Court Opinion

ID: 3008955
Source: CourtListenerOpinion
Date Created: 2015-10-09 05:13:12.583943+00
Date Added: 2024-06-11T08:11:51.651652
License: Public Domain

Opinion issued October 8, 2015

                                      In The

                               Court of Appeals
                                     For The

                          First District of Texas
                              ————————————
                               NO. 01-13-00708-CV
                              ———————————
                       STAGE STORES, INC., Appellant
                                        V.
                         JON GUNNERSON, Appellee

                    On Appeal from the 61st District Court
                            Harris County, Texas
                      Trial Court Case No. 2013-21878

                               DISSENTING OPINION

      I respectfully dissent. This case construes, as a matter of first impression in

Texas state court, the standards for a “reasoned award” in arbitrations brought

under the Federal Arbitration Act (FAA). 1 I believe the majority’s decision to

1
      See 9 U.S.C. §§ 1–16.
reverse and remand this case is contrary to the controlling federal authority that the

lead opinion relies upon and purports to follow. I believe the award is sufficient to

satisfy the standards of a reasoned award under the FAA and that it is a mistake to

send this case back to the arbitrator to address her rejection of one of appellant

Stage Stores, Inc.’s defenses in making her award. Both the lead opinion and the

concurrence mistake an argument, which need not be addressed in a reasoned

award, and an issue, which must be disposed of in a reasoned award—as was done

here. In my view, affirmance of the arbitration award is the natural result of the

argument from federal authority relied upon in the lead opinion and the natural

holding under controlling federal authority. It is the disposition that is incorrect.

      I would affirm the trial court’s confirmation of the arbitration award.

                                        Background

      Following an arbitration of an employment dispute between Stage Stores

and former employee, appellee Jon Gunnerson, the arbitrator issued a reasoned

award disposing of Gunnerson’s claim that Stage Store’s wrongfully refused to pay

benefits due to him based on his “good reason” for terminating his employment

contract. The lead opinion sets out the four specific rulings made by the arbitrator:

      (1) that a valid contract existed between the parties; (2) that Stage’s
      “actions in restructuring the organization and removing [Gunnerson]
      from a direct reporting relationship to the CEO diminished
      [Gunnerson’s] status, thereby allowing [Gunnerson] to terminate his
      position for good reason pursuant to paragraph 4 of the Agreement”;
      (3) that Gunnerson was entitled to recover attorneys’ fees; and (4) that

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      Gunnerson “failed to meet his burden of proof regarding the present
      value of future stock options.”

Slip Op. at 5.

      Stage Stores applied to vacate this arbitration award, essentially arguing that,

in failing to specifically address each of its defenses to Gunnerson’s claim, the

arbitrator exceeded her powers or so imperfectly executed them that a mutual,

final, and definite award upon the subject matter submitted was not made. See Slip

Op. at 7 (citing 9 U.S.C. § 10(a)(4)). The trial court denied Stage’s application

seeking to vacate the arbitration award and granted Gunnerson’s application to

confirm the award.

                                         Discussion

      Stage Stores complains that the arbitrator failed to mention one of its

defenses in the award, namely that the contract at issue required notice of the

grounds supporting good reason and an opportunity to cure before Gunnerson’s

contract could be terminated. It contends that, under the doctrine of functus officio,

which declares that arbitral judgments must be complete, it is entitled to a new

arbitral proceeding. The panel concludes that it “cannot fill in this gap for the

arbitrator,” but that it “can, however, have the trial court remand it to the arbitrator

to decide an issue which was raised but not completely adjudicated by the original

award.” Slip Op. at 28–29 (emphasis added).

                                           3
      I would hold that the parties raised no issue that the arbitrator did not

completely decide. Only a defense was not mentioned, and that defense was

necessarily rejected by the disposition of the encompassing issue. The arbitrator

did dispose of the issue raised by Stage Stores. She stated in the arbitration award

that Gunnerson was “allow[ed] to terminate his position for good reason pursuant

to paragraph 4 of the Agreement,” and she set out that Gunnerson was entitled to

receive his attorney’s fees but that he failed to meet his burden of proof regarding

the present value of stock purchases. The issue of whether he was allowed to

terminate his position has been completely decided, and there is no basis for

returning this case to the arbitrator.

      Stage Stores’ real complaint is that the arbitrator did not specifically address

an argument—not the issue requiring resolution. And this assertion is insufficient

to establish that that arbitrator “exceeded [her] powers, or so imperfectly executed

them that a mutual, final, and definite award upon the subject matter submitted was

not made,” as required to vacate the award here. See 9 U.S.C. § 10(a)(4). By

deciding the actual issue submitted—i.e., that Stage Stores’ “actions in

restructuring the organization and removing [Gunnerson] from a direct reporting

relationship to the CEO diminished [Gunnerson’s] status, allow[ed] [him] to

terminate his position for good reason pursuant to paragraph 4 of the

Agreement”—the arbitrator necessarily decided Stage Stores’ defenses challenging

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Gunnerson’s showing of good cause for termination. Nothing can be added to the

award to make it complete by sending it back to the arbitrator to hear a defense she

has already heard and rejected—as the lead opinion acknowledges.

