Court Opinion

ID: 4407295
Source: CourtListenerOpinion
Date Created: 2019-06-17 08:53:49.781884+00
Date Added: 2024-06-11T13:32:32.290488
License: Public Domain

COURT OF APPEALS
                                  EIGHTH DISTRICT OF TEXAS
                                       EL PASO, TEXAS

                                                   §
  MARIA G. GUILLEN-CHAVEZ,                                          No. 08-17-00046-CV
                                                   §
                     Appellant,                                       Appeal from the
                                                   §
  v.                                                                327th District Court
                                                   §
  READYONE INDUSTRIES, INC.,                                      of El Paso County, Texas
                                                   §
                     Appellee.                                    (TC# 2011-DCV-00615)
                                                   §

                                          OPINION

       In this appeal, Maria Guillen-Chavez asserts that the trial court erred by entering a

judgment confirming an arbitrator’s award where the arbitrator was allegedly not selected pursuant

to the terms of a purported agreement between her and her employer, ReadyOne Industries.

Specifically, Guillen-Chavez maintains that counsel for ReadyOne consented on the record at a

hearing to using a local El Paso County arbitrator to resolve a non-subscriber negligence dispute,

thereby creating a Rule 11 agreement on the issue. However, the trial court eventually appointed

an out-of-town arbitrator after the parties could not agree on a mutually acceptable local arbitrator.

       Guillen-Chavez asks this Court to vacate the arbitrator’s award and remand to the trial

court with instructions to appoint a local arbitrator. We will grant this requested relief.

                                         BACKGROUND
         This is not the Court’s first time wading into this now more than nearly seven-year-long

arbitration fight.1 At this stage of litigation, the parties essentially agree that a motion to compel

arbitration exists; the dispute now is over who can arbitrate this claim.

         By way of background, ReadyOne contends that Guillen-Chavez signed an agreement to

arbitrate claims against the company. The ReadyOne arbitration agreement has an English

language version and a Spanish language version. Guillen-Chavez allegedly signed the Spanish

version. The arbitrator identity issue in this case arises because there is a discrepancy between the

English and Spanish language versions of the arbitration agreement. The English version referred

arbitration to Judicial Workplace Arbitration, Inc., whereas the Spanish version that bears Guillen-

Chavez’s purported signature stated that arbitration would be handled by the non-existent firm

Judicial Workforce Arbitration, Inc.

         At a May 10, 2013, hearing, the trial court stated that it would grant the motion to compel

arbitration, and ReadyOne stated it would submit a proposed order naming “JWA” as the

arbitrator. Guillen-Chavez refused to approve the proposed order as to substance and form, leading

ReadyOne to file a motion for entry of order. At the entry of order hearing, Guillen-Chavez

contended that the Spanish language arbitration agreement required arbitration before an entity

that did not exist, and she argued that entering an order naming an out-of-town arbitrator would be

unjust. The following colloquy ensued in open court, with the portions that Guillen-Chavez

maintains show a mutual agreement vis-à-vis arbitrator selection bolded and italicized:

         MR. ACOSTA:                This Court has held us to what the actual language of the
                                    agreement says. Judicial Workforce Arbitrators, Inc. it
                                    doesn’t exist. So we’ve agreed to arbitrate [with] an entity
                                    that doesn’t exist.

1
 ReadyOne Indus., Inc. v. Guillen-Chavez, 394 S.W.3d 724 (Tex.App.—El Paso 2012, no pet.)(dismissing
attempted interlocutory appeal of trial court’s discovery order ancillary to pending motion to compel arbitration); In
re ReadyOne Indus., Inc., 394 S.W.3d 680 (Tex.App.—El Paso 2012, orig. proceeding)(conditionally granting
mandamus relief vacating discovery orders).

                                                          2
                       So as far as any fairness or equitable concerns that
              we have, I don't think they can force us to arbitrate a place
              out of town that we don’t feel we ever agreed to. And they
              don’t even have the correct entity on the order. What we
              propose, Judge, and I think what was allowed under the rules
              is the Court uses discretion and appoints an arbitrator locally
              here in town who will if the Court is compelling us to
              arbitrate that we both can agree to. I don't think it's fair that
              we should be allowed to arbitrate from out of town firm that
              we never agreed to. The Defense is trying to shove down our
              throat and put it on [the] order. We’ve never even heard or
              seen this thing before. So we’d ask the Court to exercise its
              discretion in appointing a local arbitrator to do the arbitration
              if that’s what the Court is seeking us to do.

