Stage Stores, Inc. v. Jon Gunnerson

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

OPINION

Following an arbitration hearing and award, Stage Stores, Inc. filed an

application to vacate the arbitration award. Jon Gunnerson filed a response and an

application to confirm the arbitration award. Gunnerson’s application also sought

the award of attorneys’ fees. The trial court denied Stage’s application to vacate
the arbitration award, denied Gunnerson’s request for attorneys’ fees, and granted

the application to confirm the arbitration award. In one issue on appeal, Stage

argues that the trial court erred by denying its application to vacate the arbitration

award on the ground that the arbitrator exceeded her authority. In one issue on

cross-appeal, Gunnerson argues that the trial court abused its discretion by denying

his request for attorneys’ fees.

We reverse and remand.

Background

Stage Stores is a nationwide department store retailer with brands including

“Palais Royal,” “Bealls,” and “Goody’s.” It is headquartered in Houston.

Gunnerson was a senior executive for Stage for six years. In February 2010, he

was promoted to Senior Vice President Director of Stores for the Houston

Division. He entered into an employment contract as a part of obtaining that

position.

The employment contract includes an arbitration provision, requiring the

parties to submit any disputes relating to the employment contract to arbitration.

Arbitration is subject to the Federal Arbitration Act (“FAA”) and the rules of the

American Arbitration Association. The provision does not specify a form for the

arbitration award.

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 The contract also contains provisions for various methods of terminating the

contract. One method in particular, “By the Executive for Good Reason,”

permitted Gunnerson to receive certain financial benefits upon termination. That

method also contained certain requirements, including advance notice of the

grounds supporting good reason and an opportunity to cure.

On July 2, 2012, Gunnerson submitted a resignation letter to Stage. In the

letter, Gunnerson explained that he was invoking the “By the Executive for Good

Reason” method for terminating the contract. Stage refused to pay the benefits

available under that method. Gunnerson initiated an arbitration proceeding,

challenging the refusal.

Gunnerson and Stage selected an arbitrator. After a preliminary hearing, the

arbitrator issued a “Report of Preliminary Hearing and Scheduling Order.” In the

order, the arbitrator noted that, by agreement of the parties, the form of the award

would be a “reasoned award.”

In its opening argument at the hearing, Stage Stores raised the notice and

cure requirements of the contract as a basis for rejecting Gunnerson’s claim.

During Gunnerson’s testimony at the hearing, both sides questioned him about the

notice and cure requirements and whether the requirements had been satisfied. In

its closing argument, Stage Stores again raised the notice and cure requirements as

a basis for rejecting Gunnerson’s claim.

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 Following the hearing, the arbitrator issued an initial award. The initial

award determined that Gunnerson was entitled to recover his attorneys’ fees and

costs, but did not identify the amount awarded. After the arbitrator issued the

initial award, the parties submitted briefing on the matter of Gunnerson’s fees and

costs. The trial court then issued a final award.

The only difference between the initial and final awards was that the final

award included the amount of fees and costs awarded. The awards are four pages

in length. They contain a statement of jurisdiction, an identification of the parties,

a statement of the issues, a recitation of certain procedural facts, the arbitrator’s

rulings, and the arbitrator’s damage awards.

In the section identifying the issues under consideration, the arbitration

award identifies Gunner’s main argument to be that, by “restructur[ing] the

Company’s organization chart such that Gunnerson no longer directly reported to

[the CEO] but instead to another Senior V.P. . . .[,] [Stage] materially reduced,

decreased or diminished Gunnerson’s nature and status within the Company,

thereby providing him with good reason to resign, pursuant to paragraph 4.4.3(iii)

of the Agreement.” For Stage, the award identifies two of its main arguments: that

Gunnerson “voluntarily elected to leave his job as a result of another job offer, and

. . . the changes to the organizational structure do not rise to the level of a material

reduction, decrease or diminution of his status within the organization.”

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 In the rulings section, the award provides four specific rulings: (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 Gunnerson

“failed to meet his burden of proof regarding the present value of future stock

options.” The arbitration award then includes the specific amount of damages

awarded to Gunnerson.

Stage then filed an application to vacate the award in the trial court.

Gunnerson filed a response and an application to confirm the arbitration award. In

his application to confirm the award, Gunnerson requested the trial court to award

him attorneys’ fees because Stage’s application to vacate the award was “without

justification.” Following a hearing, the trial court denied Stage’s application to

vacate the award, denied Gunnerson’s request for attorneys’ fees, and granted

Gunnerson’s application to confirm the award.

Arbitration Award

In its sole issue on appeal, Stage argues that the trial court erred by denying

its application to vacate the arbitration award.

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A. Standard of Review & Applicable Law

The dispute between the parties at arbitration concerned whether a certain

provision in Gunnerson’s employment agreement was satisfied. The employment

agreement provided that any disputes relating to the agreement are subject to

arbitration according to the FAA.

