Court Opinion

ID: 9950007
Source: CourtListenerOpinion
Date Created: 2024-03-13 06:12:08.756214+00
Date Added: 2024-06-11T14:34:51.661328
License: Public Domain

REVERSED AND RENDERED and Opinion Filed March 7, 2024

                                  S  In The
                            Court of Appeals
                     Fifth District of Texas at Dallas
                              No. 05-22-01190-CV

                       JOHN CLENDENING, Appellant
                                  V.
                         BLUCORA, INC., Appellee

                On Appeal from the County Court at Law No. 5
                            Dallas County, Texas
                    Trial Court Cause No. CC-22-03304-E

                       MEMORANDUM OPINION
                  Before Justices Molberg, Reichek, and Smith
                           Opinion by Justice Smith

      Appellant John Clendening appeals the trial court’s order confirming an

arbitration award. In one issue, appellant argues that the trial court erred by

confirming the award because the award exceeded the arbitrator’s authority and

directly contradicted the parties’ agreement. We agree.

                      Factual and Procedural Background

      Appellant is the former CEO of appellee Blucora, Inc. His employment

agreement provided that any employment-related disputes between him and appellee

were to be resolved in binding arbitration. In 2020, appellant filed an arbitration
claim against appellee seeking damages, and appellee filed counterclaims against

appellant. The parties settled their disputes and entered into a Settlement Agreement

and Release on January 21, 2022.

      The agreement mandated appellee to make specific payments to appellant and

mandated appellant to perform certain obligations; both parties were to perform by

set dates and times. Specifically, appellant had to provide answers to interrogatories

by 12:00 p.m. on January 22, 2022. If appellee found the answers acceptable,

appellee was to make another payment to appellant. If not, appellee could terminate

the settlement agreement or seek further information from appellant. Appellant

could also terminate the agreement for appellee failing to make a payment. If either

party terminated the agreement, the agreement would be deemed void and arbitration

would continue as if no settlement had been reached. If the parties complied to each

other’s satisfaction, they would file a joint motion to dismiss with prejudice all

claims in the arbitration proceeding.

      Appellant provided interrogatory responses to appellee on January 22, 2022.

Appellee was not satisfied with the answers, and the parties filed further claims

against each other in arbitration. On March 9, 2022, the arbitrator emailed the parties

and informed them that appellee’s motion for an expedited resolution was denied.

The arbitrator further informed the parties:

      I am aware that operative dates in the settlement agreement have now
      passed. Therefore, as a consequence of this ruling, the parties would
      need to confer, to at least attempt to come up with an agreed

                                         –2–
      understanding of the date for the final payment called for by the
      settlement agreement, as well as dates for any interview and/or potential
      eventual deposition of [appellant].

      On March 22, the parties submitted a joint agreed motion to dismiss as

provided by the Settlement Agreement. The arbitrator granted the motion on April

1. On April 6, appellee submitted a motion to compel appellant to provide more

complete answers and to attend a four-hour deposition. The arbitrator held a hearing

on the motion on May 11. The arbitrator granted the motion to compel on June 8,

explicitly concluding that (1) after entering the April 1 order, he retained jurisdiction

to rule on any motion to compel under “Paragraph 1(h) of the Settlement

Agreement”; (2) “it is determined that the arbitrator retained and still has jurisdiction

to consider the requested relief”; and (3) “the arbitrator retained jurisdiction to grant

such relief.” The arbitrator directed the parties to conference and attempt to reach

an agreement on the logistics of the date and time of the deposition. The parties

were to provide the arbitrator with a status report on June 15.

      On June 24, appellant filed a motion in the trial court to vacate the arbitrator’s

June 8 order granting appellee’s motion to compel appellant’s deposition, which the

parties refer to as the arbitration award. Appellee filed a competing motion to affirm.

The parties did not challenge the arbitrator’s April 1, 2022 order granting the parties’

joint agreed motion to dismiss. After a hearing, the trial court denied appellant’s

motion to vacate and confirmed the arbitration award. This appeal followed.

                                          –3–
                                Arbitrator’s Powers

      Appellant argues that the arbitrator exceeded his authority by ordering the

deposition without jurisdiction to do so and that the arbitrator’s award ordering the

deposition directly contradicts with the agreed deadline for the deposition to occur.

Appellee responds that the arbitrator had jurisdiction to order the deposition even

though it was past the deadline in the Settlement Agreement. Specifically, appellee

contends that appellant waived any argument that the agreement required strict

adherence to the deadlines because appellant participated, without objection, to the

informal interview long after its January 25, 2022 deadline, and it was appellee’s

dissatisfaction with appellant’s answers in the informal interview that led appellee

to file the motion to compel appellant’s deposition. Appellee further responds that

the arbitrator was faced with new claims arising after the operative dates had passed

and, thus, was construing and applying the contract when he reached a legal

determination that appellee could still seek a deposition.         Appellee notes, “If

[appellant] were right that the February 2022 date was an absolute limit on the

arbitrator’s power, then he could effectively strip the arbitrator of jurisdiction simply

by running out the clock.”

      We review a trial court’s decision to confirm an arbitration award de novo.

Ancor Holdings, LLC v. Peterson, Goldman & Villani, Inc., 294 S.W.3d 818, 826

(Tex. App.—Dallas 2009, no pet.). The parties agree that the Settlement Agreement

is “governed by the substantive laws of the State of Texas,” but dispute whether the

                                          –4–
Texas Arbitration Act (TAA) or the Federal Arbitration Act (FAA) applies in this

case. The employment agreement, under which arbitration began, provided that it

was governed by the laws of Delaware. Both agreements provided that the dispute

was to be resolved under the rules of the American Arbitration Association.

