Court Opinion

ID: 4230870
Source: CourtListenerOpinion
Date Created: 2017-12-20 23:25:38.13821+00
Date Added: 2024-06-11T14:42:38.637957
License: Public Domain

ACCEPTED
                                                                           03-17-00492-CV
                                                                                 21273618
                                                                 THIRD COURT OF APPEALS
                                                                           AUSTIN, TEXAS
                                                                        12/13/2017 3:34 PM
                                                                         JEFFREY D. KYLE
                                                                                    CLERK
                       No. 03-17-00492-CV

            In the Court of Appeals                        FILED IN
                                                    3rd COURT OF APPEALS
                                                         AUSTIN, TEXAS
         for the Third Judicial District            12/13/2017 3:34:07 PM
                                                        JEFFREY D. KYLE
                 Austin, Texas                               Clerk

     DIXIE EQUIPMENT, LLC AND DIXIE TURBINE SERVICES, LLC,
                                       Appellants,
                                v.

             ENERGIA DE RAMOS, S.A.P.I. DE C.V. F/K/A
                DEACERO POWER S.A.P.I. DE C.V.,
                                        Appellee.

         On Appeal from the 200th Judicial District Court
                      Travis County, Texas

BRIEF OF APPELLEE ENERGIA DE RAMOS, S.A.P.I. DE C.V. F/K/A
             DEACERO POWER S.A.P.I. DE C.V.

                                 Breck Harrison
                                  State Bar No. 24007325
                                 Michael Roberts
                                  State Bar No. 24082153
                                 Danica L. Milios
                                  State Bar No. 00791261
                                 JACKSON WALKER L.L.P.
                                 100 Congress Ave., Suite 1100
                                 Austin, Texas 78701
                                 [Tel.] (512) 236-2000
                                 [Fax] (512) 236-2002
                                 bharrison@jw.com

                                 COUNSEL FOR APPELLEE

           ORAL ARGUMENT CONDITIONALLY REQUESTED
                  IDENTITY OF PARTIES AND COUNSEL

Appellants

Dixie Equipment, LLC and
Dixie Turbine Services, LLC

Lead Appellate Counsel

Kevin J. Terrazas
 State Bar No. 24060708
Timothy A. Cleveland
 State Bar No. 24055318
CLEVELAND | TERRAZAS PLLC
4611 Bee Cave Rd., # 306B
Austin, Texas 78746
[Tel.] (512) 680-3257
kterrazas@clevelandterrazas.com

Appellee

Energia de Ramos, S.A.P.I. de C.V. f/k/a
Deacero Power S.A.P.I. de C.V.

Lead Appellate Counsel                 Additional Appellate Counsel

Breck Harrison                         Michael Roberts
 State Bar No. 24007325                 State Bar No. 24082153
JACKSON WALKER L.L.P.                  Danica L. Milios
100 Congress Ave., Suite 1100           State Bar No. 00791261
Austin, Texas 78701                    JACKSON WALKER L.L.P.
[Tel.] (512) 236-2000                  100 Congress Ave., Suite 1100
[Fax] (512) 236-2002                   Austin, Texas 78701
bharrison@jw.com                       [Tel.] (512) 236-2000
                                       [Fax] (512) 236-2002
                                       mroberts@jw.com
                                       dmilios@jw.com

                                  ii
                                       TABLE OF CONTENTS

Identity of Parties and Counsel ................................................................ii

Table of Authorities ................................................................................... v

Statement of the Case ............................................................................viii

Statement Regarding Oral Argument ...................................................... x

Issues Presented........................................................................................ x

Statement of Facts .................................................................................... 3

        I.      The Ramos Arizpe Project ....................................................... 3

        II.     The Arbitration Proceeding .................................................... 4

        III.    The District Court Confirms the Arbitration Award ............. 8

Summary of Argument .............................................................................. 9

Argument ................................................................................................. 11

        I.      The Arbitration Panel’s Decision To Hold the Final
                Arbitration Hearing in Dixie’s Voluntary Absence and
                in Accordance with the Panel’s Rules Did Not Violate
                Dixie’s Purported Due Process or Constitute Misconduct
                under the FAA ....................................................................... 14

                A.       The Arbitration Panel’s Decision To Hold the Final
                         Arbitration Hearing in Dixie’s Absence Comported
                         with Due Process Because Dixie Had Full Notice
                         of the Hearing and Voluntarily Elected To
                         Abandon the Proceedings............................................. 16

                B.       The Arbitration Panel’s Decision To Conduct the
                         Hearing in Dixie’s Absence Was Authorized by the
                         Rules of the ICDR ........................................................ 20

                                                     iii
                 C.      It Was Dixie’s Burden To Procure a Transcript of
                         the Final Arbitration Hearing; Its Failure To Do so
                         Does Not Support Vacatur of the Arbitration
                         Award ........................................................................... 22

        II.      The Arbitration Panel’s Decision To Hold the Final
                 Arbitration Hearing Despite Dixie’s Claimed Inability
                 To Pay Is Not Grounds for Vacatur ...................................... 28

                 A.      Dixie Failed To Prove Its Inability To Pay in the
                         Arbitration Proceeding................................................. 28

                 B.      The ICDR Procedures Specifically Authorized the
                         Arbitration Panel To Reject Dixie’s Counterclaims
                         for Failure To Pay Its Share of the Arbitration
                         Fees............................................................................... 31

Prayer ...................................................................................................... 32

Certificate of Service ............................................................................... 33

                                                      iv
                                 TABLE OF AUTHORITIES

                                                                                           Page(s)

Cases

21st Fin. Servs., L.L.C. v. Manchester Fin. Bank,
     747 F.3d 331 (5th Cir. 2014) .......................................................... 17

Baravati v. Josephthal, Lyon & Ross, Inc.,
     28 F.3d 704 (7th Cir. 1994) ............................................................ 21

BDO Seidman LLP v. J.A. Green Dev. Corp.,
     327 S.W.3d 852 (Tex. App.—Dallas 2010, no pet.) ........................ 31

Berstein Seawell & Kove v. Bosarge,
     813 F.2d 726 (5th Cir. 1987) .................................................... 17, 18

Bonded Builders Home Warranty Assoc., Inc. v. Smith,
     488 S.W.3d 468 (Tex. App.—Dallas 2016, no pet) ......................... 30

Craft v. Davis,
     No. 2-07-332-CV, 2008 WL 4180357 (Tex. App.—Fort
     Worth Sept. 11, 2008, no pet.) (mem. op.) ..................................... 23

CVN Grp., Inc. v. Delgado,
     95 S.W.3d 234 (Tex. 2002).............................................................. 22

Ewing v. Act Catastrophe-Tex. L.C.,
     375 S.W.3d 545 (Tex. App.—Houston [14th Dist.]
     2012, pet. denied) ........................................................................... 18

Gilbert v. Rain & Hail Ins.,
     No. 02-16-00277-CV, 2017 WL 710702 (Tex. App.—Fort
     Worth Feb. 23, 2017, pet. denied) (mem. op.) ................................ 19

GJR Mgmt. Holdings, L.P. v. Jack Raus, Ltd.,
     126 S.W.3d 257 (Tex. App.—San Antonio 2003, pet. denied) .......... 23

