Court Opinion

ID: 6336824
Source: CourtListenerOpinion
Date Created: 2022-05-02 07:21:13.632827+00
Date Added: 2024-06-11T09:24:18.573790
License: Public Domain

Affirmed and Memorandum Opinion filed April 28, 2022.

                                     In The

                    Fourteenth Court of Appeals

                              NO. 14-21-00074-CV

     ASTON SOLAR, LLC AND ASTON HOLDINGS, INC., Appellants

                                        V.
              SUNNOVA ENERGY CORPORATION, Appellee

                   On Appeal from the 125th District Court
                           Harris County, Texas
                     Trial Court Cause No. 2020-52979

                 MEMORANDUM OPINION

      Aston Solar, LLC and Aston Holdings, Inc., appeal the trial court’s order
confirming an arbitration award and denying their motion to vacate the award. In
the arbitration, each side sought damages under a contract. The arbitrator found in
favor of appellee Sunnova Energy Corporation, which then sought to confirm the
arbitrator’s award. In the trial court, Sunnova named Aston Solar and Aston
Holdings as defendants although the arbitrator’s award is claimed to cover only
Aston Solar. The trial court confirmed the award against both appellants.
      Appellants argue that the arbitrator exceeded her authority by awarding
consequential damages despite a consequential damage exclusion in the contract.
Separately, assuming that the arbitrator did not exceed her authority, appellants say
the court erred in confirming the award against Aston Holdings because Aston
Holdings neither consented to nor participated in the arbitration.

      We hold that the arbitrator decided all issues within her authority, which
included the authority to determine damages questions, and thus did not exceed her
powers. We also hold that the trial court did not err in confirming the award
against Aston Holdings. We affirm the trial court’s judgment.

                                    Background

      We present the facts as found by the arbitrator. Sunnova, a solar leasing and
financing company, provides financing to companies—called “channel partners”—
that design and build solar systems. Aston Solar is a solar design, installation, and
service company that markets solar systems, designs the systems for each
customer, obtains permits, and installs and services the solar panels. In 2014,
Aston Solar became one of Sunnova’s channel partners, and the parties signed a
Channel Partner Agreement (“CPA”), which contained an arbitration clause.

      Under the CPA, once Aston Solar installed systems on customers’
properties, ownership transferred to Sunnova but Aston Solar remained responsible
to perform warranty repair work. The customers leased the systems from Sunnova.

      Sunnova began receiving customer complaints on some systems installed by
Aston Solar. Sunnova contacted Aston Solar to conduct repairs. Aston Solar made
repairs on some of the systems but refused to provide any further repairs or service
until Sunnova paid Aston Solar. Sunnova ultimately repaired some of the systems
at its own expense; other systems were considered total losses. Sunnova did not

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receive any further lease payments from the affected customers due to the
customers’ frustration.

        Aston Solar demanded arbitration under the CPA. According to Aston
Solar, it completed some of the requisite repair work but Sunnova refused to pay
Aston Solar for that work. Aston Solar sought $179,170.16 in damages. Aston
Solar also claimed that Sunnova failed to follow the CPA’s requirements to notify
Aston Solar of the customer complaints and to allow Aston Solar to cure the
deficiencies.

        Sunnova filed counterclaims, alleging that it was entitled to withhold
payment under the CPA as an offset against damages incurred because of Aston
Solar’s inferior work. Sunnova contended that Aston Solar breached the CPA by
failing to properly design and install the systems, failing to honor warranty
obligations, and failing to indemnify Sunnova. Sunnova agreed that Aston Solar
should be credited certain offsets for the work it performed but alleged that Aston
owed, after applying the offsets, $574,282 in damages, plus interest and attorney’s
fees.

        The arbitrator held a two-day hearing, receiving witness testimony and
exhibits. After considering the evidence and the parties’ arguments, the arbitrator
found that Aston Solar’s claims failed but that Sunnova was entitled to relief on its
counterclaims. The arbitrator signed a final award, finding that Sunnova was
entitled to $574,282 in damages, as well as attorney’s fees, arbitration fees and
expenses, and interest.

