Southwinds Express Construction v. D.H. Griffin of Texas, Inc.

• Court: Court of Appeals of Texas
• Decided: December 8, 2015
• Docket: 14-15-00610-CV
• Status: Published

Opinion

ACCEPTED 14-15-00610-cv FOURTEENTH COURT OF APPEALS HOUSTON, TEXAS 12/8/2015 10:48:02 AM CHRISTOPHER PRINE CLERK

No. 14-15-00610-CV ___________________________________ FILED IN 14th COURT OF APPEALS IN THE COURT OF APPEALS FOR THE HOUSTON, TEXAS FOURTEENTH JUDICIAL DISTRICT OF TEXAS AT HOUSTON 12/8/2015 10:48:02 AM __________________________________ CHRISTOPHER A. PRINE Clerk SOUTHWINDS EXPRESS CONSTRUCTION, LLC Appellant

v.

D.H. GRIFFIN OF TEXAS, INC. Appellee __________________________________

On appeal from the 151st District Court, Harris County, Texas Cause No. 2015-22736 _________________________________

BRIEF OF APPELLEE. D.H. GRIFFIN OF TEXAS, INC. _________________________________

LAPIN & LANDA, LLP

Robert E. Lapin State Bar No. 11945050 500 Jefferson, Suite 2000 Houston, TX 77002 Office: (713) 756-3232 Fax: (713) 654-8704 Email: blapin@lapinlanda.com

LAW OFFICE OF DON TOMLINSON Don Tomlinson State Bar No. 24039507 8 Loggerhead Hitchcock, TX 77563 Office: (832) 444-4848 Email: don@dontomlinsonlaw.com No. 14-15-00610-CV ___________________________________

IN THE COURT OF APPEALS FOR THE FOURTEENTH JUDICIAL DISTRICT OF TEXAS AT HOUSTON __________________________________

SOUTHWINDS EXPRESS CONSTRUCTION, LLC Appellant

D.H. GRIFFIN OF TEXAS, INC. Appellee __________________________________

On appeal from the 151st District Court, Harris County, Texas Cause No. 2015-22736 _________________________________

BRIEF OF APPELLEE. D.H. GRIFFIN OF TEXAS, INC. _________________________________

IDENTITIES OF PARTIES AND COUNSEL

In accordance with Texas Rule of Appellate Procedure 38.2(a)(1)(A),

Appellee certifies that following is a complete list of all parties to this appeal:

APPELLANT: SOUTHWINDS EXPRESS CONSTRUCTION, LLC

Counsel for Appellant Appeal/Trial Court: Robert J. Killeen, Jr. Email: rkilleen@killeen-law.com Robert C. Stern Email: rstern@killeen-law.com Gerald M. “Tracy” Johnson, III Email: tjohnson@killeen-law.com Killeen & Stern, P.C.

ii 1811 Bering Drive, Suite 120 Houston, TX 77057 Office: 713.626.5100 Fax: 713.626.4545

Appellee: D.H. Griffin of Texas, Inc.

Counsel for Appellee Appeal/Trial Court: Robert E. Lapin Email: blapin@lapinlanda.com Lapin & Landa, LLP 500 Jefferson, Suite 2000 Houston, TX 77002 Office: 713.756.3232 Fax: 713.654.8704

Don Tomlinson Email: don@dontomlinsonlaw.com Law Office of Don Tomlinson 8 Loggerhead Hitchcock, TX 77563 Office: 832.444.4848

Trial Judge: Hon. Michael Engelhart Presiding Judge 151st Judicial District Court Harris County 201 Caroline, 11th Floor Houston, TX 77002

iii TABLE OF CONTENTS

Identities of Parties and Counsel ............................................................................. ii

Table of Contents ................................................................................................... iv

Index of Authorities ............................................................................................... vi

Statement of the Case .............................................................................................. 1

Statement on Oral Argument .................................................................................. 3

Reply to Issues Presented ........................................................................................ 3

Statement of Facts ................................................................................................... 4

Summary of Argument ......................................................................................... 13

Reply Point One (In response to Issue 1) ............................................................. 15

The trial court did not err in determining the dispute between the parties was subject to arbitration because the parties’ oral agreement to expand the Subcontractor Agreement’s scope of work to include C&D haul-off constituted an oral modification of the Subcontractor Agreement and therefore fell within the scope of that agreement’s claims resolution clause which required resolution of disputes by binding arbitration. The parties agreed to submit their dispute to binding arbitration under the AAA’s rules without limit as to scope of issues to be arbitrated. Thus, the trial court correctly deferred to the Arbitrator’s findings. Moreover, mediation was not a condition precedent to arbitration.