                                                v
Grp. 32 Dev. & Eng’g, Inc. v. GC Barnes Grp.,
     No. 3:14-CV-2436-B, 2015 WL 144082
     (N.D. Tex. Jan. 9, 2015) ........................................................... 18, 22

House Grain Co. v. Obst,
     659 S.W.2d 903 (Tex. App.—Corpus Christi 1983,
     writ ref’d n.r.e.)............................................................................... 23

In re Chestnut Energy Partners, Inc.,
     300 S.W.3d 388 (Tex. App.—Dallas 2009, pet. denied) ........... 12, 26

In re Kempwood Assocs., L.P.,
     9 S.W.3d 125 (Tex. 1999) (orig. proceeding) (per curiam) ................ 12

In re Olshan Found. Repair Co.,
     328 S.W.3d 883 (Tex. 2010) (orig. proceeding) ............ 12, 21, 29, 31

Jacaman Polaris Sports Ctr. Ltd. v. Falcon Int’l Bank,
     No. 04-16-00481-CV, 2017 WL 2852632 (Tex. App.—
     San Antonio July 5, 2017, no pet.) (mem. op.) ................... 12, 25, 26

Kline v. O’Quinn,
     874 S.W.2d 776 (Tex. App.—Houston [14th Dist.] 1994,
     writ denied) .................................................................................... 23

KNJ Enters., Inc. v. Wilbanks & Wilbanks, P.C.,
     No. 14-14-00271-CV, 2015 WL 1736400 (Tex. App.—
     Houston [14th Dist.] Apr. 14, 2015, no pet.) (mem. op.).... 18, 19, 26

Laws v. Morgan Stanley Dean Witter,
     452 F.3d 398 (5th Cir. 2006) .......................................................... 13

Nafta Traders, Inc. v. Quinn,
     339 S.W.3d 84 (Tex. 2011).................................................. 23, 24, 27

Peacock v. Wave Tec Pools, Inc.,
     107 S.W.3d 631 (Tex. App.—Waco 2003, no pet.) .......................... 20

                                                 vi
Saks v. Rogers,
        No. 04-16-00286-CV, 2017 WL 3159712 (Tex. App.—
        San Antonio July 26, 2017, no pet.) (mem. op.) ............................. 19

Statewide Remodeling, Inc. v. Williams,
        244 S.W.3d 564 (Tex. App.—Dallas 2008, no pet.) .................. 23, 26

Totem Marine Tug & Barge, Inc. v. N. Am. Towing, Inc.,
        607 F.2d 649 (5th Cir. 1979) .................................................... 16, 17

Venture Cotton Coop. v. Freeman,
        435 S.W.3d 222 (Tex. 2014) ............................................................ 29

Venture Cotton Coop. v. Neudorf,
        No. 14-13-00808-CV, 2014 WL 4557765 (Tex. App.—
        Houston [14th Dist.] Sept. 16, 2014, no pet.) (mem. op.) ........ 12, 19

Volt Info. Sci., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ.,
        489 U.S. 468 (1989) ........................................................................ 20

Vorwerk v. Williamson Cnty. Grain, Inc.,
        No. 03-10-00549-CV, 2012 WL 593481 (Tex. App.—
        Austin Feb. 23, 2012, pet. denied) (mem. op.) ............. 11, 20, 23–25

Codes and Rule

9 U.S.C. § 10(a)(3) ................................................................................... 13

9 U.S.C. § 10(c) ........................................................................................ 12

TEX. R. APP. P. 38.1(i) .............................................................................. 31

Other Authorities

International Dispute Resolution Procedures, Available at
   https://www.icdr.org/icdr/ShowProperty?nodeId=/UCM/A
   DRSTAGE2020868&revision=latestreleased
   (last accessed December 12, 2017) ..................................................... 22

                                                    vii
                             STATEMENT OF THE CASE

 Nature of the Case:                       Appellee Energia de Ramos, S.A.P.I.
                                           de C.V. f/k/a Deacero Power, S.A.P.I.
                                           de C.V. (“EdR”) initiated arbitration
                                           proceedings against Appellants, Dixie
                                           Equipment, LLC (“Dixie Equipment”)
                                           and Dixie Turbine Services, LLC
                                           (“Dixie     Turbine”)    (collectively,
                                           “Dixie”) pursuant to the parties’
                                           contracts. CR.12.1 Dixie appeared
                                           and asserted counterclaims. CR.12;
                                           CR.202–20.

 Course of Proceedings:                    Seven months after EdR instituted
                                           the arbitration proceedings, Dixie
                                           informed       the      duly-appointed
                                           arbitration     panel     (“Arbitration
                                           Panel”) that it was unable to pay its
                                           portion of the arbitration fees.
                                           CR.12–13.       In response to the
                                           Arbitration Panel’s order, Dixie filed a
                                           written statement in which it
                                           confirmed that it would not pay its
                                           portion of the arbitration fees, that its
                                           counsel’s role would be “limited to
                                           that of an observer,” and that it
                                           “[would] no longer be an active
                                           participant in the proceedings.”
                                           CR.237. The Arbitration Panel held
                                           the final arbitration hearing. CR.14.
                                           EdR       presented       documentary
                                           evidence, as well as fact and expert
                                           witness testimony, in support of its
                                           claims against Dixie. Id.         Dixie,
                                           through its counsel, attended the

1. Citations of CR.__ reference the clerk’s record, with the blank identifying the page.

                                          viii
                           morning session of the first day of the
                           two-day hearing, but did not return
                           for the remainder of the proceedings.
                           Id. The Arbitration Panel awarded
                           EdR      $16,664,184.60      including
                           economic damages, attorneys’ fees,
                           expert fees, arbitration fees and
                           expenses, and prejudgment interest.
                           CR.11–34. EdR filed a Petition to
                           Confirm Arbitration Award in the
                           district court, which was granted.
                           CR.246–73. This appeal followed.
                           CR.365–66.

Trial Court:               200th District Court, Travis County;
                           the    Honorable    Karin    Crump,
                           presiding.

Trial Court Disposition:   The district court confirmed the
                           arbitration award. CR.246–73.

                           ix
                 STATEMENT REGARDING ORAL ARGUMENT

     Because this case is controlled by the application of well-established

legal principles, Appellee does not believe that oral argument is needed

to aid in the Court’s decisional process. However, if the Court concludes

that it will hear oral argument in this matter, counsel for Appellee would

like to be heard.

                            ISSUES PRESENTED

     1.    Whether an arbitration panel’s receipt of evidence following a

party’s voluntary absence from a final arbitration hearing, with actual

knowledge of the hearing, due to alleged inability to pay constitutes

arbitrator misbehavior under the Federal Arbitration Act sufficient to

vacate the arbitration award.

     2.    Whether a party may complain on appeal regarding the lack

of a transcript of a final arbitration hearing when the party neither

requested one nor objected to the failure to record the proceedings before,

during, or after the hearing.

     3.    Whether a party’s voluntary waiver of its counterclaims due

to an alleged inability to pay, a result mandated by the party’s chosen

arbitration rules, is a violation of the party’s due-process rights.

