John M. O'Quinn, P.C., d/b/a O'Quinn & Laminack, John M. O'Quinn & Associates, a Texas General Partnership, John M. O'Quinn & Associates, L.L.P, d/b/a O'Quinn & Laminack, John M. O'Quinn Law Firm, P.L.L.C., and O'Quinn & Laminack v. Martha Wood and Patricia Haynes--Appeal from 4th District Court of Rusk County

NO. 12-06-00151-CV

IN THE COURT OF APPEALS

TWELFTH COURT OF APPEALS DISTRICT

TYLER, TEXAS

JOHN M. O QUINN, P.C., d/b/a O QUINN APPEAL FROM THE FOURTH

& LAMINACK, JOHN M. O QUINN &

ASSOCIATES, A TEXAS GENERAL

PARTNERSHIP, JOHN M. O QUINN &

ASSOCIATES, L.L.P., d/b/a O QUINN &

LAMINACK, JOHN M. O QUINN LAW

FIRM, P.L.L.C., AND O QUINN & JUDICIAL DISTRICT COURT OF

LAMINACK, APPELLANTS

V.

MARTHA WOOD AND

PATRICIA HAYNES, APPELLEES RUSK COUNTY, TEXAS

NO. 12-06-00188-CV

IN RE: JOHN M. O QUINN, P.C., d/b/a

ORIGINAL PROCEEDING

O QUINN & LAMINACK, ET AL

MEMORANDUM OPINION

John M. O Quinn, P.C., d/b/a O Quinn & Laminack, John M. O Quinn & Associates, a Texas General Partnership, John M. O Quinn & Associates, L.L.P., d/b/a O Quinn & Laminack, John M. O Quinn Law Firm, P.L.L.C., and O Quinn & Laminack (collectively O Quinn ) bring a parallel interlocutory appeal and petition for writ of mandamus1

complaining of the trial court s order dismissing its motion to vacate the arbitrators class determination award for want of jurisdiction. We dismiss O Quinn s interlocutory appeal for want of jurisdiction and conditionally grant its petition for writ of mandamus.

Background

O Quinn represented Martha Wood, Patricia Haynes, and allegedly approximately three thousand other women (collectively the putative class members ) in breast implant litigation. The putative class members signed contingent fee agreements with O Quinn. Those agreements required that all disputes between O Quinn and the putative class members be resolved by arbitration.2 Following the settlements of the putative class members claims related to their breast implants, O Quinn deducted 1.5% of the settlement proceeds for expenses common to all clients in the litigation. Alleging that this deduction breached their contract with O Quinn, Wood and Haynes, individually and as class representatives, filed suit.

O Quinn filed a motion to compel arbitration, which was granted by the trial court. Wood and Haynes filed a petition for writ of mandamus, which was denied by both this court and the Texas Supreme Court. However, arbitration did not occur. Instead, the trial court, on motion by Wood and Haynes, reconsidered its prior order and entered a second order authorizing the arbitrator to determine all class action issues. 3 This time, O Quinn filed a petition for writ of mandamus, which was initially granted by this court. Our decision was reversed by the Texas Supreme Court, and we vacated our prior opinion. See In re John M. O Quinn, P.C., 155 S.W.3d 195 (Tex. App. Tyler 2003, orig. proceeding), mand. granted, In re Wood, 140 S.W.3d 367 (Tex. 2004).

The case proceeded to arbitration. The arbitration panel ruled by a majority opinion to certify the class as to the putative class members breach of contract and breach of fiduciary duty claims, but denied class certification of their claims under the Texas Deceptive Trade Practices Act. The arbitration panel s order also stayed the proceedings for thirty days.4

O Quinn then filed under seal in the trial court a motion to vacate the arbitrators class determination award. The trial court dismissed the motion finding that it [did] not have jurisdiction of the motion. In making its ruling, the trial court implicitly found that the grounds alleged in O Quinn s motion were not permissible grounds for vacatur under federal law. O Quinn challenged the trial court s order by filing an interlocutory appeal in this court. Because of the novel issues presented, O Quinn also filed a petition for writ of mandamus. We consolidate the two proceedings for purposes of this opinion and dispose of them simultaneously. As a threshold matter, we must decide whether this case is properly before us by way of interlocutory appeal or petition for writ of mandamus.

