Eaton Commercial, L.P. v. Paradigm Hotel SA Riverwalk, LP

Opinion

Fourth Court of Appeals San Antonio, Texas MEMORANDUM OPINION No. 04-15-00705-CV

EATON COMMERICAL, L.P., Appellant

v.

PARADIGM HOTEL SA RIVERWALK, LP, Appellee

From the 45th Judicial District Court, Bexar County, Texas Trial Court No. 2015CI11882 Honorable John D. Gabriel, Jr., Judge Presiding

Opinion by: Patricia O. Alvarez, Justice

Sitting: Patricia O. Alvarez, Justice Luz Elena D. Chapa, Justice Jason Pulliam, Justice

Delivered and Filed: October 5, 2016

REVERSED AND REMANDED WITH INSTRUCTIONS

Appellant Eaton Commercial, L.P. appeals the trial court’s order confirming an arbitration

award, contending the trial court erred in denying Eaton’s request to remand the award to the

arbitrator to clarify ambiguities in the award. Because we agree the arbitrator’s award is

ambiguous, we reverse the trial court’s order and remand the cause to the trial court with

instructions to remand the award to the arbitrator for clarification. 1

1 Eaton alternatively argues the trial court erred in refusing to correct the award. Because we sustain Eaton’s first issue, we do not address its alternative argument. See TEX. R. APP. P. 47.1 (providing opinions should only address issues necessary to final disposition of appeal). We note, however, “[a] court may not interpret [an arbitration] award 04-15-00705-CV

FACTUAL AND PROCEDURAL BACKGROUND

Eaton entered into a contract with Appellee Paradigm Hotel SA Riverwalk, L.P. to

construct a hotel. The contract provided for Eaton to be paid its costs plus a fee with a guaranteed

maximum price (“GMP”). The GMP in the original contract was $10,268,700.00. In May of

2013, Paradigm approved change order number 1 adding “the 9th Street Roadway Improvements”

which increased the GMP by $804,005.00 to $11,072,705.00. 2

Eventually, both parties alleged the other party breached the contract. Eaton alleged

Paradigm owed it additional amounts for change orders and other costs incurred by Eaton, and

Paradigm alleged it overpaid Eaton and incurred lost revenue as a result of Eaton’s breach of the

contract. In accordance with the contract, these disputes were submitted to arbitration.

In the arbitration proceeding, Eaton alleged the total adjusted GMP for the project was

$12,833,363.00. Eaton alleged it was owed $1,765,560.00 for seven itemized amounts which

included additional amounts for change orders and other costs and a credit for a water line. 3

Because the contract only required Paradigm to pay Eaton its costs plus a fee, Eaton also alleged

its costs and fee totaled $12,363,654.28. Subtracting the amount Paradigm paid Eaton in the

amount of $10,634,088.00 from the amount of Eaton’s alleged costs and fee, Eaton alleged it was

owed a balance of $1,729,567.00.

The arbitrator concluded Paradigm owed Eaton “an adjustment to the GMP of

$769,553.33” based on the arbitrator’s review of the seven amounts itemized by Eaton. The

in order to resolve [an] ambiguity and implement the award; instead the court must remand the award to the arbitrator with instructions to clarify the award’s particular ambiguities.” Brown v. Witco Corp., 340 F.3d 209, 216 (5th Cir. 2003). 2 One of Eaton’s exhibits reflects the GMP after change order number 1 to be $11,067,803.00. It is unclear from the record how Eaton computed this number. 3 The briefs and proposed award Eaton submitted to the arbitrator are not a model of clarity and contain numerous mathematical errors. For example, in its trial brief and in its proposed award, Eaton alleged the additional amount it was owed was $1,765,500; however, Eaton itemized seven amounts which total $1,767,959. In addition, Eaton alleged the sum of $1,729,567 and $32,480 is $1,765,560, but the two amounts actually total $1,762,047.

-2- 04-15-00705-CV

arbitrator also awarded Eaton $123,000.00 in attorney’s fees and $3,550.01 as a reimbursement

for the apportioned arbitration fees and expenses. Finally, the arbitrator awarded Eaton pre-

judgment interest at the rate of 10% accruing from May 6, 2014, the date the arbitration demand

was filed, and continuing through the date of the award, and post-award interest to accrue if

Paradigm had not paid the award within thirty days from the date of the award.

Eaton filed a motion to clarify the award, asserting the award did not specify the final

contract amount Eaton was due because the award did not state the amount of the GMP to which

the $769,553.33 adjustment was to be added. Eaton attached an award summary to its motion,

asserting the final GMP amount was $11,837,356.33, which was the total of the original GMP

stated in the contract, the adjustment to the GMP from change order number 1, and the additional

$769,553.33 adjustment to the GMP stated in the arbitrator’s award. 4 The arbitrator initially

denied the motion; however, after receiving additional filings from both parties, the arbitrator

issued a second order stating the arbitrator believed she was “without authority to issue a ruling or

take any other action until a court of competent jurisdiction issues further orders.”

