holding that the bases for vacatur under the FAA are exclusive
How later courts described this case
- holding that the bases for vacatur under the FAA are exclusive
- noting that, if error cannot be demonstrated in the record, an arbitration award must be presumed correct
- noting that arbitration proceedings “are often informal; 23 procedural rules are relaxed, rules of evidence are not followed, and no record is made.”
- a party opposing arbitration bears the burden to raise an affirmative defense to the agreement’s enforcement
Written by the judges who cited it.
The opinion
ACCEPTED
03-17-00492-CV
21273618
THIRD COURT OF APPEALS
AUSTIN, TEXAS
12/13/2017 3:34 PM
JEFFREY D. KYLE
CLERK
No. 03-17-00492-CV
In the Court of Appeals FILED IN
3rd COURT OF APPEALS
AUSTIN, TEXAS
for the Third Judicial District 12/13/2017 3:34:07 PM
JEFFREY D. KYLE
Austin, Texas Clerk
DIXIE EQUIPMENT, LLC AND DIXIE TURBINE SERVICES, LLC,
Appellants,
v.
ENERGIA DE RAMOS, S.A.P.I. DE C.V. F/K/A
DEACERO POWER S.A.P.I. DE C.V.,
Appellee.
On Appeal from the 200th Judicial District Court
Travis County, Texas
BRIEF OF APPELLEE ENERGIA DE RAMOS, S.A.P.I. DE C.V. F/K/A
DEACERO POWER S.A.P.I. DE C.V.
Breck Harrison
State Bar No. 24007325
Michael Roberts
State Bar No. 24082153
Danica L. Milios
State Bar No. 00791261
JACKSON WALKER L.L.P.
100 Congress Ave., Suite 1100
Austin, Texas 78701
[Tel.] (512) 236-2000
[Fax] (512) 236-2002
bharrison@jw.com
COUNSEL FOR APPELLEE
ORAL ARGUMENT CONDITIONALLY REQUESTED
IDENTITY OF PARTIES AND COUNSEL
Appellants
Dixie Equipment, LLC and
Dixie Turbine Services, LLC
Lead Appellate Counsel
Kevin J. Terrazas
State Bar No. 24060708
Timothy A. Cleveland
State Bar No. 24055318
CLEVELAND | TERRAZAS PLLC
4611 Bee Cave Rd., # 306B
Austin, Texas 78746
[Tel.] (512) 680-3257
kterrazas@clevelandterrazas.com
Appellee
Energia de Ramos, S.A.P.I. de C.V. f/k/a
Deacero Power S.A.P.I. de C.V.
Lead Appellate Counsel Additional Appellate Counsel
Breck Harrison Michael Roberts
State Bar No. 24007325 State Bar No. 24082153
JACKSON WALKER L.L.P. Danica L. Milios
100 Congress Ave., Suite 1100 State Bar No. 00791261
Austin, Texas 78701 JACKSON WALKER L.L.P.
[Tel.] (512) 236-2000 100 Congress Ave., Suite 1100
[Fax] (512) 236-2002 Austin, Texas 78701
bharrison@jw.com [Tel.] (512) 236-2000
[Fax] (512) 236-2002
mroberts@jw.com
dmilios@jw.com
ii
TABLE OF CONTENTS
Identity of Parties and Counsel ................................................................ii
Table of Authorities ................................................................................... v
Statement of the Case ............................................................................viii
Statement Regarding Oral Argument ...................................................... x
Issues Presented........................................................................................ x
Statement of Facts .................................................................................... 3
I. The Ramos Arizpe Project ....................................................... 3
II. The Arbitration Proceeding .................................................... 4
III. The District Court Confirms the Arbitration Award ............. 8
Summary of Argument .............................................................................. 9
Argument ................................................................................................. 11
I. The Arbitration Panel’s Decision To Hold the Final
Arbitration Hearing in Dixie’s Voluntary Absence and
in Accordance with the Panel’s Rules Did Not Violate
Dixie’s Purported Due Process or Constitute Misconduct
under the FAA ....................................................................... 14
A. The Arbitration Panel’s Decision To Hold the Final
Arbitration Hearing in Dixie’s Absence Comported
with Due Process Because Dixie Had Full Notice
of the Hearing and Voluntarily Elected To
Abandon the Proceedings............................................. 16
B. The Arbitration Panel’s Decision To Conduct the
Hearing in Dixie’s Absence Was Authorized by the
Rules of the ICDR ........................................................ 20
iii
C. It Was Dixie’s Burden To Procure a Transcript of
the Final Arbitration Hearing; Its Failure To Do so
Does Not Support Vacatur of the Arbitration
Award ........................................................................... 22
II. The Arbitration Panel’s Decision To Hold the Final
Arbitration Hearing Despite Dixie’s Claimed Inability
To Pay Is Not Grounds for Vacatur ...................................... 28
A. Dixie Failed To Prove Its Inability To Pay in the
Arbitration Proceeding................................................. 28
B. The ICDR Procedures Specifically Authorized the
Arbitration Panel To Reject Dixie’s Counterclaims
for Failure To Pay Its Share of the Arbitration
Fees............................................................................... 31
Prayer ...................................................................................................... 32
Certificate of Service ............................................................................... 33
iv
TABLE OF AUTHORITIES
Page(s)
Cases
21st Fin. Servs., L.L.C. v. Manchester Fin. Bank,
747 F.3d 331 (5th Cir. 2014) .......................................................... 17
Baravati v. Josephthal, Lyon & Ross, Inc.,
28 F.3d 704 (7th Cir. 1994) ............................................................ 21
BDO Seidman LLP v. J.A. Green Dev. Corp.,
327 S.W.3d 852 (Tex. App.—Dallas 2010, no pet.) ........................ 31
Berstein Seawell & Kove v. Bosarge,
813 F.2d 726 (5th Cir. 1987) .................................................... 17, 18
Bonded Builders Home Warranty Assoc., Inc. v. Smith,
488 S.W.3d 468 (Tex. App.—Dallas 2016, no pet) ......................... 30
Craft v. Davis,
No. 2-07-332-CV, 2008 WL 4180357 (Tex. App.—Fort
Worth Sept. 11, 2008, no pet.) (mem. op.) ..................................... 23
