Case: 21-50960 Document: 00516551568 Page: 1 Date Filed: 11/18/2022
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
November 18, 2022
No. 21-50960
Lyle W. Cayce
Clerk
In the Matter of: Jon Christian Amberson
Jon Christian Amberson; Jon Christian Amberson PC;
Amberson Natural Resources, LLC,
Appellants,
versus
James Argyle McAllen; El Rucio Land and Cattle
Company, LLC; San Juanito Land Partnership, Ltd.;
McAllen Trust Partnership,
Appellees.
Appeal from the United States District Court
for the Western District of Texas
USDC No. 5:20-CV-1193
Before Jones, Southwick, and Oldham, Circuit Judges.
Leslie H. Southwick, Circuit Judge:
A bankruptcy court confirmed an arbitrator’s award. The district
court affirmed. The compelling of arbitration and the commencement of
proceedings to confirm the resulting arbitrator’s award had been in state
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court. Prior to a ruling on confirmation, two of the state-court parties filed
for bankruptcy, and the case was removed to bankruptcy court. The only
issue before us is whether a counterclaim raised in state court should have
been arbitrated. The bankruptcy and federal district courts refused to
consider that argument, holding that the state court’s order compelling
arbitration, which had found all claims were subject to arbitration, became
conclusive under state law when the objecting party did not seek mandamus
review of that order before the arbitration began.
We disagree. State law allows vacatur to be sought because arbitrators
exceeded their powers by resolving a claim not covered by the arbitration
agreement. Losing on that argument before arbitration does not bar renewing
it after. A different vacatur provision relied upon by the lower courts is
confusing, but whatever it means, it does not bar reconsideration of
arguments about the scope of the arbitration agreement. Thus, the question
of arbitrability of the contested claim remains open. The record is sufficiently
clear, though, that we address arbitrability here. We hold that the disputed
claim was subject to arbitration.
The lengthy analysis that follows is not fully endorsed by the other
members of the panel. There are different views as to what parts are
necessary or even relevant. In a word, perhaps there are too many words.
Nonetheless, Judge Jones’ separate opinion concurs in the holding regarding
which vacatur provision applies. The entire panel agrees the arbitration
award was properly confirmed and we should AFFIRM.
FACTUAL AND PROCEDURAL BACKGROUND
The debtor and appellant, Jon Christian Amberson, was and may still
be a practicing lawyer. His former father-in-law is the appellee, James Argyle
McAllen, a south Texas rancher. McAllen and related entities own “the
27,000-plus acre McAllen Ranch . . . once owned by [McAllen’s] great-
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grandfather, for whom the City of McAllen, on the Rio Grande [] near the
southern tip of Texas, is named.” Forest Oil Corp. v. El Rucio Land & Cattle
Co., 518 S.W.3d 422, 426 (Tex. 2017). The ranch is part of the 97,000 acres
the King of Spain granted in 1799 to Jose Manuel Gomez, whom a McAllen
ancestor later married. Margaret McAllen & Mary Margaret McAllen,
McAllen Ranch, in 4 New Handbook of Texas 363–64 (1996).
Forest Oil Corporation had producing oil and gas wells on over 1,500
acres of the McAllen Ranch for over 30 years; it also operated a processing
plant on 5.75 acres of the ranch. Forest Oil, 518 S.W.3d at 426. In 2004,
McAllen discovered that Forest Oil had secretly been burying toxic and
radioactive waste on his land. That same year, McAllen and three entities he
controlled brought suit in state court against Forest Oil. The suit was
successful though protracted, ending in 2017 with an affirmance by the
Supreme Court of Texas of awards of over $20 million to McAllen and other
entities against Forest Oil. Id. at 427, 432.
Beginning in 2004, McAllen employed Amberson’s law firm, Jon
Christian Amberson, P.C., to represent him in the lawsuit against the
corporation. Over time, McAllen and the Amberson firm executed three
attorney engagement agreements. Each had language similar to this: “[a]ny
fee dispute arising under this agreement and/or the services rendered for”
McAllen by the law firm would be arbitrated.
McAllen, individually, and Amberson’s law firm are parties in this
litigation, but there are others whom we now identify. McAllen is joined as a
creditor and appellee with El Rucio Land and Cattle Company, LLC; San
Juanito Partnership, LTD; and McAllen Trust Partnership, all of whom were
parties to the litigation against Forest Oil. Joining the Amberson law firm as
appellants are Amberson, individually, and Amberson Natural Resources,
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LLC (“ANR”). We will describe ANR later. Unless there is a need to
distinguish, we will refer to the parties simply as McAllen and Amberson.
The district court found that during the years-long Forest Oil
litigation, Amberson and his firm billed McAllen for a significant number of
services that were not performed, some ostensibly related to the Forest Oil
litigation, some not. Amberson also borrowed large sums of money from
McAllen for litigation expenses that he never repaid.
A controversy about another matter — referred to as the “Cannon
Grove” transaction — is at the center of this appeal. McAllen sought to defer
capital gains taxes through a “Reverse 1031 Exchange,” as allowed by federal
statute. 26 U.S.C. § 1031. McAllen did not use Amberson to structure the
transaction. McAllen needed a non-blood relative to serve as an intermediary
and hold an interest in certain property. Amberson agreed to serve as the
intermediary, creating ANR specifically for this transaction. The property
itself was held by an entity called Cannon Grove Investments, LLC.
McAllen provided ANR with $4,500,000 on March 18, 2009. That
money was intended to enable ANR to purchase a 90% stake in Cannon Grove
Investments, with the other 10% to be purchased by a McAllen entity. Later,
McAllen asked for his money back. Amberson refused, insisting the money
had been a gift. McAllen responded the money had been a loan, with the
collateral being ANR’s 90% Cannon Grove interest.
In January 2015, the Amberson law firm filed suit in Hidalgo County
District Court to compel McAllen to arbitrate a dispute over a contingency
fee related to the Forest Oil litigation. After a nonsuit and a failed mediation,
the Amberson firm refiled its petition in August 2017. McAllen answered
and counterclaimed for breach of fiduciary duty, fraud, and theft, joining
Amberson individually and ANR as third-party defendants. McAllen also
expanded the suit from dealing only with the law firm’s claim for fees relating
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to the Forest Oil litigation by counterclaiming for damages relating to the
Cannon Grove transaction.
In October 2017, Amberson filed for summary judgment on the
Cannon Grove claims, raising various affirmative defenses. Simultaneously,
Amberson moved to compel arbitration on all claims except for those
regarding Cannon Grove. After a hearing, the Hidalgo County District Court
in April 2018 ordered all the claims to arbitration without explanatory
analysis. Amberson moved to have the court reconsider or clarify its order.
After another hearing, the court in October 2018 denied reconsideration,
again without explanation, and reaffirmed that all claims were to be
arbitrated. An arbitrator was appointed that same month.
Eight claims among the parties were then arbitrated. In a lengthy
decision issued on April 30, 2020, the arbitrator awarded McAllen almost
$7,300,000 and also $2,000,000 in attorneys’ fees. Further, Amberson was
required to convey all his Cannon Grove interests to McAllen. Amberson
was awarded nothing. Later, the arbitrator awarded McAllen an additional
$1,750,000. The arbitrator stated that the Ambersons “preserved their
running objection to the arbitrability of the ‘Cannon Grove’ transaction.”
The arbitrator interpreted the court’s referral order as barring consideration
of arbitrability, which he stated was an atypical bar. He made no decision on
whether the claims were properly subject to arbitration.
On May 14, 2020, McAllen moved in Hidalgo County District Court
to confirm the award. On July 20, 2020, the day before a hearing on the
motion, ANR filed a Chapter 11 petition in the Bankruptcy Court for the
Western District of Texas. Three days later, Amberson himself filed under
Chapter 11 in the same court. Also on July 20, ANR removed the suit for
confirmation to the Bankruptcy Court for the Southern District of Texas.
That adversary proceeding was soon transferred to the Western District.
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In bankruptcy court, McAllen sought confirmation of the entire award
and Amberson sought vacatur of the part of the award relating to Cannon
Grove. The bankruptcy court concluded that the only procedure for
challenging an order compelling arbitration was by seeking immediate review
through a writ of mandamus, making it too late to present that argument in a
motion to vacate part of the award. Amberson appealed to the district court,
which affirmed. Amberson then timely appealed here.
DISCUSSION
Amberson makes no complaint here about any part of the arbitrator’s
award except for the portion based on the Cannon Grove claim. He argues
that claim was beyond the scope of the arbitration agreement between the
parties. McAllen responds that the challenge to the compelling of all claims
to arbitration comes too late and also argues that Amberson invoked the
wrong statutory section when seeking to overturn part of the award.
Analyzing these arguments will require examining several different sources
for meaning. We start, though, with two points the parties did not raise.
I. Should state courts have been allowed to resolve these issues, and was the
Texas Arbitration Act, not the Federal Arbitration Act, the correct enactment?
Neither party on appeal questions the jurisdiction of the bankruptcy
court over the arbitration award. Even so, we must assure ourselves of our
own subject-matter jurisdiction and that of the federal courts whose rulings
we are reviewing. Keyes v. Gunn, 890 F.3d 232, 235 n.4 (5th Cir. 2018).
Shifting this state court dispute into bankruptcy court does not
immediately appear the most natural path for confirming an arbitrator’s
award. Whatever other options could have been pursued, though, “litigants
may validly consent to adjudication by bankruptcy courts.” Wellness Int’l
Network v. Sharif, 575 U.S. 665, 674 (2015). In this case, there was actual or
implied consent by all parties in the bankruptcy court. Therefore, the
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bankruptcy court and the district court had jurisdiction over questions of
confirming the arbitration award. So do we.
