COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 02-17-00035-CV
SCOTT A. MILLER APPELLANT
V.
JEREMY J. WALKER, D/B/A APPELLEE
MAVERICK WEALTH
MANAGEMENT
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FROM THE 236TH DISTRICT COURT OF TARRANT COUNTY
TRIAL COURT NO. 236-281183-15
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OPINION
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I. INTRODUCTION
Appellee Jeremy J. Walker, d/b/a Maverick Wealth Management petitioned
the trial court to vacate the attorneys’-fees portion of an arbitration award in favor
of Appellant Scott A. Miller, arguing that the panel had exceeded its authority by
awarding attorneys’ fees that were not recoverable under an arbitration
agreement or pursuant to Texas law. In response, Miller moved the trial court to
confirm the arbitration award and to sanction Walker for filing a frivolous petition
to vacate. The trial court vacated the attorneys’ fees and declined to sanction
Miller. In two issues, Miller challenges both rulings. We hold that the panel was
authorized to award Miller attorneys’ fees in light of the parties’ submissions
requesting attorneys’ fees and Walker’s failure to advise the panel that it lacked
the authority to award Miller attorneys’ fees. We also conclude, however, that
the trial court did not abuse its discretion by denying Miller’s motion for sanctions.
Therefore, we will affirm the trial court’s judgment insofar as it denied Miller’s
motion for sanctions, but we will reverse the trial court’s judgment vacating the
attorneys’ fees and render judgment confirming the arbitration award.
II. BACKGROUND
Miller operates a financial-advisory practice as an independent affiliate of
Ameriprise Financial Services, Inc. Walker joined the practice in 2009 as an
Associate Financial Advisor and signed an “Ameriprise Financial Services, Inc.
Associate Financial Advisor Agreement” (AFA Agreement), which among other
employment terms, contained a section providing for arbitration of certain claims.
Both Miller and Walker are “registered” with—or are considered “Associated
Persons” by—the Financial Industry Regulatory Authority (FINRA).
In May 2015, Walker resigned as an Associate Financial Advisor and,
according to Miller, “started a competing business two miles away.” Believing
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that Walker was using confidential information taken from his practice to gain a
competitive advantage for his new business in violation of several written
agreements, and concluding that FINRA Rule 13200 required the dispute to be
arbitrated through FINRA, Miller obtained a temporary restraining order against
Walker in state court and concurrently filed a statement of claim with FINRA
Dispute Resolution. In his statement of claim, Miller averred that Walker had
breached contracts, breached fiduciary duties, and misappropriated trade
secrets, and he sought permanent injunctive relief and attorneys’ fees. Walker
filed an answering statement that contained general and specific denials,
affirmative defenses, and his own request for attorneys’ fees. Both sides also
signed a FINRA Arbitration Submission Agreement, agreeing to “submit the
present matter in controversy, as set forth in the attached statement of claim,
answers, and all related [other claims], to arbitration in accordance with the
FINRA By-Laws, Rules, and Code of Arbitration Procedure.” Miller nonsuited his
state-court action after a FINRA arbitration panel was selected.
After a hearing on June 22, 2015, the panel issued an order granting in
part Miller’s request for a permanent injunction. Later, on August 11, 2015, the
panel held a full-day evidentiary hearing on damages, costs, and attorneys’ fees.
In addition to some testimonial evidence about attorneys’ fees, both sides
submitted an affidavit or declaration in support of attorneys’ fees and costs.
Miller’s attorney’s declaration sought reasonable attorneys’ fees in the amount of
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$95,965.90, and Walker’s attorney’s affidavit sought attorneys’ fees and costs in
the amount of $150,025.00.
The panel issued its award on September 1, 2015, awarding Miller
compensatory damages in the amount of $76,238.49 and attorneys’ fees and
costs in the amount of $95,965.50. The award stated that Walker was liable for
the attorneys’ fees “pursuant to Texas Civil Practice and Remedies Code Section
38.001.” Walker paid the compensatory-damages portion of the award but filed a
petition in state court, pursuant to the Federal Arbitration Act (FAA), to vacate or,
alternatively, to modify or correct the attorneys’-fees portion of the award.