CVN Grp., Inc. v. Delgado,
95 S.W.3d 234 (Tex. 2002).............................................................. 22
Ewing v. Act Catastrophe-Tex. L.C.,
375 S.W.3d 545 (Tex. App.—Houston [14th Dist.]
2012, pet. denied) ........................................................................... 18
Gilbert v. Rain & Hail Ins.,
No. 02-16-00277-CV, 2017 WL 710702 (Tex. App.—Fort
Worth Feb. 23, 2017, pet. denied) (mem. op.) ................................ 19
GJR Mgmt. Holdings, L.P. v. Jack Raus, Ltd.,
126 S.W.3d 257 (Tex. App.—San Antonio 2003, pet. denied) .......... 23
v
Grp. 32 Dev. & Eng’g, Inc. v. GC Barnes Grp.,
No. 3:14-CV-2436-B, 2015 WL 144082
(N.D. Tex. Jan. 9, 2015) ........................................................... 18, 22
House Grain Co. v. Obst,
659 S.W.2d 903 (Tex. App.—Corpus Christi 1983,
writ ref’d n.r.e.)............................................................................... 23
In re Chestnut Energy Partners, Inc.,
300 S.W.3d 388 (Tex. App.—Dallas 2009, pet. denied) ........... 12, 26
In re Kempwood Assocs., L.P.,
9 S.W.3d 125 (Tex. 1999) (orig. proceeding) (per curiam) ................ 12
In re Olshan Found. Repair Co.,
328 S.W.3d 883 (Tex. 2010) (orig. proceeding) ............ 12, 21, 29, 31
Jacaman Polaris Sports Ctr. Ltd. v. Falcon Int’l Bank,
No. 04-16-00481-CV, 2017 WL 2852632 (Tex. App.—
San Antonio July 5, 2017, no pet.) (mem. op.) ................... 12, 25, 26
Kline v. O’Quinn,
874 S.W.2d 776 (Tex. App.—Houston [14th Dist.] 1994,
writ denied) .................................................................................... 23
KNJ Enters., Inc. v. Wilbanks & Wilbanks, P.C.,
No. 14-14-00271-CV, 2015 WL 1736400 (Tex. App.—
Houston [14th Dist.] Apr. 14, 2015, no pet.) (mem. op.).... 18, 19, 26
Laws v. Morgan Stanley Dean Witter,
452 F.3d 398 (5th Cir. 2006) .......................................................... 13
Nafta Traders, Inc. v. Quinn,
339 S.W.3d 84 (Tex. 2011).................................................. 23, 24, 27
Peacock v. Wave Tec Pools, Inc.,
107 S.W.3d 631 (Tex. App.—Waco 2003, no pet.) .......................... 20
vi
Saks v. Rogers,
No. 04-16-00286-CV, 2017 WL 3159712 (Tex. App.—
San Antonio July 26, 2017, no pet.) (mem. op.) ............................. 19
Statewide Remodeling, Inc. v. Williams,
244 S.W.3d 564 (Tex. App.—Dallas 2008, no pet.) .................. 23, 26
Totem Marine Tug & Barge, Inc. v. N. Am. Towing, Inc.,
607 F.2d 649 (5th Cir. 1979) .................................................... 16, 17
Venture Cotton Coop. v. Freeman,
435 S.W.3d 222 (Tex. 2014) ............................................................ 29
Venture Cotton Coop. v. Neudorf,
No. 14-13-00808-CV, 2014 WL 4557765 (Tex. App.—
Houston [14th Dist.] Sept. 16, 2014, no pet.) (mem. op.) ........ 12, 19
Volt Info. Sci., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ.,
489 U.S. 468 (1989) ........................................................................ 20
Vorwerk v. Williamson Cnty. Grain, Inc.,
No. 03-10-00549-CV, 2012 WL 593481 (Tex. App.—
Austin Feb. 23, 2012, pet. denied) (mem. op.) ............. 11, 20, 23–25
Codes and Rule
9 U.S.C. § 10(a)(3) ................................................................................... 13
9 U.S.C. § 10(c) ........................................................................................ 12
TEX. R. APP. P. 38.1(i) .............................................................................. 31
Other Authorities
International Dispute Resolution Procedures, Available at
https://www.icdr.org/icdr/ShowProperty?nodeId=/UCM/A
DRSTAGE2020868&revision=latestreleased
(last accessed December 12, 2017) ..................................................... 22
vii
STATEMENT OF THE CASE
Nature of the Case: Appellee Energia de Ramos, S.A.P.I.
de C.V. f/k/a Deacero Power, S.A.P.I.
de C.V. (“EdR”) initiated arbitration
proceedings against Appellants, Dixie
Equipment, LLC (“Dixie Equipment”)
and Dixie Turbine Services, LLC
(“Dixie Turbine”) (collectively,
“Dixie”) pursuant to the parties’
contracts. CR.12.1 Dixie appeared
and asserted counterclaims. CR.12;
CR.202–20.
Course of Proceedings: Seven months after EdR instituted
the arbitration proceedings, Dixie
informed the duly-appointed
arbitration panel (“Arbitration
Panel”) that it was unable to pay its
portion of the arbitration fees.
CR.12–13. In response to the
Arbitration Panel’s order, Dixie filed a
written statement in which it
confirmed that it would not pay its
portion of the arbitration fees, that its
counsel’s role would be “limited to
that of an observer,” and that it
“[would] no longer be an active
participant in the proceedings.”
CR.237. The Arbitration Panel held
the final arbitration hearing. CR.14.
EdR presented documentary
evidence, as well as fact and expert
witness testimony, in support of its
claims against Dixie. Id. Dixie,
through its counsel, attended the
1. Citations of CR.__ reference the clerk’s record, with the blank identifying the page.
viii
morning session of the first day of the
two-day hearing, but did not return
for the remainder of the proceedings.
Id. The Arbitration Panel awarded
EdR $16,664,184.60 including
economic damages, attorneys’ fees,
expert fees, arbitration fees and
expenses, and prejudgment interest.
CR.11–34. EdR filed a Petition to
Confirm Arbitration Award in the
district court, which was granted.
CR.246–73. This appeal followed.
CR.365–66.
Trial Court: 200th District Court, Travis County;
the Honorable Karin Crump,
presiding.
Trial Court Disposition: The district court confirmed the
arbitration award. CR.246–73.
ix
STATEMENT REGARDING ORAL ARGUMENT
Because this case is controlled by the application of well-established
legal principles, Appellee does not believe that oral argument is needed
to aid in the Court’s decisional process. However, if the Court concludes
that it will hear oral argument in this matter, counsel for Appellee would
like to be heard.
ISSUES PRESENTED
1. Whether an arbitration panel’s receipt of evidence following a
party’s voluntary absence from a final arbitration hearing, with actual
knowledge of the hearing, due to alleged inability to pay constitutes
arbitrator misbehavior under the Federal Arbitration Act sufficient to
vacate the arbitration award.
2. Whether a party may complain on appeal regarding the lack
of a transcript of a final arbitration hearing when the party neither
requested one nor objected to the failure to record the proceedings before,
during, or after the hearing.
3. Whether a party’s voluntary waiver of its counterclaims due
to an alleged inability to pay, a result mandated by the party’s chosen
arbitration rules, is a violation of the party’s due-process rights.
x
No. 03-17-00492-CV
In the Court of Appeals
for the Third Judicial District
Austin, Texas
DIXIE EQUIPMENT, LLC AND DIXIE TURBINE SERVICES, LLC,
Appellant,
v.
ENERGIA DE RAMOS, S.A.P.I. DE C.V. F/K/A
DEACERO POWER S.A.P.I. DE C.V.,
Appellee.