Another preliminary issue is whether the state or the federal act on
arbitration applies, i.e., the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1–
16, or the Texas General Arbitration Act (usually abbreviated “TAA”),
Tex. Civ. Prac. & Rem. Code §§ 171.001–171.098. Under the
Supremacy Clause, if the FAA applies, it preempts any inconsistent
provision of the TAA. See Allied–Bruce Terminix Cos. v. Dobson, 513 U.S. 265,
272 (1995). Each party accepts that the TAA applies because the arbitration
clauses specify that the arbitration is “governed by Texas law.”
The answer, though, is complicated by the fact that “Texas law”
includes the FAA due to Texas courts’ incorporating the FAA into their
substantive law. See Freudensprung v. Offshore Tech. Servs., Inc., 379 F.3d 327,
338 & n.7 (5th Cir. 2004). Texas courts do not read choice-of-law provisions
as exclusive of the FAA unless a provision “specifically exclude[s] the
application of federal law.” In re L & L Kempwood Assocs., L.P., 9 S.W.3d 125,
127 (Tex. 1999). The Supreme Court of Texas once distinguished
contractual language requiring “that arbitration occur ‘pursuant to the’”
TAA from language requiring that arbitration occur “‘pursuant to the
arbitration laws in your state.’” In re Olshan Found. Repair Co., 328 S.W.3d
883, 890 (Tex. 2010). The former was held to be an exclusion of the FAA,
but the latter was not. Id.
Generally, a court may accept the parties’ agreement on the applicable
law. See Fruge v. Amerisure Mut. Ins. Co., 663 F.3d 743, 747 (5th Cir. 2011).
Further, federal preemption is an affirmative defense that must be raised at a
sufficiently early time to avoid unfair surprise. Motion Med. Techs., LLC v.
Thermotek, Inc., 875 F.3d 765, 771 (5th Cir. 2017). Preemption may be
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forfeited by not asserting it. See American Airlines, Inc. v. Dep’t of Transp.,
202 F.3d 788, 811–12 (5th Cir. 2000). We apply the TAA.
II. Did Amberson use the wrong section of the Texas Arbitration Act when
seeking to vacate the Cannon Grove award, and is there a procedural bar?
Amberson initiated suit in state court in order that his claims against
McAllen under the representation contracts could be arbitrated. Beginning
there and continuing at every later stage, he has argued that McAllen’s
counterclaim regarding the Cannon Grove tax matter was not subject to the
arbitration agreements. First, he relies on the fact that the agreements were
between McAllen and Amberson’s law firm, while the parties to the Cannon
Grove transaction were McAllen and Amberson’s company, ANR. Second,
even if an alter-ego relation is shown among the Amberson parties, Amberson
insists the Cannon Grove tax transaction is beyond the scope of arbitration
agreements that solely related to fee disputes between client and law firm.
The parties agree that two separate subsections of the TAA that
provide for vacating an arbitrator’s award are the only possible ones for the
argument that the arbitrator should not have considered the Cannon Grove
claim. This is the statutory language:
(a) On application of a party, the court shall vacate an award if:
...
(3) the arbitrators:
(A) exceeded their powers;
. . .; or
(4) there was no agreement to arbitrate, the issue was
not adversely determined in a proceeding [to compel or stay
arbitration], and the party did not participate in the arbitration
hearing without raising the objection.
Tex. Civ. Prac. & Rem. Code § 171.088.
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There is no dispute that the arbitration agreements were validly
executed and properly applied to the claims other than the one involving
Cannon Grove. The relief sought here is to vacate part of an award because
one of the claims resolved by the arbitrator was beyond the scope of the
agreements. The question is whether vacatur may be sought under the
(a)(3)(A) provision for exceeding arbitrators’ powers or must instead be
brought under the (a)(4) one for an absence of an agreement to arbitrate. If
it is the latter, then is that claim barred because mandamus review of the
order compelling arbitration on that claim must be sought immediately?
Answering these questions requires that we interpret a Texas statute.
We apply any interpretation made by the state’s highest court. Weiser-Brown
Operating Co. v. St. Paul Surplus Lines Ins. Co., 801 F.3d 512, 518 (5th Cir.
2015). When that court has not declared meaning, our obligation as a federal
court is to interpret a state statute in a manner consistent with the method
that would be employed by that state’s highest court. Id.
One additional rule and one additional consideration apply to
interpreting the TAA. The rule comes from the TAA itself, which is based
on a uniform act prepared by the National Conference of Commissioners on
Uniform State Laws. The enactment insists that its terms “shall be
construed to effect its purpose and make uniform the construction of other
states’ law applicable to an arbitration.” Tex. Civ. Prac. & Rem.
Code § 171.003. The Supreme Court of Texas has applied that provision
when interpreting the TAA. See East Tex. Salt Water Disposal Co. v. Werline,
307 S.W.3d 267, 272 (Tex. 2010). There, the court reviewed decisions from
close to 20 states but found a lack of uniformity. Id. at 272–74.
In addition, the Supreme Court of Texas often considers
interpretations of FAA provisions when interpreting mirror provisions in the
TAA. Even if the court does not adopt them, their relevance is evident. See,
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e.g., Nafta Traders, Inc. v. Quinn, 339 S.W.3d 84, 97 (Tex. 2011) (considering
for purposes of the TAA, then rejecting Hall St. Assoc., LLC v. Mattel, Inc.
552 U.S. 576, 579, 588–89 (2008), which had held that parties could not
contract for broader judicial review than provided in FAA).
We search for answers from each of these sources of meaning.
A. Texas state appellate court interpretations
As a federal court interpreting a state statute, our work is controlled
by authoritative pronouncements of that state’s highest court. The Supreme
Court of Texas has analyzed the meaning of “the arbitrators exceeded their
powers” under Section 171.088(a)(3)(A). When the parties have executed
an arbitration agreement, the rule is that “[a]n arbitrator derives his power
from the parties’ agreement to submit to arbitration.” City of Pasadena v.
Smith, 292 S.W.3d 14, 20 & n. 41 (Tex. 2009) (citing Gulf Oil Corp. v. Guidry,
327 S.W.2d 406, 408 (Tex. 1959)). The TAA itself states that when a court
appoints the arbitrator, as occurred here, that person “has the powers of an
arbitrator named in the agreement to arbitrate.” Tex. Civ. Prac. &
Rem. Code § 171.041(c).
Reasonably, then, “exceeded their powers” would include resolving
a claim that the parties’ agreement did not grant arbitrators any authority to
decide. At least one Texas intermediate court opinion cited in the briefs
makes that point. See Centex/Vestal v. Friendship W. Baptist Church, 314
S.W.3d 677 (Tex. App.—Dallas 2010). There, though neither party at the
time the state district court was considering a motion to compel arbitration
argued that any claim was beyond the scope of their agreement, id. at 681,
one of the parties later moved to vacate because an award was made on claims
of non-parties. Id. at 682–83. The court of appeals held that arbitrators have
the power to decide claims within the scope of the agreement and also those
the parties agreed to arbitrate at the time of the motion to compel. Id. at 686.
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There was no suggestion that a court can expand the terms of the agreement,
but the parties may agree to expand it themselves.
Other opinions apply Section 171.088(a)(3)(A) to the argument that a
claim is not within the terms of an existing arbitration agreement. See, e.g.,
Center Rose Partners, Ltd. v. Bailey, 587 S.W.3d 514, 527–28 (Tex. App.—
Houston [14th Dist.] 2019) (applying Section 171.088(a)(3)(A) to whether
certain claims were within scope of agreement); Ruff v. Ruff, No. 05-18-
00326-CV, 2020 WL 4592794, at *8 (Tex. App.—Dallas Aug. 11, 2020)
(same). Vacatur sought under (a)(3)(A) may raise other issues, such as
whether the agreement authorized the remedies that were imposed. See
Constr. Fin. Servs., Inc. v. Douzart, No. 09-16-00035-CV, 2018 WL 1096103,
at *4 (Tex. App.— Beaumont Feb. 28, 2018).
The only barrier raised by a party to this common-sense reading of
“exceeded their powers” is that a more specific provision applies and
requires certain predicates. See § 171.088(a)(4). We now examine whether
that provision has been interpreted to have exclusive application to
arbitrators deciding a claim beyond the scope of the parties’ agreement.
The Supreme Court of Texas has not needed to interpret the vacatur
ground that there was no agreement to arbitrate. 1 Logically, whether there
was an agreement at all and the scope of an agreement could be separate
statutory issues. We examine Texas court of appeals decisions for guidance.
They are not binding in our analysis, but they are worthy of deference unless
we are “convinced by other persuasive data that the highest court of the state
1
Five of the court’s decisions have quoted this vacatur ground; none applied it.
See Ex parte E.H., 602 S.W.3d 486, 492 (Tex. 2020); Hoskins v. Hoskins, 497 S.W. 3d 490,
494 (Tex. 2016); Nafta Traders, 339 S.W. 3d at 91 n.22; East Texas Salt Water, 307 S.W. 3d
at 268 n.3.; CVN Grp., Inc. v. Delgado, 95 S.W.3d 234, 237 n.15 (Tex. 2002).
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would decide otherwise.” Temple v. McCall, 720 F.3d 301, 307 (5th Cir.
2013) (quotation marks and citation omitted) (this standard was first stated
in West v. American Tel. & Tel. Co., 311 U.S. 223, 237 (1940)). The district
court and the parties have cited some Texas intermediate court decisions.
We review them now.
The bankruptcy court gave significant weight to Thomas v. Cook, 350
S.W.3d 382 (Tex. App.—Houston [14th Dist.] 2011). The bankruptcy court
relied on this language: “Thomas also contends that the arbitrator exceeded
his authority by addressing all of the causes of action she asserted against
Cook. We reject this contention because the trial court properly sent all of
the causes of action Thomas asserted against Cook, contract and tort alike,
to arbitration.” Id. at 393. With respect, Thomas was not saying that because
the trial court sent all claims, it was proper for arbitrators to consider them.
