Ashley Brigham Patten, Robert C. Karlseng Jacques v. M. Brett Johnson, Geoffrey Harper, Fish & Richardson

AFFIRMED; Opinion Filed April 15, 2014.
S In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-12-01695-CV
ASHLEY BRIGHAM PATTEN; ROBERT C. KARLSENG; JACQUES YVES
LEBLANC; KARLSENG LAW FIRM, P.C.; PATTEN LAW FIRM, P.C. F/K/A PATTEN
& KARLSENG, P.C.; AND LEBLANC & KARLSENG, P.C., F/K/A LEBLANC, PATTEN
& KARLSENG, P.C., Appellants
V.
M. BRETT JOHNSON; GEOFFREY HARPER; FISH & RICHARDSON, P.C.;
H. JONATHAN COOKE; ROBERT W. FAULKNER; AND JAMS INC. A/K/A JAMS
ADR SERVICES, INC., Appellees
On Appeal from the 298th Judicial District Court
Dallas County, Texas
Trial Court Cause No. DC-12-02006
OPINION
Before Justices O’Neill, Lang, and Brown
Opinion by Justice Lang
This is an appeal of the trial court’s judgment granting appellees’ pleas to the jurisdiction
and motions to dismiss in a lawsuit filed by appellants following the vacatur of an arbitration
award against them. On appeal, appellants present three issues: (1) “[w]hether arbitral immunity
poses a jurisdictional bar to any claims factually related to an arbitration against any type of
defendant—a litigant, attorneys, a law firm, the arbitrator, and his sponsoring organization—no
matter what the scope of the lawsuit’s claims and damages”; (2) “[w]hether attorneys are
immune from liability when they engage in fraudulent acts for their own financial interests or on
behalf of a client”; and (3) “[w]hether the trial court erred in ruling on the pleas to the
jurisdiction before discovery into the extent of the Defendants’ fraudulent scheme.”
For the reasons described below, we decide against appellants on their third issue. We
need not reach appellants’ remaining issues. The trial court’s judgment is affirmed.
I. FACTUAL AND PROCEDURAL BACKGROUND
The events giving rise to this case include an underlying business dispute, the merits of
which are not at issue in this appeal. Following arbitration of that underlying business dispute in
2007, an arbitration award against appellants was rendered by the arbitrator in 2008 and
subsequently vacated by this Court. Then, this separate lawsuit, in which appellants assert
claims they describe as “factually related” to the arbitration, was filed.
Appellants’ second amended petition (the “petition”) filed in this case in the trial court
below was the live petition at the time of the trial court’s ruling dismissing this lawsuit. The
petition described the underlying business dispute in detail. We discuss some of the details of
the underlying business dispute in order to address the discrete issues in this case. Specifically,
the petition stated that prior to 2005, appellants Ashley Brigham Patten, Robert C. Karlseng, and
Jacques Yves LeBlanc (collectively, “Patten”) and appellee H. Jonathan Cooke were partners in
several real estate title service businesses. According to the petition, in approximately 2005, the
businesses were “reorganized” by Patten and Cooke “in order to comply with state law.” The
petition stated that as part of that “reorganization,” Patten and Cooke created three law firms,
appellants Karlseng Law Firm, P.C.; Patten Law Firm, P.C. f/k/a Patten & Karlseng, P.C.; and
LeBlanc & Karlseng, P.C. f/k/a LeBlanc, Patten & Karlseng, P.C. (collectively, the “Law
Firms”), and the “business operations” of the real estate title service businesses were then
“handled through the Law Firms.”
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Appellants stated in the petition that after the “reorganization,” a dispute arose respecting
Cooke’s share of compensation from the businesses. Cooke filed suit against Patten and the Law
Firms claiming damages for breach of fiduciary duty and fraud. 1 Initially, appellee Geoffrey
Harper of Fish & Richardson, P.C. (“Fish & Richardson”) was listed in that suit as Cooke’s
counsel.
According to the petition, the parties in the underlying business dispute were ordered to
arbitrate because their business agreements “contained clauses for arbitration with the American
Arbitration Association (“AAA”).” Appellants alleged that during negotiations on the scope of
the arbitration, Harper “pushed” to use appellee JAMS Inc. (“JAMS”) 2 instead of AAA as the
arbitration administrator. In February 2007, Harper and counsel for Patten signed an agreement
that stated in part that arbitration would be administered by JAMS in accordance with JAMS
rules (the “Rule 11 Agreement” or “Arbitration Agreement”). Further, the parties in the
underlying dispute entered into an agreement with JAMS (the “JAMS Agreement”) for
administration of the arbitration. In accordance with JAMS rules, appellee Robert W. Faulkner
was selected as the sole arbitrator.
Appellants asserted in the petition that JAMS’s arbitrator disclosure form requests
potential arbitrators to check “yes” or “no” as to, among other things, whether (1) the arbitrator
“has or has had” a “significant personal relationship” or any “professional relationship” with any
party or lawyer for a party or (2) there is “any other matter that . . . [m]ight cause a person aware
of the facts to reasonably entertain a doubt that the arbitrator would be able to be impartial.”
According to appellants, “[o]n the same day he was chosen, Faulkner signed his disclosures, only
1
The facts of the parties’ underlying business dispute are set forth in more detail in a 2009 opinion of this Court. See Karlseng v. Cooke,
286 S.W.3d 51, 52–53 (Tex. App.—Dallas 2009, no pet.); see also Karlseng v. Cooke, 346 S.W.3d 85, 86 (Tex. App.—Dallas 2011, no pet.).
2
The record shows “JAMS” is short for “Judicial Arbitration and Mediation Service.”
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indicating one prior arbitration with [Fish & Richardson] and Harper and disclosing no other
matter.”