On Appeal from the 200th Judicial District Court
Travis County, Texas
BRIEF OF APPELLEE ENERGIA DE RAMOS, S.A.P.I. DE C.V. F/K/A
DEACERO POWER S.A.P.I. DE C.V.
TO THE HONORABLE THIRD COURT OF APPEALS:
The district court correctly confirmed the Arbitration Panel’s award
of damages in favor of EdR for Dixie’s breach of contract. Dixie invites
the Court to vacate that award because Dixie voluntarily abandoned the
arbitration proceeding and did not participate in the final arbitration
hearing, asserting an unsubstantiated inability to pay. According to
Dixie, the Arbitration Panel violated its due-process rights by conducting
the final arbitration hearing in Dixie’s absence without a transcript.
Dixie also seeks to fault EdR for not securing a transcript of the final
arbitration hearing.
At every turn, however, Texas law mandates confirmation of the
Arbitration Panel’s award. Dixie had actual knowledge of the
proceedings and voluntarily chose to avoid them. The Arbitration Panel
was authorized by the rules of the arbitral forum to proceed in Dixie’s
absence. And it was Dixie’s sole responsibility to procure a record of the
proceedings if it wanted to contest the result, not EdR’s. Dixie received
all the process to which it was entitled.
Moreover, Dixie cannot now be heard to complain about the cost of
arbitration. Dixie has never claimed that the arbitration agreements
were unconscionable due to excessive costs, and it failed to offer any
evidence to that effect before the Arbitration Panel. Dixie’s voluntary
decision to abandon the arbitration proceeding, citing an unproven
inability to pay, does not create a due-process violation. The Court should
affirm the district court’s judgment confirming the arbitration award.
2
STATEMENT OF FACTS
EdR is an affiliate of Deacero, S.A.P.I. de C.V., a steel manufacturer
located in Mexico. See CR.14. This case arises out of two contracts
executed in December 2012 and April 2013: (1) the Equipment Purchase
Agreement (“EPA”) between Dixie Equipment and EdR; and (2) the
Engineering Project Management and Centerline Installation Contract
(“Installation Contract”) between Dixie Turbine Services and EdR. See
CR.42–82 (EPA); CR.83–170 (Installation Contract). Both the EPA and
the Installation Contract contained arbitration provisions. CR. 51–52
(EPA arbitration provision); CR.115 (Installation Contract arbitration
provision).
I. THE RAMOS ARIZPE PROJECT
Pursuant to the EPA and the Installation Contract, Dixie agreed to
disassemble, refurbish, transport, and install a turbine generator and
related components for a power generation facility in Ramos Arizpe,
Nuevo León, Mexico to serve EdR’s manufacturing plants and other
facilities’ electric power needs (“Project”). CR.14–15.2 EdR planned on
2. Record cites to CR.11–34 come from the Arbitration Award (defined herein) issued
by the Arbitration Panel. The Arbitration Award was issued following the
Arbitration Panel’s receipt of pre- and post-hearing briefing, documentary evidence,
3
selling any excess power it did not need to Mexico’s state-run electric
power provider and other third parties. CR.14.
Following Dixie’s delays and deficient performance throughout the
Project, and after EdR paid it $24,266,213.90, over a million dollars more
than the price agreed-upon in the EPA and Installation Contract, Dixie
abandoned the Project on September 10, 2014. CR.15–16. Dixie’s
premature abandonment of the incomplete Project required EdR to hire
a number of contractors to correct and complete Dixie’s scope of work
under both the EPA and Installation Contracts. CR.16.
II. THE ARBITRATION PROCEEDING
Seeking to recoup the amounts paid to other contractors to correct
and complete Dixie’s scope of work, as well as lost profits associated with
lost sales of power occasioned by the Project’s delayed completion, EdR
filed its Notice of Arbitration in September 2015. CR 12. In October
2015, Dixie filed its Original Answer and Counterclaim. Id. Following
the parties’ selection of the Arbitration Panel, the parties agreed that the
arbitration would be conducted in accordance with the procedures of the
expert and fact witness testimony, Dixie’s Original Answer, and EdR’s counsel’s
responses to the Arbitration Panel’s inquires during the final arbitration hearing.
4
International Center for Dispute Resolution’s (“ICDR”) International
Dispute Resolution Procedures (“ICDR Procedures”) and agreed on a
scheduling order to govern Case Number 01–15–0004–9165 (“Arbitration
Proceeding”). CR.12; CR.35–39 (February 17, 2016 Report of Preparatory
Conference and Scheduling Order (“Initial Scheduling Order”)). Dixie
was initially an active participant in the Arbitration Proceeding. For
example, pursuant to the Initial Scheduling Order, Dixie agreed to a
procedural schedule which provided for the exchange of discovery, expert
designation deadlines, a discovery deadline, and the exchange of pretrial
materials. CR.35–39. Further, Dixie agreed to a final arbitration
hearing beginning September 12, 2016, in Austin, Texas. CR.37.
On April 8, 2016, Dixie’s then-counsel informed the Arbitration
Panel and EdR that it would not pay its portion of the arbitration fees for
unexplained financial reasons. CR.13. Following this representation,
EdR still complied with its obligations under the Initial Scheduling
Order, serving Dixie with its document production and a Statement of
Persons with Knowledge of Relevant Facts. The Arbitration Panel held
a status conference on June 3, 2016, concerning the status of the
Arbitration Proceeding in light of Dixie’s representation that it would not
5
pay its share of the arbitration fees. Id. During this conference, the
Arbitration Panel required Dixie to provide a written status report to the
Panel and EdR. Id.
On June 13, 2016, in response to the Arbitration Panel’s order for a
written status report, Dixie stated that it was “financially unable to
continue to defend” against the claims in the Arbitration Proceeding.
CR.237. Further, Dixie stated that its attorney would “remain as counsel
for Dixie, but [his] role [would] be limited to that of an observer [and]
Dixie [would] no longer be an active participant in the proceedings.” Id.
Dixie requested that the Arbitration Panel “take judicial notice of its
pleadings and give due consideration to the contractual limitations on
damages agreed to under the contracts.” Id.
Following Dixie’s representation, and EdR’s June 13, 2016 request
to continue to the final arbitration hearing, the Arbitration Panel
confirmed that the final arbitration hearing would take place in Austin,
Texas beginning on September 12, 2016, as provided in the previously
agreed-upon Initial Scheduling Order. See CR.13; CR.37. The Panel
noted that Dixie’s counsel would not put on evidence, but would appear
at the hearing in an observer role. CR.13. Subsequently, Dixie informed
6
the Arbitration Panel that Dixie would not be pursuing its counterclaims
because it could not pay the “tribunal fees required to advance these
claims.” Id.
On August 8, 2016, the Arbitration Panel held its final status
conference confirming preparations and deadlines for the final
arbitration hearing. Id. Counsel for EdR and Dixie participated in this
status conference. Id. Prior to the final arbitration hearing, EdR served
its Hearing Exhibit List, Pre-Hearing Brief, and Timeline and Witness
List on the Arbitration Panel and Dixie. CR.13–14.
