Southwinds Express Construction v. D.H. Griffin of Texas, Inc. ( 2015 )

ACCEPTED
14-15-00610-cv
FOURTEENTH COURT OF APPEALS
HOUSTON, TEXAS
12/8/2015 10:48:02 AM
CHRISTOPHER PRINE
CLERK
No. 14-15-00610-CV
___________________________________
FILED IN
14th COURT OF APPEALS
IN THE COURT OF APPEALS FOR THE HOUSTON, TEXAS
FOURTEENTH JUDICIAL DISTRICT OF TEXAS AT HOUSTON
12/8/2015 10:48:02 AM
__________________________________ CHRISTOPHER A. PRINE
Clerk
SOUTHWINDS EXPRESS CONSTRUCTION, LLC
Appellant
v.
D.H. GRIFFIN OF TEXAS, INC.
Appellee
__________________________________
On appeal from the 151st District Court, Harris County, Texas
Cause No. 2015-22736
_________________________________
BRIEF OF APPELLEE. D.H. GRIFFIN OF TEXAS, INC.
_________________________________
LAPIN & LANDA, LLP
Robert E. Lapin
State Bar No. 11945050
500 Jefferson, Suite 2000
Houston, TX 77002
Office: (713) 756-3232
Fax: (713) 654-8704
Email: blapin@lapinlanda.com
LAW OFFICE OF DON TOMLINSON
Don Tomlinson
State Bar No. 24039507
8 Loggerhead
Hitchcock, TX 77563
Office: (832) 444-4848
Email: don@dontomlinsonlaw.com
No. 14-15-00610-CV
___________________________________
IN THE COURT OF APPEALS FOR THE
FOURTEENTH JUDICIAL DISTRICT OF TEXAS
AT HOUSTON
__________________________________
SOUTHWINDS EXPRESS CONSTRUCTION, LLC
Appellant
v.
D.H. GRIFFIN OF TEXAS, INC.
Appellee
__________________________________
On appeal from the 151st District Court, Harris County, Texas
Cause No. 2015-22736
_________________________________
BRIEF OF APPELLEE. D.H. GRIFFIN OF TEXAS, INC.
_________________________________
IDENTITIES OF PARTIES AND COUNSEL
In accordance with Texas Rule of Appellate Procedure 38.2(a)(1)(A),
Appellee certifies that following is a complete list of all parties to this appeal:
APPELLANT: SOUTHWINDS EXPRESS CONSTRUCTION, LLC
Counsel for Appellant
Appeal/Trial Court: Robert J. Killeen, Jr.
Email: rkilleen@killeen-law.com
Robert C. Stern
Email: rstern@killeen-law.com
Gerald M. “Tracy” Johnson, III
Email: tjohnson@killeen-law.com
Killeen & Stern, P.C.
ii
1811 Bering Drive, Suite 120
Houston, TX 77057
Office: 713.626.5100
Fax: 713.626.4545
Appellee: D.H. Griffin of Texas, Inc.
Counsel for Appellee
Appeal/Trial Court: Robert E. Lapin
Email: blapin@lapinlanda.com
Lapin & Landa, LLP
500 Jefferson, Suite 2000
Houston, TX 77002
Office: 713.756.3232
Fax: 713.654.8704
Don Tomlinson
Email: don@dontomlinsonlaw.com
Law Office of Don Tomlinson
8 Loggerhead
Hitchcock, TX 77563
Office: 832.444.4848
Trial Judge: Hon. Michael Engelhart
Presiding Judge
151st Judicial District Court
Harris County
201 Caroline, 11th Floor
Houston, TX 77002
iii
TABLE OF CONTENTS
Identities of Parties and Counsel ............................................................................. ii
Table of Contents ................................................................................................... iv
Index of Authorities ............................................................................................... vi
Statement of the Case .............................................................................................. 1
Statement on Oral Argument .................................................................................. 3
Reply to Issues Presented ........................................................................................ 3
Statement of Facts ................................................................................................... 4
Summary of Argument ......................................................................................... 13
Reply Point One (In response to Issue 1) ............................................................. 15
The trial court did not err in determining the dispute between the
parties was subject to arbitration because the parties’ oral agreement
to expand the Subcontractor Agreement’s scope of work to include
C&D haul-off constituted an oral modification of the Subcontractor
Agreement and therefore fell within the scope of that agreement’s
claims resolution clause which required resolution of disputes by
binding arbitration. The parties agreed to submit their dispute to
binding arbitration under the AAA’s rules without limit as to scope of
issues to be arbitrated. Thus, the trial court correctly deferred to the
Arbitrator’s findings. Moreover, mediation was not a condition
precedent to arbitration.
Arguments and Authorities ......................................................................... 16
The Oral Agreement Modified The Subcontractor Agreement ................. 16
Mediation as a Condition Precedent to Arbitration ..................................... 21
iv
Reply Point Two (In response to Issue 2) ............................................................. 25
The trial court did not err in applying the statutory grounds for vacatur
set forth in §171.088 of the Texas Civil Practice & Remedies Code
when it denied Southwinds’ motion to vacate the Arbitrator’s Award
because Southwinds failed to meet its statutory burden of
demonstrating that there was no valid agreement to arbitrate the
dispute in question.
Arguments and Authorities ……………………………………………..…26
Reply Point Three (In response to Issue 3) ........................................................... 28
The Arbitrator’s Award is not tainted by a disregard for the law or by
a gross mistake in applying the law.
Arguments and Authorities ……………………………………………..…28
Conclusion and Prayer .......................................................................................... 31
Certificate of Service ............................................................................................ 32
Certificate of Compliance ..................................................................................... 33
v
INDEX OF AUTHORITIES
CASES
Am. Garment Props., Inc. v. CB Richard Ellis-El Paso, L.L.C., 155 S.W.3d
431 (Tex.App.—El Paso 2004, no pet.) ................................................................ 17
Aspri Investments, LLC v. AFEEF and ENM Food Mart, Inc., No. 04-07-
00249-CV, 2011 Tex. App. LEXIS 7082 (Tex.App.—San Antonio August
31, 2011, pet. dism’d) (mem. op.) ................................................................... 20, 27
Burlington Res. Oil & Gas Co. LP v. San Juan Basin Royalty Trust, 249
S.W.3d 34 (Tex. App.—Houston [1st Dist.] ................................................... 19, 20
Centex/Vestal v. Friendship W. Baptist Church, 314 S.W.3d 677 (Tex.
App.—Dallas 2010, pet. denied) ............................................................... 20, 27, 30
Churchill Forge, Inc. v. Brown, 61 S.W.3d 368, 371 (Tex. 2001) ....................... 23
City of Baytown v. C.L. Winter, Inc., 886 S.W.2d 515, 520 (Tex. App.--
Houston [1st Dist.] 1994, writ denied) .................................................................. 26
Crossmark, Inc. v. Hazar, 124 S.W.3d 422 (Tex. App.—Dallas 2004, pet.
denied) ................................................................................................................... 29
CVN Group, Inc. v. Delgado, 95 S.W.3d 234, 238 (Tex. 2002) .................... 20, 27
Double Diamond, Inc. v. Hilco Electric Coop., Inc., 127 S.W.3d 260 (Tex.
App.—Waco 2003, no pet.) .................................................................................. 17
E. Tex. Salt Water Disposal Co. v. Werline, 307 S.W.3d 267 (Tex. 2010) .......... 27
Fairfield Ins. Co. v. Stephens Martin Paving, LP, 246 S.W.3d 653 (Tex.