        Sunnova then moved to confirm the award in district court. As defendants,
Sunnova named both Aston Solar and Aston Holdings.1 Appellants responded and

        1
            According to appellants, Aston Holdings is the sole member of Aston Solar.

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moved to vacate the final award because the arbitrator exceeded her powers by
awarding damages not permitted by the CPA. Appellants also argued that Aston
Holdings was not a proper party to the action, as it was not a party to the CPA and
was not subject to the final award.

      The trial court granted Sunnova’s motion in its entirety, confirmed the
arbitrator’s final award, denied appellants’ motion to vacate, and signed a
judgment in favor of Sunnova in accordance with the final award.

      Aston Solar and Aston Holdings appeal.

                               Standard of Review

      The parties agree that the Texas Arbitration Act governs this case. See Tex.
Civ. Prac. & Rem. Code §§ 171.001-.098.          “Unless grounds are offered for
vacating, modifying, or correcting an award under Section 171.088 or 171.091, the
court, on application of a party, shall confirm the award.” Id. § 171.087. We
review de novo a trial court’s order confirming or vacating an arbitration award;
however, our review of the underlying award is extremely deferential. See CVN
Grp., Inc. v. Delgado, 95 S.W.3d 234, 238 (Tex. 2002); Matter of Marriage of
Piske, 578 S.W.3d 624, 629 (Tex. App.—Houston [14th Dist.] 2019, no pet.).
Judicial review of the arbitration process is limited, and even a mistake of law or
fact by the arbitrator in applying substantive law is not a proper ground for
vacating an award. See Cambridge Legacy Grp., Inc. v. Jain, 407 S.W.3d 443, 447
(Tex. App.—Dallas 2013, pet. denied). We indulge all reasonable presumptions in
favor of the award and none against it. See Delgado, 95 S.W.3d at 238.

                                      Analysis

      Appellants present two issues for review. First, they argue that the trial
court should have vacated the award in its entirety because the arbitrator exceeded

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her authority.   Second, they argue that, at the least, the trial court erred in
confirming the award as to Aston Holdings, which they claim was a non-party to
the CPA and the arbitration proceeding.

A.    The arbitrator did not exceed her authority.

      Appellants’ argument for vacating the award centers on the contention that
the arbitrator exceeded her authority.        See Tex. Civ. Prac. & Rem. Code
§ 171.088(a)(3)(A) (on application of a party, the court shall vacate an arbitration
award if, among other specifically enumerated reasons, the arbitrator exceeded her
powers).

      Texas law strongly favors arbitration of disputes. Prudential Secs., Inc. v.
Marshall, 909 S.W.2d 896, 898 (Tex. 1995). An arbitrator’s powers are derived
from the parties’ agreement to submit to arbitration. Nafta Traders, Inc. v. Quinn,
339 S.W.3d 84, 90 (Tex. 2011). Therefore, we look to the arbitration agreement to
determine whether the arbitrator had authority to decide the issue. See id.; D.R.
Horton-Tex., Ltd. v. Bernhard, 423 S.W.3d 532, 534 (Tex. App.—Houston [14th
Dist.] 2014, pet. denied).

      An arbitrator exceeds her authority when she disregards the contract and
dispenses her own idea of justice. Bernhard, 423 S.W.3d at 534. However, an
arbitrator does not exceed her authority merely because she may have
misinterpreted the contract or misapplied the law. Id. “[A]n arbitrator does not
exceed her authority by committing a mistake of law, but instead by deciding a
matter not properly before her.” Id. (internal quotation omitted). The proper
inquiry is not whether the arbitrator correctly decided an issue, but whether the
arbitrator had authority to decide the issue at all. Id.; Forest Oil Corp. v. El Rucio
Land & Cattle Co., 518 S.W.3d 422, 431 (Tex. 2017). An arbitrator does not
exceed her authority when the matter she addresses is one that the parties agreed to
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arbitrate. Centex/Vestal v. Friendship W. Baptist Church, 314 S.W.3d 677, 686
(Tex. App.—Dallas 2010, pet. denied). We resolve any doubts regarding the scope
of what is arbitrable in favor of arbitration. Id. at 684.