THE COURT:    Mr. Hughes.

MR. HUGHES:   Yeah, I would suspect that maybe this entity changed it’s
              name. I'm not for sure. Your Honor, we would agree to go
              with a local arbitrator. And I say this with reluctance
              because we had another case where we went before a local
              arbitrator, finished the arbitration and then we had trouble
              getting the agreement or the arbitrator’s award enforce[d]
              because the local arbitrator had disclosed every case they
              had done with the different firms even though the Scherr
              Legate Firm was involved in some of those other cases. So
              we’ve always been a little reluctant. Reluctantly in two
              respects because we like using local arbitrators. We like
              keeping things in town.
                       On the other hand, if there's going to be something
              that’s going to -- we go through arbitration and suddenly it
              doesn’t stick, we don’t like to leave that sitting around. But
              in this case we will agree on both of those to use [a] local
              entity if we can agree to you know say to a local arbitration
              if that’s okay with you guys.

MR. ISAAC:    That’s fine, Judge. I mean I guess the process to them
              there’s a proposal of different arbitrators name. If we can’t
              agree, the Court appoint[s] one based off our selection.

THE COURT:    How many arbitrators do we have, two?

MR. HUGHES:   Yeah, there’s -- yeah, there's three or four I guess. It's
              pretty straight forward, yes, Your Honor.

THE COURT:    Okay. And how many speak Spanish? One probably. Right?

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       MR. ACOSTA:            That would be a concern of ours also.

       THE COURT:             Yeah, I mean --

       MR. HUGHES:            I didn’t think about it. Although I guess we can have a
                              translator.

       THE COURT:             Yeah, it’s always better though to -- so I think let’s try and
                              get someone that's speaking Spanish and then keep it local.

       MR. ACOSTA:            Yes, Your Honor.

       THE COURT:             So let’s make that adjustment Mr. Hughes on this.

       MR. HUGHES:            Okay. We'll do that, Your Honor.

       THE COURT:             And if there’s nothing further, then we’re adjourned.
                              [Emphasis added].

       The trial court then issued an order compelling arbitration that stated, in relevant part:

       IT IS THEREFORE ORDERED, ADJUDGED, AND DECREED that all of
       Plaintiff’s claims and causes of action against Defendant herein are referred to an
       arbitrator from El Paso County, Texas for binding arbitration.

       Following the issuance of this order, Guillen-Chavez and ReadyOne could not agree on a

mutually acceptable local arbitrator. ReadyOne filed a second motion to enforce the arbitration

agreement. At the hearing, a different lawyer than the one from the previous hearing argued for

ReadyOne. Counsel for ReadyOne informed the trial court that the parties could not agree on a

mutually acceptable arbitrator and as such the trial court should appoint “JWA” based in Kerrville

as arbitrator, pursuant to the terms of the original arbitration agreement and pursuant to Paragraph

13 of the arbitration agreement, which stated that in the event of a discrepancy between the English

and Spanish language versions, the English version would control. Guillen-Chavez countered that

prior counsel had agreed on the record to using an El Paso County arbitrator. The trial court later

issued a modified order compelling arbitration with Walker Crowson, an arbitrator located in El

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Paso County. However, Crowson later voluntarily withdrew as arbitrator, and the parties were

again unable to agree to a mutually acceptable arbitrator.

       Following the withdrawal, the trial court held another hearing regarding the appointment

of an arbitrator. Guillen-Chavez again argued that ReadyOne’s prior counsel had made a binding

Rule 11 agreement on the record to use a local arbitrator, and ReadyOne again asked the court to

appoint JWA as the arbitrator. The trial court suggested the parties arbitrate before Steve Ables,

who was “not exactly local, but he is our Regional Presiding Judge.” Guillen-Chavez objected

that Ables was not local, that he was a member of JWA, and that she does not consent to him

serving as arbitrator. The trial court then entered an order naming Judicial Workplace Arbitrations

as the arbitrator with a presiding arbitrator “to be selected pursuant to their selection process.” The

parties ultimately arbitrated before arbitrator Charles W. Seymore from Sugar Land, Texas. He

was selected pursuant to JWA’s selection process.

       After the arbitrator issued his ruling, ReadyOne filed a motion to confirm the arbitration

award, which Guillen-Chavez opposed. In support of her position, Guillen-Chavez argued, among

other things, that the arbitrator lacked jurisdiction over the suit because he was not selected

pursuant to the parties’ agreement that any arbitrator would be based out of El Paso County.

