K & Ingrid Inc. v. Evangel Healthcare Charities Inc. D/B/A Evangel Hospice Care Service ( 2024 )

Affirmed and Memorandum Opinion filed May 2, 2024.
In The
Fourteenth Court of Appeals
NO. 14-23-00486-CV
K & INGRID INC., Appellant
V.
EVANGEL HEALTHCARE CHARITIES INC. D/B/A EVANGEL HOSPICE
CARE SERVICE, Appellee
On Appeal from the County Civil Court at Law No. 2
Harris County, Texas
Trial Court Cause No. 1177381
MEMORANDUM OPINION
Appellant K & Ingrid, Inc. sued appellee Evangel Healthcare Charities Inc.
d/b/a Evangel Hospice Care Service (“Evangel”), asserting Evangel breached the
parties’ consulting agreement. The parties proceeded to arbitration; the arbitrator
returned a judgment in favor of Evangel and assessed approximately $61,000 in
damages. Evangel moved to enter judgment on the arbitration award and K &
Ingrid filed a motion to vacate. The trial court denied the motion to vacate and
signed a final judgment. For the reasons below, we affirm the trial court’s
judgment.
BACKGROUND
K & Ingrid provides consulting services for hospices. Evangel runs a
hospice in Houston and retained K & Ingrid to assist in the management and
administration of its business. The parties signed a Hospice Management Services
Agreement on April 16, 2021, which provides that K & Ingrid would receive as
compensation for its services 40% of Evangel’s monthly profits.
K & Ingrid sued Evangel in November 2021, asserting a breach of contract
claim stemming from Evangel’s alleged failure to tender the payments required by
the parties’ Agreement. Evangel asserted a counterclaim, contending that K &
Ingrid failed to provide the services required by the Agreement. Evangel also
moved to compel arbitration according to the terms of the parties’ Agreement. The
trial court granted Evangel’s motion and the parties proceeded to arbitration in
December 2021.
The arbitrator issued a judgment in favor of Evangel and found that K &
Ingrid committed the following breaches of the parties’ Agreement:
• K & Ingrid submitted payment requests to Medicaid without having a
signed Physician Certification of Terminal Illness Form. See 26 Tex.
Admin. Code §§ 266.203(a)(1), (b) (requiring a signed and dated
Physician Certification of Terminal Illness Form that meets the
necessary requirements before submitting an initial request for
payment); 266.209 (requiring a Physician Certification of Terminal
Illness Form to be eligible for Medicaid hospice payments).
• K & Ingrid failed to ensure that Evangel’s operations and patient care
services were “delivered and managed well-enough to ensure that
Evangel passed the [Texas Health and Human Services Commission]
survey.” See 26 Tex. Admin. Code § 558.501(a) (stating that the
Texas Health and Human Services Commission may “conduct a
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survey or investigation” of a hospice to assess compliance with
applicable regulations).
• K & Ingrid “failed to reasonably respond to requests by Evangel for
access to Evangel patient records, and other documents and
information related to third-party expenses.”
The arbitrator denied K & Ingrid’s claims for alleged breaches of the parties’
Agreement and assessed $61,377.01 as Evangel’s damages.
Back in the trial court, Evangel moved to enter judgment on the arbitration
award. K & Ingrid filed a motion to vacate the arbitration award, asserting that
corruption, fraud, or other undue means warranted revisiting the arbitrator’s
determination. See Tex. Civ. Prac. & Rem. Code Ann. § 171.088(a)(1) (the trial
court shall vacate an arbitration award if “the award was obtained by corruption,
fraud, or other undue means”). Arguing that the existence of the signed Physician
Certification of Terminal Illness Forms was “a critical issue in the arbitration
proceedings,” K & Ingrid alleged that Evangel misrepresented to the arbitrator that
these signed forms did not exist. Rather, K & Ingrid contended, the physician-
signed forms were in Evangel’s exclusive possession and Evangel refused to turn
them over to K & Ingrid. K & Ingrid stated that it was able to obtain the forms
only after they were discovered by a recently-fired Evangel employee.