Interlocutory Appeal

O Quinn and the putative class members agreed that any dispute arising out of their respective fee agreements would be submitted to arbitration under the Federal Arbitration Act (FAA). See 9 U.S.C.A. 1-16. When applying the FAA, we look to federal law resolve substantive issues, but apply state law to resolve procedural issues. Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 271-72 (Tex. 1992). The availability of appellate review is a procedural issue. Id. at 272. Therefore, we apply Texas procedure in determining the proper avenue for review of the challenged order. Id.

Unless specifically authorized by statute, Texas appellate courts may review only final orders or judgments. Id. As a general rule, a final order or judgment is one that finally disposes of all remaining parties and claims, based on the record, regardless of its language. See Lehman v. Har-Con Corp., 39 S.W.3d 191, 200 (Tex. 2001); see also Wagner v. Warnash, 156 Tex. 334, 295 S.W.2d 890, 892 (Tex. 1956) (final order disposes of all issues and parties so that no future action by the trial court will be necessary in order to settle and determine the entire controversy ); but see DeAyala v. Mackie, 193 S.W.3d 575, 578 (Tex. 2006) (in probate cases, multiple judgments final for purposes of appeal can be rendered on certain discrete issues). This rule applies whether the merits of a case will be decided in the trial court or through arbitration. See Childers v. Advanced Found. Repair, L.P., 193 S.W.3d 897, 898 (Tex. 2006) (per curiam) (order compelling arbitration, otherwise interlocutory, is made final by dismissal of all parties and claims in case); Brooks v. Pep Boys Automotive Supercenters, 104 S.W.3d 656, 660 (Tex. App. Houston [1st Dist.] 2003, no pet.) (order compelling arbitration without dismissing lawsuit is interlocutory per se because it does not dispose of all parties and issues).

The order denying O Quinn s motion to vacate disposes of a single discrete issue in the case; it does not finally dispose of all parties and claims. Therefore, the order is interlocutory. See Transwestern Pipeline Co. v. Blackburn, 831 S.W.2d 72, 74 (Tex. App. Amarillo 1992, orig. proceeding) (trial court s discovery order signed after arbitration had been initiated was merely incident to the final resolution of the main cause and therefore interlocutory).

An interlocutory order of a district court, county court at law, or county court that certifies or refuses to certify a class is appealable. Tex. Civ. Prac. & Rem. Code Ann. 51.014(a)(3) (Vernon Supp. 2006). However, there is no similar provision authorizing an interlocutory appeal of either a class certification award by an arbitration panel or a decision by the trial court not to review the merits of a class certification award. Nor is an appeal of such an order authorized by the Texas General Arbitration Act, which permits appeals from certain types of interlocutory orders related to arbitration proceedings. See Tex. Civ. Prac. & Rem. Code Ann. 171.098 (Vernon 2005).

The order denying O Quinn s motion to vacate is not a final order and does not fall within one of the statutory exceptions to the general rule requiring that Texas courts review only final orders or judgments. Therefore, the order is not appealable, and we do not have jurisdiction of O Quinn s interlocutory appeal. See Tipps, 842 S.W.2d at 272. Accordingly, we will review the trial court s order by mandamus.