       The trial court entered judgment confirming the arbitration award and denying the request

to vacate the award. This appeal from Guillen-Chavez followed.

                                           DISCUSSION

       In her sole issue on appeal, Guillen-Chavez maintains that the trial court erred by

confirming the arbitration award because she and ReadyOne entered into a Rule 11 agreement in

open court to use an arbitrator from El Paso County, but the trial court appointed an out-of-town

arbitration firm in violation of that Rule 11 agreement.

                                                  5
        ReadyOne advances three arguments in favor of confirming the arbitration award. First,

to the extent that ReadyOne’s prior counsel’s comments constituted a Rule 11 agreement to use a

local arbitrator, the agreement was conditioned on both parties agreeing to a mutually acceptable

arbitrator, which did not happen. Second, the trial court could have ordered arbitration before

JWA because the naming of “Judicial Workforce Arbitration, Inc.” as the arbitrator in the Spanish

language agreement was an obvious misnomer, and the terms of the arbitration agreement in both

versions stated the English version would control. Third, even if the purported misnomer resulted

in Guillen-Chavez and ReadyOne failing to meet minds as to the arbitrator’s identity, they still met

minds as to submitting the matter to arbitration, meaning that the trial court had the residual

authority under 9 U.S.C.A. § 5 to name JWA as arbitrator based on the breakdown in naming an

arbitrator.

                                        Standard of Review

        We review a trial court’s decision to confirm an arbitral award under the Federal

Arbitration Act de novo.      Garza/Phelps Dodge Refining Corp. v. Phelps Dodge Refining

Corp./Garza, 262 S.W.3d 514, 517 (Tex.App.—El Paso 2008, no pet.). We indulge every

reasonable inference to uphold the arbitration award.          Id.   Our review of the award is

“extraordinarily narrow” and does not encompass the decision on the merits. Id. at 517.

        As required by the FAA, a court must grant an order confirming an arbitral award “unless

the award is vacated, modified, or corrected as prescribed in sections 10 and 11” of the FAA. 9

U.S.C.A. § 9. A court may vacate an arbitral award under four circumstances:

        (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;

                                                 6
       (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).

       This case involves the allegation that arbitration award should be vacated because the

arbitrator exceeded his power because he was not duly appointed according to the terms of a Rule

11 agreement. Arbitrators exceed their powers for purposes of Section 10(a)(4) when they decide

matters not properly before them, including when an arbitration clause does not give the arbitrator

authority to reach an issue. Ancor Holdings, L.L.C. v. Peterson, Goldman & Villani, Inc., 294
S.W.3d 818, 829 (Tex.App.—Dallas 2009, no pet.). Arbitrators derive their power solely from the

parties’ agreement to submit to arbitration, and they must be selected pursuant to the method

specified in the parties’ agreement. Americo Life, Inc. v. Myer, 440 S.W.3d 18, 21 (Tex. 2014).

“An arbitration panel selected contrary to the contract-specified method lacks jurisdiction over the

dispute.” Id. “Accordingly, courts do not hesitate to vacate an award when an arbitrator is not

selected according to the contract-specified method.” Id. [Internal quotation marks omitted].

                                Existence of a Rule 11 Agreement

       Although this case had its genesis in an arbitrator identity disparity between English and

Spanish versions of the arbitration agreement (Judicial Workplace Arbitration, Inc. versus Judicial

Workforce Arbitration, Inc.), we must first deal with the threshold issue of whether the written

arbitration agreement was modified by a Rule 11 agreement made in open court. If the parties

made a Rule 11 agreement as to the identity of an arbitrator during the motion to compel hearing,

the Rule 11 agreement naming an arbitrator or the proper arbitrator selection method would

                                                 7
supersede the written arbitration agreement containing the purported misnomer. Cf. Whataburger

Rests., L.L.C. v. Cardwell, 446 S.W.3d 897, 912 (Tex.App.—El Paso 2014), rev’d on other

grounds, 484 S.W.3d 426 (Tex. 2016)(on-the-record agreement to arbitrate in El Paso was

enforceable under Rule 11 notwithstanding a forum-selection clause in the written arbitration

agreement to the contrary).