Four days later, Cooke filed an “original claim for relief” in the arbitration in which he
identified appellee M. Brett Johnson, also of Fish & Richardson, as counsel. Further, according
to appellants, Cooke asserted (1) additional claims for breach of contract, negligent
misrepresentation, conversion, shareholder oppression, and unjust enrichment, and (2) a
“damages claim for attorneys’ fees.” The petition stated Harper testified during the arbitration
that “[Fish & Richardson] had a contingent fee agreement with Cooke which was just signed on
Thursday, December 6, 2007, less than a week before the arbitration began, giving [Fish &
Richardson] a 45% fee plus expenses.”
According to the petition,
The arbitrator issued a $22 million award—far larger than Patten thought possible
or supported by the evidence—which included $6 million in attorneys’
fees . . . . The damages award was approximately $14 million, but rather than
award the “contingent” fees as 45% of the damages, Faulkner awarded 145% of
the damages, adding the “contingent” fee on top of the total damages. . . .
Shocked at the size and terms of the award, Patten began rigorous investigation
and discovered that Faulkner and Johnson in fact knew each other. Patten fought
confirmation of the award, but after denying Patten an opportunity for discovery
of the [relationship between Faulkner and Johnson], the trial court confirmed the
award.
Patten and the Law Firms appealed the trial court’s confirmation of the arbitration award
in this Court. See Karlseng, 286 S.W.3d at 51. In April 2009, this Court (1) concluded the trial
court had abused its discretion by not granting appellants a continuance to allow an adequate
opportunity to investigate whether Faulkner failed to disclose information he had a duty to
disclose and (2) remanded the case to the trial court. Id. at 58. After further proceedings in the
trial court, the case was again appealed in this Court. See Karlseng, 346 S.W.3d at 85. In June
2011, this Court (1) concluded Faulkner’s failure to disclose the relationship between him and
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Johnson constituted “evident partiality” and (2) vacated the arbitration award and remanded the
case for further proceedings. Id. at 100.
The case now before us was originally filed in the trial court by appellants (“plaintiffs”)
against appellees (“defendants”) in February 2012, subsequent to vacatur of the arbitration
award. The petition also included (1) an extensive recitation of facts 3; (2) counts of fraud, fraud
3
In addition to the facts already described above, appellants’ second amended petition stated in part as follows:
24. Faulkner and Johnson had a social, professional, and business relationship (“the Faulkner-Johnson
Relationship”). The Defendants concealed the Faulkner-Johnson Relationship throughout the arbitration and subsequent
litigation. Neither Faulkner nor the Attorneys disclosed the Faulkner-Johnson Relationship, when Faulkner ruled on
summary judgment briefing that included Johnson’s name on the pleadings. They still did not disclose the Faulkner-
Johnson Relationship as the arbitration hearing began. Unbelievably, Johnson and Faulkner introduced themselves to each
other as though they were strangers in front of LeBlanc. This gesture seemed innocuous to LeBlanc at the time, but later
became striking when LeBlanc learned they in fact knew each other, and knew each other well. Faulkner never
supplemented his disclosures (as the JAMS Rules and arbitrator ethics require) to indicate that he knew Johnson. The
Attorneys and Cooke likewise never disclosed the relationship, despite JAMS’ requirement to do so. The failure to disclose
the relationship was a material omission.
....
26. At the arbitration hearing Cooke portrayed himself as an unsophisticated nonlawyer who was taken
advantage of by his lawyer-partners. He claimed that he was “shocked” at an alleged March 28, 2005, meeting with his
lawyer-partners during which they explained that the businesses would be reorganized into law firms in order to comply
with state law. Cooke swore that he had no idea as of that date that there were any problems with the way he was
compensated or that the companies would have to be restructured. He thought the TDI issue was just “a problem getting a
license, period” and that he did not know about the gravity of the TDI audit along with certain other facts. He also insisted
that he knew nothing about LKP Management (“LKP”), an entity set up to handle payroll for the business in the hopes of
satisfying TDI. Cooke signed an affidavit claiming that LKP was created “without consulting or informing me” and the
payroll functions were shifted to LKP “without consulting or informing me.” Cooke made these statements with the
assistance of the Attorneys.
....
29. In 2008, while Patten’s appeal of the arbitration award confirmation was pending, Patten uncovered emails
and other communications from archived files demonstrating that Cooke had lied during his testimony as he had known all
along about the necessary reorganization of the business into law firms and in fact had himself directed many of the steps
to do so (the “Cooke Emails”). Emails from late 2004 and early 2005 — before the purported March 28, 2005, meeting —
demonstrate that Cooke not only knew about the gravity of the TDI issues but also fully participated in, if not directed, the
set up of LKP and the law firms to restructure the business, and directed payroll payments through LKP. Moreover, Cooke
directed transfers of more than one million dollars from the Law Firms — although he claimed he had no knowledge of
their existence — to companies in which he had an interest. More than any of the other three partners, Cooke directed and
controlled the businesses’ various bank accounts. The Cooke Emails include discussions about how to respond to the TDI
inquiry, including restructuring payroll and execution of management service agreements to document the relationships
among the partners’ various business entities with outside counsel.
30. Throughout 2008—after the existence of the Faulkner-Johnson Relationship was exposed—Harper engaged
in acts designed to further the fraudulent scheme including threatening the Plaintiffs with criminal charges on multiple
occasions. He threatened Patten with bank fraud charges when the Plaintiffs sought to lower their supersedeas bond
amounts. He garnished accounts that did not belong to the judgment debtors, including an account for a business belonging
to LeBlanc’s father, payroll accounts, and an escrow account belonging to the Plaintiffs’ nascent business in Corpus
Christi. As a result, LeBlanc’s father lost business and the Corpus Christi business was so paralyzed by Harper garnishing
money belonging the [sic] Patten’s customers that it closed soon thereafter. The Attorneys engaged in these acts at a time
when they knew their arbitration judgment was itself based on fraudulent acts and would be unlikely to stand which would
in turn cost the Attorneys $6 million.