1. Review of Award

There are two general guiding principles of arbitration that are particularly

relevant to our review here. The first is that arbitration is a matter of contract.

Rain CII Carbon, LLC v. ConocoPhillips Co., 674 F.3d 469, 472 (5th Cir. 2012).

“Ultimately, arbitrators derive their powers from the parties’ agreement.” Cat

Charter, LLC v. Schurtenberger, 646 F.3d 836, 843 (11th Cir. 2011). Our review

of an arbitration award, then, typically focuses on whether it gives effect to the

parties’ contractual arbitration agreement. See id. at 843 n.13 (“We refer to

contractual provisions regarding the scope or form of the arbitration.”).

The second guiding principle is that arbitration is designed as an efficient,

less-costly alternative to judicial litigation. Royce Homes, L.P. v. Bates, 315

S.W.3d 77, 85 (Tex. App.—Houston [1st Dist.] 2010, no pet.). The FAA

substantiat[es] 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-

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 consuming judicial review process, and bring arbitration theory to
grief in post arbitration process.

Hall Street Assocs., LLC v. Mattel, Inc., 552 U.S. 576, 588, 128 S. Ct. 1396, 1405

(2008) (internal citations and quotations omitted); Cat Charter, 646 F.3d at 845.

As a result, judicial review of an arbitration award is extraordinarily narrow and

we vacate an arbitration award only in very unusual circumstances. See Oxford

Health Plans LLC v. Sutter, --- U.S. ---, 133 S. Ct. 2064, 2068 (2013) (holding

courts only vacate arbitration award in very unusual circumstances); Rain CII

Carbon, 674 F.3d at 471–72 (holding review of arbitration award is extraordinarily

narrow). Although the parties have broad authority to modify by contract many of

the standard rules for arbitration, the parties cannot expand the grounds for vacatur

in judicial review. Hall Street, 552 U.S. at 578, 128 S. Ct. at 1400.

Instead, Section 10 of the FAA provides the exclusive grounds upon which a

reviewing court may vacate an arbitration award. Id. at 576; Rain CII Carbon, 674

F.3d at 473 (citing 9 U.S.C.A. § 10 (West 2009)). Stage’s application for vacatur

concerns the fourth ground: “where the arbitrators exceeded their powers, or so

imperfectly executed them that a mutual, final, and definite award upon the subject

matter submitted was not made.” 1 9 U.S.C.A. § 10(a)(4).

1
The central dispute in this appeal is whether the arbitration award was so deficient
that it failed to satisfy the parties’ agreement that the award would be “reasoned.”
Other courts to review this issue have framed the determination of whether the
arbitration award was reasoned as a question of whether the arbitration panel

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 Similarly, the parties cannot modify by contract the standard or scope of

judicial review of an arbitration award. Cat Charter, 646 F.3d at 843 n.13 (citing

Hall Street, 552 U.S. at 578, 128 S. Ct. at 1400). Instead, we must review the

award under a number of well-established requirements that flow from the

principle of maintaining the efficiency and reduced cost of arbitration. Royce

Homes, 315 S.W.3d at 85–86; Rain CII Carbon, 674 F.3d at 471–72. In order to

protect the strong deference accorded to arbitration awards, we review de novo the

trial court’s ruling to vacate or confirm an arbitration award. Rain CII Carbon,

674 F.3d at 472.

In contrast, our review of the underlying arbitration award is “exceedingly

deferential.” Apache Bohai Corp. LDC v. Texaco China BV, 480 F.3d 397, 401

(5th Cir. 2007). We review a challenge to an arbitration award under a “heavy

presumption” in favor of confirming the award, and we must resolve all doubts in

favor of arbitration. Cat Charter, 646 F.3d at 842; Brook v. Peak Int’l, Ltd., 294

F.3d 668, 672 (5th Cir. 2002). Accordingly, a “party seeking relief under

“exceeded its authority.” See Cat Charter, LLC v. Schurtenberger, 646 F.3d 836,
843 (11th Cir. 2011); Rain CII Carbon, LLC v. ConocoPhillips Co., 674 F.3d 469,
472 (5th Cir. 2012). We believe the better way to frame the issue of whether the
arbitration award was reasoned is to ask if the award is so deficient that the
arbitrator “so imperfectly executed [its powers] that a mutual, final, and definite
award upon the subject matter submitted was not made.” 9 U.S.C.A. § 10(a)(4)
(West 2009). This is only a shift in nomenclature, however. We otherwise find
the cases reviewing this issue on point and persuasive, and we apply the same
principles that flow from the question of whether section 10 of the FAA was
violated, regardless of the specific language in section 10 that is relied on as a
basis for this determination.

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[subsection 10(a)(4) of the FAA] bears a heavy burden. ‘It is not enough . . . to

show that the [arbitrator] committed an error—or even a serious error.’” Oxford

Health Plans, --- U.S. at ---, 133 S. Ct. at 2068 (quoting Stolt-Nielsen S.A. v.