      Appellants argue that the “types of damages” awarded by the arbitrator were
specifically excluded by the CPA. Therefore, they contend that, in granting such a
remedy, the arbitrator acted outside the scope of her authority and the trial court
should have vacated the award. We disagree.

      The CPA permitted the arbitrator to determine the availability and amount of
damages. The arbitration clause, Section 18.1, stated, “Any dispute, controversy,
difference or claim arising out of or in connection with this agreement, or the
breach, termination or validity of this agreement . . . shall be submitted to final and
binding arbitration . . . . ” (Capitalization normalized.) No provision in the CPA
specifically excluded a determination of damages from the arbitrator’s authority.
Thus, any dispute arising out of the CPA—including any dispute regarding
damages—was within the arbitrator’s broad authority. E.g., Baker Hughes Oilfield
Operations, Inc. v. Hennig Prod. Co., 164 S.W.3d 438, 443 (Tex. App.—Houston
[14th Dist.] 2005, no pet.) (provision that parties would arbitrate “‘any controversy
or claim arising out of or relating to the Agreement or to [Baker Hughes’] services,
equipment, or products provided to Customer’” was, “by its plain language, a
broad arbitration provision and subsume[d] any controversy or claim arising out of
or relating to Baker Hughes’ services”).

      Appellants do not dispute that the CPA vested the arbitrator with authority to
award damages; in fact, appellants themselves sought damages as a remedy for
their own claims in arbitration. Appellants argue instead that the arbitrator could
not award the specific damages sought by Sunnova. The arbitrator’s award does
not specify the nature of the damages sought by and awarded to Sunnova. In post-

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hearing, pre-award briefing, Sunnova asserted that several customers’ systems
were “total losses” and others were “salvaged” after Sunnova made repairs.
Sunnova characterized its damages as “the money paid to Aston to design, install,
and repair” the “total loss” systems, as well as “Sunnova’s direct costs in labor and
repair materials.” In its briefing, Aston Solar contended that “Sunnova’s claim for
damages amounting to the entire cost of certain systems” was not recoverable
under the terms of the CPA.

      Appellants’ argument is two-fold. First, according to appellants, Sunnova’s
sole and exclusive remedy for any complaints about Aston Solar’s installation
work was provided in Section 9.2 of the CPA. This section, titled “Limited
Remedy and Procedures,” provides, in relevant part:

      During the warranty period, . . . as the sole and exclusive remedy,
      Contractor shall repair or replace, at its sole option, cost and expense,
      all work . . . covered by a warranty under Section 9.1 (“Warranty
      Services”) within a reasonable period of time after receipt of written
      notice . . . . If Contractor does not make such repair or replacement
      within ten (10) days of receipt of notice from Sunnova, Contractor
      shall be deemed to be in breach of this agreement; provided that so
      long as such cure cannot be achieved in such period and Contractor is
      diligently pursuing such cure by appropriate action, Contractor shall
      not be deemed in default. In such event, Sunnova may, upon written
      notice to contractor and without prejudice to any other rights Sunnova
      may have under applicable law, make such repair or replacement and
      (I) charge the costs and expenses of such repair or replacement to
      Contractor, who shall pay such amounts, or (II) offset such amounts
      against any payments otherwise due under this agreement by Sunnova
      to Contractor for work related to any solar system. (Capitalization
      normalized.)