2008) ................................................................................................................ 23, 24
First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) ........................... 20
GJR Mgmt. Holdings, L.P. v. Jack Raus, Ltd., 126 S.W.3d 257 (Tex. App.—
San Antonio 2003 (pet. denied) ............................................................................. 27
vi
Grand Int’l Bhd. Of Locomotive Eng’rs v. Wilson, 341 S.W.2d 206 (Tex.
Civ. App.—Fort Worth 1960, writ ref’d n.r.e.) .................................................... 29
Group Hosp. Servcs., Inc. v. One and Two Brookriver Center, 704 S.W.2d
886 (Tex.Civ.App.—Dallas 1986, no writ) .......................................................... 18
Haddock v. Quinn, 287 S.W.3d 158 (Tex.App.—Ft. Worth 2009) ...................... 20
Home Owners Mgmt. Enters., Inc. v. Dean, 230 S.W.3d 766 (Tex. App.—
Dallas 2007, no pet.) ............................................................................................. 29
Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002) ............................... 19
Humitech Dev. Corp. v. Perlman, 424 S.W.3d 782 (Tex.App.—Dallas 2014,
no pet.) ................................................................................................................... 29
Hyatt Cheek Builders-Engineers v. Board of Regents of the Univ. of Texas
System, 607 S.W.2d 258 (Tex.Civ.App.—Texarkana, 1980, writ dism’d) .......... 18
In re Mabry, 355 S.W.3d 16, 29 (Tex. App.—Houston [1st Dist.] 2010, orig.
proceeding [mand. denied]) .................................................................................. 24
In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 128-29 (Tex. 2004) .............. 23
Int’l Bank of Commerce v. Int’l Energy Dev. Corp., 981 S.W.2d 38 (Tex.
App.—Corpus Christi 1998, pet. denied) ............................................................. 30
J.J. Gregory Gourmet Servs., Inc. v. Anton’s Imp. Co., 927 S.W.2d 31 (Tex.
App.—Houston [1st Dist.] 1995, no writ) ............................................................ 29
Lawrence v. CDB Servs., Inc., 44 S.W.3d at 544 (Tex. 2001) ....................... 23, 24
Lone Star Steel Co. v. Scott, 759 S.W.2d 144 (Tex.Civ.App.—Texarkana,
1988, writ denied) ................................................................................................. 18
Mann Frankfurt Stein & Lipp Advisers, Inc. v. Fielding, 289 S.W.3d 844
(Tex. 2009) ............................................................................................................ 22
Mar-Lan Industries, Inc. v. Nelson, 635 S.W.2d 853 (Tex. App. —El Paso
1982, no writ) ........................................................................................................ 17
vii
Marsh USA v. Cook, 354 S.W.3d 764 (Tex. 2011) ........................................ 23, 24
Myer v. Americo Life, Inc., 232 S.W.3d 401 (Tex.App.—Dallas 2007) .............. 29
Nafta Traders, Inc. v. Quinn, 339 S.W.3d 84, 89-90 (Tex. 2011) ........................ 26
Pheng Inv., Inc. v. Rodriquez, 196 S.W.3d 322 (Tex. App.—Fort Worth
2006, no pet.) .................................................................................................. 28, 30
Printing & Numerical Registering Co. v. Sampson, LR 19 Eq 462, 465, 874
WL 16322 (1875) .................................................................................................. 24
Roe v. Ladymon, 318 S.W.3d 502 (Tex. App.—Dallas 2010, no pet.) ................ 20
Royston, Rayzor, Vickery & Williams, L.L.P. v. Lopez, 467 S.W.3d 494
(Tex. 2015) ...................................................................................................... 22, 23
Sacks v. Dallas Gold & Silver Exch., Inc., 720 S.W.2d 177, 180
(Tex.App.—Dallas 1986, no writ) ........................................................................ 24
South Hampton Co. v. Stinnes Corp., 733 F.2d 1108 (5th Cir. 1984) .................. 17
Tanox, Inc. v. Akin, Gump, Strauss, Hauer & Feld, L.L.P., 105 S.W.3d 244
(Tex. App.—Houston [14th Dist.] 2003, pet. denied) .......................................... 30
Teleometrics Int’l, Inc. v. Hall, 922 S.W.2d 189 (Tex. App.—Houston [1st
Dist.] 1995, writ denied) ....................................................................................... 30
Triton 88 v. Star Electric, L.L.C., 411 S.W.3d 42 (Tex. App. —Houston (1st
Dist.) 2013, no pet.) .............................................................................................. 17
Universal Computer Sys., Inc. v. Dealer Solutions, L.L.C., 183 S.W.3d 741
(Tex. App.—Houston [1st Dist.] 2005, pet. denied) ............................................ 30
Werline v. E. Tex. Salt Water Disposal Co., 209 S.W.3d 888 (Tex. App.—
Texarkana 2006), aff’d, 307 S.W.3d 267 (Tex. 2010) .................................... 28, 30
Wood Motor Co. v. Nebel, 150 Tex. 86, 238 S.W.2d 181, 185 (1951) .......... 23, 24
viii
Xtria L.L.C. v. Int’l Ins. Alliance Inc., 286 S.W.3d 583 (Tex. App.—
Texarkana 2009, pet. denied) .............................................................. 27, 28, 29, 30
TEXAS CONSTITUTION
Tex. Const. art. I, § 16 .......................................................................................... 23
TEXAS STATUTES
Tex. Civ. Prac. & Rem. Code Ann. § 154.002 ..................................................... 25
Tex. Civ. Prac. & Rem. Code § 171.087 .............................................................. 26
Tex. Civ. Prac. & Rem. Code Ann., Title 7 .......................................................... 24
Tex. Fam. Code Ann. §§ 6.601–6.604 .................................................................. 24
AAA RULES
American Arbitration Association Rule of Commercial Arbitration, R-7 ........... 19
RECORD REFERENCES
Clerk’s Record CR[Vol.#]:[Page#]
ix
No. 14-15-00610-CV
___________________________________
IN THE COURT OF APPEALS FOR THE
FOURTEENTH JUDICIAL DISTRICT OF TEXAS AT HOUSTON
__________________________________
SOUTHWINDS EXPRESS CONSTRUCTION, LLC
Appellant
v.
D.H. GRIFFIN OF TEXAS, INC.
Appellee
_________________________________
BRIEF OF APPELLEE. D.H. GRIFFIN OF TEXAS, INC.
_________________________________
TO THE HONORABLE FOURTEENTH COURT OF APPEALS:
Appellee, D.H. Griffin of Texas, Inc., respectfully submits this brief in
response to the brief filed by Appellant. Appellant, Southwinds Express
Construction, appeals from the entry of a Final Order Confirming Arbitration
Award entered by the 151st Judicial District Court, Honorable Michael Engelhart,
Judge Presiding. Appellee respectfully requests that this Court affirm the entry of
the Final Order Confirming Arbitration Award by the trial court.