                                              Waiver

       ReadyOne attacks reliance on the purported Rule 11 agreement on both substantive and

procedural grounds. We address ReadyOne’s procedural objection first. ReadyOne contends that

notwithstanding the validity of any purported Rule 11 agreement precluding the appointment of

JWA, Guillen-Chavez waived any objection to the arbitrator by failing to renew her objection to

the arbitrator’s authority before the arbitrator himself. See Brook v. Peak Int’l, Ltd., 294 F.3d 668,

673-74 (5th Cir. 2002)(objections to constitution of arbitration panel must be stated at beginning

of arbitration). Thus, even if a valid Rule 11 agreement formed on the terms that Guillen-Chavez

advances in this Court and in the court below, her failure to repeat this specific point before the

arbitrator waived her ability to rely on the Rule 11 agreement on appeal in this Court.

       In the first place, we observe that Guillen-Chavez did object at length to the seating of the

arbitrator based on the fact that he was not from El Paso. ReadyOne urges us to look deeper into

Guillen-Chavez’s objection and hold that the argument was not preserved because her argument

that the arbitrator is “not from El Paso” was based not on the assertion of a contractual right to

have an El Paso arbitrator, but on her perception that the arbitrator could not be fair due to a lack

of political and cultural understanding of the El Paso’s unique cross-border environment. This

distinction walks a razor’s edge. Indeed, it is hard to determine whether the arguments raised when

Guillen-Chavez objected to the arbitrator being from outside of El Paso were separate from her

                                                  8
contractual right-to-a-local-arbitrator argument, or whether those concerns merely informed an

objection on contractual grounds to the arbitrator being from out-of-town.

       Apart from this record ambiguity, we also find ReadyOne’s preservation argument difficult

to square with the reality that the contested issue of arbitrator identity was extensively and heavily

litigated for months in district court. Guillen-Chavez’s objection to a non-El Paso arbitrator was

repeated at several pre-arbitration hearings. While ReadyOne cites Brook as authority showing

that an objection to an arbitrator’s identity is waived if the objection is not made before the

arbitrator himself, Brook is distinguishable from this case precisely because in this case there was

pre-arbitration litigation in district court. In Brook, it was the employee, not the employer,

demanding arbitration. Brook, 294 F.3d at 670. The employer agreed to arbitrate and proceedings

bypassed the district court entirely until it came time to confirm the arbitral award, at which point

the employee who originally demanded arbitration resisted entry of judgment. Id. at 670-72. The

Fifth Circuit did hold that the employee was required to object to the defects in the arbitrator

appointment process before the arbitrator. Id. at 673-74. However, in holding that an objection to

the constitution of the arbitration panel was a prerequisite to raising the argument in a

confirmation/vacatur proceeding, the Fifth Circuit also noted that “[a]lternatively, before

proceeding to arbitration, Brook could have sought an order from the district court compelling

arbitration before a properly selected arbitrator . . . [b]ut Brook did not timely go to court,” nor did

he object in district court proceedings until after he was “prompted by the federal magistrate judge

long after the arbitration had run its course.” Id. Thus, Brook deals with the issue of whether an

objection to arbitrator is necessary in the absence of pre-arbitration district court proceedings

compelling arbitration during which a party could raise a formal objection to the arbitrator.

Likewise, another recent Fifth Circuit case ReadyOne cited in supplemental briefing also dealt

                                                   9
with preservation in the context of arbitral confirmation proceedings in which the parties bypassed

the district court completely and chose to arbitrate voluntarily. Light-Age, Inc. v. Ashcroft-Smith,

922 F.3d 320, 322-23 (5th Cir. 2019)(citing Brook).

       This case is distinct from Brook and Light-Age because those cases involved consent and

bypass of the district court while this case involved direct judicial intervention and pre-arbitration

district court litigation. Because arbitration in this case took place under compulsion at the

conclusion of district court proceedings, and because Guillen-Chavez raised this issue multiple

times during district court proceedings, we find that the objection to the out-of-town arbitrator was

preserved, and we may reach this issue.

                                               Merits

       We turn to the merits of the purported Rule 11 agreement. Guillen-Chavez asserts that the

stipulations counsel made with respect to using a local arbitrator during the first motion to compel

hearing constitute a binding and enforceable Rule 11 agreement. ReadyOne does not directly deny

that stand-in counsel agreed to arbitrate using a local arbitrator under circumstances that would

suggest the promise was enforceable as a Rule 11 agreement. Instead, ReadyOne’s main point of

contention is that any agreement was conditioned on both parties agreeing to an acceptable El Paso

County arbitrator. Since the parties could not agree on an acceptable compromise arbitrator, the

Rule 11 agreement did not control the selection process, meaning the trial judge could either resort

back to the written agreement or else exercise her Section 5 discretion to break the impasse and

appoint an arbitrator herself.

