Court Opinion

ID: 9379232
Source: CourtListenerOpinion
Date Created: 2023-03-15 06:08:29.573457+00
Date Added: 2024-06-11T17:16:59.962245
License: Public Domain

AFFIRMED and Opinion Filed March 13, 2023

                                  S  In The
                           Court of Appeals
                    Fifth District of Texas at Dallas
                              No. 05-21-01015-CV

              GBENGA FUNMILAYO, Appellant
                         V.
 VELANDERA ENERGY PARTNERS LLC AND MANISH RAJ, Appellees

               On Appeal from the 401st Judicial District Court
                            Collin County, Texas
                   Trial Court Cause No. 401-05307-2021

                        MEMORANDUM OPINION
              Before Justices Molberg, Partida-Kipness, and Carlyle
                           Opinion by Justice Molberg
      Appellant Gbenga Funmilayo appeals the trial court’s judgment confirming

an arbitration award for appellees Velandera Energy Partners LLC and Manish

Raj. Funmilayo presents five issues for our review in which he argues the trial

court erred by not vacating the arbitration award because the arbitrator exceeded

her powers by deciding issues he argues were previously determined in his favor.

We reject Funmilayo’s argument for reasons explained below, and we affirm the

trial court in this memorandum opinion. See TEX. R. APP. P. 47.4.
                                               Background

         This case concerns a dispute about the ownership of and authority to operate

Velandera Energy Partners LLC.1 Velandera adopted its operating agreement on

February 1, 2018. Under the agreement, the “business and affairs of the Company

are managed by its Managers, who are appointed and removed by the Members.”

According to the agreement, Manish Raj was the sole member, and Funmilayo was

appointed initial Manager. Among other things, the operating agreement provided:

         If any controversy or claim, whether based on contract, tort, statute, or
         other legal or equitable theory (including any claim of fraud,
         misrepresentation, or fraudulent inducement), arising out of or related
         to the corporate contract between and among the Company, its
         Members, Mangers, employees, or agents, the parties agree to resolve
         the Dispute as provided in [Article 14 of the agreement].
          ....
         If not resolved by mediation, the parties shall resolve the Dispute by
         arbitration pursuant to [Article 14] and the then-current rules and
         supervision of the American Arbitration Association. . . . The
         arbitrator’s decision and award are final and binding and may be
         entered in any court having jurisdiction. The arbitrator does not have
         the power to award, and no one subject to this Article may seek, an
         award of, punitive, exemplary, or consequential damages, or any
         damages excluded by or in excess of any damage limitations
         expressed in this Agreement or any subsequent agreement between
         the parties. To prevent irreparable harm, the arbitrator may grant
         temporary or permanent injunctive or other equitable relief.

         Issues of arbitrability are determined in accordance with the Federal
         substantive and procedural laws relating to arbitration. All other
         aspects of the Agreement are interpreted in accordance with, and the
         arbitrator applies and is bound to follow, the substantive laws of the
         State of Texas.

   1
       We limit our discussion of the facts of this case to those necessary to resolve the appeal.

                                                     –2–
On June 15, 2018, Velandera and Funmilayo entered into an employment

agreement, which was to be valid for ten years, subject to termination by

Velandera for various reasons enumerated in the agreement. Raj made Schanti

Corporation a Velandera member on July 12, 2018.

      On July 19, 2018, Velandera’s members—Raj and Schanti—resolved that

Funmilayo was removed as manager, though the “employment agreement with

[Funmilayo] remain[ed] unaffected by” his removal as manager, provided he was

“relieved of any duties of a Manager . . . .” The next day, Raj notified Funmilayo

that, “Manager and Members of Velandera Energy Partners have decided to

terminate your employment” due to “failure to perform duties in compliance with

the employment agreement.”

      Velandera sued Funmilayo, alleging breach of fiduciary duty and seeking

declaratory and injunctive relief.   The case was submitted to arbitration at

Funmilayo’s request. In its second amended complaint filed with the arbitrator,

Velandera alleged Raj was its sole member and held a 100 percent interest.

