GUY WILLIAMS v. ALMA FLORES--Appeal from County Court at Law No 1 of Nueces County

NUMBER 13-01-00545-CV

COURT OF APPEALS

THIRTEENTH DISTRICT OF TEXAS

CORPUS CHRISTI EDINBURG

GUY WILLIAMS, Appellant,

v.

ALMA FLORES, Appellee.

On appeal from the County Court at Law

Number One of Nueces County, Texas.

MEMORANDUM OPINION

Before Chief Justice Valdez and Justices Hinojosa and Castillo

Memorandum Opinion by Justice Hinojosa

Appellant, Guy Williams, challenges the judicial confirmation of an arbitration award in favor of appellee, Alma Flores. Williams maintains that evidence discovered after the arbitration ruling conclusively establishes the evident partiality of the arbitrator, Andrew Lehrman; thus, the trial court erred in denying his motion to vacate the arbitration award and motion for new trial. We affirm the judgment of the trial court.

A. Partiality in Arbitration Proceeding

In his third and fourth points of error, Williams claims the trial court erred in not finding the arbitrator exhibited evident partiality in favor of Flores by: (1) failing to disclose his knowledge of a potential bias or conflict with a witness presented by Williams; (2) conducting the arbitration in a manner which substantially prejudiced Williams s rights by not complying with the arbitration agreement in the method of presentation of the arbitration; (3) refusing to hear evidence from Williams material to the controversy while considering evidence by Flores; (4) disregarding generally accepted accounting principles by miscalculating the accounting numbers in favor of Flores; and (5) failing to find Flores misappropriated $1,500.

Texas has long favored arbitration as a means of disposing of pending disputes. Prudential Sec. Inc. v. Marshall, 909 S.W.2d 896, 898 (Tex. 1995); Brazoria County v. Knutson, 142 Tex. 172, 176 S.W.2d 740, 743 (1943). We review a trial court s decision to confirm or vacate an arbitration award de novo. Henry v. Halliburton Energy Servs., Inc., 100 S.W.3d 505, 508 (Tex. App. Dallas 2003, pet. denied); see McIlroy v. Painewebber, Inc., 989 F.2d 817, 819 (5th Cir. 1993). An arbitration award has the effect of a judgment of a court of last resort and is entitled to great deference in a court of law. City of San Antonio v. McKenzie Constr. Co., 136 Tex. 315, 150 S.W.2d 989, 996 (1941). A trial court reviewing the award may not substitute its judgment for the arbitrator s merely because it would have reached a different conclusion. Int l Bank of Commerce Brownsville v. Int l Energy Dev. Corp., 981 S.W.2d 38, 42 (Tex. App. Corpus Christi 1998, pet. denied). Every reasonable presumption will be indulged to uphold the arbitration proceeding, and none indulged against it. CVN Group, Inc. v. Delgado, 95 S.W.3d 234, 238 (Tex. 2002); House Grain Co. v. Obst, 659 S.W.2d 903, 905-06 (Tex. App. Corpus Christi 1983, writ ref d n.r.e.).

The Texas General Arbitration Act ( TGAA ) permits courts to set aside arbitration awards only in limited circumstances. Absent specific common-law or statutory grounds for vacating, modifying, or correcting an award, the reviewing court must confirm it. See Tex. Civ. Prac. & Rem. Code Ann. 171.087 (Vernon Supp. 2004); Callahan & Assocs. v. Orangefield Indep. Sch. Dist., 92 S.W.3d 841, 844 (Tex. 2002). A court may vacate an arbitration award on statutory grounds if: (1) the award was procured by fraud, corruption, or other undue means; (2) a party was prejudiced by the evident partiality, or by the corruption, misconduct, or willful behavior of the arbitrator; (3) the arbitrator exceeded his power; (4) the arbitrator refused to postpone the hearing, refused to hear evidence material to the controversy, or otherwise conducted the hearing in a manner so as to substantially prejudice the rights of a party; or (5) if there was no valid arbitration agreement, the issue was not adversely determined in a proceeding to compel or stay arbitration, and the complaining party did not participate in the arbitration hearing without raising an objection. Tex. Civ. Prac. & Rem. Code Ann. 171.088(a) (Vernon Supp. 2004); Crossmark, Inc. v. Hazar, 124 S.W.3d 422, 430 (Tex. App. Dallas 2004, pet. denied).

1. Evident Partiality

A party seeking to vacate an award on the basis of evident partiality must prove the existence of facts that would establish a reasonable impression of the arbitrator s partiality to one party. Babcock & Wilcox Co. v. PMAC, Ltd., 863 S.W.2d 225, 233 (Tex. App. Houston [14th Dist.] 1993, writ denied). A prospective neutral arbitrator selected by the parties exhibits evident partiality by not disclosing facts which might, to an objective observer, create a reasonable impression of the arbitrator s partiality. Burlington N. R.R. Co. v. TUCO, Inc., 960 S.W.2d 629, 636 (Tex. 1997).

