ACCEPTED

01-14-00919-CV
FIRST COURT OF APPEALS
HOUSTON, TEXAS
2/17/2015 8:59:22 AM
CHRISTOPHER PRINE
CLERK

No. 01-14-00919-CV
FILED IN
1st COURT OF APPEALS
HOUSTON, TEXAS
IN THE COURT OF APPEALS
2/17/2015 8:59:22 AM
FOR THE FIRST DISTRICT OF TEXAS
CHRISTOPHER A. PRINE
AT HOUSTON Clerk

Juan A. Rueda

Appellant

Vs.

Randall W. Holland

Appellee

Appeal from the

11 th Judicial District Court of Harris County, Texas
Trial Court Cause No. 2012-41959

APPELLANT'S BRIEF

William H. Luck, Jr.

Texas Bar No. 12666450
1412B Stonehollow Drive
Houston, Texas 77339
(281) 358-7611
(281) 358-0299 (fax)
Bi1l.Luck(Zi)'shcgloba l.net

Lead Attorney for Appellant

ORAL ARGUMENT REQUESTED

 Identity of Parties and Counsel

The following is a complete list of the parties, attorneys and any other
person who has any interest in the outcome of this lawsuit:

Trial and Appellate

Counsel

Juan A. Rueda William H. Luck, Jr.

1412B Stonehollow Dr.
Houston, Texas 77339
(281) 358-7611
(281) 358-0299 (fax)
Bill.Luck!iJl,sbcglobal.net

Appellee Trial and Appellate

Counsel

Randall W. Holland Michael Boltz

1400 Wood loch Forest Dr.
Suite 540
The Woodlands, Texas 77380
(832) 381-3070
(832) 218-2400 (fax)
Bolz@boltzlaw.com

2
 Table of Contents

Index of Authorities ...................................................................... 4

Statement ofthe Case ...................................................................... 5

Issue Presented (1) The trial court erred in entering a judgment on the second
decision of the arbitrator (and the trial court instead should have vacated this
second decision and entered a judgment on the first decision of the arbitrator)
because the arbitrator was not empowered to redetermine the merits of the case
with his second decision by virtue of Rule R-50 of the Commercial Rules of the
AAA and by virtue of Sections 171.054 and 171.091 (a)(2) ofthe Texas Civil
Practice & Remedies Code. The trial court should have vacated the second
decision of the arbitrator because the arbitrator exceeded his powers [per Section
171.088 (a)(3)(A) of the Texas Civil Practice & Remedies Code] and entered
judgment on the first decision of the arbitrator ............................................ 6

Statement of Facts .......................................................................... 6

Summary of the Argument ................................................................. 8

Argument ...................................................................................... 8

Prayer ............................................................................................ 16

Certificate of Service ....................................................................... 17

Appendix ................................................................................ Tabs 1,2,3,4,5

3
 Index of Authorities

Section 171.053 of the Texas Civil Practice & Remedies Code ................... 12

Section 171.054 of the Texas Civil Practice & Remedies Code ............... 6,8,9

Section 171.088 of the Texas Civil Practice & Remedies Code ............... 6, 8, 9

Section 171.091 of the Texas Civil Practice & Remedies Code .................. 6, 8

Rule R-46 of the Commercial Rules of the American Arbitration Association . .12

Rule R-50 ofthe Commercial Rules of the American Arbitration Association ....
............... ............ ............... ............ ...... ............ ............ 6, 8, 9, 14

City of Pasadena v. Smith, 292 S.W.3d 14, 20 (Tex.2009) ............................ 8

D.R. Horton -Tex., Ltd. v. Bernhard, 423 S.W.3d 532, 534 (Tex.App.-Houston
[14th Dist.] 2014, pet. filed 3-4-14) ................................................... .15

Gray v. Noteboom, 159 S.W.3d 750, 753 (Tex.App.-Fort Worth 2005, pet. denied)
............................................................................................. .14

In re Olshan Found. Repair Co., 328 S.W.3d 883, 894 (Tex.2010) ............... 13

Ritchie v. Rupe, No. 11-0447 decided June 20, 2014 ..................... 5, 7,10,11

Sydow v. Verner, LUpfer, Berhard, McPherson, 218 S.W.3d 162, 169 (Tex.App.-

Houston [14th Dist.] 2007, no pet.) ...................................................... 9

4
 Statement of the Case

Juan A. Rueda ("Rueda") sued Randall W. Holland ("Holland") for damages

for minority shareholder oppression and breach of fiduciary duty. Pursuant to a

written agreement of the parties to arbitrate their disputes under the Commercial

Rules of the American Arbitration Association ("AAA") [CR 44], the court

ordered the parties to arbitration [CR 106]. At the conclusion of the arbitration, the

arbitrator issued a decision in favor of Rueda on his minority shareholder

oppression claim, and the arbitrator submitted that decision to the AAA [CR 151].

The arbitrator's decision was complete in all respects, with the exception of being

signed by the arbitrator [CR 147-150]. The day after the arbitrator submitted his

decision to the AAA but before the AAA forwarded the decision to the parties, the

Supreme Court of Texas issued its decision in Ritchie v. Rupe, No. 11-0447

decided June 20, 2014 [CR 151]. The Ritchie decision effectively abolished the

common law claim in Texas of minority shareholder oppression and in response to

the Ritchie decision, the arbitrator issued a second decision reversing his previous

decision and ordering that Rueda take nothing on his minority shareholder

oppression claim [CR 151-156]. Rueda filed a motion with the arbitrator asking

the arbitrator to disregard his second decision, because the arbitrator was not

empowered under the AAA Commercial Rules to redetermine his decision on the

merits ofthe case. The arbitrator denied Rueda's motion [CR 209]. Rueda filed a

5
similar motion with the trial court [CR 140-218] which was denied by the trial

court (because the first decision of the arbitrator was not signed - RRI 14) and the

trial court on October 20,2014 signed a judgment based on the arbitrator's second

decision [CR 221]. Rueda filed a Notice of Appeal on November 14,2014 [CR

229-231].

Issue Presented

(1) The trial court erred in entering a judgment on the second decision ofthe

arbitrator (and the trial court instead should have vacated this second decision and

entered a judgment on the first decision of the arbitrator) because the arbitrator was

not empowered to redetermine the merits of the case with his second decision by

virtue of Rule R-50 of the Commercial Rules ofthe AAA and by virtue of Sections

171.054 and 171.091 (a)(2) of the Texas Civil Practice & Remedies Code. The

trial court should have vacated the second decision of the arbitrator because the

arbitrator exceeded his powers [per Section 171.088 (a)(3)(A) ofthe Texas Civil

Practice & Remedies Code] and entered judgment on the first decision ofthe

arbitrator.

Statement of Facts

Rueda sued Holland for damages for minority shareholder oppression and

breach of fiduciary duty [CR 5-11]. Holland filed a motion to compel arbitration

based on a written agreement between the parties to arbitrate their disputes under

6
the Commercial Rules ofthe AAA [the motion is at CR 14-19 and the arbitration

paragraph is at CR 44-45]. The court ordered the parties to arbitration [CR 106].

At the conclusion of the arbitration, the arbitrator issued a decision in favor of

Rueda on his minority shareholder oppression claim, and the arbitrator submitted

that decision to the AAA [CR 151 and see also CR 146]. The arbitrator's decision

was complete in all respects, with the exception of being signed by the arbitrator

[CR 147-150]. The day after the arbitrator forwarded his decision to the AAA but

before the AAA forwarded the decision to the parties, the Supreme Court of Texas

issued its decision in Ritchie v. Rupe, No. 11-0447 decided June 20, 2014 [CR

151]. The Ritchie decision effectively abolished a common law claim in Texas for

minority shareholder oppression that had previously been recognized by various

courts of appeals in Texas, and in response to the Ritchie decision, the arbitrator

issued a second decision reversing his previous decision and ordering that Rueda

take nothing on his minority shareholder oppression claim [CR 151-156]. Rueda

filed a motion with the arbitrator asking the arbitrator to disregard his second

decision, because the arbitrator was not empowered under the AAA Commercial

Rules to redetermine his decision on the merits of the case. The arbitrator denied

Rueda's motion [CR 209]. Rueda filed a similar motion with the trial court [CR

140-218] which was denied by the trial court (because the first decision of the

7
arbitrator was not signed - RRl 14) and the trial court signed a judgment based on

the arbitrator's second decision on October 20, 2014 [CR 221].

Summary of the Argument

The trial court erred in entering a judgment on the second decision of the arbitrator

(and the trial court instead should have disregarded this second decision and

entered ajudgment on the first decision of the arbitrator) because the arbitrator was

not empowered to redetermine the merits ofthe case with his second decision by

virtue of Rule R-50 of the Commercial Rules ofthe AAA [CR 184] and by virtue

of Sections 171.054 and 171.091 (a)(2) of the Texas Civil Practice & Remedies

Code. The trial court should have vacated the second decision of the arbitrator

because the arbitrator exceeded his powers [per Section 171.088 (a)(3)(A) of the

Texas Civil Practice & Remedies Code] and entered judgment on the first decision

of the arbitrator.

