City of Arlington v. Tibor Kovacs

• Court: Court of Appeals of Texas
• Decided: June 21, 2018
• Docket: 02-17-00456-CV
• Status: Published

Opinion

COURT OF APPEALS SECOND DISTRICT OF TEXAS FORT WORTH

NO. 02-17-00456-CV

CITY OF ARLINGTON APPELLANT

V.

TIBOR KOVACS APPELLEE

----------

FROM THE 48TH DISTRICT COURT OF TARRANT COUNTY TRIAL COURT NO. 048-261269-12

MEMORANDUM OPINION 1

I. Introduction

Appellee Tibor Kovacs was initially terminated from the Arlington Police

Department (APD) for violating a number of personnel rules, but an arbitrator

later reinstated him. City of Arlington v. Kovacs, 508 S.W.3d 472, 473 (Tex.

App.—Fort Worth 2015, pet. denied). The trial court confirmed the arbitration

1 See Tex. R. App. P. 47.4. award, and Appellant the City of Arlington appealed, asking this court to

determine whether the arbitrator had exceeded his authority by relying on

evidence of events that occurred after the City terminated Kovacs. Id. at 473,

480. We decided that the arbitrator had exceeded his authority to resolve the

dispute because the City’s personnel manual limited the extent to which the

arbitrator could consider post-termination evidence and because the arbitrator’s

written decision confirmed that he had improperly considered post-termination

evidence in determining whether Kovacs had violated the personnel rules as

charged. Id. at 473, 479. Accordingly, we reversed the trial court’s judgment and

remanded the case to the trial court for further proceedings. Id. at 480.

On remand, Kovacs asked the trial court to send the matter to the

arbitrator for reconsideration and argued that “[t]he Court of Appeals was wrong

on several fronts.” The City opposed Kovacs’s motion and asked the trial court

to vacate the arbitrator’s award and to enter a final judgment for the City.

The trial court vacated the award and remanded the case to the original

arbitrator for rehearing. Kovacs moved to modify the trial court’s order of remand

and to affirm the original arbitration award; he also requested findings of fact and

conclusions of law. The trial court declined both requests. Each party filed a

notice of appeal to this court. 2 We may consider the record from the first appeal

2 This appeal is an accelerated interlocutory appeal because the trial court’s order essentially denies confirmation of the original arbitration award by following our instructions to vacate it. Compare Tex. Civ. Prac. & Rem. Code Ann. § 171.098(a)(3) (West 2011) (allowing interlocutory appeal of an order

2 in considering this second appeal. See Humphries v. Humphries, 349 S.W.3d

817, 820 n.1 (Tex. App.—Tyler 2011, pet. denied).

In a single issue, the City asks us to determine whether the trial court erred

by remanding the case for a new arbitration before the original arbitrator, arguing

that the arbitration agreement only contemplates that the award may be set

aside. In the first three of his four cross-issues, Kovacs attempts to revisit issues

decided in the first appeal, 3 and in his fourth cross-issue, he objects to the trial

“confirming or denying confirmation of an award”), and id. § 171.098(a)(5) (allowing interlocutory appeal of an order “vacating an award without directing a rehearing” (emphasis added)), with E. Tex. Salt Water Disposal Co. v. Werline, 307 S.W.3d 267, 271–72 (Tex. 2010) (holding that a trial court’s order denying confirmation of an award is not insulated from appellate review merely because the trial court also vacates the award and directs a rehearing and that “an order requiring a new arbitration is as final a decision as an appellate court’s remand of a case to a trial court for a new trial, and therefore appealable”). 3 Specifically, in his first three issues, Kovacs argues that the trial court erred (1) by failing to sustain the arbitration award after remand from this court, claiming that in the first appeal, the parties and this court failed to recognize theories that were firmly based in the record and developed after remand and that, if properly recognized, would have resulted in upholding the trial court’s judgment affirming the arbitrator’s award for him; (2) by not finding that certain evidence was actually not post-termination evidence and thus was properly considered by the arbitrator; and (3) by not finding that the City should be estopped from arguing that improper post-termination evidence fatally flawed the arbitration award when the City offered that evidence to the arbitrator.

The law-of-the-case doctrine is the principle under which questions of law decided on appeal to a court of last resort will govern the case throughout its subsequent stages. Farmers Grp. Ins., Inc. v. Poteet, 434 S.W.3d 316, 329 (Tex. App.—Fort Worth 2014, pet. denied). Because the supreme court denied Kovacs’s petition for review following the issuance of our first opinion, that opinion is binding on any subsequent proceedings in this court. See id.

3 court’s denial of his request for findings of fact and conclusions of law. We affirm

the trial court’s judgment.