                                     x
                          No. 03-17-00492-CV

               In the Court of Appeals
            for the Third Judicial District
                    Austin, Texas
       DIXIE EQUIPMENT, LLC AND DIXIE TURBINE SERVICES, LLC,
                                         Appellant,

                                    v.

                ENERGIA DE RAMOS, S.A.P.I. DE C.V. F/K/A
                   DEACERO POWER S.A.P.I. DE C.V.,
                                           Appellee.

           On Appeal from the 200th Judicial District Court
                        Travis County, Texas

BRIEF OF APPELLEE ENERGIA DE RAMOS, S.A.P.I. DE C.V. F/K/A
             DEACERO POWER S.A.P.I. DE C.V.

TO THE HONORABLE THIRD COURT OF APPEALS:

     The district court correctly confirmed the Arbitration Panel’s award

of damages in favor of EdR for Dixie’s breach of contract. Dixie invites

the Court to vacate that award because Dixie voluntarily abandoned the

arbitration proceeding and did not participate in the final arbitration

hearing, asserting an unsubstantiated inability to pay. According to

Dixie, the Arbitration Panel violated its due-process rights by conducting
the final arbitration hearing in Dixie’s absence without a transcript.

Dixie also seeks to fault EdR for not securing a transcript of the final

arbitration hearing.

     At every turn, however, Texas law mandates confirmation of the

Arbitration Panel’s award.        Dixie had actual knowledge of the

proceedings and voluntarily chose to avoid them. The Arbitration Panel

was authorized by the rules of the arbitral forum to proceed in Dixie’s

absence. And it was Dixie’s sole responsibility to procure a record of the

proceedings if it wanted to contest the result, not EdR’s. Dixie received

all the process to which it was entitled.

     Moreover, Dixie cannot now be heard to complain about the cost of

arbitration. Dixie has never claimed that the arbitration agreements

were unconscionable due to excessive costs, and it failed to offer any

evidence to that effect before the Arbitration Panel. Dixie’s voluntary

decision to abandon the arbitration proceeding, citing an unproven

inability to pay, does not create a due-process violation. The Court should

affirm the district court’s judgment confirming the arbitration award.

                                     2
                             STATEMENT OF FACTS

      EdR is an affiliate of Deacero, S.A.P.I. de C.V., a steel manufacturer

located in Mexico. See CR.14. This case arises out of two contracts

executed in December 2012 and April 2013: (1) the Equipment Purchase

Agreement (“EPA”) between Dixie Equipment and EdR; and (2) the

Engineering Project Management and Centerline Installation Contract

(“Installation Contract”) between Dixie Turbine Services and EdR. See

CR.42–82 (EPA); CR.83–170 (Installation Contract). Both the EPA and

the Installation Contract contained arbitration provisions. CR. 51–52

(EPA arbitration provision); CR.115 (Installation Contract arbitration

provision).

I.    THE RAMOS ARIZPE PROJECT

      Pursuant to the EPA and the Installation Contract, Dixie agreed to

disassemble, refurbish, transport, and install a turbine generator and

related components for a power generation facility in Ramos Arizpe,

Nuevo León, Mexico to serve EdR’s manufacturing plants and other

facilities’ electric power needs (“Project”). CR.14–15.2 EdR planned on

2. Record cites to CR.11–34 come from the Arbitration Award (defined herein) issued
by the Arbitration Panel. The Arbitration Award was issued following the
Arbitration Panel’s receipt of pre- and post-hearing briefing, documentary evidence,

                                         3
selling any excess power it did not need to Mexico’s state-run electric

power provider and other third parties. CR.14.

      Following Dixie’s delays and deficient performance throughout the

Project, and after EdR paid it $24,266,213.90, over a million dollars more

than the price agreed-upon in the EPA and Installation Contract, Dixie

abandoned the Project on September 10, 2014.                CR.15–16.      Dixie’s

premature abandonment of the incomplete Project required EdR to hire

a number of contractors to correct and complete Dixie’s scope of work

under both the EPA and Installation Contracts. CR.16.

II.   THE ARBITRATION PROCEEDING

      Seeking to recoup the amounts paid to other contractors to correct

and complete Dixie’s scope of work, as well as lost profits associated with

lost sales of power occasioned by the Project’s delayed completion, EdR

filed its Notice of Arbitration in September 2015. CR 12. In October

2015, Dixie filed its Original Answer and Counterclaim. Id. Following

the parties’ selection of the Arbitration Panel, the parties agreed that the

arbitration would be conducted in accordance with the procedures of the

expert and fact witness testimony, Dixie’s Original Answer, and EdR’s counsel’s
responses to the Arbitration Panel’s inquires during the final arbitration hearing.

                                        4
International Center for Dispute Resolution’s (“ICDR”) International

Dispute Resolution Procedures (“ICDR Procedures”) and agreed on a

scheduling order to govern Case Number 01–15–0004–9165 (“Arbitration

Proceeding”). CR.12; CR.35–39 (February 17, 2016 Report of Preparatory

Conference and Scheduling Order (“Initial Scheduling Order”)). Dixie

was initially an active participant in the Arbitration Proceeding. For

example, pursuant to the Initial Scheduling Order, Dixie agreed to a

procedural schedule which provided for the exchange of discovery, expert

designation deadlines, a discovery deadline, and the exchange of pretrial

materials.   CR.35–39.    Further, Dixie agreed to a final arbitration

hearing beginning September 12, 2016, in Austin, Texas. CR.37.

     On April 8, 2016, Dixie’s then-counsel informed the Arbitration

Panel and EdR that it would not pay its portion of the arbitration fees for

unexplained financial reasons. CR.13. Following this representation,

EdR still complied with its obligations under the Initial Scheduling

Order, serving Dixie with its document production and a Statement of

Persons with Knowledge of Relevant Facts. The Arbitration Panel held

a status conference on June 3, 2016, concerning the status of the

Arbitration Proceeding in light of Dixie’s representation that it would not

                                    5
pay its share of the arbitration fees. Id. During this conference, the

Arbitration Panel required Dixie to provide a written status report to the

Panel and EdR. Id.

     On June 13, 2016, in response to the Arbitration Panel’s order for a

written status report, Dixie stated that it was “financially unable to

continue to defend” against the claims in the Arbitration Proceeding.

CR.237. Further, Dixie stated that its attorney would “remain as counsel

for Dixie, but [his] role [would] be limited to that of an observer [and]

Dixie [would] no longer be an active participant in the proceedings.” Id.

Dixie requested that the Arbitration Panel “take judicial notice of its

pleadings and give due consideration to the contractual limitations on

damages agreed to under the contracts.” Id.

     Following Dixie’s representation, and EdR’s June 13, 2016 request

to continue to the final arbitration hearing, the Arbitration Panel

confirmed that the final arbitration hearing would take place in Austin,

Texas beginning on September 12, 2016, as provided in the previously

agreed-upon Initial Scheduling Order. See CR.13; CR.37. The Panel

noted that Dixie’s counsel would not put on evidence, but would appear

at the hearing in an observer role. CR.13. Subsequently, Dixie informed

                                    6
the Arbitration Panel that Dixie would not be pursuing its counterclaims

because it could not pay the “tribunal fees required to advance these

claims.” Id.