Argument

The written agreement between the parties in this case to arbitrate their

disputes states that arbitration will be conducted " ... in accordance with the

Commercial Arbitration Rules of the American Arbitration Association ("AAA")"

[CR 44]. An arbitrator's authority derives from the arbitration agreement [City of

Pasadena v. Smith, 292 S.W.3d 14, 20 (Tex.2009)] and, therefore, the rules

governing the arbitrator's authority in this case should be the rules stated in the

8
Commercial Rules of the AAA. Rule R-50 of the Commercial Rules of the AAA

gives the arbitrator authority to make clerical-type changes to the arbitrator's

decision, but Rule R-50 specifically states that "The arbitrator is not empowered to

redetermine the merits of any claim already decided." This rule is similar to the

standards set forth in Section 171.054 (a)(I) of the Texas Civil Practice &

Remedies Code which gives arbitrators the authority to " ... modifY or correct an

award ... on the grounds stated in Section 171.091..." Substantive changes to the

arbitrator's decision, however, do not fall within any of the permissible categories

of modification contained in Sections 171.054 and 171.091. Sydow v. Verner,

LUpfer, Berhard, McPherson, 218 S.W.3d 162,169 (Tex.App. -Houston [14th

Dist.] 2007, no pet.).

In this case, at conclusion of the arbitration, the arbitrator issued a decision

in favor of Rueda on his minority shareholder oppression claim and the arbitrator

submitted that decision to the AAA [CR 151]. As this Court can determine from

the arbitrator's first decision, this first decision was complete in all respects with

the exception of being signed by the arbitrator [CR 147-150]. In this regard, the

arbitrator's (Judge Mark Davidson's) first decision was on Judge Davidson's

letterhead, it consisted of almost four pages and - at the end of the decision - it

stated "In the meantime, a judgment consistent with this ruling should be submitted

9
to the Court as soon as possible. Thanks to all for the opportunity to serve." It

then concluded with "Respectfully submitted, MARK DAVIDSON."

The day after the arbitrator submitted his first decision to the AAA but

before the AAA forwarded the decision to the parties, the Supreme Court of Texas

issued its decision in Ritchie v. Rupe, No. 11-0447 decided June 20, 2014 [CR

151]. The Ritchie decision effectively abolished the common law claim in Texas

of minority shareholder oppression and in response to the Ritchie decision, the

arbitrator issued a second decision reversing his previous decision and ordering

that Rueda take nothing on his minority shareholder oppression claim [CR 151-

156]. Rueda filed a motion with the arbitrator asking the arbitrator to disregard his

second decision, because the arbitrator was not empowered under the AAA

Commercial Rules to change his decision on the merits of the case. The arbitrator

denied Rueda's motion [CR 209]. Rueda filed a similar motion with the trial court

[CR 140-218] which was denied by the trial court as the trial court on October 20,

2014 signed a judgment based on the arbitrator's second decision [CR 221].

The statements made by the arbitrator in his second decision (as well as the

statements made by the AAA when forwarding both the arbitrator's first and

second decisions to the parties) indicate that the first decision of the arbitrator was,

in fact, a decision ofthe arbitrator.

10
 In the arbitrator's second decision [CR 151] Judge Davidson, states as

follows:

"I attach the ruling that I had written and submitted to the AAA
the day before Ritchie v. Rupe was announced by the Texas
Supreme Court. The Ritchie case, by its terms, overruled
years of precedents from the Courts of Appeals that created a
common law cause of action for shareholder oppression. My
preliminary opinion, as you will see, awarded the Claimant a
judgment on that theory. The Ritchie case takes away that
theory, and his judgment." [emphasis included by the
arbitrator Judge Davidson).

Significantly, Judge Davidson refers to his first ruling as a "ruling" that he

had written and submitted to the AAA and he also refers to the Ritchie case as

taking away Rueda's "judgment." Both of these statements by Judge Davidson (as

well as the decision itself with its completeness on its face except for the signature)

indicates that this first ruling was, in fact, the arbitrator's ruling.

When Elizabeth Kidd with the AAA forwarded to the parties bye-mail the

two decisions from Judge Davidson in this arbitration [CR 146], Ms. Kidd refered

to the first decision as the "original ruling." In this regard, Ms. Kidd stated (in

part) the following [again CR 146]:

"Judge Davidson has also asked me to forward his original ruling

which was drafted prior to the Richie v. Rupe decision and which
was supplanted by the final Award." [emphasis added).

When Judge Davidson later denied Rueda's motion asking the arbitrator to

disregard his second decision (because - Rueda argued - the arbitrator was not

11
empowered to redetermine the merits of the case), Judge Davidson did refer to his

first ruling as a "draft of a preliminary opinion" that was "never adopted, signed or

sent to all counsel" [CR 209], but an examination ofthe first ruling does indicate

that it was complete in all respects except for the signature. Rueda believes that

the question of whether this first decision of the arbitrator can be substantively

changed by the arbitrator (as this decision was with the second decision of the

arbitrator) turns on the issue of whether the first decision was, in fact, a "decision"

since it was not signed. Rueda does not believe that the Commercial Rules of the

AAA mandate that the decision be signed by the arbitrator to be the decision of the

arb itrator.

Rule R-46 ofthe Commercial Rules states the following with respect to the

"Form of Award":

"Any award shall be in writing and signed by a majority ofthe

arbitrators. It shall be executed in the form and manner required
law."

This rule is similar to the standards set forth in Section 171.053 (a) of the

Texas Civil Practice & Remedies Code which states that "The arbitrators' award

must be in writing and signed by each arbitrator joining in the award."

Significantly, neither the Commercial Rules of the AAA nor Chapter 171

ofthe Texas Civil Practice & Remedies Code state anywhere in either rule or

statute that a decision is not a binding decision of the arbitrator if the formality of

12
the signing of the decision is not done (and neither rule or statute even addresses a

single arbitrator arbitration - as is the situation in this case - as each references

signing involving multiple arbitrator arbitrations). In addition, neither the

Commercial Rules of the AAA nor Chapter 171 of the Texas Civil Practice &

Remedies Code even requires all arbitrators to sign a decision - each simply states

that in multiple arbitrator arbitrations either a majority of the arbitrators or the

arbitrators who join in the decision (respectively) must sign the decision.

Rueda believes that requiring a single arbitrator arbitration decision to be

signed by the arbitrator in order for the decision to be considered as the arbitrator's

decision (when neither the Commercial Rules of the AAA nor Chapter 171 of the

Texas Civil Practice & Remedies Code states this) would be adding a level of

judicial-type formality to the arbitration process (making this a requirement would

be similar to a judgment in a court of law) - and this type offormality is exactly

what the arbitration process by its very nature is intended to avoid.

The arbitration process is intended, of course, to avoid the steep expenses

and costs involved in the formal litigation process. In re Olshan Found. Repair

Co., 328 S.W.3d 883,894 (Tex.201O).

Many of the formalities that are involved in the judicial process are not

appropriate for this reason when the parties have chosen arbitration as the vehicle

by which to resolve their disputes. F or example, in holding that arbitrators are not

13
required to state the reason for their award or to make any findings of fact (as

available in the formal judicial process), the Fort Worth Court of Appeals stated

the following in Gray v. Noteboom, 159 S.W.3d 750, 753 (Tex.App.-Fort Worth

2005, pet. denied):

"To require the panel to submit findings of fact and

conclusions of law is in direct opposition of
the arbitration procedures. Arbitration is the vehicle the
parties have agreed upon to avoid the time and expense
invo Ived in a judicial determination of the dispute. The
parties have agreed upon an arbitrator or have agreed
on a method for the selection of an arbitrator. They
have agreed to be bound by the award ofthe arbitrator.
Requiring the arbitrator to submit findings offact and
conclusions oflaw to placate the disappointed party has the
effect of throwing the controversy back into the judicial
system. Upon receipt of the findings and conclusions,
we could reasonably anticipate the filing of a suit by the
disappointed party seeking the setting aside of the award
due to no evidence or insufficient evidence and
complaining the findings are contrary to the greater
weight and degree of the credible evidence. Again,
requiring findings and conclusions adds another tier
in the judicial determination of disputes and diminishes the
benefits of nonjudicial determination.

Looking at the first decision found in CR 147-150, this decision was the

decision of the arbitrator. Per Rule R-50 of the Commercial Rules of the AAA, the

arbitrator was not empowered to redetermine the merits of this case after this first

decision.

14
 Section 171.088 (a) (3)(A) of the Texas Civil Practice & Remedies Code

states that the court shall vacate an [arbitration] award if "the arbitrators exceeded

their powers."

As the 14th Court of Appeals held in the case of D.R. Horton -Tex., Ltd. v.

Bernhard, 423 S.W.3d 532, 534 (Tex.App.-Houston [14th Dist.] 2014, pet. filed 3-

4-14);

"Thus, the appropriate inquiry is not whether the arbitrator

decided an issue correctly, but instead whether she had
authority to decide the issue at all. "

Again, Rueda would show that by the very specific and plain language of

Rule R-50 of the Commercial Rules of AAA (which were the specific rules that the

parties agreed to be bound by in the arbitration agreement), Judge Davidson was

not " ... empowered to redetermine the merits of any claim already decided" and

Rueda requests that this Court vacate the second decision and award of the

arbitrator [per Section 171.088 (a)(3)(A) of the Texas Civil Practice & Remedies

Code] and render a judgment in this case that the first decision of the arbitrator (the

decision found at CR 147-150) is the decision of the arbitrator and enter a

judgment on this first decision.

15
 Prayer

Rueda requests that the Final Judgment of October 20, 2014 be reversed and

a judgment in favor of Rueda and against Holland be rendered by this Court and

that this judgment be per the terms of the first arbitrator's ruling found at CR 147-

CR 150].