31. In November 2008, while the first appeal was pending, Patten’s counsel presented the Cooke Emails as
proof of Cooke’s lies about his knowledge of the business dealings and problems with TDI to Harper. His response was to
accuse Karlseng of a felony and deny his client had ever seen the Cooke Emails. Harper threatened Karlseng with criminal
prosecution via email and during informal discussions Karlseng’s counsel initiated about the gravity of Cooke’s actions.
Harper even continued to make representations to the court of appeals directly contrary to the facts and proof Harper now
had in his possession that Cooke’s testimony and affidavits during the arbitration were false.
32. Karlseng, Patten, LeBlanc, and Cooke had owned a building in San Antonio via a real estate partnership that
was part of the dispute in the arbitration as the scope was expanded in the Rule 11 agreement. The building sold by
agreement in September 2009. Cooke, with Harper’s assistance, waited at the bank during the closing and withdrew
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by non-disclosure, “breach of contract (Arbitration Agreement),” and “breach of contract (JAMS
Agreement)”; and (3) allegations pertaining to “fraudulent concealment and discovery rule,”
“participatory and vicarious liability,” and conspiracy. Plaintiffs sought “unliquidated damages
within the jurisdictional limits of this court,” exemplary damages, and attorney’s fees “for breach
of the contract for arbitration.”
approximately $57,000 in proceeds that belonged to all four partners. The money never touched Cooke’s bank account.
Instead, he endorsed the check over to Fish which deposited the funds in Fish’s bank account.
33. Throughout 2008 and 2009, as Patten expended hundreds of thousands of dollars for the appeal and in
defense of their assets, Harper and Johnson continued to deny that any relationship with Faulkner existed at all. On
September 4, 2008, Cooke filed his brief in the court of appeals, signed by Harper and Johnson, calling the allegations of
the Faulkner-Johnson Relationship “a fishing expedition,” “fanciful,” “frivolous,” and “pure fiction.” At stake in the appeal
was not only the award for the Attorneys’ client, but also their $6 million award in attorneys’ fees from which they would
personally profit.
....
35. On remand the trial court significantly limited Faulkner’s testimony. However Faulkner still admitted that
he “absolutely” recognized Johnson when he walked into the arbitration and that he made no effort to inform himself or
refresh his recollection of any relationship with Fish or its lawyers such as Johnson.
36. During deposition and hearing testimony in June 2009, Johnson finally admitted that he did know Faulkner
and had actively concealed his relationship with him while any arbitrations were pending before him. Johnson admitted
that he and Faulkner had dined at the Capital Grille and at the Mansion on Turtle Creek, sat together in Johnson’s floor
Mavericks seats, had drinks at the Faulkners’ home and had dinner at their country club, among other socializing. Johnson
emailed “Bob” Faulkner on his personal email account and corresponded with Faulkner’s wife on her personal email
account. Johnson’s then-current wife joined in this correspondence and accompanied Johnson in many of these social
outings with Faulkner. In fact, they even met to introduce their new baby to Faulkner over lunch at the Tower Club.
37. The Faulkner-Johnson Relationship was so personal and familiar that they emailed each other and their
wives using first names, and Faulkner using his personal email account. Faulkner emailed Johnson that Johnson’s new wife
— an attorney who had sought advice from Faulkner on becoming a federal magistrate judge herself — was “quite a
woman.” The two couples’ email banter included scheduling the Faulkners joining the Johnsons at a Dallas Mavericks
game and advice about traveling in the Northern California wine country. Faulkner’s wife also wrote the Johnsons with a
marked familiarity: “Brett, this is Shelia. Another favorite restaurant of ours is Mustard’s Grill north of Yountsville . . . .
Ya’ll have a great time!!!!”
38. Faulkner also sought Johnson’s help in promoting his arbitration career—particularly for lucrative
intellectual property cases. Not licensed as an attorney in Texas, Faulkner has aggressively promoted himself as an
intellectual property arbitrator. To promote his business he relied on his relationship with Johnson and by extension, with
Fish. While Karlseng I was pending, Faulkner called Johnson and asked for an introduction to intellectual property
litigators in Fish’s New York office. Johnson obliged. Faulkner’s relationship was rewarded when he was included as part
of an IP Law Review seminar’s faculty that was chaired by Fish partners in New York.
39. Faulkner’s failure to disclose his relationship with Johnson and subsequent deep resistance to coming clean
about that relationship served to protect himself and to continue to profit from his relationship with Johnson and Fish by
promoting himself as an intellectual property arbitrator.
40. This was not the first time Fish added Johnson to an arbitration pending before Faulkner after he made his
disclosures. In 2006, Fish itself sued a former client, Busking, for fees, and the client sued Fish and Harper for legal
malpractice (the “Busking Arbitration”). The dispute went to arbitration before Faulkner who did not disclose his
relationship with Johnson when Fish was a party. Faulkner failed to update his disclosures when Johnson appeared on the
case — even though he had socialized with him during the arbitration itself. Opposing counsel grew suspicious of Harper’s
familiarity with Faulkner and inquired as to their relationship—too precise a question. Faulkner denied any relationship
with Harper then ruled in Fish’s favor. What Busking and his counsel did not know—because Faulkner and Johnson did
not disclose the facts—was that they not only knew each other but had just postponed a date for a Dallas Mavericks game
set for the eve of the arbitration rather than disclose their relationship.
41. In sum, the Faulkner-Johnson Relationship was personal, social, and sought mutual profit therefrom. They
hosted each other at expensive social events at Capital Grille, the Mansion, Faulkner’s home, a private country club, and
Mavericks games, with their spouses joining them. Faulkner breached his duty to disclose these contacts despite the
enormous power, responsibility, and discretion vested in an arbitrator and the very limited judicial review of arbitration. In
both the Busking Arbitration and this case, the Attorneys had a direct financial interest in the outcome. In short, the
Attorneys stood to personally profit had their scheme succeeded and personally told lies to further the scheme.
