Continental Carbon Company v. National Union Fire Insurance Company of Pittsburg

Affirmed and Memorandum Opinion filed April 17, 2012
In The
Fourteenth Court of Appeals
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NO. 14-11-00162-CV
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CONTINENTAL CARBON COMPANY, Appellant,
V.
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH,
Appellee.
On Appeal from the 333rd District Court
Harris County
Trial Court Cause No. 2010-44411
MEMORANDUM OPINION
This is an appeal from a final judgment confirming an arbitration award. In
one issue, the appellant, Continental Carbon Company, contends the trial court
erred in confirming the award because the arbitrators exceeded the limited authority
granted to them under the arbitration provision in the parties’ contract. We affirm.
I
Continental operates carbon-black manufacturing plants in the United States.
Carbon black is used in tires as well as other rubber and plastic items. National
Union Fire Insurance Company of Pittsburgh issued Continental an umbrella policy
for the period of July 30, 2001, to July 30, 2002.
In 2001, the Action Marine boat dealership, several individual persons, and
the City of Columbus, Georgia, sued Continental in an Alabama federal court. The
Action Marine plaintiffs alleged they had been exposed to pollution in the form of
carbon-black dust or particulates discharged by Continental during the production
process at its plant in Alabama, and these “fugitive emissions” landed on their
homes, boats, and cars, resulting in property damage and other losses. In 2005, the
Action Marine plaintiffs recovered a multimillion-dollar judgment that was
affirmed on appeal.
After the Action Marine plaintiffs filed suit, Continental put National Union
on notice that its umbrella policy might be triggered. Relevant here, Endorsement
12 of National Union’s policy contains a pollution exclusion. Endorsement 12
provides in material part:
This insurance does not apply to:
1. Bodily Injury, Property Damage or Personal Injury arising out of the
actual or threatened discharge, dispersal, seepage, migration, release or
escape of pollutants anywhere in the world ….1
Endorsement 12 also contains an exception to the pollution exclusion for the
“Products – Completed Operations Hazard” or PCOH. The policy defines the
PCOH in part as follows:
1
Defined terms are in bold in the policy.
2
Products-Completed Operations Hazard includes all Bodily Injury and
Property Damage occurring away from premises you own or rent and
arising out of Your Product . . . except:
a. products that are still in your physical possession ….
“Your Product” is defined to include:
1. Any goods or products, other than real property, manufactured, sold,
handled, distributed or disposed of by:
a. you ….
If the parties disagree about the interpretation of Endorsement 12, the policy
calls for the disagreement to be arbitrated as follows:
It is further agreed that in the event of a disagreement as to the interpretation
of this endorsement, the disagreement shall be submitted to binding
arbitration before a panel of three (3) arbitrators. Within thirty (30) days of a
written request for arbitration by either you or us, each party will choose an
arbitrator. If the two arbitrators are unable to agree within one month upon
the third arbitrator, such arbitrator shall at the request of either party be
selected by the American Arbitration Association in accordance with its
rules and procedures.
The parties shall submit their cases to the panel by written and oral evidence
at a hearing time and place selected by the third arbitrator. The panel shall be
relieved of all judicial formality, shall not be obligated to adhere to the strict
rules of law or evidence, shall seek to enforce the intent of the parties hereto
and may refer to, but are not limited to, relevant legal principles ….
National Union denied coverage and Continental demanded arbitration. The
arbitration took place April 13–15, 2010, before a panel of three arbitrators in
Houston. Continental and National Union’s primary disagreement concerned the
meaning of the terms “Your Product” and “physical possession” as used in the
PCOH exception. Continental argued that the carbon black alleged to have caused
the Action Marine plaintiffs’ damages was its product and that it was not in
Continental’s physical possession after it was discharged from Continental’s plant.
National Union contended that the “fugitive emissions” of carbon-black dust and
particulates did not constitute Continental’s completed or finished product as
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contemplated in the PCOH exception and any losses Continental suffered arose
from carbon black in its possession.