In response, Evangel stated that the motion to vacate was an attempt “to re-
try this concluded matter and consider foreign unauthenticated evidence not part of
the arbitration record.” Objecting to K & Ingrid’s proffered evidence, Evangel
asserted that the produced forms were “heavily redacted” and contained different
handwriting, thus calling into question their authenticity. Evangel also asserted
that the incomplete forms were “not the only issue complained about in
arbitration.”
On March 10, 2023, the trial court signed two orders that (1) denied K &
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Ingrid’s motion to vacate, and (2) entered judgment on the arbitration award. K &
Ingrid filed a “Supplement to Plaintiff’s Motion to Vacate Arbitration Award” the
following day, attaching an affidavit from Dr. Carlos Munoz attesting that he
signed the Physician Certification of Terminal Illness Forms on the dates shown
therein. K & Ingrid again asserted that the arbitration award should be vacated for
corruption, fraud, or undue means, alleging that Evangel “intentionally withheld
and misrepresented relevant material documents and information which it had
exclusive custody and control of.”
The trial court signed a final judgment on March 31, 2023, rendering
judgment on the arbitration award. The trial court signed an amended final
judgment on April 6, 2023, incorporating a previously-rendered judgment in favor
of third-party defendants.
K & Ingrid filed a motion for new trial, again asserting that the arbitration
award should be vacated on grounds of corruption, fraud, or undue means.
Evangel filed a response and the trial court signed an order denying K & Ingrid’s
motion. K & Ingrid timely filed this appeal.
ANALYSIS
K & Ingrid asserts four issues on appeal:
1. the trial court erred in denying K & Ingrid’s motion to vacate the
arbitration award and motion for new trial;
2. the arbitrator conducted the arbitration in a manner that substantially
prejudiced K & Ingrid’s rights;
3. Evangel is not entitled to the assessed damages; and
4. the arbitration award should be vacated under the Texas Arbitration
Act.
In essence, K & Ingrid’s four issues all contend that the arbitration award should
be vacated. We begin with the general legal principles applicable to this question
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before turning to the individual issues K & Ingrid raises on appeal.
I. Legal Principles Governing the Vacatur of Arbitration Awards
As an initial matter, we note that neither the applicable arbitration provision
in the parties’ Agreement nor the arbitrator’s award states whether arbitration in
this matter is governed by the Federal Arbitration Act (the “FAA”) or the Texas
Arbitration Act (the “TAA”). However, the Agreement does state that it is
governed by Texas law.
“If an arbitration agreement does not specify whether the FAA or the TAA
applies, but states that it is governed by the laws of Texas, both the FAA and the
TAA apply unless the agreement specifically excludes federal law.” Moody Nat’l
Grapevine MT, LP v. TIC Grapevine 2, LP, 651 S.W.3d 450, 455 (Tex. App.—
Houston [14th Dist.] 2022, pet. denied) (internal quotation omitted). Therefore,
because the parties’ Agreement does not specifically exclude the application of
federal law, we apply both the FAA and the TAA to our analyses of K & Ingrid’s
issues. See id.We review de novo a trial court’s decision to confirm or vacate an arbitration
award under the FAA or the TAA. Denbury Onshore, LLC v. TexCal Energy S.
Tex., L.P., 513 S.W.3d 511, 515 (Tex. App.—Houston [14th Dist.] 2016, no pet.).
Review of an arbitration award is extremely narrow and all reasonable inferences
are indulged in favor of the award. Id.; see also Human Biostar, Inc. v. Celltex
Therapeutics Corp., 514 S.W.3d 844, 850 (Tex. App.—Houston [14th Dist.] 2017,
pet. denied) (“We give great deference to the trial court’s decision to confirm an
arbitration award and indulge every reasonable presumption in favor of it.”). A
party seeking to vacate an arbitration award bears the burden of presenting a
complete record that establishes grounds for vacatur. Denbury Onshore, LLC, 513
S.W.3d at 515.