It simply held that due to the broad construction of arbitration clauses, the
trial court did not err in compelling arbitration of all claims. Id. We find no
useful guidance in Thomas.
In addition, the bankruptcy court rejected Amberson’s reliance on
two Texas court of appeals’ decisions analyzing the FAA because neither
decision held that an “arbitrator exceeded his authority by deciding claims
that the trial court specifically referred to it.” See Ancor Holdings, LLC v.
Peterson, Goldman, & Villani, Inc., 294 S.W.3d 818, 829 (Tex. App.—Dallas
2009); Barsness v. Scott, 126 S.W.3d 232, 241 (Tex. App.—San Antonio
2003). More importantly, though, neither opinion held the opposite, i.e., that
mere referral eliminates issues of the scope of the agreement. Further, both
courts held that arbitrators’ authority is derived from the arbitration
agreement; they exceed their powers when they do not limit their decision to
what the agreement allows. Ancor, 294 S.W. 3d at 829; Barsness, 126 S.W. 3d
at 241 (both citing Guidry, 327 S.W. 3d at 409).
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In addition, the bankruptcy court determined that Amberson had to
seek immediate appellate review of the order compelling arbitration of all
claims. We will analyze that holding later.
One other opinion the bankruptcy court discussed made some useful
holdings. In the case, a party claimed he never signed the arbitration
agreement and thus was not subject to it; the court held this was an argument
that no arbitration agreement existed, and Section 171.088(a)(4) applied.
Kreit v. Brewer & Pritchard, P.C., 530 S.W. 3d 231, 242–43 (Tex. App.—
Houston [14th Dist.] 2017) (citing Penhollow Custom Homes, LLC v. Hawkins,
No. 05-07-01101-CV, 2008 WL 3020812, at *2 (Tex. App.—Dallas Aug. 6,
2008, pet. denied) (mem. op.). There was no right to seek vacatur on that
ground because the objection had not been made to the arbitrator. Id.
Certainly, the court was correct that absent an objection to the arbitrator,
whatever (a)(4) otherwise permits is expressly forfeited. There was no order
compelling arbitration, so Kreit did not consider its relevance to (a)(4).
In summary, neither lower court in this case nor the parties cite any
decisions by Texas appellate courts that support their holdings that Section
171.088(a)(4) applies to the argument that a specific claim was outside the
scope of an arbitration agreement. 2 We also discovered none. There is no
authority from the Supreme Court of Texas. A few intermediate appellate
courts have held that when a claim is not within the scope of the arbitration
agreement, vacatur is to be sought under Section 171.088(a)(3)(A). That
view is sound textually, but what to make of Section 171.088(a)(4) remains
2
One of the Texas cases cited by the parties had a concurrence that interpreted
that language much as did the lower courts in the case before us. See Southwinds Express
Const., LLC v. D.H. Griffin of Tex., Inc., 513 S.W.3d 66, 81–82 (Tex. App.—Houston [14th
Dist.] 2016) (Frost, C.J., concurring). The parties, though, do not refer to the concurrence,
nor, for all the reasons stated in this opinion, do we find it persuasive.
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elusive. Also of importance, the fact the TAA is based on a uniform act adds
to the sources relevant for guidance when there is no controlling precedent.
Our analysis must continue.
B. Application of Texas rules of interpretation
Because the Texas courts have not definitively resolved our
interpretive issue, we apply the rules of statutory interpretation employed by
the Supreme Court of Texas to determine if a clear meaning can be found.
When interpreting state statutes, that court will “rely on the plain meaning
of a statute’s words as expressing legislative intent unless a different meaning
is supplied, is apparent from the context, or the plain meaning of the words
leads to absurd or nonsensical results.” Cadena Comercial USA Corp. v. Texas
Alcoholic Beverage Comm’n, 518 S.W.3d 318, 325 (Tex. 2017). In this task, it
will “consider the context and framework of the entire statute and meld its
words into a cohesive reflection of legislative intent.” Id. at 326.
To gain context, we examine the statutory reasons for vacating an
arbitration award besides those two. The first provision is for vacating when
the award is procured improperly, such as by fraud. See Tex. Civ. &
Prac. Rem. Code § 171.088(a)(1). The second is when the arbitrators
were corrupt, biased, or engaged in misconduct. Id. § 171.088(a)(2). The
third, which includes arbitrators’ exceeding their powers, also allows vacatur
when the arbitrators made significantly unfair procedural rulings, such as
refusing to postpone the hearing when the necessity was shown, refusing to
accept material evidence, or prejudicing a party in the manner in which the
arbitrators conducted the hearing. Id. § 171.088(a)(3)(B)–(D). Each of the
other reasons for vacating allows a court to reject an arbitration award when
there is a serious question that the arbitrators’ decision resulted from
improper influences or unfair procedures.
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The two grounds for vacating at issue here involve less malign conduct
than do these others. A plain meaning of “exceeded their powers” would
apply to a variety of breaches. Some might be procedural, such as requiring
production of documents despite a valid claim of privilege or refusing to hear
certain evidence, or it might be ordering a category of relief that was not
permitted by the arbitration agreement. Amberson argues arbitrators also
exceed their powers when they arbitrate a claim that is beyond the scope of
the parties’ agreement. That argument starts with the advantage of being a
common-sense interpretation, but McAllen insists that context blocks that
meaning. The context is (a)(4), which he argues is a specific provision for
seeking vacatur when there was no agreement to arbitrate a particular claim.
Further, that specific provision comes with procedural hurdles, and McAllen
argues it makes no sense for those hurdles to become irrelevant simply by
making the same claim under (a)(3)(A).
We start by examining the text for a plain meaning: “there was no
agreement to arbitrate, the issue was not adversely determined in a
proceeding [to compel or stay arbitration], and the party did not participate
in the arbitration hearing without raising the objection.” § 171.088(a)(4).
The need for an objection in the arbitration was satisfied here, so we ignore
it. We see a clear requirement: pre-arbitration, a court must not have made
a particular determination about the existence of an agreement to arbitrate.
Just what needs not to have been determined is unclear, though.
In deciding if there is a plain meaning, we consider rules of grammar
and “common meaning,” unless absurdity results. City of Rockwall v.
Hughes, 246 S.W. 3d 621, 625–26 (Tex. 2008) (citing Tex. Gov’t Code
§ 311.011(b)). One difficulty here is the triple negative — “no arbitration
agreement,” “not,” and “adversely determined.” The first negative —
“[t]here was no agreement to arbitrate” — is the vacatur ground. It is not
itself an “issue,” i.e., a topic for debate, but it is what must be shown by the
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party seeking vacatur.
One way to make the text clearer and less clumsy is to disconnect
syntactically “there was no agreement to arbitrate” from “the issue.”
Indeed, we already observed that “there was no agreement” is not even an
“issue.” The vacatur “issue” here is whether an arbitration agreement
existed. “Adversely determining,” i.e., rejecting that an agreement existed,
would be a finding of no agreement. Not rejecting means no court decided
there was no arbitration agreement, which includes a finding an agreement
did exist. Another reading is that “the issue” should be understood to mean
“the argument.” Rejecting the argument there was no agreement would
mean finding there was an agreement. Not rejecting reverses course again.
Regardless of all that, the “issue” concerns whether there was an
agreement to arbitrate. Even if the bankruptcy and district courts were right
that this provision blocks post-arbitration reconsideration of an issue,
Amberson did not argue that there was no agreement, only that it did not
cover one claim. He has had to add to the text of the vacatur provision that
there was no agreement to arbitrate a specific claim.
What to make of these difficulties will be analyzed later. It is enough
now to conclude there is no plain textual meaning.
C. Rules applicable to this uniform act
Having found neither controlling Texas judicial explication nor plain
meaning under the state’s rules of interpretation, we consider whether there
is a construction that would be “uniform [with] the construction of other
states’ law applicable to an arbitration.” Tex. Civ. Prac. & Rem.
Code § 171.003; see also Tex. Gov. Code § 311.028 (“A uniform act in-
cluded in a code shall be construed to effect its general purpose to make uni-
form the law of those states that enact it.”)
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Before examining other states’ judicial decisions, we review a decision
by the Supreme Court of Texas that interpreted a provision of a different
uniform act. Nathan v. Whittington, 408 S.W.3d 870, 873 (Tex. 2013). The
provisions of that act were to “be applied and construed to effectuate its
general purpose to make uniform the law with respect to the subject of this
chapter among states enacting it.” Id. (quoting Tex. Bus. & Com. Code
§ 24.012, a section of the Texas Uniform Fraudulent Transfer Act).
The court examined the caselaw from other states interpreting their
similar statutory provisions and found no uniformity. It then reviewed
comments made by the National Conference of Commissioners on Uniform
State Laws that drafted the uniform act. Id. at 873-74. The comments in the
Prefatory Note to the uniform act stated that the relevant provision was a
statute of limitations. Id. at 874. After considering that Note, the court
concluded the statutory text far better fit the category of a statute of repose,
and that is how the court classified it. Id.
We will follow a similar path. After some background on the adoption
of the TAA, we examine how other UAA states have interpreted the relevant
text. We also review the comments of the National Conference of
Commissioners but then supplement our analysis by examining a few law-
journal articles by the chairman of the drafting committee for the uniform act.
1. Background of Texas Arbitration Act
The TAA was enacted in 1965. See Acts 1965, 59th Tex. Leg., p. 1593,
ch. 689, § 1 (entitling it the “Texas General Arbitration Act”). It was a
revision of the 1956 Uniform Arbitration Act. See Paul Carrington, The 1965
General Arbitration Statute of Texas, 20 Sw. L.J. 21, 60 (1966). Texas is one
of 23 states to adopt the 1956 UAA. 1956 Unif. Arb. Act, 7 U.L.A. 99
(2009) (chart of jurisdictions).