AnimalFeeds Int’l Corp., 559 U.S. 662, 671, 130 S. Ct. 1758, 1767 (2010)).

Ultimately, our review is a determination of whether the “[a]ward [is] so deficient

that it warrant[s] sending the parties back to square one.” Cat Charter, 646 F.3d at

842; accord 9 U.S.C.A. § 10(a)(4) (allowing vacatur when arbitrator so imperfectly

executed her powers “that a mutual, final, and definite award upon the subject

matter submitted was not made”).

2. Interpretation of Parties’ Agreement

The parties agreed that the arbitrator would issue a “reasoned award.” The

parties dispute on appeal what “reasoned award” means and whether the arbitration

award was reasoned. We review de novo the trial court’s interpretation on the

parties’ agreement for the form of the arbitration award. Green v. Ameritech

Corp., 200 F.3d 967, 974 (6th Cir. 2000). “[C]ourts have generally been reluctant

to vacate awards challenged on the grounds that their form was improper.” Rain

CII Carbon, 674 F.3d at 473 (citing Cat Charter, 646 F.3d at 842 n.12).

B. Functus Officio Exception

In order to fully frame the scope of our review, it is important to identify

another requirement in reviewing a ruling on a challenge to an arbitration award.

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“[A] court is required to enforce an arbitration award only as written by the

arbitrator.” Brown v. Witco Corp., 340 F.3d 209, 216 (5th Cir. 2003). If an

arbitration award conforms to the parties’ agreement, courts must confirm the

award. 9 U.S.C.A. § 9 (West 2009). In contrast, we must vacate the award if the

arbitrators “so imperfectly executed [their powers] that a mutual, final, and definite

award upon the subject matter submitted was not made.” Id. § 10(a)(4).

This is not a strictly binary determination, however. An award that is

ambiguous, for example, cannot be enforced. Brown, 340 F.3d at 216. In that

situation, “the court must remand the award to the arbitrator with instructions to

clarify the award’s particular ambiguities.” Id.; accord Murchison Capital

Partners v. Nuance Commc’ns, Inc., 760 F.3d 418, 423 (5th Cir. 2014). Once any

ambiguities are resolved, the court rules on the challenge to the enforcement of the

arbitration award. See Brown, 340 F.3d at 216.

The authority for a court to remand an ambiguity to an arbitrator for

clarification is an exception to what is known as the functus officio doctrine. See

id. at 219. The functus officio doctrine is “a common law rule that bars an

arbitrator from revisiting the merits of an award once the award has been issued.”

Id. at 218. While once strictly enforced, a number of exceptions to the rule have

arisen. Id. at 218–19. Under one exception, remand to the arbitration panel is

appropriate to allow the panel to “clarify or construe an arbitration award that

10
seems complete but proves to be ambiguous in its scope and implementation.” Id.

at 219. Under another exception, remand to the arbitration panel is appropriate to

allow the panel to “decide an issue which has been submitted but which has not

been completely adjudicated by the original award.” Id. Another exception

permits a remand to “correct a mistake which is apparent on the face of [the]

award.” Id. On remand, the arbitration panel cannot retry any already resolved

issues. See id. at 221. But the panel can complete the adjudication and clarify any

existing ambiguities. See id.

Accordingly, if a trial court, in the course of determining an action to

confirm or vacate an arbitration award, determines that the award (1) contains a

mistake apparent on the face of the award, (2) is ambiguous in its scope or

implementation, or (3) fails to completely adjudicate the matters raised in

arbitration, then the court must remand the matter to the arbitrator for a

clarification or completion of the award. See Brown, 340 F.3d at 216, 219;

Murchison Capital, 760 F.3d at 423 (citing Oil, Chem. & Atomic Workers Int’l

Union, Local 4–367 v. Rohm & Haas, Tex., Inc., 677 F.2d 492, 495 (5th Cir.

1982)). Thereafter, the court rules on the confirmation action. See Brown, 340

F.3d at 216, 219; Murchison Capital, 760 F.3d at 423.

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C. “Reasoned Award”

The parties agreed that the form of the award would be a “reasoned award.”

The parties did not provide any definition of “reasoned award” or any further detail

of what constitutes a reasoned award. In its motion to vacate, Stage argued that the

award was not reasoned and, accordingly, should be vacated. Gunnerson argued

that the award was reasoned and, as a result, should be confirmed. The parties

raise the same arguments on appeal. Accordingly, before we can determine if the

award is reasoned, we must first determine what “reasoned award” means. “We

give contract terms their plain and ordinary meaning unless the instrument

indicates the parties intended a different meaning.” See Dynegy Midstream Servs.,

Ltd. P’ship v. Apache Corp., 294 S.W.3d 164, 168 (Tex. 2009).

As an initial matter, we note that the agreement for a reasoned award is not

contained in the arbitration provision in Gunnerson’s employment agreement.