Respectfully submitted,

lSI William H. Luck, Jr.

By: ________~------­
William H. Luck, Jr.
TB# 12666450
1412B Stonehollow Dr.
Houston, Texas 77339
(281) 358-7611
(281) 358-0299 (Fax)
Bill.Luck@sbcglobal.net
LEAD ATTORNEY
FOR APPELLANT

CERTIFICATE OF WORD COUNT

I certify that this brief (beginning with "Summary of the Argument" and
ending with the last sentence following "Prayer") contains 1,943 words per my
computer's word count.

lSI William H. Luck, Jr.

William H. Luck, Jr.

16
 CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the foregoing Appellant's
Brief has been served (by the method indicated below) on this the Wh day of
February 2015 to the following:

Michael Boltz By Fax: (832) 218-2400

1400 Woodloch Forest Dr.
Suite 540
The Woodlands, Texas 77380
Lead Appellate Attorney for Appellee

lSI William H. Luck, Jr.

William H. Luck, Jr.

17
 Appendix

Final Judgment signed on October 20,2014 ........................................... Tab 1

Rules R-46 - R-50 of the Commercial Rules of the American Arbitration

Association ........................................................................... Tab 2

The first decision of the arbitrator. ............................................... Tab 3

The second decision of the arbitrator. ............................................ Tab 4

Section 171.053 - 171.091 of the Texas Civil Practice & Remedies Code .. Tab 5

18
TAB 1
i
'.

1017/201411:47:20 AM
Chris Daniel - District Cieri< Harris County
Envelope No. 2744005
By. JONATHAN PATTON
Filed: 10171201411:47:20AM

NO. 2012-41959

JUAN A. RUEDA § IN TIlE DISTRICT COURT OF

Plaintiff/Counter Defendant §
§
v. § 11 TH JUDICIAL DISTRICT
§
RAN.DALL W. HOLLAND §
pefendantiCounter Plaintiff § HARRIS COUNTY, TEXAS

ORDER ON DEFENDANT/COUNTER PLAINTIFF'S MOTION TO CONFIRM

ARBITRATION AWARD

After considering DefendantiCounter Plaintiff, Randall W. Holland's motion to confirm

the arbitration award, the response, and arguments of counsel, an(,\ after a hearing on the motion, '\
the Court
,£ , /
{:, • I
, .. ~
.A""'''''' cI .
{l: .. ~.*"./.r-
oG~ "~:rg tall M!I8M. aRa~ters judgment in acc,?rdance with the atbittation MVM"a art: ' J
ORopPi tftat R;an:8all W. list_a's _mn:ey § tees in the tiiliouni of" are to 'S,-, "c
he paid by PlaiHaft1'CsHnte, Qei8fl~2nt bleD An Rueda... " "1

CD,20m. ./"'" ~ fe.

t> "''''.
J c....
SIGNED on ,2014.
" '"
.::;...,1..,
9.(

Page 1 ofl

221
TAB 2
The award shall be made promptly by the arbitrator and, unless otherwise agreed
by the parties or specified by law, no later than 30 calendar days from the date
of closing the hearing, or, if oral hearings have been waived, from the due date
set for receipt of the parties' final statements and proofs.

(a) Any award shall be in writing and signed by a majority of the arbitrators. It shall
be executed in the form and manner required by law.

(b) The arbitrator need not render a reasoned award unless the parties request such
an award in writing prior to appointment of the arbitrator or unless the arbitrator
determines that a reasoned award is appropriate.

(a) The arbitrator may grant any remedy or relief that the arbitrator deems just and
equitable and within the scope of the agreement of the parties, including, but not
limited to, specific performance of a contract.
(b) In addition to a final award, the arbitrator may make other decisions, including
interim, interlocutory, or partial rulings, orders, and awards. In any interim,
interlocutory, or partial award, the arbitrator may assess and apportion the fees,
expenses, and compensation related to such award as the arbitrator determines
is appropriate.
(e) in the final award, the arbitrator shall assess the fees, expenses, and compensation
prOVided in Sections R-S3, R-54, and R-SS. The arbitrator may apportion such fees,
expenses, and compensation among the parties in such amounts as the arbitrator
determines is appropriate.

(d) The award of the arbitrator(s) may include:

i. interest at such rate and from such date as the arbitrator(s) may deem
appropriate; and
ii. an award of attorneys' fees if all parties have requested such an award or it
is authorized by law or their arbitration agreement.

R-48. i\\Ai~:;rd Upon 5ett!ernent "'. Consent f..,ward

(a) if the parties settle their dispute during the course of the arbitration and if the
parties so request, the arbitrator may set forth the terms of the settlement in a
"consent award." A consent award must include an allocation of arbitration costs,
induding administrative fees and expenses as weil as arbitrator fees and expenses.

(b) The consent award shall not be released to the parties until all administrative fees
and all arbitrator compensation have been paid in full.

27 RULES AND MEDIATION PROCEDURES

Parties shall accept as notice and delivery of the award the placing of the award
or a true copy thereof in the mail addressed to the parties or their representatives
at their last known addresses, personal or electronic service of the award, or the
filing of the award in any other manner that is permitted by law.

Within 20 calendar days after the transmittal of an award, any party, upon notice
to the other parties, may request the arbitrator, through the AAA, to correct any
clerical, typographical, or computational errors in the award. The arbitrator is not
empowered to redetermine the merits of any claim already decided. The other
parties shall be given 10 calendar days to respond to the request. The arbitrator
shall dispose of the request within 20 calendar days after transmittal by the AAA
to the arbitrator of the request and any response thereto.

The AAA shall, upon the written request of a party to the arbitration, furnish
to the party, at its expense, copies or certified copies of any papers in the AAA's
possession that are not determined by the AAA to be privileged or confidential.

(a) No judiciai proceeding by a party relating to the subject matter of the arbitration
shall be deemed a waiver of the party's right to arbitrate.
(b) Neither the AAA nor any arbitrator in a proceeding under these rules is a necessary
or proper party in judicial proceedings relating to the arbitration.
(e) Parties to an arbitration under these rules shall be deemed to have consented that
judgment upon the arbitration award may be entered in any federal or state court
having jurisdiction thereof.
(d) Parties to an arbitration under these rules shall be deemed to have consented
that neither the AAA nor any arbitrator shall be liable to any party in any action for
damages or injunctive relief for any act or omission in connection with any arbitration
under these rules.
(e) Parties to an arbitration under these rules may not call the arbitrator, the AAA., or
AAA employees as a witness in litigation or any other proceeding relating to the
arbitration. The arbitrator, the AAA and AAA employees are not competent to
testify as witnesses in any such proceeding.

28 RULES AND MEDIATION PROCEDURES

TAB 3
 THE HONORABLE MARK DAVIDSON

770 South Post Oak Lane, Suite 410

Houston, Texas 77056

Mr. Rick Hawks

Mr. Michael Boltz

\1r. William Luck

near Counsel:

This matter was submitted to me as an arbitrator under the rules of the American
Arbitration Association. Both parties presented evidence and post submission briefs. This letter
is the award ofthe arbitrator. A reasoned ruling was requested, and the reasons for the findings I
make are included.
This is a dispute between two shareholders of a small business, Enviro-Grow Nursery,
Inc .. Claimant, .luan Rueda (herein ""Claimant") owns forty-nine percent of the stock.
Respondent Randall Holland (herein "Respondent") owns fifty-one percent of the stock. The
business apparently prospered for many years before the downturn in the national and local
economy in 2008. At some point after that, the profitability of the company declined. Their
business and personal relationship apparently also suffered. At some point, the Petitioner claims
the Respondent told him that he would need an army of lawyers and that he would take away
,'verything in the business. After that happened, this claim ensued.
Alleging a variety of cau..<:es of action, Claimant has plead that Respondent has used his
position as majority shareholder, president of the board of directors and president of the
company to reduce the value of his equity interest as a sharehQlder. He acknowledges the
existence of the "business judgment rule", but argues that the actions taken by Respondent are so
outside the pale of that rule that it is inapplicable. Specific actions taken by the Respondent the
Claimant argues were actionable arc;
I) Overcompensation of Respondent. For many years, the stated salary of the parties
was constant. Claimant made $1,000.00 a month and Respondent made considerable
more. This was not claimed to be inappropriate, since Claimant was only expected to
work on a part time basis, and worked the rest of the time in a business venture he
owned alone. After two management level employees left the company in 2009, the
Respondent took over some of their assignments. This was appropriate, since the
company was not making enough money to justify the hiring of new employees. The