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The 1965 enactment did not revise the text of the two UAA provisions
that concern us. These are the relevant vacatur grounds in the UAA:
(3) The arbitrators exceeded their powers;
...
(5) There was no arbitration agreement and the issue was not
adversely determined in proceedings under Section 2 and the
party did not participate in the arbitration hearing without
raising the objection;
but the fact that the relief was such that it could not or would
not be granted by a court of law or equity is not ground for
vacating or refusing to confirm the award.
1956 Unif. Arb. Act, § 12(a), 7 U.L.A. at 514–15 (2009).
The TAA as enacted in 1965 used identical language:
(3) The arbitrators exceeded their powers;
...
(5) There was no arbitration agreement and the issue was not
adversely determined in proceedings under Article 225 and the
party did not participate in the arbitration hearing without
raising the objection; but the fact that the relief was such that it
could not or would not be granted by a court of law or equity is
not ground for vacating or refusing to confirm the award.
Acts 1965, 59th Leg.; ch. 689, § 1, Art. 237.
The TAA was initially codified as Texas Revised Civil Statutes
articles 224–238. It was recodified in 1997 as Texas Civil Practice and
Remedies Code, Sections 171.001–171.098. Act of May 8, 1997, 75th Leg.,
R.S., ch. 65, § 1.01; ch. 165, § 5.01, eff. Sept. 1, 1997. The recodification
combined Subparts (3) and (4), forming Section 171.088 (a)(3) (A)–(D). That
caused Subpart (5) to be codified as Section 171.088 (a)(4). The concluding
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clarification in Subpart (5) was omitted in 1997. 3 Importantly, the 1965 TAA
vacatur provisions of concern to us are still in effect.
2. Decisions from other states
We consider the Texas law to be clear, at least in general terms, on
what it means for arbitrators to exceed their powers. “An arbitrator derives
his power from the parties’ agreement to submit to arbitration.” Nafta
Traders, 339 S.W.3d at 90. That principle predates the 1965 TAA. The
state’s high court stated in 1959 that “the authority of arbitrators is derived
from the arbitration agreement and is limited to a decision of the matters
submitted therein either expressly or by necessary implication.” Gulf Oil,
327 S.W.2d at 408. The briefing and the lower courts cite little Texas caselaw
that either applied or refused to apply the exceeding-powers vacatur ground
to an argument that one or more, but not all, claims were outside the terms
of the agreement. To the extent that means the applicability is largely an
open question, we have no difficulty stating that the plain statutory text
makes the exceeding-powers vacatur ground applicable.
As we earlier explained, the only argument that this straightforward
interpretation is wrong is that a different vacatur ground is said to be
specifically and solely applicable. Consequently, we sought opinions from
other states for whether they apply the “exceeded their powers” vacatur
ground when, as here, the argument is that some but not all of the arbitrated
claims were beyond the scope of the agreement. We did not find many
addressing the issue. We will discuss one.
3
The 1997 recodification also changed “[t]here was no arbitration agreement” to
“there was no agreement to arbitrate.” See Act of May 8, 1997, 75th Leg., R.S., ch. 165, §
5.01, § 171.088 (a)(4). Caselaw interprets the new phrase still to mean “no arbitration
agreement exists.” See, e.g., Kreit, 530 S.W.3d at 241.
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The Virginia Supreme Court held that an arbitrator exceeded his
powers in deciding a claim not covered by the arbitration agreement in a
construction contract. Trustees of Asbury United Methodist Church v. Taylor
& Parrish, Inc., 452 S.E.2d 847, 850 (Va. 1995). The agreement bound the
parties to arbitrate all disputes “relating to contract documents.” Id. at 852–
53. A claim based on a quantum meruit theory did not relate to any contract
document, and the arbitrator exceeded his powers by deciding it. See id. The
court also held that the trial court order referring “all matters” to the
arbitrator “was void . . . because the trial court could not confer jurisdiction
on the arbitrator to adjudicate disputes that were not based on the parties’
contract.” Id. at 852. That all sounds correct to us: arbitrators exceed their
powers if they decide a claim the agreement does not include.
We now examine other states’ use of the vacatur ground that was held
to be exclusive in this case: is a trial court’s ordering an arbitration an adverse
determination of the issue that there is no arbitration agreement, thus barring
examining the scope of the agreement on a motion to vacate? See Tex. Civ.
Prac. & Rem. Code § 171.088(a)(4).
Our search among all states’ judicial opinions was for this phrase from
the UAA: “no arbitration agreement and the issue was not adversely
determined.” There were about 250 opinions. We examined 125 of them as
a reasonable sampling. Though many courts may not have quoted that entire
phrase when interpreting it, we are not looking for all cases, just a
representative group. Of the 125 opinions, there were 81 that quoted at least
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this part of the provision but did not interpret or apply it. 4 We will group the
remaining ones into different categories.
We discovered only three opinions that applied a provision
comparable to Section 171.088(a)(4) in a manner that even approaches what
the bankruptcy and district courts did in this case. The analysis in one of
them was later overruled, and another at least allowed post-arbitration
appellate review of the trial court’s initial order. The third opinion’s support
for that approach was an alternative basis for the result. All of them were
addressing the argument that there was no enforceable agreement at all.
In the first opinion, the court held that because a party had “moved to
stay arbitration on the ground that there was no agreement to arbitrate,” then
had its argument “decided adversely” by the denial of a stay, it could not
seek to vacate the award on the basis there was no agreement. Safeway Ins.
Co. v. Am. Arb. Ass’n, 617 N.E.2d 312, 319 (Ill. App. Ct. 1993). Later, that
state’s supreme court rejected this reasoning in a different case. See Salsitz
v. Kreiss, 761 N.E.2d 724, 730–31 (Ill. 2001). It held that a party who fails to
take an interlocutory appeal of an order compelling or denying a stay of
arbitration “does not lose the opportunity to contest the arbitrability of the
dispute in a subsequent appeal from a final judgment of the court confirming
the arbitration award.” Id. at 729–30.
The second opinion held that “adversely determined” meant that a
trial court, post-arbitration, could not reconsider its earlier ruling that an
enforceable arbitration agreement existed; even so, the statute “preserves
the issue of arbitrability for the appellate courts after confirmation of the
4
See, e.g., Cinatl v. Prososki, 949 N.W.2d 505, 516 (Neb. 2020); Marathon Oil Co.
v. ARCO Ala., Inc., 972 P.2d 595, 600 n.1 (Ala. 1999); Evans Elec. Constr. Co. v. University
of Kan. Med. Ctr., 634 P.2d 1079, 1086 (Kan. 1981).
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award.” Kauders v. Uber Techs., Inc., 159 N.E.3d 1033, 1046 (Mass. 2010).
“[A] party wishing to challenge an order compelling arbitration must wait
until the arbitration is completed and the award is confirmed before
challenging the order compelling arbitration on appeal.” Id. at 566–67.
Section 171.088(a)(4) is equally susceptible to that interpretation, though
Kauders may more circumvent than interpret the difficult text.
In the third, the court held that arguing for the first time in a motion
to vacate that there was no arbitration agreement was untimely. Louisiana
Safety Sys., Inc. v. Tengasco, Inc., No. E2000-03021-COA-R3-CV, 2001 WL
1105395, at *5 (Tenn. Ct. App. Sept. 21, 2001). The court then stated that
vacatur on this ground also required that a court had not held before the
arbitration that an “agreement did exist.” Id. Of course, a holding that an
agreement exists is not a determination of an agreement’s scope.
In contrast to those, nine opinions involved (as does the case before
us) a motion to compel and a later vacatur motion based on there being no
agreement or arbitrators exceeding their powers; in each, the court
considered the merits of vacatur, usually without analyzing the “adversely
determined” provision. 5 A tenth opinion was not in our random sample, but
as we earlier discussed, it was identified because it overruled one of the few
holdings that vacatur on these grounds was barred. See Salsitz, 761 N.E.2d
at 724. An eleventh opinion, which was an appeal from a denial of a motion
5
Anderson v. Banks, 37 A.3d 915 (Me. 2012); Boskovich Farms, Inc. v. Taco Bell
Corp., No. 2010-CA-000754-MR, 2011 WL 2935373 (Ky. Ct. App. July 22, 2011); Adam
Assocs. Int’l, Inc. v. William A. Berry & Son, Inc., No. 05-0997-BL52, 2007 WL 1296879
(Mass. Dist. Ct. May 2, 2007); Miller v. City of Anchorage, No. 2204–CA–000702–MR,
2006 WL 29190 (Ky. Ct. App. Jan. 6, 2006); Alexander v. Everhart, 7 P.3d 1282 (Kan. Ct.
App. 2000); Laszlo N. Tauber, M.D. & Assocs. v. Trammell Crow Real Est. Servs., Inc., 738
A.2d 1214 (D.C. 1999); Graber v. Comstock Bank, 905 P.2d 1112 (Nev. 1995); Park Imperial,
Inc. v. E. L. Farmer Const. Co., 454 P.2d 181 (Ariz. Ct. App. 1969).
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to compel, has related analysis. See Layne-Minnesota Co. v. Regents of Univ.
of Minn., 123 N.W.2d 371, 376–77 (Minn. 1963). When a court, on a motion
to compel, finds the agreement unclear, “the issue of arbitrability [should] be
initially determined by the arbitrators subject to a party’s right reserved in
[the vacatur provisions for exceeding powers and for no agreement] to
challenge such determination subsequent to any award.” Id. at 377.