In his petition to vacate, Walker argued that in awarding Miller attorneys’
fees, the panel had exceeded its authority under section IX(7) of the AFA
Agreement because that provision permitted attorneys’ fees incurred in an
arbitration to be awarded to Walker or to Ameriprise but not to Miller.1 According
to Walker, “There was simply no authority in the AFA Agreement for the Panel to
require Mr. Walker to pay Mr. Miller’s attorneys’ fees.” Citing a choice-of-law
provision, Walker alternatively argued that the panel had exceeded its authority
under the AFA Agreement by basing its attorneys’-fees award on a Texas statute
(civil practice and remedies code section 38.001) instead of on Minnesota law,
1
Section IX(7) states in relevant part, “You [Walker] and Ameriprise
Financial shall each be responsible for their own costs of legal representation, if
any[,] except where such costs of legal representation may be awarded as a
statutory remedy by the arbitrator.”
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which does not contain a statute like section 38.001. In his petition to modify or
correct the attorneys’-fees portion of the award, Walker argued that the award
should be reduced by $17,400.50 because there was an evident, material
miscalculation of figures.
Miller responded to each of Walker’s arguments and additionally asked the
trial court to sanction Walker under rule of civil procedure 13 and civil practice
and remedies code chapter 10 for filing a frivolous petition to vacate the
attorneys’ fees. The trial court vacated the attorneys’-fees portion of the award
and denied all other relief, including Miller’s motion for sanctions and
accompanying request for attorneys’ fees incurred as a result of Walker’s petition
to vacate.
III. AUTHORITY TO AWARD ATTORNEYS’ FEES
In his first issue, Miller argues that the panel did not exceed its authority by
awarding him attorneys’ fees because the arbitration was conducted under
FINRA rules, which allow an award of attorneys’ fees, not pursuant to the AFA
Agreement, which expressly excluded from arbitration the claims that Miller
alleged against Walker. Alternatively, Miller contends that even if the AFA
Agreement and its section IX(7) controlled, the parties authorized the panel to
award him attorneys’ fees because both sides submitted requests for attorneys’
fees and Walker neither objected to Miller’s request for attorneys’ fees nor
claimed that the panel lacked the authority to award Miller attorneys’ fees. Miller
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argues that having obtained an unfavorable result, Walker cannot now complain
that the panel exceeded its authority.
Walker responds that although the arbitration was brought under the
FINRA rules, the AFA Agreement nevertheless controlled whether the panel
could award attorneys’ fees. Walker argues that the panel had no authority to
award Miller attorneys’ fees because he is not mentioned under the AFA
Agreement’s section IX(7) and because Miller was not a signatory to the AFA
Agreement. Walker further contends that he did not authorize the panel to award
Miller attorneys’ fees by requesting that the panel award him attorneys’ fees and
that he challenged Miller’s entitlement to an award of attorneys’ fees.
We agree with Miller that the panel had the authority to award him
attorneys’ fees because (1) the parties submitted requests for attorneys’ fees and
(2) Walker never advised the panel that it lacked the authority to award Miller
attorneys’ fees.
A. Standard of review
Walker filed his petition under the FAA, and there is no dispute that it
applies here. An appellate court reviews de novo a trial court’s decision to
vacate an arbitration award under the FAA. White v. Siemens, 369 S.W.3d 911,
914 (Tex. App.—Dallas 2012, no pet.). However, because of the strong policy
favoring arbitration, judicial review of an arbitration award is “exceedingly
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deferential.” BNSF Ry. Co. v. Alstom Transp., Inc., 777 F.3d 785, 787 (5th Cir.
2015).
B. Vacatur for exceeding authority
An arbitration award must be confirmed unless it is vacated, modified, or
corrected pursuant to one of the limited grounds set forth in sections 10 and 11 of
the FAA. See 9 U.S.C. § 9 (West 2009); Hall St. Assocs., L.L.C. v. Mattel, Inc.,
552 U.S. 576, 586, 128 S. Ct. 1396, 1404 (2008). One ground for vacatur is
“where the arbitrators exceeded their powers.” 9 U.S.C. § 10(a)(4) (West 2009).
It is well settled that arbitration is a “matter of contract” and that “the power
and authority of arbitrators in an arbitration proceeding is dependent on the
provisions under which the arbitrators were appointed.” BNSF Ry. Co., 777 F.3d
at 787‒88 (quoting Brook v. Peak Int’l, Ltd., 294 F.3d 668, 672 (5th Cir. 2002)).
Thus, generally, an arbitrator exceeds his powers if he acts contrary to express
contractual provisions. Rain CII Carbon, LLC v. ConocoPhillips Co., 674 F.3d
469, 472 (5th Cir. 2012).