      Second, appellants argue that the CPA specifically precluded consequential
damages. For this part of their argument, appellants rely on Section 17.1, titled
“Consequential Damages,” which provides:

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      Notwithstanding any other provision of this agreement, no party shall
      be liable to the other for, nor shall a court or arbitrator assess, any
      indirect, incidental, or consequential losses or damages, including
      losses of use, profits, business opportunity, reputation or financing, or
      any punitive damages, special damages, mental anguish damages, or
      pain and suffering damages, whether arising in contract, warranty, tort
      (including negligence), strict liability or otherwise, subject to the
      following exclusions: (I) liquidated damages payable according to
      Article 8; (II) damages arising out of a breach of Article 12 by either
      party; or (III) claims made by, damages incurred by, or amounts
      payable to third parties for physical damage to or physical destruction
      of property, or death or bodily injury under an indemnity given under
      this agreement, or to the extent a party is insured against such risk(s)
      under policies of insurance. (Capitalization normalized.)
      Reading these two provisions together, appellants contend that Sunnova
failed to comply with the notice requirement in Section 9.2, but that, even if it had
complied, Sunnova’s sole and exclusive remedy for any deficient work was to
make the repairs itself and either charge Aston Solar or offset the repair cost
against any payments due. And, appellants continue, in no event could Sunnova
recover for its consequential damages caused by Aston Solar’s performance, per
Section 17.1.

      Essentially, appellants’ argument is that the arbitrator misinterpreted
Sections 9.2 and 17.1 of the CPA. This is an issue of contract interpretation, which
was for the arbitrator, not the trial court or this court, to decide. See Petrobras
Am., Inc. v. Astra Oil Trading NV, No. 01-11-00073-CV, 2012 WL 1068311, at
*17 (Tex. App.—Houston [1st Dist.] Mar. 29, 2012, no pet.) (mem. op.) (“In
actuality, what Petrobras is asking this Court to do is exactly what we cannot:
second-guess the Panel’s decision on the merits of contract interpretation.”).
Whether Sunnova could recover its claimed damages under the CPA was placed
squarely before the arbitrator and decided during the arbitration. The arbitrator
stated in the award, “Aston responds that Sunnova is simply charging back its
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losses from non-paying customers which is not allowed under the Agreement.”
The arbitrator disagreed with appellants and awarded Sunnova damages.

      We will not disturb the arbitrator’s decision, and we find support from other
courts that have addressed comparable challenges. In Forest Oil, the contract at
issue provided for arbitration and gave the arbitrators “‘the authority to award
punitive damages where allowed by Texas substantive law.’” Forest Oil, 518
S.W.3d at 432 (quoting the arbitration agreement). The losing party argued that
the panel’s award of damages exceeded Texas law, and therefore the arbitrators
exceeded their authority. Id. at 431. But, as the supreme court noted, the contract
also provided that all “‘disputes relating to this Agreement or disputes over the
scope of this arbitration clause[] will be resolved by arbitration.’” Id. at 432
(quoting the agreement). Under this provision, determining what damages Texas
law allows was as much within the arbitrators’ broad authority as determining the
amount to be awarded. Id.

      The San Antonio Court of Appeals resolved a similar issue. See DiAthegen,
LLC v. Phyton Biotech, Inc., No. 04-14-00267-CV, 2015 WL 5037645 (Tex.
App.—San Antonio Aug. 26, 2015, pet. denied) (mem. op.). There, the contract
provided that in the event of an uncured breach by one party, the other party was
entitled to terminate the agreement and “‘to recover all losses, costs, expenses and
damages incurred or suffered by it.’” Id. at *1 (quoting the contract). However,
the agreement also provided that “‘in no event will a party be liable to another
party for any consequential, incidental or special damages, including lost profits
and revenues.’” Id. (quoting the contract). The contract required all disputes, with
one immaterial exception, be resolved through binding arbitration. Id. Following
arbitration, the losing party sought vacatur, arguing that the panel exceeded its
authority by awarding consequential damages not recoverable under the contract.

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Id. at *3. The appellate court held that the record did not support the assertion that
the panel had disregarded the contractual limitations on its authority. Rather, the
panel expressly acknowledged the contract limitation on damages and that it was
bound by it. Id. at *5. At worst, the panel made an error of law classifying the
damages as either direct or consequential, but “‘convincing a court of an
arbitrator’s error—even his grave error—is not enough.’” Id. (quoting Oxford
Health Plans LLC v. Sutter, 569 U.S. 564, 572 (2013)).

