Court Opinion

ID: 9661135
Source: CourtListenerOpinion
Date Created: 2023-08-23 22:30:08.53382+00
Date Added: 2024-06-11T18:14:25.643972
License: Public Domain

EVELYN V. KEYES, Justice,
dissenting.
This is a case of first impression for this Court with important jurisdictional implications for Texas arbitration law. Because I believe the majority has incorrectly decided this appeal, I respectfully dissent.
Bison Building Materials, Ltd. and Lloyd K. Aldridge both appeal the trial court’s order confirming in part and vacating in part, on legal grounds, an arbitration award subject to the Federal Arbitration Act, 9 U.S.C. §§ 1-16 (2006) (the FAA). The appeal presents threshold questions of subject matter jurisdiction, namely, (1) whether the parties to an arbitration agreement have the power to expand the jurisdiction of a state district court reviewing an arbitration award under the FAA to include a legal review of the arbitrator’s decision and, if so, (2) whether the trial court that partially vacates an arbitration award under such expanded jurisdiction retains jurisdiction over future implied arbitral proceedings until it is satisfied that the arbitrator has applied the law correctly.
The majority simply assumes that the trial court has subject matter jurisdiction to vacate an arbitration award under the FAA on the law, rather than on statutorily prescribed grounds, and that it retains jurisdiction over any future arbitral proceedings implied by its legal judgments. Therefore, it concludes that this appeal is interlocutory. Because I strongly disagree that the trial court has the power that the majority ascribes to it, I respectfully dissent. I would determine the scope of the district court’s subject matter jurisdiction before attempting to decide whether it retains jurisdiction it may never have had. Subject matter jurisdiction — ie., the court’s power to act — takes priority over all other issues and may — indeed must— *77be raised at any stage of the proceedings when it appears doubtful.1
This is a dispute over an employee’s right to sue his employer for personal injuries after the employee has signed a post-injury waiver of the right to sue. The arbitrator dismissed Aldridge’s claims against Bison after finding that Aldridge had signed such a waiver. The trial court reviewed the arbitrator’s award on legal grounds and entered a final “Order” confirming the arbitration award in part and vacating it in part on the ground that the arbitrator had misconstrued Texas law. The court held, “as a matter of first impression, that both the Texas Supreme Court decision Storage & Processors, Inc. v. Reyes, 134 S.W.3d 190 (Tex.2004) ... and the fair notice requirements described therein are properly applied to a post-injury waiver.” Applying Reyes, the court confirmed the arbitration award “as to the finding that Aldridge signed the post-injury waiver” and vacated the award “solely as to the arbitrator’s finding that the post-injury waiver precludes arbitration because there are fact issues,” ie., namely (1) whether the post-injury waiver is enforceable and (2) whether “the ambiguous terms of the waiver preclude this action seeking arbitration.” Bison appeals the trial court’s legal conclusions. In a cross-appeal, Aldridge contends there are fact issues regarding whether he signed, or understood that he was signing, the post-injury waiver.2
Ordinarily, a district court may vacate an award under the FAA only if (1) the award was procured by fraud, corruption, or undue means; (2) there was evidence of partiality or corruption among the arbitrators; (3) the arbitrators were guilty of misconduct that prejudiced the rights of a party; (4) the arbitrators exceeded their powers; or (5) in making the award, the arbitrators acted with manifest disregard for the law. 9 U.S.C. § 10(a); Harris v. Parker College of Chiropractic, 286 F.3d 790, 792 (5th Cir.2002); Denver & Rio Grande W. R.R. v. Union Pac. R.R., 119 F.3d 847, 849 (10th Cir.1997) (court may vacate arbitration award only for reasons enumerated in FAA, 9 U.S.C. § 10, or for handful of judicially created reasons). The court of appeal reviews de novo a trial court’s decision to confirm or vacate an arbitration award under the FAA. See Tanox, Inc. v. Akin, Gump, Strauss, Hauer & Feld, 105 S.W.3d 244, 250 (Tex.App.-Houston [14th Dist.] 2003, pet. denied); Gateway Techs., Inc. v. MCI Telecomms. Corp., 64 F.3d 993, 996 (5th Cir.1995). This review, likewise, is usually “extraordinarily narrow” because of the narrow grounds on which an arbitration award may be vacated under the FAA. Tanox, 105 S.W.3d at 250 (quoting Hughes Training, Inc. v. Cook, 254 F.3d 588, 593 (5th Cir.2001)).
In this case, however, in addition to providing that any disputes between the *78parties were to be decided under the FAA, the parties’ arbitration agreement (the “Agreement”) stated:
Either party may bring an action in any court of competent jurisdiction ... to enforce an arbitration award. A party opposing enforcement of an award may bring a separate action in any court of competent jurisdiction to set aside the award, where the standard of review will be the same as that applied by an appellate court reviewing a decision of a trial court sitting without a jury.
(Emphasis added).
Both the United States Court of Appeals for the Fifth Circuit and our sister state Court of Appeals for the Fourteenth District have held that parties may contractually modify the standard of review of an arbitration award made under the FAA. Harris, 286 F.3d at 793; Gateway, 64 F.3d at 996; Tanox, 105 S.W.3d at 251.3 When parties agree contractually to subject an arbitration award under the FAA to expanded judicial review, “federal arbitration policy demands that the court conduct its review according to the terms of the arbitration contract.” Gateway, 64 F.3d at 997; see also Volt Info. Sci. Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 469, 109 S.Ct. 1248, 1250, 103 L.Ed.2d 488 (1989). However, the court must first determine whether the arbitration agreement does, in fact, expand the jurisdiction of the trial courts to review the award. If the agreement does not contain “clear and express language altering the standard of review,” the FAA’s default standard of review of arbitration awards applies. Tanox, 105 S.W.3d at 251-52.