Velandera alleged, following a transaction in Louisiana, Funmilayo “acted

unilaterally and without authorization to issue a ‘Members’ Resolution’” stating,

among other things, that Raj’s membership interest was invalid, Raj’s and

Schanti’s membership interests were voided, and two other individuals were

elected and admitted as company members; and that Funmilayo issued an

                                       –3–
“unauthorized resolution” naming himself as manager of the “allegedly

reconstituted” company. Velandera alleged that, because Funmilayo failed to act

according to the operating agreement, Raj and Schanti voted to remove him as

manager on July 19, 2018, and served him with a letter terminating his position as

manager, and the next day served him with a letter terminating his employment

agreement. Despite this, Velandera alleged Funmilayo continued to hold himself

out as manager and member of the company. In addition to its breach of fiduciary

duty claims, Velandera added claims for business disparagement and tortious

interference with a contract. Velandera also sought declaratory relief, requesting

declarations that, among other things, Raj and Schanti were the sole members of

Velandera; Funmilayo no longer had the right to act as manager for Velandera and

was never a member of Velandera; and the employment agreement between

Velandera and Funmilayo was terminated in accordance with the terms of the

agreement and Velandera owed nothing to Funmilayo as a result of the

termination.

      Funmilayo filed an amended answer and counterclaims on November 9,

2018. He alleged, among other things, that following his “purported removal” as

manager and the invalid termination of his employment contract, he informed Raj

he would continue to perform his duties for Velandera. Funmilayo alleged Raj

prevented him from acting in any capacity on behalf of the company. Among

others, Funmilayo sought a declaration that any actions taken by Raj and Schanti

                                       –4–
on behalf of Velandera as members or managers of the company were null and

void and that Funmilayo be recognized as manager and a member of Velandera

under the operating agreement. Funmilayo alleged breach of contract, arguing that

valid contractual relationships existed between himself and Velandera, and that

Velandera, Raj, and Schanti violated the terms of the employment agreement by,

among other things, “wrongfully terminating [his] employment without cause” and

failing to “pay all money owed to Funmilayo under the Employment Agreement.”

Funmilayo also alleged breach of fiduciary duty, quantum meruit, money had and

received, and promissory estoppel, and he sought injunctive relief.

      Regarding his breach of contract claim, Funmilayo argued in post-hearing

briefing to the arbitrator that, under the terms of the employment agreement, “only

the Company could terminate Funmilayo’s employment”—Raj could not because

he “had no interest in [Velandera and] he lacked the required vote to . . . terminate

[Funmilayo’s] employment.”       Funmilayo further argued his termination was

invalid because “Raj failed to follow the procedures prescribed in the Operating

Agreement as they relate to Members rights to receive notice of meetings.”

Funmilayo also argued that, to the extent Raj could terminate Funmilayo, any

termination breached his employment agreement because Velandera presented no

evidence that Funmilayo failed to perform under the agreement or committed any

fraud or willful misconduct. On his money had and received claim, Funmilayo

                                        –5–
argued, among other things, that Velandera failed to provide the salary owed to

Funmilayo under his employment agreement.

      On January 7, 2019, the arbitrator awarded declaratory relief as follows:

“Manish Raj and Schanti Corp. are the sole members of Velandera Energy Partners

LLC”; “Gbenga Funmilayo is not and never was a member of Velandera”;

“Funmilayo no longer has the right to act as a manager of Velandera, effective July

19, 2018 at 4:30 p.m.”; “Actions taken by Funmilayo in the purported capacity of

member or manager of Velandera on or after July l9, 2018, are invalid”; “Actions

taken by Funmilayo to admit members to Velandera without the participation of

Manish Raj and Schanti Corp., including the admission of Akintunde Ademola and

Olukemi Funmilayo, are invalid”; and, “The ‘Contract Agreement between

Velandera Energy Partners LLC and Gbenga Funmilayo of Velandera

Petrophysical Consulting, LLC’ is invalid and unenforceable.” The arbitrator also

awarded injunctive relief, which included enjoining Funmilayo from acting as a

manager for Velandera and communicating with particular entities regarding

Velandera’s accounts.    The arbitrator denied “[a]ll other claims submitted by

Funmilayo” and all claims not expressly granted by the award.

