Court Opinion

ID: 2986868
Source: CourtListenerOpinion
Date Created: 2015-09-23 00:40:57.285081+00
Date Added: 2024-06-11T09:34:37.316755
License: Public Domain

Affirmed and Memorandum Opinion filed May 16, 2013.

                                     In The

                    Fourteenth Court of Appeals

                              NO. 14-12-00241-CV

  DERRICK TURNER D/B/A NO LIMIT TRANSPORTATION, Appellant
                                        V.

                     PACKAGE EXPRESS, L.P., Appellee

                   On Appeal from the 190th District Court
                           Harris County, Texas
                     Trial Court Cause No. 2010-01789

                 MEMORANDUM                     OPINION

      This is an appeal from a final judgment confirming an arbitration award
against appellant, Derrick Turner d/b/a no Limit Transportation, and in favor of
appellee, Package Express, L.P.     Turner argues that the trial court erred in
confirming the award because the arbitration clause was unconscionable and the
arbitrator made gross mistakes. Finding no error, we affirm.
                                    BACKGROUND

      On August 3, 2006, Turner and Package Express executed an agreement
entitled “Delivery Service Agreement for Independent Contractor” (“2006
Agreement”). In the 2006 Agreement, Turner was designated as the “Contractor”
and he agreed to provide delivery services as an independent contractor in
exchange for a percentage of the commissionable fees charged, minus various
designated operating expenses. The parties also agreed that “any disputes under
this Agreement will be submitted to arbitration by the American Arbitration
Association, and the parties agree that the arbitrator’s decision shall be binding,
conclusive, and non-appealable.”       With respect to the costs and fees for any
arbitration that might become necessary, the parties specified that “Contractor
agrees to pay for all costs of such arbitration, including arbitrator’s fees.”

      The 2006 Agreement was the first of three agreements between Turner and
Package Express regarding Turner’s provision of delivery services to Package
Express. The second agreement was signed on September 14, 2009 (“September
2009 Agreement”). The parties agreed that the September 2009 Agreement was
“the entire agreement and understanding” between Package Express and Turner
and it superceded all prior agreements and understandings between the parties.
Turner and Package Express once again agreed to submit all disputes to binding
arbitration by the American Arbitration Association and Turner agreed “to pay for
all costs of such arbitration, including arbitrator’s fees.”

      The parties signed the third agreement on December 9, 2009 (“December
2009 Agreement”). As they did in the September 2009 Agreement before it, the
parties agreed that the December 2009 Agreement replaced all prior agreements
and understandings and constituted the entire agreement between them.            The
December 2009 Agreement contains a new arbitration clause, however, which

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provides that:

      [A]ll claims, disputes or controversies arising out of, in connection
      with or in relation to this agreement or the service provided, including
      any and all issues of arbitrability of any such claim, dispute or
      controversy, and regardless of whether any such claim, dispute or
      controversy is based or claimed to be based in whole or in part on a
      claim by either Party of breach of this agreement by the other party
      shall be decided by resort to arbitration utilizing a single arbitrator,
      administered by the American Arbitration Association in accordance
      with the Commercial Rules. The arbitration shall be held in Houston,
      Texas. The decision of the arbitrator shall be final, binding and
      enforceable in any court of competent jurisdiction and the Parties
      agree that there shall be no appeal from the arbitrator’s decision. . . .
      The arbitrator shall have the power to award attorney fees, costs and
      expenses to the prevailing party in any such arbitration proceeding.
      Eventually a dispute arose between the parties because Turner came to
believe that Package Express had breached both the 2006 Agreement and the
September 2009 Agreement by intentionally (1) paying Turner less than the
contractually required percentage of commissionable fees charged; and (2)
inflating the amount of expenses and fees he owed. When the dispute was not
resolved to Turner’s satisfaction, he initiated a lawsuit in January 2010 asserting
breach of contract and other causes of action against Package Express.

       Once served with Turner’s lawsuit, Package Express filed a motion to
compel arbitration. In the motion to compel arbitration, Package Express pointed
out the existence of the various arbitration clauses and argued that all of Turner’s
causes of action fell within the scope of each. Turner did not file any opposition to
Package Express’s motion to compel arbitration. The trial court granted Package
Express’s motion and ordered that if Turner wished “to pursue the claims he raises
in this litigation or any other dispute arising under the Delivery Service
Agreements he signed on December 9, 2009, September 14, 2009 and August 6,

                                         3
2006, he shall submit those claims to arbitration by the American Arbitration
Association.”