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Johnson, Harper, and Fish & Richardson (collectively, the “Attorneys”) filed a “Motion
to Dismiss for Lack of Jurisdiction and Motion for Summary Judgment.” Therein, they asserted
in part, “Though cloaked in a variety of state law claims, Plaintiffs’ Petition amounts to no more
than a collateral attack on the already-vacated arbitration award.” According to the Attorneys,
Plaintiffs have had full relief under the Texas Arbitration Act, which provides
their exclusive remedy and preempts their claims. The arbitration award has been
vacated, and the dispute will soon be arbitrated again. As a matter of law,
Plaintiffs are not entitled to more. Because Plaintiffs’ claims are preempted, this
Court lacks jurisdiction—power—to do anything other than dismiss.
Additionally, the Attorneys contended (1) plaintiffs’ claims against them are “barred by the
doctrine of qualified attorney immunity” because “the conduct complained of was within the
course and scope of representing a client” and (2) the Attorneys are entitled to summary
judgment because plaintiffs’ claims “fail as a matter of law” on the merits. Exhibits attached to
the motion as evidence included (1) an affidavit of Johnson in which he testified as to basic facts
respecting the underlying business dispute and arbitration; (2) the live petition in the underlying
business dispute; (3) the Rule 11 Agreement; (4) a copy of JAMS’s “Comprehensive Arbitration
Rules & Procedures”; and (5) the arbitration award signed by Faulkner in the underlying
business dispute.
Cooke filed a “Plea to the Jurisdiction and Subject Thereto, Original Answer” and a
“Motion to Dismiss/Summary Judgment for Lack of Jurisdiction and Subject Thereto,
Traditional Motion for Summary Judgment.” Cooke (1) generally denied plaintiffs’ allegations
for purposes of his answer and (2) adopted the summary judgment arguments, authorities, and
evidence pertaining to the merits of plaintiffs’ claims in the motion and exhibits filed by the
Attorneys. Further, Cooke asserted in part (1) plaintiffs “filed this lawsuit seeking damages for
alleged wrongdoing related to an arbitration award”; (2) “[p]ursuant to Section 171.088 of the
Texas Civil Practice and Remedy Code, vacatur of the arbitration award is the exclusive remedy
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for challenging such conduct” (emphasis original); and (3) “[t]his Court has no jurisdiction to
review further complaints about the arbitration process.”
Faulkner and JAMS, collectively, filed a general denial answer and a plea to the
jurisdiction. They asserted in part the trial court lacks jurisdiction because (1) “arbitrators (like
Faulkner) and their sponsoring organizations (like JAMS) are immune from liability to
arbitration litigants (like Plaintiffs) for claims arising from conduct that purportedly
compromised an arbitration award, regardless how they are labeled” and (2) “the Texas
Arbitration Act, TEX. CIV. PRAC. & REM. CODE § 171.088, provides the exclusive remedy for
vacating an arbitration award” and “preempts Plaintiffs’ claims, regardless of how they are
labeled.”
Plaintiffs filed a “unified response” to defendants’ pleas and motions described above. In
that response, plaintiffs asserted in part
The Defendants’ scheme revolved around taking advantage of the Faulkner-
Johnson Relationship to obtain large sums of money for both Cooke and the
Attorneys through their late-added contingent fee. The Defendants’ acts to further
the goals of and to cover up their schemes continued after the arbitration ended in
December 2007. . . . [Plaintiffs] seek[] a remedy, not of avoiding an arbitration
award, but of recovering damages incurred as a result of Defendants’ fraudulent
acts and breaches of contracts including the legal fees incurred during the
arbitration, protecting assets Fish and Cooke wrongfully sought to seize to satisfy
the ill-gotten judgment, and defending against Harper’s threats of criminal
prosecution, along with losses incurred from the destruction of business arising
out of the Attorneys’ acts.
Further, plaintiffs argued “[s]ection 171.088 does not ‘preempt’ the field of disputes related to
arbitration no matter what the factual basis or claims made,” but rather “is the only mechanism to
vacate an arbitration award itself.” According to plaintiffs, because the award in this case has
already been vacated, section 171.088 is “inapplicable and irrelevant.” Additionally, plaintiffs
asserted “[b]oth Faulkner and the Attorneys engaged in acts foreign to their professional duties”
and thus any arbitral or attorney immunity is inapplicable. Numerous exhibits were attached to
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plaintiffs’ response, including, among other things, deposition testimony and transcripts of
proceedings in the underlying business dispute.
Prior to the hearing on defendants’ pleas to the jurisdiction and motions for dismissal and
summary judgment, plaintiffs filed (1) a motion for continuance “in order to allow time to secure
discovery that is needed to adequately respond to the Defendants’ Motions” and (2) a motion to
compel discovery. Plaintiffs asserted in part
All Defendants claim that Section 171.088 of the Texas Civil Practice &
Remedies Code “preempts” [Plaintiffs’] claims for breach of contract and fraud
because they are related to an arbitration. Defendants assert that Section 171.088
is an exclusive remedy for any claim related to an arbitration, citing cases that
analyze avoiding collateral attacks on pending arbitration awards and arbitral
immunity. But (1) [Plaintiffs are] not collectively attacking an arbitration award—
rather, [Plaintiffs] seek[] damages for the costs of the fraudulent arbitration itself,
and (2) arbitral immunity is not so cut and dried and depends on the facts
surrounding an arbitrator’s actions.
(citations omitted). Further, plaintiffs stated in part, “None of the jurisdictional pleas or
immunities plead by the defendants is absolute. Thus, each depend[s] on the exact facts
committed by each of the defendants.” Attached to plaintiffs’ motion was an affidavit in which
plaintiffs’ counsel testified in part
7. [Plaintiffs] cannot present by affidavits facts essential to justify the
opposition to the Dispositive Motions and need[] additional time to take the
deposition of the defendants M. Brett Johnson, Geoff Harper, Jonathan Cooke,
Robert Faulkner, and a JAMS representative about their acts, omissions, and
communications underlying the claims in this case.