The arbitration panel issued its award on June 3, 2010. A majority of the
panel agreed with National Union’s interpretation of the policy, determining that for
purposes of the PCOH exception: (1) a “product” is “the thing that a manufacturer
produces for sale [but not items] that are in the process being manufactured and are
not yet ready for sale;” and (2) the contested fugitive emissions fell within the
“physical possession” limitation.
About a month later, on July 2, Continental filed a coverage action against
National Union in an Oklahoma federal court. Contemporaneously, on July 4,
National Union filed an action in the Southern District of Texas, Houston Division,
seeking a declaratory judgment that it did not have any duty to defend or indemnify
Continental for “fugitive emissions” lawsuits. National Union moved to dismiss
Continental’s coverage action in Oklahoma. It argued that the parties had entered
into a tolling agreement providing that no coverage action could be filed “until 30
days after the final decision of the arbitration panel,” which was July 3, 2010—one
day after Continental filed its coverage action—and therefore Continental breached
the parties’ tolling agreement.
Meanwhile, on July 19 National Union filed a petition to confirm the
arbitration award in the trial court below. On August 16, Continental filed a motion
to vacate the arbitration award in the Oklahoma federal court. Continental also filed
a motion to stay proceedings in the trial court pending the Oklahoma court’s ruling,
and attached a copy of the motion to vacate it filed in the Oklahoma court.
National Union moved to confirm the award in the trial court on September
24. In October, the Oklahoma court granted National Union’s motion to dismiss
Continental’s coverage action without prejudice. At the same time, it dismissed as
moot Continental’s motion to vacate the arbitration award. In a separate order in
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response to Continental’s motion to alter or amend the judgment, the Oklahoma
court ruled that Continental’s coverage action did not amount to a request to vacate
the award; therefore, even if the court had not dismissed the case, it would have
dismissed the motion to vacate because that issue was not properly before it.
Continental filed its motion to vacate the arbitration award in the trial court
on November 5, 2010, five months after the panel delivered award. After a hearing
and additional briefing, the trial court rendered final judgment confirming the
arbitration award on January 31, 2011. The trial court’s judgment did not specify the
basis for its ruling.
II
On appeal, Continental argues that the arbitrators exceeded their authority
and therefore the award must be vacated under the Federal Arbitration Act. See 9
U.S.C. § 10(a)(4). National Union contends, however, that we need not reach this
issue because Continental failed to challenge or brief an independent basis for
affirming the trial court’s judgment—namely, National Union’s contention below
that Continental’s motion to vacate was barred by limitations because it was filed
after the FAA’s three-month deadline for filing notice of a motion to vacate. See 9
U.S.C. § 12.
A
Under the FAA, if parties have agreed to binding arbitration and to rendition
of judgment by a court upon the arbitration award, then at any time within one year
after the award is made, any party to the arbitration may apply to the appropriate
court for an order confirming the award. 9 U.S.C. § 9. Upon such an application,
“the court must grant such an order unless the award is vacated, modified, or
corrected as prescribed in sections 10 and 11 of [the FAA].” Id. When National
Union moved for confirmation of the award, Continental responded with a request
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to vacate it. National Union replied that the trial court could not consider
Continental’s request because Continental had waited too long to move for vacatur.
See id. § 12 (“Notice of a motion to vacate, modify, or correct an award must be
served upon the adverse party or his attorney within three months after the award is
filed or delivered.”). Continental then filed a surreply in which it argued that its
motion was not time-barred. The trial court granted National Union’s motion to
confirm the award and denied all other relief, which included Continental’s motion
to vacate the award.
Continental’s appeal to this court presents a single appellate issue
challenging both the trial court’s grant of National Union’s motion to confirm and
the trial court’s denial of Continental’s motion to vacate the award. In its original
brief, however, Continental reurges only its motion to vacate; it does not address all
of the trial court’s possible grounds for denying Continental’s motion and granting
National Union’s motion to confirm the arbitration award. The trial court could
have denied the motion to vacate because it was served more than three months after
the arbitration award was filed or delivered and, having done so, could have granted
the motion to confirm under section 9 of the FAA.