      On Velandera’s motion, the trial court confirmed the arbitration award on

January 18, 2019, and entered a judgment nunc pro tunc on August 2, 2019, to

correct the date on the original judgment.

                                        –6–
         On March 16, 2021, Funmilayo filed new claims with a second arbitrator.

He alleged “post-judgment breach of contract,” arguing he had maintained his

employment at Velandera because the first arbitrator denied Velandera’s request

for a declaration that the employment agreement between Velandera and

Funmilayo was terminated in accordance with the terms of the agreement and

Velandera owed nothing to Funmilayo as a result of the termination. Funmilayo

asserted Velandera “refused to allow [him] to continue to function as its Chief

Executive Officer, post-First Arbitration and post-Judgment which confirmed the

First Arbitration Award[,]” and refused to pay his salary and benefits. Funmilayo

also alleged tortious interference with a contract.

         In its motion for summary judgment in response, Velandera contended,

among other things, that res judicata precluded Funmilayo’s new claims. It argued

the first arbitration denied Funmilayo’s breach of employment agreement claim,

and that the new claims were based on the same premise as the original breach

claim.

         The arbitrator granted Velandera’s motion for summary judgment, finding

that Funmilayo’s claims were barred by res judicata and the operating agreement;

Velandera terminated the employment agreement in accordance with its terms and

declaratory relief was not necessary; if Funmilayo could assert a breach of contract

claim, no breach occurred; and Funmilayo’s tortious interference with contract

claim was invalid or barred.

                                         –7–
        On September 21, 2021, Funmilayo filed a petition to vacate the second

arbitration award, making the argument that he presents now on appeal. Velandera

and Raj filed a motion to confirm the award. The trial court denied the petition to

vacate.      On November 10, 2021, the trial court confirmed the arbitrator’s

September 13, 2021 award in all respects. This appeal followed.

                                              Discussion

        Funmilayo argues the trial court erred by confirming the second arbitration

award because the arbitrator exceeded her powers by deciding a claim against him

that, he argues, the first arbitrator decided in his favor. Funmilayo argues this went

beyond the second arbitrator’s powers because the operating agreement provided

that the first “arbitrator’s decision and award [were] final and binding[.]”2 He also

argues the decision went beyond the second arbitrator’s powers because—

according to the agreement—the arbitration was governed by the American

Arbitration Association’s rules of arbitration, under which the arbitrator was “not

empowered to redetermine the merits of any claim already decided.”3 Velandera

    2
      Funmilayo’s five issues on appeal are stated in his brief as follows: whether the first arbitrator
retained Funmilayo’s employment with Velandera; whether Funmilayo can seek remedy for breach of
contract after the first arbitration; whether Velandera and Raj relitigated the issue of the alleged
termination of the employment agreement; whether the second arbitrator exceeded her powers when she
granted Velandera and Raj’s motion for summary judgment; and whether any part of the second
arbitration is valid, and whether the trial court should have ordered a rehearing.
    3
       According to the record before us, commercial arbitration rule R-50, “Modification of Award,”
states, “Within 20 calendar days after the transmittal of an award, any party, upon notice to the other
parties, may request the arbitrator, through the AAA, to correct any clerical, typographical, or
computational errors in the award. The arbitrator is not empowered to redetermine the merits of any claim
already decided. The other parties shall be given 10 calendar days to respond to the request. The arbitrator

                                                   –8–
and Raj argue, among other things, that the question of whether Funmilayo’s

employment agreement was terminated was actually litigated in the first

arbitration.     They argue that the second arbitrator, in rejecting Funmilayo’s

subsequent claims relating to breach of the employment agreement based on,

among other things, res judicata, did not re-decide any matters decided in the first

arbitration and therefore did not exceed her powers. Thus, Velandera and Raj

argue, there was no statutory basis to vacate the arbitration award. We agree.

