Hearing examiner did not exceed his powers in upholding indefinite suspension in firefighter's disciplinary appeal, San Antonio Court of Appeals rules

  
Mata v. City of San Antonio (Tex.App.- San Antonio [4th Dist.] April 18, 2012)
   

MEMORANDUM OPINION BY JUSTICE REBECCA SIMMONS

Appellant ["FIREFIGHTER" substituted for name] appealed the termination of his employment with the San Antonio Fire Department to a hearing examiner, who upheld the termination. FIREFIGHTER then appealed the hearing examiner's decision to district court, where the court denied his motion for summary judgment and granted summary judgment in favor of appellees City of San Antonio and San Antonio Firefighters' and Police Officers' Civil Service Commission (collectively the City). On appeal, FIREFIGHTER contends the trial court erred because the hearing examiner's decision was capricious and not supported by substantial evidence, or alternatively, that the hearing examiner exceeded his jurisdiction. We affirm the trial court's judgment.

BACKGROUND
 
On November 19, 2007, FIREFIGHTER, a San Antonio fire fighter, tested positive for cocaine use. The drug test was administered according to the terms of a collective bargaining agreement (CBA) between the City and the San Antonio fire fighters' bargaining agent, International Association of Firefighters, Local 624. The CBA allowed the City to randomly drug test each fire fighter once in a twelve-month period. Based on the positive results of FIREFIGHTER's drug test, San Antonio Fire Chief Charles Hood issued FIREFIGHTER a notice of proposed indefinite suspension. A meeting regarding FIREFIGHTER's discipline was scheduled for April 1, 2008. Local 624's Grievance Committee Chairperson Carlos Cordell accompanied FIREFIGHTER to the April 1st meeting in an effort to seek a lesser disciplinary penalty than employment termination. FIREFIGHTER, Chief Hood, and one witness signed the notice of indefinite suspension, Cordell did not. FIREFIGHTER's employment was thereby terminated,[1] and FIREFIGHTER did not appeal that decision.

However, after the suspension was signed, FIREFIGHTER, Cordell, Chief Hood, and several other attendees at the meeting discussed and reviewed the terms and conditions of a "Release and Settlement Agreement," or "last chance agreement," that would reinstate FIREFIGHTER as a fire fighter. This agreement permitted FIREFIGHTER to return to work conditioned on his execution of the agreement, his consent to submit to non-random drug testing, and his completion of a drug rehabilitation program. Cordell and FIREFIGHTER asked for a few changes in the terms of the agreement, which the City made. Notably, Cordell and FIREFIGHTER did not seek to change the non-random drug tests required by the last chance agreement. At the time, neither FIREFIGHTER nor Cordell questioned the legality of nor argued that the last chance agreement violated the terms of the CBA. FIREFIGHTER, Chief Hood, and one witness signed the last chance agreement, Cordell did not.

Later, following completion of a drug rehabilitation program, FIREFIGHTER again tested positive for cocaine use. The non-random drug test was conducted according to the terms of the last chance agreement. FIREFIGHTER was indefinitely suspended and his employment was terminated. FIREFIGHTER appealed the suspension to an independent third-party hearing examiner and contended the last chance agreement was unenforceable and void because the CBA did not permit non-random drug testing. FIREFIGHTER did not contest the accuracy of the drug test, nor did he assert that he did not use cocaine. The hearing examiner upheld FIREFIGHTER's termination.

FIREFIGHTER appealed the decision to the trial court and filed a motion for summary judgment claiming the hearing examiner acted arbitrarily and capriciously or exceeded his jurisdiction in upholding FIREFIGHTER's termination. The City responded with a motion for summary judgment contending (1) FIREFIGHTER is estopped from denying enforcement of the last chance agreement, (2) the hearing examiner neither exceeded his authority nor acted capriciously in upholding FIREFIGHTER's termination, and the examiner's decision should be confirmed as a matter of law, and (3) alternatively, if the court determined the random drug testing provision of the last chance agreement void, the agreement should be rescinded in its entirety and FIREFIGHTER's original termination upheld. The City also sought (1) a declaration that the last chance agreement was valid and enforceable, (2) a judgment confirming the hearing examiner's award, and (3) attorney's fees. The trial court granted summary judgment in favor of the City without stating the grounds upon which it was granted. FIREFIGHTER appeals the trial court's summary judgment.

STANDARD OF REVIEW

We review a summary judgment de novo. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005). "When both parties move for partial summary judgment on the same issues and the trial court grants one motion and denies the other, as here, the reviewing court considers the summary judgment evidence presented by both sides, determines all questions presented, and if the reviewing court determines that the trial court erred, renders the judgment the trial court should have rendered." Id.

In this case the parties agree on the underlying facts. They disagree on the enforceability of the last chance agreement and the interpretation of the CBA. Specifically, they disagree on the standard to employ in reviewing the hearing examiner's decision.

THIRD-PARTY HEARING EXAMINERS

The threshold issue on appeal is the determination of the applicable standard of review of the hearing examiner's decision. FIREFIGHTER contends the trial court should have reviewed the hearing examiner's decision under either a "substantial evidence or capricious" standard. The City argues review is severely restricted to whether the hearing examiner had jurisdiction to make his decision or exceeded his jurisdiction in making his decision.

A. Standard of Review of a Hearing Examiner's Decision
 
The statutory framework of the Fire Fighters and Police Officers Civil Service Act (the Act) establishes a process for fire fighters challenging disciplinary suspensions. See TEX. LOC. GOV'T CODE ANN. §§ 143.001-.363 (West 2008 & Supp. 2012); City of Houston v. Williams, 99 S.W.3d 709, 713 (Tex. App.-Houston [14th Dist.] 2003, no pet.). Under this scheme, a fire fighter can elect to have his suspension reviewed by a hearing examiner or the Civil Service Commission. See TEX. LOC. GOV'T CODE ANN. §§ 143.010, 143.053, 143.057; City of DeSoto v. White, 288 S.W.3d 389, 392 (Tex. 2009). A hearing examiner's decision is ordinarily reviewable "only on the grounds that the arbitration panel was without jurisdiction or exceeded its jurisdiction or that the order was procured by fraud, collusion, or other unlawful means." See TEX. LOC. GOV'T CODE ANN. § 143.057(j); City of Pasadena v. Smith, 292 S.W.3d 14, 17 (Tex. 2009). However, the Act provides that a "collective bargaining contract [that] specifically provides otherwise" prevails over a "civil service provision." See TEX. LOC. GOV'T CODE ANN. § 174.006(a); City of San Antonio v. Scott, 16 S.W.3d 372, 376 (Tex. App.-San Antonio 1999, pet. denied).

B. The Standard Provided in Section 143.057 Governs this Dispute
 
FIREFIGHTER argues the CBA specifically provides for a substantial evidence or capricious standard of review and therefore this standard prevails over the standard set forth in section 143.057(j) of the Local Government Code. The City responds that the substantial evidence or capricious review is limited to the grievance process outlined in the CBA, and that disciplinary proceedings are specifically excluded from that process. To determine the proper standard of review of the hearing examiner's decision we must review the CBA. "The construction of an unambiguous contract is a question of law for the court, which we may consider under a de novo standard of review." Tawes v. Barnes, 340 S.W.3d 419, 425 (Tex. 2011); accord Coker v. Coker, 650 S.W.2d 391, 393-94 (Tex. 1983).

Article 30 (Grievance Procedure) of the CBA prescribes a grievance procedure for disputes between the City and Local 624 or one of its fire fighters. Section (1)(D) of Article 30 contains an exception from the grievance procedure for certain disciplinary matters that are subject to the Local Government Code:

Disciplinary matters subject to the appeals procedure provided by Texas Local Government Code Chapter 143 shall not be subject to the grievance/arbitration procedure; provided that such matters, at the employee's election, will be subject to the Civil Service Commission or grievance/arbitration procedure under a just-cause standard, if Texas Local Government Code Section 143.057 is repealed or amended to eliminate the optional appeal of disciplinary matters to a Hearing Examiner. If the provisions of Chapter 143 are not repealed, and should the employee elect to proceed to the optional appeal of disciplinary matters to a Hearing Examiner, the examiner shall be one of the six (6) pre-selected, qualified neutrals as called for in Section 5(A) hereof. The powers, duties, and/or obligations of said arbitrator/hearing examiner shall likewise be as provided for in this Agreement and applicable provisions of the Texas Local Government Code, Chapter 143.

FIREFIGHTER argues that the terms "arbitrator" and "hearing examiner" are used interchangeably and that Article 31 of the CBA provides the standard of review for the hearing examiner's award:

If, at any time after a decision and/or award of the Civil Service Commission and/or an arbitrator, any affected party contests or challenges the decision or award in any other legal proceeding, the following shall apply:

. . . The decision and award of the arbitrator and/or the Commission must be upheld, unless the contesting party can establish the award was not supported in whole or in part by substantial evidence and/or that the award of the arbitrator and/or the Commission was capricious.