Regardless of which Act applies, our disposition would be the same in this case as

both acts provide for vacatur of an arbitration award where the arbitrator exceeded

his powers. See 9 U.S.C. § 10(a)(4) (FAA permits a court to vacate an arbitration

award “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”); TEX. CIV. PRAC. & REM. CODE ANN. § 171.088(a)(3)(A) (TAA provides that

court shall vacate an award if arbitrators exceeded their powers); see also White v.

Siemens, 369 S.W.3d 911, 915 (Tex. App.—Dallas 2012, no pet.) (explaining that

we need not determine which act applies because our conclusion would be the same

under either act).

      An arbitrator exceeds his powers where the arbitrator exceeds his contractual

authority. Ancor Holdings, 294 S.W.3d at 830. “It is well established that courts

may set aside awards when the arbitrator exceeds his contractual mandate by acting

contrary to express contractual provisions.” Beaird Indus., Inc. v. Local 2297, Int’l

Union, 404 F.3d 942, 946 (5th Cir. 2005); see, e.g., Townes Telecomms., Inc. v.

Travis, Wolff & Co., L.L.P., 291 S.W.3d 490, 492–94 (Tex. App.—Dallas 2009, pet.

denied) (arbitration panel acted in direct contravention and exceeded its powers

                                        –5–
when it allocated costs between the parties where the agreement expressly prohibited

it from doing so and instead required the panel to designate the non-prevailing party

to bear the costs of both sides).

      “Whether enforcing an agreement to arbitrate or construing an arbitration

clause, courts and arbitrators must give effect to the contractual rights and

expectations of the parties. In this endeavor, as with any other contract, the parties’

intentions control.” Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 682

(2010) (internal quotations and citations omitted). An arbitrator may not ignore the

plain language of the parties’ contract. Ancor Holdings, 294 S.W.3d at 830.

      Section 1.e. of the Settlement Agreement at issue here provided:

      Upon receipt of the payment [if appellee found appellant’s responses
      acceptable], . . . Parties will jointly file a motion to dismiss with
      prejudice all claims in the Arbitration, subject to the continuing
      jurisdiction outlined in Paragraph 1.h. [Appellant] acknowledges that,
      if [appellee] files a motion to compel pursuant to Paragraph 1.h., the
      arbitrator shall rule on such motion as though the Arbitration is
      ongoing.

The Settlement Agreement further provided that, after payment was made and the

parties filed a joint motion to dismiss, appellee could ask appellant follow-up

questions through an informal conversation, which was not to be recorded. Once

that conversation occurred, or if appellee did not request such conversation, appellee

was to make a final payment to appellant. Section 1.h. of the agreement provided:

                                         –6–
      If [appellee] does not believe that the Answers are fully complete or is
      not satisfied by the subsequent conversation with [appellant], the
      arbitrator in the Arbitration will retain jurisdiction to hear [appellee’s]
      Motion to Compel seeking to compel [appellant] to provide more
      complete Answers and provide up to a four-hour deposition (to occur
      not later than February 27, 2022 on a mutually convenient date) to
      answer questions under oath.

      We conclude that, although the parties agreed the arbitrator retained limited

jurisdiction to hear a motion to compel after they filed their joint motion to dismiss,

the language in Section 1.h. restricted the arbitrator’s authority to order a deposition

“to occur not later than February 27, 2022.”            This language is plain and

unambiguous. The fact that the parties failed to contract for a situation where the

deadlines had passed does not create an ambiguity in the language or authorize the

arbitrator to act outside of the parties’ agreement. Here, the arbitrator exceeded his

authority by ordering, in direct contravention of the parties’ agreement, appellant’s

deposition to occur later than February 27, 2022. Therefore, the trial court erred

when it failed to vacate the award. We sustain appellant’s sole issue on appeal.

                                     Conclusion

      The arbitrator exceeded his powers by ordering appellant’s deposition after

February 27, 2022, and the trial court erred by denying appellant’s motion to vacate

the award. Therefore, we reverse the trial court’s order confirming the arbitration

award and render judgment vacating the June 8, 2022 arbitration order that granted

appellee’s Motion to Compel Deposition.

                                          –7–
      The arbitrator’s April 1, 2022 order granting the parties’ joint agreed motion

to dismiss remains in effect.

                                          /Craig Smith/
                                          CRAIG SMITH
                                          JUSTICE

221190F.P05

                                       –8–
                                    S
                             Court of Appeals
                      Fifth District of Texas at Dallas
                                   JUDGMENT

 JOHN CLENDENING, Appellant                     On Appeal from the County Court at
                                                Law No. 5, Dallas County, Texas
 No. 05-22-01190-CV           V.                Trial Court Cause No. CC-22-03304-
                                                E.
 BLUCORA, INC., Appellee                        Opinion delivered by Justice Smith.
                                                Justices Molberg and Reichek
                                                participating.

      In accordance with this Court’s opinion of this date, the order of the trial court
granting appellee Blucora, Inc.’s motion to affirm the June 8, 2022 arbitration award
is REVERSED and judgment is RENDERED that:

      appellant John Clendening’s motion to vacate the arbitration award is
      granted, and the arbitrator’s June 8, 2022 arbitration order granting
      appellee Blucora, Inc.’s Motion to Compel Deposition is vacated.

      The arbitrator’s April 1, 2022 order granting the parties’ joint agreed
      motion to dismiss remains in effect.

       It is ORDERED that appellant JOHN CLENDENING recover his costs of
this appeal from appellee BLUCORA, INC.

Judgment entered this 7th day of March 2024.

                                          –9–