       Turner then initiated an arbitration case against James Walker, Larry
Wilson, and Package Express. In that arbitration, on March 31, 2011, Turner filed
his “Plaintiff’s Objection to Arbitration” in which he asked the arbitrator to declare
all three contracts, in their entirety, to be invalid because they had been procured
by fraud, lacked consideration, and were unconscionable.

       Turner later filed his “Specification of Claims” in the arbitration. Turner
asserted claims for breach of contract, fraud and fraudulent inducement, violations
of the Texas Theft Liability Act, quantum meruit, and unjust enrichment. Turner
also alleged that Package Express was liable for employee James Walker’s alleged
extortion of money from Turner under theories of respondeat superior and
ratification.1 Finally, Turner sought to recover his attorney’s fees incurred as a
result of the arbitration. Package Express and Walker disputed Turner’s claims.
They asserted that Turner had been paid in accordance with the terms of the
contract in place at the time, contended that the contracts allowed the deduction of
specified expenses from Turner’s pay, and denied that Walker had extorted money
from Turner.

       The arbitration hearing occurred on June 30, 2011.                        According to the
arbitration award, the parties presented evidence during the hearing, including the
testimony of four witnesses: Turner, Larry Wilson, Dina Mattson, and Walker.2
The parties also submitted post-hearing briefing and agreed that the issue of
attorney’s fees would be decided after the hearing by the submission of affidavits.
       1
         Turner alleged that James Walker approached him soon after the 2006 Agreement was
signed and told Turner that if he wanted to keep his contract with Package Express, Turner had
to pay him $500.00 per week for one year.
       2
           There is no transcript of the arbitration hearing in the appellate record.

                                                    4
The arbitrator issued his ruling on September 12, 2011. In his ruling, the arbitrator
rejected Turner’s request that he dismiss all claims without prejudice.                 The
arbitrator then ruled that (1) Turner “should take nothing against Package
Express;” (2) attorney’s fees, costs, and expenses would be borne by the party
incurring them; and (3) Turner would pay the American Arbitration Association’s
administrative fees and expenses totaling $1,425.00 and the arbitrator’s
compensation of $1,000.00.

       Package Express moved to confirm the arbitration award in the original trial
court. The following day, Turner filed his First Amended Motion for New Trial.
In that amended motion, Turner challenged “the arbitration based on the fact that
the employment contract and its arbitration clause were procured by fraud.”
Turner also asserted that the “arbitration clause is unenforceable because it is
unconscionable and [he] had no idea what those rules were.” Finally, Turner
asserted that the “contract and the arbitration clause were procured by
misrepresentation.”3

       Turner also filed a response to Package Express’s motion to confirm the
arbitration award. In his response, Turner recognized that judicial review of the
arbitration process is severely limited. Despite that recognition, Turner argued the
trial court should vacate the arbitration award for four reasons: (1) there was no
enforceable agreement to arbitrate; (2) “the issue was not adversely determined in
proceedings to compel arbitration”; (3) he objected at the arbitration hearing; and
(4) he asserted he did not receive proper notice of the hearing on the motion to
compel arbitration.

       3
         Turner initially filed a motion for new trial on October 11, 2011. However, since he
filed an amended motion for new trial prior to the trial court’s final judgment, we need not
consider the contents of the original motion. See Union Carbide Corp. v. Burton, 618 S.W.2d
410, 416 (Tex. App.—Houston [14th Dist.] 1981, writ ref’d n.r.e.).

                                             5
      The trial court confirmed the arbitration award and signed a final judgment
on December 5, 2011. A week later, Turner filed his Third Amended Motion for
New Trial.4 In this final motion for new trial, Turner revisited Package Express’s
motion to compel arbitration filed more than a year earlier, asserting that a trial
court “must determine whether a valid arbitration agreement exists, and then
whether the agreement encompasses the claims raised.” Turner then argued he was
entitled to a new trial because (1) he was not given notice of the motion to compel
arbitration hearing; (2) evidence of a valid arbitration agreement was not produced
during the hearing; (3) the arbitration clause was invalid because it was signed
under duress;        (4) the arbitration clause was              procured     by fraudulent
misrepresentation; (5) “the arbitration clause is unenforceable because it is
unconscionable and [Turner] had no idea what those rules of arbitration were”; and
(6) the arbitration clause is unenforceable since Package Express retained the right
to unilaterally modify the arbitration agreement.