STATEMENT OF THE CASE
Pursuant to the terms of a Subcontractor Agreement (CR1:36-47) executed
between Appellee D.H. Griffin of Texas, Inc. (“Griffin”) and Appellant
Southwinds Express Construction, LLC (“Southwinds”), Griffin initiated an
1
arbitration proceeding (CR1:26-31) against Southwinds seeking damages and
equitable relief after Southwinds walked off the job of a new construction,
renovation, and demolition project prior to completing its scope of work. During
the arbitration proceeding, Southwinds twice objected to the jurisdiction of the
American Arbitration Association (“AAA”) to administer Griffin’s claims
(CR1:32-33). On both occasions, the Arbitrator rejected Southwinds’ objections
and, following a two-day final arbitration hearing, issued an Award of Arbitration
(“the Arbitrator’s Award”) (CR1:8-12) in favor of Griffin and against Southwinds,
expressly overruling Southwinds’ objection to AAA’s jurisdiction and granting
Griffin monetary and equitable relief. After Southwinds failed to abide by the
Arbitrator’s Award, Griffin initiated an action in the 151st District Court, Harris
County, Texas to have the Arbitrator’s Award confirmed (CR1:4-12). Southwinds
objected to confirmation of the award and filed pleadings asserting the identical
lack of jurisdiction arguments and asking the trial court to vacate the Arbitrator’s
Award (CR1:15-23). The trial court requested additional briefing from Griffin
(CR1:76) and, after consideration of both parties’ briefing and arguments, entered
a final order confirming the Arbitrator’s Award (CR1:110-111). Southwinds
appeals from the entry of that final order.
2
STATEMENT ON ORAL ARGUMENT
Appellant requested oral argument. Appellee maintains oral argument is not
likely to add materially to the information before the Court, but, out of an abundance
of caution and to avoid waiver, requests the right to participate in any oral argument
that may be scheduled by the Court.
REPLY TO ISSUES PRESENTED
REPLY POINT ONE
In response to Issue 1.
The trial court did not err in determining the dispute between the parties was
subject to arbitration because the parties’ oral agreement to expand the
Subcontractor Agreement’s scope of work to include C&D haul-off constituted an
oral modification of the Subcontractor Agreement and therefore fell within the
scope of that agreement’s claims resolution clause which required resolution of
disputes by binding arbitration. The parties agreed to submit their dispute to binding
arbitration under the AAA’s rules without limit as to scope of issues to be arbitrated.
Thus, the trial court correctly deferred to the Arbitrator’s findings. Moreover,
mediation was not a condition precedent to arbitration.
REPLY POINT TWO
In response to Issue 2.
The trial court did not err in applying the statutory grounds for vacatur set
forth in §171.088 of the Texas Civil Practice & Remedies Code when it denied
Southwinds’ motion to vacate the Arbitrator’s Award because Southwinds failed to
meet its statutory burden of demonstrating that there was no valid agreement to
arbitrate the dispute in question.
3
REPLY POINT THREE
In response to Issue 3.
The Arbitrator’s Award is not tainted by a disregard for the law or by a gross
mistake in applying the law.
STATEMENT OF FACTS
Appellee D.H. Griffin of Texas, Inc. (“Griffin”) is a demolition contractor
headquartered in Houston, Texas, since the 1990s. On occasion, Griffin is a
subcontractor for a general contractor (usually when the overall project includes
new construction and renovation as well as demolition).
In 2013, the Lemoine Company (“Lemoine”), a construction
company/general contractor headquartered in Lafayette, Louisiana, hired Griffin to
serve as the demolition subcontractor for a new construction, renovation, and
demolition project (“the Project”) on the grounds of Our Lady of Lourdes Hospital
(“the Owner”) in Lafayette (CR1:27).
At Griffin’s request, Appellant Southwinds Express Construction, LLC
(“Southwinds”) submitted a bid for removing debris and other material from the
demolition site of the Project (CR1:86). Southwinds’ bid was for concrete
excavation and haul-off, brick haul-off, and construction and demolition (“C&D”)
haul-off. Griffin accepted Southwinds’ terms for the concrete haul-off and the
brick haul-off but was unwilling to accept Southwinds’ proposed price terms
($12/cubic yard) for the C&D haul-off. So, on September 26, 2013, Griffin and
4
Southwinds entered into a Subcontractor Agreement whose scope of work
encompassed only the concrete haul-off and brick haul-off (CR1:36-47).
However, the scope of work agreed to between the parties (memorialized in Ex. A
to the Subcontractor Agreement) expressly referenced Southwinds’ original
proposal for the C&D haul-off.
Over the course of the ensuing two weeks, the Griffin and Southwinds
reached agreement on the price Griffin would agree to pay Southwinds for C&D
haul-off ($9/cubic yard) and, on October 9, 2013, reached an oral agreement to
expand Southwinds’ scope of work for the Project to include C&D haul-off for that
price (CR1:8-10). As clear evidence of the material terms of this agreement, the
very next day, Southwinds hauled and dumped 50 yards of C&D and invoiced
Griffin for the same at $9/cubic yard (CR1:10).
Five days later, Griffin attempted to reduce this agreement to writing by
sending Southwinds two unexecuted originals of a proposed new Subcontractor
Agreement whose only change from the existing Subcontractor Agreement was the
expansion of the scope of work to include C&D haul-off for $9/cubic yard (CR1:9,
48-59). Southwinds sought to unilaterally change the payment terms of the
proposed new Subcontractor Agreement by interlineating “Payment terms will be
Net 14” into the agreement and then privately executed the proposed second
Subcontractor Agreement and chose not to return it to Griffin (CR1:9).
5
Southwinds’ unilateral, private interlineation represented a material change to the
payment terms because the Subcontractor Agreement contained “pay when paid”
payment terms providing that Griffin’s obligation to pay Southwinds for its work
did not arise until after Griffin had first been paid by Lemoine for Southwinds’
work (CR1:43).
In the absence of a replacement written agreement, the agreement between
the parties whereby Southwinds’ scope of work expanded to include C&D haul-off
for $9/cubic yard became an oral modification of the existing Subcontractor
Agreement best evidenced by the parties’ subsequent course of dealing whereby,
throughout October, November and December of 2013, Southwinds hauled and
dumped C&D, invoiced Griffin at the price of $9/cubic yard, and was paid by
Griffin at that rate pursuant to the “pay when paid” terms of the Subcontractor
Agreement. – all of which transpired without an iota of complaint from
Southwinds (CR1:8-10).
The all-inclusive price which Griffin paid Southwinds for C&D haul-off
included the cost of disposal of that debris at a local landfill. However,
unbeknownst and without any notice to Griffin, in December of 2013, Southwinds
stopped paying the landfill for disposal of loads of construction debris dating back
to mid-November and had sent the landfill a check which had bounced (CR1:10).
In response, the landfill owner understandably refused to allow Southwinds to
6
bring any more construction debris for disposal there. Without a landfill available
for disposal of the debris, Southwinds ceased work on the Project (CR1:10).
In mid-January, 2014, Griffin learned that Southwinds had ceased work and
had abandoned the job before completing the scope of its work for the Project
(CR1:10). At the same time, Griffin was notified by the landfill that Southwinds
owed the landfill, in arrears, approximately $67,000.00 for debris from the Project
which Southwinds had hauled to and deposited in the landfill (CR1:10). The
landfill demanded payment from Griffin and threatened to place a lien on the
Owner’s property if Southwinds’ payment obligation to the landfill remained
unpaid (CR1:10).
When Griffin contacted Southwinds to investigate why Southwinds had
refused to fulfill its payment obligations to the landfill owner, Southwinds
deflected the conversation from its nonpayment of its obligations to the landfill and
instead suggested that Griffin was behind in its payment of Southwinds’ invoices
to Griffin. Such a suggestion was without merit because Southwinds knew that
Griffin was not obligated to pay Southwinds until Griffin had been paid by
Lemoine and Griffin had, to that date, timely paid Southwinds for all invoices for
which Griffin had been paid by Lemoine.