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

and we review the entire record. Graham-Rutledge & Co., Inc. v. Nadia Corp.,

281 S.W.3d 683, 687 (Tex. App.—Dallas 2009, no pet.).                                 All reasonable

presumptions are indulged to uphold an arbitrator’s decision. Ancor Holdings,

LLC v. Peterson, Goldman & Villani, Inc., 294 S.W.3d 818, 826 (Tex. App.—

Dallas 2009, no pet.). Given that “arbitration is designed as an efficient, less-

costly alternative to judicial litigation[,]” our “review of an arbitration award is

extraordinarily narrow and we vacate an arbitration award only in very unusual

circumstances.” Stage Stores, Inc. v. Gunnerson, 477 S.W.3d 848, 854 (Tex.

App.—Houston [1st Dist.] 2015, no pet.). An arbitration award has the same effect

as a judgment of a court of last resort; it is presumed valid and entitled to great

shall dispose of the request within 20 calendar days after transmittal by the AAA to the arbitrator of the
request and any response thereto.”

                                                  –9–
deference. Cambridge Legacy Group, Inc. v. Jain, 407 S.W.3d 443, 447 (Tex.

App.—Dallas 2013, pet. denied).

      Unless grounds are offered for vacating, modifying, or correcting an award

under sections 171.088 or 171.091 of the civil practice and remedies code, the

court, on application of a party, shall confirm the award. TEX. CIV. PRAC. & REM.

CODE § 171.087. On application of a party, the court shall vacate an award if,

among other things, an arbitrator exceeds her powers. Id. § 171.088(a)(3)(A).

Arbitrators derive their “power from the parties’ agreement to submit to

arbitration, and because the law favors arbitration, and arbitration agreements are

often quite broad, judicial review of an arbitration award is usually very narrow.”

City of Pasadena v. Smith, 292 S.W.3d 14, 20 (Tex. 2009).

                                    Res judicata

      Under the doctrine of res judicata, if the defendant wins a suit, “the plaintiff

is barred from bringing another action on claims actually litigated and also on

claims that could have been litigated in the original cause of action.” Jeanes v.

Henderson, 688 S.W.2d 100, 103 (Tex. 1985). Res judicata applies when there is

(1) a prior final judgment on the merits by a court of competent jurisdiction; (2)

identity of parties or those in privity with them; and (3) a second action based on

the same claims that were raised or could have been raised in the first action.

Citizens Ins. Co. of Am. v. Daccach, 217 S.W.3d 430, 449 (Tex. 2007). It is based

on policies reflecting the need to “bring all litigation to an end, prevent vexatious

                                        –10–
litigation, maintain stability of court decisions, promote judicial economy, and

prevent double recovery.” Barr v. Resolution Tr. Corp. ex rel. Sunbelt Fed. Sav.,

837 S.W.2d 627, 629 (Tex. 1992). Arbitration awards have preclusive effect for

res judicata purposes. Premium Plastics Supply, Inc. v. Howell, 537 S.W.3d 201,

204 (Tex. App.—Houston [1st Dist.] 2017, no pet.).

      “Texas follows a transactional approach to determine whether res judicata

applies.” TRO-X, L.P. v. Eagle Oil & Gas Co., 608 S.W.3d 1, 11 (Tex. App.—

Dallas 2018), aff’d, 619 S.W.3d 699 (Tex. 2021).             Under this approach, a

subsequent suit is barred if it arises out of the same subject matter as the prior suit,

and that subject matter could have been litigated in the prior suit. Citizens, 217

S.W.3d at 449. In determining what constitutes the same subject matter, we

examine “the factual basis of the claim or claims in the prior litigation[,]”

analyzing “the factual matters that make up the gist of the complaint, without

regard to the form of action.” Barr, 837 S.W.2d at 630.

                                       Analysis

      We begin with the factual basis of Funmilayo’s claims in the first arbitration.