Continental did not address any of these grounds in its original brief. When
National Union pointed out in its own brief that Continental had failed to address
the timeliness of the motion to vacate, Continental filed a motion asking us to treat
its reply brief as a supplement to its original brief or, alternatively, to amend its
original brief. We denied the motion. See Standard Fruit & Vegetable Co. v.
Johnson, 985 S.W.2d 62, 65 (Tex. 1998) (stating that courts of appeals have
discretion in deciding whether to allow a party to amend or supplement an appellate
brief).
B
Generally, an appellant must attack all independent bases or grounds that
support an adverse ruling. Britton v. Tex. Dep’t of Criminal Justice, 95 S.W.3d 676,
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681 (Tex. App.—Houston [1st Dist.] 2002, no pet.); see also Fox v. Maguire, 224
S.W.3d 304, 307 (Tex. App.—El Paso 2005, pet. denied). If the appellant fails to do
so, then we must affirm. See Navarro v. Grant Thornton, LLP, 316 S.W.3d 715,
719–20 (Tex. App.—Houston [14th Dist.] 2010, no pet.); Britton, 95 S.W.3d at 681;
Inscore v. Karnes Cnty. Sav. & Loan Ass’n, 787 S.W.2d 183, 184 (Tex.
App.—Corpus Christi 1990, no writ). The Supreme Court of Texas has repeatedly
instructed that “the courts of appeals may not reverse the judgment of a trial court
for a reason not raised in a point of error.” Walling v. Metcalfe, 863 S.W.2d 56, 58
(Tex. 1993). Further, “grounds of error not asserted by points of error or argument
are considered waived on appeal.” Fort Bend Cnty. Drainage Dist. v. Sbrusch, 818
S.W.2d 392, 395 (Tex. 1991); Zamarron v. Shinko Wire Co., 125 S.W.3d 132, 139
(Tex. App.—Houston [14th Dist.] 2003, pet. denied). We are thus prohibited from
altering even an erroneous judgment in a civil case without a challenge to the error
on appeal. Milton M. Cooke Co. v. First Bank & Trust, 290 S.W.3d 297, 303 (Tex.
App.—Houston [1st Dist.] 2009, no pet.).
Moreover, it is well-settled that Rule 38.3 of the Texas Rules of Appellate
Procedure does not allow an appellant to include in a reply brief a new issue in
response to a matter pointed out in the appellee’s brief but not raised in the
appellant’s original brief. See, e.g., Priddy v. Rawson, 282 S.W.3d 588, 597 (Tex.
App.—Houston [14th Dist.] 2009, pet. denied); In re TCW Global Project Fund II,
Ltd., 274 S.W.3d 166, 171 (Tex. App.—Houston [14th Dist.] 2008, orig.
proceeding); McAlester Fuel Co. v. Smith Int’l, Inc., 257 S.W.3d 732, 737 (Tex.
App.—Houston [1st Dist.] 2007, pet. denied); Howell v. Tex. Workers’ Comp.
Comm’n, 143 S.W.3d 416, 439 (Tex. App.—Austin 2004, pet. denied); In re
M.D.H., 139 S.W.3d 315, 318 (Tex. App.—Fort Worth 2004, pet. denied).
National Union argues in its appellate brief that Continental failed to
challenge all of the independent bases for the trial court’s ruling. Under Rule 38.3,
Continental may address in its reply brief any matter in National Union’s brief. See
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Tex. R. App. P. 38.3. But this rule does not authorize Continental, without first
obtaining leave of court, to challenge bases for the trial court’s ruling for the first
time in its reply brief. See Marsh v. Livingston, No. 14-09-00011-CV, 2010 WL
1609215, at *4 (Tex. App.—Houston [14th Dist.] Apr. 22, 2010, pet. denied) (mem.
op.). We hold that Continental’s failure to raise or brief the issue of limitations in its
appellant’s brief waives the issue. Because Continental has failed to attack an
independent ground that supports the judgment, we affirm.2
/s/ Jeffrey V. Brown
Justice
Panel consists of Justices Frost, Brown, and Christopher.
2
Even if this court had allowed Continental to amend or supplement its original brief to challenge
all of the independent bases for the trial court’s ruling, this court still would have affirmed the trial
court’s judgment.
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