On February 6, 2014, Southwinds confirmed to Griffin that it would not
return to the jobsite and complete its work on the Project. The next day, Griffin’s
7
lawyer sent Southwinds a letter advising Southwinds that, pursuant to its rights
under the Subcontractor Agreement: (1) Griffin would pay the unpaid landfill bill
from funds which would otherwise have been due Southwinds, (2) Griffin would
withhold future sums paid by Lemoine for work completed by Southwinds to cover
whatever expenses Griffin would incur to complete the work which Southwinds
was refusing to perform, and (3) Griffin reserved the right to pursue Southwinds
for any and all other expenses to be incurred by Griffin as a result of Southwinds
having walked off of the job.
In response, Southwinds had its lawyer file a lien on the job project, notify
the Owner of its lien and, for the first time, sent Griffin’s lawyer the unsigned copy
of the proposed revised Subcontractor Agreement which Griffin had sent unsigned
to Southwinds back in October and onto which Southwinds’ subsequently and
unilaterally imposed handwritten interlineations seeking to add a “net 14 days”
payment term to the agreement. Griffin had never signed and, upon receipt,
expressly rejected that agreement as constituting any sort of enforceable second
agreement. That is why Southwinds’ assertion in its Statement of Facts in
Appellant Brief (p. 5) that there was a second “…Subcontractor Agreement dated
October 14, 2013….” is patently untrue and was soundly rejected by both the
Arbitrator and the trial court.
8
Thereafter, Griffin paid off the landfill bill which Southwinds had refused to
pay, hired and paid third-parties to complete the work which Southwinds had
refused to perform, and initiated an arbitration against Southwinds with the
American Arbitration Association (“the AAA”) to recover all damages to which
Griffin was entitled under the Subcontractor Agreement (CR1:25-31). The
Subcontractor Agreement contained a claims resolution provision (CR1:37) which
provided for mediation unless, in Griffin’s sole discretion, Griffin believed
mediation would be a useless exercise, in which case Griffin had the right to
directly proceed to initiate binding arbitration. Griffin concluded that Southwinds
had no interest being held accountable for its conduct and even less interest in
agreeing to compensate Griffin for the substantial damages it caused. Griffin had
the unequivocal right to skip mediation and properly exercised that right.
Here, Griffin wishes to point out to that Southwinds’ Statement of Facts,
which erroneously claims that the “facts” listed in its brief “are not disputed”,
posits as a “fact” in its Appellant’s Brief (pages 4 and 5) that “Griffin
acknowledged that at the time it instituted the arbitration proceeding, it owed
Southwinds $94,531.00”. Such a statement is entirely untrue. In point of fact, what
Griffin acknowledged was that this amount would have been due Southwinds but
for Southwinds having breached the Subcontractor Agreement by, among other
thing, walking off the job prior to its completion and requiring Griffin to incur
9
substantial damages resulting therefrom in an amount well in excess of what
Southwinds might have been due had it performed its obligations under the
Subcontractor Agreement.
After Griffin initiated binding arbitration, Southwinds sought to evade
accountability in arbitration by objecting to the jurisdiction of the AAA to
administer Griffin’s claims (CR1:32-35), even though the Subcontractor
Agreement clearly made any such dispute subject to the AAA’s Construction
Industry Arbitration Rules (CR1:37).
Southwinds has never disputed that it willingly executed the Subcontractor
Agreement and that the agreement contained a valid and enforceable claim
resolution provision which provided for binding arbitration of unresolved claims
between the parties. Nor has Southwinds ever disputed that, on October 9, 2013, it
orally agreed to perform C&D haul-off in return for a payment of $9/cubic yard,
that it thereafter performed C&D haul-off for the next three months and invoiced
Griffin at the rate of $9/cubic yard or that it subsequently abandoned the Project
prior to completion of its scope of work.
Southwinds instead sought to avoid it liability for the damages it caused
Griffin by abandoning the Project by arguing that Subcontractor Agreement’s
claims resolution clause does not reach Griffin’s claim for damages arising out of
Southwinds’ conduct because Griffin’s claims for damages arising from the C&D
10
haul-off portion of Southwinds’ scope of work somehow fell outside of the reach
of the Subcontractor Agreement’s claims resolution clause. Thus, Southwinds
claimed, the AAA did not have jurisdiction to hear these claims.
Griffin responded that Southwinds and Griffin’s oral agreement to expand
the Subcontractor Agreement’s scope of work to include C&D haul-off constituted
an oral modification of the Subcontractor Agreement (CR1:8-10). Therefore, C&D
haul-off was governed by the Subcontractor Agreement and, consequently,
resolution of Griffin’s claims arising therefrom fell within the scope of the
Subcontractor Agreement’s claims resolution clause.
After both parties briefed this issue, the Arbitrator conducted a November
17, 2014 telephonic hearing on the subject and overruled Southwinds’ objection to
the AAA’s jurisdiction over this matter but agreed to reconsider the issue at the
final arbitration hearing if any new facts presented themselves to call her ruling
into question.
At the two-day final arbitration hearing on January 29-30, 2015, both parties
exercised the opportunity to fully brief and present evidence on this issue.
Southwinds also argued that mediation was a condition precedent to arbitration
pursuant to the Subcontractor Agreement, to which Griffin responded that the
Subcontractor Agreement gave Griffin the clear right to escalate the dispute
directly to arbitration.
11
After hearing the evidence and considering the parties’ legal arguments, the
Arbitrator issued a March 12, 2015 Award of Arbitration (“the Arbitrator’s
Award”) (CR1:8-12) in favor of Griffin and against Southwinds on each of these
issues, expressly overruling Southwinds’ objection to AAA’s jurisdiction and
granting Griffin monetary and equitable relief.
Because Southwinds would not respond post-arbitration to multiple queries
as to when Griffin would be paid, Griffin initiated an action in the 151st District
Court, Harris County, Texas to have the Arbitrator’s Award confirmed (CR1:4-12).
Southwinds objected to confirmation of the award and filed pleadings asserting the
identical lack of jurisdiction and mediation arguments and asking the trial court to
vacate the Arbitrator’s Award (CR1:15-23). After careful consideration of the
parties’ extensive briefing and arguments, on June 16, 2015, the trial court entered
its final order confirming the Arbitrator’s Award (CR1:110-111), ruling on the
merits of the identical arguments which Southwinds has re-asserted in this appeal
and expressly finding:
The Court is persuaded that the agreement between the parties
contemplated additional potential work such as the C&D work. Thus,
this work arose out of the agreement and, consequently, the arbitration
agreement contemplated additional work. Further, the issue of
whether there was, in fact, an enforceable oral agreement to do the
C&D work was for the arbitrator to decide, not this Court. The Court
will note, though, that the agreement between the parties does NOT
(emphasis in original) state that no subsequent agreements could be
formed; only that no oral representations prior to the written
agreement existed or were relied on. Finally, this Court is not
12
persuaded that the mediation clause was a condition precedent to
arbitration.”
Southwinds appeals from the entry of that final order.
SUMMARY OF ARGUMENT
When distilled to its essence, Southwinds makes but one argument with two
facets. The argument is arbitrability. The facets are that the subject matter
arbitrated did not fall under the arbitration provision of the Subcontractor
Agreement and that mediation was a condition precedent to arbitration.
Southwinds makes these same arguments in all three issues. For the reasons stated
herein, each of Southwinds’ arguments fail.
On two occasions, the Arbitrator ruled against Southwinds’ jurisdiction
argument – pre-hearing and then in the final arbitration itself. The basis for the
Arbitrator’s decision was that the parties’ agreement on the terms of the C&D
haul-off constituted an oral modification of the Subcontractor Agreement, thereby
bringing the dispute over C&D haul-off within the scope of the Subcontractor
Agreement’s dispute resolution clause which provided for arbitration. After the
subsequent filing of briefs on this issue by the parties in the trial court, the court
ruled, correctly:
…that the agreement between the parties contemplated additional
potential work such as the C&D work. Thus, this work arose out of
the agreement and, consequently, the arbitration agreement
contemplated additional work. Further, the issue of whether there was,
in fact, an enforceable oral agreement to do the C&D work was for the
13
arbitrator to decide, not this Court. The Court will note, though, that
the agreement between the parties does NOT (emphasis in original)
state that no subsequent agreements could be formed; only that no oral
representations prior to the written agreement existed or were relied
on.