Instead, it appears in the “Report of Preliminary Hearing and Scheduling Order”

from the arbitration records. The parties conducted the arbitration pursuant to the

Commercial Arbitration Rules of the American Arbitration Association. Rule R-

42(b) of the then-applicable Commercial Arbitration Rules provides, “The

arbitrator need not render a reasoned award unless the parties request such an

award in writing prior to appointment of the arbitrator or unless the arbitrator

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determines that a reasoned award is appropriate.” 2 AM. ARBITRATION ASS’N,

COMMERCIAL ARBITRATION RULES AND MEDIATION PROCEDURES R-42(b) (2009)

(emphasis added).

The same situation arose in Cat Charter. The court noted that the arbitration

rules permit the parties to vary the procedure established by the rules. Cat

Charter, 646 F.3d at 840 n.6 (citing AM. ARBITRATION ASS’N, COMMERCIAL

ARBITRATION RULES AND MEDIATION PROCEDURES R-1(a)). They can still be

amended after arbitration has begun if the parties have the consent of the arbitrator.

Id. The court questioned whether the arbitrator was bound to deliver a reasoned

award “[g]iven the deference we accord arbitrators in determining arbitral

procedures.” Id. Even so, the court interpreted the notation in the arbitration

scheduling order “to be sufficient ‘consent’ within the meaning of Arbitration Rule

R–1(a), and assume[d] that the parties validly altered the procedures to require a

reasoned award when they subsequently communicated with the Panel.” Id.

Neither party argues that the arbitrator could issue anything less than a

reasoned award. Further, as we explain below, the content of the award reflects

that the award provided at least some reasoning for the outcome of the award.

2
The parties’ agreed to a reasoned award on October 25, 2012. The Commercial
Arbitration Rules of the American Arbitration Association were amended,
effective October 1, 2013. The same rule exists in identical form under the new
rules as rule R-46(b). See AM. ARBITRATION ASS’N, COMMERCIAL ARBITRATION
RULES AND MEDIATION PROCEDURES R-42(b) (2013).

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Accordingly, for the purposes of this appeal, we conclude that the arbitrator’s

notation in the scheduling order that the parties agreed to a reasoned award

functions either as the consent of the arbitrator to amend the rules or as a

determination by the arbitrator that a reasoned award was appropriate. See id.; AM.

ARBITRATION ASS’N, COMMERCIAL ARBITRATION RULES AND MEDIATION

PROCEDURES R-1(a), R-42(b).

Absent an agreement to the contrary, an arbitrator issues a “standard award,”

which simply announces a result without any reasoning or explanation. Cat

Charter, 646 F.3d at 844. “At the other end of the spectrum, the Arbitration Rules

allow parties to request that the arbitrators make ‘findings of fact and conclusions

of law,’ a relatively exacting standard familiar to the federal courts.” Id.; see also

Green, 200 F.3d at 975 (holding “‘findings of fact’ and ‘conclusions of law’ are

familiar terms in legal parlance with reasonably plain meanings”).

In contrast to these well-known terms, the Eleventh Circuit determined that

“reasoned award” was “a somewhat ambiguous term left undefined by the FAA

[and] the Arbitration Rules.” Cat Charter, 646 F.3d at 843. As Stage recognizes,

“reasoned award” has not been defined by a Texas state court. 3

3
The San Antonio Court of Appeals has, however, determined the meaning of the
phrase “include a brief, written opinion addressing the issues before them” in the
context of an arbitration award. See SSP Holdings Ltd. P’ship v. Lopez, 432
S.W.3d 487, 495 (Tex. App.—San Antonio 2014, pet. denied).

14
 Nevertheless, Stage argues that “reasoned award” is “a familiar legal

term. . . . defined by the Commercial Arbitration treatise and is the prevailing

practice in most industrialized nations.” Stage relies on two sources to support this

claim. See 3 THOMAS H. OEHMKE WITH JOAN M. BROVINS, COMMERCIAL

ARBITRATION § 118:5 (3d ed. 2003); Stephen L Hayford, A New Paradigm for

Commercial Arbitration: Rethinking the Relationship Between Reasoned Awards

and the Judicial Standards for Vacatur, 66 GEO. WASH. L. REV. 443, 444–45

(1998). Oehmke and Brovins assert, “A reasoned award would usually include a

detailed listing, or at least mention, of expressions or statements offered as a

justification of the arbitral decision.” 3 OEHMKE, BROVINS, COMMERCIAL

ARBITRATION § 118:5. They provide no authority for this assertion, however.

They further assert that “a reasoned award should offer enough facts and legal

principles to ascertain the reasons for the ultimate award,” but the cases they rely

on do not address the definition of “reasoned award.” See id. (citing Reich v.

Newspapers of New England, Inc., 44 F.3d 1060 (1st Cir. 1995); Armstrong v.

Commodity Futures Trading Conm’n, 12 F.3d 401 (3d Cir. 1993)).

Likewise, Hayford concedes that, “contrary to the prevailing practice in

other industrialized countries, commercial arbitrators in the United States seldom

articulate their reasons for decision in their written awards.” Hayford, 66 GEO.