But it is equally settled that parties may expand an arbitrator’s authority
beyond that provided by their written agreement. OMG, L.P. v. Heritage
Auctions, Inc., 612 F. App’x 207, 208 (5th Cir.), cert. denied, 1365 S. Ct. 503
(2015). By submitting issues for an arbitrator’s consideration, parties may agree
to arbitrate disputes that they were not otherwise contractually compelled to
arbitrate. Id. at 210 (citing Executone Info. Sys., Inc. v. Davis, 26 F.3d 1314,
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1323 (5th Cir. 1994)); see Wells Fargo Bank, N.A. v. WMR e-PIN, LLC, 653 F.3d
702, 711 (8th Cir. 2011) (“[T]he arbitrator may expand the scope of its review
based on the issues the parties submit or the arguments they advance in the
proceedings.”); Am. Postal Workers Union, AFL-CIO, Milwaukee Local v.
Runyon, 185 F.3d 832, 835 (7th Cir. 1999) (“[A]n arbitrator’s authority is also
limited by the actual issue submitted by the parties.”); DiRussa v. Dean Witter
Reynolds Inc., 121 F.3d 818, 824 (2nd Cir. 1997), cert. denied, 522 U.S. 1049
(1998) (“Our inquiry under § 10(a)(4) thus focuses on whether the arbitrators had
the power, based on the parties’ submissions or the arbitration agreement, to
reach a certain issue, not whether the arbitrators correctly decided that issue.”).
Attorneys’ fees are no exception to this rule. See, e.g., Hollern v.
Wachovia Sec., Inc., 458 F.3d 1169, 1173‒74 (10th Cir. 2006) (holding that
district court erred by vacating attorneys’-fees portion of arbitration award
because parties submitted issue of attorneys’ fees to arbitrators and did not
challenge arbitrators’ authority to award attorneys’ fees); Thomas v. Prudential
Sec., Inc., 921 S.W.2d 847, 851 (Tex. App.—Austin 1996, no writ) (holding that
“both parties’ claims for attorney fees reflect their unified intention to authorize
the panel’s award of attorney fees”).
C. The panel had the authority to award Miller attorneys’ fees
The record demonstrates that both sides submitted written requests for
attorneys’ fees. Miller sought attorneys’ fees in his statement of claim, as did
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Walker in his answering statement. Both sides also submitted a submission
agreement, in which they each agreed to submit the matters contained in their
pleadings to the arbitration panel. At the August 11, 2015 hearing, both sides
submitted a written declaration or affidavit proving up their respective requests
for attorneys’ fees. In his affidavit, Walker’s attorney not only acknowledged that
both sides had requested attorneys’ fees, but he even stated that the panel was
authorized to award attorneys’ fees:
Respondent requests recovery of reasonable and necessary
attorneys’ fees in accordance with the FINRA Dispute Resolution
Arbitrator’s Guide, page 67, which states if all parties request or
agree to such fees, then the Panel may award attorneys’ fees. Both
parties requested attorneys’ fees in this dispute, therefore this
burden is met. [Emphasis added.]
And under the heading “Relief Requested,” the panel’s award states that both
sides requested attorneys’ fees.
Further, before raising the matter in his petition to vacate, Walker never
objected or otherwise advised the panel that it did not have the authority to award
Miller attorneys’ fees, either in his FINRA pleadings or before the panel.
Regarding his pleadings, Walker contends that he “consistently argued during
the arbitration that Miller had no right to any recovery.” As support, he directs us
to his first amended answering statement, in which he argued that “Miller has No
Legal Right to Recover Any Damages,” and to his prehearing brief, in which he
asked the panel to “deny all of [Miller’s] damages claims, deny [Miller’s] request
for attorneys’ [f]ees, and award [him] damages.” But Walker improperly conflates
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his arguments and defenses challenging Miller’s entitlement to prevail on the
merits of his claims with an unrelated objection to the panel’s authority to award
Miller attorneys’ fees. The two are very different. See ConocoPhillips, Inc. v.
Local 13-0555 United Steelworkers Int’l Union, 741 F.3d 627, 630 (5th Cir. 2014)
(“There are three types of disputes concerning arbitration: (1) the merits of the
dispute; (2) whether the parties agreed to arbitrate the merits; and (3) who has
‘the primary power to decide’ whether the parties agreed to arbitrate the merits.”
(emphasis removed) (quoting First Options of Chicago, Inc. v. Kaplan, 514 U.S.
938, 942, 115 S. Ct. 1920, 1923 (1995))).