The Arbitrator also ruled that mediation was not a condition precedent to
arbitrating the matter because of the plain language of the Subcontractor
Agreement, to wit:
In the event that a claim is not resolved through the negotiations of the
parties, claim resolution will be resolved through mediation unless, in
the sole discretion of [Griffin], [Griffin] believes mediation would be
a useless exercise in which case [Griffin], unilaterally, may escalate
the claims process to binding arbitration at any time” (Subcontractor
Agreement, p. 2, paragraph 3).
The Arbitrator properly found that, pursuant to this contractual language,
mediation was not a condition precedent to the valid filing of an arbitration claim
by Griffin without first having resorted to mediation. After the filing of briefs by
the parties on this subject in the trial court, the court ruled, appropriately: “…this
Court is not persuaded that the mediation clause was a condition precedent to
arbitration.”
Additionally, the trial court appropriately applied the statutory grounds for
vacatur set forth in §171.088 of the Texas Civil Practice & Remedies Code when it
denied Southwinds’ motion to vacate the Arbitrator’s Award. As is discussed
herein, Southwinds failed to meet its statutory burden of demonstrating that there
was no valid agreement to arbitrate the dispute in question. The trial court
14
therefore correctly applied §171.088 when it denied Southwinds’ request for
vacatur.
Lastly, Southwinds has not established that the Arbitrator’s Award is in any
way tainted by a disregard for the law or by a gross mistake in applying the law.
Here, Southwinds simply restates its flawed argument on the arbitrability of this
dispute and asserts that, because the Arbitrator rejected the argument and ruled
against Southwinds, that ruling must necessarily constitute manifest disregard and
gross error. Such an assertion is not only contrary to the law, it ignores the very
telling fact that Southwinds voluntarily and willingly agreed in the Subcontractor
Agreement to subject itself to arbitration under the AAA’s rules and to allow an
arbitrator to rule on those very subjects. The trial court properly agreed and
correctly rejected Southwinds’ suggestion that the Arbitrator’s Award was in any
way tainted by a disregard for the law or by a gross mistake in applying the law.
REPLY POINT ONE
In response to Issue 1.
The trial court did not err in determining the dispute between the parties was
subject to arbitration because the parties’ oral agreement to expand the
Subcontractor Agreement’s scope of work to include C&D haul-off constituted an
oral modification of the Subcontractor Agreement and therefore fell within the
scope of that agreement’s claims resolution clause which required resolution of
disputes by binding arbitration. The parties agreed to submit their dispute to binding
arbitration under the AAA’s rules without limit as to scope of issues to be arbitrated.
Thus, the trial court correctly deferred to the Arbitrator’s findings. Moreover,
mediation was not a condition precedent to arbitration.
15
ARGUMENTS AND AUTHORITIES
In its brief, Southwinds argues that the parties’ oral agreement to include
C&D haul-off within the scope of Southwinds’ work for the Project fell outside the
reach of the Subcontractor Agreement’s dispute resolution clause and that, as a
consequence, the Arbitrator had no jurisdiction to hear Griffin’s claims arising
from Southwinds’ breach of that agreement and the trial court erred in confirming
an award the Arbitrator had no jurisdiction to make. Southwinds also argues that
both the Arbitrator and the trial court lacked jurisdiction to hear the dispute
because mediation was a condition precedent to arbitration.
For the reasons detailed herein, both of Southwinds’ jurisdictional
arguments should be soundly rejected.
The Oral Agreement Modified The Subcontractor Agreement
On October 9, 2013, Southwinds and Griffin orally agreed to expand the
Subcontractor Agreement’s Scope of Work to include C&D haul-off for $9 per
cubic yard. That there was a clear meeting of the minds as to these material terms
supported by new consideration is evidenced by: (i) the agreement reached
between the parties, (ii) Southwinds’ immediate commencement (on October 10,
2013) of C&D haul-off and invoicing Griffin $9 per cubic yard for each load, and
(iii) the parties course of dealings throughout October, November and December of
16
2013 during which Southwinds hauled C&D, invoiced Griffin $9 per cubic yard,
and was paid by Griffin at that rate.
The parties’ October 9, 2013 oral agreement to expand Southwinds scope of
work under the Subcontractor Agreement to include C&D haul-off for $9 per cubic
yard therefore constituted a binding and enforceable oral modification of the
September 26, 2013 Subcontractor Agreement.
In Double Diamond, Inc. v. Hilco Electric Coop., Inc., 127 S.W.3d 260, 267
(Tex. App.—Waco 2003, no pet.), the Waco Court of Appeals confirmed
longstanding Texas law when it held:
A written agreement not required by law to be in writing may be
modified by a later oral agreement, even though it provides that it can
be modified only in writing.
See also Mar-Lan Industries, Inc. v. Nelson, 635 S.W.2d 853, 855 (Tex. App.—El
Paso 1982, no writ). Accord, Triton 88 v. Star Electric, L.L.C., 411 S.W.3d 42, 57
(Tex. App.—Houston (1st Dist.) 2013, no pet.); Am. Garment Props., Inc. v. CB
Richard Ellis-El Paso, L.L.C., 155 S.W.3d 431, 435 (Tex.App.—El Paso 2004, no
pet.); see also South Hampton Co. v. Stinnes Corp., 733 F.2d 1108, 1118 (5th Cir.
1984).
Texas courts have long recognized and enforced oral modifications even
where the parties’ agreement contains a no-oral-modification clause, reasoning that
the written agreement is of no higher legal degree than an oral one, and either may
17
vary or discharge the other. Id.; see also Lone Star Steel Co. v. Scott, 759 S.W.2d
144, 153 (Tex.Civ.App.—Texarkana, 1988, writ denied); Group Hosp. Servcs.,
Inc. v. One and Two Brookriver Center, 704 S.W.2d 886, 890 (Tex.Civ.App.—
Dallas 1986, no writ); Hyatt Cheek Builders-Engineers v. Board of Regents of the
Univ. of Texas System, 607 S.W.2d 258, 265 (Tex.Civ.App.—Texarkana, 1980,
writ dism’d).
Here, no Texas law (e.g., the statute of frauds) required the oral modification
to be in writing. Hence, Griffin and Southwinds were perfectly free to modify their
binding September 26, 2013 Subcontractor Agreement orally to expand the
agreement’s Scope of Work to include the C&D haul-off and that is precisely what
they did when they agreed on or about October 9, 2013 that Southwinds would
haul C&D for $9 per cubic yard.
Because the binding and enforceable oral modification modified the
Subcontractor Agreement and because the Subcontractor Agreement contained a
dispute resolution clause permitting either party to invoke binding arbitration, the
oral modification, then being a part of the Subcontractor Agreement as though
written in the agreement ab initio, was subject to the arbitration provision. Thus,
when Southwinds walked off the job and failed to complete the C&D haul-off, and
when Griffin asserted its claim against Southwinds for breach of the Subcontractor
Agreement, that claim (along with Griffin’s additional claims) was subject to the
18
binding arbitration provision of the Subcontractor Agreement. That is precisely
what the Arbitrator found in her Award of Arbitration (see pp. 2-3). The trial court
affirmed that result and indicated that the decision on this subject was the province
of the Arbitrator and not the trial court; this Court should reach precisely the same
result.