147
 problem is that as the company's financial fortunes have continued to decline, the
Respondent has, at the very least, maintained the same level of compensation and in
some ways has increased it. The respondent's salary as a percentage of gross income
was almost doubled in the last five years, assuming the Company's books are corree/.
At a time in which the company's income and profits are in a steep decline, this is
inappropriate. The effect of five years' worth of these payments has been to shrink
the Claimant's equity interest in the company substantially. Ordinarily, I would think
the compensation of the chief officer of a company would fall within the business
Judgment Rule. In this case, however, the President/CEO raised his salary as the
company's fortunes declined
I acknowledge evidence that the salary is appropriate. First, the Plaintiffs expert
witness said it was, although he was short on specifics. The problem is that the
Plaintiff was apparently keeping two sets of books, and the Plaintiffs expert waS only
offered an 0Ppoltunity to see one ofthem. When you count the company-<>wned
truck the Respondent decided to give himselffor extra work he thought he was doing,
his level of compensation goes up considerably. The expert was not advised of this
form of compensation. Nor was the expert advised of the quaint practice of pocketing
cash sales. Whether his testimony would have been the same if he knew of that
additional compensation is unknown. It is telling that the Plaintiff was paying
himself handsomely for the additional work he was doing. but offered his bookkeeper
and co-owner substantially less amounts for doing additional work.
2) Conversion of Corporate Property to the Respondent. The evidence is a mixed
bag.
a. The golf cart. The company owned a number of golf carts, which they used
to take employees and customers around the property try to sell or retrieve
plants and trees. Apparently one of the carts was used by the Plaintiff. This is
not a major problem. However, he went on and converted the property to his
own name. The taking 0 f the value of a used golf cart is not a crime against
nature. It is symptomatic of a trend of converting corporate assets to his
ownership.
b. The cash sales. When the Claimant bought plants from the company, he and
the Respondent had negotiated that he would get them at half price.
Apparently, the company made less money, although they did make a profit,
on such sales. This was known to both parties. The Claimant paid cash. The
Respondent would pocket the cash. This was not known to both parties. As a
matter of law, this is taking property from the company without the
knowledge or consent of his co-owner.
c. The truck. The company paid for a Ford F250 truck, whieh was used for
company business. The title to the car was transferred to the Respondent.
The deed to this transaction was signed by the Respondent, deeding it to
himself. He did not intorm his co-owner of this transaction. It was recorded
in a separate ledger that he did not show to his co-owner or to his expert
witness as "extra compensation." Who was the judge of the value of his extra
compensation? Himself. Did he report his extra income to the IRS?
Apparently not.

148
 Respondent argues that Claimant purchased trucks from the company.as well.
The huge distinction here is that the purchase of those trucks was agreed J() by
bOlh shareholders. and that the corporation received money from the
transaction. Was the sale of the two trucks done for fair maJi(et value? J
heard no evidence one way or the other. The fact that the sales to the Claimant
ere agreed to by the Respondent is persuasive, if not conclusive. In the case
of the F250 truck, Respondent paid no money into the company, and did not
tell his co-shareholder of the transaction. That is a distinction and a difference
from Lhe purchase of the two trucks.

Respondent further argues that the truck was extra considemtion tor the extra
work he was doing. This begs all sorts of questions. First - what independent
valuation did he get before the transfer of the truck tor this extra
consideration? (Answer - no evidence presented - from which I presume
none.). Second - What extra cOllsideration did he offer other employees for
the extra work they were doing (Answer - much, much less were paid or
offered to the Claimant and the bookkeeper.) Third - in selling a company
asset to himself without any increase in the company's cash on hand, is this
not stripping the company of equity as a matter of law? (Answer - yes)

d. The Country Club Membership. This falls squarely within the Business
Judgment Rule. The evidence is that it is used for business entertainment. No
evidence was presented of excessive personal use.
e. The Grimes County Tree farm. This was, by far, the largest physical asset
of the company. The question of whether to sell led to a significant
disagreement between the panies. The Respondent advocated "shrinking the
company in order to grow the company." The problem is that after he shrunk
the company, he paid virtually all of the money to himself and his family, and
the company grew not at all.
L The Boat. This was clearly a marketing concept by making an
accommodation to a good customer. It is well within the business judgment
rule.

3) Increase in Rent Payments. The Respondent has raised the rent the company pays
him to rent property he owns. The company has rented the property for a number of
years, and rent was the same until the Respondent removed the Claimant from the
board of directors ofthe company. Since then, he has gradually raised the rent every
year. The evidence establishes that rent is now a much higher percent of gross
income than it was before the disagreement between the parties. There is no question
that the Respondent is the beneficiary ofthis increase, and that the company has
received no benefit from the increase oFrenlS. Nonetheless, since rents are within
market rates, I am (barely) unable to find a violation of the law on this portion of the
complaint.
4) Summary. I find that the Respondent breached his duties to his co-shareholder. J
find that he decreased the equity of the company, and that much, but not all, of the
diminishment in net equity of the company was converted to his personal use. To the
extent to which assets were converted 10 his personal benefit to provide him extra

149
 compensation for extra work he has doing, I find that he failed to act as a fiduciary
should to his co-shareholder, and that his determination of the value of his extra work
was not based on acceptable or customary standards of corporate compensation. To
the extent to which he used corporate equity to pay himself and his family back for
loans, he failed to consider all corporate responsibilities in making a decision that
helped only himself.
5) Damages. This is trickier. The business was losing money when the Respondent
started taking its net equity. He accelerated its loss of shareholder equity. Some of
the things he did were within the business judgment rule. The decision to continue
the business was certainly within the business judgment rule. My ruling is to give the
Claimant 49% of the value of the Ford Truck, the equity in the Grimes county tree
fann and the golf cart, offset by 49% of the amount of the settlement of the suit
brought against the corporation by Amegy Bank. By my calculation that comes to
$74,572.36. In addition to that, I award prejudgment interest at the legal rate, court
costs, and, if applicable, fees of arbitration.
6) Conclusion. Neither ofthe parties are evil people. lbey had a faIling out. It
happens. If the Respondent had chosen to buyout the Claimant, none of this would
have happened. Instead, he tried to reduce the Claimant's equity to nothing. Now, he
owes him this money and Mr. Rueda is still a shareholder. Perhaps they can work
together to either wind down the company or to let it grow again. I hope so. In the
meantime, a judgment consistent with this ruling should be submitted to the Court as
soon as possible.
Thanks to all for the opportunity to serve.

Respectfully submitted,

MARK DAVIDSON

MD/ms

150
TAB 4
 AMERICAN ARBITRATION ASSOCIATION
Commercial Arbitration Tribunal

Juan A. Rueda, )
Claimant. )
v. )
)
Randall W. Holland ) AM Case No. 7020 \300 0744
Respondent, )
)
v. )
Em·iro-Grow Nursery Inc. )
Respondent. )

FINAL AWARD OF ARBITRATOR

I. THE UNDERSIGNED ARBITRATOR, having been designated in accordance with the

arbitration agreement entered into between the above-Ilanted parties and dated March I, 1995,
and in accordance with the Commet·cial Rules of the Ametican Arbitl"ation Associationsnd
having been duly sworn, and having duly heard the proofs and attegations of the Parties at
heating held on May 7, 2014 and .lune 5, 2014, at which William Luck was present on behalf of
Claimant Juan Rueda, Michael Boltz was present on behalf of Randall Holland, and Richard
Hawks was present on behalf of Enviro-Ot'Ow NursefY, inc., which was named as a third-party in
Randall Holland's Answer and Counterolaim after the case was initialed, hereby AWARD as
tbttows:

TIle Claimant takes nothing. The RespondenlsfCross Claimants take nothing.

I altach the ruling I had written aud submitted to the AAA the day before RIC/lie v. Rupe
was aOllollllced by the Texas Silpreme Court. The Richie case, by its temls, overruled years
of precedents toom the Courts of Appeals that created a common law cause of action for
-.:hRreholdcr oppression. My preliminary opinion, as you witt see, awarded the Claimant a
judgmenl on Ihat theory. The Richie case lakes away that theory, and his judgment.

Tile Claimant also asks for a j\ldgment iYdsed 011 an .informal relationship. I am \ltlable 10
find the existence of such an informal relationship all lhe facts ofthis case. While there may be
cases in Ihe corporate organizational slmcture in wltich such a relationship exists, J am unable
lind that this is such a case within the meaning of the Richie opinion.

Since those are the only two causes of action submitted by the Claimant, he is not entitled
to relief.

151
 The Respondent bas COllnterslled for his attol'lley" fees, claiming that this is a frivolous
claim. First, but for the timing ofthe release ofthe Richie opinion, he would have a judgment
entered against him. Second, I was aware of the Court of Appeals opinion, and relied, ill pari, on
it for the ,"Casoning of my prelimiDllry opinion. 'll,e Claimant relied 011 existing case law. Tltat
deteats a claim ofa frivolous claim as a matter of law.

nle Administrative tees and expenses of tlte AAA totaling $6, I00.00 are to be borne by Juan
Rueda. The Compensation 811d expenses of AIbitrlllors totaling $8,365.00 are to be borne
equally.

This Award is in full settlement of all claims 8nd counterclaims submitted to this Arbltration.
All claims not expressly granted herein are hereby denied. Ajudgmellt consistent with Ihis ruling
should he submitted to tlte COllrt as soon as Jlossible.

