Court Opinion

ID: 3104046
Source: CourtListenerOpinion
Date Created: 2015-10-16 05:34:18.476784+00
Date Added: 2024-06-11T12:26:58.552483
License: Public Domain

Opinion issued May 29, 2014.

                                     In The

                              Court of Appeals
                                    For The

                          First District of Texas
                            ————————————
                              NO. 01-14-00038-CV
                           ———————————
                  HILL INTERNATIONAL, INC., Appellant
                                       V.
            RIVERSIDE GENERAL HOSPITAL, INC., Appellee

                   On Appeal from the 234th District Court
                            Harris County, Texas
                      Trial Court Case No. 2013-63359

                          MEMORANDUM OPINION

      In this breach–of–contract case, Hill International, Inc. and Riverside

General Hospital, Inc. arbitrated their dispute, pursuant to their contractual

agreement to arbitrate.   An arbitrator awarded damages to Hill for breach of

contract, but denied Hill’s claims for pre–judgment interest, attorney’s fees, and
costs, and also offset the award with Riverside’s contract damages. Hill moved in

the trial court to modify or vacate the arbitration award. The trial court denied

Hill’s request. On appeal, Hill contends that the trial court erred because (1) the

arbitrator exceeded his authority by offsetting the damages; and (2) the arbitrator

committed a gross mistake in applying contract interpretation law and in failing to

award fees and costs. Finding no error, we affirm.

                                    Background

      In January 2009, Hill agreed to provide construction management services

for repairs and renovations to Riverside’s buildings in exchange for payment from

Riverside. The agreement provided: “All claims, disputes, and other matters in

question between the Parties to this Agreement arising out of or relating to this

Agreement or the breach thereof . . . shall be submitted to binding arbitration.” It

also stated: “This agreement may be terminated by either party upon thirty (30)

days written notice.” Riverside did not remit several payments to Hill due under

the agreement.    On January 25, 2010, Hill notified Riverside that it would

terminate the contract.     On February 5, 2010, Hill ceased providing services,

terminating the contract.

      Course of proceedings

      Hill sued Riverside in federal district court.     The federal district court

ordered the parties to arbitrate their dispute and dismissed the suit. Hill demanded

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arbitration through the American Arbitration Association. The Honorable Dwight

Jefferson conducted an arbitration hearing; at its conclusion, he awarded Hill

$108,316.21 in damages plus $37,574 in contractual carrying charges for

Riverside’s breach of contract. He offset this award with $18,693 in damages for

Hill’s failure to give adequate notice of termination, and $13,725 in damages for

Hill’s breach of the arbitration provision. He denied Hill’s requests for attorney’s

fees and costs of arbitration.

      Hill then applied to state district court to modify or vacate the offsets, and it

requested pre–judgment interest, attorney’s fees, and costs.         Hill included a

transcript of the arbitration hearing and attached the arbitrator’s award to its

motion. After conducting an oral hearing, the trial court denied Hill’s application.

                                     Discussion

      Hill contends that the trial court erred in refusing to modify the award to

delete the offsets and to include pre-judgment interest, attorney’s fees, and costs,

because it is evident from the record that the arbitrator both exceeded his authority

and committed a gross mistake in his decision.

      Standard of review

      We review de novo a trial court’s confirmation of an arbitration award.

Royce Homes, L.P. v. Bates, 315 S.W.3d 77, 85 (Tex. App.—Houston [1st Dist.]

2010, no pet.).    Our review of an arbitration decision is “extremely narrow”

                                          3
because Texas law favors arbitration. Universal Computer Sys., Inc. v. Dealer

Solutions, L.L.C., 183 S.W.3d 741, 752 (Tex. App.—Houston [1st Dist.] 2005, pet.

denied) (quoting IPCO–G.&C. Joint Venture v. A.B. Chance Co., 65 S.W.3d 252,

256 (Tex. App.—Houston [1st Dist.] 2001, pet. denied)). Judicial review focuses

on “the integrity of the process, not the propriety of the result.” Jones v. Brelsford,

390 S.W.3d 486, 492 (Tex. App.—Houston [1st Dist.] 2012, no pet.).                 An

arbitration award has the same effect as the judgment of a court of last resort, and a

reviewing court may not substitute its judgment for that of the arbitrators merely

because it would have reached a different result. J.J. Gregory Gourmet Servs., Inc.

v. Antone’s Imp. Co., 927 S.W.2d 31, 33 (Tex. App.—Houston [1st Dist.] 1995, no

writ). Review is so limited that a court may not vacate an arbitration award even if

it is based upon a mistake of fact or law. Universal Computer Sys., 183 S.W.3d at

752.