      That same day, Turner also filed a motion to vacate the arbitration award. In
addition to raising the same arguments he made in his response to Package
Express’s motion to confirm the arbitration award, Turner asserted the award
should be vacated because (1) the arbitrator refused to postpone the hearing after
Turner allegedly showed sufficient cause for the requested postponement; (2) the
arbitrator refused to hear evidence material to the controversy; (3) the arbitrator
conducted the arbitration hearing in a manner that substantially prejudiced his
rights; and (4) the award violates public policy or the law. The trial court signed
orders denying both motions, and this appeal followed.

                                          ANALYSIS

      Turner brings two issues on appeal, both of which challenge the trial court’s
      4
          No second amended motion for new trial appears in the appellate record.

                                                6
confirmation of the arbitration award. In his first issue, Turner contends the trial
court erred when it confirmed the arbitration award because “the arbitration clause
was unconscionable and thus unenforceable.” In his second issue, Turner argues
the trial court erred when it refused to vacate the arbitration award and grant a new
trial “because the arbitrator made a gross mistake that implied bad faith and failure
to exercise honest judgment.” We address each issue in turn.

I.    Applicable law and standard of review

      None of the arbitration agreements specified whether the Federal Arbitration
Act (FAA) or the Texas General Arbitration Act (TGAA) would govern in the
event of a dispute. See 9 U.S.C. § 1, et seq.; Tex. Civ. Prac. & Rem. Code Ann.
§ 171.001, et seq. (West 2011). All of the contracts at issue do, however, contain
identical choice-of-law clauses providing that the contracts “shall be construed and
enforced in accordance with the laws of the state of Texas.” In addition, both
parties reference only the TGAA in their original briefs, and in his reply brief,
Turner expressly states he “invokes only the Texas Arbitration Act and common
law challenges to arbitration.” Accordingly, we conclude this appeal is governed
by the TGAA. See Callahan & Assocs. v. Orangefield Indep. Sch. Dist., 92
S.W.3d 841, 844 (Tex. 2002) (applying TGAA to dispute between Texas school
district and Texas architects when neither party disputed the applicability of the
TGAA); Ouzenne v. Haynes, No. 01-10-00112-CV, 2012 WL 1249420, at *1 (Tex.
App.—Houston [1st Dist.] April 12, 2012, no pet.) (mem. op.) (applying TGAA
when parties agreed it governed dispute); Aspri Invs., L.L.C. v. Aleef, No. 04-10-
00573-CV, 2011 WL 384987, at *3 (Tex. App.—San Antonio Aug. 31, 2011, pet.
dism’d) (mem. op.) (holding TGAA governed parties’ agreement when contract at
issue contained Texas choice-of-law provision).

      We review a trial court’s judgment confirming an arbitration award de novo,

                                         7
considering the entire record.     White v. Siemens, 369 S.W.3d 911, 914 (Tex.
App.—Dallas 2012, no pet.). Texas law clearly favors arbitration and as a result,
judicial review is extraordinarily narrow. E. Tex. Salt Water Disposal Co. v.
Werline, 307 S.W.3d 267, 271 (Tex. 2010). An arbitration award has the same
effect as a judgment of a court of last resort; accordingly, all reasonable
presumptions are indulged in favor of the award. CVN Grp., Inc. v. Delgado, 95
S.W.3d 234, 238 (Tex. 2002). Even a mistake of fact or law by the arbitrator is not
a proper ground for vacating an award. Crossmark, Inc. v. Hazar, 124 S.W.3d
422, 429 (Tex. App.—Dallas 2004, pet. denied). Under the TGAA, a reviewing
court is authorized to confirm, vacate or modify an arbitration award, but the
matters that can be reviewed are limited. Las Palmas Med. Ctr. v. Moore, 349
S.W.3d 57, 64 (Tex. App.—El Paso 2010, no pet.). A party seeking to vacate an
arbitration award bears the burden of presenting a complete record that establishes
grounds for a vacatur.      Amoco D.T. Co. v. Occidental Petroleum Corp., 343
S.W.3d 837, 841 (Tex. App.—Houston [14th Dist.] 2011, no pet.).

