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
2
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
4
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.
12
Stage Stores, Inc. v. Jon Gunnerson
Combined Opinion