On September 12 and 13, 2016, the Arbitration Panel held the final
arbitration hearing in Austin, Texas. EdR presented documentary and
testimonial evidence in support of its claims, calling four live witnesses,
including two expert witnesses, who were questioned by the Arbitration
Panel. CR.14. The Arbitration Panel additionally questioned EdR’s
counsel. Id. Dixie’s counsel attended the hearing the morning of
September 12, but did not return for the remainder of the hearing. Id.
Following the hearing, the Arbitration Panel requested EdR brief
discrete issues, which it did, serving Dixie with a copy of its post-hearing
briefing. Id. Despite attending part of the hearing and being copied on
7
all pre- and post-hearing correspondence and pleadings, Dixie did not
request a transcript of the final arbitration hearing or object to the
absence of a transcript.
On November 22, 2016, the Arbitration Panel issued its Final
Award in the form of an 18-page reasoned award (“Arbitration Award”).
CR.11–34; CR.195–97. In issuing its rulings, the Arbitration Panel
referenced and analyzed five specific issues and specifically relied on
“EdR’s pleadings, Dixie’s Original Answer, the evidence presented at the
Final Arbitration Hearing, and post-hearing briefing.” CR.17. The
Arbitration Panel ultimately awarded EdR $13,627,162.30 against Dixie
Equipment and $3,037,022.34 against Dixie Turbine. CR.27.
III. THE DISTRICT COURT CONFIRMS THE ARBITRATION AWARD
EdR promptly filed its Petition to Confirm Arbitration Award in
Travis County state court on November 30, 2016. CR.3–171. Exactly
three months following the Arbitration Panel’s issuance of the award,
Dixie’s non-attorney owner, Claude Hendrickson, filed an “Answer to
Petition to Confirm Arbitration Award” on behalf of Dixie. CR.174–81.
On April 13, 2017, Dixie filed a pleading entitled “Additional Briefing
Related to Motion to Vacate[,]” asserting substantially the same
8
arguments raised before this Court, and EdR filed a response the
following day. CR.230–44.
The district court denied Dixie’s purported Motion to Vacate on
April 18, 2017. On April 19, 2017, the district court granted EdR’s
Petition to Confirm Arbitration Award and confirmed the Arbitration
Award in its entirety, with post-award interest. CR.246–73. Dixie filed
a Motion for New Trial and Motion to Modify the Judgment, again raising
substantially the same arguments it raises before this Court. CR.333–
42. Both motions were overruled by operation of law, and this appeal
followed. CR.365–66.
SUMMARY OF ARGUMENT
The district court confirmed the Arbitration Award, issued after the
Arbitration Panel received and considered pre- and post-hearing briefing,
testimonial and documentary evidence, and Dixie’s Original Answer.
Dixie argues the Arbitration Award should have been vacated because:
(1) it was “unable to participate” in the final arbitration hearing; (2) EdR
did not request a record of the final arbitration hearing on Dixie’s behalf,
and; (3) Dixie could not “present its counterclaims[.]” Dixie claims that
these purported failures of the Arbitration Panel and EdR violated its
9
due-process rights and support vacatur of the Arbitration Award.
Because Dixie’s contentions are foreclosed by Texas law, the Court should
reject them.
To reverse the district court’s judgment, Dixie would have this
Court ignore the presumption in favor of arbitration awards and sanction
the strategy of partially participating in a previously agreed-upon
arbitration proceeding, voluntarily withdrawing from the proceeding,
and re-appearing only after the fact to contest the results of the
proceeding from which it withdrew. Sanctioning Dixie’s strategy would
not serve due process, fairness, or common sense.
Texas law has long held that arbitration awards may be set aside
in only the most egregious of circumstances, none of which are presented
here. Dixie had full notice—indeed it had actual knowledge—of the final
arbitration hearing, and it voluntarily opted not to participate. Dixie had
every opportunity to request a record be made of the final arbitration
hearing, but it failed to do so. Finally, Dixie made no attempt to prove
the purportedly excessive cost of the Arbitration Proceeding, to which it
voluntarily agreed. Dixie cannot establish error in the Arbitration
10
Panel’s actions and decision at all, much less such error that would
support vacatur under Texas law.
The Court should affirm the district court’s judgment confirming
the Arbitration Award.
ARGUMENT
As this Court and the Texas Supreme Court have repeatedly
recognized, “Texas law has long favored arbitration of disputes.”
Vorwerk v. Williamson Cnty. Grain, Inc., No. 03-10-00549-CV, 2012 WL
593481, at *4 (Tex. App.—Austin Feb. 23, 2012, pet. denied) (mem. op.)
(citing Prudential Secs. Inc. v. Marshall, 909 S.W.2d 896, 898 (Tex. 1995)
(orig. proceeding) (per curiam)). Arbitration awards are conclusive as to
all matters submitted to the arbitrators because the award has the effect
of a judgment of a court of last resort. Id.
Accordingly, judicial review of arbitration awards “is
extraordinarily narrow,” and courts “indulge every reasonable
presumption in favor of upholding the arbitration award.” Id. (citing E.
Tex. Salt Water Disposal Co. v. Werline, 307 S.W.3d 267, 271 (Tex. 2010);
CVN Grp., Inc. v. Delgado, 95 S.W.3d 234, 238 (Tex. 2002)). An
arbitration award must be confirmed unless it is vacated, modified, or
11
corrected pursuant to one of the limited—and exclusive—grounds set
forth in the Federal Arbitration Act (FAA).3 Venture Cotton Coop. v.
Neudorf, No. 14-13-00808-CV, 2014 WL 4557765, at *3 (Tex. App.—
Houston [14th Dist.] Sept. 16, 2014, no pet.) (mem. op.) (citing Hall St.
Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 584 (2008) (holding that the
bases for vacatur under the FAA are exclusive)).
Dixie urges the Court to vacate the arbitration award for
“misconduct” under section 10 of the FAA.4 That provision authorizes
vacatur in limited circumstances, including
3. The parties agreed the Arbitration Proceeding “would be governed in all aspects
by Texas law.” CR.12. Accordingly, both the FAA and TAA may apply. In re Olshan
Found. Repair Co., 328 S.W.3d 883, 890 (Tex. 2010) (orig. proceeding); In re
Kempwood Assocs., L.P., 9 S.W.3d 125, 127–28 (Tex. 1999) (orig. proceeding) (per
curiam). Because Dixie raises vacatur grounds only pursuant to the FAA, EdR
focuses its brief on the FAA.