II.   The trial court did not err in confirming the arbitration award over
      Turner’s unconscionability objections.
      In his first issue on appeal, Turner contends the trial court erred when it
confirmed the arbitration award because the December 2009 Agreement is
unconscionable for several reasons and therefore unenforceable. For example,
Turner   alleges   the   December      2009    Agreement’s   arbitration   clause   is
unconscionable because Package Express changed it so that instead of Package
Express being responsible for the payment of attorney’s fees, costs, and expenses
related to an arbitration proceeding, the arbitrator would now have the authority to
award them to the prevailing party. According to Turner, this change would have a
chilling effect on a decision by an independent contractor such as himself to pursue
arbitration to vindicate his rights under the contract.
                                           8
      We reject this argument because it is based on a fundamental misreading of
the three arbitration clauses in this case.          Turner contends the change is
unconscionable because Package Express agreed in both the 2006 Agreement and
the August 2009 Agreement that it would pay all costs associated with any
arbitration that might occur. Turner is incorrect. In both of the earlier agreements,
Turner was designated as the “Contractor” while Package Express was identified
as “PE.” Both the 2006 arbitration clause and the September 2009 arbitration
clause provide:

      Except for claims by PE under Paragraph 18 below,5 any dispute
      under this Agreement will be submitted to arbitration by the American
      Arbitration Association, and the parties agree that the arbitrator’s
      decision shall be binding, conclusive, and non-appealable. Contractor
      agrees to pay for all costs of such arbitration, including arbitrator’s
      fees.
Under the plain language of both arbitration clauses, Turner, not Package Express,
agreed to pay all costs associated with any arbitration.          The December 2009
Agreement changed the arbitration clause to empower the arbitrator to award
attorney’s fees, costs, and expenses to the prevailing party—a provision more, not
less, favorable to Turner. Moreover, Turner has not pointed to evidence that the
$2,425.00 in arbitration fees and expenses he was ultimately ordered to pay were
so high as to be unconscionable. See In re Poly-America, L.P., 262 S.W.3d 337,
356–57 (Tex. 2008).

      Next, Turner argues the arbitration clause is unconscionable because
Package Express “forced [him] to sign another contract by intimidation and
threatening to withhold my assigned routes until it was signed.” Turner also
asserts the clause is unconscionable because, in the December 2009 Agreement,

      5
          Paragraph 18, which is not at issue here, addresses confidential information and
provides for injunctive relief.

                                            9
Package Express changed the sections addressing both the timing and the method
of calculating his payments under the contract.

       We conclude these contentions attack the unconscionability of the December
2009 Agreement as a whole, not the unconscionability of the arbitration clause
specifically. As such, Turner was required to submit those challenges to the
arbitrator. In re LaBatt Food Serv., L.P., 279 S.W.3d 640, 647–48 (Tex. 2009).
Turner did exactly that when he submitted his “Plaintiff’s Objection to Arbitration”
to the arbitrator. The arbitrator ruled against him on this issue, conducted the
arbitration, and found in favor of Package Express. The trial court confirmed the
arbitration award, and Tuner has presented nothing in his first issue that would
authorize this court to vacate the arbitrator’s decision regarding unconscionability.
We overrule Turner’s first issue.

III.   The trial court did not err in confirming the arbitration award over
       Turner’s gross mistake objections.
       In his second issue, Turner asserts the trial court also erred when it
confirmed the arbitration award because he established common-law grounds for
vacating it. Assuming without deciding that common-law grounds may still be
used to vacate an arbitration award under the TGAA, the common law requires that
the award be tainted with fraud, misconduct, or gross mistake that implies bad faith
and failure to exercise honest judgment by the arbitrator.           Ewing v. Act
Catastrophe-Texas, L.C., 375 S.W.3d 545, 550 (Tex. App.—Houston [14th Dist.]
2012, pet. denied).

       Turner argues that the arbitrator made two separate gross mistakes. First, he
contends the arbitrator’s rejection of Turner’s alleged request to continue the
hearing to permit additional time for discovery violated not only section

                                         10
171.088(a)(3)(B) of the Civil Practice and Remedies Code,6 but also indicates the
arbitrator failed to give honest consideration to Turner’s claims and thus
constitutes gross mistake.          Second, Turner argues the arbitrator made a gross
mistake in ordering Turner to reimburse James Walker $500.00.