      Remand in this case is, in my view, directly contrary to the spirit and

purpose of the FAA, the federal case law construing reasoned arbitral awards, and

the functus officio doctrine the lead opinion seeks to apply. None of the law cited

in the lead opinion supports returning a case to the arbitrator to address each

argument made by the parties. Rather, all of the cases cited in the opinion hold to

the contrary. In my view, Stage Stores’ argument is identical to the type of

challenge to a reasoned award in federal arbitration that controlling federal

opinions have consistently found to be without merit. I disagree, therefore, that

remand is supported by the law controlling reasoned awards subject to the FAA.

      The functus officio doctrine is the “rule that bars an arbitrator from revisiting

the merits of an award once the award has been issued.” Brown v. Witco Corp.,

340 F.3d 209, 218 (5th Cir. 2003) (cited in lead opinion, Slip Op. at 10–11). The

exceptions are limited. An arbitrator can (1) correct a mistake which is apparent on

the face of his award; (2) decide an issue which has been submitted but which has

not been completely adjudicated by the original award; or (3) clarify or construe an

arbitration award that seems complete but proves to be ambiguous in its scope and

implementation. Id. at 219. In Brown, the Fifth Circuit added that, “in the absence

                                          5
of any contractual provision or formal arbitration rule expressly to the contrary,”

an arbitrator “may exercise his power to clarify the terms of an award when he is

asked to do so by parties mutually and without any party’s objection within a

reasonable period of time.” Id. None of these circumstances applies here. The

reasoned award requested by the parties and made by the arbitrator presents no

mistake on its face, decides each issue submitted, and contains no ambiguity that

prevents its being readily implemented. Therefore, the circumstances requiring

remand to the arbitrator under exceptions to the functus officio doctrine as

enunciated in Brown do not exist.

      The Eleventh Circuit in Cat Charter, LLC v. Schurtenberger—a case

likewise relied upon in the lead opinion—described the requirements of a reasoned

award. It stated, “Logically, the varying forms of awards may be considered along

a ‘spectrum of increasingly reasoned awards,’ with a ‘standard award’ requiring

the least explanation and ‘findings of fact and conclusions of law’ requiring the

most,” so that “a ‘reasoned award is something short of findings and conclusions

but more than a simple result.’” 646 F.3d 836, 844 (11th Cir. 2011) (quoting

Sarofim v. Trust Co. of the W., 440 F.3d 213, 215 n.1 (5th Cir. 2006)); see also

Rain CII Carbon, LLC v. ConocoPhillips Co., 674 F.3d 469, 473 (5th Cir. 2012)

(accord). Thus, the Cat Charter court concluded, “Strictly speaking, then, a

‘reasoned’ award is an award that is provided with or marked by the detailed

                                        6
listing or mention of expressions or statements offered as a justification of an act—

the ‘act’ here being, of course, the decision of the [arbitration] Panel.” 646 F.3d at

844 (emphasis in original.)

      In Cat Carter, the appellate court refused to return the case to the arbitrator

in response to the defendants’ complaint that the award’s statement that the

plaintiffs had proved their claims “by the greater weight of the evidence” added no

explanatory value to the award “on what is most certainly a ‘bare’ or ‘standard’

award.” Id. The court held, to the contrary, that the arbitrators’ statement in the

award was “greater than what is required in a ‘standard award,’ and that is all we

need decide.’” Id. at 845. It pointed out that if the parties had wanted a greater

explanation they could have requested findings of fact and conclusions of law, but

they did not. Id. The Cat Charter court concluded:

      We decline to narrowly interpret what constitutes a reasoned award to
      overturn an otherwise apparently seamless proceeding. The parties
      received precisely what they bargained for—a speedy, fair resolution
      of a discrete controversy by an impartial panel of arbitrators skilled in
      the relevant areas of the law. To vacate the Award and remand for an
      entirely new proceeding would insufficiently respect the value of
      arbitration and inject the courts further into the arbitration process
      than Congress has mandated.

Id. at 846.

      The Fifth Circuit cited this conclusion approvingly in Rain CII Carbon,

which is also relied upon by the lead opinion. 674 F.3d at 473–74. In both Rain CII

Carbon and Cat Charter, the federal circuit court construed federal arbitration law

                                          7
and found an award that minimally addressed the issues sufficient to withstand a

party’s request for vacatur. See Rain CII Carbon, 674 F.3d at 474 (holding

sufficient for reasoned award “the arbitrator’s statement that, based upon all of the

evidence, he found that the initial price formula should remain in effect” after

delineating in previous paragraph “that Conoco had failed to show that the initial

formula failed to yield market price, a contention that the arbitrator obviously

accepted”); Cat Charter, 646 F.3d at 840–41, 845 (holding sufficient reasoned

award that declared that claimants had proven their Deceptive and Unfair Trade

Practices and breach of contract claim “by the greater weight of the evidence,” that

held that claimants were substantially prevailing parties and respondents were not,

awarded claimants their attorney’s fees, ordered respondents to “jointly and

severally pay” claimants specified damages, fees, costs, and interest, and granted

plaintiffs lien on boat).