II. Discussion

As set out in our prior opinion, in 2010 and 2011, APD charged Kovacs

with having violated City personnel manual rules and then fired him. See

Kovacs, 508 S.W.3d at 473–74.

Although Kovacs argues in his second cross-issue that he was not officially

terminated until after the conclusion of an administrative appeal in May 2011,

Kovacs was notified of his proposed dismissal by Acting Police Chief Will

Johnson on January 21, 2011, and given two days to file a response. In the

January 21, 2011 notice, Kovacs was informed that if the acting chief decided

that dismissal remained appropriate after reviewing his response, the dismissal

would “become effective immediately following [that] decision” and Kovacs could

then pursue a formal appeal to Police Chief Theron L. Bowman. Accordingly, we

overrule Kovacs’s second cross-issue to the extent it is not otherwise barred by

our previous opinion pursuant to the law-of-the-case doctrine.

Kovacs unsuccessfully attempted the administrative appeal and then

requested that the termination decision be reviewed by arbitration. Id. at 474.

The arbitrator acknowledged that he was limited by the City’s personnel manual

to determining whether Kovacs violated the personnel rules “as charged” 4 and

4 The personnel manual states, in pertinent part, “In making a decision, the Arbitrator shall be limited to determining: 1) whether the employee violated the

4 whether the disciplinary action was reasonable. Id. at 474. In his written

decision, the arbitrator concluded that—based on events occurring after Kovacs’s

termination 5—the City had failed to establish by a preponderance of the evidence

the most serious charges. Id. at 474–75. Thus, the arbitrator determined that

Kovacs should be reinstated, given a twenty-day suspension, and awarded back

pay. Id. at 475.

Pursuant to the personnel manual, the City filed a petition in district court

seeking to vacate the arbitrator’s award on the ground that the arbitrator had

exceeded his authority by improperly relying on evidence that was unavailable at

the time that Kovacs was fired in January 2011. Id.

The trial court determined that Kovacs was not entitled to back pay during

the time he was incarcerated but otherwise confirmed the award, and the City

appealed to this court, raising the same argument as to the arbitrator’s having

exceeded his authority. Id. We agreed, reversed the trial court’s judgment

confirming the arbitration award, and remanded the case to the trial court for

further proceedings. Id. at 479–80.

personnel rules, as charged, and 2) whether the disciplinary action imposed is reasonable.” 5 Specifically, the arbitrator considered that in March 2011, Kovacs was no- billed on four felony charges (family violence, attempted sexual assault, and two retaliation charges) and his fiancée’s application for a protective order against him was denied, and that in April 2011, the complainant in the other charges signed an affidavit of nonprosecution. Kovacs, 508 S.W.3d at 474–75.

5 In the first appeal, Kovacs argued that the City had waived any objection to

the arbitrator’s consideration of the post-termination evidence because it did not

object when the complained-of evidence was elicited during the arbitration. Id. at

475 n.4. In his third cross-issue in the instant appeal, he now argues that the

City should be estopped from arguing that the evidence fatally flawed the

arbitration award “due to well-established rules against ‘sandbagging,’” when the

City itself offered the evidence.

We noted in our first opinion that the City had advised the arbitrator at the

outset of the proceeding that it had to prove that the policy violations occurred as

alleged “given the facts available to the decision-maker at the time the discipline

was imposed,” and we overruled Kovacs’s argument. Id. (emphasis added).

Further, we observed that post-termination evidence has no bearing whatsoever

on the inquiry of whether an employer has just cause to terminate an employee,

and an arbitrator exceeds his authority when he considers such evidence in that

context. Id. at 477–78. Accordingly, we stated that the post-termination

evidence had no relevance as to whether Kovacs was arrested, charged, or

arrested and charged, as set out in the first three inquiries in the City’s first

charge under the personnel manual. Id. at 478. We then had to determine for

what purpose the arbitrator considered the post-termination evidence as to the

remaining charges and held that the arbitrator had considered it for an improper

purpose. Id. at 478–79. At this stage, pursuant to the law-of-the-case doctrine, it

does not matter who presented any improperly considered evidence, and we

6 overrule Kovacs’s third cross-appeal issue. See id.; Farmers Grp. Ins., Inc., 434

S.W.3d at 329.

In its sole issue in this appeal, the City argues that the trial court erred by

remanding the case for a new arbitration before the original arbitrator because

the arbitration agreement at issue contemplates only that the award may be set

aside.