In Tanox, the Texas Court of Appeals, like the federal Fifth Circuit Court of Appeals, held that parties have the power to expand the jurisdiction of the trial court reviewing an arbitration award. Id. at 251-52. However, in Tanox, the parties’ agreement to submit their disputes to arbitration “under the rules of American Arbitration Association then in place and applicable legal and equitable principles” and their choice of law provision stating that the “agreement shall be construed in accordance with the laws of the State of Texas” lacked the clear and express language necessary to express the intent to alter the standard of review. Id. Therefore, the default FAA standard applied. Id. at 252.
The Tanox court distinguished Gateway and Hughes, two of the Fifth Circuit cases cited above, in which the court did find that express language in the parties’ arbitration agreement altered the standard of review of the arbitration award. See Tanox, 105 S.W.3d at 251; Hughes, 254 F.3d at 590 (construing agreement that “in actions seeking to vacate an award, the standard of review to be applied to the arbitrator’s findings of fact and conclusions of law will be the same as that applied by an appellate court reviewing a decision of a trial court sitting without a jury ’ ”) (emphasis added); Gateway, 64 F.3d at 996 *79(construing agreement that “[t]he arbitration decision shall be final and binding on both parties, except that errors of law shall be subject to appeal”) (emphasis in original); see also Harris, 286 F.3d at 793 (construing agreement that “[t]he Award of the Arbitrator shall be binding on the parties hereto, although each party shall retain his right to appeal any questions of law, and judgment may be entered thereon in any court having jurisdiction”) (emphasis added).
Here, the language in the parties arbitration agreement is virtually identical to that at issue in Hughes, specifically, “the standard of review will be the same as that applied by an appellate court reviewing a decision of a trial court sitting without a jury.” Cf. Hughes, 254 F.3d at 590. Therefore, I would hold that the parties did clearly express their intent to expand the jurisdiction of the trial court by their arbitration agreement and that they had the power to do so under the foregoing authority. I would also hold that, under the plain language of the Agreement, the parties conferred on the trial court the same jurisdiction this Court has when reviewing a decision of a trial court sitting without a jury — namely the jurisdiction to review findings of fact and conclusions of law, to reverse decisions on factual sufficiency grounds when there is no evidence to support them or they are contrary to the great weight and preponderance of the evidence, and to decide questions of law de novo.
I see nothing in the language of the parties’ Agreement, however, that expresses the intent to confer on the trial court not only the foregoing power to review the arbitration award under the appellate standard of review applied to a trial court’s decision in a bench trial, but also the jurisdiction to order a new arbitration under the law as the district court interprets it and to retain jurisdiction with no right of appeal until the trial court has satisfied itself that the retrial is legally correct. Moreover, the parties themselves clearly understood the scope of review they had conferred on the trial court to be limited to a legal review subject to appeal, as evidenced by their appeal and cross-appeal from the trial court’s final “Order” filed in this Court. Nor is there is anything that indicates, or even suggests, that in entering its final order the trial court attempted to direct a rehearing under its conception of the law while retaining jurisdiction over the proceedings or that, had it done so, it would have been acting within power conferred on it either by the FAA or by the parties’ arbitration Agreement. Thus, I cannot agree that the majority’s understanding of the nature of the trial court’s Order and its effect is correct. Rather, it is clear that the trial court and the parties both thought that the “Order” was a final judgment expressing the court’s opinion on the law that was subject to appellate review. And, indeed, this is the only reasonable interpretation of the Order and its effect, since the alternative is the waste of litigants’ and court resources on potentially fruitless arbitrations until much-delayed appellate review finally determines what the applicable law is.
The majority relies on authority from this Court, Stolhandske v. Stern, 14 S.W.3d 810 (Tex.App.-Houston [1st Dist.] 2000, pet. denied), as support for its conclusion that the trial court retains jurisdiction over future arbitrations until the arbitrator enters an award the trial court believes to be legally correct and that, therefore, the trial court’s order vacating the arbitration award in part was interlocutory. 14 S.W.3d at 813. Stolhandske construed a provision in the Texas Arbitration Act which states that a party may appeal a trial court’s order “vacating an award without directing a rehearing,” *80which is literally what happened here. Id. (quoting Tex. Civ. Prac. & Rem.Code Ann. § 171.0098(a) (Vernon Supp.1999)). Therefore, had the majority followed the plain language of section 171.0098(a) and Stolhandske, it would have had to conclude that the trial court’s order was ap-pealable, not interlocutory. The majority infers from Stolhandske, however, that a party may not appeal a trial court’s order that vacates an arbitration award subject to the FAA when the trial court’s order implies, without directing, a future arbitration to be conducted under a different interpretation of the law. I do not interpret Stolhandske as applying to the situation here, where the trial court did not direct a rehearing and where, had it done so, it would have been acting beyond its authority under both the FAA and the parties’ arbitration Agreement.
Bison and Aldridge have properly appealed the trial court’s legal conclusions. I would hold that we are obligated to review those conclusions de novo. See Tanox, 105 S.W.3d at 250.
For the foregoing reasons, I would address the merits of this appeal.