As for Walker’s conduct before the panel, at the outset of the August 11,
2015 hearing, when the Chairman notified the parties that the purpose of the
hearing was to consider “damages, costs, and attorneys’ fees,” Walker did not
object or otherwise notify the panel that it did not have the authority to award
Miller attorneys’ fees. Nor did Walker object when Miller testified about his
attorneys’ fees. At the conclusion of the hearing, when the Chairman asked the
parties “[i]f there [were] any other issues or objections that either side need[ed] to
raise with respect to the hearing today in connection with the Panel’s
deliberation -- or prior to the Panel’s deliberation,” Walker raised an issue, but it
did not involve attorneys’ fees. A party may not participate in arbitration without
objecting to the arbitrator’s authority to address a particular issue, only to
challenge the arbitrator’s authority to address the issue after obtaining an
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unfavorable result. Mantle v. Upper Deck Co., 956 F. Supp. 719, 735 (N.D. Tex.
1997); see AGCO Corp. v. Anglin, 216 F.3d 589, 593 (7th Cir. 2000) (“If a party
willingly and without reservation allows an issue to be submitted to arbitration, he
cannot await the outcome and then later argue that the arbitrator lacked authority
to decide the matter.”).
Walker argues that our opinion in City of Arlington v. Kovacs, 508 S.W.3d
472 (Tex. App.—Fort Worth 2015, pet. denied), supports his argument. It does
not. The question in that case was “whether the arbitrator, in determining
whether Kovacs violated the personnel rules as charged, exceeded his authority
by relying on evidence of events that occurred after the City terminated Kovacs.”
Id. at 473. Unlike in this case, there was no contention that the parties, by their
submissions, expanded the arbitrator’s authority beyond the terms contained in
the City’s arbitration manual.
Citing only one inapposite authority2 and ignoring the settled caselaw that
we recited above, Walker argues that his request for attorneys’ fees did not
authorize the panel to award Miller attorneys’ fees because only he, not Miller,
had a right to recover fees under the AFA Agreement. Notwithstanding that we
support our holding by also relying on Walker’s failure to challenge the panel’s
authority, Walker overlooks that “the arbitrator’s interpretation of the scope of the
2
In re Lyon Fin. Servs., Inc., 257 S.W.3d 228 (Tex. 2008) (orig.
proceeding) (involving denial of motion to dismiss based on forum-selection
clause).
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issue submitted to him is to be treated with great deference” and “must be upheld
so long as it is rationally derived from the parties’ submission.” Bull HN Info.
Sys., Inc. v. Hutson, 229 F.3d 321, 332 (1st Cir. 2000) (citations omitted). In light
of the parties’ requests for attorneys’ fees, and in the absence of any objection to
the panel’s authority to award attorneys’ fees, the panel rationally could have
concluded that it had the authority to award Miller attorneys’ fees. See id.
Finally, we note that the Tenth Circuit has reasoned that “parties may
extend [an arbitrator’s authority to decide an issue] in their submissions to the
arbitrators so long as the submissions do not violate an express provision of the
original arbitration agreement.” Hollern, 458 F.3d at 1174 (emphasis added).
But see OMG, L.P., 612 F. App’x at 208 (“By submitting issues for an arbitrator’s
consideration, parties may expand an arbitrator’s authority beyond that provided
by the original arbitration agreement such that we need not address whether the
original agreement encompassed such authority.” (emphasis added)). To the
extent that Walker’s argument can liberally be construed to implicate the Tenth
Circuit’s standard, our holding is not inconsistent with it. Even if we assumed
that the arbitration was conducted under the AFA Agreement instead of by the
FINRA rules, although the AFA Agreement did not expressly permit an award of
attorneys’ fees to an Independent Advisor like Miller, it also did not expressly
prohibit such an award. As in any other instance in which parties deem a matter
arbitrable via their submissions, the parties’ submissions to the panel here
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effectively amended the AFA Agreement to expressly authorize an award of
attorneys’ fees to Miller.3 See Hollern, 458 F.3d at 1174 (“Although the Option
Account Agreement itself did not expressly permit an award of attorneys’ fees,
the parties’ subsequent submissions to the arbitrators amended the original
arbitration agreement to expressly authorize attorneys’ fees.”).
The trial court erred by vacating the attorneys’-fees portion of the
arbitration award. See OMG, L.P., 612 F. App’x at 210; Hollern, 458 F.3d at
1173‒74; Thomas, 921 S.W.2d at 851. We sustain Miller’s first issue.