We do not agree with FIREFIGHTER's interpretation of the CBA and its interaction with the Local Government Code. The CBA is unambiguous. See Coker, 650 S.W.2d at 393 (holding language that can be given certain or definite legal meaning is unambiguous). By its very terms Article 31 provides the standard of review for the decision and award solely for arbitrators and the Civil Service Commission. It is silent as to hearing examiners. If the employee elects to appeal a suspension to a hearing examiner, Article 30(1)(D) of the CBA specifically subjects such disciplinary procedures to the provisions of Local Government Code section 143.057. Contrary to FIREFIGHTER's interpretation, Article 30(1)(D) of the CBA clearly distinguishes between a hearing examiner and an arbitrator under the grievance procedures. Article 30 contains a number of sections setting forth the procedures to be followed in a grievance proceeding including the submission of unresolved grievances to arbitration before an arbitrator. Article 30 section 5 clearly recognizes the difference between a "grievance . . . submitted to arbitration" and an "employee appeal to a Hearing Examiner." We presume these distinctions were intentional. See Ogden v. Dickinson State Bank, 662 S.W.2d 330, 332 (Tex. 1983) ("Generally, the parties to a contract intend every clause to have some effect. . . ."); accord Birnbaum v. Swepi LP, 48 S.W.3d 254, 257 (Tex. App.-San Antonio 2001, pet. denied). It is undisputed that (1) FIREFIGHTER's termination was subject to a disciplinary procedure, and (2) FIREFIGHTER elected to have his suspension reviewed by a hearing examiner. Therefore, FIREFIGHTER is subject to the standard of review set forth in Local Government Code section 143.057(j).

C. Did the Hearing Examiner Exceed His Jurisdiction?

If a fire fighter appeals his termination to a hearing examiner, "his ability to seek further review in a district court is severely limited." See City of DeSoto v. White, 288 S.W.3d 389, 391 (Tex. 2009). It is undisputed that the hearing examiner had jurisdiction to hear FIREFIGHTER's appeal; moreover, FIREFIGHTER makes no allegation that the hearing examiner's decision was procured by fraud, collusion, or other unlawful means. See TEX. LOC. GOV'T CODE ANN. § 143.057(j). Thus, the issue in this case is whether the hearing examiner exceeded his authority by enforcing the last chance agreement. See id. The supreme court has provided the following test to guide our inquiry: "[A] hearing examiner exceeds his jurisdiction when his acts are not authorized by the Act or are contrary to it, or when they invade the policy-setting realm protected by the nondelegation doctrine." City of Waco v. Kelley, 309 S.W.3d 536, 542 (Tex. 2010) (quoting City of Pasadena v. Smith, 292 S.W.3d 14, 21 (Tex. 2009)). FIREFIGHTER makes no argument that the hearing examiner's acts violated the nondelegation doctrine; therefore, we will address whether the hearing examiner's acts were not authorized by the Act or whether they were contrary to the Act. See Kelley, 309 S.W.3d at 542.

1. The Hearing Examiner's Decision Was Authorized by the Act

The hearing examiner's decision to uphold the indefinite suspension of FIREFIGHTER's employment was authorized by section 143.052 of the Act, which provides that the head of a fire department "may suspend a fire fighter . . . for the violation of a civil service rule." See TEX. LOC. GOV'T CODE ANN. § 143.052(b). A commission rule allowing for removal or suspension is valid if the ground for removal is a "violation of an applicable fire or police department rule." Id. § 143.051(12). The applicable rule in this case is San Antonio Fire Fighters' and Police Officers' Civil Service Commission Rule XIII(C)(12)(4.09) which states, "The use, possession, sale or acceptance of illegal drugs or narcotics by Members of the San Antonio Fire Department either on or off duty is prohibited."

FIREFIGHTER has not contested his cocaine use, nor has he challenged the reliability or accuracy of the drug tests that indicated his cocaine use. Thus, FIREFIGHTER violated the Fire Department's rules and the hearing examiner did not exceed his authority under the Act to uphold the suspension. See TEX. LOC. GOV'T CODE ANN. § 143.051(12), 143.052(b).

2. The Hearing Examiner's Decision Was Not Contrary to the Act

FIREFIGHTER contends that because the last chance agreement altered the CBA, the hearing examiner's decision violated the Act's "exclusive bargaining" requirement that only the Union could bargain on FIREFIGHTER's behalf. The Act provides, "fire fighters . . . are entitled to organize and bargain collectively with their public employer," id. § 174.023, and "[a] public employer shall recognize an association selected by a majority of the fire fighters of the fire department of a political subdivision as the exclusive bargaining agent for the fire fighters of that department unless a majority of the fire fighters withdraw the recognition," id. § 174.101.

Article 9 of the CBA, entitled "Maintenance of Standards," states that "[a]ll standards, privileges, and working conditions enjoyed by the City of San Antonio Fire Fighters at the effective date of this Agreement, which are not included in this Agreement shall remain unchanged for the duration of this Agreement." The hearing examiner found that "[t]he record indicates there is a history of settlement agreements in the San Antonio Fire Department." FIREFIGHTER does not dispute this history. Based on the examiner's findings and the plain language of the CBA, fire fighters had the privilege or work condition of entering into last chance agreements prior to the effective date of the CBA. Accordingly, the record shows that the execution of a last chance agreement was not contrary to the CBA. Thus, the hearing examiner's decision to uphold the suspension was not contrary to the "exclusive bargaining" provisions in the Code. See generally TEX. LOC. GOV'T CODE ANN. § 174.023-.109 (West 2008 & Supp. 2012).

In addition, the hearing examiner noted FIREFIGHTER's failure to challenge his first indefinite suspension:

Had Mr. FIREFIGHTER believed that the indefinite suspension issued to him for his first offense (April 1, 2008) was improper, the appropriate means of challenging the discipline was to file an appeal. The appeal of a subsequent disciplinary action (November 2008), is not the proper step, means, or forum for questioning the prior disciplinary action.

There is no evidence in the record that FIREFIGHTER appealed his first indefinite suspension. See TEX. LOC. GOV'T CODE ANN. § 143.052(d) (requiring a suspended fire fighter to appeal his suspension within ten days). See generally TEX. LOC. GOV'T CODE ANN. §§ 143.001-.363 (West 2008) (providing procedures to fire fighters for appealing disciplinary actions); City of Houston v. Williams, 99 S.W.3d 709, 713 (Tex. App.-Houston [14th Dist.] 2003, no pet.). After his first indefinite suspension, FIREFIGHTER was reinstated contingent upon his execution of the last chance agreement. In his appeal of his second indefinite suspension, FIREFIGHTER asked the hearing examiner for reinstatement because the last chance agreement was void. If the last chance agreement is void, then FIREFIGHTER's first indefinite suspension remains in place.[2] Thus, under the facts available to the hearing examiner, he could not have reinstated FIREFIGHTER. Cf. City of Pasadena v. Smith, 292 S.W.3d 14, 20 (Tex. 2009) ("[T]he Act does not empower a hearing examiner to make rules."). The Act's ten-day period to appeal a suspension would bar FIREFIGHTER's untimely appeal from the original indefinite suspension. See TEX. LOC. GOV'T CODE ANN. § 143.052(d); see also City of Temple Firemen's & Policemen's Civil Serv. Comm'n v. Bender, 787 S.W.2d 951, 951 (Tex. 1990) (per curium) ("We hold that a civil service commission's jurisdiction is not invoked unless a fire fighter or police officer files a notice of appeal with the commission within ten days after the occurrence of the action being appealed. . . ."); Downs v. City of Fort Worth, 692 S.W.2d 209, 212 (Tex. App.-Fort Worth 1985, writ ref'd n.r.e.) (citing the precursor statutes to sections 143.052, 143.053, and 143.057, and holding that compliance with the ten-day timeframe is mandatory).

CONCLUSION

For the reasons given above, we hold that the hearing examiner did not exceed his jurisdiction by upholding FIREFIGHTER's employment termination. Therefore, we affirm the trial court's summary judgment.

[1] "An indefinite suspension is equivalent to dismissal from the department." TEX. LOC. GOV'T CODE ANN. § 143.052(b) (West 2008).
[2] Cf. Summers v. Keebler Co., 133 Fed. App'x 249, 252 (6th Cir. 2005) ("For even if the last chance agreement were construed to violate the collective bargaining agreement, such a violation did not cause the Plaintiff's injury. The Plaintiff alleges she was injured by being discharged from her job. Without signing the last chance agreement in the first place after she had passed out on the job due to intoxication, she would have been justifiably terminated. Her signing of the last chance agreement saved her from being terminated.").

Thwarted demand to arbitrate employment dispute did not extend the statute of limitations for lawsuit

    

Time employee’s claim against former employer spent in arbitration (which did not go forward because of employer’s refusal to pay the required fees) not added to limitations period under equitable tolling theory. Fifth Circuit affirms district court’s summary judgment based on four-year statute of limitations in opinion that is not precedent, but nevertheless instructive.

Fonseca v. USG Insurance Services, Inc. No 11-11063 (5^th Cir., Apr. 13, 2012) (per curiam)

 

From July 2001 until August 2006, Plaintiff-Appellant Victoria Fonseca worked for USG Insurance Services, Inc. ("USG") as the branch manager of USG's Arlington, Texas branch. Throughout Fonseca's employment, Gerald W. Horton served as USG's President. In November 2005, Horton offered Fonseca the opportunity to enter into a deferred compensation agreement ("DCA"). Subsequently, on August 29, 2006, USG fired Fonseca. Shortly thereafter, on September 8, 2006, Fonseca learned that USG did not intend to pay her under the DCA because USG had never received a signed acceptance.