Relating to his employment agreement, Funmilayo alleged its termination was not

valid, and that he communicated to Raj that he would continue to perform his

duties. He alleged Raj prevented him from performing any of those duties for

Velandera.    Under his breach of contract cause of action, Funmilayo alleged

Velandera and Raj violated the terms of the employment agreement “by

                                         –11–
wrongfully terminating [his] employment” without cause, and failed to pay the

money owed him under the employment agreement. Under his money had and

received cause of action, Funmilayo alleged that Velandera and Raj “purportedly

terminated Funmilayo’s employment but such termination [was] invalid,” but that,

valid or not, Velandera wrongfully withheld his wages under the agreement.

      In the second arbitration, Funmilayo again alleged breach of the employment

agreement, alleging Velandera “refused to allow [him] to continue to function as

its Chief Executive Officer” and refused to pay his salary under the agreement.

      The underlying factual premises—that Funmilayo’s employment agreement

was never terminated, that any termination was wrongful, that Raj was preventing

him for performing his duties under the agreement, and that he was owed money

under the agreement—were therefore the same in each arbitration. See TRO-X,

L.P., 608 S.W.3d at 13 (considering whether the “underlying factual premises” in

the first suit “differ[ed] from the factual premises underlying the claims” in

subsequent suit in determining whether res judicata applied). The first arbitrator

rejected these claims when it denied “[a]ll other claims submitted by Funmilayo[,]”

including his breach of contract and money had and received causes of action.

Therefore, we conclude res judicata applied to Funmilayo’s claims in the second

arbitration because (1) the first arbitration award, confirmed by the trial court, was

a prior final judgment on the merits by a court of competent jurisdiction; (2) the

parties were the same in each arbitration; and (3) Funmilayo’s second arbitration

                                        –12–
claims were based on the same claims raised in the first arbitration or on claims

that could have been raised. See Citizens, 217 S.W.3d at 449. Accordingly, we

conclude the second arbitrator did not redetermine any matters decided in the first

arbitration and therefore did not exceed her powers under the arbitration

agreement.

      In reaching this conclusion, we necessarily reject Funmilayo’s contention

that the trial court, by failing to grant Velandera and Raj’s request for declaratory

relief regarding Funmilayo’s termination under the employment agreement,

somehow “retain[ed] his employment” with Velandera.            Funmilayo cites no

authority supporting this proposition. Whatever effect the denial of declaratory

relief may have, see Martin v. Martin, Martin & Richards, Inc., 989 S.W.2d 357,

359 (Tex. 1998) (deciding that a judgment dismissing “a claim for a declaration

that a contract is valid does not amount to a declaration that the contract is

invalid,” and observing that the Restatement suggests that a judgment denying

“declaratory relief without determining the matters presented” “should not

preclude subsequent claims or issues”), that effect cannot be what Funmilayo

argues it is here, given that the trial court, as discussed above, also denied

Funmilayo’s claims relating to breach of the employment agreement.

      Funmilayo argues his breach of contract claim was denied because the first

arbitrator must have found the agreement was never terminated, which he argues

explains the denial of Velandera and Raj’s requested declaratory relief; in other

                                       –13–
words, he argues his breach of contract claim was premised on the agreement’s

termination.   We cannot agree.       As detailed above, Funmilayo argued the

employment agreement was breached not just because he was “wrongfully

terminat[ed,]” but also because Velandera had failed to pay him money owed

under the agreement. He made the same claim under his money had and received

cause of action. These claims applied whether or not Funmilayo had been actually

terminated, and they were denied by the first arbitrator.