8. [Plaintiffs] must secure testimony from this [sic] witness regarding
issues such as what Harper and Johnson knew about Cooke’s perjury during the
arbitration, whether they assisted him, and what still undisclosed acts the
attorneys and Faulkner engaged in to conceal the Faulkner-Johnson Relationship
so that the defendants could profit from it.
9. This evidence is material to the defendants’ defense of immunity which
[Plaintiffs] seek[] to defeat and to [Plaintiffs’] claims for fraud and breach of
contract.
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Faulkner and JAMS, collectively, and the Attorneys filed motions seeking a protective
order respecting plaintiffs’ discovery requests. Specifically, the Attorneys asserted in part
All conduct of which Plaintiffs complain occurred in the context of an
arbitration—by lawyers representing a client, by a witness testifying, and by an
arbitrator making disclosures. . . .
In seeking summary disposition, Defendants do not contest Plaintiff’s
factual allegations. Defendants’ dispositive motions raise questions of law, not
fact. Plaintiffs do not need discovery to oppose the motions.
Following a hearing on defendants’ pleas to the jurisdiction and motions to dismiss and
plaintiffs’ discovery-related motions, the trial court concluded it “lacks subject-matter
jurisdiction over Plaintiffs’ claims” and dismissed this case without prejudice. This appeal
timely followed.
II. JURISDICTION
A. Standard of Review
The absence of subject matter jurisdiction may be raised by a plea to the jurisdiction or
various other procedural vehicles. See, e.g., In re I.I.G.T., 412 S.W.3d 803, 805–06 (Tex.
App.—Dallas 2013, no pet.); City of Dallas v. Heard, 252 S.W.3d 98, 102 (Tex. App.—Dallas
2008, pet. denied). “Whether the trial court has subject matter jurisdiction is a question of law,
which we review de novo.” Heard, 252 S.W.3d at 102 (citing Tex. Dep’t of Parks & Wildlife v.
Miranda, 133 S.W.3d 217, 226 (Tex. 2004)).
In performing our review, we do not look to the merits of the plaintiff’s case, but consider
only the pleadings and the evidence pertinent to the jurisdictional inquiry. Rawlings v. Gonzalez,
407 S.W.3d 420, 425 (Tex. App.—Dallas 2013, no pet.). “[W]e construe the pleadings liberally
in favor of the plaintiff and look to the plaintiff’s intent.” Heard, 252 S.W.3d at 102 (citing
Miranda, 133 S.W.3d at 226–27). “The plaintiff has the burden to plead facts affirmatively
showing the trial court has subject matter jurisdiction.” Id. (citing Miranda, 133 S.W.3d at 226).
The defendant then has the burden to assert and support, with evidence, its contention that the
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trial court lacks subject matter jurisdiction. Id. (citing Miranda, 133 S.W.3d at 228). “If it does
so, the plaintiff must raise a material fact issue regarding jurisdiction to survive the plea to the
jurisdiction.” Id. (citing Miranda, 133 S.W.3d at 228). “If the evidence creates a fact issue
concerning jurisdiction, the plea to the jurisdiction must be denied.” Id. at 103 (citing Miranda,
133 S.W.3d at 227–28). “If the evidence is undisputed or fails to raise a fact issue concerning
jurisdiction, the trial court rules on the plea to the jurisdiction as a matter of law.” Id. (citing
Miranda, 133 S.W.3d at 228).
We apply an abuse-of-discretion standard of review to a trial court’s decision on whether
to grant a continuance of a hearing to allow additional discovery. See Joe v. Two Thirty Nine
Joint Venture, 145 S.W.3d 150, 161 (Tex. 2004); Klumb v. Houston Mun. Emp. Pension Sys.,
405 S.W.3d 204, 227 (Tex. App.—Houston [1st Dist.] 2013, pet. filed). A trial court abuses its
discretion when it reaches a decision so arbitrary and unreasonable as to amount to a clear and
prejudicial error of law. Joe, 145 S.W.3d at 161. There is no abuse of discretion in a case in
which the trial court could reasonably conclude additional discovery was unnecessary and
irrelevant to the legal issues in the case. See id.; Klumb, 405 S.W.3d at 227.
B. Applicable Law
“Arbitration is generally a contractual proceeding by which the parties to a controversy,
in order to obtain a speedy and inexpensive final disposition of the disputed matter, select
arbitrators or judges of their own choice, and by consent submit the controversy to these
arbitrators for determination.” Blue Cross Blue Shield of Tex. v. Juneau, 114 S.W.3d 126, 134
(Tex. App.—Austin 2003, no pet.) (emphasis original) (citing Manes v. Dallas Baptist Coll., 638
S.W.2d 143, 145 (Tex. App.—Dallas 1982, writ ref’d n.r.e.)). “Arbitration of disputes is
strongly favored under both federal and Texas law.” Cambridge Legacy Grp., Inc. v. Jain, 407
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S.W.3d 443, 447 (Tex. App.—Dallas 2013, pet. denied) (citing Prudential Sec. Inc. v. Marshall,
909 S.W.2d 896, 898 (Tex. 1995)).
Chapter 171 of the Texas Civil Practice and Remedies Code, titled “General Arbitration,”
is referred to as the “Texas Arbitration Act” (“TAA”). TEX. CIV. PRAC. & REM. CODE ANN.