 

On May 7, [2006], Fonseca filed an arbitration demand with the American Arbitration Association ("AAA"). On July 16, 2006, the AAA declined to serve as a arbitrator because USG failed to pay the required arbitration fees for this type of dispute. Fonseca then filed a suit on October 13, 2010 in Texas state court alleging fraud and breach of contract against Defendant-Appellees USG and Universal Specialty Underwriters, Inc. (collectively "the Defendants"). Defendants removed to district court on the basis of diversity. On summary judgment, the district court held that Fonseca's suit was time-barred based on Texas's four-year statute of limitations for these claims. Tex. Civ. Prac. & Rem. Code § 16.004 (fraud); id. at § 16.051 (breach of contract).

   
We review a district court's decision refusing to exercise its equitable tolling powers for abuse of discretion. Granger v. Aaron's, Inc., 636 F.3d 708, 712 (5th Cir. 2011). The doctrine of equitable tolling "preserves a plaintiff's claim when strict application of the statue of limitations would be inequitable." United States v. Patterson, 211 F.3d 927, 930 (5th Cir. 2000). It principally applies when the "plaintiff is actively misled by the defendant . . . or is prevented in some extraordinary way from exerting his rights." Id. Fonseca admits that under Texas's four-year statute of limitations, her claims expired on September 8, 2010 but contends that the statute of limitations should have been tolled during the period that the AAA considered her arbitration demand.
  

We have previously stated, albeit in dicta, that a "demand for arbitration does not toll the statute of limitations." United States ex rel. Portland Const. Co. v. Weiss Pollution Control Corp., 532 F.2d 1009, 1013 (5th Cir. 1976). In Portland Construction, we held that a claimant who demanded arbitration is not required to wait until the outcome of the arbitration to file a lawsuit. Id. In this case, Fonseca could have (and should have) filed her suit within the statute of limitations and, thereafter, sought a stay of the action pending arbitration. See id. Such a course would have guaranteed that the lawsuit was brought within the limitations period without waiving any right to arbitration which may have existed. Moreover, Fonseca has shown no evidence that she was misled by defendants or that she was prevented from pursuing her cause in any way. In fact, the record reveals that Fonseca had ample time both before and after the AAA's refusal to arbitrate her case in which to file her lawsuit, yet she took none of the steps "recognized as important by the statute before the end of the limitations period." Granger, 636 F.3d at 712. Therefore, in light of our decision in Portland Construction and the facts of this case, we cannot say that the district court abused its discretion when it declined to equitably toll the statute of limitations.

 

AFFIRMED.

  
[*] Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4.

"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:

El Paso Court of Appeals sustains challenge to stand-alone arbitration requirement on the ground that did not impose mutual obligations on employer and at-will employee

  
Stand-alone arbitration agreements require binding promises from both sides as they are the only consideration rendered to create a contract. Because there was no valid arbitration agreement, the trial court erred in compelling arbitration. Judgment reversed. 
    

Daniel Mendivil v. Zanios Foods, Inc. (Tex. App. – El Paso,Jan. 11, 2012, n. pet h.)

  

OPINION BY CHIEF JUSTICE ANN CRAWFORD McCLURE

  

Daniel Mendivil appeals the trial court's order compelling arbitration, complaining that the arbitration provision was invalid, illusory, and unconscionable. For the reasons that follow, we reverse and remand.

   

FACTUAL SUMMARY

 
Mendivil was employed as a delivery-truck driver for Zanios Foods, Inc. in El Paso, Texas, and made deliveries both within El Paso and outside of Texas. Upon commencement of his employment, Mendivil was the sole signatory of an Arbitration Policy Statement (APS) prepared by Zanios, which states:

In consideration of Zanios Foods, Inc.'s offer to employ or to continue to employ me and my agreement to accept employment or continued employment under the terms set forth in this Arbitration Policy Statement, I acknowledge that my employment at Zanios is "at will", meaning I can be terminated or quit my employment at any time for any or no reason and I further agree that any controversy, claim, or dispute against Zanios Foods, Inc. ("Zanios") arising out of or relating to my employment with Zanios or the termination of my employment with Zanios . . . shall be resolved exclusively by final and binding arbitration. . . .

Arbitration shall be the sole and exclusive remedy for any such controversy, claim, or dispute against Zanios. I acknowledge that I am knowingly and voluntarily waiving the right to purse [sic] any such controversy, claim, or dispute against Zanios in any court or administrative forum and instead will pursue them through arbitration.

I understand that if I decide to submit any dispute to arbitration in accordance with this Arbitration Policy Statement, I must submit a written request for arbitration to Zanios's President within one (1) month from the date of the incident in question, and I must respond within ten (10) calendar days to each communication regarding the selection of an arbitrator, the scheduling of an arbitration hearing, or any other matters related to the arbitration proceeding. If Zanios does not receive a written request for arbitration from me within one (1) month, or if I do not respond to any communication about the arbitration proceeding within ten (10) calendar days, I understand and acknowledge that I will have knowingly and voluntarily waived my right to arbitration on the incident in question[.] The arbitration shall be held in Albuquerque, New Mexico. The parties shall each pay one-half of the cost of the arbitrator and each party shall otherwise pay its own costs and attorneys' fees.

If this Arbitration Policy Statement shall for any reason be declared unenforceable, I knowingly and voluntarily waive the right to a trial by jury in any action or judicial proceeding which would otherwise have been subject to arbitration.

 
By signing below, I acknowledge that I have read this Arbitration Policy Statement, understand its contents, and voluntarily agree to abide by its terms.
 
After Mendivil suffered an injury in the course of his employment, Zanios terminated his employment, allegedly for a reason unrelated to the injury. Mendivil filed suit against Zanios under Chapter 451 of the Texas Labor Code, which prohibits the discharge of or discrimination against an employee who files a workers' compensation claim in good faith or hires a lawyer to represent the employee in a claim. TEX. LAB. CODE ANN. § 451.001 (West 2006).
 
In a motion to compel arbitration, Zanios alleged that Mendivil's signature on the APS represented his understanding that the offer of employment was conditioned upon a promise to arbitrate his claims. Mendivil countered that no valid arbitration agreement existed because the APS lacked proper consideration and mutual language requiring Zanios to arbitrate, to be bound by arbitration, or to perform any mutual promise. Mendivil maintained that the APS was illusory because it contained no provisions by which Mendivil could either enforce the arbitration agreement against Zanios or require Zanios to arbitrate because Zanios had not promised anything. Mendivil likewise declared the APS unconscionable in part because the provisions required that he arbitrate his claims in Albuquerque, New Mexico, give notice of his intent to arbitrate within thirty days of any incident or waive arbitration, respond to all letters from Zanios within ten days or risk waiving his opportunity to arbitrate, and pay one-half of any arbitration fees.
 
In response, Zanios argued that no case law requires an employer's reciprocal, mirrored promise to arbitrate any claims it might have against an employee in exchange for the employee's promise to arbitrate, and contended that an employer need only provide "some" consideration to render an arbitration agreement enforceable. According to Zanios, it had provided sufficient consideration to form a valid arbitration agreement with Mendivil by agreeing: (1) to binding arbitration; (2) to be bound by the result; (3) to arbitrate in a particular venue; (4) to have arbitration conducted under particular rules; (5) to pay for one-half of the arbitration fee; (6) to pay its own attorney's fees and costs; and (7) to forego recovery of its attorney's fees. Zanios informed the trial court that it would agree to conduct arbitration in El Paso and pay the entirety of arbitration costs up to $10,000.
 
Without expressly finding the APS to be a valid agreement, the trial court granted the motion to compel, ordered that the parties arbitrate in El Paso, and directed that Zanios pay all arbitration fees up to $10,000, after which Mendivil and Zanios would each pay one-half of the arbitration fees in excess of $10,000.

WAS THERE AN AGREEMENT TO ARBITRATE?

In Issues One and Five Mendivil generally challenges the order compelling arbitration as written and as modified by the trial court. In Issue Four, he contends the APS was unconscionable. In Issues Two and Three, he complains that the APS is illusory and invalid for lack of mutual consideration. We review de novo a trial court's determination regarding the validity of an agreement to arbitrate. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003).
 
Applicable Law
 
It is undisputed that the Federal Arbitration Act (FAA), which typically governs arbitration provisions in contracts involving interstate commerce, applies here. See 9 U.S.C.A. §§ 1-16 (West 2009); In re Rubiola, 334 S.W.3d 220, 223 (Tex. 2011). To compel arbitration under the FAA, a party must establish that there is a valid arbitration agreement and that the claims fall within the scope of the agreement. In re Dillard Dep't Stores, Inc., 186 S.W.3d 514, 515 (Tex. 2006). While a strong presumption favoring arbitration exists, "the presumption arises only after the party seeking to compel arbitration proves that a valid arbitration agreement exists." J.M. Davidson, Inc., 128 S.W.3d at 227.
 
When determining the validity of arbitration agreements that are subject to the FAA, we apply state-law principles that govern the formation of contracts. In re Palm Harbor Homes, Inc., 195 S.W.3d 672, 676 (Tex. 2006). When deciding whether a party has met its burden to establish a valid agreement to arbitrate, we do not resolve doubts or indulge a presumption in favor of arbitration. J.M. Davidson, Inc., 128 S.W.3d at 227. Rather, the party attempting to compel arbitration must show that the arbitration agreement meets all requisite contract requirements. Id. at 228. If the trial court determines that a valid agreement exists, the burden shifts to the party opposing arbitration to raise an affirmative defense to enforcement of the arbitration agreement. Id. at 227-28. Nonetheless, although a court may enforce agreements to arbitrate disputes, a court cannot order arbitration in the absence of such an agreement. Freis v. Canales, 877 S.W.2d 283, 284 (Tex. 1994), citing United Steelworkers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582, 80 S.Ct. 1347, 1352-53, 4 L.Ed.2d 1409 (1960); see 9 U.S.C. § 2.
  