On the subject of arbitrability, Texas law is clear. “The scope of the
arbitration is a matter of substantive arbitrability for a court to decide unless the
parties clearly agreed otherwise.” See Howsam v. Dean Witter Reynolds, Inc., 537
U.S. 79, 84 (2002); Burlington Res. Oil & Gas Co. LP v. San Juan Basin Royalty
Trust, 249 S.W.3d 34, 39 (Tex. App.—Houston [1st Dist.] 2007, pet. denied). In
this case, parties agreed in paragraph 3 of the Subcontractor Agreement to subject
any dispute to binding arbitration under the rules of the AAA’s Construction
Industry Dispute Resolution Procedures. Those very rules provide that the
Arbitrator “shall have the power to rule on his or her own jurisdiction, including
any objections with respect to the existence, scope or validity of the arbitration
agreement.” American Arbitration Association Rule of Commercial Arbitration, R-
7. This explains why, rather than ask a court to decide the arbitrability issue,
Southwinds raised its jurisdictional objection to the Arbitrator in the course of the
arbitration proceeding in its pleadings, pre-hearing conference, and during the final
arbitration hearing itself. The Arbitrator decided the issue, ruling at each
19
opportunity that C&D haul-off was arbitrable under the Subcontractor Agreement
and that mediation was not a condition precedent to arbitration. The trial court, in
turn, ruled that these findings, indeed, fell within the province of the Arbitrator and
that mediation was not a precedent to arbitration.
In Aspri Investments, LLC v. AFEEF and ENM Food Mart, Inc., No. 04-07-
00249-CV, 2011 Tex. App. LEXIS 7082 (Tex.App.—San Antonio August 31,
2011, pet. dism’d) (mem. op.) the Court stated:
Most courts have concluded that where the parties’ agreement did not
limit the issues to be arbitrated or the applicability of the AAA rules,
incorporation of the AAA rules constitutes clear and unmistakable
evidence of the parties’ intent to delegate issues of arbitrability to the
arbitrator. See Haddock, 287 S.W.3d at 172-73 (discussing cases);
Burlington, 249 S.W.3d at 40-42 (same). We conclude the parties
agreed to submit arbitrability issues to the arbitrators. Because the
arbitration panel had the primary power to decide the scope of
arbitration, the court’s standard for reviewing the panel’s decision on
that matter is the same as the standard used in reviewing the panel’s
decision on substantive matters. First Options of Chicago, Inc. v.
Kaplan, 514 U.S. 938, 943 (1995). That is, the trial court reviews the
panel’s determination with great deference, indulging all reasonable
presumptions in favor of the panel’s decision. See CVN Group, 95
S.W.3d at 238; Roe v. Ladymon, 318 S.W.3d 502, 511 (Tex. App.—
Dallas 2010, no pet.). Any doubts concerning the scope of what is
arbitrable should be resolved in favor of arbitration. Centex/Vestal,
314 S.W.3d at 684. … We conclude that Aspri has not shown grounds
for the trial court to do anything other than defer to the arbitration
panel’s determinations about the scope of the arbitration, and we hold
the trial court did not err in failing to vacate on the ground the
arbitrators exceeded their powers.
The same result should follow here.
20
Mediation as a Condition Precedent to Arbitration
In its brief, Southwinds argues that, notwithstanding its plain language, the
dispute resolution clause in the Subcontractor Agreement required mediation to be
a condition precedent to arbitration. As the Arbitrator ruled and as the trial court
agreed, this is argument is devoid of legal basis or merit.
Southwinds suggests that the contractual dispute-resolution process required
negotiation, followed by mediation, followed by arbitration (assuming no
settlement). Not so. The dispute resolution process agreed to between the parties in
paragraph 3 of the Subcontractor Agreement called for negotiation (which Griffin
attempted on various occasions but which Southwinds absolutely and steadfastly
rebuffed), followed by mediation unless Griffin, at its sole discretion, decided to
bypass mediation by escalating the dispute straight to arbitration.
Paragraph 3 of the Subcontractor Agreement clearly and unambiguously
provides:
In the event that a claim is not resolved through the negotiations of the
parties, claim resolution will be resolved through mediation, unless in
the sole discretion of [Griffin], [Griffin] believes mediation would be
a useless exercise in which case [Griffin], unilaterally, may escalate
the claims process to binding arbitration at any time.
While this contract language in no way requires Griffin to justify why it
decided to forego mediation and escalate the dispute directly to binding arbitration
by filing an arbitration claim against Southwinds, Griffin notes here that, given the
21
chronology of events detailed at the arbitration, Griffin understandably concluded
that Southwinds had no interest being held accountable for its conduct and even
less interest in agreeing to compensate Griffin for the substantial damages it
caused. Griffin had the unequivocal right to skip mediation and properly exercised
that right.
The cases relied upon by Southwinds in support of its suggestion that this
Court should brand the dispute resolution clause in the Subcontractor Agreement
as illusory are inapplicable here.
In Mann Frankfurt Stein & Lipp Advisers, Inc. v. Fielding, 289 S.W.3d 844
(Tex. 2009), for example, the question was whether a promisor could unilaterally
discontinue or change performance. The case concerned the enforceability of a
covenant-not-to-compete and is far afield from this dispute. The dispute resolution
clause in this case does not grant Griffin the right to change its performance of the
Subcontractor Agreement, only to escalate from mediation to arbitration. Griffin
was not discontinuing or changing anything. The Subcontractor Agreement gave
Griffin the right to do exactly what it did.
Citing Royston, Rayzor, Vickery & Williams, L.L.P. v. Lopez, 467 S.W.3d
494 (Tex. 2015), Southwinds argues that the Supreme Court of Texas recently
stated that an arbitration provision that permits one party to amend or change the
agreed-upon procedure so as to avoid its obligations is illusory, but that is simply
22
not what happened in this case. Griffin had no right to change or to amend the
agreed-upon procedure because the agreed-upon procedure plainly was spelled out
in the dispute resolution clause itself; i.e., it was agreed upon. By executing the
Subcontractor Agreement, Southwinds agreed to the precise procedure which was
followed: failed negotiation moving to mediation unless Griffin chose to move
straight from negotiation to arbitration. There is nothing illusory or unenforceable
about that. In Royston, the Court found that the arbitration provision in question
was not illusory.
Freedom of contract is fundamental to the conduct of business in Texas. As
the Supreme Court of Texas stated in Marsh USA v. Cook, 354 S.W.3d 764 (Tex.
2011): “The Texas Constitution protects the freedom to contract.” See Tex. Const.
art. I, §16; Fairfield Ins. Co. v. Stephens Martin Paving, LP, 246 S.W.3d 653, 663–
64 (Tex. 2008); see also In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 128–29
(Tex. 2004).
In Fairfield, the Court stated: “This Court has long recognized Texas’ strong
public policy in favor of preserving the freedom of contract.” Tex. Const. art. I, §
16 (“No bill of attainder, ex post facto law, retroactive law, or any law impairing
the obligation of contracts, shall be made.”); see also Churchill Forge, Inc. v.
Brown, 61 S.W.3d 368, 371 (Tex. 2001); Lawrence, 44 S.W.3d at 553 (citations
omitted); Wood Motor Co. v. Nebel, 150 Tex. 86, 238 S.W.2d 181, 185 (1951).