WASH. L. REV. at 444–45. Hayford’s article then argues for why “reasoned

15
awards” should be used in the United States, not that they are used regularly with a

well-defined meaning within any U.S. jurisdiction. Id. at 446. Accordingly,

“reasoned award” is not a “familiar legal term” within the context of U.S.

arbitration proceedings, and we must still determine its meaning.

While “reasoned award” is not a “familiar legal term” in the context of U.S.

arbitration proceedings, that does not mean it was without meaning at the time the

parties and the arbitrator agreed that the arbitrator would issue a “reasoned award.”

Instead, at the time of the agreement for a reasoned award, two federal courts had

defined the term, the Eleventh Circuit in Cat Charter and the Fifth Circuit in Rain

CII Carbon. Cat Charter, 646 F.3d at 844; Rain CII Carbon, 674 F.3d at 473.

In Cat Charter, the court noted that Webster’s defined “reasoned” as

“‘provided with or marked by the detailed listing or mention of reasons.’” 646

F.3d at 844 (quoting Webster’s Third New Int’l Dictionary: Unabridged 1892

(1993)). “Reason” was defined as “‘an expression or statement offered as an

explanation of a belief or assertion or as a justification of an act or procedure.’” Id.

(quoting Webster’s Third New Int’l Dictionary: Unabridged 1891)). From these

definitions, the court concluded, “Strictly speaking, then, a ‘reasoned’ award is an

award that is provided with or marked by the detailed listing or mention of

expressions or statements offered as a justification of an act —the ‘act’ here being,

of course, the decision of the Panel.” Id. The court held that “a ‘reasoned award

16
is something short of findings and conclusions but more than a simple result.’” Id.

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

In Rain CII Carbon, the court quoted Cat Charter at length over the

meaning of “reasoned award.” 674 F.3d at 473–74 (citing Cat Charter, 646 F.3d

at 842, 844, 846). It also recognized the court’s previous holding that the detail

and specificity required of a reasoned award falls between a standard award and

findings of fact and conclusions of law. Id. at 473 (citing Sarofim, 440 F.3d at 215

n.1).

Because the parties did not create their own definition of “reasoned award,”

and because these cases represent the prevailing definition of “reasoned award”

within the context of an arbitration proceeding under the FAA, we adopt the

definition provided by these courts. We hold, then, that the detail and specificity

required of a “reasoned award” falls between a standard award and findings of fact

and conclusions of law. Rain CII Carbon, 674 F.3d at 473; Cat Charter, 646 F.3d

at 844. We further hold that a “reasoned award” is “an award that is provided with

or marked by the detailed listing or mention of expressions or statements offered as

a justification of . . . the decision of the Panel” or arbitrator. Cat Charter, 646 F.3d

at 844.

Before turning to the analysis of these legal principles, it is important to

emphasize that determining whether an award is a “reasoned award” is a question

17
of form, not substance. The scheduling order expressly stated that “reasoned

award” was the parties’ agreement as to the form of the award. Similarly, Cat

Charter recognizes that the determination of whether an award is reasoned is a

review of the form of the award. Id. at 844 (“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. In this light, therefore, a ‘reasoned award

is something short of findings and conclusions but more than a simple result.’”

(emphasis added; internal citations omitted)).

Accordingly, our review is limited to whether the award was in the form of a

reasoned award. See id. We do not review whether the substance of the award is

correctly reasoned or well reasoned. See Wachovia Sec., LLC v. Brand, 671 F.3d

472, 478 (4th Cir. 2012) (“A court sits to determine only whether the arbitrator did

his job—not whether he did it well, correctly, or reasonably, but simply whether he

did it.”); see also Oxford Health Plans, --- U.S. at ---, 133 S. Ct. at 2068 (“Because

the parties bargained for the arbitrator’s construction of their agreement, an arbitral

decision even arguably construing or applying the contract must stand, regardless

of a court’s view of its (de)merits.”).

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D. Analysis

A review of the award reveals that, even if the arbitrator was not completely

successful, the award largely conforms to the requirements for being a reasoned

award. As an initial matter, the arbitrator’s award is four pages in length and

contains more than just a recitation of which party wins and what the recovery is.

Near the beginning of the arbitration award, the arbitrator wrote, “For the reasons

set forth herein, the Arbitrator concludes that the Claimant has met his burden of

proof in part, and failed to meet his burden of proof in other respects, but is entitled

to the relief set out below.” The award also contains a statement of jurisdiction, an

identification of the parties, a statement of the issues, a recitation of certain

procedural facts, the arbitrator’s rulings, and the arbitrator’s damage awards. This

is clearly more than a standard award. But this does not establish that it was a

reasoned award. See Rain CII Carbon, 674 F.3d at 474 (“[I]t is clear that, in eight

pages, the arbitrator rendered more than a standard award, which would be a mere

announcement of his decision. Thus, the remaining question is whether the

arbitrator’s award is sufficiently more than a standard award so as to be a reasoned

award.”).