Contract Elements
  
The elements required for the formation of a valid and binding contract include: (1) an offer; (2) acceptance in strict compliance with the terms of the offer; (3) a meeting of the minds; (4) each party's consent to the term; and (5) execution and delivery of the contract with the intent that it be mutual and binding. Cessna Aircraft Co. v. Aircraft Network, L.L.C., 213 S.W.3d 455, 465 (Tex.App.-Dallas 2006, pet. denied). An agreement to arbitrate, like other contracts, must also be supported by consideration. In re Palm Harbor Homes, Inc., 195 S.W.3d at 676; In re AdvancePCS Health L.P., 172 S.W.3d 603, 607 (Tex. 2005) (per curiam).
  
Mutual Promises and Consideration
  
Mutual, reciprocal promises which bind both parties may constitute consideration for a contract. Texas Custom Pools, Inc. v. Clayton, 293 S.W.3d 299, 309 (Tex.App.-El Paso 2009, no pet.). Arbitration clauses generally do not require mutuality of obligation so long as adequate consideration supports the underlying contract. In re Lyon Financial Services, Inc., 257 S.W.3d 228, 233 (Tex. 2008), citing In re FirstMerit Bank, N.A., 52 S.W.3d 749, 757 (Tex. 2001). Thus, when an agreement to arbitrate is part of a larger underlying contract, the remainder of the contract may constitute sufficient consideration for the arbitration provision. In re Palm Harbor Homes, Inc., 195 S.W.3d at 676; In re AdvancePCS, 172 S.W.3d at 607.
 
However, stand-alone arbitration agreements require binding promises from both sides as they are the only consideration rendered to create a contract. In re AdvancePCS, 172 S.W.3d at 607; see also In re 24R, Inc., 324 S.W.3d 564, 566 (Tex. 2010) (mutual promises to submit a dispute to arbitration are sufficient consideration to support an arbitration agreement); Vanegas v. American Energy Services, 302 S.W.3d 299, 302 (Tex. 2009) ("`A bilateral contract is one in which there are mutual promises between two parties to the contract, each party being both a promisor and a promisee.'"), citing Hutchings v. Slemons, 141 Tex. 448, 174 S.W.2d 487, 489 (1943).
 
In In re Halliburton Co., an employer provided notice to its employee that it was adopting a new dispute resolution program, by which both the employer and all employees were required to submit all employment disputes to binding arbitration and waived all rights each may have to a trial by jury for employment-related matters. In re Halliburton, Co., 80 S.W.3d 566, 568-69 (Tex. 2002). The employer informed its employees if an employee accepted or continued employment after January 1, 1998, the employee agreed to resolve all legal claims against the employer through the new program rather than in the courts. In re Halliburton, Co., 80 S.W.3d at 569. The Texas Supreme Court determined that the new dispute resolution program was not dependent upon the employee's continuing employment but rather that the employee accepted the terms of the new program as a matter of law by continuing employment beyond January 1, 1998. In re Halliburton, Co., 80 S.W.3d at 569. Because both the employer and the employee mutually promised to submit all employment disputes to arbitration, thus binding both parties to the terms of the new dispute resolution program, the Texas Supreme Court found that the new dispute resolution agreement between the employer and the at-will employee was supported by sufficient consideration and was not illusory. In re Halliburton, Co., 80 S.W.3d at 566, 569-70.
 
Thus, employers and their at-will employees are not precluded from forming other contracts between themselves, "so long as neither party relies on continued employment as consideration for the contract." J.M. Davidson, Inc., 128 S.W.3d at 228; In re Polymerica, L.L.C, 296 S.W.3d 74, 76 (Tex. 2009) (where employer could not avoid its promise to arbitrate by amending a termination provision or terminating it altogether, the dispute resolution plan was not illusory). When mutual promises to submit employment disputes to arbitration bind both parties to their promises to arbitrate, sufficient consideration exists to support an arbitration agreement between the employer and the at-will employee. In re Halliburton, Co., 80 S.W.3d at 569-70; see also J.M. Davidson, Inc., 128 S.W.3d at 228.
 
Illusory Promises
 
A promise which does not bind the promisor, as when the promisor retains the option to discontinue performance, is illusory. In re 24R, Inc., 324 S.W.3d 564, 567 (Tex. 2010), citing Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 849 (Tex. 2009); see also J.M. Davidson, Inc., 128 S.W.3d at 228; Light v. Centel Cellular Co., 883 S.W.2d 642, 645 (Tex. 1994) (employer's promises were illusory because they were dependent upon at-will employee's period of continued employment; thus, employer could avoid performance by terminating at-will employee's employment while the employee was bound to her promise whether or not she remained employed); compare In re Halliburton, Co., 80 S.W.3d at 569-70 (because mutual promises to submit employment disputes to arbitration bound both parties to their promises to arbitrate, sufficient consideration existed to support the arbitration agreement between the employer and the at-will employee). An agreement to arbitrate may be illusory if a party can unilaterally avoid the agreement to arbitrate. In re Palm Harbor Homes, Inc., 195 S.W.3d at 677; J.M. Davidson, Inc., 128 S.W.3d at 228-30; In re Halliburton Co., 80 S.W.3d at 569-70. Consequently, when a purported bilateral contract is supported only by illusory promises, there is no contract. In re 24R, Inc., 324 S.W.3d at 567, citing Vanegas v. American Energy Services, 302 S.W.3d 299, 302 (Tex. 2009), quoting Light, 883 S.W.2d at 644-45.
 
Analysis
 
The stand-alone APS requires binding promises from both Zanios and Mendivil as such promises are the only consideration provided for the formation of the contract. In re AdvancePCS, 172 S.W.3d at 607; see also In re 24R, Inc., 324 S.W.3d at 566-67. But Zanios never expressly agreed to arbitrate its disputes with Mendivil nor to be bound by the result of such arbitration. Clearly, the language of the purported contract does not apply to any claims that Zanios may assert against Mendivil. Indeed, other than Zanios' recital of consideration, there are only two other recitals that are not wholly burdensome to Mendivil alone: (1) the statement identifying the arbitration venue; and (2) the allocation of arbitration costs as well as attorney's fees and costs.
 

While the benefits to Zanios are clear, those to Mendivil are not. Zanios did not agree to waive a trial by jury and did not agree to resolve any controversy, claim, or dispute that it may have against Mendivil by final and binding arbitration. We are unable to discern from the APS that Zanios has made a mutual, binding promise to Mendivil. When a promise does not bind a promisor, the promise is illusory. In re 24R, Inc., 324 S.W.3d at 564, 567. Had Mendivil sought to compel Zanios to arbitrate under the terms of the APS, he would be unsuccessful as no provision therein binds Zanios to perform such obligation or to be bound by the arbitration result. Consequently, because the APS lacks binding promises from each party as required for the formation of a contract, it lacks the requisite consideration and is illusory. In re AdvancePCS, 172 S.W.3d at 607; see also In re 24R, Inc., 324 S.W.3d at 566-67.

 
Zanios failed to prove the existence of a valid arbitration agreement in the trial court. Because there was no valid arbitration agreement, the trial court erred in compelling arbitration. In re Dillard Dep't Stores, Inc., 186 S.W.3d at 515. We sustain Issues Two and Three. Our resolution of these issues renders it unnecessary for us to consider Issues One, Four, and Five.
 
We reverse and remand for further proceedings.
 
CASE INFO: EL PASO COURT OF APPEALS –No. 08-10-00359-CV – Opinion released 1/14/11

REVERSED AND REMANDED: Opinion by Chief Justice Mcclure [ PDF ]
(Before Chew, Chief Justice Mcclure, Justice Antcliff)

08-10-00359-CV

Daniel Mendivil v. Zanios Foods, Inc.--Appeal from County Court at Law No 5 of El Paso County

No Orders Compelling Arbitration in Rule 202 Proceeding (unless agreed by the parties)

Rule 202 petition does not confer jurisdiction on trial court to enter order compelling arbitration over objection of the other party, Dallas Court of Appeal says in case in which it also awards mandamus relief against the trial court's order permitting Rule 202 discovery (presuit discovery to investigate claim, here female attorney's sex discrimination claim against law firm in which she was partner on equal pay issue).


Patton Boggs, LLP v. Kate Moseley (Tex.App.- Dallas, Dec. 29, 2011)
   
EXCERPT FROM OPINION BY JUSTICE ROBERT M. FILLMORE
  
Appellant Patton Boggs filed this interlocutory appeal challenging the trial court's denial of its motion to compel arbitration. See Tex. Civ. Prac. & Rem. Code Ann. § 51.016 (West Supp. 2011) (appeal or writ of error to the court of appeals from the judgment or interlocutory order of a district court in a matter subject to Federal Arbitration Act); Tex. Civ. Prac. & Rem. Code Ann. § 171.098(a)(1) (West 2011) (party may appeal an order denying an pplication to compel arbitration under section 171.021); see Tex. Civ. Prac. & Rem. Code Ann. § 171.021(a) (West 2011) (court shall order parties to arbitration on application of a party showing an agreement to arbitrate and the opposing party's refusal to arbitrate). See Footnote 7 In its sole issue on appeal, Patton Boggs contends the trial court erred by denying Patton Boggs's motion to compel arbitration and to stay the rule 202 proceedings.
  