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Under the FAA, courts may vacate an arbitrator’s decision “only in very
unusual circumstances.” Oxford Health Plans LLC v. Sutter, 569 U.S. 564, 568
(2013). The grounds on which a trial court may vacate an arbitration award under
the FAA are limited to the following enumerated circumstances:
1) where the award was procured by corruption, fraud, or undue means;
2) where there was evident partiality or corruption of the arbitrators;
3) where the arbitrators were guilty of misconduct in refusing to
postpone the hearing, upon sufficient cause shown, or in refusing to
hear evidence pertinent and material to the controversy; or of any
other misbehavior by which the rights of any party have been
prejudiced; or
4) where the arbitrators exceeded their powers, or so imperfectly
executed them that a mutual, final, and definite award upon the
subject matter submitted was not made.
9 U.S.C.A. § 10(a); see also Vargas v. Rigid Glob. Bldgs., LLC, 654 S.W.3d 1, 6
(Tex. App.—Houston [14th Dist.] 2022, pet. denied).
Similarly, trial courts may vacate an arbitrator’s decision under the TAA
only when it is shown that:
1) the award was obtained by corruption, fraud, or undue means;
2) a party’s rights were prejudiced by an arbitrator’s evident partiality,
corruption, or misconduct;
3) the arbitrator exceeded his powers, refused to postpone the hearing,
refused to hear material evidence, or conducted the hearing in a
manner that substantially prejudiced a party’s rights; or
4) there was no agreement to arbitrate.
Tex. Civ. Prac. & Rem. Code Ann. § 171.088(a). Unless these grounds are
asserted, the trial court must confirm the award. Id. § 171.087.
II. K & Ingrid’s Motion to Vacate and Motion for New Trial
In its first issue, K & Ingrid asserts that the arbitration award should be
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vacated on grounds of “newly-discovered evidence” and points to the affidavit of
Dr. Carlos Munoz and the signed Physician Certification of Terminal Illness forms
attached to its “Supplement to Plaintiff’s Motion to Vacate Arbitration Award.” K
& Ingrid builds this argument around the showing necessary to warrant a new trial.
See, e.g., Phillips v. Abraham, 517 S.W.3d 355, 362 (Tex. App.—Houston [14th
Dist.] 2017, no pet.).1 We review the denial of a new trial motion for an abuse of
discretion. Hunter v. Ramirez, 637 S.W.3d 858, 862 (Tex. App.—Houston [14th
Dist.] 2021, no pet.).
“Newly-discovered evidence” is not an enumerated ground supporting
vacatur of an arbitration award under either the FAA or the TAA. See 9 U.S.C.A.
§ 10(a); Tex. Civ. Prac. & Rem. Code Ann. § 171.088(a). Therefore, this
argument does not provide a basis to revisit the trial court’s denial of K & Ingrid’s
motion to vacate. See Tex. Civ. Prac. & Rem. Code Ann. § 171.087; Oxford
Health Plans LLC, 569 U.S. at 568-69.
Moreover, the party seeking vacatur under the FAA or the TAA bears the
burden of presenting a complete record establishing the reason or reasons for
revisiting the arbitration award. Denbury Onshore, LLC, 513 S.W.3d at 515.
“Without a record of the arbitration proceedings, for example, we presume
adequate support for the arbitration award.” Valdes v. Whataburger Rests., LLC,
No. 14-16-00222-CV, 2017 WL 2602728, at *3 (Tex. App.—Houston [14th Dist.]
June 15, 2017, no pet.) (mem. op.).