In the section identifying the issues under consideration, the arbitration

award summarized all but one of the parties’ main arguments. The award

identifies Gunner’s main argument to be that, by “restructur[ing] the Company’s

19
organization chart such that Gunnerson no longer directly reported to [the CEO]

but instead to another Senior V.P. . . .[,] [Stage] materially reduced, decreased or

diminished Gunnerson’s nature and status within the Company, thereby providing

him with good reason to resign, pursuant to paragraph 4.4.3(iii) of the Agreement.”

For Stage, the award identifies two of its main arguments: Gunnerson “voluntarily

elected to leave his job as a result of another job offer, and . . . the changes to the

organizational structure do not rise to the level of a material reduction, decrease or

diminution of his status within the organization.”

In the rulings section, the award provides four specific rulings: (1) a valid

contract existed between the parties; (2) 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)

Gunnerson was entitled to recover attorneys’ fees; and (4) Gunnerson “failed to

meet his burden of proof regarding the present value of future stock options.” The

arbitration award then includes the specific amount of damages and attorneys’ fees

to which Gunnerson was entitled.

Generally, this award contains the same amount of explanation as those

upheld in Cat Charter and Rain CII Carbon. In Cat Charter, the pertinent portion

of the arbitration award consisted of six paragraphs. 646 F.3d at 840–41. Each of

20
the paragraphs summarized the claim asserted by the claimants and identified

which party had prevailed “by the greater weight of the evidence.” Id. Only one

paragraph contained more detail than this. Id. at 841. The arbitration award then

identified the total amount of money to be paid, including damages, fees, costs, and

interest. Id. The court held that this amounted to a reasoned award. Id. at 845.

The court noted that the determination of each claim “turned primarily on

credibility determinations.” Id. at 844. The court held that finding for one party

by the greater weight of the evidence “is easily understood to mean that . . . the

Panel found the Plaintiffs’ witnesses to be more credible.” Id. at 844–45.

Accordingly, the award met the minimum requirements for being a reasoned

award. Id. at 845. While the award could have provided more detail, “had the

parties wished for a greater explanation, they could have requested that the Panel

provide findings of fact and conclusions of law; to this court, the [explanation

given in the award] is greater than what is required in a ‘standard award,’ and that

is all we need decide.” Id.

In Rain CII Carbon, the arbitration award was eight pages long. 674 F.3d at

474. The argument for vacatur “hinge[d] on the summary nature of the arbitrator’s

statement that, based upon all of the evidence, he found that the initial price

formula should remain in effect.” Id. The court rejected this argument because it

“ignore[d] that the preceding paragraph thoroughly delineate[d] Rain’s contention

21
that Conoco had failed to show that the initial formula failed to yield market price,

a contention that the arbitrator obviously accepted.” Id. The court held that

vacatur in that situation would be “inconsistent with the deference owed to arbitral

awards and the congressional policy favoring arbitration of commercial disputes,

and is also contrary to the interest of finality.” Id.

Nevertheless, Stage argues that the award is not a reasoned award because

the arbitration award failed to address one of its key defenses: that Gunnerson

failed to provide the requisite notice and opportunity to cure in order to avail

himself of the good-cause termination provision. Gunnerson denies that notice and

cure was one of Stage’s key defenses and argues, accordingly, the arbitration

award did not need to address it in order to be a reasoned award. We disagree with

Gunnerson.

Stage’s attorneys raised the notice and cure requirements as a defense during

opening and closing statements. During his testimony at the hearing, both sides

questioned Gunnerson about the notice and cure requirements and whether the

requirements had been satisfied. Pursuant to the terms of the contract, giving

sufficient notice and opportunity to cure was a condition of receiving the money he

sought in the arbitration proceeding. Accordingly, we hold that Stage sufficiently

identified and argued the matter in the arbitration proceeding and that the matter

was significant enough to merit some reasoning in the award.

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 The dissent would have us hold that the arbitrator’s failure to address this

issue in the award does not prevent the award from being reasoned. Relying on

Cat Charter and Rain CII Carbon, the dissent reasons that the arbitration award

need only identify “issues” and not “arguments.” We cannot agree with the

dissent’s interpretation of these cases.

In Cat Charter, the appellant argued that the award was not reasoned

because the award only determined that the opposing party had proven its case “by

the greater weight of the evidence.” 646 F.3d at 844. Instead of holding the award

did not need any reasoning to explain the issue, the court held that, based on the

facts of the case, no further reasoning was necessary because the only matter at

issue was credibility of the witnesses. Id. at 844–45. The necessary conclusion is

that, when more than credibility of the witnesses is at issue, more reasoning is

necessary. See id.

Rain CII Carbon bears this out. In Rain CII Carbon, the appellant

complained that the award only determined that, “based upon all of the evidence,

. . . the initial price formula should remain in effect.” 674 F.3d at474. The dissent

to this opinion suggests that this is all that is necessary for an award to be reasoned.