     On August 8, 2016, the Arbitration Panel held its final status

conference confirming preparations and deadlines for the final

arbitration hearing. Id. Counsel for EdR and Dixie participated in this

status conference. Id. Prior to the final arbitration hearing, EdR served

its Hearing Exhibit List, Pre-Hearing Brief, and Timeline and Witness

List on the Arbitration Panel and Dixie. CR.13–14.

     On September 12 and 13, 2016, the Arbitration Panel held the final

arbitration hearing in Austin, Texas. EdR presented documentary and

testimonial evidence in support of its claims, calling four live witnesses,

including two expert witnesses, who were questioned by the Arbitration

Panel. CR.14. The Arbitration Panel additionally questioned EdR’s

counsel.   Id.   Dixie’s counsel attended the hearing the morning of

September 12, but did not return for the remainder of the hearing. Id.

Following the hearing, the Arbitration Panel requested EdR brief

discrete issues, which it did, serving Dixie with a copy of its post-hearing

briefing. Id. Despite attending part of the hearing and being copied on

                                     7
all pre- and post-hearing correspondence and pleadings, Dixie did not

request a transcript of the final arbitration hearing or object to the

absence of a transcript.

       On November 22, 2016, the Arbitration Panel issued its Final

Award in the form of an 18-page reasoned award (“Arbitration Award”).

CR.11–34; CR.195–97.       In issuing its rulings, the Arbitration Panel

referenced and analyzed five specific issues and specifically relied on

“EdR’s pleadings, Dixie’s Original Answer, the evidence presented at the

Final Arbitration Hearing, and post-hearing briefing.”     CR.17.   The

Arbitration Panel ultimately awarded EdR $13,627,162.30 against Dixie

Equipment and $3,037,022.34 against Dixie Turbine. CR.27.

III.   THE DISTRICT COURT CONFIRMS THE ARBITRATION AWARD

       EdR promptly filed its Petition to Confirm Arbitration Award in

Travis County state court on November 30, 2016. CR.3–171. Exactly

three months following the Arbitration Panel’s issuance of the award,

Dixie’s non-attorney owner, Claude Hendrickson, filed an “Answer to

Petition to Confirm Arbitration Award” on behalf of Dixie. CR.174–81.

On April 13, 2017, Dixie filed a pleading entitled “Additional Briefing

Related to Motion to Vacate[,]” asserting substantially the same

                                    8
arguments raised before this Court, and EdR filed a response the

following day. CR.230–44.

     The district court denied Dixie’s purported Motion to Vacate on

April 18, 2017. On April 19, 2017, the district court granted EdR’s

Petition to Confirm Arbitration Award and confirmed the Arbitration

Award in its entirety, with post-award interest. CR.246–73. Dixie filed

a Motion for New Trial and Motion to Modify the Judgment, again raising

substantially the same arguments it raises before this Court. CR.333–

42. Both motions were overruled by operation of law, and this appeal

followed. CR.365–66.

                         SUMMARY OF ARGUMENT

     The district court confirmed the Arbitration Award, issued after the

Arbitration Panel received and considered pre- and post-hearing briefing,

testimonial and documentary evidence, and Dixie’s Original Answer.

Dixie argues the Arbitration Award should have been vacated because:

(1) it was “unable to participate” in the final arbitration hearing; (2) EdR

did not request a record of the final arbitration hearing on Dixie’s behalf,

and; (3) Dixie could not “present its counterclaims[.]” Dixie claims that

these purported failures of the Arbitration Panel and EdR violated its

                                     9
due-process rights and support vacatur of the Arbitration Award.

Because Dixie’s contentions are foreclosed by Texas law, the Court should

reject them.

     To reverse the district court’s judgment, Dixie would have this

Court ignore the presumption in favor of arbitration awards and sanction

the strategy of partially participating in a previously agreed-upon

arbitration proceeding, voluntarily withdrawing from the proceeding,

and re-appearing only after the fact to contest the results of the

proceeding from which it withdrew. Sanctioning Dixie’s strategy would

not serve due process, fairness, or common sense.

     Texas law has long held that arbitration awards may be set aside

in only the most egregious of circumstances, none of which are presented

here. Dixie had full notice—indeed it had actual knowledge—of the final

arbitration hearing, and it voluntarily opted not to participate. Dixie had

every opportunity to request a record be made of the final arbitration

hearing, but it failed to do so. Finally, Dixie made no attempt to prove

the purportedly excessive cost of the Arbitration Proceeding, to which it

voluntarily agreed.   Dixie cannot establish error in the Arbitration

                                    10
Panel’s actions and decision at all, much less such error that would

support vacatur under Texas law.

     The Court should affirm the district court’s judgment confirming

the Arbitration Award.

                                  ARGUMENT

     As this Court and the Texas Supreme Court have repeatedly

recognized, “Texas law has long favored arbitration of disputes.”

Vorwerk v. Williamson Cnty. Grain, Inc., No. 03-10-00549-CV, 2012 WL
593481, at *4 (Tex. App.—Austin Feb. 23, 2012, pet. denied) (mem. op.)

(citing Prudential Secs. Inc. v. Marshall, 909 S.W.2d 896, 898 (Tex. 1995)

(orig. proceeding) (per curiam)). Arbitration awards are conclusive as to

all matters submitted to the arbitrators because the award has the effect

of a judgment of a court of last resort. Id.

     Accordingly,     judicial     review       of     arbitration      awards   “is

extraordinarily   narrow,”       and   courts        “indulge   every    reasonable

presumption in favor of upholding the arbitration award.” Id. (citing E.

Tex. Salt Water Disposal Co. v. Werline, 307 S.W.3d 267, 271 (Tex. 2010);

CVN Grp., Inc. v. Delgado, 95 S.W.3d 234, 238 (Tex. 2002)).                      An

arbitration award must be confirmed unless it is vacated, modified, or

                                       11
corrected pursuant to one of the limited—and exclusive—grounds set

forth in the Federal Arbitration Act (FAA).3 Venture Cotton Coop. v.

Neudorf, No. 14-13-00808-CV, 2014 WL 4557765, at *3 (Tex. App.—

Houston [14th Dist.] Sept. 16, 2014, no pet.) (mem. op.) (citing Hall St.

Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 584 (2008) (holding that the

bases for vacatur under the FAA are exclusive)).

      Dixie urges the Court to vacate the arbitration award for

“misconduct” under section 10 of the FAA.4 That provision authorizes

vacatur in limited circumstances, including

3. The parties agreed the Arbitration Proceeding “would be governed in all aspects
by Texas law.” CR.12. Accordingly, both the FAA and TAA may apply. In re Olshan
Found. Repair Co., 328 S.W.3d 883, 890 (Tex. 2010) (orig. proceeding); In re
Kempwood Assocs., L.P., 9 S.W.3d 125, 127–28 (Tex. 1999) (orig. proceeding) (per
curiam). Because Dixie raises vacatur grounds only pursuant to the FAA, EdR
focuses its brief on the FAA.