       The Sixth Circuit, like the Cat Charter court, refused to overturn the award

and to return the case to the arbitrator for clarification, finding that the arbitrator

“minimally satisfied the explanation requirement stated in the arbitration

agreement” by stating, with respect to each of the plaintiff’s three claims that the

plaintiff “has not met his burden of proof.” Green v. Ameritech Corp., 200 F.3d
967, 971, 977–78 (6th Cir. 2000).

                                          8
      By contrast to these cases holding that the requirements for a reasoned

award were satisfied, the Fifth Circuit declined jurisdiction over the trial court’s

order sending a case back to the arbitrators under the functus officio doctrine to

complete the task assigned them in a case where the award issued by the arbitral

panel was “patently ambiguous.” Murchison Capital Partners v. Nuance

Commc’ns, Inc., 760 F.3d 418, 423 (5th Cir. 2014) (stating, where trial court

returned case to arbitrators to determine whether part of determination made in

award was related only to benefit-of-the-bargain damages request of party or also

to out-of-pocket losses, that “declining jurisdiction over the district court’s order

and permitting the arbitration panel to clarify its award is necessary given our

deferential standard of review of arbitration awards”).

      Here, there is no assertion of ambiguity, nor could there be. The arbitrator

clearly and expressly found “good reason pursuant to paragraph 4 of the

Agreement” for Gunnerson to terminate his position due to Stage Stores’ “actions

in restructuring the organization and removing him from a direct reporting

relationship to the CEO,” and awarded him his attorney’s fees. There is nothing to

clarify with respect to Stage Stores’ defense of notice and opportunity to cure and

nothing to add: the arbitrator rejected Stage Stores’ defense as grounds preventing

Gunnerson from terminating the contract, and it deemed him a prevailing party

entitled to attorneys’ fees. There is thus no basis for applying the exception to the

                                          9
functus officio doctrine for lack of complete adjudication. The award completely

disposes of the termination issue.

      In my view, it is clear that the arbitrator did enough in this case and that

there are no grounds for sending it back to the arbitrator under the ambiguity or

lack of clarity exceptions to the functus officio doctrine. The reasoned award at

issue is at least as comprehensive and detailed as the arbitral awards at issue in

Rain CII Carbon, Cat Charter, and Green. None of those cases sent a completely

decided arbitration award addressing every submitted issue back to the arbitrator

for a second attempt at arbitration, and none required that every argument or

defensive theory—as opposed to every issue—be disposed of. Indeed, one must

seriously question—as the federal courts that decided these federal arbitration law

cases did—what purpose is served by remand other than to introduce into

arbitration the same lengthy and costly court procedures that the parties sought to

avoid by agreeing to arbitration. And, worse, in this case, either the arbitrator will

reach a completely different result on the same facts or the arbitrator will reach the

same results, resulting in duplicative litigation. In neither case will the losing party

have recourse to the courts to second-guess the arbitrator’s second-time-around

decision, unless the state trial judge or appellate panel decides that the law was not

sufficiently explained to satisfy its own independent standards of review and sends

                                          10
it back for the arbitrator to try yet again to satisfy the state courts on the federal

legal issues of sufficiency of the reasoned award.

      The Eleventh Circuit set out in Cat Charter exactly why a reviewing court

should not require the detailed findings and conclusions of law the majority

imposes on the arbitrator in this case when the parties have merely requested a

reasoned award. The court stated:

      Our conclusion today holds consistent with the general review
      principles embodied in the FAA. The Supreme Court has read §§ 9-11
      of the FAA

             as substantiating a national policy favoring arbitration
             with just the limited review needed to maintain
             arbitration’s essential virtue of resolving disputes
             straightaway. Any other reading opens the door to the
             full-bore legal and evidentiary appeals that can render
             informal arbitration merely a prelude to a more
             cumbersome and time-consuming judicial review
             process, and bring arbitration theory to grief in the post-
             arbitration process.

Cat Charter, 646 F.3d at 845 (quoting Hall Street Assocs., LLC v. Mattel, Inc., 552
U.S. 576, 588, 128 S. Ct. 1396, 1405 (2008) (citations and internal quotation marks

omitted)).

      To send this case back to the arbitrator is, to me, to pervert the ends of

federal arbitration as stated by the United States Supreme Court in Hall Street v.

Mattel, and as recognized by the Eleventh Circuit in Cat Charter, and to impose on

arbitrations subject to the FAA heightened state court standards of review of

                                         11
reasoned arbitration awards that are clearly improper under, and superseded by,

controlling federal law. I, therefore, cannot join either the lead opinion or the

judgment of the majority. Much less can I join the concurrence, which would

require even more of the arbitrator for every reasoned award.

                                      Conclusion

      I would affirm the arbitration award.

                                              Evelyn V. Keyes
                                              Justice

Panel consists of Justices Keyes, Higley, and Brown.

Justice Brown, joining the majority and concurring.

Justice Keyes, dissenting.

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