4. Dixie actually cites 9 U.S.C. § 10(c) as the asserted statutory basis for vacatur of
the arbitral panel’s award for alleged misconduct. Appellants’ Br. at 7–8. Section
10(c), however, does not concern misconduct, but states that “The United States
district court for the district wherein an award was made that was issued pursuant
to section 580 of title 5 may make an order vacating the award upon the application
of a person, other than a party to the arbitration, who is adversely affected or
aggrieved by the award, if the use of arbitration or the award is clearly inconsistent
with the factors set forth in section 572 of title 5.” 9 U.S.C. § 10(c). The only portion
of 9 U.S.C. section 10 that concerns “misconduct” is 9 U.S.C. section 10(a)(3). Because
the substance of Dixie’s argument on appeal concerns “misconduct,” EdR assumes
Dixie seeks vacatur under that provision. See Appellants’ Br. at 7–8; see also In re
Chestnut Energy Partners, Inc., 300 S.W.3d 386, 397-98 (Tex. App.—Dallas 2009,
pet. denied) (noting that section 10(a) sets forth the limited situations in which a
court may vacate an arbitration award); Jacaman Polaris Sports Ctr. Ltd. v. Falcon
12
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.
9 U.S.C. § 10(a)(3); see Appellants’ Br. at 7–8. “Misconduct” authorizing
vacatur of an award is not an error in the arbitrator’s determination or
an error of law, but is conduct that “so affects the rights of a party that it
may be said that he was deprived of a fair hearing.” Laws v. Morgan
Stanley Dean Witter, 452 F.3d 398, 399 (5th Cir. 2006).
Dixie cannot demonstrate any misconduct by the Arbitration
Panel—let alone such conduct that deprived Dixie of an opportunity for
a fair hearing. Dixie had full notice and the opportunity to be heard in
the Arbitration Proceeding. It voluntarily abandoned the Arbitration
Proceeding claiming an alleged and unproven inability to pay its portion
of the arbitration fee. The district court properly granted EdR’s Petition
to Confirm Arbitration Award. This Court should affirm.
Int’l Bank, No. 04-16-00481-CV, 2017 WL 2852632, at *3 (Tex. App.—San Antonio
July 5, 2017, no pet.) (mem. op.) (same).
13
I. THE ARBITRATION PANEL’S DECISION TO HOLD THE FINAL
ARBITRATION HEARING IN DIXIE’S VOLUNTARY ABSENCE AND IN
ACCORDANCE WITH THE PANEL’S RULES DID NOT VIOLATE DIXIE’S
PURPORTED DUE PROCESS OR CONSTITUTE MISCONDUCT UNDER THE
FAA.
Dixie admits that it was fully aware of the Arbitration Proceeding
pending in the ICDR that was set to resolve the competing breach-of-
contract claims asserted by Dixie and EdR. Appellants’ Br. at 3. It
further admits that it voluntarily abandoned the proceedings due to
alleged financial issues. Id. Dixie nonetheless contends that the
Arbitration Panel engaged in misconduct and violated its due-process
rights by conducting the final arbitration hearing in Dixie’s absence
without making a record. Id. at 5–14. Dixie attempts to analogize to the
post-answer-default rule that, in the absence of a reporter’s record, a
defaulting party is entitled to remand for a new trial. Id. at 8–13 (citing
Smith v. Smith, 544 S.W.2d 121, 122 (Tex. 1976)). Claiming that there
are no “reported case[s] addressing this issue in the arbitration context,”
id. at 8, Dixie invites the Court to craft a new rule that would give a party
an automatic rehearing before an arbitration panel when the party, after
notice of the proceedings, and even partial participation, voluntarily
abandons the proceedings and a record is not made. Id. at 8–13.
14
For multiple reasons, the Court should reject Dixie’s invitation.
First, Dixie had full notice, indeed it had actual knowledge, of the
Arbitration Proceeding, including the final arbitration hearing, and it
voluntarily abandoned it. CR.13–14; CR.237. Several cases—reported
and unreported—have rejected the notion that an arbitral decision may
be upended on due-process or “misconduct” grounds by a party’s failure
to appear after notice—with or without a transcript of the proceedings.
Second, courts repeatedly hold that parties to arbitration will be held to
the rules to which they contractually obligated themselves. When, as
here, arbitration rules specifically authorize the arbitral panel to proceed
in the absence of a party who had notice, the absent party has no grounds
to complain about the conduct of the hearing. Third, the burden to
procure a transcript of the final arbitration hearing lay squarely with
Dixie, both under the rules of the ICDR and under well-established Texas
jurisprudence. Dixie’s voluntary abdication of its responsibility to make
its own record does not establish misconduct or a violation of due process
by the panel.
15
None of the grounds asserted by Dixie constitutes misconduct to
support vacatur of the Arbitration Panel’s decision under the FAA. The
district court’s decision to confirm the Arbitration Award was correct.
A. The Arbitration Panel’s Decision To Hold the Final
Arbitration Hearing in Dixie’s Absence Comported with Due
Process Because Dixie Had Full Notice of the Hearing and
Voluntarily Elected To Abandon the Proceedings.
Dixie erroneously contends that the Arbitration Panel’s “ex parte
receipt of evidence constitutes misbehavior by the arbitrators prejudicial
to Dixie’s rights in violation of 9 U.S.C. § 10(c)[sic].” Appellants’ Br. at 8.
In other words, Dixie contends that a final arbitration hearing in which
one party presents evidence while another does not, in general, violates
the FAA. Id. As support for this erroneous statement of the law, Dixie
cites Totem Marine Tug and Barge, Inc. v. North American Towing, Inc.,
607 F.2d 649, 653 (5th Cir. 1979), for the principle that “arbitrators
cannot conduct ex parte hearings or receive evidence except in the
presence of each other and of the parties, unless otherwise stipulated.”
Appellants’ Br. at 8. Dixie’s assertion misstates both the law of the Fifth
Circuit, as expressed by Totem Marine and later cases, as well as Texas
jurisprudence, which universally authorizes ex parte hearings, provided
the absent party received notice.
16
To begin, there is no blanket rule prohibiting ex parte arbitration
hearings.5 To the contrary, “[w]hile all parties in an arbitration
proceeding are entitled to notice and an opportunity to be heard, due
process is not violated if the hearing proceeds in the absence of one of the
parties when that party’s absence is the result of his decision not to
attend.” Berstein Seawell & Kove v. Bosarge, 813 F.2d 726, 729 (5th Cir.
1987) (quoting Totem Marine, 607 F.2d at 651) (other citations omitted).
To support vacatur of an award based on an ex parte hearing, a party
must show “the absence of actual or constructive notice.” 21st Fin. Servs.,
L.L.C. v. Manchester Fin. Bank, 747 F.3d 331, 337 (5th Cir. 2014) (citing
Bernstein, 813 F.3d at 729). “Where there is sufficient evidence showing
5. Dixie elides the holding of Totem Marine to suggest that it generally prohibits ex
parte arbitration hearings. The case makes no such general proclamation. The very
quote offered by Dixie for its purported general rule against ex parte hearings
qualifies the rule with the limitation, “unless otherwise stipulated.” 607 F.2d at 653.