       “Unless otherwise provided in these rules, no agreement between attorneys or parties

touching any suit pending will be enforced unless it be in writing, signed and filed with the papers

as part of the record, or unless it be made in open court and entered of record.” [Emphasis added].

                                                 10
TEX.R.CIV.P. 11 An agreement made in open court to alter the terms of a written arbitration

agreement is enforceable under Rule 11. See Whataburger Rests., L.L.C., 446 S.W.3d at 912 (oral

agreement made on the record superseded terms of written arbitration agreement). Contract law

governs Rule 11 agreements made in open court. Gen. Metal Fabricating Corp. v. Stergiou, 438
S.W.3d 737, 744 (Tex.App.—Houston [1st Dist.] 2014, no pet.).

       ReadyOne’s defensive arguments shift our focus away from the essentially uncontested

issue of whether a Rule 11 agreement formed and toward the issue of what the terms of the Rule

11 agreement required. Because the Rule 11 agreement was oral and not written, we must look to

the hearing transcript to determine the precise contours of the agreement. ReadyOne points to

comments stand-in counsel made during the hearing about reluctance and concern about picking

the right arbitrator to show that all parties understood that any Rule 11 agreement between the

parties was limited in scope and conditioned on both parties’ mutual assent to an arbitrator. Since

the parties could not agree on a local arbitrator under the terms of the Rule 11 agreement, the trial

court properly exercised its discretion to appoint an arbitrator under 9 U.S.C.A. § 5.

       We would agree with ReadyOne’s logic if the record suggested that the Rule 11 agreement

was indeed conditional. But we disagree with ReadyOne’s interpretation of the transcript as

evincing an agreement to use a local arbitrator if and only if both parties mutually agreed on

identity. Though stand-in counsel did voice reluctance to the trial court, and though it took some

back and forth between the parties and the trial court to parse through different concerns, the record

shows that everyone in the courtroom apparently ended the hearing on the same page. Counsel

for ReadyOne agreed to “use local entity” if Guillen-Chavez would agree to “a local arbitration.”

Guillen-Chavez’s counsel said “[t]hat’s fine” and stated that “the process” would involve “a

proposal of different arbitrators name[s]. If we can’t agree, the Court appoint[s] one based off our

                                                 11
selection.” The Court asked counsel for ReadyOne for an estimate of how many available

arbitrators could hear this case. Counsel for ReadyOne stated that he believed three or four

arbitrators would be available and that he understood the process to be “straight forward.” Then,

following discussions about whether a Spanish-speaking arbitrator should be used, the trial court

asked counsel for ReadyOne to “make that adjustment,” and counsel responded, “Okay. We’ll do

that, Your Honor.” The hearing then adjourned.

       As we interpret the transcript, we find that the parties agreed to use an El Paso County

arbitrator, preferably one that spoke Spanish if possible, and if the parties could not agree on which

arbitrator to use, the trial court would select from a set of El Paso County arbitrators proposed by

the parties. That agreement met the strictures of Rule 11 enforceability and thereby modified the

terms of the original arbitration agreement on the issue of arbitrator identity.

       The fact that the parties were ultimately not able to agree on a mutually acceptable local

arbitrator was insufficient to justify the exercise of the Section 5 appointment power because the

arbitrator selection process specified by the terms of the Rule 11 agreement had not yet been

exhausted. 9 U.S.C.A. § 5 states: “[i]f in the agreement provision be made for a method of naming

or appointing an arbitrator . . . such method shall be followed . . . .” Here, the Rule 11 agreement

provided that if the parties could not agree on the identity of a mutually acceptable local arbitrator,

the trial court would select a local arbitrator from a list of names submitted by the parties. Because

the agreement specified the method for selecting an arbitrator, the trial court was required to first

use that method in appointing an arbitrator. Id. Only if an arbitrator could still not be appointed

once the selection process agreed to by the parties was exhausted would the trial court then have

the ability to invoke Section 5 and appoint an arbitrator sua sponte.

       Since the arbitrator was not selected from a pool of local arbitrators suggested by both

                                                  12
sides, the arbitrator in this case did not have the authority to render an award. Guillen-Chavez’s

appellate point is meritorious.

                                        CONCLUSION

       Issue One is sustained. We reverse the trial court’s judgment confirming the arbitration

award and remand for further proceedings.

                                             __________________________________________
June 12, 2019                                YVONNE T. RODRIGUEZ, Justice

Before McClure, C.J., Rodriguez, and Palafox, JJ.
McClure, C.J., Not Participating

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