Eaton then filed a petition asking the trial court to interpret the award, remand the award

for further proceedings, or confirm the award in the amount of $1,463,331.68. Paradigm filed a

motion to confirm the award for the specific amounts listed by the arbitrator. The trial court denied

Eaton’s petition and granted Paradigm’s motion confirming the award. The trial court’s order

states:

1) That the Final Award issued on June 15, 2015 is confirmed; and 2) Pursuant to that Award, Paradigm Hotel SA Riverwalk, LP is to pay Eaton Commercial, LP $769,533.33 for its claims, $123,0000 in attorney’s fees, $3,550.01 in administrative costs, as well as 10% prejudgment interest running from May 6, 2014 (date of the [sic] Eaton’s filing of the arbitration

4 As previously noted, this figure is based on Eaton’s calculation that the GMP after change order number 1 was $11,067,803, and the record is not clear how this amount was calculated because the total of the original GMP in the contract of $10,268,700 and the $804,005.00 added to the GMP in change order number 1 is $11,072,705.00.

-3- 04-15-00705-CV

demand) to June 15, 2015 (date of issuance of the Final Award), post award interest at the rate of 10% per annum shall begin to accrue thirty (30) days from the date of the Final Award.

Eaton appeals.

STANDARD OF REVIEW

We review a trial court’s decision to confirm an arbitration award de novo in order to

protect the great deference accorded to arbitration awards. Stage Stores, Inc. v. Gunnerson, 477

S.W.3d 848, 855 (Tex. App.—Houston [1st Dist.] 2015, no pet.); SSP Holdings Ltd. P’ship v.

Lopez, 432 S.W.3d 487, 492 (Tex. App.—San Antonio 2014, pet. denied). “In a de novo review,

the trial court’s decision is given no deference.” Lopez, 432 S.W.3d at 493.

PROPER TRIAL COURT ACTION WHEN ARBITRATION AWARD IS AMBIGUOUS

If an arbitration award is ambiguous, it cannot be enforced. Brown, 340 F.3d at 216;

Gunnerson, 477 S.W.3d at 855. If a trial court determines an arbitration award is unclear or

ambiguous in the process of deciding whether the award should be confirmed or vacated, the trial

court may not interpret the award to resolve the ambiguity but must remand the award to the

arbitrator for clarification. Murchison Capital Partners, L.P. v. Nuance Commc’ns, Inc., 760 F.3d

418, 423 (5th Cir. 2014) (quoting Brown, 340 F.3d at 216); Gunnerson, 477 S.W.3d at 855-56. In

that case, “a limited rehearing [by the arbitrator] to correct the problem is but a preface to

determining confirmation.” E. Tex. Salt Water Disposal Co. v. Werline, 307 S.W.3d 267, 270

(Tex. 2010). Once the arbitrator’s award is clarified, the trial court can then rule on whether the

award should be confirmed. Werline, 307 S.W.3d at 270-71; Gunnerson, 477 S.W.3d at 856. The

foundation for a trial court’s power to remand an ambiguous award “is the policy in favor of clear

final awards that completely resolve the dispute originally submitted to the arbitrator.” Weinberg

v. Silber, 140 F.Supp.2d 712, 722-23 (N.D. Tex. 2001) (internal citations omitted), aff’d, 57 Fed.

Appx. 211 (5th Cir. 2003); see also TEX. CIV. PRAC. & REM. CODE ANN. § 171.054(b)(2) (West -4- 04-15-00705-CV

2011) (allowing arbitrator to clarify award on submission to the arbitrator by a court in which an

application to confirm the award is pending).

AMBIGUITY IN AWARD

In determining whether an award is ambiguous, we read the arbitrator’s opinion and award

together. M & C Corp. v. Erwin Behr GmbH & Co., 143 F.3d 1033, 1038 (6th Cir. 1998). In the

instant case, after reviewing the arbitrator’s award and reasoning in their entirety, we hold the

award is ambiguous.

The arbitrator found Paradigm owed Eaton “an adjustment to the GMP of $769,553.33.”