§§ 171.001–.098 (West 2011); see Valerus Compression Servs., LP v. Austin, 417 S.W.3d 202,
205 n.1 (Tex. App.—Houston [1st Dist.] 2013, no pet.). Section 171.088 of the TAA provides in
part
(a) On application of a party, the court shall vacate an award if:
(1) the award was obtained by corruption, fraud, or other undue means;
(2) the rights of a party were prejudiced by:
(A) evident partiality by an arbitrator appointed as a neutral
arbitrator;
(B) corruption in an arbitrator; or
(C) misconduct or wilful misbehavior of an arbitrator;
(3) the arbitrators:
(A) exceeded their powers;
(B) refused to postpone the hearing after a showing of sufficient
cause for the postponement;
(C) refused to hear evidence material to the controversy; or
(D) conducted the hearing, contrary to [various sections in the
TAA], in a manner that substantially prejudiced the rights of a
party; or
(4) there was no agreement to arbitrate, the issue was not adversely
determined in a proceeding under Subchapter B [which pertains to
proceedings to compel or stay arbitrations], and the party did not
participate in the arbitration hearing without raising the objection.
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TEX. CIV. PRAC. & REM. CODE ANN. § 171.088. 4 “[A]n application to vacate the award for an
arbitrator’s alleged misrepresentation or failure to disclose a relationship is the exclusive remedy
under the arbitration act.” Juneau, 114 S.W.3d at 136; see also Yazdchi v. Am. Arbitration
Ass’n, No. 01-04-00149-CV, 2005 WL 375288, at *4 (Tex. App.—Houston [1st Dist.] Feb. 17,
2005, no pet.) (mem. op.) (concluding lawsuit against arbitrator based on claim for damages
resulting from “false [a]rbitration” was preempted by section 171.088). “Absent a statutory
ground to vacate or modify an arbitration award, a reviewing court lacks jurisdiction to review
other complaints about the arbitration, including the sufficiency of the evidence supporting the
award.” Juneau, 114 S.W.3d at 135.
C. Analysis
We begin with appellants’ third issue, in which they contend “the trial court erred in
ruling on the pleas to the jurisdiction before discovery into the extent of the Defendants’
fraudulent scheme.” 5 Appellants argue in part in their brief in this Court that “[t]he trial court
appears to have found a lack of subject matter jurisdiction based solely on the Defendants’
jurisdictional TAA ‘preemption’ argument, one of many issues before the court, although the
4
The Federal Arbitration Act (“FAA”) contains a similar provision. See 9 U.S.C.A. §§ 1–16 (West, Westlaw through April 10, 2014).
Specifically, section 10 of the FAA provides in part
(a) In any of the following cases the United States court in and for the district wherein the award was made may make
an order vacating the award upon the application of any party to the arbitration—
(1) where the award was procured by corruption, fraud, or undue means;
(2) where there was evident partiality or corruption in the arbitrators, or either of them;
(3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause
shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by
which the rights of any party have been prejudiced; or
(4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and
definite award upon the subject matter submitted was not made.
9 U.S.C.A. § 10; see also Cambridge Legacy Grp., Inc., 407 S.W.3d at 447 (FAA preempts contrary state law respecting substantive issues).
5
The headings and discussion in the “Argument” section of appellants’ brief in this Court do not directly correspond to their stated issues
described above. Based on the content of appellants’ argument in their appellate brief, we construe their third issue to complain as to the trial
court’s granting of the pleas to the jurisdiction as well as to the timing of that ruling. See TEX. R. APP. P. 38.1(f) (“The statement of an issue or
point will be treated as covering every subsidiary question that is fairly included.”).
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arguments below sometimes intertwined arbitral and qualified attorney immunity.” Further,
appellants state
The trial court found a jurisdictional bar to claims against an arbitrator, his
sponsoring organization, attorneys, and a litigant that is neither granted by the
language of the TAA nor the persuasive case law on arbitral immunity. Even if
this jurisdiction or the Supreme Court of Texas were to adopt this jurisdictional
theory to protect arbitrators from any arbitration-related claims, and not just
avoidance of an arbitration award itself, the protection does not extend to
attorneys and litigants.
According to appellants, “[Plaintiffs’] claims and damages, and the facts underlying
them, are far broader in scope than and do not attack the Arbitration Award.” Specifically,
appellants contend in part (1) “Johnson and Faulkner actively concealed their social, business,
and personal relationship, and, as a result, an arbitration award issued where Fish, Johnson, and
Harper would financially benefit” (emphasis original); (2) “[i]nformation [Plaintiffs] discovered
during the pendency of those appeals indicates that Cooke perjured himself with the apparent
assistance of the Attorneys and Defendants’ fraudulent acts continued after the 2007 arbitration
in order to protect their scheme and their hope of profiting from it”; and (3) “JAMS and Faulkner
failed to provide the neutral arbitration Patten had contracted and paid for and that JAMS
promised to provide.” Additionally, appellants argue (1) “[n]either the language of the TAA
itself nor the cases prohibiting collateral attacks on arbitration awards ‘preempt’ or provide a
single ‘exclusive remedy’ for all claims however remotely related to an arbitration” and (2)
because they are “not attacking an arbitration award here, collaterally or otherwise,” section
171.088 and Juneau “are inapplicable and pose no bar to [plaintiffs’] claims.”
Finally, in their reply brief in this Court, appellants state in part
This is not a lawsuit based on the facts that support vacatur of an arbitration
award for evident partiality—the passive failure to disclose. This lawsuit is based
on the cover up of a cover up, based in turn on facts that occurred after the failure
to disclose and after the December 2007 arbitration proceeding itself. . . . The
damages sought are far broader than those at issue in the Cooke Arbitration—
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whether and to what extent Cooke has an interest in the now defunct title
servicing partnerships.
Appellees respond in part
Appellants’ allegations concern actions taken and omissions made in obtaining
the award or trying to keep it. Their causes of action—for fraud and breach of
contract—only address arbitration conduct. Courts uniformly hold that vacatur is
the exclusive remedy for complaints about arbitrations, including complaints like
Appellants.’
Additionally, according to appellees, (1) “[b]ecause all of Appellants’ causes of action come
from the arbitration, all alleged damages must come from the arbitration” and (2) “[t]he
pervasive regulatory schemes found in the [TAA] and the [FAA] preempt any remedy other than
vacatur, which the TAA and FAA expressly provide.”