Moseley responds that the trial court lacked jurisdiction over Patton Boggs's motion to compel arbitration filed in the rule 202 proceeding. We agree. Because the only proceeding before the trial court was a rule 202 petition, the trial court had no jurisdiction to grant a motion to compel arbitration absent an agreement between the parties that the motion should be granted. See In re Southwest Sec., Inc., No. 05-99-01836-CV, 2000 WL 770117, at *2 (Tex. App.-Dallas, June 14, 2000, orig. proceeding.) (not designated for publication). The trial court lacked jurisdiction to compel arbitration in the rule 202 proceeding. Accordingly, we dismiss this interlocutory appeal for lack of jurisdiction. Tex. R. App. P. 42.3(a).
 
Conclusion
  
We conditionally grant the petition for writ of mandamus and order the trial court to vacate the portions of its August 15, 2011 order that grant Moseley's rule 202 request to take depositions and that grant in part Moseley's request for production of documents. A writ will issue only in the event the trial court fails to vacate the portions of its August 15, 2011 order that grant Moseley's rule 202 request to take depositions and that grant in part Moseley's request for production of documents in conjunction with those depositions.
We dismiss this interlocutory appeal for lack of jurisdiction.

SOURCE: DALLAS COURT OF APPEALS - 05-11-01097-CV  - 12/29/11

Sup. Ct. SCI Arbitration case decided: In Re Services Corporation International (Tex. 2011)(orig. proceeding)

       
In Re Service Corporation International (SCI) (Tex. 2011)
    
PER CURIAM OPINION OF THE TEXAS SUPREME COURT
 
This mandamus proceeding arises from an arbitration agreement governed by the Federal
Arbitration Act (FAA). The parties entered into a contract for interment rights and services. The
contract obligated the parties to arbitrate this dispute over the care and maintenance of the cemetery.
 
The arbitration agreement provides that an arbitrator would either be selected by mutual agreement
of the parties or appointed by the American Arbitration Association (AAA). The parties failed to
agree to an arbitrator and the trial court appointed an arbitrator without allowing a reasonable
opportunity to procure an appointment by AAA. We conclude that the trial court abused its
discretion and conditionally grant the petition for writ of mandamus.

SERVICE CORPORATION INTERNATIONAL
OFFICE TOWER IN HOUSTON

Relators Service Corporation International and SCI Texas Funeral Services, Inc. (jointly
SCI) entered into a written contract with Gabriel and Yolanda Serna for two burial plots in the
Magic Valley Memorial Gardens after the death of their son. The contract contained an arbitration
clause to be utilized for dispute resolution. Under the arbitration clause, the parties would choose
an arbitrator by mutual agreement. If the parties were unable to agree on an arbitrator, the AAA
would select the arbitrator upon application of one or both of the parties.
  
The Sernas filed a suit against SCI on March 19, 2009, alleging, among other things, that SCI
had misrepresented the cemetery as a licensed endowment-care facility and failed to properly
maintain the cemetery. In its original answer, SCI asserted that the dispute was bound for
arbitration. The parties were unable to agree on an arbitrator for several months. When the parties
eventually reached an agreement on an arbitrator on October 14, 2009, he was disqualified because
he represented employees of SCI in an unrelated case. On October 27, the Sernas asked the trial
court to appoint an arbitrator, arguing that SCI had waived its right to seek an appointment by the
AAA. On November 10, the trial court appointed former district judge Abel C. Limas to arbitrate
the case after concluding that the parties were unable to agree on an arbitrator and SCI had waived
the right to seek an AAA appointment. SCI filed a motion for rehearing arguing that the contractual
provision required that the AAA appoint the arbitrator, and that the Sernas were responsible for
initiating proceedings with the AAA. The trial court denied the motion for rehearing on December
15. SCI unsuccessfully sought a writ of mandamus from the court of appeals. In this Court, SCI
requests that we direct the trial court to vacate its order naming Limas as arbitrator.
  
Mandamus relief is appropriate when the trial court has abused its discretion and there is no
adequate remedy by appeal. In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135–36 (Tex. 2004)
(citations omitted). When a trial court errs in determining the law or in applying the law to the facts,
it has abused its discretion. Id. at 135 (citations omitted). No adequate remedy by appeal exists
when a trial court erroneously appoints an arbitrator pursuant to section 5 of the Federal Arbitration
 

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Act because the FAA does not provide for review of the trial court’s actions in state court.1 See 9
U.S.C. § 5; In re La. Pac. Corp., 972 S.W.2d 63, 65 (Tex. 1998) (per curiam). Because the terms
of the contract require the parties to apply to the AAA to appoint an arbitrator upon their failure to
agree to an arbitrator, we conditionally issue a writ of mandamus.
 
The parties agree that this case is governed by the FAA, 9 U.S.C. §§ 1–16. Section 5 of the
FAA provides:
 

If in the agreement provision be made for a method of naming or appointing an
arbitrator or arbitrators or an umpire, such method shall be followed; but if no
method be provided therein, or if a method be provided and any party thereto shall
fail to avail himself of such method, or if for any other reason there shall be a lapse
in the naming of an arbitrator or arbitrators or umpire, or in filling a vacancy, then
upon the application of either party to the controversy the court shall designate and
appoint an arbitrator or arbitrators or umpire, as the case may require, who shall act
under the said agreement with the same force and effect as if he or they had been
specifically named therein . . . .

 
9 U.S.C. § 5 (emphasis added). The primary purpose of the FAA is to require enforcement of
arbitration agreements “according to their terms.” Volt Info. Scis. v. Bd. of Trs., 489 U.S. 468, 479
(1989). Before the trial court can intervene and appoint an arbitrator, section 5 requires that parties
follow the previously agreed method of arbitrator selection. CMH Homes v. Perez, 340 S.W.3d 444,
449 (Tex. 2011). Because the FAA requires the trial court to follow the arbitrator selection method
detailed in the contract, we first determine the method of appointment required by the contract.
 

Footnote 1 This case was filed prior to the 2009 addition of section 51.016 to the Texas Civil Practice and Remedies Code expanding state court interlocutory review of certain FAA arbitration matters. See CMH Homes v. Perez, 340 S.W.3d 444 (Tex. 2011) (discussing the appellate remedies available to parties in arbitration proceedings following the 2009 amendment).
 

-3-

 
The contract signed by SCI and the Sernas outlined the following method of appointing an
arbitrator:
 

[T]he arbitrator shall be selected by mutual agreement of the parties. If the parties fail
to or are unable to agree on the selection of an appropriate arbitrator, the AAA shall
select the arbitrator pursuant to its rules and procedures upon the application of one
or both parties.

 
The agreement provides only two ways that the parties may select an arbitrator: (1) mutual
agreement, or (2) if the parties cannot agree, the AAA selects an arbitrator. When the parties failed
to agree on an arbitrator, the contract required petitioning the AAA to appoint an arbitrator. Because
the contract plainly requires the AAA to appoint an arbitrator when mutual agreement fails, the trial
court abused its discretion by appointing an arbitrator unless an exception under section 5 applies.
 
The parties contracted to this method of appointing an arbitrator. The trial court is permitted
to appoint an arbitrator under section 5 of the FAA only if one or both of the parties “fail[s] to avail”
itself of the agreed-upon arbitrator selection method, or there is a “lapse” in the selection of an
arbitrator. 9 U.S.C. § 5. The section 5 substitution process triggered by the “fail to avail” and
“lapse” language of the FAA should be invoked by the trial court when there is some “mechanical
breakdown in the arbitrator selection process” or “one of the parties refuses to comply, thereby
delaying arbitration indefinitely.” In re La. Pac. Corp., 972 S.W.2d at 64–65 (Tex. 1998) (citing
In re Salomon Inc., 68 F.3d 554, 560 (2d Cir. 1995) (interpreting “lapse” and “fail to avail” in
section 5 of the FAA)). The Sernas argue that SCI has forfeited its right to involve the AAA in the
arbitrator selection process because of a lapse due to the time that had passed, the failure of SCI to
 

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apply to the AAA, and a mechanical breakdown in the method of selecting an arbitrator. We do not
agree.
  
The Sernas contend that a time lapse in applying to the AAA triggered the trial court’s
authority to appoint an arbitrator under section 5 of the FAA. It is important to remember that the
FAA disfavors waiver and similar forfeitures of arbitration rights, and there is a strong presumption
against them. Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24–25 (1983)
(observing that, under the FAA, any doubts concerning “an allegation of waiver, delay or a like
defense to arbitrability” should be “resolved in favor of arbitration”); Prudential Secs. Inc. v.
Marshall, 909 S.W.2d 896, 898 (Tex. 1995) (noting the presumption, under both federal and state
law, against waiver of a contractual right to arbitration). We have observed that “one of the central
purposes of the FAA has been to allow the parties to select their own arbitration panel if they choose
to do so.” In re La. Pac. Corp., 972 S.W.2d at 65. However, section 5 tempers the principle that
parties are free to make – and enforce – their arbitration agreements as they see fit, with the
countervailing grant of authority to a district court to intercede and “spur the arbitral process
forward” when the parties reach a stalemate in naming an arbitrator. Pac. Reins. Mgmt. Corp. v.
Ohio Reins. Corp., 814 F.2d 1324, 1329 (9th Cir. 1987).
 