Totem Marine specifically notes that the arbitration rules governing the parties
before the court required that “all evidence shall be taken in the presence of all the
parties, except where any of the parties is absent in default or has waived his right
to be present.” 607 F.2d at 652 (emphasis added). Like the forum rules in Totem
Marine, the governing rules in this matter expressly authorized the Arbitration Panel
to conduct a hearing in the absence of a party, if the party failed to appear after being
duly notified. ICDR art. 26; see infra § I.B. Thus Totem Marine supports the panel’s
choice to conduct its hearing in Dixie’s absence: Dixie had actual knowledge of the
final arbitration hearing and elected not to participate, with the exception of its
counsel attending part of the first day of the hearing. The rules of the forum
“otherwise stipulated” that the Arbitration Panel was authorized to conduct its
hearing without Dixie.
17
that a party has received actual or constructive notice of the arbitration
hearing, the award will be enforced.” Grp. 32 Dev. & Eng’g, Inc. v. GC
Barnes Grp., No. 3:14-CV-2436-B, 2015 WL 144082, at *4 (N.D. Tex. Jan.
9, 2015) (citing 21st Fin. Servs., L.L.C., 747 F.3d at 337).
Texas state courts have come to the same conclusion. In Ewing v.
Act Catastrophe-Texas L.C., 375 S.W.3d 545, 551–52 (Tex. App.—
Houston [14th Dist.] 2012, pet. denied), the Fourteenth Court of Appeals
considered Ewing’s due-process challenge (nearly identical to that
asserted by Dixie) to an arbitration award issued after a hearing about
which she had notice, but elected not to attend. Citing the Fifth Circuit’s
decision in Berstein, the court held that due process does not mandate
that parties be heard at an arbitration proceeding. Due process requires
only that parties be given a meaningful opportunity to be heard. Id.
(citing Berstein, 813 F.2d at 729). The court rejected Ewing’s due-process
challenge, pointedly concluding “[i]f a party’s absence at the arbitration
hearing is the result of her decision not to attend, there is no due process
violation.” Id.
The Fourteenth Court reached a similar result in KNJ Enterprises,
Inc. v. Wilbanks & Wilbanks, P.C., No. 14-14-00271-CV, 2015 WL
18
1736400 (Tex. App.—Houston [14th Dist.] Apr. 14, 2015, no pet.) (mem.
op.). There, the court considered KNJ’s assertion that, even though it
received notice of the arbitration proceedings, its absence prevented the
arbitrator from resolving its claims. Id. at *5. The court rejected KNJ’s
argument, noting that KNJ “could not prevent consideration of claims
sent to arbitration by opting not to participate in an arbitration
proceeding of which it had notice.” See also Neudorf 2014 WL 4557765,
at *5–6 (rejecting due-process challenge to arbitral panel’s decision to
conduct an ex parte hearing when the objecting party intentionally
avoided service of the arbitration complaint and notice of hearing).
Other Texas courts have likewise rejected attempts to vacate
arbitration awards and decisions based on one party’s intentional
absence from the proceedings. See Saks v. Rogers, No. 04-16-00286-CV,
2017 WL 3159712, at *9 (Tex. App.—San Antonio July 26, 2017, no pet.)
(mem. op.) (noting that “[d]ue process is satisfied when notice procedures
are followed in compliance with the rules under which the parties agreed
to be bound”); Gilbert v. Rain & Hail Ins., No. 02-16-00277-CV, 2017 WL
710702, at *4 (Tex. App.—Fort Worth Feb. 23, 2017, pet. denied) (mem.
op.) (refusing to vacate arbitration decision for alleged misconduct when
19
arbitrator conducted hearing in the absence of a party who had notice
and was given the “opportunity to participate in the proceedings but
explicitly chose not to.”); cf. Vorwerk, 2012 WL 593481, at *5 (“Courts
have held that neither an arbitrator’s receipt of ex parte affidavits or ex
parte documents nor an arbitrator’s ex parte telephone call to a party’s
counsel constitute arbitrator misconduct.”); Peacock v. Wave Tec Pools,
Inc., 107 S.W.3d 631, 640 (Tex. App.—Waco 2003, no pet.) (same).
Simply put, no due-process violation arises from an arbitration
panel’s decision to conduct an arbitration hearing in a party’s voluntary
absence after notice is provided. The Arbitration Panel’s decision to
proceed was not misconduct at all, much less misconduct rising to the
level necessary to void the award under the FAA.
B. The Arbitration Panel’s Decision To Conduct the Hearing in
Dixie’s Absence Was Authorized by the Rules of the ICDR.
It is axiomatic that arbitration is “a matter of consent, not coercion,
and parties are generally free to structure their arbitration agreements
as they see fit.” Volt Info. Sci., Inc. v. Bd. of Trs. of Leland Stanford
Junior Univ., 489 U.S. 468, 479 (1989). To that end, the United States
Supreme Court has recognized that parties may “specify by contract the
rules under which [their] arbitration will be conducted.” Id. As Judge
20
Posner has stated in more colorful terms: “[S]hort of authorizing trial by
battle or ordeal or, more doubtfully, by a panel of three monkeys, . . .
parties are as free to specify idiosyncratic terms of arbitration as they are
to specify any other terms in their contract.” Baravati v. Josephthal,
Lyon & Ross, Inc., 28 F.3d 704, 709 (7th Cir. 1994). These agreements
are strictly enforced in Texas. “Courts treat arbitration agreements as
other contracts in applying the legal rules to interpret them. The goal is
to discern the true intentions of the parties, as the FAA’s primary
purpose is to ensure private agreements to arbitrate are enforced
according to their terms, no more, no less.” In re Olshan Found. Repair
Co., LLC, 328 S.W.3d 883, 889 (Tex. 2010) (orig. proceeding).
Here, the parties voluntarily agreed to be governed by the ICDR
Procedures that would both bind them and authorize action by the
Arbitration Panel in the event of a party’s absence from the proceedings.
See CR.12 (the Arbitration Award noting that “[t]he parties further
agreed that . . . [the Arbitration Proceeding] would be governed by the
ICDR Procedures.”). In particular, Article 26 of the ICDR Procedures
governs default. In relevant part, Article 26 states:
...
21
2. If a party, duly notified under these Rules, fails to
appear at a hearing without showing sufficient cause of such
failure, the tribunal may proceed with the hearing.
3. If a party, duly invited to produce evidence or take any
other steps in the proceedings, fails to do so within the time
established by the tribunal without showing sufficient cause
for such failure, the tribunal may make the award on the
evidence before it.
ICDR art. 26.2, .3.6 Under the plain text of the ICDR Procedures, the
Arbitration Panel was specifically authorized to proceed with the final
hearing and take evidence in Dixie’s voluntary absence. See Grp. 32 Dev.
& Eng., Inc., 2015 WL 144082, at *6 (rejecting attempt to vacate award
issued after an ex parte hearing because the governing rules permitted
the hearing: “Furthermore, the Court finds no reason why the award
should be vacated based on the arbitrator’s decision to proceed ex
parte . . . as [the governing rule] permits such a practice.”).
C. It Was Dixie’s Burden To Procure a Transcript of the Final
Arbitration Hearing; Its Failure To Do so Does Not Support
Vacatur of the Arbitration Award.
