Articles Posted in Arbitration & Mediation

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Respondent, who owned a ranch, sued Petitioner, which produced natural gas on the ranch, for underpayment of royalties and underproduction of its lease. The parties resolved their dispute with two agreements that contained an arbitration provision. Respondent later sued Petitioner for environmental contamination and improper disposal of hazardous materials on the ranch. Before arbitration commenced, Respondent asked the Railroad Commission (RRC) to investigate contamination of the ranch by Petitioner. Meanwhile, an arbitration panel awarded Respondent $15 million for actual damages and $500,000 for exemplary damages. At issue on appeal was whether the RRC had exclusive or primary jurisdiction over Respondent’s claims, precluding the arbitration, and whether the arbitration award should be vacated for the evident partiality of a neutral arbitrator or because the arbitrators exceeded their powers. The Supreme Court answered in the negative, holding (1) because Respondent’s claims were inherently judicial, the doctrine of primary jurisdiction did not apply, and vacatur was not warranted for failure to abate the arbitration hearing; and (2) the arbitrators did not exceed their authority. View "Forest Oil Corp. v. El Rucio Land & Cattle Co." on Justia Law

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RSL Funding, LLC had arbitration agreements with three individuals (collectively, Individuals) who owned annuity contracts they agreed to sell to RSL or its designee. Neither RSL nor the Individuals had arbitration agreements with the companies that wrote the annuity contracts (collectively, MetLife). After MetLife refused to honor contracts by which the Individuals sold their annuities, RSL sued MetLife and the Individuals in the County Court at Law (CCL) for a declaratory judgment. A district court suit was also initiated involving the same parties and subject matter. The Individuals initially joined forces with RSL but disputes subsequently arose. RSL initiated arbitration with the Individuals and moved to stay the CCL suit pending completion of arbitration. The CCL denied the motion. The court of appeals affirmed, concluding that RSL waived its right to arbitrate through its litigation conduct in the trial courts. The First Circuit affirmed but on different grounds, holding (1) the court of appeals erred by determining that RSL waived its right to arbitrate by litigation conduct; but (2) RSL did not challenge a separate ground on which the trial court court have denied RSL’s motion to stay the litigation - that RSL failed to join its assignees in the arbitration. View "RSL Funding, LLC v. Pippins" on Justia Law

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The parties were litigating a dispute involving an estate and family trusts when a family corporation filed for bankruptcy. The parties signed an agreement with a provision stating that they would attempt to settle any disputes by mediation and, if unsuccessful, by binding arbitration. The bankruptcy court’s order approving the settlement contained a permanent injunction prohibiting the parties from suing each other “on subjects pertaining to the subject matter of this litigation” without first obtaining its permission to do so. Later, that court denied Leonard permission to file suit and ordered the parties to comply with the agreement. The parties signed an arbitration agreement and “agreed to a resolution through arbitration pursuant to the provisions of the Texas General Arbitration Act.” Leonard subsequently filed a Complaint in Arbitration, alleging fraudulent conveyance and breach of fiduciary duties. After a hearing, the arbitrator dismissed most of the claims, stating that his ruling was based both on the statute of limitations and lack of standing Other parties sought to confirm the arbitration award; Leonard moved to vacate, alleging the arbitrator manifestly disregarded the law. Manifest disregard is not a ground for vacatur under the Act. The court of appeals held, and the Texas Supreme Court affirmed, that the TAA’s enumerated vacatur grounds (TEX. CIV. PRAC. & REM. CODE 171.087) are exclusive. View "Hoskins v. Hoskins" on Justia Law

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Petitioner sued Respondent, her employer, to recover damages for an injury she received during the course of her employment. Respondent moved to compel arbitration based on its employee handbook. Petitioner opposed arbitration, arguing that the arbitration agreement was unconscionable and illusory. The trial court denied the motion, basing its ruling on only some of Petitioner’s unconscionability arguments and without discussing her remaining arguments. Respondent filed an interlocutory appeal. The court of appeals reversed, thus rejecting the trial court’s express grounds in its ruling. Petitioner petitioned for review, arguing that she raised other grounds to deny arbitration that the court of appeals did not address. The Supreme Court granted Petitioner’s petition and reversed, holding that the could of appeals could not order arbitration without addressing all of Petitioner’s arguments or remanding the case to the trial court to address them. View "Cardwell v. Whataburger Restaurants LLC" on Justia Law

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Francisco Lopez hired Royston, Rayzor, Vickery & Williams, LLP (the Firm) to represent him in a divorce suit. The attorney-client employment contract between the parties contained an arbitration provision specifying that Lopez and the Firm will arbitrate any disputes that arise between them with the exception of claims made by the Firm for recovery of its fees and expenses. Once the underlying divorce matter was settled, Lopez sued the Firm, claiming that the Firm induced him to accept an inadequate settlement. The Firm moved to compel arbitration. The trial court denied the Firm’s motion. The Firm filed an interlocutory appeal challenging the denial and an original proceeding seeking mandamus under common law. The court of appeals affirmed the trial court’s refusal to order arbitration and denied mandamus relief, concluding that the arbitration provision was so one-sided as to be substantively unconscionable and unenforceable. The Supreme Court reversed, holding that Lopez did not prove that either the arbitration provision was substantively unconscionable or any other defense to the arbitration provision. View "In re Royston, Rayzor, Vickery, & Williams, LLP" on Justia Law