. See Mapco, Inc. v. Carter, 817 S.W.2d 686, 687 (Tex.1991) (holding that lack of subject-matter jurisdiction is fundamental error that may be raised for first time at appellate level).

. Despite the trial court’s characterization of the issues on which it ordered a new arbitration as “fact issues,” issues of whether a post-injury waiver is enforceable and whether the terms of a waiver are ambiguous are both questions of law. See J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex.2003) ("Deciding whether a contract is ambiguous is a question of law for the court.”); Silsbee Hosp., Inc. v. George, 163 S.W.3d 284, 289-90 (Tex.App.-Beaumont 2005, pet. denied) (construing waiver agreement signed by employee and holding, “When the fair notice requirements apply, a contract must satisfy both requirements [i.e., the express negligence doctrine and conspicuousness] to avoid being unenforceable as a matter of law ”) (emphasis added).

. As the majority states in an extensive footnote, "The federal circuit courts of appeal are split on the issue, with the First, Third, and Sixth in accord with the Fifth, and the Eighth, Ninth, and Tenth in disagreement.” However, while the majority states that "[t]his sort of clause presents interesting issues of jurisdiction and policy,” it declines to address them in the body of its opinion because "the parties do not raise or brief [them] here.” This is incorrect. Bison cites both the Agreement and Tanox in its appellate brief as providing the standard of review of the trial court’s setting aside of the award. Moreover, as stated above, whether parties have the power to expand district court subject matter jurisdiction over motions to enforce or deny arbitration awards is a threshold jurisdictional issue that may always be addressed, regardless of whether it is raised by the parties.