D. We cannot modify or correct the award
Walker argues that if we reverse the trial court’s judgment vacating the
attorneys’-fees portion of the arbitration award, then we should modify the award
by reducing it to $78,250.
A party may raise an independent ground for obtaining the same relief
awarded in the judgment as a cross-point on appeal. City of Austin v.
Whittington, 384 S.W.3d 766, 789 (Tex. 2012). But a party who seeks greater
relief than what the trial court awarded in the judgment must file a notice of
3
Insofar as the FINRA rules applied, those “rules explicitly contemplate that
[a] Panel [may] award attorneys’ fees” when “‘all of the parties request . . . such
fees.’” CF Global Trading, LLC v. Wassenaar, No. 13 Civ. 766(KPF), 2013 WL
5538659, at *8 (S.D.N.Y. Oct. 8, 2013). Also, unlike in his petition to vacate,
Walker does not argue on appeal that the panel exceeded its authority by
applying Texas law instead of Minnesota law. Thus, Walker does not specifically
contest Miller’s assertion that civil practice and remedies code section 38.001
was a valid statutory basis to award him attorneys’ fees. See Tex. Civ. Prac. &
Rem. Code Ann. § 38.001 (West 2015).
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appeal. Id.; see Tex. R. App. P. 25.1(c) (“The appellate court may not grant a
party who does not file a notice of appeal more favorable relief than did the trial
court except for just cause.”).
Walker petitioned the trial court to vacate the attorney’s-fees portion of the
award or, alternatively, to modify or correct it. Walker prevailed on his petition to
vacate, but the trial court denied all of the other relief that it did not expressly
grant, including the petition to modify or correct. Thus, by asking us to modify or
correct the arbitration award, Walker is seeking greater relief than what the trial
court ordered. Consequently, he was required to file a separate notice of appeal.
Because he did not do so, his cross-issue is not properly before us. See City of
Austin, 384 S.W.3d at 789; see also Valerus Compression Servs. v. Reeves Cty.
Appraisal Dist., 478 S.W.3d 20, 32 n.7 (Tex. App.—El Paso 2015, pet. filed)
(reasoning similarly on own facts).
IV. MOTION FOR SANCTIONS
In his second issue, Miller argues that the trial court abused its discretion
by denying his motion to sanction Walker under rule of civil procedure 13 for filing
a frivolous, bad-faith petition to vacate the arbitration award.
Rule 13 authorizes a trial court to impose sanctions against an attorney, a
represented party, or both who file a pleading that is groundless and brought in
bad faith. Tex. R. Civ. P. 13. A pleading is groundless when it has no basis in
law or fact and is not warranted by a good faith argument for the extension,
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modification, or reversal of existing law. Id. Bad faith requires the conscious
doing of a wrong for a dishonest, discriminatory, or malicious purpose; it is not
simply bad judgment or negligence. Elkins v. Stotts-Brown, 103 S.W.3d 664, 669
(Tex. App.—Dallas 2003, no pet.). Courts presume that pleadings, motions, and
other papers are filed in good faith, and the party moving for sanctions has the
burden of overcoming this presumption. GTE Commc’n Sys. Corp. v. Tanner,
856 S.W.2d 725, 731 (Tex. 1993). We review a trial court’s award or denial of
sanctions for an abuse of discretion. Low v. Henry, 221 S.W.3d 609, 614 (Tex.
2007).
Presumably, the trial court denied Miller’s motion for sanctions because it
granted Walker’s petition to vacate. Thus, from a practical perspective, the trial
court did not abuse its discretion.
Nevertheless, we have concluded that the trial court erred by vacating the
attorneys’ fees. But even so, Walker’s primary argument in response to Miller’s
first issue is that the attorneys’-fees portion of the award is inconsistent with the
terms of the AFA Agreement. Parties in both state and federal courts throughout
the country have raised similar arguments. Although we ultimately disagreed
with Walker’s argument, we cannot conclude that it has no basis in law or fact.
We overrule Miller’s second issue.
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V. CONCLUSION
Having sustained Miller’s first issue, we reverse the part of the trial court’s
judgment vacating the attorneys’-fees portion of the arbitration award and render
judgment confirming that portion of the award. We affirm the part of the trial
court’s judgment confirming the remainder of the arbitration award.
/s/ Bill Meier
BILL MEIER
JUSTICE
PANEL: WALKER, MEIER, and BIRDWELL, JJ.
DELIVERED: February 15, 2018
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