      DiAthegen is directly on point. As in that case, the present record does not
support appellants’ contention that the arbitrator disregarded the CPA’s prohibition
against consequential damages. At worst, the arbitrator made an error of law
classifying the damages Sunnova sought as either direct or consequential. But the
arbitrator’s interpretation of the CPA, and the classification of damages
recoverable under the contract, was squarely within the arbitrator’s authority. See
Forest Oil, 518 S.W.3d at 432. Even if the arbitrator erred, that is not enough to
establish that she exceeded her powers to justify vacatur. See id. at 431; Bernhard,
423 S.W.3d at 534; see also DiAthegen, 2015 WL 5037645, at *5.

      We overrule appellants’ first issue.

B.    Aston Holdings is a proper party to the award.

      In appellants’ second issue, they complain that the trial court’s order
confirming the arbitration award erroneously named Aston Holdings as a
defendant. Appellants contend that Aston Holdings was not a party to the CPA,
did not participate in the arbitration, and was not named in the final award.
Accordingly, appellants continue, the trial court erred in confirming the award
against Aston Holdings.

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      We begin with whether Aston Holdings was a signatory to the arbitration
agreement. In 2014, Sunnova and Aston Solar signed the CPA, in which Aston
Solar was designated “Contractor.” The CPA included an arbitration agreement:

      The award of the arbitral tribunal (the “arbitration award”): (I) shall
      be conclusive, final and binding upon the parties; and (II) shall be the
      sole and exclusive remedy between the parties regarding any and all
      claims and counterclaims presented to the arbitral tribunal. The
      arbitration award shall be final and binding upon the parties, and
      judgment on the arbitration award may be entered in any appropriate
      court sitting or located in the state of Texas or in any other court as
      necessary to pursue judgment. (Capitalization normalized.)

      The CPA specifically defined “party” and “parties” as “hav[ing] the
meanings set forth in the Preamble.” The Preamble provided that “Sunnova and
Contractor are each referred to in this Agreement as a ‘Party’ and collectively as
the ‘Parties.’”

      In 2016, Sunnova and Aston Holdings signed an amendment to the CPA, in
which Aston Holdings was designated “Contractor.” In the amendment, Sunnova
and Aston Holdings agreed that, “except to the extent amended in [the 2016
amendment], the terms and conditions of the CPA remain in full force and effect.”

      Construing these two documents together, we conclude that Aston Holdings
was a party and signatory to the CPA, as amended. E.g., Santander Consumer
USA, Inc. v. Mata, No. 03-14-00782-CV, 2017 WL 1208767, at *2-3 (Tex. App.—
Austin Mar. 29, 2017, no pet.) (mem. op.) (under the doctrine of incorporation by
reference, one agreement may properly constitute part of another agreement if one
agreement references the other). Accordingly, Aston Holdings agreed to be bound
by the CPA’s arbitration agreement.

      Aston Holdings also participated in the arbitration. Both Aston Solar and
Aston Holdings demanded arbitration. According to that pleading, Aston Holdings

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acquired Aston Solar in January 2011.       The pleading also referenced the
amendment to the CPA executed by Aston Holdings and represented that Aston
Holdings had “invoiced Sunnova based on the contractual relationship created by
the CPA.” In the arbitration demand, both Aston Solar and Aston Holdings sought
damages from Sunnova.      Collectively, Aston Solar and Aston Holdings sent
requests for production to Sunnova. In that discovery request, Aston Solar and
Aston Holdings defined “claimants” to mean both Aston Solar and Aston
Holdings.   Appellants also sent Sunnova interrogatories and responded to
Sunnova’s discovery requests. In appellants’ discovery response, they designated
Thomas Chen as a witness in the upcoming arbitration hearing; Chen was to
provide testimony regarding both Aston Solar and Aston Holdings and those
companies’ business relationship with Sunnova:

      Thomas Chen will provide testimony as to the usual and customary
      business practices of ASTON SOLAR AND ASTON HOLDINGS,
      INC. in its industry. Mr. Chen may provide testimony as to ASTON
      SOLAR AND ASTON HOLDINGS, INC.’S business relationship
      with Respondent, including, but not limited to, terms and conditions
      of any and all contracts and/or agreements between the parties. Mr.
      Chen will provide testimony concerning the work performed by
      ASTON SOLAR AND ASTON HOLDINGS, INC. and the services
      performed and materials used by Claimants. Mr. Chen will testify as
      to the reliance of ASTON SOLAR AND ASTON HOLDINGS, INC.
      upon the representations made by Respondents as to the payments to
      be made as a result of the work performed by ASTON SOLAR AND
      ASTON HOLDINGS, INC., the abilities of Claimants to perform the
      work in accordance with specifications, and the qualifications and
      skills of Respondent’s employees. . . .
      It is Mr. Chen’s opinion that Respondent failed to fully compensate
      Claimants for work and services performed on behalf of Respondent
      in accordance with the agreements between the Parties.

      The arbitrator’s final award, however, refers only to Aston Solar as the
“Claimant” and does not mention Aston Holdings. Because the award does not
                                      12
mention Aston Holdings, appellants contend that the award is not binding on Aston
Holdings and that the trial court’s judgment confirming the award as to Aston
Holdings was erroneous.

      Sunnova disagrees with appellants’ argument and directs us to Barton v.
Fashion Glass & Mirror, Ltd., 321 S.W.3d 641 (Tex. App.—Houston [14th Dist.]
2010, no pet.). In Barton, four parties—FGM, Windoor, Barton, and DeRiso—
entered into a rule 11 agreement, which included an arbitration clause. Id. at 644.
A dispute arose, the parties submitted to arbitration, the arbitrator issued an award,
and the trial court confirmed it. Id. On appeal, the appellants argued that the trial
court erred in confirming the arbitration award as to Barton and DeRiso because
“the arbitration award did not purport to include them.” Id. This court rejected
that argument. The rule 11 agreement collectively referred to all four parties,
including Barton and DeRiso, as the “Parties” and provided that the “Parties”
agreed to submit disputes to final and binding arbitration: “This language plainly
states that all of the parties to the agreement, which include Barton and DeRiso,
agree to arbitration and to be bound by the arbitration results.” Id. at 645. The
court also rejected the appellants’ reliance on language in the arbitration award,
which “consistently used the word ‘Defendant.’” Id. The appellants posited that
the arbitrator’s use of the singular meant that the award covered only Windoor and
did not include Barton and DeRiso. Id. We explained:

      This is too narrow a view in the circumstances. The arbitrator was
      working from the arbitration agreement, which explicitly states that all
      three appellants agreed to be bound by arbitration and had taken steps
      to fund any award against them. Further, all three appellants
      participated in the arbitration process. . . . Thus, when viewed in
      context of the language in the arbitration agreement, the information
      submitted by the parties, and the parties’ conduct in the arbitration,
      the arbitrator’s award is more reasonably read as including all three
      appellants.

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Id.

      We find Barton persuasive. Here, Aston Holdings agreed to be bound by the
arbitration agreement and participated in the proceeding. Aston Holdings alleged
in the arbitration that Sunnova was liable to Aston Holdings and affirmatively
sought monetary relief from Sunnova. Further, although the award identified only
Aston Solar as the claimant, we do not believe that the arbitrator intended to treat
Aston Solar separately from Aston Holdings.          In the award, the arbitrator
sometimes referred to Aston Solar as “Aston” and sometimes referred generally to
“claimant.” “Claimant,” as defined by appellants themselves during the arbitration
proceeding, included both Aston Solar and Aston Holdings. We determine that, in
view of all the circumstances, including the language of the CPA, as amended, and
Aston Holdings’ conduct during the arbitration, the arbitrator’s award is properly
construed as including Aston Holdings. See id. Therefore, the trial court did not
err in confirming the award as to Aston Holdings.

      We overrule appellants’ second issue.

                                   Conclusion

      We affirm the trial court’s judgment.

                                      /s/     Kevin Jewell
                                              Justice

Panel consists of Justices Jewell, Zimmerer, and Hassan.

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