4. Dixie actually cites 9 U.S.C. § 10(c) as the asserted statutory basis for vacatur of
the arbitral panel’s award for alleged misconduct. Appellants’ Br. at 7–8. Section
10(c), however, does not concern misconduct, but states that “The United States
district court for the district wherein an award was made that was issued pursuant
to section 580 of title 5 may make an order vacating the award upon the application
of a person, other than a party to the arbitration, who is adversely affected or
aggrieved by the award, if the use of arbitration or the award is clearly inconsistent
with the factors set forth in section 572 of title 5.” 9 U.S.C. § 10(c). The only portion
of 9 U.S.C. section 10 that concerns “misconduct” is 9 U.S.C. section 10(a)(3). Because
the substance of Dixie’s argument on appeal concerns “misconduct,” EdR assumes
Dixie seeks vacatur under that provision. See Appellants’ Br. at 7–8; see also In re
Chestnut Energy Partners, Inc., 300 S.W.3d 386, 397-98 (Tex. App.—Dallas 2009,
pet. denied) (noting that section 10(a) sets forth the limited situations in which a
court may vacate an arbitration award); Jacaman Polaris Sports Ctr. Ltd. v. Falcon

                                           12
             where the arbitrators were guilty of misconduct in
             refusing to postpone the hearing, upon sufficient
             cause shown, or in refusing to hear evidence
             pertinent and material to the controversy; or of
             any other misbehavior by which the rights of any
             party have been prejudiced.

9 U.S.C. § 10(a)(3); see Appellants’ Br. at 7–8. “Misconduct” authorizing

vacatur of an award is not an error in the arbitrator’s determination or

an error of law, but is conduct that “so affects the rights of a party that it

may be said that he was deprived of a fair hearing.” Laws v. Morgan

Stanley Dean Witter, 452 F.3d 398, 399 (5th Cir. 2006).

      Dixie cannot demonstrate any misconduct by the Arbitration

Panel—let alone such conduct that deprived Dixie of an opportunity for

a fair hearing. Dixie had full notice and the opportunity to be heard in

the Arbitration Proceeding. It voluntarily abandoned the Arbitration

Proceeding claiming an alleged and unproven inability to pay its portion

of the arbitration fee. The district court properly granted EdR’s Petition

to Confirm Arbitration Award. This Court should affirm.

Int’l Bank, No. 04-16-00481-CV, 2017 WL 2852632, at *3 (Tex. App.—San Antonio
July 5, 2017, no pet.) (mem. op.) (same).

                                            13
I.   THE ARBITRATION PANEL’S DECISION TO HOLD THE FINAL
     ARBITRATION HEARING IN DIXIE’S VOLUNTARY ABSENCE AND IN
     ACCORDANCE WITH THE PANEL’S RULES DID NOT VIOLATE DIXIE’S
     PURPORTED DUE PROCESS OR CONSTITUTE MISCONDUCT UNDER THE
     FAA.

     Dixie admits that it was fully aware of the Arbitration Proceeding

pending in the ICDR that was set to resolve the competing breach-of-

contract claims asserted by Dixie and EdR. Appellants’ Br. at 3. It

further admits that it voluntarily abandoned the proceedings due to

alleged financial issues.    Id.   Dixie nonetheless contends that the

Arbitration Panel engaged in misconduct and violated its due-process

rights by conducting the final arbitration hearing in Dixie’s absence

without making a record. Id. at 5–14. Dixie attempts to analogize to the

post-answer-default rule that, in the absence of a reporter’s record, a

defaulting party is entitled to remand for a new trial. Id. at 8–13 (citing

Smith v. Smith, 544 S.W.2d 121, 122 (Tex. 1976)). Claiming that there

are no “reported case[s] addressing this issue in the arbitration context,”

id. at 8, Dixie invites the Court to craft a new rule that would give a party

an automatic rehearing before an arbitration panel when the party, after

notice of the proceedings, and even partial participation, voluntarily

abandons the proceedings and a record is not made. Id. at 8–13.

                                     14
     For multiple reasons, the Court should reject Dixie’s invitation.

First, Dixie had full notice, indeed it had actual knowledge, of the

Arbitration Proceeding, including the final arbitration hearing, and it

voluntarily abandoned it. CR.13–14; CR.237. Several cases—reported

and unreported—have rejected the notion that an arbitral decision may

be upended on due-process or “misconduct” grounds by a party’s failure

to appear after notice—with or without a transcript of the proceedings.

Second, courts repeatedly hold that parties to arbitration will be held to

the rules to which they contractually obligated themselves. When, as

here, arbitration rules specifically authorize the arbitral panel to proceed

in the absence of a party who had notice, the absent party has no grounds

to complain about the conduct of the hearing. Third, the burden to

procure a transcript of the final arbitration hearing lay squarely with

Dixie, both under the rules of the ICDR and under well-established Texas

jurisprudence. Dixie’s voluntary abdication of its responsibility to make

its own record does not establish misconduct or a violation of due process

by the panel.

                                    15
      None of the grounds asserted by Dixie constitutes misconduct to

support vacatur of the Arbitration Panel’s decision under the FAA. The

district court’s decision to confirm the Arbitration Award was correct.

      A.    The Arbitration Panel’s Decision To Hold the Final
            Arbitration Hearing in Dixie’s Absence Comported with Due
            Process Because Dixie Had Full Notice of the Hearing and
            Voluntarily Elected To Abandon the Proceedings.

      Dixie erroneously contends that the Arbitration Panel’s “ex parte

receipt of evidence constitutes misbehavior by the arbitrators prejudicial

to Dixie’s rights in violation of 9 U.S.C. § 10(c)[sic].” Appellants’ Br. at 8.

In other words, Dixie contends that a final arbitration hearing in which

one party presents evidence while another does not, in general, violates

the FAA. Id. As support for this erroneous statement of the law, Dixie

cites Totem Marine Tug and Barge, Inc. v. North American Towing, Inc.,

607 F.2d 649, 653 (5th Cir. 1979), for the principle that “arbitrators

cannot conduct ex parte hearings or receive evidence except in the

presence of each other and of the parties, unless otherwise stipulated.”

Appellants’ Br. at 8. Dixie’s assertion misstates both the law of the Fifth

Circuit, as expressed by Totem Marine and later cases, as well as Texas

jurisprudence, which universally authorizes ex parte hearings, provided

the absent party received notice.

                                      16
      To begin, there is no blanket rule prohibiting ex parte arbitration

hearings.5      To the contrary, “[w]hile all parties in an arbitration

proceeding are entitled to notice and an opportunity to be heard, due

process is not violated if the hearing proceeds in the absence of one of the

parties when that party’s absence is the result of his decision not to

attend.” Berstein Seawell & Kove v. Bosarge, 813 F.2d 726, 729 (5th Cir.

1987) (quoting Totem Marine, 607 F.2d at 651) (other citations omitted).