In Pacific Reinsurance, a district judge appointed an umpire, notwithstanding the parties’
arbitration agreement, under circumstances in which the litigants had “tried and failed” to name an
umpire. Id. at 1329. Finally, after “five months of impasse,” the trial court appointed an umpire on
motion of one of the parties. Id. The Court affirmed the appointment on failure-to-avail and lapse
grounds, holding that section 5 may properly be invoked when the parties’ “impasse” had lasted for
 

-5-

 
five months. Id. The Court explained that while parties should be afforded every reasonable
opportunity “to comply with their agreement,” section 5 may be invoked by a trial court to appoint
an arbitrator where the arbitration process “stagnate[s] into endless bickering over the selection
process.” Id.
 
This is not such a case. The contract provides consensual methods for appointment of an
arbitrator, and the court must allow the parties sufficient time to utilize the contractual method
before intervening to appoint an arbitrator. An unreasonable delay in such an appointment,
sufficient to constitute a lapse or failure to avail, should be measured from the point when mutual
agreement failed. See id.; cf. In re Universal Underwriters of Tex. Ins. Co., 345 S.W.3d 404, 409
(Tex. 2011) (holding, in the context of the right to an appraisal under an insurance contract, that an
unreasonable delay sufficient to invoke waiver must be measured from the point of impasse – the
point at which the parties become aware of the futility of further negotiations). Seven months
elapsed from SCI’s motion to compel arbitration in April 2009 to the time the trial court appointed
an arbitrator in November. The Sernas argue the seven-month period establishes a deadlock or
impasse between the parties justifying the trial court’s intervention. On the contrary, that sevenmonth
period includes the time the parties worked to reach a mutual agreement and did agree on an
arbitrator, only to have him recused on conflict-of-interest grounds. The arbitration clause
contemplated efforts to reach such an agreement. The applicable delay is the time after an impasse
or deadlock is reached. See Pac. Reins., 814 F.2d at 1329.
 
An impasse, if any, occurred after the agreed arbitrator was disqualified. Acting on the Sernas’ motion, filed less than two weeks after the agreed arbitrator was disqualified, the trial court
 

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appointed an arbitrator, notwithstanding the contract. This appointment occurred just one month
after the parties had been in apparent agreement on an arbitrator. Thus, the disagreement of the
parties as to the selection of the arbitrator was at most one month old. We are unable to locate any
instance in which a federal court held that a delay in appointing an arbitrator as short as one month
constituted a lapse under section 5. In the instances in which courts have found a lapse, the periods
between the impasse and the appointment of an arbitrator are significantly longer than one month.
See e.g., Pac. Reins. Mgt. Corp., 814 F.2d at 1328 (concluding that a five-month “impasse” between
the parties resulted in both a “lapse” and “fail[ure] to utilize” the agreed-to umpire-selection
method); Trustmark Ins. Co. v. Clarendon Nat’l Ins. Co., No. 09 C 6169, 2010 U.S. Dist. LEXIS
8078, at *14 (N.D. Ill. Feb. 1, 2010) (holding that a four-month delay, measured from the time the
defendants sent a list of potential umpires to the plaintiffs with no response to the time the
defendants asked the trial court to appoint an umpire, constituted a lapse). As a matter of law, a one month interval following an impasse, by itself, cannot reasonably be construed as a lapse in
appointing an arbitrator. The parties had reached an agreement previously; both their contract and
section 5 entitled them to a reasonable opportunity to do so again.
 
Arguing a failure-to-avail point, the Sernas assert that it was clear that neither party intended
to apply to the AAA and, further, SCI’s position was that it did not have the obligation to petition
the AAA for appointment of an arbitrator. Again relying on the seven-month period from the filing
of SCI’s motion to compel through the time the trial court appointed an arbitrator, the Sernas
contend that a stalemate had been reached. Reiterating, the period of time during which the parties
are in discussions or negotiations toward mutual selection of an arbitrator does not count as delay
 

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after an impasse. See generally In re Universal Underwriters of Tex. Ins. Co., 345 S.W.3d at
408–09. As a matter of law, we conclude that under section 5 a one-month halt in negotiations
between the parties does not in itself constitute a failure to avail by SCI of its contractual right to
have the AAA select the arbitrator, irrespective of whether one or both parties had the contractual
burden to pursue AAA appointment.
 
The Sernas also argue that an ambiguity in the contract resulted in a mechanical breakdown
in the selection of an arbitrator. The contract states that “in the absence of [applicable state laws
governing arbitration], the arbitration proceedings shall be conducted in accordance with the
applicable rules of the [AAA]; provided, however, that the foregoing reference to the AAA rules
shall not be deemed to require any filing with that organization . . . .” The Sernas argue that these
provisions are contradictory and ambiguous and should be construed against the contract drafter,
SCI. When interpreting a contract, our primary concern is to ascertain and give effect to the intent
of the parties as expressed in the contract. Seagull Energy E & P, Inc. v. Eland Energy, Inc., 207
S.W.3d 342, 345 (Tex. 2006) (citations omitted). “To discern this intent, we ‘examine and consider
the entire writing in an effort to harmonize and give effect to all the provisions of the contract so
that none will be rendered meaningless. No single provision taken alone will be given controlling
effect; rather, all the provisions must be considered with reference to the whole instrument.’”Id.
(citations omitted).
 
The provisions that the Sernas argue are ambiguous simply define the rules applicable to
arbitration proceedings and do not conflict with other portions of the arbitration agreement. Because
the contract allows for the appointment of an arbitrator without the involvement of the AAA, the
 

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contract provides that, although the parties may use AAA rules to govern their dispute, no filing with
the AAA is required when the parties mutually agree. However, if the parties cannot agree, then
either party may apply to have an arbitrator appointed through the AAA’s procedures. We conclude
that the contract is not ambiguous on this point. If the parties cannot agree on an arbitrator, the
contract requires that they use AAA to appoint the arbitrator.
 
Accordingly, without hearing oral argument, we conditionally grant mandamus relief to SCI
and direct the trial court to vacate its prior order appointing an arbitrator and allow the parties a
reasonable opportunity to select an arbitrator pursuant to their agreement. TEX. R. APP. P. 59.1,
52.8(c). We are confident the trial court will comply, and the writ will issue only if it fails to do so.
 
OPINION DELIVERED: December 16, 2011
 

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FULL STYLE AND CASE DETAILS
 
IN RE SERVICE CORPORATION INTERNATIONAL AND SCI TEXAS FUNERAL SERVICES, INC. D/B/A MAGIC VALLEY MEMORIAL GARDENS; from Hidalgo County; 13th district (13-09-00681-CV, ___ SW3d ___, 02-17-10) stay order issued March 12, 2010, lifted
Pursuant to Texas Rule of Appellate Procedure 52.8(c), without hearing oral argument, the Court conditionally grants the writ of mandamus.
Per Curiam Opinion
 
Click below to read the opinion of the Corpus Christi Court of Appeals:
IN RE SERVICE CORPORATION INTERNATIONAL, Tex: Court of Appeals, 13th Dist. 2010

Americo Life, Inc. v. Robert L. Myer, No. 10-0734 (Tex. 2011)

Americo Life, Inc. v. Myer, No. 10-0734 (Tex. Dec. 16, 2011)

PER CURIAM OPINION OF THE TEXAS SUPREME COURT
   
This case concerns an arbitration provision that allows each party to appoint one arbitrator to a panel, subject to certain requirements. At issue is whether Americo Life, Inc. waived its objection to the removal of the arbitrator it selected. The underlying dispute concerned the financing mechanism for Americo’s purchase of several insurance companies from Robert Myer. FN1 Pursuant to the financing agreement, Americo and Myer submitted their dispute to arbitration under American Arbitration Association (AAA) rules. The arbitrators found in favor of Myer, and Americo filed a

FN 1: Petitioners Americo Life, Inc., Americo Financial Life and Annuity Insurance Company, Great Southern Life Insurance Company, the Ohio State Life Insurance Company, and National Farmers’ Union Life Insurance Company are referred to as Americo. Respondents Robert L. Myer and Strider Marketing Group, Inc. are referred to as Myer.

motion to vacate the award. The trial court granted the motion. It held that Americo was entitled to any arbitrator that met the requirements set forth in the financing agreement and that the arbitrator removed by the AAA met those requirements. The court of appeals reversed, holding that Americo had waived these arguments by not presenting them to the AAA. Because the record demonstrates otherwise, we reverse the court of appeals’ judgment and remand the case to the court of appeals for further proceedings.

The parties entered into a financing agreement for Americo’s purchase of several insurance
companies from Myer. This agreement provides that any disputes “shall be referred to three
arbitrators.” It further provides that “Americo shall appoint one arbitrator and Myer shall appoint
one arbitrator and such two arbitrators to select the third.” The financing agreement provides that
each arbitrator “shall be a knowledgeable, independent businessperson or professional.”
However, the contract also provides that, subject to exceptions not at issue here, the
proceedings “shall be conducted in accordance with the commercial arbitration rules of the
American Arbitration Association.” At the time the parties entered into the financing agreement,
the AAA rules provided that its “rules and any amendment of them shall apply in the form in effect
at the time the administrative filing requirements are met for a demand for arbitration or submission
agreement received by the AAA.” At the time of the demand for arbitration between the parties, the
AAA rules provided that “[a]ny arbitrator shall be impartial and independent . . . and shall be subject
to disqualification for (i) partiality or lack of independence . . . .”