       Scope of authority

       Pursuant to the Texas General Arbitration Act, we vacate an arbitration

award if an arbitrator exceeds his powers. TEX. CIV. PRAC. & REM. CODE ANN.

§ 171.088(a)(3)(A) (West 2011). “[T]he authority of arbitrators is derived from

the arbitration agreement and is limited to a decision of the matters submitted

therein either expressly or by necessary implication.” Gulf Oil Corp. v. Guidry,

327 S.W.2d 406, 408 (Tex. 1959), quoted in City of Pasadena v. Smith, 292

                                          4
S.W.3d 14, 20 n.41 (Tex. 2009). In determining the scope of an arbitrator’s

authority, we look to the language of the arbitration agreement. Royce Homes, 315
S.W.3d at 86–87; see also City of Baytown v. C.L. Winter, Inc., 886 S.W.2d 515,

518 (Tex. App.—Houston [1st Dist.] 1994, writ denied) (“In light of the broad

arbitration clause in the contract, the arbiters did not exceed their authority.”);

Baker Hughes Oilfield Operations, Inc. v. Hennig Prod. Co., Inc., 164 S.W.3d 438,

444 (Tex. App.—Houston [14th Dist.] 2005, no pet.) (“A broad arbitration

provision . . . subsumes any controversy or claim arising out of or relating to [a

party’s] services [under the contract].”).

      The construction contract states: “All claims, disputes, and other matters in

question between the Parties to this Agreement arising out of or relating to this

Agreement or the breach thereof . . . shall be submitted to binding arbitration.” At

arbitration, Riverside complained that Hill breached the contract’s notice

provision. Riverside’s claim arises out of and relates to the agreement and thus

falls within the arbitrator’s authority. See Royce Homes, 315 S.W.3d at 86–87;

City of Baytown, 886 S.W.2d at 518; Baker Hughes, 164 S.W.3d at 444.

      Hill contends that the Riverside did not submit its counterclaims to the

arbitrator via an arbitration demand, and the parties presented no evidence that the

early cancellation damaged Riverside; thus, it argues, the arbitrator exceeded his

authority in offsetting Hill’s damages with Riverside’s. Our sister court of appeals,

                                             5
however, rejected a similar argument in Baker Hughes. See 164 S.W.3d at 444.

There, a party complained that an arbitration panel exceeded its authority by

deciding a claim that had not been pleaded. Id. After examining the broad

language of the arbitration provision, the court held that, despite the claim having

not been specifically pleaded, the arbitration panel had not exceeded its authority

by deciding it.     Id.   Similarly, Riverside’s claim arises out of the parties’

agreement, and, contrary to Hill’s assertions, the arbitrator found that the parties

had tried by consent the issue of whether Hill had breached the notice–of–

termination provision, necessarily adducing evidence on the matter. Accordingly,

the trial court did not err in concluding that the arbitrator’s award was authorized

by the parties. See id. (holding that arbitration panel had authority to decide

unpleaded claim); Universal Computer Sys., 183 S.W.3d at 752–53 (deferring to

arbitrators’ findings).

      Gross mistake

      Hill contends that the trial court should have found a gross mistake in the

arbitrator’s award because (1) he offset the damages with damages relating to

Hill’s failure to provide adequate notice of termination and filing lawsuit, contrary

to Texas contract interpretation principles; and (2) he failed to award Hill pre–

judgment interest, attorney’s fees, and costs, authorized under Chapter 38 of the

Civil Practice and Remedies Code.

