In Re Aker Kvaerner/IHI--Appeal from 55th District Court of Harris County
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Petition for Writ of Mandamus Conditionally Granted and Memorandum Opinion
filed October 13, 2010.
In The
Fourteenth Court of Appeals
NO. 14-10-00538-CV
IN RE AKER KVAERNER|IHI, Relator
ORIGINAL PROCEEDING
WRIT OF MANDAMUS
MEMORANDUM OPINION
On June 17, 2010, relator, Aker Kvaerner|IHI, filed a petition for writ of
mandamus in this Court. See Tex. Gov’t Code Ann. § 22.221 (Vernon 2004); Tex. R.
App. P. 52. In the petition, relator asks this Court to compel the Honorable Dion Ramos,
presiding judge of the 55th District Court of Harris County, to set aside the trial court’s
May 13, 2010 order directing the parties to arbitrate in Houston, Texas. We conditionally
grant the petition.
BACKGROUND
Relator and real party in interest, Bay Ltd., entered into a subcontract (the
“Agreement”) for the construction of a processing facility in Cameron Parish, Louisiana,
in which relator was the contractor. The owner of the project was Cameron LNG, LLC
(“Cameron”).
The Agreement provided for arbitration of any disputes between relator and Bay
with the arbitration to take place in Houston, Texas. However, the Agreement also
contemplated that such claims could be consolidated with any disputes also involving
Cameron.
After a dispute arose between relator and Bay, Bay initiated arbitration with the
American Arbitration Association against relator in Texas on June 26, 2007 (the “Texas
arbitration”).
Subsequently, in December 2007, relator initiated arbitration against
Cameron in San Diego, California, pursuant to its contract with Cameron (the “California
arbitration”).
Relator added Bay to that arbitration proceeding, notwithstanding the
pending Texas arbitration, pursuant to the consolidation provision in the Agreement. The
AAA issued a consolidation order on April 13, 2009, directing that Bay be joined as a
party to the California arbitration, and that Bay’s claims be consolidated in the California
arbitration.
On June 2, 2009, Bay and relator settled part of their dispute and dismissed the
Texas arbitration, but agreed to arbitrate the remaining claims in the California
arbitration. Relator and Cameron subsequently settled their dispute in mediation and, on
August 31, 2009, Cameron was dismissed from the California arbitration.
Relator
notified Bay that it intended to proceed with arbitration of Bay’s claims in San Diego.
Bay responded with a motion to dismiss the California arbitration, on September
18, 2009, and requested that the claims be transferred to the Dallas AAA office.
Subsequently, on September 25, 2009, Bay filed an original petition for declaratory
judgment in the trial court arguing that, with the dismissal of Cameron from the
California arbitration, the arbitration of the claims should take place in Houston.
On February 12, 2010, Bay filed a motion to compel arbitration requesting that the
trial court order the arbitration to take place in Houston. The trial court held a hearing on
Bay’s motion to compel on March 1, 2010, and granted the motion by way of a March 2,
2010 order, but the order did not explicitly specify the location of the arbitration. Bay
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informed the AAA of the trial court’s March 2, 2010 order, and relator filed a motion for
rehearing and/or motion to clarify the March 2, 2010 order.
The AAA requested on March 19, 2010, that the parties submit “locale
contentions” so that it could make its locale determination. On April 16, 2010, the AAA
issued its order that the arbitration “hearings will be held in San Diego, CA.”
After the AAA issued its locale order, Bay filed a motion to clarify the March 2,
2010 order. On May 13, 2010, the trial court signed a new order conflicting with the
AAA’s locale order, directing that the arbitration take place in Houston.
On May 17, 2010, the AAA reversed itself and notified the parties, that the
arbitration hearings would take place in Houston in accordance with the trial court’s May
13, 2010 order. Relator then filed this original proceeding seeking to set aside the trial
court’s May 13, 2010 order.
STANDARD OF REVIEW
To be entitled to the extraordinary relief of a writ of mandamus, the relator must
show that the trial court abused its discretion and there is no adequate remedy by appeal.
In re Laibe Corp., 307 S.W.3d 314, 316 (Tex. 2010) (orig. proceeding) (per curiam). A
trial court abuses its discretion if it reaches a decision so arbitrary and unreasonable as to
constitute a clear and prejudicial error of law, or if it clearly fails to correctly analyze or
apply the law. In re Columbia Med. Ctr. of Las Colinas, 306 S.W.3d 246, 248 (Tex.
2010) (orig. proceeding) (per curiam); In re Cerberus Capital Mgmt., L.P., 164 S.W.3d
379, 382 (Tex. 2005) (orig. proceeding) (per curiam). In determining whether appeal is
an adequate remedy, we consider whether the benefits outweigh the detriments of
mandamus review. In re BP Prods. N. Am., Inc., 244 S.W.3d 840, 845 (Tex. 2008) (orig.
proceeding).
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ANALYSIS
Relator argues that the trial court does not have jurisdiction to change the locale of
the arbitration of the claims as determined by the AAA. At oral argument, Bay conceded
that the May 13, 2010 order is unenforceable. We agree.
