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Texas: Arbitrator did not exceed scope and "violation of public policy" is not a grounds for vacatur

In Infinity Capital II, LLC v. Strasburger & Price, LLP, the First District Court of Appeals held that the trial court properly confirmed an arbitration award, in spite of a motion to vacate that argued the underlying settlement agreement was not valid, the arbitrator exceeded his powers, and the final award violated public policy. The parties had agreed to a transfer of real properties to Strasburger. Strasburger alleged that the transfer did not take place and the properties were fraudulently transferred to another entity. The earlier settlement agreement contained an arbitration provision and named the arbitrator. The Court of Appeals affirmed the arbitration award, finding that (1) an attack on the entire settlement agreement was not a sufficiently specific objection on the arbitration agreement; (2) the arbitrator did not exceed his powers as all disputes were to be resolved by him; and (3) "violation of public policy" is not an authorized ground for vacatur under the Texas Civil Practice and Remed ...

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Texas: Filing criminal complaint did not substantially invoke the judical process causing a waiver of an arbitration agreement

In Cash Biz, LP v. Henry, the San Antonio Court of Appeals held that a party who filed a criminal complaint against another did not substantially invoke the judicial process, otherwise acting as a waiver of an agreement to arbitrate. In this case, a payday lender entered into a credit service agreement that contained a "waiver of jury trial and arbitration provision" with its borrowers. When the borrowers' checks were declined for insufficient funds, Cash Biz contacted the local district attorney's office for the issuance of "bad checks and check fraud." Criminal charges were filed against the borrowers and those charges were eventually dismissed. Several of the borrowers were arrested and detained prior to the dismissal of the criminal charges.  The borrowers filed a class action suit alleging violations of the Texas Finance Code and the DTPA, amongst others. Cash Biz moved to compel arbitration under the loan contracts, which was denied by the trial court. In part, the trial court concluded ...

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Texas: Arbitrator's Receipt of Ex Parte Evidence does not Necessarily Rise to the Level of Misconduct

In Wright v. Menta, the Fifth District Court of Appeals considered whether the trial court erred by confirming an arbitration award based upon these points of error: (1) arbitrator misconduct by reviewing evidence submitted ex parte and in camera, (2) the arbitration award being unenforceable for vagueness, (3) the award of attorney's fees was outside the arbitrator's jurisdiction, and (4) the trial court unconstitutionally delegated its duty to the arbitrator. The Court of Appeals affirmed the trial court's confirmation of the arbitration award. The Court of Appeals held that the arbitrator--by reviewing in camera records relating to one side's attorney's fees--did not rise to the level of misconduct under Section 171.088 of the Texas Civil Practice and Remedies Code. Here, even if there was misconduct, it did not deprive the other party of a fair hearing because notice of the submission was made, the party objected to the arbitrator's consideration of the in camera, ex parte records, and the arbitrator ove ...

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Texas: Constables are police officers with standing to assert collective bargaining rights, arbitration award upheld

In Jefferson County Constables Association v. Jefferson County, Texas, the Corpus Christi-Edinburg Court of Appeals held that deputy constables are police officers within the meaning of the Fire and Police Employee Relations Act with standing to assert a violation of their collective bargaining rights. While Jefferson County sought to vacate an arbitration award in favor of the Jefferson County Constables Association relating to the collective bargaining agreement, the Court of Appeals held that the arbitrator did not exceed his jurisdiction, had power to issue an award, and the award did not violate the Local Government Code. The issue at arbitration was whether the county, when eliminating several deputy constable positions, violated the collective bargaining agreement. The arbitrator determined the county did violate the CBA and issued an award reinstating certain deputy constables based upon seniority. The Court of Appeals held that the arbitrator's award did not usurp the county's statutory autho ...

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Texas: TAA provides exclusive grounds for vacatur; extra-statutory grounds are not allowed

In Hoskins v. Colonel Clifton Hoskins and Hoskins, Inc., the Texas Supreme Court resolved a split of authority on the question of whether a party seeking to vacate an arbitration award under the Texas General Arbitration Act may invoke extra-statutory, common-law vacatur grounds.  According to the Court's opinion, a bankruptcy court ordered the parties to mediation, which was unsuccessful, and in accordance with a prior settlement agreement approved by the bankruptcy court, that court then appointed an arbitrator. The arbitrator issued an award and one of the parties filed a motion to vacate on several grounds, including that the "arbitrator demonstrated a manifest disregard of the law by ignoring the bankruptcy court's injunction."  The Texas Supreme Court held that in the absence of a restriction of the arbitrator's authority in the arbitration agreement, or the specific vacatur grounds set out in the TAA, a court "shall confirm the award." Thanks to Ronnie Hornberger for bringing this decision ...