In 17 cases in which there was no pre-arbitration court order, a party
was permitted to seek vacatur of an award on the basis that there was no
agreement if that objection had either been presented to the arbitrators or the
party had not participated in the arbitration. 6 These examples are the most
clear-cut applications of provisions similar to Section 171.088(a)(4).
The remaining opinions discussed the provision to some extent but
not in a manner relevant to this appeal. 7
6
Azcon Constr. Co., Inc. v. Golden Hills Resort, Inc., 498 N.W.2d 630 (S.D. 1993);
MBNA Am. Bank, N.A. v. Barben, 111 P.3d 663 (Kan. Ct. App. 2005) (unpublished table
decision); Grad. v. Wetherholt Galleries, 660 A.2d 903 (D.C. 1995); GPS USA, Inc. v.
Performance Powdercoating, 26 N.E.3d 574 (Ill. App. Ct. 2015); Parekh Constr., Inc. v. Pitt
Constr. Corp., 577 N.E.2d 632 (Mass. App. Ct. 1991); Migneault v. United Servs. Auto. Ass’n,
519 P.2d 1162 (Ariz. Ct. App. 1974); Garlock v. 3DS Props. LLC, 930 N.W.2d 503 (Neb.
2019); Smith v. Pinnamaneni, 254 P.3d (Ariz. Ct. App. 2011); Bolton v. Bernabei & Katz,
PLLC, 954 A.2d 953 (D.C. 2008); Westbrook Sch. Comm. v. Westbrook Tchrs. Ass’n, 404
A.2d 204 (Me. 1979); Roosa v. Tillotson, 695 A.2d 1196 (Me. 1997); Carroll v. MBNA Am.
Bank, 220 P.3d 1080 (Idaho 2009); City of Lawrence v. Falzarano, 402 N.E.2d 1017 (Mass.
1980); Thompson v. Lee, 589 A.2d 406 (D.C. 1991); Pelletier & Flangan, Inc. v. Maine Ct.
Facilities Auth., 673 A.2d 213 (Me. 1996); University of Ala. v. Modern Constr., Inc., 522 P.2d
1132 (Ala. 1974); Sterling Glob. Sols., LLC v. Parillo, 2017 IL App (1st) 170397-U, ¶ 1.
7
E.g., Seagate Tech., LLC v. Western Digit. Corp., 854 N.W.2d 750, 758–59 (Minn.
2014) (the requirement that an objection must be made in the arbitration that applies to
“no agreement to arbitrate” does not apply to the other vacatur provisions); MVR Dev.,
LLC v. Sanchez, No. 2 CA-CV 2008-0022, 2008 WL 2932916, at *2 (Ariz. Ct. App. July
30, 2008) (party failed, as an evidentiary matter, to show it had objected to the arbitration);
SIGNAL Corp. v. Keane Fed. Sys., Inc., S.E.2d 253, 257 (Va. 2003) (party failed to argue
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In conclusion, our examination of a large sampling of opinions from
other states that adopted the UAA vacatur provisions reveals no opinion that
barred a post-arbitration argument that a claim was beyond the scope of the
parties’ agreement if an objection was made at least in the arbitration itself.
Also, despite all the opinions that quote part of the “not adversely
determined” vacatur provision, few saw a need to interpret it. We also
discussed an opinion allowing a party to argue arbitrators exceeded their
powers in arbitrating a claim that was beyond the scope of the agreement.
Other states’ views are one component of the analysis. Next, as did
the Supreme Court of Texas in Nathan, we seek explanations from the
National Conference of Commissioners on Uniform State Laws.
3. National Conference of Commissioners notes
Uniform acts prepared by the National Conference of Commissioners
at times have official comments to each section that guide interpretation:
“Although the official comments to the [Uniform Commercial] Code were
not enacted by the Legislature, they serve as a valuable aid in construing the
statutory language.” Romo v. Austin Nat’l Bank, 615 S.W.2d 168, 170 n.2
(Tex. 1981). The UAA does not have section-by-section comments, but
there is a “Prefatory Note.” 1956 Unif. Arb. Act, 7 U.L.A. 100 (2009).
The important language for us is the Note’s last sentence: “The section on
Appeals is intended to remove doubts as to what orders are appealable and to
limit appeals prior to judgment to those instances where the element of finality is
present.” Id. (emphasis added). Insisting, as did the lower courts in this case,
that immediate mandamus review of an order compelling arbitration is the
sole route to contest that order is contrary to the intended limits.
that arbitrators resolved an issue outside the scope of the agreement, instead only arguing
that they applied the wrong legal standard).
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In addition, the first draft of the UAA had explanatory notes to assist
the Commissioners as they considered the proposal at their annual meeting
in 1954. The revised draft for the 1955 meeting also had notes but only about
the revisions. The weight the Supreme Court of Texas would give the notes
is unclear. As discussed earlier, that court will consider official comments
but reject them if they are not a convincing explanation of the law’s text. See
Nathan, 408 S.W.3d at 874. The comments in the two UAA drafts are similar
in form to official comments in completed uniform acts. Still, because the
Commissioners did not formally adopt them with the UAA, we will not rely
on them. We will, though, briefly review the comments. Learning what this
confusing vacatur provision was supposed to mean is a worthy place to begin.
In the 1954 first draft, the challenging vacatur provision stated this:
(7) There was no arbitration agreement and the issue was not
adversely determined in proceedings under section 2 or waived
by participating in the arbitration proceedings. 8
The “Note” accompanying this vacatur provision said it was
“needed” when no court order had preceded the arbitration:
Clause (7) is needed where no proceedings to compel
arbitration were taken, the opposing party has not participated
in the arbitration hearing, and first interposes his objection on
motion to vacate or in resisting a motion to confirm. 9
8
Unif. Arb. Act § 11(b), at 11 (Nat’l Conf. of Comm’rs on Unif.
State Laws, First Tentative Draft 1954), from the University of Minnesota Law Library
and the Archives Research Center, University of Illinois. We gratefully identify multiple
sources for the 1954 and 1955 drafts. The first found for 1954 was not clearly for that year’s
meeting; seeking a better 1954 draft at times located only another copy of the 1955 one.
9
Id. § 11, Note, at 13. The Section 11(b)(3) grounds for “exceeded their powers”
has no explanation in the Notes, perhaps because of a sense that it needed no explanation.
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The provision was later amended to allow participation in the
arbitration if the party objected there to the existence of an agreement. 10 It
became Section 12(a)(5) in the UAA and is Section 171.088(a)(4) in the TAA.
Why was it “needed,” as the Note states? Certainly, a reason could have
been to make clear that an objector who did not try to stay the arbitration
could still move for vacatur because there was no agreement. We are being
urged, though, to imply a far different effect of the provision – a failed
objection prior to the arbitration forecloses renewing the objection after.
However, if we interpret the provision that way — a claim that there
is no agreement to arbitrate can be asserted only once, either before or after
arbitration — it creates tension with the drafters’ decision to limit the right
to appeal. The drafters remarked that the New York act, used as a model for
some provisions, allowed appeals from any order. First Tentative Draft,
supra note 9, § 16 Note, at 16 (citing N.Y. Civ. Prac. Act § 1467 (1920)).
The drafters rejected that, saying “the review of orders should be left to an
appeal from the final judgment except for those which are final in character
or will result in no judgment being entered.” Id. at 16–17. Thus, an appeal
was allowed from orders denying but not from compelling arbitration. Id. §
16, at 16. Section 19(a) of the 1956 Uniform Act retained that distinction.
10
“Having raised the objection that no arbitration agreement covering the issue
has been made, a party should be permitted to participate in the arbitration hearing without
loss of the objection.” Unif. Arb. Act § 12(b)(7), Note, at 6 (Nat’l Conf. of
Comm’rs on Unif. State Laws, Second Tentative Draft 1955), provided by the
National Conference of Commissioners; University of Minnesota Law Library; Archives
Research Center, University of Illinois; and University of Iowa College of Law.
In 1956, the UAA was amended one last time solely to delete two vacatur sections;
there was no change to the text that concerns us. See Handbook of the National
Conference of Commissioners on Uniform State Laws and
Proceedings of the Annual Conference 133–34, 152, 292 (1956).
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Considering this background, it seems reasonable to conclude that an appeal
from an order compelling arbitration was to be allowed ultimately.
When a revised UAA was being prepared in the late 1990’s, the draft-
ers regarded “‘not adversely determined’ . . . [as] superfluous . . . [because
when] a court ‘adversely determined’ in either type of proceeding [i.e., to
compel or stay arbitration] that the arbitration agreement was invalid, then
no valid arbitration hearing should be held.” 11 Thus, the phrase simply iden-
tified the vacatur ground as one that could have blocked the arbitration, then
noted that no court had yet accepted the argument. Consistent with this un-
derstanding, the revised UAA approved in 2000 has an almost identical va-
catur provision but with the “adverse determined” phrase removed: “there
was no agreement to arbitrate, unless the person participated in the arbitra-
tion proceedings without raising the objection” in a timely manner. 2000
Unif. Arb. Act, § 23(a)(5), 7 U.L.A. 77 (2009). According to the 1997
Comment, that also is all the 1956 language meant.
Drafters of this 1956 provision were focused on vacatur when no court
had compelled arbitration. Its intended relevance otherwise is not at all clear.
11
Revision of Unif. Arb. Act, Reporter’s Comment 76 (Nat’l Conf.
of Comm’rs on Unif. State Laws, Draft Oct. 31, 1997), archived at
https://www.uniformlaws.org/home. That Comment does not appear in the 2000 UAA
itself — once the problematic phrase was deleted, no explanation of its perceived
irrelevance was needed. There is a Comment with the new provision: “the right to
challenge an award on this ground is conditioned upon the party who contests the validity
of an arbitration agreement raising this objection no later than the beginning of the
arbitration hearing.” 2000 Unif. Arb. Act § 23, Comment A.2, 7 U.L.A. 78 (2009).