       Regarding the alleged denial of a continuance, there is no transcript of the
arbitration hearing, and the clerk’s record on appeal does not contain any written
record indicating that Turner requested a continuance of the hearing or that the
arbitrator refused it. Thus, the record also does not disclose what grounds (if any)
Turner contended were sufficient cause for a postponement and what arguments
Package Express made to the arbitrator in response.7 We therefore hold Turner has
not met his burden to present an adequate record on appeal for this Court to review
his claim. Amoco D.T. Co., 343 S.W.3d at 841.

       Regarding the reimbursement, Turner argues it “strains credulity for the
arbitrator to order Mr. Turner to reimburse Mr. Walker five hundred dollars for
what, by [Package Express’s] own admission, amounted to criminal acts.” We
disagree that, on this record, Turner has established the arbitrator committed a
gross mistake.

       Turner is incorrect when he states the arbitrator ordered him to reimburse
Walker exclusively. Instead, the arbitration award provides:

       The administrative fees and expenses of the American Arbitration
       Association . . . totaling $1,425.00, and the compensation and
       expenses of the Arbitrator totaling $1,000.00 shall be borne by
       Turner. Therefore, Turner shall reimburse [Package Express]; James
       Walker the sum of $500.00, representing that portion of said fees and
       6
          Civil Practice and Remedies Code section 171.088(a)(3)(B) provides that a court shall
vacate an arbitration award if the arbitrator “refused to postpone the hearing after a showing of
sufficient cause for the postponement.”
       7
           Turner posits some grounds in his reply brief, but he offers no record support for them.

                                                 11
       expenses in excess of the apportioned costs previously incurred by
       [Package Express]; James Walker.

In his Specification of Claims filed with the arbitrator, Turner alleged that Walker,
while acting in the course and scope of his employment with Package Express,
extorted money from Turner. Yet Turner sought to hold Package Express, not
Walker, liable for Walker’s alleged wrongful conduct.8 Also, the plain language of
the award establishes that the arbitrator ordered Turner to reimburse the $500.00 to
both Package Express and Walker, the victorious parties in the arbitration. The
December 2009 Agreement authorized the arbitrator to award attorney’s fees and
arbitration costs and expenses to the prevailing party. Exercising that contractual
authority does not constitute a gross mistake. See Barton v. Fashion Glass and
Mirror, Ltd., 321 S.W.3d 641, 646 (Tex. App.—Houston [14th Dist.] 2010, no
pet.) (stating that the arbitrator’s power is derived from the agreement to arbitrate,
and resolving the parties’ dispute in an unexpected manner does not mean the
arbitrator exceeded his authority).

       Turner also asserts the arbitrator’s decision constitutes a gross mistake
because Package Express admitted Walker engaged in criminal conduct. Turner is
again incorrect. Instead, the record shows that Package Express denied Turner’s
extortion allegations. In addition, the arbitration award states that Walker testified
during the hearing. Because there is no transcript of the hearing, we must presume
his testimony supports the arbitrator’s decision. See id. at 645 n.2 (“Without a
complete record of the arbitration proceedings, we presume adequate support for

       8
          In the arbitration award, the arbitrator included the following sentence: “Turner has
stated in his Closing Brief that he did not want to pursue any claims against Walker.” Turner’s
Closing Brief in the arbitration proceeding is not included in the appellate record; therefore, we
presume it supports the arbitrator’s decision. In re Chestnut Energy Partners, Inc., 300 S.W.3d
386, 401 (Tex. App.—Dallas 2009, pet. denied).

                                               12
the arbitration award.”); CVN Grp., Inc., 95 S.W.3d at 238.

      For these reasons, we hold Turner has not demonstrated that the arbitrator
committed a gross mistake. Accordingly, we overrule his second issue on appeal.

                                  CONCLUSION

      Having overruled Turner’s issues on appeal, we affirm the trial court’s final
judgment confirming the arbitration award in favor of Package Express.

                                      /s/    J. Brett Busby
                                             Justice

Panel consists of Chief Justice Hedges and Justices Brown and Busby.

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