MARK DAVIDSON, AI'bilral'or

July 9,2014

152
 AMERICAN ARBITRATION ASSOCIATION
Commerclal Arbitration Tribunal

JU811 Rueda, )
Claint.1nl, )
v. )
)
Randall W. Holland ) AAA Case No. 7020 [3000744
Respondent, )
)
v. )
Enviro-Gt'ow Nursery Tnc )
Respondent )

FINAL AWARD OF ARBITRATOR - NOT SIGNED OR ADOPTED

I, THE UNDERSIGNED ARBITRATOR, having been designated in accordance with the

a"bitration agreement entered into between the above-named p31iies and dated March I, 1995,
and in accordance with the Commercial Rules of the American Al'bitration Association and
having been duly sworn, and having duly heard the proofs and allegations of the Parties at
hearing held on May 7, 2014 and June 5, 2014, at which William Luek was present on behalf of
Claimant Juan Rueda, Michael Boltz was present 011 behalf of Randall Holland, alld Richard
Hawks was present 011 behalf of Enviro-Gl'Ow Nursery, Inc., ,hereby AWARD as follows:
This is a dispute between two shareholders of a small business, Envim-Grow
Nursery, Inc .. .Iuan Rueda (herein "Claimant") owns forty-nine pCl'cen! of the stock.
Respondent Randall Holland (herein "Respondent") 0\\015 fifty-one percent of the stock. The
evidence presented at Irial indicate that the husiness apparently prospered for many years before
the downtul'll in the national and local economy ill 20()S. At some point after that, the
profitability of the company declined. Their business and personal relationship apparently also
sufIered. At some point, the Petitioner claims the Respondent told him that he would need an
army of lawyers and that he would take away ever),thing in the business. After that happened,
this cluim ensued.
Alleging a variety of callses of action, Claimant has plead that Respondent has used his
position as mlliority Shareholder, president of the board ofdireetors and president of the
company 10 reduce the vallie of his equity interest as a shareholder. He ackl10wledges the
existence oCthe "businessjudgnlent rule", but argues that the actions taken by Respondent are so
outside the pale of that n.le that it is inapplicable.

Specific actions taken by the Respondent. that the Claimant argue.. were action.ble are:

1) OverC(lInl.ensation of Respondent. For many years, tbe stated stllury of the parties was
eonslallt. Claimant made $1,000.00 a month and Respondent made considerablY more. This
was 110t claimed to be inappropriate, since Claimant was only expected to work on a part

153
 time basis, and worked the rest of tbe time in a business venture be owned alone. After two
m..nagement level employees left the company in 2009, the Respondent took over some of
their assignment.~. This was appropriate, since the company was not making enough mOlley
to justify the hiting of new employees. The problem is that as the company's financial
fortunes have continued to decline, the Respondent has. at the very least, maintained the
same level of compensation and in sOllle ways has increased it. The Respondent's salary us a
percentage of gross income was .lmost doubled in the last five years, assllming Ihe
COlllpllllJ"S books are correct. At a time in which the company's iIlcome and profits are in 8
steep decline, tltis is inappropriate. The effect of five years' worth of these payments has
been to shrink the Claimant's equity interest ill the company substantially. Ordinarily, r
would think the compensation of the chief officer of a company would fall within the
Busines. Judgment Rule. In this case, howc"er, the President/CEO raised his salary as the
company's fortunes declined
[ acknowledge evidence presented at hearing that the salary is appropriate. First, the
Respondent's expert witness said it was, although he was short 01) specifies. The problem is
that the Plaintiff was apparently keeping two sets of books, and the Rospolldent's expert was
only oITered an opportunity to see one of them. When you cOllnt the company-owned truck
the Res]IDndent decided to give himself for extra work he thought he was doing, his level of
compensation goes up considerablY. The expeti was not ad"ised of this form of
compensation. Nor was the expet1 advised of the quaint practice ofpocketing cash sales.
Whether his testimony would Ilave been the S8ll1e if he knew of that additional compensation
is unknown. It is telling that the Respondent was paying himself handsomely for the
additional work he was doing, but offered his bookkeeper and co-owner substantially less
amollnts for doing additional work.
2) Conversion of COloporate Property to the RespOJIdent.
a. The golf cart. The compal1y owned a nllmber of golf cam, which tbey used to take
employees and clIstomers arollnd the propelty to try to sell or retrieve plants and
tree~. Applucntly one of the C811s was used by the Respondent. This is not a ml\ior
problem. However, he went On ftnd converted the property to his own name. The
taking of the value of a used golf Catt is not a crime against nature. It is symptomatic
of a trend of converting corporate assets to his ownership.
b. TIle cash 98Ies. When the Claimant bought pilll1ts from the company, he and the
Respondent had negotiated that he would get them at half price. Apparentl)'. the
company made less money, although they did make a profit on such sales. This was
known to both pal1ies. The Claimant paid cash, and the Respondent would pocket the
cash. This was not known to both parties. As a matter of Jaw, this is taking property
hom the compnny without the knowtedge or consent of his co· owner.
c. The trlld<. The company paid for a Ford F250 truck, which was used fur compat')'
business. '!1le title to the car was transfen..,d to the Respondent. 'The deed to this
transactioll was signed by the Respondent. deeding it to himself. He did not inform
his CO-01\11er of this trAnsaction. It was recorded ill a sepamte ledger that he did not
show to his co-ownel' or to his expert witness as "extra compensation." Who was the
judge of the value of his extra compensation? Himself. Did he report his extra
income to the IRS? Apparently lIOt.
Respondent argues that Clahnant purchased trucks fl'OlI1 the company us well. The
hnge distinction here i.. that the purchase of those trucks \l'as agreed to by bOlh

154
 .,hal'eholtle..s, and that the corporation received money from the IraJl.,action. Was the
sale of the two trucks done for fair nlarket value? I heard no evidence one way 0" the
other. The ract that the sales to the Claimant were agreed to by the Respondent is
persuasive, ifnot conclusive. In the case of the F250 tL'Uck, Respondent paie! no
moncy into tbe company, and did lIot tell bis co-shareholder of the transaction. That
is a distinction and a difference ftODllhe purchase of the lwo trllcks.
Respondent further argues tbat the !nIck WItS extra consideration for the extra work he
was doing. This begs all sorts of questions. First - what independent valuation did
he get before the tnu\S[er oflhe tmel< tor this extra consideration? (Answer - no
evidence presented - from which J presume none.). Second ... What extra
conside.ration did he offer other employees for the extra work they were doing
(Answer - much, much less were paid or offered to the Claimant and tbe
bookkeeper.) Third·- ill selling a company asset to himself without any increase in
the company's cash on 118nd, is this not stripping the company of equity as a matte,' of
law? (Answer - yes)
d. The Country CluJ, MembeJ·shlp. This falls squarely witbin tbe Business Judgment
Rule. The evidence is that it is llsed for business enteItainmcnt. No evidence was
presented of excessive personal use.
e. Tbe G"bnes Connty Tree farm. This was, by far, the largest physical asset ofthe
company. The question of whether to sell led to a significant disagreement between
the parties. The Respondent advocated "shrinking the company in order to grow the
company." The problem is that after he sluunk the company, he paid viltuoUy all of
the money to himself and his family, and the company grew not at all.
[ The Boat. This was clearly a marketing concept by making an accommodation to a
good customer. It is well within the business judgment rule.

3) Increase in .Relit Payments. The Respondent has raised the rent the company pays him to
rent propelty he OWIIS. The company has rented the JlIOpe!1y fOI' a number of years, and rent
was the same until the Respondent removOO the Claimant from the board of directors of the
company. Since then, he has gradually raised the rent every year. The evidence establisbes
that !'ent is now ft much higher percent of gross income than it was before the disagreement
bctween thc p811ics. There is no question that the Respondel\t is the beneficiary of this
increase, and that the company has r~ceivOO no benefit fi'Om the increase of rents.
Nonethele....., since ,'ents are within market rates, I am unable to find a violation of the lnw on
ihis portion of the complaint.
4) Summary. I find that the Respondent breached his duties to his co-shareholder. I find that
he decreased Ihe equity of the company, and that much, bllt not all, of the diminislm>ent in
net equity oflhe company was converled to his personal use. To the extent to which assets
were converted to his personal benefit to provide him extra compensation for extra work he
has doing, I find tltat he failed to act as a fiduciary should to his co-shareholder, and that his
determinatioll of the value of his extra work was not based on acceptable 0" customary
standards of corpOrate compensation. To the extent to which he used corporale equity to puy
himself and bis fillnily back for loans, he failed to consider all corporate responsibilities in
making a decision thaI helped only himself,
5) Damages. The business was losing money when the Respoodent started taking its nel equity.
He acceie ....ted its loss of shareholder <:quily, Some of the things he did were within the

155
 ~-

business judgment rule. The decision to continue the business was certainly within the
business judgment mlo, My ruling is to give the Claimant 49% of the value of the Ford
Truck, the equity in the G,·jme. county 1ree farm and the golfcRrt(s}, offset by 49% ofthe
smount oflhe ""Illement of the suit brought against the corporation by Amegy Bank. By my
calculation that comes to $74,572.36. In addition to that, I award prejudgment interest at the
legal rate, cOUli costs, and, fees of arbitration,
6} Conclusion •. This Award is in nul settlement of all claims alld counterclaims submitted to
this Arbitration. All claims not expressly granted herein B''C hereby denied, In the meantime,
a judgment consistent witb this ruling should be submitted to the Court as soon as possible.
Thanks to all for Ihe opporlllllity to serve.
Respectfully submitted,

MARK DAVIDSON

MOlin •

156
TABS
 CIVIL PRACTICE & REMEDIES CODE
CHAPTER 171. GENERAL ARBITRATION
§§171.051 • 171.054

CPRC §171.0SI. SUBPOENAS CPRC §171.053. ARBITRATORS'