Here, Myer argued to the AAA that Americo’s selected arbitrator, Ernest Figari, Jr., was not
impartial and therefore should be removed. Americo responded that Figari was, in fact, impartial.

-- Page 2 end --

The parties dispute whether Americo additionally responded that its selected arbitrator need only
meet the “independent” and “knowledgeable” requirements from the financing agreement.
The AAA agreed with Myer and removed Figari from the arbitration panel. Americo
asserted a standing objection to the continuation of the arbitration without Figari. Americo also
stated that it would proceed to arbitrate without waiving its objection and without waiver of the right
to appeal any decision based on the removal of Figari. Americo subsequently selected another
arbitrator.

The arbitration panel rendered a unanimous decision awarding Myer declaratory relief,
breach of contract damages of $9.29 million, $15.8 million in damages for wrongfully withheld
payments under the financing agreement, and $1.29 million in attorney’s fees and costs. Myer filed
a petition to confirm the award in the district court and Americo filed a motion to vacate or modify
the award. Americo argued that, inter alia, the award was not made by arbitrators selected under
the financing agreement’s requirements and was therefore void.2 The court granted Americo’s
motion to vacate and found that the AAA failed to follow the arbitration selection method contained
in the financing agreement, that the AAA had no authority to strike Figari, and that the award was
void because it was issued by an improperly appointed panel.

The court of appeals reversed. It held that:

After arbitration, appellees argued to the trial court the award should be
vacated under section five of the Federal Arbitration Act because the award was not
made by arbitrators who were appointed under the method provided in the

 
FN 2: Americo’s motion to vacate or modify the award was pursuant to section five of the Federal Arbitration Act (FAA), which provides: “If in the agreement provision be made for a method of naming or appointing an arbitrator or arbitrators or an umpire, such method shall be followed . . . .” 9 U.S.C. § 5.
    
-- Page 3 end --
 

[financing] agreement. In their brief in support of their motion to vacate the
arbitration award, appellees further explained their argument to mean the [financing]
agreement did not require the party-appointed arbitrators to be “independent and
impartial. Nor does the Agreement allow the AAA to disqualify a party’s appointed
arbitrator for partiality, bias, or any other basis.” They continued to argue that
because their right to select an arbitrator was governed by the standards in the
[financing] agreement, the impartiality standard set out in the AAA rules was
inapplicable. Essentially, appellees argued to the trial court they had a right to a
non-neutral arbitrator. This, however, is not the argument they raised to the AAA
in response to appellants’ objection to Figari.

315 S.W.3d 72, 75 (Tex. App.—Dallas 2009, pet. filed) (emphasis in original) (footnote omitted).

We have held that “appellate courts should reach the merits of an appeal whenever
reasonably possible.” Perry v. Cohen, 272 S.W.3d 585, 587 (Tex. 2008) (citing Verburgt v. Dorner,
959 S.W.2d 615, 616 (Tex. 1997)). Here, the record demonstrates that Americo argued to both the
AAA and the district court that it was entitled to any arbitrator who met the requirements set forth
in the financing agreement, regardless of the AAA’s requirements.

In response to Myer’s objection to Figari, Americo argued to the AAA that Figari was
neutral. However, Americo also asserted:

Finally, an argument can be made that the AAA rules do not govern the
selection of and qualifications for arbitrators in this proceeding. . . . The Agreement
states that “[e]ach arbitrator shall be a knowledgeable, independent businessperson
or professional.” . . .

As long as Mr. Figari is “a knowledgeable, independent businessperson or
professional,” he is an acceptable designee for the arbitration panel hearing this
matter, irrespective of the AAA rules. . . . Here, the parties’ arbitration agreement
plainly provides the method for selecting arbitrators for the three-person panel and
establishes the qualifications for serving on the panel. . . . Mr. Figari possesses the
requisite qualifications and the fact that he has served previously and is now serving
as a member of a panel considering a dispute between some of these same parties
does not change that fact. There has been—and can be—no allegation that Mr.
Figari has been anything but knowledgeable and independent in his performance on
the panels in Myer I and Myer II.

-- Page 4 end --

Furthermore, Americo wrote the AAA again after the AAA removed Figari but before the
arbitration, stating:

[T]he AAA Commercial Arbitration Rules do not govern the selection of and
qualifications for arbitrators to hear disputes between Americo and Myer. . . . The
Agreement states that “[e]ach arbitrator shall be a knowledgeable, independent
businessperson or professional.” . . .

Mr. Figari is “a knowledgeable, independent businessperson or professional”.
Therefore, he is a proper designee for the Panel to hear this matter.

In addition, Americo’s letter to the AAA cited Brook v. Peak International, Ltd., which discusses
the vacation of arbitration awards by arbitrators not appointed under the method provided by a
contract and the preservation of such a complaint by presenting it during arbitration. 294 F.3d 668,
673 (5th Cir. 2002). Americo reiterated this argument in the district court, stating that “the Award
must be vacated under FAA § 5 and applicable law, because the Award was not made by arbitrators
who were appointed under the method provided in the Agreement.”

The court of appeals is correct that Americo did not expressly state that arbitrators were not
required to be neutral. 315 S.W.3d at 75–76. However, Americo argued that the AAA requirements
did not apply, that the only applicable requirements were that they be knowledgeable and
independent businesspersons or professionals, and that Figari met these qualifications. Americo
properly preserved this argument. Therefore, without hearing oral argument, TEX. R.APP. P. 59.1,
we reverse the court of appeals’ judgment and remand the case to the court of appeals for further
proceedings consistent with this opinion.

OPINION DELIVERED: December 16, 2011

-- Page 5 end --

CASE DETAILS:
AMERICO LIFE, INC., AMERICO FINANCIAL LIFE AND ANNUITY INSURANCE COMPANY, GREAT SOUTHERN LIFE INSURANCE COMPANY, THE OHIO STATE LIFE INSURANCE COMPANY, AND NATIONAL FARMERS' UNION LIFE INSURANCE COMPANY v. ROBERT L. MYER AND STRIDER MARKETING GROUP, INC.; from Dallas County; 5th district (05-08-01053-CV, 315 SW3d 72, 10-22-09)

Pursuant to Texas Rule of Appellate Procedure 59.1, after granting the petition for review and without hearing oral argument, the Court reverses the court of appeals' judgment and remands the case to that court.

Per Curiam Opinion

Click below to read the Dallas Court of Appeal's Opinion: 315 S.W.3d 72 (2009)

Texas Supreme Court again addresses arbitration issues, hands down three arb-related decisions in one day

 
Among the opinions released by the Texas Supreme Court in almost a dozen cases decided today, Friday December 16, 2011, no less than three deal with arbitration, and all three relate in one way or another to the selection of arbitrators. Here is the list, with opinion excerpts:        
   
In re Service Corporation International, (Tex. 2011)
  
No. 10-0158 (Tex. Dec. 16, 2011)(appointment of arbitrator based on agreement on method, rather than selection by the trial court judge) (mandamus relief granted)
    
Norma Sandoval and her sister, Nora Martinez, jointly filed suit against Service Corporation International (SCI) alleging fraud, deceptive trade practices, and other tort claims arising from their respective interment rights and services contracts for family burial plots at Mont Meta Memorial Park.1 The parties agree the dispute was required to be arbitrated pursuant to the Federal Arbitration Act, 9 U.S.C. §§ 1-16.
 
SCI asserts that the trial court’s appointment of an arbitrator interfered with the contractual rights of the parties and was not authorized by the Federal Arbitration Act. Without reaching the parties’ arguments as to which party or parties have the burden of approaching the AAA to appoint an arbitrator, we agree with SCI that the trial court’s appointment was an abuse of discretion from which there is no adequate remedy by appeal. In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135–36 (Tex. 2004). In a related case also decided today, In re Service Corp. International & SCI Tex. Funeral Services, Inc. d/b/a Magic Valley Memorial Gardens, we analyzed an identical arbitration provision. __ S.W.3d __ (Tex. 2011). Following the rationale in Magic Valley Memorial Gardens, we conclude the trial court abused its discretion by appointing an arbitrator instead of following the agreed-upon method of selection outlined in the contract. As a matter of law, the two month delay in the selection of an arbitrator in this case, by itself, does not establish a lapse or failure of the parties to avail themselves of the contractual selection method. See 9 U.S.C. § 5; Magic Valley Memorial Gardens, __ S.W.3d __ (Tex. 2011). Accordingly, without hearing oral argument, we conditionally grant SCI’s petition for writ of mandamus and direct the trial court to vacate its prior order appointing David Calvillo as arbitrator. TEX. R.APP. P. 59.1, 52.8(c). We are confident the trial court will comply, and the writ will issue only if it fails to do so.
 
OPINION DELIVERED: December 16, 2011

Pursuant to Texas Rule of Appellate Procedure 52.8(c), without hearing oral argument, the Court conditionally grants the writ of mandamus.
Per Curiam Opinion
Links to pdf version of opinion and to Electronic Briefs in this case can be found on the Texas Supreme Court's web site

Full case style and lower-court info: IN RE SERVICE CORPORATION INTERNATIONAL AND SCI TEXAS FUNERAL SERVICES, INC., JOINTLY D/B/A MONT META MEMORIAL GARDENS; from Cameron County; 13th district (13-10-00026-CV, ___ SW3d ___, 02-23-10)

 
In Re SCI, (Tex. 2011)
   
No. 10-0155 (Tex. Dec. 16, 2011)(arbitration, procedure to select arbitrator)(mandamus relief granted)

This mandamus proceeding arises from an arbitration agreement governed by the Federal Arbitration Act (FAA). The parties entered into a contract for interment rights and services. The contract obligated the parties to arbitrate this dispute over the care and maintenance of the cemetery.
 