23
Sophisticated businesspersons, as here, have every right to enter into the
contracts and contractual language of their choosing. On that subject, the Fairfield
Court quoted law well-settled since at least 1875:
[I]f there is one thing which more than another public policy
requires, it is that men of full age and competent understanding shall
have the utmost liberty of contracting, and that their contracts when
entered into freely and voluntarily shall be held sacred and shall be
enforced by Courts of justice. Therefore, you have this paramount
public policy to consider — that you are not lightly to interfere with
this freedom of contract. Nebel, 238 S.W.2d at 185 (quoting Printing
& Numerical Registering Co. v. Sampson, LR 19 Eq 462, 465, 1874
WL 16322 (1875)).
Of course, as the Marsh Court also stated: “[T]he Legislature may impose
reasonable restrictions on the freedom to contract consistent with public policy.”
See Fairfield at 664-65.
In In re Mabry, 355 S.W.3d 16, 29 (Tex. App.—Houston [1st Dist.] 2010,
orig. proceeding [mand. denied]), this Court stated: “[In various areas of the law],
Texas public policy permits and encourages parties to enter into agreements to
submit disputes to various forms of alternative dispute resolution.” See, e.g., Tex.
Fam. Code Ann. §§ 6.601–6.604; Tex. Civ. Prac. & Rem.Code Ann., Title 7.
Texas public policy, this Court also stated, strongly favors “preserving the freedom
to contract.” Lawrence, 44 S.W.3d at 553. But “[t]he courts will not enforce a
contract whose provisions are against public policy.” Sacks v. Dallas Gold &
Silver Exch., Inc., 720 S.W.2d 177, 180 (Tex.App.-Dallas 1986, no writ).
24
This Court continued:
We can see no reason why we should hold that cooperative law
agreements violate public policy in Texas. Neither the collaborative
law statute nor common law prohibit the practice of cooperative law
in Texas, and [Mabry] has offered no persuasive evidence as to why
cooperative law agreements cannot be negotiated by parties within
Texas’s generous ADR ambit. See Tex. Civ. Prac. & Rem.Code Ann.
§ 154.002.
Nothing in the Subcontractor Agreement, specifically including its dispute-
resolution clause, is against or violates public policy and the Legislature has not
seen fit so to say. Southwinds had every opportunity to negotiate changes to the
dispute-resolution provision of the Subcontractor Agreement but engaged in
absolutely no effort to do so; it must be so, therefore, that Southwinds was just as
much in agreement with the exact language of the dispute-resolution provision as it
was with any other provision in the Subcontractor Agreement.
As is set forth above, the parties agreed to abide by arbitration rules which
let the Arbitrator decide the arbitrability issues. Beyond any doubt, the Arbitrator
had the authority to decide arbitrability, the Arbitrator did so, the trial court upheld
the Arbitrator’s decisions with respect to arbitrability. Arbitrability was properly
decided by the Arbitrator, affirmed by the trial court and should not be disturbed.
REPLY POINT TWO
In response to Issue 2.
The trial court did not err in applying the statutory grounds for vacatur set
forth in §171.088 of the Texas Civil Practice & Remedies Code when it denied
25
Southwinds’ motion to vacate the Arbitrator’s Award because Southwinds failed to
meet its statutory burden of demonstrating that there was no valid agreement to
arbitrate the dispute in question.
ARGUMENTS AND AUTHORITIES
The Arbitrator’s Award must be confirmed unless there are grounds for
modifying, correcting or vacating the award. Texas Civil Practice & Remedies
Code §171.087; Nafta Traders, Inc. v. Quinn, 339 S.W.3d 84, 89-90 (Tex. 2011);
City of Baytown v. C.L. Winter, Inc., 886 S.W.2d 515, 520 (Tex. App. - Houston
[1st Dist.] 1994, writ denied).
Southwinds’ brief argues that the trial court should have vacated the
Arbitrator’s Award in this case because there was no valid agreement to arbitrate
the C&D haul-off claims.
Griffin incorporates herein the evidence, arguments and authorities detailed
above in response to Issue No. 1 wherein Griffin demonstrated that there was
indeed a valid and enforceable agreement between the parties to arbitrate the C&D
haul-off claims. Therefore, the trial court did not err by failing to apply the
§171.088 statutory grounds for vacating an arbitration award because Southwinds
failed to meet its legal burden of demonstrating no valid agreement to arbitrate.
Southwinds also suggests that vacatur of the Arbitrator’s Award was
justified under §171.088(a)(3)(A) because the Arbitrator exceeded her powers by
deciding matters outside the scope of her authority. Here, as the only basis for this
26
argument, Southwinds rehashes its suggestion that that the arbitrator exceeded her
authority because she did not have jurisdiction to hear the claims she decided.
In response, Griffin again incorporates herein the evidence, arguments and
authorities detailed above in response to Issue No. 1 wherein Griffin demonstrated
that arbitrability, including issues of jurisdiction, may be decided by the Arbitrator
where the parties have requested, as here, that the Arbitrator so decide. In Aspri, p.
6, the Court stated clear and well-settled Texas law:
We review de novo the trial court’s judgment confirming an
arbitration award “while giving strong deference to the arbitrator with
respect to issues properly left to the arbitrator’s resolution.” Xtria
L.L.C. v. Int'l Ins. Alliance Inc., 286 S.W.3d 583, 591 (Tex. App.—
Texarkana 2009, pet. denied); see Centex/Vestal v. Friendship W.
Baptist Church, 314 S.W.3d 677, 683 (Tex. App.—Dallas 2010, pet.
denied); GJR Mgmt. Holdings, L.P. v. Jack Raus, Ltd., 126 S.W.3d
257, 262 (Tex. App.—San Antonio 2003, pet. denied). Judicial review
of arbitration awards is “extraordinarily narrow.” E. Tex. Salt Water
Disposal Co. v. Werline, 307 S.W.3d 267, 271 (Tex. 2010). Courts are
to indulge all reasonable presumptions in favor of the award…. CVN
Group, Inc. v. Delgado, 95 S.W.3d 234, 238 (Tex. 2002);
Centex/Vestal, 314 S.W.3d at 683.
In essence, Southwinds admits in its brief that this argument arises from the
suggestion that the Arbitrator “dispensed her own justice” by carefully considering
the facts and ruling in Griffin’s favor. In other words, because Southwinds lost,
the Arbitrator somehow exceeded her own powers. Such a suggestion is without
any legal basis and should be rejected.
27
Since Southwinds failed to meet its burden of proving all three elements
with respect to the §171.088 statutory grounds for seeking vacatur of the
Arbitrator’s Award, the trial court committed no error in failing to vacate the
award.
REPLY POINT THREE
In response to Issue 3.
The Arbitrator’s Award is not tainted by a disregard for the law or by a gross
mistake in applying the law.
ARGUMENTS AND AUTHORITIES
Southwinds’ third and final argument relies yet again on the notion that the
Arbitrator decided matters not covered by a valid arbitration agreement, arguing
that this constitutes manifest disregard of the law and gross error.
Other than the naked assertion and conclusion that not ruling in its favor on
the arbitrability issue constitutes manifest disregard for the law and gross error,
Southwinds has offered no proof whatsoever of any semblance of manifest
disregard or gross error.
In Aspri, supra, the Court stated, at 20-21:
[A] party challenging an arbitration award on the ground of gross
mistake has the burden of demonstrating the arbitrators acted in bad
faith or failed to exercise honest judgment. Xtria, 286 S.W.3d at 598;
Werline, 209 S.W.3d at 898; Pheng Inv., Inc. v. Rodriquez, 196
S.W.3d 322, 330-31 (Tex. App.—Fort Worth 2006, no pet.). “Gross
mistake results in a decision that is arbitrary and capricious;” whereas
“a judgment rendered after honest consideration given to conflicting
28
claims, no matter how erroneous, is not arbitrary or capricious.” Xtria
at 598. An arbitrator’s decision is arbitrary and capricious if it is the
product of “willful and unreasoning action, action without
consideration and in disregard of the facts and circumstances of the
case.” Grand Int’l Bhd. Of Locomotive Eng’rs v. Wilson, 341 S.W.2d
206, 211 (Tex. Civ. App.—Fort Worth 1960, writ ref’d n.r.e.).