Having laid out the assertions of the parties respecting “preemption,” we analyze the
applicable authorities. We begin with the Juneau case. See Juneau, 114 S.W.3d at 126. In
Juneau, a three-member arbitration panel rendered an award against Blue Cross Blue Shield of
Texas (“Blue Cross”) in favor of HealthCor Liquidation Trust (“HealthCor”). Id. at 128. Blue
Cross filed suit to vacate the award, naming HealthCor and the individual arbitrators, including
James J. Juneau, as defendants. Id. Subsequently, Blue Cross settled its claims against
HealthCor and nonsuited two of the arbitrators, leaving only Juneau. Id. at 129. In a
supplemental petition, Blue Cross alleged Juneau had failed to disclose a prior relationship with
a HealthCor attorney involved in the arbitration process. Id. Further, Blue Cross argued that,
had it known of the relationship before arbitration began, Blue Cross would have sought
Juneau’s disqualification. Id. Blue Cross contended Juneau had engaged in “intentional or
negligent misrepresentation.” Id. at 134. Juneau filed a plea to the jurisdiction, which the trial
court granted. Id. at 128. The Third Court of Appeals in Austin affirmed. Id. at 128.
On appeal, Blue Cross argued in part that in its lawsuit against Juneau, it was not seeking
to vacate or modify the arbitration award, but “desires ‘to recover . . . the attorney’s fees and
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expenses incurred’ as the result of discovering and briefing Juneau’s
‘nondisclosure/misrepresentation.’” Id. at 133–34. The court of appeals stated in part, “Absent a
statutory ground to vacate or modify an arbitration award, a reviewing court lacks jurisdiction to
review other complaints about the arbitration, including the sufficiency of the evidence
supporting the award.” Id. at 135. Additionally, the court of appeals reasoned in part
A suit against an individual arbitrator is not contemplated by the arbitration act.
To permit a cause of action against an arbitrator, in addition to the possibility of
vacating the award, would contravene the purpose of arbitration. Speed, cost
savings, and a final determination would no longer characterize an arbitration
proceeding. Instead, a disgruntled party could circumvent the act and seek relief
outside the statutory limitations, rendering meaningless the notion that parties can
contract to be bound to an arbitrated judgment. In light of the [TAA’s] purpose,
its procedures to vacate an arbitration award, and the strong deference afforded
arbitration judgments, we hold that an application to vacate the award for an
arbitrator’s alleged misrepresentation or failure to disclose a relationship is the
exclusive remedy under the arbitration act.
Id. at 136.
Appellants argue (1) Juneau is not binding on this Court, but rather is merely persuasive
authority and (2) “[a]llowing an absolute bar to an arbitration-related lawsuit, as the trial court’s
dismissal has done,” is “contrary to the public policy of safeguarding the integrity of arbitration.”
Further, appellants assert “[t]he jurisdictional component of the Juneau holding is premised on
whether a statutory ground to vacate or modify an award exists.” According to appellants,
because they “do[] not contest any arbitration award with this lawsuit, directly or indirectly,”
“the holding of Juneau and its progeny is not applicable and poses no bar, jurisdictional or
otherwise, to [plaintiffs’] claims.” Additionally, appellants contend Juneau did not address, and
there is no Texas law granting, “jurisdictional protection to attorneys and litigants.”
We address appellants’ contentions as to preemption in four points. First, the court of
appeals’ reasoning in Juneau (1) recognized that parties are not without remedy under the TAA
when impartiality is compromised and (2) addressed specific policy concerns pertaining to
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arbitration, including speed, cost savings, and finality. Id. at 136. We agree with and adopt the
principle stated in Juneau that “[a]bsent a statutory ground to vacate or modify an arbitration
award, a reviewing court lacks jurisdiction to review other complaints about the arbitration.” See
id. at 135; see also Yazdchi, 2005 WL 375288, at *4; Pisciotta v. Shearson Lehman Bros., Inc.,
629 A.2d 520, 525 (D.C. 1993) (“Allowing parties to arbitration to secure [arbitration’s
advantages] and yet to pursue damages in court for alleged unfairness in the arbitration process
would, we conclude, exceed the limited scope of proper judicial intervention in this area.”).
Second, we disagree with appellants that Juneau is applicable only where a party is
seeking to vacate or modify, “directly or indirectly,” an existing arbitration award. Appellants
argue the court of appeals in Juneau “viewed the lawsuit for what it was in substance—a
collateral attack on the award—and an attempt to circumnavigate Section 171.088’s provisions.”
However, as described above, Blue Cross argued in part that it was not seeking to vacate or
modify the arbitration award against it, but “desires ‘to recover . . . the attorney’s fees and
expenses incurred’ as the result of discovering and briefing Juneau’s
‘nondisclosure/misrepresentation.’” Juneau, 114 S.W.3d at 133–34. The court in Juneau
observed that (1) in its original petition, Blue Cross sought to vacate or modify the award, (2)
Blue Cross argued in its supplemental petition that “Juneau engaged in intentional or negligent
misrepresentation and that the award should be modified or vacated,” and (3) both the original
and supplemental petitions filed by Blue Cross requested “such other relief, both legal and
equitable, to which [Blue Cross] may show itself justly entitled.” Id. at 134. Also, the court of
appeals stated in a footnote, “At oral argument, Blue Cross argued that such general prayer
permits its suit for damages associated with Juneau’s nondisclosure.” Id. at 134 n.4. The court
of appeals did not specifically address that argument of Blue Cross. Nor did the court of appeals
limit its reasoning or holding to collateral attacks on existing arbitration awards. See id. at 136.
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Third, although Juneau involved only claims against an arbitrator, the Third Court of
Appeals’ statement that “[a]bsent a statutory ground to vacate or modify an arbitration award, a
reviewing court lacks jurisdiction to review other complaints about the arbitration” was not, on
its face, limited to complaints respecting arbitrators. See id. at 135. Further, the same policy
concerns addressed in Juneau, i.e., speed, cost savings, and finality, are implicated regardless of
who is named as a defendant in “complaints about the arbitration.” See id. at 136.