                                         6
      Texas common law allows a reviewing court to set aside an arbitration

award “only if the decision is tainted with fraud, misconduct, or gross mistake as

would imply bad faith and failure to exercise honest judgment.”           Universal

Computer Sys., 183 S.W.3d at 752 (quoting IPCO, 65 S.W.3d at 256) (internal

quotation omitted).1   “Gross mistake results in a decision that is arbitrary or

capricious. An honest judgment made after due consideration given to conflicting

claims, however erroneous, is not arbitrary or capricious.” Bailey & Williams v.

Westfall, 727 S.W.2d 86, 90 (Tex. App.—Dallas 1987, writ ref’d n.r.e.), quoted in

Universal Computer Sys., 183 S.W.3d at 752. The party seeking to vacate an

arbitration award must demonstrate the gross mistake. Universal Computer Sys.,
183 S.W.3d at 752 (citing Anzilotti v. Gene D. Liggin, Inc., 899 S.W.2d 264, 267

(Tex. App.—Houston [14th Dist.] 1995, no writ)).

      Hill contends that Riverside’s earlier material breach of the contract excused

Hill from its obligations under the contract to provide notice of termination and to

demand arbitration; thus, the arbitrator erred in offsetting Hill’s requested damages

with Riverside’s damages associated with early termination and defending Hill’s

federal suit. See Mustang Pipeline Co. v. Driver Pipeline Co., 134 S.W.3d 195,

196 (Tex. 2004). But it is not our province to determine the proper construction of

1
  In light of Callahan & Associates v. Orangefield Independent School District, we
assume without deciding that Hill may rely on the common law gross–mistake
standard in seeking to modify or vacate the arbitration award. 92 S.W.3d 841, 844
(Tex. 2002).
                                         7
the parties’ agreement, nor the damages arising therefrom.           See Universal

Computer Sys., 183 S.W.3d at 753. Rather, we confine our review to whether the

arbitrator’s interpretation of the contract constitutes bad faith or a failure to

exercise honest judgment. See id. Nothing in the record suggests as much, and

Hill does not point to anything, other than its disagreement with the arbitrator’s

method of contract interpretation and application of the law to the facts at hand.

Without more, the arbitrator’s legal conclusion that Riverside’s breach did not

excuse Hill from complying with the notice–of–termination and arbitration

provisions is not arbitrary or capricious.

      The same is true for the arbitrator’s denial of interest, fees, and costs.

Relying on Johnson & Higgins of Texas, Inc. v. Kenneco Energy Inc., 962 S.W.2d
507 (Tex. 1998), and Bituminous Casualty Corp. v. Vacuum Tanks Inc., 75 F.3d
1048 (5th Cir. 1996), Hill contends that the arbitrator committed a gross mistake

by failing to award it pre–judgment interest. But these cases discuss pre–judgment

interest on judgments rendered by courts, not on awards rendered by arbitrators.

Johnson & Higgins, 962 S.W.2d at 531; Bituminous, 75 F.3d at 1057. In the

context of the Federal Arbitration Act, we have held that a party denied pre–

judgment interest in arbitration is not otherwise entitled to it upon confirmation of

the arbitration award, neither under the FAA nor any applicable Texas statute.

Thomas Petroleum, Inc. v. Morris, 355 S.W.3d 94, 99 (Tex. App.—Houston [1st

                                             8
Dist.] 2011, pet. denied); Fogal v. Stature Constr., Inc., 294 S.W.3d 708, 722 (Tex.

App.—Houston [1st Dist.] 2009, pet. denied). Likewise, the arbitrator’s decision

to deny any award of attorney’s fees under section 38.001 of the Civil Practice and

Remedies Code is a determination left to the purview of the arbitrator and not

reviewable on appeal absent a showing of bad faith or a failure to exercise honest

judgment. See Providian Bancorp Servs. v. Thomas, 255 S.W.3d 411, 417 (Tex.

App.—El Paso 2008, no pet.).        Hill shows no evidence of bad faith by the

arbitrator. Accordingly, we hold that that the arbitrator did not commit a gross

mistake. See Universal Computer Sys., 183 S.W.3d at 752.

                                    Conclusion

      We hold that the arbitrator neither exceeded his authority nor committed a

gross mistake. We therefore affirm the trial court’s order.

                                             Jane Bland
                                             Justice

Panel consists of Justices Jennings, Bland, and Massengale.

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