But the Fifth Circuit did not hold that this was all that was necessary. Instead, the

court held that the greater detail needed was supplied elsewhere in the award. See

id. (“[T]he preceding paragraph thoroughly delineates Rain’s contention that

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Conoco had failed to show that the initial formula failed to yield market price, a

contention that the arbitrator obviously accepted.” (Emphasis added.)).

Accordingly, we find no support for the dissent’s argument in the opinions on

which the dissent relies.

Before determining the ramification of failing to identify and address one

issue in what appears to otherwise be a reasoned award, we will address other

claims for deficiencies in the award. Stage points out that, under the employment

contract, Gunnerson had good cause to resign only if Stage “materially reduce[d],

decrease[d], or diminishe[d]” Gunnerson’s position or responsibilities. Stage

claims that, while she found that Stage had diminished Gunnerson’s position, the

arbitrator failed to find that the diminution was material. We agree with

Gunnerson that this type of argument has already been rejected in Rain CII

Carbon. In Rain CII Carbon, Conoco argued that the arbitration award failed to

provide sufficient reasoning in the award’s simple assertion “that, based upon all of

the evidence, [the arbitrator] found that the initial price formula should remain in

effect.” 674 F.3d at 474. The court rejected this argument, pointing out that, in

making the argument, “Conoco ignores that the preceding paragraph thoroughly

delineates Rain’s contention . . . [which] the arbitrator obviously accepted.” Id.

Here, the arbitration award includes a section identifying the issues

presented by the parties. The award states Gunnerson’s main argument was that

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Stage “materially reduced, decreased or diminished Gunnerson’s nature and status

within the Company.” The award further states that one of Stage’s main defenses

was that “the changes to the organizational structure do not rise to the level of a

material reduction, decrease or diminution of his status within the organization.”

The arbitration award, in its section identifying the rulings of the court,

determined that Stage “diminished [Gunnerson’s] status.” Based on this, Stage

would have us conclude that, after recognizing that both parties were disputing

whether the changes were material, the arbitrator either (1) somehow forgot that

this was a central dispute between the parties and simply determined that some

diminution had occurred or (2) decided it was not material, intentionally ignored

this central dispute, and decided to find in Gunnerson’s favor anyway. “Such a

narrow approach is inconsistent with the deference owed to arbitral awards and the

congressional policy favoring arbitration of commercial disputes, and is also

contrary to the interest of finality.” Id. Reading the award as a whole, we hold

that the clear, logical inference is that the arbitrator determined that the diminution

in Gunnerson’s status was material.

Lastly, Stage identifies two problems with the award of attorneys’ fees that,

it argues, shows that the arbitration award was not reasoned. First, Stage argues

that the arbitrator inappropriately determined that Gunnerson was entitled to

attorneys’ fees in the interlocutory award when the parties had not yet submitted

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the issue for consideration. Second, Stage argues that the final award only adds the

amount of the attorneys’ fees award without any explanation.

For the claim that the arbitrator prematurely decided the matter of attorneys’

fees, Stage asserts that the parties “agreed that arbitration would be bifurcated.

The arbitrator would decide liability first and, if Gunnerson prevailed, the parties

would later submit briefing and argument about whether he was entitled to

attorney’s fees.” Stage provides no citations to the record to support the claim that

such an agreement exists, however. See TEX. R. APP. P. 38.1(i) (requiring briefs to

contain appropriate citations to the record); Manon v. Solis, 142 S.W.3d 380, 391

(Tex. App.—Houston [14th Dist.] 2004, pet. denied) (holding appellate court has

no duty to search voluminous record without sufficient guidance from appellant to

determine whether assertion of reversible error is valid). Accordingly, we have no

basis for determining what the agreement between the parties actually was and

what limitations the arbitrator agreed to for the initial award. Without this, we

cannot determine what effect any premature ruling may have had on the final

arbitration award. 4

For the complaint that the final award only adds the amount of attorneys’

fees without any explanation for the amount, Stage asserts that it argued to the

4
But see Rain CII Carbon, 674 F.3d at 473–74 (rejecting argument that error in
initial award that was corrected in the final award can be basis for determination
that award was not reasoned).

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arbitrator “that the award of fees was not mandatory under the contract; that

Gunnerson had not submitted any proof that the fees sought were reasonable and

necessary as required by Texas law; and that Gunnerson sought recovery of fees

and costs that are unavailable under Texas law.” Stage complains that the final

arbitration award only adds the amount of the fees awarded without specifically

addressing any of its arguments.