Additionally, to the extent appellants’ argument on appeal can be construed to assert that
the TAA does not preempt claims that fall outside the scope of any arbitral or attorney immunity,
we disagree. The doctrine of “immunity” respecting persons involved in an arbitration is
separate and independent of “preemption” of claims by the TAA. See id. at 133 (stating in
section titled “Preemption” that “[e]ven if Juneau is not protected by the doctrine of arbitral
immunity, Blue Cross’s appeal still fails”). Therefore, we conclude the scope of any arbitral or
attorney immunity is not material in determining whether such preemption applies.
Finally, in a letter brief filed in this Court several hours before submission, appellants
assert the Second Court of Appeals in Fort Worth recently “allow[ed] a husband’s claims against
his ex-wife to proceed outside the court of continuing jurisdiction over the divorce because they
concerned post-divorce acts.” See Byrd v. Vick, Carney & Smith, LLP, 409 S.W.3d 772, 775–76
(Tex. App.—Fort Worth 2013, pet. filed). Appellants argue they likewise seek to “pursue claims
concerning facts and injuries that occurred after and outside the arbitration leading to the now-
vacated award.” Byrd involved a husband’s claims for “damages based on alleged wrongful
conduct by [his former wife] during and after divorce proceedings.” Id. The court of appeals in
that case concluded the claims in question were not “claims attempting to enforce the terms of
the decree” and therefore were not “enforcement claims for which the divorce court has
exclusive, continuing jurisdiction” under the Texas Family Code. Id. at 776. Unlike the case
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before us, Byrd did not involve the issue of whether claims were preempted under an arbitration
statute. Therefore, we do not find Byrd persuasive.
Now, we consider appellants’ argument that the trial court erred by not allowing
additional discovery before ruling on appellees’ pleas to the jurisdiction. Appellants contend in
part in their brief in this Court that because “immunity is qualified and fact-based” and
“[plaintiffs] allege[] a fraudulent scheme” by defendants that would preclude immunity, this case
“is not subject to summary dismissal on jurisdictional grounds” and “[t]hus, discovery is
warranted.” Further, the record shows that in their motion for continuance, appellants (1) sought
discovery respecting “exact facts committed by each of the defendants” and (2) described how
such evidence relates to “immunity.” Appellants did not contend in their motion for
continuance, nor do they contend on appeal, that such evidence might pertain to preemption by
the TAA, which, as described above, is a jurisdictional issue separate and independent from
immunity. Specifically, appellants do not address how the discovery sought by them could have
raised a material fact issue as to whether their claims are not “about the arbitration” and therefore
not preempted. See Juneau, 114 S.W.3d at 135. On this record, we conclude the trial court did
not abuse its discretion by not allowing the additional discovery requested by appellants. See
Joe, 145 S.W.3d at 162 (no abuse of discretion in denying continuance where party seeking
continuance failed to describe discovery that could have raised fact issue on matter in question);
Klumb, 405 S.W.3d at 227 (same).
In the trial court, appellees accepted the factual allegations in the petition as true, so the
relevant evidence was undisputed. See Miranda, 133 S.W.3d at 228. Further, the record shows
each of appellants’ claims is dependent upon events and/or conduct pertaining to the arbitration
in the underlying business dispute. Therefore, on this record, we conclude appellants’
complaints are “about” the arbitration in the underlying business dispute. See Juneau, 114
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S.W.3d at 135. Consequently, because appellants’ complaints in this case did not present “a
statutory ground to vacate or modify an arbitration award,” the trial court lacked jurisdiction to
review those complaints. See id. Thus, we conclude the trial court properly granted appellees’
pleas to the jurisdiction.
We decide against appellants on their third issue.
III. CONCLUSION
We decide appellants’ third issue against them. We need not address appellants’
remaining issues. The trial court’s judgment is affirmed.
/ Douglas S. Lang/
DOUGLAS S. LANG
JUSTICE
121695F.P05
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S
Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
ASHLEY BRIGHAM PATTEN; ROBERT On Appeal from the 298th Judicial District
C. KARLSENG; JACQUES YVES Court, Dallas County, Texas
LEBLANC; KARLSENG LAW FIRM, Trial Court Cause No. DC-12-02006.
P.C.; PATTEN LAW FIRM, P.C. F/K/A Opinion delivered by Justice Lang, Justices
PATTEN & KARLSENG, P.C.; AND O’Neill and Brown participating.
LEBLANC & KARLSENG, P.C., F/K/A
LEBLANC, PATTEN & KARLSENG, P.C.,
Appellants
No. 05-12-01695-CV V.
M. BRETT JOHNSON; GEOFFREY
HARPER; FISH & RICHARDSON, P.C.;
H. JONATHAN COOKE; ROBERT W.
FAULKNER; AND JAMS INC. A/K/A
JAMS ADR SERVICES, INC., Appellees
In accordance with this Court’s opinion of this date, the judgment of the trial court is
AFFIRMED.
It is ORDERED that appellees M. Brett Johnson; Geoffrey Harper; Fish & Richardson,
P.C.; H. Jonathan Cooke; Robert W. Faulkner; and JAMS Inc. a/k/a JAMS ADR Services, Inc.
recover their costs of this appeal from appellants Ashley Brigham Patten; Robert C. Karlseng;
Jacques Yves LeBlanc; Karlseng Law Firm, P.C.; Patten Law Firm, P.C. f/k/a Patten &
Karlseng, P.C.; and LeBlanc & Karlseng, P.C., f/k/a LeBlanc, Patten & Karlseng, P.C.
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Judgment entered this 15th day of April, 2014.
/Douglas S. Lang/
DOUGLAS S. LANG
JUSTICE
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