The arbitrator noted the original contract contained a GMP of $10,268,700. In its reasoning, the

arbitrator also recognized Paradigm signed a change order to add $804,005 to the GMP. 5 Although

the arbitrator recognized the signed change order adjusted the GMP from the original contract

amount, the award does not state the amount of the GMP to which the $769,553.33 adjustment is

to be added. In addition, although the arbitrator refers to the $769,553.33 as an adjustment to the

GMP, her reasoning suggests the $769,553.33 were additional costs incurred by Eaton which

would be added to the amount it was to be paid under the contract for its costs and fee, rather than

just an adjustment to the GMP. 6 Because Paradigm paid Eaton only $10,634,088, the award is

unclear regarding the total amount Eaton was owed after the $769,553.33 adjustment.7

Accordingly, because the award is ambiguous, the trial court erred by not remanding the award to

5 In calculating the $769,553.33 adjustment, the arbitrator gave Paradigm a $60,000 credit for a water line that was included as a line item in change order number 1. In crediting the $60,000 to reduce the GMP adjustment, the arbitrator necessarily determined change order number one increased the GMP stated in the original contract. 6 As an example, the arbitrator found Eaton was entitled to $581,493.00 for scope changes. In her reasoning, the arbitrator concluded, “there were structural supplemental instructions and Paradigm directives that increased subcontractor costs by $462,642.00 and Eaton costs by $118,851.00 for a total of $581,493.00.” In addition, the award itself refers to one adjustment as “Costs arising from Paradigm Subcontractor Selections/Negotiations.” 7 We note the arbitrator may have been misled by statements in the briefs and the proposed award Eaton provided to the arbitrator. In the briefs and the proposed award, Eaton states, “Included in Eaton’s claim is retainage which [Paradigm] has wrongfully withheld.” Eaton’s allegation, however, was that the adjusted GMP was $12,833,363.00, and its total costs and fee were $12,363,654.28.

-5- 04-15-00705-CV

the arbitrator for clarification. See Murchison Capital Partners, L.P., 760 F.3d at 423; Gunnerson,

477 S.W.3d at 855-56.

PARADIGM’S ARGUMENTS

Paradigm asserts several arguments in its brief against remanding the award to the

arbitrator for clarification. We briefly address each of these arguments.

A. Record from Arbitration Proceeding

First, Paradigm argues Eaton failed to provide the record from the arbitration proceeding

which is necessary to modify the award. See GJR Mgmt. Holdings, L.P. v. Jack Raus, Ltd., 126

S.W.3d 257, 263 (Tex. App.—San Antonio 2003, pet. denied) (stating losing party seeking to

modify or vacate an arbitration award has burden of bringing forth record to establish basis for

vacating or modifying the award). We are not, however, instructing the trial court to modify the

award but to remand the award to the arbitrator for clarification. In holding the award is

ambiguous, we need only consider the face of the award, not the record from the arbitration

proceeding.

B. Full Satisfaction

Paradigm also asserts the arbitration award states the award is in full satisfaction of all

claims and any relief not specifically awarded is denied. Ramos v. Perez, No. 13-10-00350-CV,

2011 WL 3557311, at *5 (Tex. App.—Corpus Christi Aug. 11, 2011, pet. denied) (asserting broad

language in arbitration award stating award was in full settlement of claims submitted to arbitration

and all claims not expressly granted are denied “suggests that the arbitrator considered and

resolved all claims submitted”). Eaton, however, is not challenging the amount of the adjustment

the arbitrator found resolved the parties’ claims. Instead, Eaton contends the award is unclear

because it fails to state the amount Eaton was owed after the $769,553.33 adjustment.

-6- 04-15-00705-CV

Accordingly, Eaton is not asserting a new claim for additional relief but seeks to clarify the relief

that was granted.

C. Arbitrator Denied Motion to Clarify

Paradigm also relies on the arbitrator’s initial denial of Eaton’s motion to clarify. The

record is unclear regarding the arbitrator’s reason for initially denying the motion. But see Riha v.

Smulcer, 843 S.W.2d 289, 292 (Tex. App.—Houston [14th Dist.] 1992, writ denied) (noting

arbitrator responded to request for clarification by stating arbitrator found “no reason to change or

explain the findings” and regional director notified the parties the arbitrator advised the award “as

rendered is final and is clear as stated”). The arbitrator’s second order, however, appears to revisit

the issue by listing the pleadings, letters, and documents previously considered in the prior order

and concluding she was without authority to issue a ruling. Even if the arbitrator believed her

award did not require clarification, however, this court holds to the contrary by determining the

award is ambiguous and requires clarification. See Murchison Capital Partners, L.P., 760 F.3d at

423; Gunnerson, 477 S.W.3d at 855-56.

D. Revisit Merits

Finally, Paradigm asserts the arbitrator cannot revisit the merits of her decision. “The

functus officio doctrine is ‘a common law rule that bars an arbitrator from revisiting the merits of

an award once the award has been issued.’” Gunnerson, 477 S.W.3d at 856 (quoting Brown, 340

F.3d at 218). “The authority for a court to remand an ambiguity to an arbitrator for clarification is

an exception to” the doctrine. Id. Under this exception, the arbitrator is not revisiting the merits

of her decision but clarifying the ambiguity in her decision.

-7- 04-15-00705-CV

CONCLUSION

The trial court’s order is reversed, and the cause is remanded to the trial court with

instructions to remand the award to the arbitrator to clarify the amount Eaton is owed after the

$769,553.33 adjustment.

Patricia O. Alvarez, Justice

-8-