To support vacatur of an award based on an ex parte hearing, a party

must show “the absence of actual or constructive notice.” 21st Fin. Servs.,

L.L.C. v. Manchester Fin. Bank, 747 F.3d 331, 337 (5th Cir. 2014) (citing

Bernstein, 813 F.3d at 729). “Where there is sufficient evidence showing

5. Dixie elides the holding of Totem Marine to suggest that it generally prohibits ex
parte arbitration hearings. The case makes no such general proclamation. The very
quote offered by Dixie for its purported general rule against ex parte hearings
qualifies the rule with the limitation, “unless otherwise stipulated.” 607 F.2d at 653.
Totem Marine specifically notes that the arbitration rules governing the parties
before the court required that “all evidence shall be taken in the presence of all the
parties, except where any of the parties is absent in default or has waived his right
to be present.” 607 F.2d at 652 (emphasis added). Like the forum rules in Totem
Marine, the governing rules in this matter expressly authorized the Arbitration Panel
to conduct a hearing in the absence of a party, if the party failed to appear after being
duly notified. ICDR art. 26; see infra § I.B. Thus Totem Marine supports the panel’s
choice to conduct its hearing in Dixie’s absence: Dixie had actual knowledge of the
final arbitration hearing and elected not to participate, with the exception of its
counsel attending part of the first day of the hearing. The rules of the forum
“otherwise stipulated” that the Arbitration Panel was authorized to conduct its
hearing without Dixie.

                                           17
that a party has received actual or constructive notice of the arbitration

hearing, the award will be enforced.” Grp. 32 Dev. & Eng’g, Inc. v. GC

Barnes Grp., No. 3:14-CV-2436-B, 2015 WL 144082, at *4 (N.D. Tex. Jan.

9, 2015) (citing 21st Fin. Servs., L.L.C., 747 F.3d at 337).

     Texas state courts have come to the same conclusion. In Ewing v.

Act Catastrophe-Texas L.C., 375 S.W.3d 545, 551–52 (Tex. App.—

Houston [14th Dist.] 2012, pet. denied), the Fourteenth Court of Appeals

considered Ewing’s due-process challenge (nearly identical to that

asserted by Dixie) to an arbitration award issued after a hearing about

which she had notice, but elected not to attend. Citing the Fifth Circuit’s

decision in Berstein, the court held that due process does not mandate

that parties be heard at an arbitration proceeding. Due process requires

only that parties be given a meaningful opportunity to be heard. Id.

(citing Berstein, 813 F.2d at 729). The court rejected Ewing’s due-process

challenge, pointedly concluding “[i]f a party’s absence at the arbitration

hearing is the result of her decision not to attend, there is no due process

violation.” Id.

     The Fourteenth Court reached a similar result in KNJ Enterprises,

Inc. v. Wilbanks & Wilbanks, P.C., No. 14-14-00271-CV, 2015 WL
18
1736400 (Tex. App.—Houston [14th Dist.] Apr. 14, 2015, no pet.) (mem.

op.). There, the court considered KNJ’s assertion that, even though it

received notice of the arbitration proceedings, its absence prevented the

arbitrator from resolving its claims. Id. at *5. The court rejected KNJ’s

argument, noting that KNJ “could not prevent consideration of claims

sent to arbitration by opting not to participate in an arbitration

proceeding of which it had notice.” See also Neudorf 2014 WL 4557765,

at *5–6 (rejecting due-process challenge to arbitral panel’s decision to

conduct an ex parte hearing when the objecting party intentionally

avoided service of the arbitration complaint and notice of hearing).

     Other Texas courts have likewise rejected attempts to vacate

arbitration awards and decisions based on one party’s intentional

absence from the proceedings. See Saks v. Rogers, No. 04-16-00286-CV,

2017 WL 3159712, at *9 (Tex. App.—San Antonio July 26, 2017, no pet.)

(mem. op.) (noting that “[d]ue process is satisfied when notice procedures

are followed in compliance with the rules under which the parties agreed

to be bound”); Gilbert v. Rain & Hail Ins., No. 02-16-00277-CV, 2017 WL
710702, at *4 (Tex. App.—Fort Worth Feb. 23, 2017, pet. denied) (mem.

op.) (refusing to vacate arbitration decision for alleged misconduct when

                                   19
arbitrator conducted hearing in the absence of a party who had notice

and was given the “opportunity to participate in the proceedings but

explicitly chose not to.”); cf. Vorwerk, 2012 WL 593481, at *5 (“Courts

have held that neither an arbitrator’s receipt of ex parte affidavits or ex

parte documents nor an arbitrator’s ex parte telephone call to a party’s

counsel constitute arbitrator misconduct.”); Peacock v. Wave Tec Pools,

Inc., 107 S.W.3d 631, 640 (Tex. App.—Waco 2003, no pet.) (same).

     Simply put, no due-process violation arises from an arbitration

panel’s decision to conduct an arbitration hearing in a party’s voluntary

absence after notice is provided. The Arbitration Panel’s decision to

proceed was not misconduct at all, much less misconduct rising to the

level necessary to void the award under the FAA.

     B.    The Arbitration Panel’s Decision To Conduct the Hearing in
           Dixie’s Absence Was Authorized by the Rules of the ICDR.

     It is axiomatic that arbitration is “a matter of consent, not coercion,

and parties are generally free to structure their arbitration agreements

as they see fit.” Volt Info. Sci., Inc. v. Bd. of Trs. of Leland Stanford

Junior Univ., 489 U.S. 468, 479 (1989). To that end, the United States

Supreme Court has recognized that parties may “specify by contract the

rules under which [their] arbitration will be conducted.” Id. As Judge

                                    20
Posner has stated in more colorful terms: “[S]hort of authorizing trial by

battle or ordeal or, more doubtfully, by a panel of three monkeys, . . .

parties are as free to specify idiosyncratic terms of arbitration as they are

to specify any other terms in their contract.” Baravati v. Josephthal,

Lyon & Ross, Inc., 28 F.3d 704, 709 (7th Cir. 1994). These agreements

are strictly enforced in Texas. “Courts treat arbitration agreements as

other contracts in applying the legal rules to interpret them. The goal is

to discern the true intentions of the parties, as the FAA’s primary

purpose is to ensure private agreements to arbitrate are enforced

according to their terms, no more, no less.” In re Olshan Found. Repair

Co., LLC, 328 S.W.3d 883, 889 (Tex. 2010) (orig. proceeding).

     Here, the parties voluntarily agreed to be governed by the ICDR

Procedures that would both bind them and authorize action by the

Arbitration Panel in the event of a party’s absence from the proceedings.

See CR.12 (the Arbitration Award noting that “[t]he parties further

agreed that . . . [the Arbitration Proceeding] would be governed by the

ICDR Procedures.”). In particular, Article 26 of the ICDR Procedures

governs default. In relevant part, Article 26 states:

     ...

                                     21
     2.    If a party, duly notified under these Rules, fails to
     appear at a hearing without showing sufficient cause of such
     failure, the tribunal may proceed with the hearing.

     3.    If a party, duly invited to produce evidence or take any
     other steps in the proceedings, fails to do so within the time
     established by the tribunal without showing sufficient cause
     for such failure, the tribunal may make the award on the
     evidence before it.

ICDR art. 26.2, .3.6 Under the plain text of the ICDR Procedures, the

Arbitration Panel was specifically authorized to proceed with the final

hearing and take evidence in Dixie’s voluntary absence. See Grp. 32 Dev.

& Eng., Inc., 2015 WL 144082, at *6 (rejecting attempt to vacate award

issued after an ex parte hearing because the governing rules permitted

the hearing: “Furthermore, the Court finds no reason why the award

should be vacated based on the arbitrator’s decision to proceed ex

parte . . . as [the governing rule] permits such a practice.”).