Here, K & Ingrid did not bring forth a record of the arbitration proceedings,
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To obtain a new trial based on newly-discovered evidence, the moving party must show
(1) the evidence came to his knowledge after trial, (2) his failure to discover the evidence sooner
was not due to lack of diligence, (3) the evidence is not cumulative, and (4) the evidence is so
material that it would probably produce a different result if a new trial were granted. Phillips,
517 S.W.3d at 362.
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either with its motion to vacate or motion for new trial. Without this record, K &
Ingrid cannot make the showing necessary to warrant a new trial based on newly-
discovered evidence. See id. at *3; Denbury Onshore, LLC, 513 S.W.3d at 515;
see also Phillips, 517 S.W.3d at 362.
We overrule K & Ingrid’s first issue.
III. The Manner in Which the Arbitrator Conducted the Arbitration
In its second issue, K & Ingrid asserts the arbitrator conducted the arbitration
in a manner that substantially prejudiced its rights because:
1. the arbitrator misapplied the law regarding who may sign a Physician
Certification of Terminal Illness Form;
2. the arbitrator awarded damages to Evangel for its breach of contract
claim even though it found some of Evangel’s damages theories “too
speculative”; and
3. the arbitrator failed to compel Evangel to give K & Ingrid access to
the software on which the Physician Certification of Terminal Illness
Forms were stored.
These allegations appear to fall within an enumerated ground for vacatur of an
arbitration award. See 9 U.S.C.A. § 10(a)(3); Tex. Civ. Prac. & Rem. Code Ann.
§ 171.088(a)(2), (3). However, these grounds were not raised in the trial court as a
basis for vacating the arbitration award and we cannot consider them for the first
time on appeal. See Tex. R. App. P. 33.1(a); Human Biostar, Inc., 514 S.W.3d at
850.
We overrule K & Ingrid’s second issue.
IV. The Damages Assessed in Favor of Evangel
In its third issue, K & Ingrid raises the following arguments:
1. “the Arbitrator’s conclusion that Evangel lost revenue due to the
breach by K & Ingrid is without merit” because Medicaid will not
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disperse payments without a signed Physician Certification of
Terminal Illness Form;
2. Evangel was the first party to breach the Agreement, thus excusing K
& Ingrid from future performance;
3. the arbitrator shifted her determination of relevant dates; and
4. failure of the arbitrator to award K & Ingrid damages for services
rendered after July 21, 2021, “amounts to unjust enrichment.”
Three reasons foreclose our consideration of these contentions. First, they were
not raised in the trial court. See Tex. R. App. P. 33.1(a); Human Biostar, Inc., 514
S.W.3d at 850. Second, they are outside the grounds that permit vacating an
arbitration award. See 9 U.S.C.A. § 10(a)(3); Tex. Civ. Prac. & Rem. Code Ann.
§ 171.088(a)(2), (3). Third, we may not review the merits underlying an
arbitration award. See Thomas v. Cook, 350 S.W.3d 382, 393 (Tex. App.—
Houston [14th Dist.] 2011, pet. denied) (“The court may not review the arbitrators’
decision on the merits even if it is alleged that the decision is based on factual error
or it misinterprets the parties’ agreement.”) (internal quotation omitted).
We overrule K & Ingrid’s third issue.
V. Vacatur Under the Texas Arbitration Act
In its fourth and final issue, K & Ingrid asserts it is entitled to vacatur of the
arbitration under the Texas Arbitration Act because:
1. Evangel’s failure to give K & Ingrid access to its software constituted
a “fatal breach” of the Agreement; and
2. the arbitrator failed to state in the arbitration award that she ordered
Evangel to provide K & Ingrid access to its software and Evangel
refused.
We decline to reach these arguments for the reasons enumerated above in our
analysis of K & Ingrid’s third issue.
We overrule K & Ingrid’s fourth issue.
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CONCLUSION
We affirm the trial court’s April 6, 2023 amended final judgment.
/s/ Meagan Hassan
Justice
Panel consists of Justices Wise, Spain, and Hassan.
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