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Elisa Zapata died while under the care of the Fredericksburg Care Company, LP, a nursing home. Zapata’s death and survival beneficiaries sued Fredericksburg, alleging negligent care and wrongful death. Fredericksburg filed a motion to compel arbitration based on an arbitration clause contained in an agreement that Zapata signed prior to her admission in the nursing home. The trial court denied the motion to compel arbitration, concluding (1) the pre-admission agreement’s arbitration clause did not comply with Tex. Civ. Prac. & Rem. Code Ann. 74.451 and was therefore invalid; and (2) the McCarran-Ferguson Act (MFA) applied in this case, thus triggering the exemption under which the Federal Arbitration Act (FAA) would not preempt the state statute. The court of appeals affirmed. The Supreme Court reversed, holding that the MFA does not exempt section 74.451 from preemption by the FAA, and the trial court should have granted Fredericksburg’s motion to compel arbitration. View "Fredericksburg Care Co., LP v. Perez" on Justia Law

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When Richmont Holdings, Inc. bought the assets of Superior Recharge Systems, LLC the parties signed an asset Purchase Agreement that contained an arbitration provision. Superior Discharge’s part-owner, Jon Blake, signed an employment contract to continue as general manager of the business. The contract contained a covenant not to compete but not an arbitration provision. After Blake’s employment was terminated, Superior Recharge and Blake (together, Blake) sued Richmont in Denton County for fraud and breach of contract. Richmont then sued Blake individually in Dallas County to enforce the covenant not to compete. The Dallas County suit was subsequently abated. Nineteen months after being sued, Richmont moved to compel arbitration, asserting that Blake’s claims arose out of the Asset Purchase Agreement. The trial court denied the motion, and the court of appeals affirmed. The Supreme Court reversed. On remand, the court of appeals concluded that Richmont had waived arbitration by substantially invoking the judicial process. The Supreme Court reversed, holding that the circumstances of this case did not approach a substantial invocation of the judicial process. Remanded. View "Richmont Holdings, Inc. v. Superior Recharge Sys., LLC" on Justia Law

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Respondents sold a collection of insurance companies to Petitioners in an agreement that contained an arbitration clause. Petitioners later invoked arbitration, alleging breach of contract. After Respondents complained about Petitioners’ first and second choice arbitrators the American Arbitration Association (AAA) struck the arbitrators. Petitioners’ third appointee was not challenged, and the arbitration proceeding resulted in an award in Respondents’ favor. When Respondents filed a motion to confirm the award in the trial court, Petitioners renewed their previous objection to the disqualification of their first-choice arbitrator. Ultimately, the court of appeals held that the arbitration panel was properly appointed under the terms of the arbitration agreement and the AAA rules. The Supreme Court reversed, holding (1) because the AAA disqualified Petitioners’ first-choice arbitrator for partiality, the arbitration panel was formed contrary to the express terms of the arbitration agreement; (2) therefore, the arbitration panel exceeded its authority when it resolved the parties’ dispute; and (3) accordingly, the arbitration award must be vacated. View "Americo Life, Inc. v. Myer" on Justia Law

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Plaintiffs, two groups of cotton farmers, filed suits against the cooperative of which they were members under contract, alleging that they were fraudulently induced to join the cooperative. Plaintiffs’ agreements with the cooperative provided for the arbitration of all disputes under the Federal Arbitration Act (FAA). The cooperative filed a motion to stay the litigation and a motion to compel arbitration. The trial court denied the motions, concluding that the parties’ arbitration agreement was unconscionable. The court of appeals affirmed, reasoning that the agreements were unconscionable because they forced the farmers to “forego substantive rights and remedies afforded by statute.” The Supreme Court reversed, holding that the limitation of statutory remedies was insufficient to defeat arbitration under the FAA. Remanded. View "Venture Cotton Coop. v. Freeman" on Justia Law

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Petitioners and Respondent entered into an agreement. The parties later disputed whether their agreement required Petitioners to indemnify Respondent for breaching certain representations and warranties in the agreement. The parties proceeded to arbitration, and the arbitrators selected Respondent’s $125 million settlement award. Petitioners moved to vacate the award, asserting that one of the arbitrators was neither impartial nor free from bias. After a hearing, the trial court granted Petitioners’ motion, concluding that the arbitrator did not disclose information that might yield a reasonable impression that the arbitrator was not impartial. The court of appeals reversed, concluding that Petitioners waived their evident partiality claim by failing to object or inquire further when the disclosures occurred. The Supreme Court reversed the court of appeals’ judgment and reinstated the trial court’s order vacating the award and requiring a new arbitration, holding (1) the arbitrator’s failure to disclose the information that might yield a reasonable impression of the arbitrator’s partiality to an objective observer constituted evident partiality; and (2) Petitioners did not waive their partiality challenge. View "Tenaska Energy, LLC v. Ponderosa Pine Energy, LLC" on Justia Law