     C.    It Was Dixie’s Burden To Procure a Transcript of the Final
           Arbitration Hearing; Its Failure To Do so Does Not Support
           Vacatur of the Arbitration Award.

     Just as courts strictly enforce agreements to arbitrate, they strictly

enforce arbitration awards, and hold objecting parties to a high burden

6.   See International       Dispute   Resolution    Procedures, Available at
https://www.icdr.org/icdr/ShowProperty?nodeId=/UCM/ADRSTAGE2020868&revisi
on=latestreleased (last accessed December 12, 2017).

                                     22
of proof.   Texas courts, including this Court, unanimously hold that

“[w]hen a party seeks to modify or vacate an arbitration award, it has the

burden of bringing forth a complete record and establishing any basis

that would warrant vacating the award.” Vorwerk, 2012 WL 593481, at

*5; Nafta Traders, Inc. v. Quinn, 339 S.W.3d 84, 101–02 (Tex. 2011)

(noting that, if error cannot be demonstrated in the record, an arbitration

award must be presumed correct); Statewide Remodeling, Inc. v.

Williams, 244 S.W.3d 564, 569-70 (Tex. App.—Dallas 2008, no pet.); Craft

v. Davis, No. 2-07-332-CV, 2008 WL 4180357, at *2 & n.11 (Tex. App.—

Fort Worth Sept. 11, 2008, no pet.) (mem. op.); GJR Mgmt. Holdings, L.P.

v. Jack Raus, Ltd., 126 S.W.3d 257, 263 (Tex. App.—San Antonio 2003,

pet. denied); Kline v. O’Quinn, 874 S.W.2d 776, 783 (Tex. App.—Houston

[14th Dist.] 1994, writ denied); House Grain Co. v. Obst, 659 S.W.2d 903,

906 (Tex. App.—Corpus Christi 1983, writ ref’d n.r.e.).

     Bringing forth a complete record from an arbitration proceeding is

just as critical as bringing forth a complete record from a judicial

proceeding, even though arbitration proceedings are traditionally

designed to have fewer procedural rules. Nafta Traders, 339 S.W.3d at

101-02 (noting that arbitration proceedings “are often informal;

                                    23
procedural rules are relaxed, rules of evidence are not followed, and no

record is made.”).   Regardless, when parties seek judicial review of

arbitration proceedings, “the only review to which they can agree is the

kind of review courts conduct. If error cannot be demonstrated, an award

must be presumed correct.” Id.

     Dixie’s attempt to carve out an exception to this rule for parties who

intentionally and voluntarily avoid arbitration hearings has no support

in Texas law. As the Court implicitly acknowledged in Vorwerk, an

objecting party is required to procure a full record of the proceedings in

order to vacate an award, even when the party is voluntarily absent from

the proceedings. 2012 WL 593481, at *5–6. In Vorwerk, the Court

rejected an attempt to vacate an arbitration award based on ex parte

communications because the objecting party failed to procure a record.

Id. at *6.    Like Dixie, Vorwerk, had answered and voluntarily

participated in arbitration proceedings before he failed to appear at a

hearing. Id. at *1. Subsequent to the hearing, the president of the

arbitration   organization   engaged    in   additional   ex   parte   fax

communications with Vorwerk’s opposing party. Id. at *1–2. When the

arbitration panel later issued an award against Vorwerk, he sought to

                                   24
vacate the award, claiming misconduct based on the ex parte

communications. Id. at *5.

     Even though Vorwerk, like Dixie, was absent from the hearing, the

Court enforced the strict rule that Dixie seeks to avoid here: As the

objecting party, Vorwerk was obligated to procure a record of the

arbitration proceedings—notwithstanding his absence.         Id. at *6.

Without a record, the Court could not “conclusively determine the basis

for the arbitrator’s award, whether new information was conveyed to the

panel in the fax, and if it was, whether it deprived Vorwerk of a fair

hearing.” Accordingly, the Court rejected Vorwerk’s attempt to vacate

the arbitration award because he failed to procure a record. Id.

     Similarly, in Jacaman Polaris Sports Center Ltd. v. Falcon

International Bank, No. 04-16-00481-CV, 2017 WL 2852632, at *3 (Tex.

App.—San Antonio July 5, 2017, no pet.) (mem. op.), the San Antonio

Court rejected a party’s argument that an arbitration award should be

vacated on misconduct grounds because the arbitration panel failed to

make a record of its hearing in the absence of the objecting party. In

Jacaman, the arbitration panel provided the parties notice of a scheduled

                                   25
hearing, which Jacaman did not attend. Id. at *1.7 Subsequently, the

panel issued its award, adverse to Jacaman. Id. Jacaman challenged the

award claiming FAA misconduct for the panel’s failure to record the

hearing at issue. Id. at 2–3. Citing both the rule of the arbitral forum,

which provided all parties the right to request a record, as well as the

standard Texas rule that the objecting party had the burden to procure a

record of the arbitration proceedings, the court rejected Jacaman’s

challenge. Id. at *3 (citing Commercial Arbitration Rules of the Am.

Arbitration Assoc. R-28; In re Chestnut Energy Partners, Inc., 300
S.W.3d 388, 400 (Tex. App.—Dallas 2009, pet. denied); Statewide

Remodeling, 244 S.W.3d at 568; see also KNJ Enter., 2015 WL 1736400,

at *4–5 (rejecting party’s attempt to vacate an arbitration award because

the party failed to procure a complete record of the proceedings, even

though party was absent from the proceedings).

      Dixie, like Vorwerk and Jacaman, had full notice and actual

knowledge of the Arbitration Proceeding, including the final arbitration

7. The court’s decision does not make clear that Jacaman did not attend the hearing,
or that a hearing even occurred. However, the Brief of Appellee, Falcon Bank, at 6-
7, discusses these facts, providing record cites. See http://www.search.txcourts.gov/
SearchMedia.aspx?MediaVersionID=6caac296-93f2-4ca2-a1f5-dc7528f8a302&coa=c
oa04&DT=Brief&MediaID=bfe0e3e7-cd51-42d1-9365-edb1789ddc83 (last accessed
December 12, 2017).

                                         26
hearing.   CR.13–14; CR.35–39 (Initial Scheduling Order noting final

arbitration hearing would begin September 12, 2016).           The Initial

Scheduling Order, to which Dixie agreed in February 2016, scheduled the

final arbitration hearing to begin September 12, 2016. CR. 37. Dixie,

through its counsel, even attended part of the final arbitration hearing.

CR.14. Dixie was well aware that the Arbitration Panel would receive

evidence at the final arbitration hearing. CR.13. Nothing prevented

Dixie from requesting that a transcript be made of the final arbitration

hearing, and the record reflects no objection in the Arbitration

Proceeding to the Arbitration Panel and EdR’s intention to not procure a

transcript. Having failed in its obligation to make its record for appeal,

Dixie cannot shift the burden to EdR to manufacture its due-process

claim. Nafta Traders, 339 S.W.3d at 101–02.

     Dixie’s proposed new rule, obligating arbitration panels and

opposing parties to secure a transcript when one party voluntarily

abandons an arbitration hearing after notice and prior participation in

the arbitration proceeding, has been effectively rejected by every court to

have considered it, including this Court. The district court properly

                                    27
rejected Dixie’s challenge to the Arbitration Award. The Court should

affirm.