Here, in March 1999, both parties agreed in writing on the selection of Lehrman as the neutral arbitrator, and no evidence exists that Lehrman failed to disclose an improper relationship with either party. Instead, the gist of Williams s argument centers on a letter written by one of his witnesses. The letter, addressed to a partner in Lehrman s law firm and courtesy copied to Lehrman, alleged the partner made slanderous remarks against the witness and his wife, a Nueces County District Court Judge. // The existence of the letter was unbeknownst to Williams until after the arbitration ruling. The witness testified he faxed the letter on January 22, 1999. Williams also provided an affidavit from the witness s secretary stating that Lehrman had contacted the office and wanted to talk about the letter. Williams argues that Lehrman s failure to disclose his knowledge of this letter evidences Lehrman s partiality in favor of Flores.

In denying Williams s motion to vacate the arbitration award, the trial court specifically found that as the movant, Williams had not met his burden of establishing that Lehrman had a duty to disclose the alleged potential bias. While a neutral arbitrator has a duty to disclose dealings of which he or she is aware that might create an impression of possible bias , Mariner Fin. Group, Inc. v. Bossley, 79 S.W.3d 30, 35 (Tex. 2002) (quoting Commonwealth Coatings Corp. v. Cont l Cas. Co., 393 U.S. 145, 149 (1968)), the ultimate burden of proving an arbitrator s partiality belongs to the complaining party. Id. Despite repeated urging by the trial court, Williams did not present testimony from the arbitrator in conjunction with his motion to vacate the arbitration award. Instead, Williams provided testimony from the witness, concluding that the arbitrator might tend to discredit the witness s affidavit because of the existence of the letter. Such subjective facts are not sufficient to meet the objective standard in TUCO. See Henry, 100 S.W.3d at 509 n.3. Additionally, following the denial of Williams s motion to vacate, Lehrman testified by deposition that: (1) he never received the letter; (2) the letter did not accuse him of committing any improper conduct; (3) to the best of his recollection, he was unaware of the letter prior to the arbitration; and (4) he was later informed by the partner that the matter was resolved and the witness was satisfied.

Under TUCO s objective standard, the consequences for nondisclosure are directly tied to the materiality of the unrevealed information. Mariner Fin. Group, 79 S.W.3d at 32. A similar standard is recognized under the Federal Arbitration Act. Int l Bank of Commerce, 981 S.W.2d at 44 (to warrant relief from arbitration award under Federal Arbitration Act, arbitrator s partiality must be direct, definite, and capable of demonstration rather than remote, uncertain or speculative").

Here, Lehrman had no relationship to any of the parties to the arbitration; and the attenuated relationship between Lehrman and Williams s witness was immaterial at best. Unlike in Mariner Fin. Group, the arbitrator here did not have an adverse relationship with a party s expert witness. In fact, the testimony of the witness in question merely corroborated other testimony concerning the contractual relationship between the parties. Further, there is no objective evidence that the mere existence of the letter created a reasonable impression of the arbitrator s partiality. As recognized by Justice White in Commonwealth Coatings, some undisclosed relationships are too insubstantial to warrant vacating an award. Commonwealth Coatings, 393 U.S. at 152 (White, J., concurring). Under the circumstances of this case, we conclude that any relationship existing between Lehrman and Williams s witness was too insubstantial to warrant vacating the arbitration award. Accordingly, we hold that Williams has failed to satisfy his burden of showing that the arbitrator s nondisclosure would create a reasonable impression of partiality to an objective observer.

2. Failure to Comply with the Arbitration Agreement

Williams also contends that Lehrman exceeded his power by not complying with the arbitration agreement in the method of presentation of the arbitration. Specifically, Williams complains that Lehrman accepted and considered supplemental evidence submitted by Flores after her initial brief was filed, in contravention of the arbitration agreement.

As the Texas Supreme Court stated, the authority of arbitrators is derived from the arbitration agreement and is limited to a decision of the matters submitted therein either expressly or by necessary implication. Gulf Oil Corp. v. Guidry, 160 Tex. 139, 327 S.W.2d 406, 408 (1959). Arbitrators, therefore, exceed their authority when they decide matters not properly before them. City of Baytown v. C.L. Winter, Inc., 886 S.W.2d 515, 518 (Tex. App. Houston [1st Dist.] 1994, writ denied).

Here, Williams does not contend that Lehrman decided an issue that was outside the scope of the agreement. Williams merely complains that Lehrman incorrectly decided an issue within the scope of the agreement. Even if true, this would not amount to Lehrman exceeding his authority. See Action Box Co. v. Panel Prints, Inc., 130 S.W.3d 249, 251-52 (Tex. App. Houston [14th Dist.] 2004, no pet.).

3. Failure to Hear Evidence Material to the Controversy

Williams next contends that Lehrman was partial to Flores because he refused to hear evidence material to the controversy. The evidence Williams complains of is an audited version of a profit and loss statement which had already been submitted to Lehrman in Williams s response.