Just as courts strictly enforce agreements to arbitrate, they strictly
enforce arbitration awards, and hold objecting parties to a high burden
6. See International Dispute Resolution Procedures, Available at
https://www.icdr.org/icdr/ShowProperty?nodeId=/UCM/ADRSTAGE2020868&revisi
on=latestreleased (last accessed December 12, 2017).
22
of proof. Texas courts, including this Court, unanimously hold that
“[w]hen a party seeks to modify or vacate an arbitration award, it has the
burden of bringing forth a complete record and establishing any basis
that would warrant vacating the award.” Vorwerk, 2012 WL 593481, at
*5; Nafta Traders, Inc. v. Quinn, 339 S.W.3d 84, 101–02 (Tex. 2011)
(noting that, if error cannot be demonstrated in the record, an arbitration
award must be presumed correct); Statewide Remodeling, Inc. v.
Williams, 244 S.W.3d 564, 569-70 (Tex. App.—Dallas 2008, no pet.); Craft
v. Davis, No. 2-07-332-CV, 2008 WL 4180357, at *2 & n.11 (Tex. App.—
Fort Worth Sept. 11, 2008, no pet.) (mem. op.); GJR Mgmt. Holdings, L.P.
v. Jack Raus, Ltd., 126 S.W.3d 257, 263 (Tex. App.—San Antonio 2003,
pet. denied); Kline v. O’Quinn, 874 S.W.2d 776, 783 (Tex. App.—Houston
[14th Dist.] 1994, writ denied); House Grain Co. v. Obst, 659 S.W.2d 903,
906 (Tex. App.—Corpus Christi 1983, writ ref’d n.r.e.).
Bringing forth a complete record from an arbitration proceeding is
just as critical as bringing forth a complete record from a judicial
proceeding, even though arbitration proceedings are traditionally
designed to have fewer procedural rules. Nafta Traders, 339 S.W.3d at
101-02 (noting that arbitration proceedings “are often informal;
23
procedural rules are relaxed, rules of evidence are not followed, and no
record is made.”). Regardless, when parties seek judicial review of
arbitration proceedings, “the only review to which they can agree is the
kind of review courts conduct. If error cannot be demonstrated, an award
must be presumed correct.” Id.
Dixie’s attempt to carve out an exception to this rule for parties who
intentionally and voluntarily avoid arbitration hearings has no support
in Texas law. As the Court implicitly acknowledged in Vorwerk, an
objecting party is required to procure a full record of the proceedings in
order to vacate an award, even when the party is voluntarily absent from
the proceedings. 2012 WL 593481, at *5–6. In Vorwerk, the Court
rejected an attempt to vacate an arbitration award based on ex parte
communications because the objecting party failed to procure a record.
Id. at *6. Like Dixie, Vorwerk, had answered and voluntarily
participated in arbitration proceedings before he failed to appear at a
hearing. Id. at *1. Subsequent to the hearing, the president of the
arbitration organization engaged in additional ex parte fax
communications with Vorwerk’s opposing party. Id. at *1–2. When the
arbitration panel later issued an award against Vorwerk, he sought to
24
vacate the award, claiming misconduct based on the ex parte
communications. Id. at *5.
Even though Vorwerk, like Dixie, was absent from the hearing, the
Court enforced the strict rule that Dixie seeks to avoid here: As the
objecting party, Vorwerk was obligated to procure a record of the
arbitration proceedings—notwithstanding his absence. Id. at *6.
Without a record, the Court could not “conclusively determine the basis
for the arbitrator’s award, whether new information was conveyed to the
panel in the fax, and if it was, whether it deprived Vorwerk of a fair
hearing.” Accordingly, the Court rejected Vorwerk’s attempt to vacate
the arbitration award because he failed to procure a record. Id.
Similarly, in Jacaman Polaris Sports Center Ltd. v. Falcon
International Bank, No. 04-16-00481-CV, 2017 WL 2852632, at *3 (Tex.
App.—San Antonio July 5, 2017, no pet.) (mem. op.), the San Antonio
Court rejected a party’s argument that an arbitration award should be
vacated on misconduct grounds because the arbitration panel failed to
make a record of its hearing in the absence of the objecting party. In
Jacaman, the arbitration panel provided the parties notice of a scheduled
25
hearing, which Jacaman did not attend. Id. at *1.7 Subsequently, the
panel issued its award, adverse to Jacaman. Id. Jacaman challenged the
award claiming FAA misconduct for the panel’s failure to record the
hearing at issue. Id. at 2–3. Citing both the rule of the arbitral forum,
which provided all parties the right to request a record, as well as the
standard Texas rule that the objecting party had the burden to procure a
record of the arbitration proceedings, the court rejected Jacaman’s
challenge. Id. at *3 (citing Commercial Arbitration Rules of the Am.
Arbitration Assoc. R-28; In re Chestnut Energy Partners, Inc., 300
S.W.3d 388, 400 (Tex. App.—Dallas 2009, pet. denied); Statewide
Remodeling, 244 S.W.3d at 568; see also KNJ Enter., 2015 WL 1736400,
at *4–5 (rejecting party’s attempt to vacate an arbitration award because
the party failed to procure a complete record of the proceedings, even
though party was absent from the proceedings).
Dixie, like Vorwerk and Jacaman, had full notice and actual
knowledge of the Arbitration Proceeding, including the final arbitration
7. The court’s decision does not make clear that Jacaman did not attend the hearing,
or that a hearing even occurred. However, the Brief of Appellee, Falcon Bank, at 6-
7, discusses these facts, providing record cites. See http://www.search.txcourts.gov/
SearchMedia.aspx?MediaVersionID=6caac296-93f2-4ca2-a1f5-dc7528f8a302&coa=c
oa04&DT=Brief&MediaID=bfe0e3e7-cd51-42d1-9365-edb1789ddc83 (last accessed
December 12, 2017).
26
hearing. CR.13–14; CR.35–39 (Initial Scheduling Order noting final
arbitration hearing would begin September 12, 2016). The Initial
Scheduling Order, to which Dixie agreed in February 2016, scheduled the
final arbitration hearing to begin September 12, 2016. CR. 37. Dixie,
through its counsel, even attended part of the final arbitration hearing.
CR.14. Dixie was well aware that the Arbitration Panel would receive
evidence at the final arbitration hearing. CR.13. Nothing prevented
Dixie from requesting that a transcript be made of the final arbitration
hearing, and the record reflects no objection in the Arbitration
Proceeding to the Arbitration Panel and EdR’s intention to not procure a
transcript. Having failed in its obligation to make its record for appeal,
Dixie cannot shift the burden to EdR to manufacture its due-process
claim. Nafta Traders, 339 S.W.3d at 101–02.
Dixie’s proposed new rule, obligating arbitration panels and
opposing parties to secure a transcript when one party voluntarily
abandons an arbitration hearing after notice and prior participation in
the arbitration proceeding, has been effectively rejected by every court to
have considered it, including this Court. The district court properly
27
rejected Dixie’s challenge to the Arbitration Award. The Court should
affirm.