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CFPB Seeks Comments on Proposed Rules Prohibiting Mandatory Arbitration in Consumer Financial Matters

The Consumer Financial Protection Bureau announced that it is seeking comments on proposed rules to prohibit mandatory arbitration clauses in many consumer financial products.

The proposed rules are here.

The CFPB's 2015 study on arbitration is here.

Texas: Settlement Agreements, Arbitration, Indemnification, and Summary Judgment

The Tenth Court of Appeals (Waco), in Capstone Building Corp. v. IES Commercial, Inc., reversed the trial court's summary judgment in favor of IES. This case is a severed part of a broader dispute relating to a housing complex at Sam Houston State University.* Capstone was the general contractor, and IES was the mechanical/HVAC/electrical subcontractor. Capstone and IES entered into a settlement agreement after IES filed a petition for arbitration alleging a payment dispute. The settlement agreement included a payment amount, a warranty that the sub's subs had been paid, and that IES would indemnify Capstone from claims brought by subs or suppliers. Capstone released claims relating to HVAC warranty claims. Several years later, SHSU sued ACC alleging construction defects, including alleged HVAC defects, according to the opinion. IES filed for summary judgment on Capstone's claims against it, and the trial court granted the motion for summary judgment. The Court of Appeals rejected IES' argument that the s ...

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Texas: Arbitration Agreement was not Unconscionable

In Bonded Builders Home Warranty Association of Texas, Inc. v. Smith, the Fifth District Court of Appeals (Dallas) reversed the trial court's denial of a motion to compel arbitration. In objecting to the motion to arbitrate, Smith asserted that the arbitration clause inserted in a warranty was unconscionable because "(1) it requires Plaintiffs to ask an arbitrator to award damages against a company that is sending business to the arbitration company; (2) the rules that govern the arbitration are unknown until a pre-approved arbitration company is selected;...and (3) to date, Plaintiffs are unable to access the pre-approved companies or their rules." The Fifth District Court of Appeals outlines the standard of review in denying a motion to compel arbitration, the legal standards applicable to a motion to compel arbitration, and Texas law relating to the substantive or procedural unconscionablilty of an arbitration agreement. Unconscionablilty in Texas "is not satisfied by speculation but by specific proof in ...

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Second Circuit: NFL Commissioner Properly Exercised Discretion when Arbitrating under CBA

In a 2-1 decision, the U.S. Second Circuit Court of Appeals held that NFL Commissioner Roger Goodell, serving as arbitrator, properly exercised his broad discretion under a collective bargaining agreement and his procedural rulings were properly grounded in the CBA, reversing the decision of the U.S. District Court for the Southern District of New York.

The Court of Appeals analyzes the award under the Labor Management Relations Act, and according to the Court "These standards do not require perfection in arbitration awards. Rather, they dictate that even if an arbitrator makes mistakes of fact or law, we may not disturb an award so long as he acted within the bounds of his bargained-for authority."

The appellate court's decision is here.

Texas: Court Abused Discretion in Ordering Mediation when Parties Agreed to Arbitrate

In In Re Frank A. Smith Sales, Inc. d/b/a Frank Smith Toyota, the Thirteenth District Court of Appeals held that mandamus was appropriate when a trial court ordered parties to mediation instead of ordering them to arbitration. In this employment-related matter, the employee handbook contained a dispute resolution procedure that included "binding arbitration of any legal dispute" between the employee and the employer. After the employee was terminated, she filed suit alleging discrimination, retaliation, and defamation. The employer filed a motion requesting arbitration and while that motion was set and heard, the district court did not rule on it. Instead, the district court ordered the parties to mediation. The Thirteenth District Court of Appeals held that the district court abused its discretion when it did not rule on the motion to compel arbitration for over a year and ordered the parties to mediation instead of ruling on the motion to compel arbitration. The Court of Appeals ordered to trial court to ...

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