As Stage recognizes, the final award gave Gunnerson the full amount of

attorneys’ fees and costs that he requested. From this simple fact, anyone reading

the award must conclude that the arbitrator rejected each of Stage’s arguments for

why something less than the full amount could be awarded. Furthermore, this was

not a central dispute between the parties. While the arbitrator considered the

matter separately from the rest of the parties’ dispute, the record for attorneys’ fees

is a mere fraction of the entire record. Gunnerson’s motion for fees consisted of

three pages. Stage’s response consisted of ten pages. Gunnerson’s reply was

eleven pages. Including exhibits, the matter of attorneys’ fees takes up about 140

pages of a 1,614-page record. These 140 pages include a 60-page deposition, of

which, two pages were referenced in the response to the motion. If any hearing

was held on the matter, it is not a part of the record. Accordingly, this does not

establish any further deficiency in the award.

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E. Disposition

We have held that the award generally conforms with the requirements for

an award to be reasoned but that the award’s failure to provide any reasoning

regarding Stage’s third contention prevents a determination that the award is

reasoned. We must determine, then, the ramifications of failing to identify and

address this key defense. Stage argues that, because the award fails to address this

third defense, we must vacate the entire award. We cannot agree.

When it is ambiguous, an award cannot be enforced but must instead be

remanded back to the arbitrator for clarification under an exception to the functus

officio doctrine. See Brown, 340 F.3d at 216, 218–19. Another exception applies

when the award fails to completely adjudicate the matters raised in arbitration. Id.

at 219. When an exception to the functus officio doctrine applies, “the court must

remand the award to the arbitrator with instructions to clarify the award’s

particular ambiguities.” Id.; accord Murchison Capital, 760 F.3d at 423. Once any

ambiguities are resolved, the court rules on the challenge to the confirmation of the

arbitration award. See Brown, 340 F.3d at 216.

Here, the arbitration explicitly identified and disposed of Gunnerson’s claim

and two of Stage’s key defenses. It failed, however, to identify and provide any

amount of reasoning for ruling against Stage’s defense of notice and cure. We

cannot fill in this gap for the arbitrator. See id. We can, however, have the trial

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court remand it to the arbitrator to decide an issue which was raised but not

completely adjudicated by the original award. See id. at 219. After the arbitrator

issues a revised award accounting for this deficiency, the matter will return to the

trial court for final determination of whether the award should be confirmed or

vacated. See id. at 216.

We sustain Stage’s sole issue.

Attorneys’ Fees

In his sole issue on cross-appeal, Gunnerson argues that the trial court

abused its discretion by denying his request for attorneys’ fees. Gunnerson claims

the trial court should have granted his request for attorneys’ fees because Stage’s

challenge of the arbitration award was “without justification.” See Int’l Ass’n of

Machinists & Aerospace Workers, Dist. 776 v. Tex. Steel Co., 639 F.2d 279, 283–

84 (5th Cir. 1981).

A. Standard of Review & Applicable Law

When a party’s challenge to an arbitration award is “without merit” and its

refusal to abide by the award is “without justification,” a trial court can award

attorneys’ fees to the party seeking to confirm the arbitration award. Executone

Info. Sys., Inc. v. Davis, 26 F.3d 1314, 1331 (5th Cir. 1994) (citing Tex. Steel, 639

F.3d at 283). We review the trial court’s ruling on the request for attorneys’ fees

for an abuse of discretion. Tex. Steel, 639 F.3d at 283. The fact that a party loses

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its challenge to confirmation of the award does not establish that the challenge was

“without merit.” Id. In contrast, the fact that a challenge to the arbitration award is

framed as falling within a recognized ground for vacatur does not establish that the

challenge was justified. See id. Instead, we must determine whether the challenge,

“properly characterized,” is without merit. Id. at 284.

B. Analysis

As an initial matter, Stage argues that the “without justification” basis for

attorneys’ fees only applies to arbitration in labor disputes, not arbitration

proceedings in general. We disagree because the Fifth Circuit has considered this

basis for attorneys’ fees outside of arbitration in labor disputes. See Executone

Info. Sys., 26 F.3d at 1316–17, 1331 (considering “without justification” basis for

attorneys’ fees following arbitration between company and shareholders of merged

company).

Gunnerson argues that Stage’s application to vacate the arbitration award

was without merit because “[i]t was a direct attack on the merits of [the

arbitrator’s] underlying decisions, and was based on arguments that, remarkably,

were undermined by the very law Stage cited.” Accordingly, Gunnerson asserts

that the trial court abused its discretion by not awarding him attorneys’ fees

incurred in defending the application to vacate the arbitration award. Given that

30
we have sustained Stage’s issue concerning the matter, we cannot conclude that

Stage’s complaints about the award are without merit.

We overrule Gunnerson’s sole issue.

Conclusion

We reverse the trial court’s confirmation of the arbitration award. We

remand to the trial court (1) to draft a remand to the arbitrator for clarification on

the arbitrator’s disposition of Stage’s notice and cure defense and (2) for further

proceedings upon issuance of the revised arbitration award.

Laura Carter Higley
Justice

Panel consists of Justices Keyes, Higley, and Brown.

Justice Brown, joining the majority and concurring.

Justice Keyes, dissenting.

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