The personnel manual, in section 111.53, “Suit to Set Aside an Arbitrator’s

Decision,” states,

Judicial Review. A state district court may set aside an Arbitrator’s decision only on the grounds that the Arbitrator was without jurisdiction or exceeded his/her authority, or that the decision is manifestly a violation of law. In no event is a de novo review available to determine: 1) whether the employee violated the personnel rules, as charged, or 2) whether the disciplinary action imposed is reasonable. A suit brought under this provision will be heard by the trial court without a jury. The suit must be filed in district court within ninety (90) days of the Arbitrator’s written decision. The petition must be brought in Tarrant County, Texas.

As we stated in our first opinion, judicial review of an arbitration award is

extraordinarily narrow and focuses on the integrity of the process, not the

propriety of the result. Kovacs, 508 S.W.3d at 476. We reversed the trial court’s

judgment confirming the arbitration award because the arbitrator had exceeded

his authority by improperly considering post-termination evidence in determining

whether Kovacs violated the City’s personnel rules as charged, and we

remanded the case to the trial court “for further proceedings.” Id. at 479–80.

7 Unfortunately, the personnel manual is silent as to the trial court’s next

specific step with regard to the “further proceedings” that we mandated. But

while the City argues that the only step the trial court could have taken after

setting aside the arbitrator’s decision would have been to enter judgment for the

City, we disagree.

First, because the arbitration provision does not address whether the trial

court can grant a rehearing, we must look to the relevant law that governs

arbitration actions in Texas, which is found in the civil practice and remedies

code. 6 See Nafta Traders, Inc. v. Quinn, 339 S.W.3d 84, 101 (Tex.) (referring to

the TAA as a default), cert. denied, 565 U.S. 963 (2011); see also Hoskins v.

Hoskins, 497 S.W.3d 490, 495–97 (Tex. 2016) (interpreting distinction between

parties’ agreement in Nafta Traders, which contained a clear restriction on

arbitrator’s authority, and the TAA’s statutory vacatur grounds when the parties

did not agree to limit arbitrator’s authority).

Identical to one of the two grounds for setting aside the arbitrator’s

decision included in the arbitration provision at issue here, section

171.088(a)(3)(A) provides that on the application of a party, the court shall vacate

an award if an arbitrator exceeded his power. See Tex. Civ. Prac. & Rem. Code

Ann. § 171.088(a)(3)(A) (West 2011). As to the proper procedure following the

vacatur of an arbitrator’s award, section 171.089(b) provides, “If the award is

6 Both parties refer us to the Texas Arbitration Act (TAA)’s provisions to support their arguments.

8 vacated under Section 171.088(a)(3), the court may order a rehearing before the

arbitrator[] who made the award or [his] successor[] appointed under Section

171.041.” Id. § 171.089(b) (West 2011) (emphasis added). Pursuant to

government code section 311.016(1), the use of “may” creates discretionary

authority, see Tex. Gov’t Code Ann. § 311.016(1) (West 2013), and the

arbitration clause here evinces no intent to deny the trial court this discretion. 7

Further, based on the clause’s express terms, which we construe de novo,

see Tawes v. Barnes, 340 S.W.3d 419, 425 (Tex. 2011), if an arbitrator’s

decision is set aside under the personnel manual, an arbitration rehearing is the

only logical next step. Because, under the express terms of the personnel

manual, the trial court lacked the authority to conduct a de novo review to

determine what the arbitrator should have decided, a new decision by the

arbitrator is necessary to determine the final outcome. Accordingly, we overrule

the City’s sole issue.

In his fourth cross-issue, Kovacs argues that the trial court erred by

refusing to issue findings of fact and conclusions of law. We overrule his fourth

cross-issue because the trial court’s hearing on remand was not an evidentiary

hearing. See Int’l Union v. General Motors Corp., 104 S.W.3d 126, 129 (Tex.

7 The City asserts that to construe the arbitration clause to indicate that rehearing is discretionary would require us to “impermissibly rewrite the contract or add to its language instead of enforcing it as written.” But because the arbitration clause is silent on the matter, we instead consider the default provisions of the TAA in our review.

9 App.—Fort Worth 2003, no pet.) (holding findings of fact and conclusions of law

are appropriate following an evidentiary hearing if the trial court is called upon to

determine questions of fact based on conflicting evidence but not when the trial

court rules without determining questions of fact).

Based on our conclusion that the trial court did not abuse its discretion by

ordering a rehearing, we need not reach Kovacs’s remaining cross-issue

regarding the theories that he claims were developed in the trial court after

remand. See Tex. R. App. P. 47.1.

III. Conclusion

Having overruled the City’s sole issue and Kovacs’s dispositive cross-

issues, we affirm the trial court’s judgment.

/s/ Bonnie Sudderth

BONNIE SUDDERTH CHIEF JUSTICE

PANEL: SUDDERTH, C.J.; MEIER and GABRIEL, JJ.

DELIVERED: June 21, 2018