That Aspri may disagree with the panel’s credibility determinations
or the weight to be given to particular evidence does not render the
panel’s decision arbitrary and capricious, evidence bad faith, or show
a failure to exercise honest judgment. Aspri’s arguments amount to
nothing more than challenges to the legal and factual sufficiency of
the evidence and alleged errors in the application of the substantive
law, which we have no power to review. See id.; Crossmark, Inc. v.
Hazar, 124 S.W.3d 422, 435 (Tex. App.—Dallas 2004, pet. denied);
J.J. Gregory Gourmet Servs, Inc. v. Anton’s Imp. Co., 927 S.W.2d
31, 35 (Tex. App.—Houston [1st Dist.] 1995, no writ). Aspri has not
pointed to anything other than the result as evidence of bad faith or
bad motive. It did not establish gross mistake and the trial court
therefore did not err in denying the motion to vacate on that ground.
In Humitech Dev. Corp. v. Perlman, 424 S.W.3d 782, 795-96 (Tex.App.—Dallas
2014, no pet.), the Court stated:
Manifest disregard is a “very narrow” or “extremely limited”
standard of review. Xtria L.L.C. v. Int'l Ins. Alliance Inc., 286 S.W.3d
583, 594 (Tex. App.—Texarkana 2009, pet. denied) (“very narrow”
standard); Home Owners Mgmt. Enters., Inc. v. Dean, 230 S.W.3d
766, 768-69 (Tex. App.—Dallas 2007, no pet.) (“extremely limited”
standard). It is more than error or misunderstanding of the law. Xtria
L.L.C., 286 S.W.3d at 594; Home Owners, 230 S.W.3d at 768. The
disregarding of the law is “manifest” if it was “obvious and capable
of being readily and instantly perceived by the average person
qualified to serve as an arbitrator.” Xtria L.L.C., 286 S.W.3d at 594;
Myer v. Americo Life, Inc., 232 S.W.3d 401, 411. The term
“disregard” implies that the arbitrator “appreciate[d] the existence of
a clearly governing principle but decided to ignore or pay no
attention to it.” Myer, 232 S.W.3d at 411. “In other words, the issue
is not whether the arbitrator correctly interpreted the law, but whether
29
the arbitrator, knowing the law and recognizing that the law required
a particular result, simply disregarded the law.” Xtria L.L.C., 286
S.W.3d at 594; see Pheng Invs., Inc. v. Rodriquez, 196 S.W.3d 322,
332 (Tex. App.—Fort Worth 2006, no pet.)) (“Under this standard,
the arbitrator clearly recognizes the law but chooses to ignore it or
refuses to apply it correctly.”). It is appellants’ burden to demonstrate
that the arbitrator manifestly disregarded the law. Xtria L.L.C., 286
S.W.3d at 594; Tanox, Inc. v. Akin, Gump, Strauss, Hauer & Feld,
L.L.P., 105 S.W.3d 244, 253 (Tex. App.—Houston [14th Dist.] 2003,
pet. denied).
Gross mistake is conceptually analogous to manifest disregard. See
Int’l Bank of Commerce v. Int’l Energy Dev. Corp., 981 S.W.2d 38,
48 (Tex. App.—Corpus Christi 1998, pet. denied). A gross mistake is
a mistake that implies bad faith or a failure to exercise honest
judgment and results in a decision that is arbitrary and capricious.
Xtria L.L.C., 286 S.W.3d at 598; Werline v. E. Tex. Salt Water
Disposal Co., 209 S.W.3d 888, 898 (Tex. App.—Texarkana 2006),
aff'd, 307 S.W.3d 267, 268 (Tex. 2010); Teleometrics Int'l, Inc. v.
Hall, 922 S.W.2d 189, 193 (Tex. App.—Houston [1st Dist.] 1995,
writ denied). “A judgment rendered after honest consideration given
to conflicting claims, no matter how erroneous, is not arbitrary or
capricious.” Xtria L.L.C., 286 S.W.3d at 598. The doctrines of
manifest disregard and gross mistake do not extend to mere mistakes
of fact or law. Judicial 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."
Centex/Vestal, 314 S.W.3d at 683; Xtria L.L.C., 286 S.W.3d at 591;
Universal Computer Sys., Inc. v. Dealer Solutions, L.L.C., 183 S.W.3d
741, 752 (Tex. App.—Houston [1st Dist.] 2005, pet. denied).
Here, Southwinds has utterly failed to provide a semblance of evidence that
the Arbitrator in any way manifestly disregarded the law or committed any gross
error. Here, Southwinds simply restates its flawed argument on the arbitrability of
this dispute and asserts that, because the Arbitrator rejected the argument and ruled
against Southwinds, that ruling must necessarily constitute manifest disregard and
30
gross error. Such an assertion is not only contrary to the law, it ignores the very
telling fact that Southwinds voluntarily and willingly agreed in the Subcontractor
Agreement to subject itself to arbitration under the AAA’s rules and to allow an
arbitrator to rule on those very subjects. The trial court properly agreed and
correctly rejected Southwinds’ suggestion that the Arbitrator’s Award was in any
way tainted by a disregard for the law or by a gross mistake in applying the law.
Finally, and importantly, Southwinds did not ask the trial court to vacate the
arbitrator’s award on the basis of manifest disregard of the law or gross error, and,
therefore, Southwinds has waived its right to raise this issue on appeal.
CONCLUSION AND PRAYER
The trial court committed no error. The Arbitrator’s Award is not tainted by
a disregard for the law or by a gross mistake in applying the law. The trial court’s
Final Order Confirming Arbitrator’s Award should be affirmed.
WHEREFORE, PREMISES CONSIDERED, Appellee D.H. Griffin of
Texas, Inc. respectfully prays that this Court affirm the judgment of the trial court,
and for such other and further relief to which it may show itself justly entitled.
31
Respectfully submitted,
LAPIN & LANDA, L.L.P.
By: /s/ Robert E. Lapin
Robert E. Lapin
Bar Card No. 11945050
500 Jefferson, Suite 2000
Houston, Texas 77002
Phone: (713) 756-3232
Fax: (713) 654-8704
blapin@lapinlanda.com
LAW OFFICE OF DON TOMLINSON
Don Tomlinson
State Bar No. 24039507
8 Loggerhead
Hitchcock, TX 77563
Phone (832) 444-4848
don@dontomlinsonlaw.com
ATTORNEYS FOR APPELLEE,
D.H. GRIFFIN OF TEXAS, INC.
CERTIFICATE OF SERVICE
I hereby certify that on the 8th day of December, 2015, a true and correct
copy of the above and foregoing Brief of Appellee was delivered to Appellant’s
counsel of record, Robert J. Killeen, Jr., Robert C. Stern, and Gerald M. Johnson,
III, 1811 Bering Drive, Suite 120, Houston, TX 77057, pursuant to the Texas Rules
of Appellate Procedure via e-service and via e-mail.
/s/ Robert E. Lapin
Robert E. Lapin
32
CERTIFICATE OF COMPLIANCE
I hereby certify that this brief contains 6,851 words.
/s/ Robert E. Lapin
Robert E. Lapin
33