009 WL 890622, at *1 (5th Cir. Mar. 31, 2009) (per curiam) (“The number of grounds for challenging an arbitration award has been substantially reduced in light of [Hall Street] and [Citigroup].”); Ascension Orthopedics, Inc. v. Curasan, A.G., Civil Action No. H-07-4033, 2008 WL 2074058, at *2 (S.D. Tex. May 14, 2008) (mem.) (stating Supreme Court's Hall Street decision “is unequivocal that the grounds upon which vacatur may be based as listed in § 10 are exclusive”); In re Poly-America,L.P., 262 S.W.3d 337, 362 (Tex. 2008) (Brister, J., dissenting) (“Both federal and state law require courts to enforce an arbitrator's decision, no matter what it is, with very few exceptions. The allowable exceptions concern extrinsic or procedural matters like corruption, fraud, or refusing to hear evidence; they do not include (as the Supreme Court just held) disregarding the law, even if a legal error is 'manifest.'”); Xtria L.L.C. v. Int'l Ins. Alliance Inc., 286 S.W.3d 583, 594 (Tex. App.-Texarkana 2009, pet. filed) (stating this Court has based past application of manifest disregard standard on Fifth Circuit precedent and opining, though not deciding, that this Court would follow Citigroup). We note that, in Hall Street, the Supreme Court suggested the possibility that a “more searching review based on authority outside the statute” could serve as bases for vacating or modifying arbitration awards. Hall St., 128 S. Ct. at 1406. See Footnote 5 FOOTNOTE 5: Specifically, the Supreme Court stated: “The FAA is not the only way into court for parties wanting review of arbitration awards: they may contemplate enforcement under state statutory or common law, for example, where judicial review of different scope is arguable.” Id. This case, however, does not open the door to that possibility. Here, the parties pursued arbitration according to the terms of the Guaranty, which expressly invoked the FAA. The only arguments made in the trial court and on appeal address the FAA. Accordingly, we do not consider the viability of non-statutory grounds here and express no opinion that non-statutory grounds for vacating or modifying an arbitration award could be considered in other contexts. Because manifest disregard of the law and gross mistake are not grounds for vacating an arbitration award under the FAA, Ancor has not demonstrated trial court error as to those grounds. We overrule Ancor's first, fourth, and fifth issues. Section 10(a)(4) Ancor's second and third issues fall within section 10(a)(4) of the FAA, which states that an arbitration award may be vacated “where the arbitrators exceeded their powers.” 9 U.S.C. § 10(a)(4). Ancor's argument for vacatur under section 10(a)(4) has two parts. First, Ancor complains the arbitrator exceeded her powers by allowing PGV to arbitrate issues that were precluded by res judicata or collateral estoppel. Second, Ancor contends the arbitrator exceeded her powers by reaching a decision that does not draw its essence from the intended purpose of the Guaranty. Arbitrator Authority “An arbitrator's authority is limited to disposition of matters expressly covered by the agreement or implied by necessity.” Quinn, 257 S.W.3d at 799. Arbitrators, therefore, exceed their powers when they decide matters not properly before them. Id.; see also Gulf Oil Corp. v. Guidry, 160 Tex. 139, 327 S.W.2d 406, 408 (1959). For example, an arbitrator exceeds her powers by allocating an award of costs between the parties when the arbitration agreement specifically requires the arbitrator to designate a non-prevailing party to bear the costs of both sides. See Townes Telecomms., Inc. v. Travis, Wolff & Co., L.L.P., No. 05-08-00079-CV, 2009 WL 1844330, at *3 (Tex. App.-Dallas June 29, 2009, pet. filed). Our inquiry under section 10(a)(4) is whether the arbitrator had the authority, based on the arbitration clause and the parties' submissions, to reach a certain issue, not whether the arbitrator correctly decided the issue. Executone Info. Sys., Inc. v. Davis, 26 F.3d 1314, 1323 (5th Cir. 1994); see also DiRussa v. Dean Witter Reynolds Inc., 121 F.3d 818, 824 (2d Cir. 1997). The award must be derived in some way from the wording and purpose of the agreement, and we look to the result reached to determine whether the award is rationally inferable from the contract. Anderman/Smith Operating Co. v. Tenn. Gas Pipeline Co., 918 F.2d 1215, 1219 n.3 (5th Cir. 1990). We may not vacate an arbitration award for errors in interpretation or application of the law or facts. Crossmark, 124 S.W.3d at 429. Although Ancor's first argument is couched in terms of whether the arbitrator exceeded her powers, Ancor's argument is actually a complaint that the arbitrator committed an error of law by rejecting Ancor's assertion that PGV's claims were barred by res judicata or collateral estoppel. A complaint that the arbitrator decided the issue incorrectly or made mistakes of law, however, is not a complaint that the arbitrator exceeded her powers. See Pheng Invs., Inc. v. Rodriguez, 196 S.W.3d 322, 329 (Tex. App.-Fort Worth 2006, no pet.) (op. on reh'g). Moreover, after examining the Guaranty, the parties' submissions, the arbitrator's interim orders, and the final award, there is no doubt the arbitrator responded to the issues submitted by the parties and that the arbitration award falls within the scope of the Guaranty. Paragraph 17 of the Guaranty requires “ANY CONTROVERSY OR CLAIM” arising out of the Guaranty to be determined by binding arbitration. Because Ancor has not established that the arbitrator decided a matter not properly before her, we cannot conclude the arbitrator exceeded her powers under section 10(a)(4) of the FAA. See 9 U.S.C. § 10(a)(4); see also Quinn, 257 S.W.3d at 799. We overrule Ancor's second issue. SOURCE: Opinion by Justice Mary Murphy in Ancor Holdings, LLC v. Peterson, Goldman & Villani, Inc., No. 05-08-00739-CV (Tex.App.- Dallas, Aug. 25, 2009)

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]