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4. UAA drafting committee chairman’s journal articles
A useful interpretive source are law journal articles written by the
chairman of the committee that drafted the UAA. The articles are especially
learned commentary. An example of using learned commentary was a
Supreme Court of Texas opinion that needed a definition for “agreement”
in the TAA. See Rachal v. Reitz, 403 S.W.3d 840, 845 (Tex. 2013).
The chairman of the UAA drafting committee was Professor Maynard
E. Pirsig of the University of Minnesota School of Law; he was dean when
the UAA drafting began but returned to teaching before it concluded.
Maynard E. Pirsig, The New Uniform Arbitration Act, 11 Bus. Law. 44 n*
(1956). He wrote extensively on the UAA, starting even before its
completion in 1956. 12 The Texas Supreme Court likely would consider the
committee chairman’s explanations but not find them to be definitive.
One of his many useful articles on the UAA is from 1957. Pirsig, Some
Comments on Arbitration Legislation and the Uniform Act, 10 Vand. L. Rev.
685 (1957). He grouped the problems that can arise about an agreement’s
scope into three categories. The first was when it was plain that the dispute
does not fall within the agreement; in that case, arbitration should be denied.
Id. at 693. For the second, he gave the example of an arbitration agreement
in an employment contract that applies to disputes about wages, but the
contested issue concerns employee bonuses. Id. at 694. Instead of having a
court initially decide whether bonuses are wages, the sole decision for the
12
Maynard E. Pirsig, Toward a Uniform Arbitration Act, 9 Arb. J. 115 (1954);
Pirsig, The New Uniform Arbitration Act, 11 Bus. Law. 44 (1956); Pirsig, Some Comments
on Arbitration Legislation and the Uniform Act, 10 Vand. L. Rev. 685 (1957); Pirsig, The
Minnesota Uniform Arbitration Act and the Lincoln Mills Case, 42 Minn. L. Rev. 333
(1958); Pirsig, Arbitrability under the Uniform Act, 19 Bus. Law. 763 (1964); Pirsig,
Arbitrability and the Uniform Act, 19 Arb. J. 154 (1964) (same as the Bus. Law. article).
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court would be: “Is there an agreement to arbitrate?” Id. If there is, then the
arbitrator would get the issue of the scope of the agreement, subject to a later
objection to the award “that the arbitrator went beyond his powers.” Id. at
696. The third category concerns a different ambiguity in the agreement, and
there too the question should be given to the arbitrator so long as there is an
arbitration agreement. Id. at 694–95.
In his final article, published in 1964, Pirsig explained that if “the
arbitrability of a given dispute was reasonably in doubt, it should initially be
passed upon by the arbitrator. His decision, however, should be subject to
judicial review at the instance of an objecting party” in a motion to vacate. 13
Pirsig, Arbitrability under the Uniform Act, 19 BUS. LAW. 763, 764 (1964).
“Nothing is said in these provisions [for resolving a motion to compel] about
the need for showing that the pending dispute falls within the agreement to
arbitrate. Only an ‘agreement to arbitrate’ need be proved.” Id. In fact,
when a motion to compel or stay arbitration is filed, “the only question open
for judicial consideration should be, are there reasonable grounds shown for
the position that the dispute is within the arbitration clause. If there are, then
the question is for the arbitrator at this stage, subject to judicial review if the
question is again raised on a motion to confirm or vacate the award.” Id. at 764–
65 (emphasis added).
13
A 1958 article has a possibly divergent statement. Pirsig wrote that the objection
“there was no agreement to arbitrate the subject matter in dispute . . . could have been the
basis of a motion to compel or stay the arbitration. If such a motion was made and
adjudicated, the point cannot be raised again on a motion to vacate the award.” Pirsig,
Minnesota Uniform Arbitration Act, supra note 12 at 353–54 (emphasis added). In the same
article, though, he wrote that the UAA “should limit the court's function on a motion to
compel arbitration to determining ‘the existence of the agreement to arbitrate.’” Id. at 346.
At most, then, Pirsig meant the existence of an agreement could not be disputed a second
time. The scope of the agreement, however, as the 1964 Business Lawyer article we just
quoted in the text makes clear, could be judicially reviewed after the arbitration.
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In summary, Pirsig wrote that the court on a motion to compel decides
on the existence of an arbitration agreement and whether the claims could
reasonably fall within its scope. Difficult interpretive tasks about the
agreement go to the arbitrator. Once a final award is made, the court can then
decide whether the claims were actually within the arbitration clause. The
no-arbitration-agreement vacatur ground is generally discussed in situations
in which there were no pre-arbitration court proceedings.
We inject a Texas caveat to all this. The Supreme Court of Texas
requires that “a party seeking to compel arbitration must establish that a valid
arbitration agreement exists and that the claims at issue fall within the scope of
that agreement.” G.T. Leach Builders, LLC v. Sapphire V.P., 458 S.W.3d 502,
524 (Tex. 2015) (citing Tex. Civ. Prac. & Rem. Code § 171.021(a))
(emphasis added). The important point for us, though, is not how much
needs to be done by a Texas court when compelling or staying arbitration.
Instead, we are analyzing what cannot be undone by a Texas court after
arbitration. Any limits on the grounds for vacatur come from the statute.
5. The FAA — vacatur grounds and appellate review
A concurring opinion by a Texas Supreme Court justice considered it
important that the meaning the court adopted for a TAA provision was
consistent with the interpretation given to similar language in the FAA. East
Tex. Salt Water, 307 S.W.3d at 276 (Willett, J. concurring). One party’s
argument on how to interpret the TAA had been an invitation to “inject the
disruption of needless inconsistency with the FAA. The Court is wise to
decline.” Id. at 277. See also Nafta Traders, 339 S.W.3d at 97 (considering
the FAA when interpreting a TAA provision). Thus, opinions concerning
comparable questions under the FAA may provide useful answers.
Resolving disputes under the FAA about enforcement of arbitration
agreements involves two steps. See Kubala v. Supreme Prod. Servs., Inc., 830
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F.3d 199, 202 (5th Cir. 2016). The court is first to decide if there is a valid,
enforceable arbitration agreement. Id. That decision is for the court because
the issue of contract validity is one of law. Id.; see also 9 U.S.C. § 2
(arbitration agreements are enforceable “save upon such grounds as exist at
law or in equity for the revocation of any contract,” with an irrelevant
exception). The second step is to decide whether the claims being proposed
for arbitration are within the terms of the agreement. See Kubala, 830 F.3d
at 202. Though usually that question also is to be answered by the court, the
agreement itself may validly assign the second issue to the arbitrators. See id.
This FAA’s distinction between existence and scope of arbitration
agreements supports that whatever else the TAA (a)(4) vacatur provision
means, it is referring simply to the existence of an agreement, while (a)(3)(A)
on exceeding powers applies to all issues of its scope.
The FAA also provides that awards should be vacated “where the
arbitrators exceeded their powers.” 9 U.S.C. § 10(a)(4). This court has held
that “Section 10(a)(4) has been interpreted narrowly and allows vacatur of
an award ‘[o]nly if the arbitrator acts outside the scope of his contractually
delegated authority — issuing an award that simply reflects his own notions
of economic justice rather than drawing its essence from the contract.’”
Kemper Corp. Servs. v. Comput. Scis., 946 F.3d 817, 822 (5th Cir. 2020)
(quoting Oxford Health Plans LLC v. Sutter, 569 U.S. 564, 569 (2013))
(emphasis added).
The arbitration agreement, therefore, is what defines the arbitrator’s
powers under the FAA. The analysis of whether those powers have been
exceeded must focus on the agreement. Texas caselaw supports that we
should interpret the concept of arbitrators’ exceeding their powers under the
TAA consistently, if possible, with the interpretation of the FAA.
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As to appellate review of allegedly errant orders to compel arbitration,
the bankruptcy and district courts held that review had to be sought
immediately or not at all. Quite differently, the Supreme Court of Texas has
held that orders compelling arbitration under the FAA do not have to be
contested immediately by mandamus. Perry Homes v. Cull, 258 S.W.3d 580,
586 (Tex. 2008). The court held that such orders could be reviewed after
arbitration; to hold otherwise would inundate the courts with “routine
mandamus review of such orders,” thus “bogging down [arbitration] in
preliminary appeals.” Id. The court relied in part on a section of the FAA
that expressly barred interlocutory appeals from orders compelling
arbitration. Id. (citing 9 U.S.C. § 16(b)(2) (barring such appeals except under
28 U.S.C. § 1292(b)). The court then gave a “see also” reference to TAA
Section 171.098, which provides for interlocutory appeal only of orders
denying, not granting, motions to compel arbitration. Id. at 586 n.11. Though
waiting until after the arbitration to seek appellate review may waste the
parties’ resources, “parties may also waste resources appealing every referral
when a quick arbitration might settle the matter.” Id. at 587.
The next year, the court vacated a court of appeals’ grant of a writ of
mandamus that had stopped an FAA arbitration. In re Gulf Expl., LLC, 289
S.W.3d 836, 842–43 (Tex. 2009). “If a trial court compels arbitration when
the parties have not agreed to it, that error can unquestionably be reviewed
by final appeal.” Id. at 842. It explained Perry Homes this way: “Both federal
and Texas statutes provide for vacating an arbitration award by final appeal if
the arbitrators exceeded their powers. If appeal is an adequate remedy for an
order compelling arbitration, mandamus must be denied.” Id. Significantly,
the court said that “both the federal and state arbitration acts pointedly
exclude immediate review of orders compelling arbitration,” and therefore
mandamus review should be avoided. Id.