The mere exclusion of evidence, without more, does not demonstrate partiality. An arbitrator is not bound to hear all the evidence tendered by the parties as long as each party is given an adequate opportunity to present evidence and arguments. Babcock & Wilcox Co., 863 S.W.2d at 234.

In this case, Lehrman generously allowed both parties equal opportunity to present evidence. Further, as Williams admits, the evidence he seeks to include was merely supportive of evidence already presented in his response. Just because Williams disagrees with Lehrman s award in favor of Flores does not mean that Lehrman was partial to Flores.

4. Miscalculation of Numbers

Finally, Williams contends the trial court erred in not finding that Lehrman exhibited partiality to Flores by miscalculating figures in favor of Flores and by failing to find that Flores misappropriated $1,500.

A mere mistake of fact or law is insufficient to set aside an arbitration award; only those errors of fact or law that result in a fraud or some great and manifest wrong and injustice warrant setting aside an arbitration award. Nuno v. Pulido, 946 S.W.2d 448, 452 (Tex. App. Corpus Christi 1997, no writ). In the absence of a statutory or common-law ground to vacate or modify an arbitration award, a reviewing court lacks jurisdiction to review other complaints, including the sufficiency of the evidence to support the award. J.J. Gregory Gourmet Servs., Inc. v. Antone's Import Co., 927 S.W.2d 31, 33 (Tex. App. Houston [1st Dist.] 1995, no writ).

Williams attempts to attack Lehrman s mathematical assessment of the evidence by couching his point of error in terms of evident partiality. However, without more, a party s mere dissatisfaction with an arbitrator s calculation of damages does not demonstrate partiality. See Vernon E. Faulconer, Inc. v. HFI Ltd. P ship, 970 S.W.2d 36, 40 (Tex. App. Tyler 1998, no pet.) (claimant s dissatisfaction with amount of award will not support judicial modification of that award). Further, a reviewing court may not overturn an arbitration award based upon the evident miscalculation of numbers unless the mistake is clear, concise, and conclusive from the record. Crossmark, 124 S.W.3d at 436. The record on appeal does not establish that Lehrman failed to consider all the evidence submitted by Williams in his response. Thus, given the presumptions in favor of the arbitrator s decision, we conclude that Williams s argument affords no basis for relief. See House Grain, 659 S.W.2d at 905-06.

Williams s third and fourth points of error are overruled.

B. Motion for New Trial

In his first point of error, Williams asserts he should prevail as a matter of law because Flores failed to file a response or controverting affidavit to Williams s sworn motion for new trial. A motion for new trial is addressed to the trial court s discretion, and the trial court s ruling will not be disturbed on appeal absent a clear abuse of discretion. Strackbein v. Prewitt, 671 S.W.2d 37, 38 (Tex. 1984). To establish an abuse of discretion, the complaining party must demonstrate that the trial court acted unreasonably, arbitrarily, or without reference to any guiding rules and principles. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex. 1985).

Given our conclusion that Williams has failed to satisfy his burden of showing that the arbitrator s nondisclosure would create a reasonable impression of partiality to an objective observer, we hold the trial court did not abuse its discretion in denying Williams s motion for new trial. Accordingly, we overrule William s first point of error.

C. Application of Common Law Grounds

By his second point of error, Williams contends the trial court erred in applying common-law grounds when considering Williams s motion to vacate the arbitration award. In its order denying Williams s motion to vacate the arbitration award, the trial court s conclusions of law encompassed both common-law and statutory grounds. Specifically, the trial court concluded as follows:

(1) The arbitrator in making his decision was not guilty of fraud, misconduct or such gross mistake as would have implied bad faith or failure to exercise an honest judgment; and

(2) Movant has not met the burden of establishing that the neutral arbitrator did have the burden to disclose the potential bias as had been alleged.

Williams argues that since the parties entered into a written agreement to arbitrate, the TGAA applies, and thus, it was reversible error for the trial court to deny his motion to vacate based, in part, on common-law grounds.

The legal conclusions of the trial court are not binding upon an appellate court; instead, the appellate court is free to draw its own legal conclusions. Harlingen Irrigation Dist. Cameron County No. 1 v. Caprock Communications Corp., 49 S.W.3d 520, 530 (Tex. App. Corpus Christi 2001, pet. denied). Appellate courts review the trial court s conclusions of law de novo as legal questions. BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002). If we determine that a conclusion of law is erroneous, but the trial court rendered the proper judgment, the erroneous conclusion of law does not require reversal. Id. We examine the entire record, not just the evidence in support of the trial court s legal conclusion. Valsangiacomo v. Americana Juice Import, 35 S.W.3d 201, 205 (Tex. App. Corpus Christi 2000, pet. dism'd w.o.j.).

Here, we uphold the trial court s judgment because Williams has failed to satisfy his burden of showing that the arbitrator s nondisclosure would create a reasonable impression of partiality to an objective observer. Williams s second point of error is overruled.

The judgment of the trial court is AFFIRMED.

FEDERICO G. HINOJOSA

Justice

Memorandum Opinion delivered and filed

this the 12th day of August, 2004.