Court Opinion

ID: 9678776
Source: CourtListenerOpinion
Date Created: 2023-08-24 06:32:04.508042+00
Date Added: 2024-06-11T18:17:07.745255
License: Public Domain

HEDGES, Justice,
dissenting.
I respectfully dissent. I believe that the arbitrators exceeded their authority in awarding punitive damages.
In point of error one, Prudential alleges that the arbitration panel exceeded its authority by awarding common-law punitive damages to the Shoemakers.1 Prudential asserts that the Shoemakers’ claim did not request punitive damages. It buttresses its assertion as follows: (1) although the Shoemakers submitted a substantial claim with many allegations and detailed requests for relief, there was no specific claim for punitive damages; (2) the Shoemakers did not assert a claim for punitive damages at the hearing; (3) the panel awarded punitive damages based on its own judicial notice of its abstract ability to do so; (4) punitive damages are not inferable from a request for treble damages under a DTPA claim; (5) punitive damages are not a substitute for a “knowing” violation of the DTPA; and (6) the panel did not award any other DTPA damages.
The Shoemakers counter that a claim for punitive damages may be inferred from their amended claim. They point out that interpretation of issues presented to an arbitration panel is a procedural matter to be left to the arbitration panel, not a reviewing court. They assert that because the NASD arbitration rules and the NASD arbitrator’s manual include provisions for punitive damages, and the contract between the parties stated they would conduct the arbitration in accordance with NASD rules, the arbitration panel had sufficient authority to award punitive damages. They argue that because their damage claim included the language “treble damages” and “nature of the violations of law,” their claim fits within the NASD definition of punitive damages. They contend that their request in closing argument before the arbitration panel that the panel “make [defendants] pay” is a rationally inferable claim for punitive damages.
I defer to the majority opinion for a correct statement of the law. It is in the application of the law to the facts where we part company.
I believe that the trial court erred when it confirmed the entire arbitration award, because the statement of claim did not authorize the arbitration panel to award punitive damages. I am not persuaded by the Shoemakers’ argument that their pleadings were sufficient to allow the arbitration panel to *796infer a request for punitive damages. The Shoemakers’ claim before the arbitration panel was very detailed and requested specific damages. They never requested common-law punitive damages.
I recognize that the interpretation of issues presented to an arbitration panel is a procedural matter to be left to the arbitrator, not to a reviewing court. John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 556-57, 84 S.Ct. 909, 918, 11 L.Ed.2d 898 (1964); USX Corp. v. West, 781 S.W.2d 453, 455 (Tex.App.-Houston [1st Dist.] 1989, no writ). The issue before us is not the interpretation of a mere procedural issue, but rather the fundamental adjudicatory authority of the arbitration panel.
I believe that the request for treble damages in the Shoemakers’ statement of claim clearly refers to their DTPA claim. Treble damages under the DTPA are punitive in nature. Pace v. State, 650 S.W.2d 64, 65 (Tex.1983). In the context of the Shoemakers’ detailed DTPA claim, a claim for common-law punitive damages cannot be reasonably inferred from the Shoemakers’ claim for treble damages or their argument that the panel should “make [defendants] pay.”
The Shoemakers’ claim that the reference to the NASD manual and rules authorized the arbitration panel to award punitive damages also fails to persuade me. The fact that the manual and rules permit an arbitrator to award punitive damages as defined therein does not mean that punitive damages may be awarded in every case, even in the absence of a proper claim.
The arbitration panel erred in relying on Miley v. Oppenheimer to 'award common-law punitive damages absent a proper request. The Miley plaintiff specifically requested punitive damages. 637 F.2d at 329-31. The defendant contested only whether punitive damages were a proper remedy. Id. The court held that common-law punitive damages were available to a plaintiff alleging churning of its securities account under Texas law. Id. at 332.
I believe that the Shoemakers fail in their attempt to distinguish Totem Marine Tug & Barge, Inc. v. North American Towing, Inc., 607 F.2d 649 (C.A.5 La. 1979) They correctly argue that in Totem, the arbitrator awarded damages that the winning party had expressly stipulated were not at issue. 607 F.2d at 651-52. Therefore, the arbitrator’s authority had been specifically limited by the parties in that ease. The fact that the issue was disputed in this case does not negate the Totem holding, that the arbitrator could not award damages he had no authority to consider.
The Shoemakers’ reliance on Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 115 S.Ct. 1212, 131 L.Ed.2d 76 (1995), is misplaced as well. In that case, the United Statés Supreme Court held that a plaintiff could be awarded punitive damages under the Federal Arbitration Act and the NASD rules even though New York (the choice of law under the contract) did not permit the award of punitive damages in an arbitration, when the parties included a claim for punitive damages before the arbitration panel. 514 U.S. at 58, 115 S.Ct. at 1216.
The Shoemakers argue that when the appellant fails to present a complete record, the reviewing court must assume that the missing portions of the record support the arbitrator’s award. Jamison & Harris v. National Loan Investors, 939 S.W.2d 735, 737 (Tex.App.-Houston [14th Dist.] 1997, writ denied); City of Baytown v. C.L. Winter, Inc., 886 S.W.2d 515, 520 (Tex.App.-Houston [1st Dist.] 1994, writ denied). They contend that neither the transcripts and tapes of the arbitration proceeding nor the account agreement were ever admitted, and therefore, that the court must assume that the missing portions of the record support the arbitration panel’s award. They also contend that the absence of the initial arbitration agreement between Prudential and the Shoemakers is fatal.
The Shoemakers are incorrect in their claim that the tapes and transcripts of the arbitration hearing were not in evidence. Prudential introduced the tapes and transcripts into evidence. The Shoemakers objected on the grounds that the proffered evidence had not been authenticated. The trial court conditionally accepted the evidence, and took the Shoemakers’ objection under advisement. Because the trial court never ruled on the objection, the evidence was admitted and assumed to have been considered by the trial court in reaching its *797decision. Owens-Corning Fiberglas Corp. v. Keeton, 922 S.W.2d 658, 661 (Tex.App.-Austin 1996, writ denied).
The absence of the arbitration agreement is irrelevant to the adjudication of the merits of this appeal. Prudential is not complaining that the award is outside the contract of arbitration, and the Shoemakers certainly do not make such a contention. The only relevant document, in the context of Prudential’s claim, is the submission agreement, which is in the record.
I would sustain point of error one.
I would reverse the judgment of the trial court awarding $100,000.00 in punitive damages to the Shoemakers and render judgment deleting the punitive damages of $100,-000.00 from the trial court’s judgment and reducing the judgment in favor of the Shoemakers from $266,250.00 to $166,250.00. I would affirm the remainder of the judgment.
En banc consideration was requested.
A majority of the justices of the Court voted to consider the case en banc.
SCHNEIDER, C.J., and MIRABAL, O’CONNOR, WILSON and ANDELL, JJ., join Justice COHEN’S majority opinion.
TAFT and NUCHIA, JJ., join Justice HEDGES’ dissenting opinion.

. The arbitration panel’s citation of Miley in its award makes it clear that the punitive damages award was common-law punitive damages, as opposed to statutory punitive damages. In Miley the issue was whether the arbitration panel had the authority to award common-law punitive damages in an account churning case. Miley v. Oppenheimer, 637 F.2d 318 (5th Cir.1981). The issue of whether a proper request for common-law punitive damages was made was not before that court.