Petition for Writ of Mandamus

Mandamus is an extraordinary remedy available to correct a clear abuse of discretion or the violation of a legal duty when there is no adequate remedy by appeal. In re J.D. Edwards World Solutions Co., 87 S.W.3d 546, 549 (Tex. 2002). A trial court clearly abuses its discretion if it reaches a decision so arbitrary and unreasonable as to amount to a clear and prejudicial error of law. Walker v. Packer, 827 S.W.2d 833, 839 (Tex. 1992) (citing Johnson v. Fourth Court of Appeals, 700 S.W.2d 916, 917 (Tex. 1985)). A trial court has no discretion in determining what the law is or applying the law to the facts. Walker, 827 S.W.2d at 840. Thus, a clear failure by the trial court to analyze or apply the law correctly constitutes an abuse of discretion. Id.

The Trial Court s Jurisdiction

Subject matter jurisdiction is created by operation of law. Federal Underwriters Exch. v. Pugh, 141 Tex. 539, 174 S.W.2d 598, 600 (1943). When, as here, a trial court acquires subject matter jurisdiction of a case and subsequently compels arbitration without dismissing the case, it retains continuing jurisdiction of the case until a final judgment or order is entered. See Childers, 193 S.W.3d at 898; Brooks, 104 S.W.3d at 660. However, the manner in which it may exercise its continuing jurisdiction is limited. See In re John M. O Quinn, P.C., 155 S.W.3d at 199.5 To interfere with an ongoing arbitration, the trial court must have a specific grant of power. See Blackburn, 831 S.W.2d at 75. And even then, the trial court s involvement must be carefully tailored to fall within the purview of that authorization. See id.

When an arbitration involves a class action, trial courts are authorized to conduct a limited review of a class determination award. AAA Supplementary Rules Regarding Class Arbitration, Rule 5(d). Specifically, a party is given thirty days to seek confirmation or vacatur of the award from a court of competent jurisdiction. Id. Federal law authorizes vacatur of an arbitration award in limited circumstances. The FAA provides that an award may be vacated (1) where the award was procured by corruption, fraud, or undue means; (2) where there was evident partiality or corruption in the arbitrators, or either of them; (3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or (4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made. 9 U.S.C.A. 10(a). In addition to these statutory grounds, the Fifth Circuit has held that an arbitration award may be vacated (1) where the award displays manifest disregard of the law or (2) where the award is contrary to public policy. See Kergosien v. Ocean Energy, Inc., 390 F.3d 346, 353 (5th Cir. 2004).

O Quinn s Motion to Vacate

Here, the trial court acquired jurisdiction of the case when it initially was filed, pursuant to the constitutional grant of general jurisdiction to district courts. See Tex. Const. art. V, 8 (district court s jurisdiction consists of exclusive, appellate, and original jurisdiction of all actions, proceedings, and remedies, except where conferred by Texas Constitution or other law on some other court, tribunal, or administrative body). The trial court s order compelling arbitration was interlocutory because it did not dismiss the case. See Brooks, 104 S.W.3d at 660. Therefore, the trial court retained continuing jurisdiction of the case even though the merits would be resolved through arbitration. See id. Moreover, the trial court was authorized to review the class determination award. See AAA Supplementary Rules Regarding Class Arbitration, Rule 5(d). Wood and Haynes contend that the trial court could not grant O Quinn s motion on grounds other than those authorized by federal law, and that O Quinn did not assert any of those grounds. Therefore, their argument continues, the trial court was without jurisdiction to address the merits of O Quinn s motion and could take no action other than to dismiss the motion for want of jurisdiction. The Amarillo court has addressed and rejected a similar argument. See Blackburn, 831 S.W.2d at 73-75. In Blackburn, the court considered a challenge to an order authorizing independent discovery after the parties instituted arbitration. The relator asserted that the trial court exceeded its jurisdiction in ordering the discovery, because once arbitration was instituted, the trial court had no further role in, or jurisdiction to control, the arbitration except as expressly provided by statute. Id. at 74. According to the relator, the trial court s order was not within the powers granted to the trial court by statute. Id. In addressing the issue, the court observed that [o]nce jurisdiction is properly acquired, no subsequent fact or event serve[s] to defeat the jurisdiction. Id. at 75. Accordingly, the court concluded that the statutory limitations relied upon by the relator did not deprive the trial court of jurisdiction to rule on matters outside those limitations. Id. ( [J]urisdiction is the power to decide, and not merely the power to decide correctly. ). Therefore, the challenged order was not void. Id. However, the court also held that the trial court s order constituted an abuse of discretion because it was not authorized by statute to order discovery independent of and during the arbitration proceedings. Id. at 77-78.