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A quite recent opinion by the Supreme Court of Texas concerning an
order compelling arbitration was in the context of a state statute for enforcing
agreements to arbitrate divorce and child custody disputes. In re Ayad, ---
S.W.3d ----2022 WL 4393012 (Tex. Sept. 23, 2022) (applying TEX. FAM.
CODE §§ 6.601(a), 153.0071(a)). One spouse argued the agreement was
unenforceable, but a trial court compelled arbitration. Id. at *2–3. Citing In
re Gulf as one of its authorities, the court stated it had “long held that an
adequate remedy for a trial court’s error in compelling the parties to arbitrate
is available through an eventual appeal from a final judgment enforcing an
arbitration award.” Id. at *4. It is at least suggestive that the state’s highest
court would make so categorical a statement about the usual rule and rely on
an FAA decision when explaining Texas procedures. Mandamus was
granted in the case, though, because the trial court “did not follow a statutory
command — unique to the divorce context — that it try issues of validity and
enforceability prior to ordering arbitration.” Id.
When the court made these broad statements in Ayad and Gulf
Exploration about post-arbitration review of orders compelling arbitration,
there was no carve-out for orders under the TAA. It is a telling omission. It
means that, even though there is no FAA provision comparable to the “no
arbitration agreement” and “not adversely determined” TAA provision, the
Texas high court has stated that postponed review of the order compelling
arbitration is available under both acts. It is unwarranted to place on the
rarely interpreted and confusingly phrased (a)(4) vacatur provision the entire
weight of an outcome-altering departure from the procedure the Texas high
court has applied to the FAA and suggested applies to the TAA.
Of considerable importance to whether we should declare such a
departure, “Texas courts applying the FAA follow Texas rather than federal
procedure.” In re Palacios, 221 S.W.3d 564, 565 (Tex. 2006) (citing Jack B.
Anglin Co., Inc. v. Tipps, 842 S.W.2d 266, 272 (Tex. 1992)). Further, “it is
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important for federal and state law to be as consistent as possible in this
area.” Id. (quotation marks and citation omitted). Therefore, when the Texas
high court explains procedures to be followed in state court for the FAA, it is
generally explaining the procedure for the TAA, too. These opinions on the
FAA explain that the highest court in Texas, for reasons of judicial economy
equally applicable to the TAA, disfavors review by a writ of mandamus of
orders compelling arbitration. Appellate review can await entry of an award.
One court’s contrary view was cited by the bankruptcy court. A Texas
court of appeals held that a party “should have” sought a writ of mandamus
after the trial court compelled arbitration under the TAA; raising that claim
after arbitration was untimely. Gumble v. Grand Homes 2000, L.P., 334
S.W.3d 1, 4 (Tex. App.—Dallas, 2007). In support, the court cited three
opinions holding that a writ of mandamus is the only procedure for immediate
review of a motion to compel arbitration. Id. (citing Freis v. Canales, 877
S.W.2d 283, 284 (Tex. 1994); Mohamed v. Auto Nation USA Corp., 89 S.W.3d
830, 834, 838–39 (Tex. App.—Houston [1st Dist.] 2002, no pet.); In re Godt,
28 S.W.3d 732, 738–40 (Tex. App.—Corpus Christi-Edinburg, 2000, orig.
proceeding)). None of those three, though, addressed whether the order
compelling arbitration could also be challenged on a motion to vacate. As far
as we can tell, Gumble stands alone in holding that mandamus must be sought.
We also reiterate the appellate review allowed by the TAA. Appeal is
permitted from orders that grant a stay or refuse to compel arbitration but
not from their opposites. See Perry Homes, 258 S.W. 3d at 586 n.11 (citing §
171.098). Different treatment of the different orders is logical. Staying the
arbitration or refusing to order its commencement are final because they
prevent arbitration, while refusing to stay or compelling an arbitration are
interlocutory since other proceedings follow and an appeal can follow those.
Resolving claims without seriatim involvements by a court was a goal for this
uniform act. See 1956 Unif. Arb. Act, 7 U.L.A. 100, Pref. Note (2009).
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Allowing a party to wait until arbitration has concluded to seek review of an
order compelling arbitration is consistent with that goal.
Prohibiting the appeal of an interlocutory order and also making it
unreviewable after final judgment would be an unusually restrictive
combination. We conclude that the TAA does not create that dual obstacle
at least when the issue is whether a particular claim was subject to arbitration.
A writ of mandamus is not required; a later motion to vacate is a remedy.
D. Proper vacatur provisions for the Amberson claims
With the foregoing analysis of the TAA in hand, we examine
Amberson’s two vacatur arguments, one on the absence of an alter ego
relation, the other on whether the Cannon Grove claim was arbitrable.
The arbitrator made fact findings regarding alter ego. Additionally,
even though he determined that he had no authority to resolve whether the
Cannon Grove claims were arbitrable, the arbitrator made fact findings
relevant to that argument. Fact findings by an arbitrator are nearly
unassailable. For example, the grounds for vacatur in the TAA do not include
any related to the strength of the evidence to support the award other than if
the arbitrator refused to allow introduction of “material evidence.” §
171.088(a)(3)(C). The Texas Supreme Court has referred to “judicial review
of an arbitration award [as] extraordinarily narrow.” East Tex. Salt Water,
307 S.W.3d at 271. We conclude that the arbitrator’s fact-findings relevant
to whether the Cannon Grove claim was subject to the arbitration agreement,
a claim he did not resolve, are still entitled to substantial deference.
1. Alter ego
When analyzing whether a non-signatory can be forced to arbitrate,
the Texas Supreme Court applied Fifth Circuit precedents. In re Kellogg
Brown & Root, Inc., 166 S.W.3d 732, 739 (Tex. 2005). Concluding that it was
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important “for federal and state law to be as consistent as possible in this
area, because federal and state courts have concurrent jurisdiction to enforce
the FAA,” it used “persuasive and well-reasoned federal precedent” to
determine state law on the question. Id. Though the specific determinations
were as to the FAA, we conclude the Texas court would continue its pursuit
of consistency and apply the same reasoning to the TAA.
The concept of alter ego is one of the theories “arising out of common
principles of contract and agency law” that would bind a non-signatory to an
arbitration agreement. Id. That is the only theory argued in this case.
Determining an alter ego relation is highly fact-based. Bridas S.A.P.I.C. v.
Gov’t of Turkmenistan, 345 F.3d 347, 359 (5th Cir. 2003). In making the
decision as to corporations, we explained that an alter ego relation would be
shown “if (1) the owner exercised complete control over the corporation with
respect to the transaction at issue and (2) such control was used to commit a
fraud or wrong that injured the party seeking to pierce the veil.” Id.
Comparable analysis applies here both as to the law firm and as to ANR
concerning whether they are Amberson’s alter ego.
The arbitrator gave these reasons for holding that Amberson’s law
firm was Amberson’s alter ego:
(1) Amberson is the sole owner and decision maker of the Firm
and thus has a financial interest in the Firm and controls its
operations; (2) Amberson used the firm and both its operating
and IOLTA account to pay and subsidize personal expenses . .
. such that there is a unity of interests between the Firm and
Amberson; (3) Amberson caused the Firm to be used for the
purpose of perpetrating and did perpetrate an actual fraud on
the McAllen Parties primarily for his direct personal benefit;
and (4) given that Amberson has indicated that the Firm likely
cannot pay . . . the amounts awarded herein, it equitably would
be a manifest injustice if on this record the McAllen Parties
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were left with an uncollectible Award or resulting judgment
against the Firm.
The arbitrator then made these findings about ANR as an alter ego:
[ANR] was formed for the sole purpose of receiving a
$4,500,000.00 loan from McAllen in order to purchase the 90%
interest in Cannon Grove . . . . Amberson is the sole owner of
ANR. Amberson provided $500.00 to open up a bank account
for ANR. That is the only capital Amberson has provided to
ANR. This inadequate capitalization for ANR, coupled with
Amberson's total control of ANR, establishes a unity of interest
between Amberson and ANR. Whether or not Amberson
initially created ANR for the purpose of perpetrating a fraud,
ANR ultimately was used for such purpose in connection with
Amberson's argument that the $4,500,000.00 amount
McAllen paid Amberson’s wholly-owned entity ANR was for
a gift and was not a loan, which would be for the direct personal
benefit of Amberson. Finally, it would be manifestly unjust not
to hold Amberson personally liable for ANR's actions.
The arbitrator held that both the law firm and ANR were Amberson’s
alter egos, making Amberson personally liable for any award granted the
McAllen Parties against the firm or ANR. The bankruptcy and district courts
both agreed.
The issue, then, is whether an arbitration agreement existed, i.e., was
one enforceable, as to Amberson, individually. Does this mean we no longer
can avoid resolving whether a barrier to review arises from the proviso in
Section 171.088(a)(4) that the issue of the existence of an agreement “was
not adversely determined in a proceeding” to compel or stay arbitration? It
does not. The arbitrator’s decision on the issue of alter ego must stand,
making our authority to review of no consequence. We explain.
The Texas high court has held that under the FAA, whether a non-
signatory is bound by an arbitration agreement is an issue for the court, absent
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the agreement’s clearly giving the task to the arbitrator. In re Weekley Homes,
L.P., 180 S.W.3d 127, 130 (Tex. 2005). The agreement here was silent.
Texas applies its own procedural rules to the FAA. Id. Thus, we consider
Weekley Homes equally applicable to the TAA. A trial court’s findings on
whether an arbitration agreement exists among specific parties are entitled to
deference. Aerotek, Inc. v. Boyd, 624 S.W.3d 199, 204 (Tex. 2021). The
bankruptcy court here incorporated the arbitrator’s ruling and thus his fact-
findings into its own judgment, and we have quoted the findings above. The
district court affirmed. Amberson offers little in opposition.