AWARD plic,
(a) The arbitrators, or an arbitrator at the direction
(a) The arbitrators' award must be in writing and mus
of the arbitrators, may issue a subpoena for:
signed by each arbitrator joining in the award. jecti
(I) attendance of a witness; or (b) The arbitrators shall deliver a copy of the award terti
(2) production of books, records, documents, or to each partY personally, by registered or certified mail, • (
other evidence. or as provided in the agreement. lion
(b) A witness required to appear by subpoena un· (c) The arbitrators shall make the award: 171.1
der this section may appear at the hearing before the (I) within the time established by the agreement to ' H
1997, ;
arbitrators or at a deposition. arbitrate; or H
(c) A subpoena issued under this section shall be (2) if a time is not established by the agreemen~ 1,1961
TRCS.
served in the manner provided by law for the service of within the time ordered by the court on application ofa S,
a subpoena issued in a civil action pending in a district PartY· ....nfi
lion," I
court. (d) The parties may extend the time for making'
(d) Each provision oflaw requiring a witness to ap' the award either before or after the time expires. The
pear, produce evidence, and testify under a subpoena extension must be in writing. 1
issued in a civil action pending in a district court ap· (e) APartY waives the objection that an award _ (rex
plies to a subpoena issued under this section. not made within the time required unless the PartY no- TRC:
Hi8101), of CPRe §17I.OS1: Revised from fonner CPRe §171.007 by Acts tifies the arbitrators ofthe objection before the delivel)' appli
1997, 75th Leg., ch. 165, §S.ol, eft'. Sept I, 1997. of the award to that partY. aWaJ
HistoryofFonnerCPRC §171.007:Acts 1965,59th Leg.,ch.689, § I, eff. Jan. History of CPRe §111.053: Revised from fonner CPRe §171.0OS by Acb '
I, 1966. Codified and amended by Acts 1995, 74th Leg., ch. 588, § I, eff, Sept. I,
awa1
1997,75th Leg., ch. 165. §5.01, eft'. Sept I, 1997.
1995. Souree: TRes art. 230. HistoryofFonnerCPRC §171.008:Acts 1965,59th Leg., ch. 689, § I, elf. Jan. ') arbi1
See a1$Q 9 U.S.C. §7 (federal arbitration statute-wi.tness before arbitra· 1,1966. Codified and amended by Acts 1995, 74th Leg., ch. 588, §I, eft', SeptJ, cati,
tors; fees; compeUing attendance); O'Connor's Te.rtu Rules. "Arbitralion,~ 1995. Source: TRCS art. 231.
00.4-(;, p. 305. See also 9 U.S.C. §9 (federal arbitration statute---award of arbitraton;
that
conflrmalion;jurisdiction; procedure); O'COIlIIQrl' TutU Rules, "Arbitration,~ "
ANNOTATIONS ch. 4-C, p. 305.

Transwestem Pipeline CO, D. Blackburn, 831 l

S.W2d 72, 78 (Tex,App.-Amarillo 1992, orig. proceed· Gray v. Noteboom, 159 S.W.3d 750, 754 (Tex. iratE
ing). "[T]he [TAA] empowers the arbitrators to autho· App.-Fort Worth 2005, pet. denied). "Arbitrators are; pem
rize discovery ... , which can be enforced by orders of not required to state the reason for their award or to paid
the court." make any findings of fact." H
1997,-
Mewboume Oil Co. v. Blackburn, 793 S.w2d 735, CPRC §171.0S4. MODIFICATION OR H
737 (Tex.App.-Amarillo 1990, orig. proceeding). "The CORRECTION TO AWARD 1,1961
question of repudiation is for the determination of the 1995.:
(a) The arbitrators may modify or correct an S
arbitrators, who are empowered to cause the discovery award:
necessary for their resolution of the issues before (I) on the grounds stated in Section 171.091; or
them." (2) to clarify the award. Sl
CPRC §I71.0S2. WITNESS FEE (b) A modification or correction under Subsection
The fee for a witness attending a hearing or a depo· (a) maybe made only: 1
sition under this subchapter is the same as the fee for a (I) on application of a party; or 171.1
witness in a civil action in a district court. (2) on submission to the arbitrators by a court, if . . this
History of ePRe §171.052: Revised from fonner ePRe §171.007 by Acts an application to the court is pending under Sections , 'risdi
1997, 75th Leg., ch.I65. §5.01, eft'. Sept. I, 1997. 171.087, 171.088, 171.089, and 171.091, subject to any 'rend
HistolYofFonnerCPRC §171.007;Acts 1965.59th Leg., ch. 689, § 1, eft'. Jan.
1,1966. Codified and amended by Acts 1995, 74th Leg., ch. 588, §1, eft'. Sept. I, condition ordered by the court. H
1995. Source: TRCS art. 230. (c) A party may make an application under this '. 1997, 'j
See a1so 9 U.S.C. §7 (federal arbitration statute-witness before arbitra-
tors; fees; compeUing attendance); O'CollllOr'a 1'ex/lS Rule', "Arbitration,"
section not later than the 20th day after the date the ' "I, I~
ch. 4-C, p. 305. award is delivered to the applicant ' ·'1995. ~

488 O'CONNOR'S CPRC

 CIVIL PRACTICE 8c REMEDIES CODE
CHAPTER 171. GENERAL ARBITRATION
§§171.0S4·171.083
(d) An applicant shall give written notice of the ap·
plica.tion promptly to the opposing party. The notice
be in wri:ting:'lj state that the opposing party must serve any ob·
he award. to the application not later than the 10th day af-
date of notice.
(e) An award modified or corrected under this sec-
is subject to Sections 171.087, 171.088, 171.089,
e award: ":,171.090, and 171.091.
'the agre'emel~tl History of CPRe § 171.054: Revised from former CPRe § 171.009 by Acts
75th Leg., ch. 165. §5.01, eft'. Sept 1, 1997.
Hi'toryofFonnerCPRC §171.009: Acts 1965,59th Leg., ch. 689, § I, elf. Jan.
y the ag~eemlent ,1966. Codified by Acts 1995, 74th Leg., ch. 588, §I, elf. Septl, 1995. Source:
n application
See also 9 U.S.C. § 11 (federal arbitration statute-award of arbitrators;
,- modifiWion or correction; grounds; order); O'Connon 7knu Ruler, "Amitra-
o,-tiOD," ch. +C, p. 30S.
Teleometrlcs Int'l D. Hall, 922 S.W.2d 189, 192
(Tex.App.-Houston [1st Dist.] 1995, writ denied).
TRCS art. 232, now CPRC §171.054, "provides that an
application to the arbitrators to modify or correct an
award shall be made within 20 days after delivery of the
award. We read this language as mandatory, such that
·arbitrators may not change an award based on an appli-
cation for modification or correction made outside of
that time period."
CPRC §171.01515. ARBITRATOR'S
FEES & EXPENSES
Unless otherwise provided in the agreement to arbi-
750, 754 (Tex. trate, the arbitrators' expenses and fees, with other ex-
'Arbitrators are penses incurred in conducting the arbitration, shall be
leir award or to paid as provided in the award.
History of CPRe § 171.055: Revised from fonner CPRC § 171.010 by Acts
1997, 75th Leg., ch. 165, §5.0l, eff. Sept 1, 1997.
!l.TION OR HistoryofFonnerCPRC §171.010: Acts 1965,59th Leg., ch. 689, § 1, eff. Jan.
ARD 1,1966. Codified and amended by Acts 1995, 74th Leg., ch. 588, §l, eff. Sept t.
or correct an 1995. Source: TRCS art. 233.
See also O'CoIlllOr'S Taal Rules, "Arbitration," ch. 4-C, p. 305.
" 171.091; or Sections 171.056-171.080 reserved for expansion
SUBCHAPTER D. COURT PROCEEDINGS
der Subsection
CPRC §171.081. .JURISDICTION
The making of an agreement described by Section
171.001 that provides for or authorizes an arbitration in
s by a court, if this state and to whieh that seclion applies confers ju-
lOder Sections risdietion on the court to·enforce the agreement and to
subject to any
render judgment on an award under this chapter.
History of CPRC § 171.081: Revised from fonner CPRe §171.011 by Acts
on under this 1997, 75th Leg., ch. 165, §5.01, eff. Sept 1, 1997.
HistoryofFonner CPRC §171.011:Acts 1965, 59th Leg., ch. 689, §I, etl'. Jan.
r the date the 1, \966. Codified and amended ~ Acls 1995, 74th Leg., ch. 588, § 1, eff. Sept 1,
1995. Source: TRCS art. 234.
See also 9 U.S.C. §9 (federal arbitration statute-award of arbitrators;
confinnation;jurisdiction; procedure); O'ConnQl'~ TutU RaJa, "Arbitration,"
ch. 4-C, p. 305.
CPRC §171.082. APPLICATION
TO COURT; FEES
(a) The filing with the clerk of the court of an ap-
plication for an order under this chapter, including a
judgment or decree, invokes the jurisdiction of the
court.
(b) On the filing of the initial application and the
payment to the clerk of the fees of court required to be
paid on the filing of a civil action in the court, the clerk
shall docket the proceeding as a civil action pending in
that court.
History of CPRe §171.082; Revised from former CPRe §171.012 by Acts
1997, 75th Leg., ch. 165, §5_01, eO'. Sept. }, 1997.
History ofFonnerCPRC §171.012:ActB 1965,59th Leg., ch. 689, §1, eff.Jan.
\,1966. Codified and amended by Acts 1995, 74th leg., ch. 588, §1, eft. Sept. I,
1995. Source: TRCS art. 235.
See also 9 U.S.C. §3 (federal arbitration statute-stay of proceedings
where issue therein is referable to arbitration), §6 (federal arbitration stat-
ute-application heard as motion); O'Co~ TutU Ruin, "Arbitration,"
ch. 4·e, p. 305.
ANNOTATION.
Quanto Int'I Co. v. Uoyd, 897 S.W.2d 482, 487
(Tex.App.-Houston [1st Dist.] 1995, orig. proceed-
ing). TRCS art. 235, now CPRC §171.082, "authorizes,
as an independent cause of action, the invoking of a
trial court's jurisdiction to compel arbitration." But see
In re Riggs, 315 S.W.3d 613, 615 (Tex.App.-Fort
Worth 2010, orig. proceeding) (request for arbitration
is not independent cause of action).
CPRC§171.083. TIME FOR FILING
An applicant for a court order under this chapter
may file the application:
(I) before arbitration proceedings begin in sup·
port of those proceedings;
(2) during the period the arbitration is pending be-
fore the arbitrators; or
(3) subject to this chapter, at or after the conclu-
sion of the arbitration.
History of CPRC §171.083: Revised from fonner CPRC §171.0I2 by Acts
1997, 75th Leg., ch. 165, §5.0I, eff. Sept. 1, 1997.
HistoryofFonnerCPRC §171.012:Acts 1965,59th Leg., ch. 689, § 1, eft. Jan.
1,1966. Codified and amended by Acts 1995, 74th Leg., ch. 588, §I, eft. Sept. 1,
1995. Source: TRCS art. 235.
See also 9 U.S.C. §3 (federal arbitration statute-stay of proceedings
where issue therein is referable to arbitration), §6 (federal arbitration stat-
ute-application heard as motion); O'COllllor'l Tem8 Rules, ~Arbitration,"
ch. 4-C, p. 305.
O'CONNOR'S CPRC 489
 CIVIL PRACTICE & REMEDIES CODE
CHAPTER 171. GENERAL ARBITRATION
§§171.087 - 171.088