      Funmilayo relies on Barsness v. Scott, 126 S.W.3d 232 (Tex. App.—San

Antonio 2003, pet. denied), a case about whether an arbitration panel exceeded its

powers by modifying its original award when none of the statutory requirements

were present. The arbitrators made an original award, which stated “neither party

is the prevailing party” and “full relief has not been granted under this arbitration

award to either party.” Id. at 240. It contained no award for damages or attorney’s

fees, and stated that relief not granted was “expressly denied.” Id. Scott filed a

motion to modify the award, and in response, the arbitrators issued a modified

award declaring Scott the prevailing party and awarding him nominal damages and

attorney’s fees. Id. The court of appeals concluded the modified order granted

Scott relief he had been denied in the original award, and it could not be justified

as a clarification or modification under civil practice and remedy code

sections 171.054(a) or 171.091(a). Id. at 240–41. We do not think Barsness has

any application here, where Funmilayo submitted subsequent claims to a second

                                        –14–
arbitrator, who in turn denied the claims based on, among other things, res judicata.

There is no question presented in this case about clarification or modification of

the first arbitration award under section 171.054.

      Funmilayo also cites Genecov Group, Inc. v. Roosth Prod. Co., 144 S.W.3d

546, 550 (Tex. App.—Tyler 2003, pet. denied), where Genecov filed suit seeking

declaratory judgment that various oil and gas leases were valid and that it was the

lawful operator of a particular gas unit, as opposed to Roosth, which was the entity

listed as operator of record with the railroad commission. The parties agreed to

submit the question of the validity of the leases to arbitration, but the “issue of who

would be the lawful operator [of the unit] was not submitted to the arbitrators.” Id.

at 548. The arbitrators determined the leases were valid, and the trial court entered

final judgment confirming the arbitration award. Id. at 549–50. Genecov later

filed a second suit seeking a declaration that it was the lawful operator of the same

gas unit referred to above, as well as other relief. Id. at 500. The trial court

entered summary judgment for Roosth, finding that Genecov’s claims were barred

under res judicata by the final judgment in the first case. Id. On appeal, Genecov

argued, among other things, that the second suit was outside the ambit of res

judicata because it was an attempt to enforce the arbitration order and the

implications of the prior judgment. Id. at 552. The court of appeals observed that,

in the first suit, “the fact of who should be the operator was not determined.” Id.

The court concluded that Genecov was seeking the same relief it sought in the first

                                        –15–
suit, and therefore, its claims related to the operator issue “fit squarely within the

ambit of res judicata.” Id. “[T]he same facts which led Genecov to seek a

determination of who the unit operator was in [the first suit] existed” in the second

suit. Id. at 553. We find Genecov unhelpful. Here, Funmilayo brought claims in

the second arbitration, not Velandera or Raj, after the same factual premises were

actually before and determined by the first arbitrator. Thus, to the extent Genecov

is analogous, we find Funmilayo to be in the position of Genecov, not the

defendant in that case.

      Given the above, we conclude the trial court did not err by confirming the

second arbitration award because Funmilayo proved no statutory grounds for the

award to be vacated. We overrule Funmilayo’s first four issues. In his fifth issue,

Funmilayo raises a question about whether, assuming we agree with his arguments

above, any portion of the arbitration award is salvageable. But because we rejected

Funmilayo’s primary arguments, we need not reach this final issue because its

resolution is not necessary to the final disposition of the appeal. See TEX. R. APP.

P. 47.1.

                                    Conclusion

      The judgment of the trial court is affirmed.

                                            /Ken Molberg/
                                            KEN MOLBERG
                                            JUSTICE
211015F.P05

                                        –16–
                                    S
                            Court of Appeals
                     Fifth District of Texas at Dallas
                                   JUDGMENT

GBENGA FUNMILAYO, Appellant                    On Appeal from the 401st Judicial
                                               District Court, Collin County, Texas
No. 05-21-01015-CV          V.                 Trial Court Cause No. 401-05307-
                                               2021.
VELANDERA ENERGY                               Opinion delivered by Justice Molberg.
PARTNERS LLC AND MANISH                        Justices Partida-Kipness and Carlyle
RAJ, Appellees                                 participating.

       In accordance with this Court’s opinion of this date, the judgment of the trial
court is AFFIRMED.

    It is ORDERED that appellees VELANDERA ENERGY PARTNERS LLC
AND MANISH RAJ recover their costs of this appeal from appellant GBENGA
FUNMILAYO.

Judgment entered this 13th day of March 2023.

                                        –17–