II.   THE ARBITRATION PANEL’S DECISION TO HOLD THE FINAL
      ARBITRATION HEARING DESPITE DIXIE’S CLAIMED INABILITY TO PAY
      IS NOT GROUNDS FOR VACATUR.

      The Court should reject Dixie’s contention that its due-process

rights were violated because it was “prevented from bringing its claims

due to lack of funds.” Appellants’ Br. at 14. Dixie waived its complaint

in the first instance by not offering any proof in the arbitral forum of the

likelihood of incurring excessive costs. Even if the Court considers Dixie’s

inability-to-pay claim, however, it should still affirm the district court’s

judgment because Dixie agreed to forfeit its counterclaims in arbitration

for failure to pay its required deposit. Because Dixie failed to offer any

proof of its financial circumstances, but agreed in any event to the

consequences of its decision to not pay, the district court correctly

confirmed the Arbitration Award.

      A.   Dixie Failed To Prove Its Inability To Pay in the Arbitration
           Proceeding.

      Dixie contends that its due-process rights were violated because it

was “barred from bringing its claims in arbitration” due to its alleged

inability to pay. Id. at 15. While Texas law recognizes the possibility

                                    28
that an arbitration agreement may be held substantively unconscionable

due to excessively high costs, a party seeking to avoid arbitration on such

grounds bears the burden of proving that arbitration would be

prohibitively expensive. Olshan, 328 S.W.3d at 893. “[P]arties must at

least provide evidence of the likely cost of their particular arbitration,

through invoices, expert testimony, reliable cost estimates, or other

comparable evidence.” Id. at 895. “Evidence that merely speculates

about the risk of possible cost is insufficient.” Id.; see also Venture Cotton

Coop. v. Freeman, 435 S.W.3d 222, 227 (Tex. 2014) (a party opposing

arbitration bears the burden to raise an affirmative defense to the

agreement’s enforcement). Failing that proof, a party may be compelled

to participate in arbitration. Olshan, 328 S.W.3d at 894–97 (overturning

the denial of a motion to compel arbitration because the party seeking to

avoid arbitration “provided no comparison of [the costs of arbitration] to

the expected cost of litigation, the amount of their claim, or their ability

to pay these costs”).

     Dixie made no attempt to comply with Olshan’s requirements.

Dixie never claimed that the parties’ arbitration agreements were

unconscionable, nor did it otherwise challenge their enforceability.

                                     29
Rather, Dixie initially agreed to and participated in the Arbitration

Proceeding.       CR.13–14; CR.35–39 (February 17, 2016 Report of

Preparatory Conference and Scheduling Order signed by EdR and Dixie’s

counsels). In fact, Dixie filed a breach-of-contract counterclaim in the

Arbitration Proceeding based on the contracts containing the initial

arbitration agreements. CR.215–20. Dixie offered no evidence to support

its claim that the cost of arbitration would be excessive, but merely

announced through counsel that it would no longer participate due to its

alleged inability to pay, and abandoned the proceedings, limiting its role

to “that of an observer.” CR.13; CR.237.

      Having failed entirely to document with evidence its claim that the

cost of the agreed-to arbitration was excessive, Dixie cannot now avoid

the effect of its agreement to arbitrate by offering unsubstantiated claims

of excessive costs. Bonded Builders Home Warranty Assoc., Inc. v. Smith,

488 S.W.3d 468, 482 (Tex. App.—Dallas 2016, no pet).8 Dixie’s due-

8. Moreover, Dixie’s appellate briefing of its Issue 3 concerning its alleged inability to
pay fails to comply with Texas Rule of Appellate Procedure 38.1(i). Dixie cites to one
page from the appellate record: its letter to the Arbitration Panel stating that it would
no longer participate in the proceedings due to cost. Appellants’ Br. at 14. And it
cites one decision from this Court for the principle that Dixie could not represent itself
in the arbitration under Texas law. Id. at 14–15. Dixie makes no attempt to brief its
purported entitlement to vacatur of the Arbitration Panel’s award for its alleged
inability to pay in the absence of the evidence required by Olshan. The Court should,

                                           30
process claim based on its alleged and unproven inability to pay fails as

a matter of law.

      B.     The ICDR Procedures Specifically Authorized the Arbitration
             Panel To Reject Dixie’s Counterclaims for Failure To Pay Its
             Share of the Arbitration Fees.

      In any event, Dixie cannot be heard to complain about its inability

to present its counterclaims in arbitration due to its alleged financial

problems.      Dixie agreed to the rules of the arbitral forum, which

unequivocally state that “[f]ailure of a party asserting a claim or

counterclaim to pay the required deposits shall be deemed a withdrawal

of the claim or counterclaim.” ICDR art. 36.4.

      In the absence of any supporting evidence to substantiate its claim

that participation in the arbitration would violate its due process, Dixie

must held to its bargain with EdR. Dixie agreed to the rules of the forum

that required payment of arbitration fees to present counterclaims and

other claims for relief.         See CR.12 (noting the parties agreed the

Arbitration Proceeding would “be governed by the ICDR Procedures.”).

therefore, refuse to consider Dixie’s Issue 3. Tex. R. App. P. 38.1(i); BDO Seidman
LLP v. J.A. Green Dev. Corp., 327 S.W.3d 852, 859 n.4 (Tex. App.—Dallas 2010, no
pet.) (rejecting argument that an arbitration provision violated due process for failure
to provide authority as required by Rule 38.1(i)).

                                          31
The Court should affirm the district court’s judgment confirming the

Arbitration Award.

                              PRAYER

      For these reasons, the Court should affirm the judgment of the

district court.

                                      Respectfully submitted,

                                      /s/ Breck Harrison
                                      Breck Harrison
                                        State Bar No. 24007325
                                      Michael Roberts
                                        State Bar No. 24082153
                                      Danica L. Milios
                                        State Bar No. 00791261
                                      JACKSON WALKER L.L.P.
                                      100 Congress Ave., Suite 1100
                                      Austin, Texas 78701
                                      [Tel.] (512) 236-2000
                                      [Fax] (512) 236-2002
                                      bharrison@jw.com

                                      COUNSEL FOR APPELLEE

                                 32
                            CERTIFICATE OF SERVICE

     I certify that on December 13, 2017, a true and correct copy of the

foregoing document was served via FileTime e-filing system, certified

U.S. mail, return receipt requested, and/or third-party commercial

carrier on the following:

Kevin J. Terrazas
Timothy A. Cleveland
CLEVELAND | TERRAZAS PLLC
4611 Bee Cave Rd., # 306B
Austin, Texas 78746

COUNSEL FOR APPELLANT

                                          /s/ Breck Harrison
                                          Breck Harrison

                                     33
                        CERTIFICATE OF COMPLIANCE

      This document complies with the typeface requirements of TEX. R.

APP. P. 9.4(e) because it has been prepared in a conventional typeface no

smaller than 14-point for text and 12-point for footnotes. This document

also complies with the word-count limitations of TEX. R. APP. P. 9.4(i)

because it contains 6,464 words, excluding any parts exempted by TEX.

R. APP. P. 9.4(i)(1).

                                        /s/ Breck Harrison
                                        Breck Harrison

                                   34