The Federal Arbitration Act (“FAA”) is part of the substantive law of Texas.
Capital Income Props.-LXXX v. Blackmon, 843 S.W.2d 22, 23 (Tex. 1992) (orig.
proceeding) (per curiam).1 If the FAA applies, as here, a trial court does not have the
power to review any interlocutory ruling by an arbitration panel. Michaels v. Mariforum
Shipping, S.A., 624 F.2d 411, 414 (2d Cir. 1980). Instead, it is only after an award has
been made by the arbitrators that a party can seek to attack any of the arbitrators’
determinations in court, by moving either to vacate the award, or to modify or correct it.
Id. Accordingly, until an award has been made, a court is simply without authority to
review the validity of arbitrators’ interlocutory rulings. Id.
This case had not yet progressed to the stage of a “final” award at the time of the
trial court’s May 13, 2010 order. Before an arbitration order may be considered “final,”
the arbitrators must have intended for the award to represent their complete determination
of all claims submitted to them. Id. at 413. An interlocutory AAA ruling does not meet
this standard; therefore, such a ruling, including a locale determination, is not subject to
judicial review. Aerojet-Gen. Corp. v. Am. Arbitration Ass’n, 478 F.2d 248, 251 (9th Cir.
1973); S.J. Groves & Sons Co. v. Am. Arbitration Ass’n, 452 F. Supp. 121, 124 (D. Minn.
1978); Conestoga Title Ins. Co. v. Acoustic Home Loans, LLC, No. 1:06-CV-1636, 2007
WL 1058228, at *2 (S.D. Ind. Apr. 5, 2007).
Moreover, under the rules of the AAA by which the parties agreed to be bound,
the arbitrators’ decision on locale is considered final and binding. Specifically, Rule R-
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Bay does not dispute that the FAA is applicable to the underlying arbitration proceeding.
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11 of the Construction Industry Arbitration Rules—the rules applicable to the underlying
arbitration proceeding—states with regard to “Fixing of Locale”:
The parties may mutually agree on the locale where the arbitration is to be
held. If any party requests that the hearing be held in a specific locale and
the other party files no objection thereto within fifteen calendar days after
notice of the request has been sent to it by the AAA, the locale shall be the
one requested. If a party objects to the locale requested by the other party,
the AAA shall have the power to determine the locale, and its decision shall
be final and binding.
(Emphasis added).
In light of the AAA’s decision to reverse its determination of the arbitration’s
locale “[i]n accordance with the submitted revised Court order of May 13th,” it is
appropriate for relator to seek to set aside that order. In that regard, relator points to,
among other things, correspondence in which Bay threatens that a failure to comply with
the trial court’s order as to the required venue for the arbitration could result in a request
for contempt.2
Having determined that the trial court abused its discretion by interfering with an
interlocutory ruling by the AAA, we must determine whether relator has an adequate
remedy by appeal. “[Mandamus] will issue when the failure to do so would vitiate and
render illusory the subject matter of an appeal.” Jack B. Anglin Co. v. Tipps, 842 S.W.2d
266, 272 (Tex. 1992) (orig. proceeding).
Any appeal after the conclusion of the arbitration would vitiate relator’s right to
have the AAA decide the locale issue. To allow judicial intervention prior to the final
award would contravene the fundamental policy of deference to contractual dispute
Bay stated in a letter to the AAA that “AK|IHI’s admonishment to the AAA that it should not
proceed with setting the locale or with appointment of arbitrators is equally misguided, and borders on
encouraging inaction in contempt of a court order. If AK|IHI intends to appeal the Court’s order, that
does not justify further delays on this nearly three year old proceeding. . . . [Bay] asks that [the] AAA
comply with the Court’s order and proceed with arbitrator selection for a panel to arbitrate this dispute in
Texas.” (Emphasis added).
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resolution, and would interfere with the purpose of arbitration: the speedy resolution of
grievance without the time and expense of court proceedings. Millmen Local 550 v.
Wells Exterior Trim, 828 F.2d 1373, 1375 (9th Cir. 1987).3 Therefore, relator does not
have an adequate remedy by appeal.
CONCLUSION
We conclude that the trial court abused its discretion by ordering the parties to
arbitrate their dispute in Houston and otherwise usurping the decision-making authority
of the AAA, and relators do not have an adequate remedy by appeal. Accordingly, we
conditionally grant the petition for writ of mandamus and direct the trial court to vacate
its May 13, 2010 order.
The writ will issue only if the trial court fails to act in
accordance with this opinion.
/s/
Kent C. Sullivan
Justice
Panel consists of Justices Brown, Sullivan, and Christopher.
See also Michaels, 624 F.2d at 414 (“Most of the advantages inherent in arbitration are
dissipated by interlocutory appeals to a district court.”); Collins v. Tex Mall, L.P., 297 S.W.3d 409, 417
(Tex. App.—Fort Worth 2009, no pet.) (“Subjecting partial awards to judicial review would require the
trial courts to hold themselves open as appellate tribunals during on-going arbitration proceedings,
resulting in a waste of time, the interruption of the arbitration proceedings, and delaying tactics in a
proceeding that is supposed to produce a speedy decision.”).
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