------------------*
judgment for the arbitrator's merely because it would close facts that might, to an objective observer, create a D.R.Ho.
have reached a different conclusion." reasonable impression of her partiality. Aod we have 532,534 (T'
held that a party does not waive an evident partiality filed 3-4-14,
CPRC §171.088. VACATING AWARD
challenge if it proceeds to arbitrate without knowledge when he dis
(a) On application of a party, the court shall vacate
an award if: of the undisclosed facts. [y] Today, we are asked to idea of justi,
evaluate these standards in light of a partial disclosure. his authorit
(I) the award was obtained by corruption, fraud, or
Here, the neutral arbitrator in question disclosed that preted the c(
other undue means;
the law firm representing one party to the arbitration tor does not
(2) the rights of a party were prejudiced by:
had recommended him as an arbitrator in three other take of law
(A) evident partiality by an arbitrator appointed as properly bef,
arbitrations. He also disclosed that he was a director of
a neutral arbitrator;
a litigation services company and attended a meeting at not whether
(8) corruption in an arbitrator; or the law firm, but there was no indication the firm and " but instead ~
tor,
(e) misconduct or wilful misbehavior of an arbitra· company would ever do business. [The court lists all:' issue at atl.
the undisclosed business contacts arbitrator had with Blacko.
(3) the arbitrators: law firm.] We hold the failure to disclose this additional Christi 201
(A) exceeded their powers; information might yield a reasonable impression of the ,', 4-18-13). "11
(8) refused to postpone the hearing after a show· arbitrator's partiality to an objective observer. We fur- , 'the legislall
ing of sufficient cause for the postponement; ther hold that because the party making the evident: limitations I
(C) refused to hear evidence material to the contro- partiality challenge was unaware of the undisclosed in- : court to vael:
versy; or formation, it did not waive the claim. Accordingly, we ' the statute I
(D) conducted the hearing, contrary to Section reverse the court of appeals' judgment and reinstate:, which to tile
171.043,171.044, 171.045, 171.046, or 171.047, in a man- the trial court's order vacating the award and requiring: concomitantl
ner that substantially prejudiced the rights of a party; or a new arbitration." all grounds t
(4) there was no agreement to arbitrate, the issue gard, we notE
CVN Grp. v. Delgado, 95 S.W.3d 234, 239 (Tex.,
was not adversely determined in a proceeding under quirements f
2002). "[AJn arbitration award cannot be set aside on
Subchapter B, and the party did not participate in the to be no poli(
public policy grounds except in an extraordinary case in
arbitration hearing without raising the objection. rate, formal '
which the award clearly violates carefully articulated,
(b) A party must make an application under this the court an(
fundamental policy."
section not later than the 90th day after the date of de- the award v,
livery of a copy of the award to the applicant. A party Burlington N. R.R. Co. v. Thco Inc., 960 S.w2d party seekin
must make an application under Subsection (a)(I) not 629,629-30 (Tex. I 997). "Under [CPRC] §171.014 present any g
later than the 90th day after the date the grounds for §171.088], a court shall vacate an arbitration award erwise, thOSE
the application are known or should have been known. there has been 'evident partiality by an arbitrator also clear tha
(c) If the application to vacate is denied and a mo- pointed as a neutral.' We hold that a neutral arbitrator:: lion of the aw
tion to modify or correct the award is not pending, the selected by the parties or their representatives exhibits no authority I
court shall confirm the award. evident partiality under this provision if the arbitrator " not consider I
History ofCPRC §171.088: Revised from fonner CPRe §171.014 by Acts does not disclose facts which might, to an objective ing a timely fi
1997, 75th Leg., ch. 165, §5.01, eft'. Sept. 1, 1997. server, create a reasonable impression of the arbilra-: We conclude
HistoryofPonnerCPRC § 171.014: Acts 1965, 59th Leg., ch. 689, §I, eft'. Jan.
1,1966. Codified and amended by Acts 1995, 74th Leg., ch.S88, §l, elf. Sepll, tor's partiality. At 632:' [E]vident partiality' is also a 00- ' sues in this a
1995. Source: TRCS art. 237. sis for vacating awards under the [FAA], ... as well as , 90-day period
See also 9 U.S.C. §IO (federal arbitration statute-award of arbitrators;
vacation; grounds; rehearing), §12 (federal arbitration statute-notice alma- the arbitration statutes of many sister states. At 635: ' Las Palm
tions to vacate or modify; sen>iOOj stay of proceedings); O'Connor!! Te.urs [A]rbitrators should not be per se disqualified because, 69 (Tex.App.-
Rules, ~ Arbitration," ch. 4-(, p. 305.
of a business relationship with a party. Instead, the ' mistake ... 01
competing goals of expertise and impartiality must be' tion award 0
Tenaska Energy, Inc. v. Ponderosa Pine Ener- balanced. At 636: We emphasize that this evident par- ,', §171.088(a)(
gy, LlC, _ S.W.3d _ (Tex2014) (No. 12-0789; tiality is established from the nondisclosure itself, an award ailE
5-23-14). "[W]e held almost two decades ago that a gardless of whether the nondisclosed information nec- show immort
neutral arbitrator is evidently partial if she fails to dis- essarily establishes partiality or bias." [EJvident par
492 O·CO...... OR·S CPRC
 CIVIL PRACTICE & REMEDIES CODE
CHAPTER t 71. GENERAL ARBITRATION
§§171.088 - 171.091