We agree with the reasoning in Blackburn. Applying that reasoning to the issue before us, we conclude that the grounds authorized by federal law for vacating an arbitration award impose limitations on the trial court s exercise of its jurisdiction when considering a motion to vacate. These limitations do not deprive the trial court of jurisdiction to reach the merits of a motion to vacate simply because the grounds alleged for vacatur are not authorized by federal law. Because the trial court had continuing jurisdiction over the case and specific authorization to address the issue of vacatur, it should have reached the merits of O Quinn s motion to vacate. The trial court s order dismissing the motion for want of jurisdiction constitutes an abuse of discretion.6

Adequate Remedy by Appeal

An appellate remedy is not inadequate merely because it may involve more expense or delay than obtaining an extraordinary writ. Walker, 827 S.W.2d at 842. However, mandamus will issue when the failure to do so would vitiate and render illusory the subject matter of an appeal. Tipps, 842 S.W.2d at 272. In the case at hand, O Quinn is permitted to seek vacatur of the class determination award. See AAA Supplementary Rules Regarding Class Arbitration, Rule 5(d). An appeal of the arbitrators decision after all class issues are decided cannot restore O Quinn s right to have its motion to vacate heard prior to a determination of the merits of the putative class members claims. Therefore, the trial court must reach the merits of the motion. To hold otherwise vitiate[s] and render[s] illusory the subject matter of [the] appeal. See Tipps, 842 S.W.2d at 272.

Conclusion

The trial court abused its discretion by denying O Quinn s motion to vacate for want of jurisdiction of the motion, and appeal is an inadequate remedy. Accordingly, we conditionally grant the writ of mandamus. However, we are confident that the trial court will promptly vacate its order dated April 14, 2006 denying the motion. The writ of mandamus will issue only if the trial court fails to comply within ten days of the date of this opinion and order. O Quinn s interlocutory appeal is dismissed for want of jurisdiction.

BRIAN HOYLE

Justice

Opinion delivered December 20, 2006.

Panel consisted of Worthen, C.J., Griffith, J., and Hoyle, J.

(PUBLISH)

1 The Honorable J. Clay Gossett, Judge of the 4th Judicial District Court, Rusk County, Texas, is the respondent. Martha Wood and Patricia Haynes are the real parties in interest.

2 The agreements stated that any and all disputes, controversies, claims or demands arising out of or relating to [the] Agreement or any provision [thereof] ... or in any way relating to the relationship between Attorneys and Client ... shall be submitted to American Arbitration Association for binding arbitration under the Federal Arbitration Act in accordance with the Commercial Arbitration Rules then in effect with the American Arbitration Association.

3 The order further provided the arbitrators with the full limit of authority to determine the issues related to class action and to address and resolve all issues related to due process rights of putative class members.

4 A stay of at least thirty days was required to permit any party to move a court of competent jurisdiction to confirm or vacate the Class Determination Award. AAA Supplementary Rules Regarding Class Arbitration, Rule 5(d), available at http://www.adr.org/sp.asp?id=21936.

5 For instance, a trial court compelling arbitration must stay its own proceedings. In re J.D. Edwards World Solutions Co., 87 S.W.3d at 549. Similarly, a trial court s jurisdiction to enter discovery orders is limited once the trial court has compelled arbitration. Blackburn, 831 S.W.2d at 77-78.

6 Since the only issue before us is whether the trial court had jurisdiction to decide the motion, we do not address any aspect of the merits of O Quinn s motion.