II. THE ARBITRATION PANEL’S DECISION TO HOLD THE FINAL
ARBITRATION HEARING DESPITE DIXIE’S CLAIMED INABILITY TO PAY
IS NOT GROUNDS FOR VACATUR.
The Court should reject Dixie’s contention that its due-process
rights were violated because it was “prevented from bringing its claims
due to lack of funds.” Appellants’ Br. at 14. Dixie waived its complaint
in the first instance by not offering any proof in the arbitral forum of the
likelihood of incurring excessive costs. Even if the Court considers Dixie’s
inability-to-pay claim, however, it should still affirm the district court’s
judgment because Dixie agreed to forfeit its counterclaims in arbitration
for failure to pay its required deposit. Because Dixie failed to offer any
proof of its financial circumstances, but agreed in any event to the
consequences of its decision to not pay, the district court correctly
confirmed the Arbitration Award.
A. Dixie Failed To Prove Its Inability To Pay in the Arbitration
Proceeding.
Dixie contends that its due-process rights were violated because it
was “barred from bringing its claims in arbitration” due to its alleged
inability to pay. Id. at 15. While Texas law recognizes the possibility
28
that an arbitration agreement may be held substantively unconscionable
due to excessively high costs, a party seeking to avoid arbitration on such
grounds bears the burden of proving that arbitration would be
prohibitively expensive. Olshan, 328 S.W.3d at 893. “[P]arties must at
least provide evidence of the likely cost of their particular arbitration,
through invoices, expert testimony, reliable cost estimates, or other
comparable evidence.” Id. at 895. “Evidence that merely speculates
about the risk of possible cost is insufficient.” Id.; see also Venture Cotton
Coop. v. Freeman, 435 S.W.3d 222, 227 (Tex. 2014) (a party opposing
arbitration bears the burden to raise an affirmative defense to the
agreement’s enforcement). Failing that proof, a party may be compelled
to participate in arbitration. Olshan, 328 S.W.3d at 894–97 (overturning
the denial of a motion to compel arbitration because the party seeking to
avoid arbitration “provided no comparison of [the costs of arbitration] to
the expected cost of litigation, the amount of their claim, or their ability
to pay these costs”).
Dixie made no attempt to comply with Olshan’s requirements.
Dixie never claimed that the parties’ arbitration agreements were
unconscionable, nor did it otherwise challenge their enforceability.
29
Rather, Dixie initially agreed to and participated in the Arbitration
Proceeding. CR.13–14; CR.35–39 (February 17, 2016 Report of
Preparatory Conference and Scheduling Order signed by EdR and Dixie’s
counsels). In fact, Dixie filed a breach-of-contract counterclaim in the
Arbitration Proceeding based on the contracts containing the initial
arbitration agreements. CR.215–20. Dixie offered no evidence to support
its claim that the cost of arbitration would be excessive, but merely
announced through counsel that it would no longer participate due to its
alleged inability to pay, and abandoned the proceedings, limiting its role
to “that of an observer.” CR.13; CR.237.
Having failed entirely to document with evidence its claim that the
cost of the agreed-to arbitration was excessive, Dixie cannot now avoid
the effect of its agreement to arbitrate by offering unsubstantiated claims
of excessive costs. Bonded Builders Home Warranty Assoc., Inc. v. Smith,
488 S.W.3d 468, 482 (Tex. App.—Dallas 2016, no pet).8 Dixie’s due-
8. Moreover, Dixie’s appellate briefing of its Issue 3 concerning its alleged inability to
pay fails to comply with Texas Rule of Appellate Procedure 38.1(i). Dixie cites to one
page from the appellate record: its letter to the Arbitration Panel stating that it would
no longer participate in the proceedings due to cost. Appellants’ Br. at 14. And it
cites one decision from this Court for the principle that Dixie could not represent itself
in the arbitration under Texas law. Id. at 14–15. Dixie makes no attempt to brief its
purported entitlement to vacatur of the Arbitration Panel’s award for its alleged
inability to pay in the absence of the evidence required by Olshan. The Court should,
30
process claim based on its alleged and unproven inability to pay fails as
a matter of law.
B. The ICDR Procedures Specifically Authorized the Arbitration
Panel To Reject Dixie’s Counterclaims for Failure To Pay Its
Share of the Arbitration Fees.
In any event, Dixie cannot be heard to complain about its inability
to present its counterclaims in arbitration due to its alleged financial
problems. Dixie agreed to the rules of the arbitral forum, which
unequivocally state that “[f]ailure of a party asserting a claim or
counterclaim to pay the required deposits shall be deemed a withdrawal
of the claim or counterclaim.” ICDR art. 36.4.
In the absence of any supporting evidence to substantiate its claim
that participation in the arbitration would violate its due process, Dixie
must held to its bargain with EdR. Dixie agreed to the rules of the forum
that required payment of arbitration fees to present counterclaims and
other claims for relief. See CR.12 (noting the parties agreed the
Arbitration Proceeding would “be governed by the ICDR Procedures.”).
therefore, refuse to consider Dixie’s Issue 3. Tex. R. App. P. 38.1(i); BDO Seidman
LLP v. J.A. Green Dev. Corp., 327 S.W.3d 852, 859 n.4 (Tex. App.—Dallas 2010, no
pet.) (rejecting argument that an arbitration provision violated due process for failure
to provide authority as required by Rule 38.1(i)).
31
The Court should affirm the district court’s judgment confirming the
Arbitration Award.
PRAYER
For these reasons, the Court should affirm the judgment of the
district court.
Respectfully submitted,
/s/ Breck Harrison
Breck Harrison
State Bar No. 24007325
Michael Roberts
State Bar No. 24082153
Danica L. Milios
State Bar No. 00791261
JACKSON WALKER L.L.P.
100 Congress Ave., Suite 1100
Austin, Texas 78701
[Tel.] (512) 236-2000
[Fax] (512) 236-2002
bharrison@jw.com
COUNSEL FOR APPELLEE
32
CERTIFICATE OF SERVICE
I certify that on December 13, 2017, a true and correct copy of the
foregoing document was served via FileTime e-filing system, certified
U.S. mail, return receipt requested, and/or third-party commercial
carrier on the following:
Kevin J. Terrazas
Timothy A. Cleveland
CLEVELAND | TERRAZAS PLLC
4611 Bee Cave Rd., # 306B
Austin, Texas 78746
COUNSEL FOR APPELLANT
/s/ Breck Harrison
Breck Harrison
33
CERTIFICATE OF COMPLIANCE
This document complies with the typeface requirements of TEX. R.
APP. P. 9.4(e) because it has been prepared in a conventional typeface no
smaller than 14-point for text and 12-point for footnotes. This document
also complies with the word-count limitations of TEX. R. APP. P. 9.4(i)
because it contains 6,464 words, excluding any parts exempted by TEX.
R. APP. P. 9.4(i)(1).
/s/ Breck Harrison
Breck Harrison
34