The arbitration agreement provides that an arbitrator would either be selected by mutual agreement of the parties or appointed by the American Arbitration Association (AAA). The parties failed to agree to an arbitrator and the trial court appointed an arbitrator without allowing a reasonable opportunity to procure an appointment by AAA. We conclude that the trial court abused its discretion and conditionally grant the petition for writ of mandamus.
 
We conclude that the contract is not ambiguous on this point. If the parties cannot agree on an arbitrator, the contract requires that they use AAA to appoint the arbitrator.
 
Full case style and lower-court info: IN RE SERVICE CORPORATION INTERNATIONAL AND SCI TEXAS FUNERAL SERVICES, INC. D/B/A MAGIC VALLEY MEMORIAL GARDENS; from Hidalgo County; 13th district (13-09-00681-CV, ___ SW3d ___, 02-17-10) stay order issued March 12, 2010, lifted
 Pursuant to Texas Rule of Appellate Procedure 52.8(c), without hearing oral argument, the Court conditionally grants the writ of mandamus.
Per Curiam Opinion
Links to pdf version of opinion and to Electronic Briefs in this case can be found on the Texas Supreme Court's web site

 
Americo Life, Inc. v. Myer, (Tex. 2011)
  
No. 10-0734 (Tex. Dec. 16, 2011)(selection of arbitrators on panel, issue of neutrality of chosen arbitrator)
 
This case concerns an arbitration provision that allows each party to appoint one arbitrator to a panel, subject to certain requirements. At issue is whether Americo Life, Inc. waived its objection to the removal of the arbitrator it selected. The underlying dispute concerned the financing mechanism for Americo’s purchase of several insurance companies from Robert Myer.1 Pursuant to the financing agreement, Americo and Myer submitted their dispute to arbitration under American Arbitration Association (AAA) rules. The arbitrators found in favor of Myer, and Americo filed a motion to vacate the award. The trial court granted the motion. It held that Americo was entitled to any arbitrator that met the requirements set forth in the financing agreement and that the arbitrator removed by the AAA met those requirements. The court of appeals reversed, holding that Americo had waived these arguments by not presenting them to the AAA. Because the record demonstrates otherwise, we reverse the court of appeals’ judgment and remand the case to the court of appeals for further proceedings.
  
The court of appeals is correct that Americo did not expressly state that arbitrators were not required to be neutral. 315 S.W.3d at 75–76. However, Americo argued that the AAA requirements did not apply, that the only applicable requirements were that they be knowledgeable and independent businesspersons or professionals, and that Figari met these qualifications. Americo properly preserved this argument. Therefore, without hearing oral argument, TEX. R.APP. P. 59.1, we reverse the court of appeals’ judgment and remand the case to the court of appeals for further proceedings consistent with this opinion.
 
OPINION DELIVERED: December 16, 2011
  
Full case style and lower-court info: AMERICO LIFE, INC., AMERICO FINANCIAL LIFE AND ANNUITY INSURANCE COMPANY, GREAT SOUTHERN LIFE INSURANCE COMPANY, THE OHIO STATE LIFE INSURANCE COMPANY, AND NATIONAL FARMERS' UNION LIFE INSURANCE COMPANY v. ROBERT L. MYER AND STRIDER MARKETING GROUP, INC.; from Dallas County; 5th district (05-08-01053-CV, 315 SW3d 72, 10-22-09)
Pursuant to Texas Rule of Appellate Procedure 59.1, after granting the petition for review and without hearing oral argument, the Court reverses the court of appeals' judgment and remands the case to that court.
Per Curiam Opinion
Links to pdf version of opinion and to Electronic Briefs in this case can be found on the Texas Supreme Court's web site

Interpretation of disputed provision of MSA in divorce case left to discretion of mediator, given the parties agreement to that effect

  
Houston Court of appeals reverses trial court for deciding dispute over a specific provision of a mediated stettlement agreement in a divorce case based on parties' agreement to have the mediator decide such dispute and - in effect - act as arbitrator. Court would ordinarily have role in construction of mediated settlement agreement (MSA) as a contract, but not where - as here - the parties put the mediator in charge of arbitrating subsequent disagreements.

Entry of Judgment on the Mediated Settlement Agreement
 
Texas public policy encourages the peaceable resolution of disputes, particularly those involving the parent-child relationship, and the early settlement of pending litigation through voluntary settlement procedures. Tex. Civ. Prac. & Rem. Code Ann. § 154.002 (West 2011).
  
The Family Code furthers this policy by providing alternative dispute resolution procedures through which parties may settle a suit for dissolution of a marriage. See, e.g., Tex. Fam. Code Ann. §§ 6.601-.604 (West 2006). One such procedure is mediation. See id. § 6.602.
  
A mediated settlement agreement is binding under section 6.602 of the Family Code if the agreement:
 
(1) provides, in a prominently displayed statement that is in boldfaced type or capital letters or underlined, that the agreement is not subject to revocation;

(2) is signed by each party to the agreement; and

(3) is signed by the party’s attorney, if any, who is present at the time the agreement is signed.

Id. § 6.602(b).

Settlement agreements complying with section 6.602 are immediately enforceable, not subject to repudiation by a party, and, with certain limited exceptions, binding on the trial court without approval or determination of whether the agreement’s terms are just and right. See In re Joyner, 196 S.W.3d 883, 889 (Tex. App.—Texarkana 2006, orig. proceeding); Cayan v. Cayan, 38 S.W.3d 161, 164-66 (Tex. App.—Houston [14th Dist.] 2000, pet. denied); see also Spiegel v. KLRU Endowment Fund, 228 S.W.3d 237, 242 (Tex. App.—Austin 2007, pet. denied) (noting that when MSA meets section 6.602’s requirements, “it must be enforced in the absence of allegations that the agreement calls for the performance of an illegal act or that it was ‘procured by fraud, duress, coercion, or other dishonest means.’”) (quoting Boyd v. Boyd, 67 S.W.3d 398, 403 (Tex. App.—Fort Worth 2002, no pet.). “After all, the purpose of mediation is to let parties settle their property as they see fit, keeping those matters out of the courtroom.” Joyner, 196 S.W.3d at 889. A trial court has no authority to enter a judgment that varies from the terms of a mediated settlement agreement. Cf. Garcia-Udall v. Udall, 141 S.W.3d 323, 332 (Tex. App.—Dallas 2004, no pet.) (concluding that trial court abused its discretion under Tex. Fam. Code Ann. § 153.0071 (West 2002) by entering judgment not conforming with MSA in suit affecting parent-child relationship).
 
Neither WIFE nor HUSBAND disputes that the MSA here meets the requirements of section 6.602. Likewise, they do not dispute that the MSA is enforceable; there is no allegation that the agreement requires the performance of an illegal act or was procured by fraud, duress, or coercion. Rather, the parties’ only dispute is with respect to the meaning of that part of the MSA dividing HUSBAND’s “future retirement disbursements” equally and whether future distributions from HUSBAND’s ESOP are included within its scope.
  
Ordinarily, if the terms of the MSA could be given a certain or definite meaning, we would construe the agreement as a matter of law to determine whether WIFE’s or HUSBAND’s construction is correct. See Garcia-Udall, 141 S.W.3d at 328. But, this case presents a unique circumstance in that the parties agreed in the MSA to submit “(a) all drafting disputes[,] (b) all issues regarding the interpretation of [the MSA,] and (c) all issues regarding the intent of the parties as reflected in the [MSA]” to the mediator and to make his decision on these matters binding. Thus, by their agreement, WIFE and HUSBAND removed the resolution of their dispute from the province of the courts and assigned that responsibility to the mediator. Absent some allegation that the MSA requires an illegal act or was procured by fraud, duress, coercion, or other dishonesty, the trial court was obligated to enforce their agreement. See id. at 332; Spiegel, 228 S.W.3d at 242.
  
We reject HUSBAND’s contention that the mediator’s “flip-flopping” somehow nullifies his decision regarding the parties’ intended division of HUSBAND’s “future retirement disbursements.” HUSBAND has offered no reason why a mediator should not have the same discretion afforded trial courts to reconsider a ruling. See generally Fruehauf Corp. v. Carrillo, 848 S.W.2d 83, 84 (Tex. 1993) (noting that trial court has power to set aside interlocutory orders at any time before a final judgment is entered). The record we have of the parties’ dispute before the mediator is limited, consisting only of the MSA, counsels’ representations at the hearing on the entry of judgment, and the three letters issued by the mediator. We will not speculate about the reasons for the mediator’s reconsideration of his initial determination nor the arguments presented to him by the parties. We note only that the mediator acknowledged the parties’ continuing dispute and professed an understanding of their “concerns and the practical effect that certain language may or may not have” in his third letter. We conclude that letter, being the last of the mediator’s communications, constitutes the final expression of his decision with respect to the division of HUSBAND’s “future retirement benefits.”
  
Moore v. Moore, No. 01-11-00163-CV (Tex.App.- Houston [1st Dist.] Dec. 8, 2011)
 
Click below to read the opinion (names of parties replaced by designations HUSBAND and WIFE)