quired under [CPRC] §171.088 to vacate the arbitra-

*------------------
(2) by the court under Section 171.041, if the (2) the arbitrator
tion panel's modified award." agreement does not provide the manner for choosing '"~,,,, to a matter not,
Blue Cross Blue Shield v. Juneau, 114 S.W.3d 126, the arbitrators. be corrected with
135 (Tex.App.-Austin 2003, no pet.). "Absent a statu- (b) If the award is vacated under Section "'"i.ilm made with resp'
tory ground to vacate or modify an arbitration award, a 171.088(a)(3), the court may order a rehearing before ted; or
reviewing court lacks jurisdiction to review other com- the arbitrators who made the award or their successors (3) the form ofth
plaints about the arbitration, including the sufficiency appointed under Section 171.041. affecting the meri
of the evidence supporting the award. At 136: A suit (c) The period within which the agreement to arbi· (b) A party must
against an individual arbitrator is not contemplated by trate requires the award to be made applies to a rehear·
'l ','~C"U" not later than
the [TAA]. [W]e hold that an application to vacate the ing under this section and commences from the date of ofa copy of the
award for an arbitrator's alleged misrepresentation or the order.
failure to disclose a relationship is the exclusive rem- History of CPRC §171.089: Revised from fonner ePRC §171.014 by Acts (c) If the applic,
edy under the [TAA]." See also Jamison & Harris v. 1991, 75th Leg., ch. 165, §S,OI, eff. Sept I, 1997. '" " modify or correct th
Hislol)'ofFonnerCPRC § 171.014: Acts 1965, 59th Leg., ch. 689, §l, eff.Jan.
National Loan Investors, 939 S.W2d 735, 737 (Tex. 1,1966. Codified and amended by Acts 1995, 74th Leg., ch. 588, §l, eff. Sept. I, shall confirm the awa
App.-Houston [14th Dist.] 1997, writ denied). 1995. Source: TRCS art. 237. :"a"l)licati,~n is not gn
See also 9 U.S.C. §IO (federal arbitration statute-award of arbitrators;
Hoggett v. Zimmennan, Axelrad, Meyer, Stern & vacation; grounds; rehearing), §12 (federal arbitration statute-notice oflllO-
tions to vacate or modify; service; stay of proceedings); O'Connor'8 Te.ra (d) An applicati(
Wise, P.C., 63 S.W3d 807, 811 (Tex.App.-Houston Rules, "Arbitration," ch. 4-C, p. 305.
[14th Dist.] 2001, no pet.). "Although there are no "_._•. ~- joined in the
CPRC §f 71.090. TYPE OF RELIEF , 'vacate the award.
cases interpreting 'sufficient cause for postponement' NOT FACTOR
under §171.088(a)(3)(B), the grounds a court would History of CPRC §171.0!
The faet that the relief granted by the arbitrators 1997, 75th "'8., 'h, 165, §5,01
find sufficient to support a motion for continuance in a HistoryofFonnerCPRC 1
could not or would not be granted by a court of law or
trial court are instructive in this context. That a party to 1,1966. Codified and amende
equity is not a ground for vacating or refusing to can· 1995. Source: TRCS art. 238.
a lawsuit has other business engagements is generally See .11. 9 U,S.C. § 11 (~
firm the award.
not a ground for which a trial court will grant a continu- History of CPRC § 171.090: Revised from fonner CPRC § 171.014 by Acts " ' modification or correction; gJ
. '" notice of motions to vacate 0
ance. Instead, a request for postponement due to the 1997, 75th Leg., ch. 165, §5.01, eff. Sepl I, 1997.
; entl arbitration statute----pap<
absence of a party at trial must also show such things History of Fonner CPRe §171.0 14: Acts 1965, 59th Leg., ch. 689, § I, eff. Jan. lng; force and effect; enfortL
1,1966. Codified and amended by Acts 1995, 74th Leg., rh. 588, §l, eR'. Sepll, .. cld-C. p. 305.
as: the diligence used to arrange for the presence of the 1995. Source; TRCS art. 237.
party, that the conflicting business engagements could See also 9 U.S.C. § 10 (federal arbitration statute-awani of arbitrators;
vacation; grounds; rehearing), § 12 (federal arbitration statute-notice of mo-
not be rescheduled, that the nature of the business en- tions to vacate or modify; service; stay of proceedings); O'Connor'8 Tf!%fU
gagements was such as to require the personal pres- Rules, "Arbitration," ch. 4-C, p. 305. CaUahan & Ass,
ence of the party, and that they could not be repre- ANNOTATIONS'
841, 844 (Tex.2002)
sented at the conflicting engagement by someone ing court to modify •
else."
Pi/litteri v. Brown, 165 S.W.3d 715, 721 (Tex. bitrator's 'evident m
App.-Dallas 2004, no pet.). "The arbitrator awarded Rather, the Act only
Anzi/otti v. Gene D. Liggin, Inc., 899 S.W2d 264, the American Arbitration Association [(AAA)] and the an award that cont
266 (Tex.App.-Houston [14th Dist.] 1995, no writ). arbitrator their administrative fees and expenses .... figures' or an 'evid,
"Under the common law of this State, the test for deter- [A]ppellants assert that the trial court erred in making person, thing, or p
mining whether or not an arbitration award must be va- the award to the AAA because it is a non-party. Although [AJn arbitrator's m,
cated is whether the award is 'tainted with fraud, mis- the trial court could not have granted this relief, it did a ground under the
conduct, or such gross mistake as would imply bad faith not err in confirming this award of the arbitrator." fying or correcting'
and failure to exercise honest judgment.' Statutory ar-
bitration is merely cumulative of the common law." CPRC §171.091. MODIFYING OR Baker Hughes
CORRECTING AWARD Prod. Co., 164 S.V
CPRC §17f.089. REHEARING AFTER (a) On application, the court shall modify or cor· [14th Dis!.] 2005,
AWARD VACATED reet an award if: modify the prejudg
(a) On vacating an award on grounds other than (I) the award contains: interest itself; insl<
the grounds stated in Section 171.088(a)(4), the court (A) an evident miscalculation of numbers; or recting the award I<
may order a rehearing before new arbitrators chosen: (8) an evident mistake in the description of a per· feetuates the arbitr,
(I) as provided in the agreement to arbitrate; or son, thing, or property referred to in the award; fore permitted und.

494 O'CONNOR'S CPRC

 CIVIL PRACTICE Be REMEDIES CODE
CHAPTER 171. GENERAL ARBITRATION
§§171.091 - 171.092
n 171.041, if the arbitrators have made an award with re-
*------------------
nner for Ch"osiiq to a matter not submitted to them and the award
corrected without affecting the merits of the de-
made with respect to the issues that were submit-
the form of the award is imperfect in a manner
ita/fecting the merits of the controversy.
(b) A party must make an application under this
not later than the 90th day after the date of de-
af a copy of the award to the applicant.
(c) If the application is granted, the court shall
~g., ch. ~',,,, elf, J'1Ii or correct the award to effect its intent and
'h. 588, II, . "all. cOlofirm the award as modified or corrected. If the
ipplication is not granted, the court shall confirm the
(d) An application to modify or correct an award
be joined in the alternative with an application to
the award,
9 U.S.C. § 11 (federal arbitration statute---award of arbitrators;
; :~~~~~,~~:c;orrection; grounds; order), §12 (federal arbitration statute-
':',", to vacate or modify; service; stay of proceedings), §13 (fed-
";~ ::.~~~:," ;~::.~:::;;r.::e~fi~~le~d,O'Connor's
'" .
with order on motions;judgment; docket·
Texas Rule" "Arbitration,"
ANNOTATIONS
Callahan & Assocs. v. Orangefield lSD, 92 S.W.3d
841,844 (Tex,2002). The TAA "does not allow a review-
ing court to modify or correct an award based on an ar-
, 721 (Tex.
bitrator's 'evident mistake' in failing to award damages,
tor awarded
Rather, the Act only permits a court to modify or correct
~) ] and the
an award that contains an 'evident miscalculation of
xpenses ....
figures' or an 'evident mistake in the description of a
I in making
person, thing, or property referred. to in the award,'
y.AJthough
elief, it did [AJn arbitrator's mere failure to award damages is not
rator. " a ground under the [TAA] or the common law for modi-
fying or correcting an award, .. ,"
;OR
Baker Hughes Oilfield Opers., Inc. v. Hennig
Prod. Co., 164 S.W.3d 438, 448 (Tex.App.-Houston
ify or cor-
[14th Dist. ] 2005, no pet.). "[T] he trial court did not
modify the prejudgment interest rate or the award of
interest itself; instead, the trial court's judgment [cor-
;; or recling the award to include an accrual date] merelyef-
of a per- fectuates the arbitrators' award of interest and is there-
I', fore permitted under § 17L091.. ,,"
Barsness v. Scott, 126 S.W.3d 232, 238 (Tex.
App.-San Antonio 2003, pet. denied). "[A] waiver
of appeal in the arbitration agreement does not pre-
clude judicial review of mailers concerning [CPRC]
§§171.088 and 171.091."
City of Baytown v. C.L. Winter, Inc., 886 S.W.2d
515, 519 (Tex.App.-Houston [1st Dis!.] 1994, writ
denied), "The [TAA] authorizes the trial court to
modify or correct an arbitration award when there
is an evident miscalculation of figures, ... An evident
miscalculation of figures must be clear, concise and
conclusive from the record. An evident miscalculation
would be present if the arbitrator had clearly shown the
total amount of credits to be subtracted from the award
and then awarded a different amount ... because of
a math error. [' ] The arbitrator's failure to specify
how he applied the credits in calculating the award is
not an evident miscalculation of figures ... ," (Internal
quotes omitted.) See also Crossmark, Inc. v. Hazar,
124 S.W,3d 422, 436 (Tex.App.-Dallas 2004, pel de-
nied),
Kline v. O'Quinn, 874 S.W.2d 776, 781 (Tex.
App.-Houston [14th Dist.] 1994, writ denied). "[T] he
trial court's holding that the arbitration panel's [puni-
tive-damages] award 'failed to confomo to the parties'
arbitration agreement or relief sought' [and, there-
fore, was a violation of §171.091(a)(2),] was of ne-
cessity limited to the construction of [the] agree-
tt
ment.
CPRC §171.092. JUDGMENT
ON AWARD
(a) On granting an order that confirms, modifies,
or corrects an award, the court shall enter a judguoent
or decree conforming to the order. The judgment or de-
cree may be enforced in the same manner as any other
judguoent or decree.
(b) The court may award:
(1) costs of the application and of the proceedings
subsequent to the application; and
(2) disbursements.
History of CPRC § 171.092: Revised from fonner CPRe § 111.016 by Acts
1997, 75th Leg., th. 165, §S.OI, eff. Sept. I, 1997.
History of Fonner CPRe § 171.016: Acts 1965. 59th Leg., ch. 689, § 1, eff.
Jan. 1, 1966. Codified and amended by Acts 1995, 74th Leg., th. 588, §I, eff.
Sept. 1, 1995. Source: TRes art. 238·1.
See also 9 U.S.C. §9 (federal arbitration statute-award of arbitrators;
confinnation; jurisdiction; procedure), § 13 (federal arbitration statute-pa·
peTS filed with order on molions; judgment; docketing; force and effect; en·
forcement); O'Connor's Texas Rules, NArbitration,~ ch. 4-C, p. 305.
O'CONNOR'S C:PRC 485