We will not disturb the express findings and the conclusions drawn
from them that began with the arbitrator and were sustained by the two
federal courts that have already reviewed those findings, that the Amberson
law firm and ANR are Amberson’s alter ego. Therefore, Amberson himself
is obligated to arbitrate any claim that the agreement validly covers.
Therefore, even if Section 171.088(a)(4) bars reconsidering whether
an enforceable agreement exists if an order compelling arbitration rejected
the argument, the result here would not change. We continue to abstain from
deciding on the meaning of that vacatur provision.
2. Scope of the agreement.
A separate question is whether the arbitration agreements governing
the Amberson law firm’s work for McAllen apply to the Cannon Grove
claims. If they do, then Amberson was validly required to arbitrate them.
We earlier examined the plain language of the vacatur provision for
arbitrators’ exceeding their powers. See § 171.088(a)(3)(A). We also
examined Texas caselaw, caselaw from other states adopting the uniform act,
journal articles, and interpretations of the FAA, to help understand the
alternative (a)(4) provision. Based on all that, we hold that the vacatur
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provision for arbitrators’ exceeding their powers is the one that applies to the
argument that the scope of the agreement did not reach a particular claim.
The only determination so far as to whether the agreement applied to
the Cannon Grove claim was by the Hidalgo County District Court when it
compelled arbitration. That court provided no analysis. The arbitrator later
stated he “made no decision” on arbitrability because the court had already
ordered arbitration of all claims. The bankruptcy and district courts each
held that the issue was foreclosed because review of an order compelling
arbitration could only be sought through mandamus. We have explained our
disagreement about the necessity of pursuing mandamus. We have the
authority, though, to affirm on any basis supported by the record. Walker v.
Beaumont Indep. Sch. Dist., 938 F.3d 724, 734 (5th Cir. 2019). The parties on
appeal have briefed the merits of the arbitrability issue. As a matter of judicial
economy, we will examine the record for whether the application of the
arbitration agreement to the Cannon Grove claim is clear.
Under Texas law, a claim is within the scope of an arbitration
agreement “if the facts alleged ‘touch matters’ that are covered by, have a
‘significant relationship’ to, are ‘inextricably enmeshed’ with, or are
‘factually intertwined’ with the contract that contains the arbitration
agreement.” In re Bath Junkie Franchise, Inc., 246 S.W.3d 356, 366 (Tex.
App. — Beaumont 2008) (quoting Pennzoil Co. v. Arnold Oil Co., 30 S.W.3d
494, 498 (Tex. App. — San Antonio 2000, orig. proceeding). For a claim
“to come within the scope of the arbitration provision, a party's allegations
need only be factually intertwined with arbitrable claims or otherwise touch
upon the subject matter of the agreement containing the arbitration
provision.” Id. Perhaps put even more insistently, Texas courts are to find
that a claim falls within the scope of the arbitration agreement “unless it can
be said with positive assurance that an arbitration clause is not susceptible of an
interpretation which would cover the dispute at issue.” Prudential Sec. Inc.
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v. Marshall, 909 S.W.2d 896, 899 (Tex. 1995) (quoting Neal v. Hardee's Food
Sys., Inc., 918 F.2d 34, 37 (5th Cir.1990) (emphasis in original).
In brief, in the Cannon Grove transaction, Amberson borrowed
$4,500,000 from McAllen in 2009 to purchase a 90% interest in that
property, but in 2014 he claimed the money had been a gift. The question is
whether that dispute is intertwined with the rest of the arbitration.
There is no dispute that Amberson misappropriated funds from
McAllen during the course of the years-long Forest Oil litigation. Claims for
recovery of those funds clearly were arbitrable. One of the events discussed
by the arbitrator occurred in 2012 when McAllen satisfied a $2,000,000 loan
made by First Community Bank to Amberson’s law firm. Amberson falsely
informed McAllen that the loan had been for Forest Oil litigation expenses.
It is undisputed that McAllen borrowed the $2,000,000 from Bank of
America, using Cannon Grove as collateral. The arbitrator found Amberson
had obtained other financial assistance from McAllen, including a pledge of
over $2,000,000 in 2011 as collateral in order for Amberson to get a different
bank loan, again by misrepresenting the money was needed for the litigation.
This brief factual summary reveals that Amberson received
substantial funds from McAllen by falsely claiming they were for the Forest
Oil litigation. McAllen’s payments ostensibly for the litigation were used for
other purposes. Cannon Grove itself was key to one of the improper
payments. We see no basis for treating each of Amberson’s fraudulent
interactions with McAllen as isolated events. Amberson improperly obtained
or retained money from McAllen, using different stratagems at different
times, falsely identifying their purpose and their necessity. Also relevant is
that the arbitrator held that Amberson individually, his law firm, and ANR
formed a civil conspiracy to misappropriate McAllen’s funds. Refusing to
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return the Cannon Grove money was one act of misappropriation that
benefitted those conspirators.
We conclude that the facts of the Cannon Grove claim “‘touch
matters’ that are covered by, have a ‘significant relationship’ to, are
‘inextricably enmeshed’ with, or are ‘factually intertwined’ with the contract
that contains the arbitration agreement,” which makes them arbitrable. In re
Bath Junkie Franchise, 246 S.W.3d at 366. Put differently, it cannot be said
“with positive assurance” that this “arbitration clause is not susceptible of
an interpretation which would cover the dispute at issue.” Prudential
Securities, 909 S.W.2d at 899. The arbitration agreement for the Forest Oil
litigation was properly applied to the Cannon Grove claim too.
III. Conclusions
Interpreting the TAA to prohibit renewing the argument, post-
arbitration, that a claim was outside the scope of an arbitration agreement
finds almost no support in Texas caselaw, in clear text in the TAA, in caselaw
from other UAA jurisdictions, in the UAA’s Prefatory Note, in the drafting
committee chairman’s scholarly writings, in the explicit listing in the TAA of
what could be appealed prior to arbitration and implicitly what should wait
until after, in procedures in Texas for the FAA, and in the general right to
challenge interlocutory orders after final judgment. We hold that the TAA
allows a party to renew arguments in a motion to vacate that were rejected
prior to arbitration about the scope of the arbitration agreement.
We also hold that arbitrators exceed their powers under the TAA
when they decide a claim that is outside the scope of the parties’ agreement.
Consequently, Amberson was entitled under Section 171.088(a)(3)(A) to
have the argument considered that the arbitrator had exceeded his powers in
resolving the Cannon Grove claim. We do not reverse because we were able
to conduct that analysis based on the record before us. There was no error in
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arbitrating the Cannon Grove dispute. Moreover, Amberson individually
was subject to the arbitration because ANR and the Amberson law firm are
each Amberson’s alter ego.
As to Section 171.088(a)(4), regardless of the meaning of “the issue
was not adversely determined in a proceeding” to compel or stay the
arbitration, what matters is we have found no opinion for a court from Texas
or elsewhere, no learned commentary, or anything else that concludes it bars
determining the scope of the arbitration agreement after an award is made.
Indeed, of all its possible meanings, that may be the least likely. This oddly
worded subsection is rarely discussed in judicial opinions. In the 2000 UAA,
the problematic proviso was deleted.
AFFIRMED.
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Edith H. Jones, Circuit Judge, concurring:
Judge Southwick’s scholarly opinion illuminates the peculiarities of
the Texas Arbitration Act in a way that will be useful to the bench and bar. I
concur with much of what he has written. In particular, I agree that pre-
arbitration mandamus in state court was not the sole vehicle by which
Amberson could challenge the existence and scope of the parties’ arbitration
agreements. I agree that Section 171.088(a)(3)(A) furnishes the proper basis
for analysis of Amberson’s arguments in this case, and that under the facts
found by the arbitrator, Amberson did not have a valid challenge to the
agreement’s existence pursuant to Section 171.088(a)(4). And I agree that
Amberson was the alter ego of his law firm and ANR and that the Cannon
Grove transactions were inextricably intertwined with the Forest Oil fee
arbitration agreement. Thus, the judgment of the district and bankruptcy
courts is correctly affirmed.
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Andrew S. Oldham, Circuit Judge, concurring in the judgment:
I would decide this case under Texas Civil Practice and Remedies
Code § 171.088(a)(4). It provides for vacatur of an arbitration award if “there
was no agreement to arbitrate, the issue was not adversely determined in a
proceeding under Subchapter B, and the party did not participate in the
arbitration hearing without raising the objection.” Ibid. This text is most
naturally read to authorize vacatur where “there was no agreement to
arbitrate [the claim at issue].” Here there was such an agreement, and that
“issue” was “adversely determined” against Amberson by a Texas state
court. That’s the end of this case in my estimation.
I don’t understand the relevance of § 171.008(a)(3)(A)’s reference to
arbitrators who “exceed their powers.” I would not, as the majority does,
construe (a)(3)(A) to extend to disputes over the “scope” of an arbitration
agreement while limiting (a)(4) to disputes over the “existence” of such an
agreement. In my view, both “scope” and “existence” questions fit
comfortably within (a)(4).
It’s also important, in my view, that Texas’s courts have applied
§ 171.088(a)(4) even where the party fighting an arbitration award raises
“scope” questions. See Southwinds Express Construction, LLC v. D.H. Griffin
of Texas, Inc., 513 S.W.3d 66, 84 (Tex. App.—Houston [14th Dist.] 2016, no
pet.) (Frost, C.J., concurring) (explaining that applying § 171.088(a)(3)(A) to
circumstances like those in issue here would render portions of §
171.088(a)(4) “meaningless”); Kreit v. Brewer & Pritchard, P.C., 530 S.W.3d
231, 241–43 (Tex. App.—Houston [14th Dist.] 2017, pet. denied) (applying
§ 171.088(a)(4) over (a)(3) where a party raised the “scope” question of
whether persons were covered by an agreement).
44