Arguments and Authorities ......................................................................... 16

The Oral Agreement Modified The Subcontractor Agreement ................. 16

Mediation as a Condition Precedent to Arbitration ..................................... 21

iv Reply Point Two (In response to Issue 2) ............................................................. 25

The trial court did not err in applying the statutory grounds for vacatur set forth in §171.088 of the Texas Civil Practice & Remedies Code when it denied Southwinds’ motion to vacate the Arbitrator’s Award because Southwinds failed to meet its statutory burden of demonstrating that there was no valid agreement to arbitrate the dispute in question.

Arguments and Authorities ……………………………………………..…26

Reply Point Three (In response to Issue 3) ........................................................... 28

The Arbitrator’s Award is not tainted by a disregard for the law or by a gross mistake in applying the law.

Arguments and Authorities ……………………………………………..…28

Conclusion and Prayer .......................................................................................... 31

Certificate of Service ............................................................................................ 32

Certificate of Compliance ..................................................................................... 33

v INDEX OF AUTHORITIES

CASES

Am. Garment Props., Inc. v. CB Richard Ellis-El Paso, L.L.C., 155 S.W.3d 431 (Tex.App.—El Paso 2004, no pet.) ................................................................ 17

Aspri Investments, LLC v. AFEEF and ENM Food Mart, Inc., No. 04-07- 00249-CV, 2011 Tex. App. LEXIS 7082 (Tex.App.—San Antonio August 31, 2011, pet. dism’d) (mem. op.) ................................................................... 20, 27

Burlington Res. Oil & Gas Co. LP v. San Juan Basin Royalty Trust, 249 S.W.3d 34 (Tex. App.—Houston [1st Dist.] ................................................... 19, 20

Centex/Vestal v. Friendship W. Baptist Church, 314 S.W.3d 677 (Tex. App.—Dallas 2010, pet. denied) ............................................................... 20, 27, 30

Churchill Forge, Inc. v. Brown, 61 S.W.3d 368, 371 (Tex. 2001) ....................... 23

City of Baytown v. C.L. Winter, Inc., 886 S.W.2d 515, 520 (Tex. App.-- Houston [1st Dist.] 1994, writ denied) .................................................................. 26

Crossmark, Inc. v. Hazar, 124 S.W.3d 422 (Tex. App.—Dallas 2004, pet. denied) ................................................................................................................... 29

CVN Group, Inc. v. Delgado, 95 S.W.3d 234, 238 (Tex. 2002) .................... 20, 27

Double Diamond, Inc. v. Hilco Electric Coop., Inc., 127 S.W.3d 260 (Tex. App.—Waco 2003, no pet.) .................................................................................. 17

E. Tex. Salt Water Disposal Co. v. Werline, 307 S.W.3d 267 (Tex. 2010) .......... 27

Fairfield Ins. Co. v. Stephens Martin Paving, LP, 246 S.W.3d 653 (Tex. 2008) ................................................................................................................ 23, 24

First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) ........................... 20

GJR Mgmt. Holdings, L.P. v. Jack Raus, Ltd., 126 S.W.3d 257 (Tex. App.— San Antonio 2003 (pet. denied) ............................................................................. 27

vi Grand Int’l Bhd. Of Locomotive Eng’rs v. Wilson, 341 S.W.2d 206 (Tex. Civ. App.—Fort Worth 1960, writ ref’d n.r.e.) .................................................... 29

Group Hosp. Servcs., Inc. v. One and Two Brookriver Center, 704 S.W.2d 886 (Tex.Civ.App.—Dallas 1986, no writ) .......................................................... 18

Haddock v. Quinn, 287 S.W.3d 158 (Tex.App.—Ft. Worth 2009) ...................... 20

Home Owners Mgmt. Enters., Inc. v. Dean, 230 S.W.3d 766 (Tex. App.— Dallas 2007, no pet.) ............................................................................................. 29

Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002) ............................... 19

Humitech Dev. Corp. v. Perlman, 424 S.W.3d 782 (Tex.App.—Dallas 2014, no pet.) ................................................................................................................... 29

Hyatt Cheek Builders-Engineers v. Board of Regents of the Univ. of Texas System, 607 S.W.2d 258 (Tex.Civ.App.—Texarkana, 1980, writ dism’d) .......... 18

In re Mabry, 355 S.W.3d 16, 29 (Tex. App.—Houston [1st Dist.] 2010, orig. proceeding [mand. denied]) .................................................................................. 24

In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 128-29 (Tex. 2004) .............. 23

Int’l Bank of Commerce v. Int’l Energy Dev. Corp., 981 S.W.2d 38 (Tex. App.—Corpus Christi 1998, pet. denied) ............................................................. 30

J.J. Gregory Gourmet Servs., Inc. v. Anton’s Imp. Co., 927 S.W.2d 31 (Tex. App.—Houston [1st Dist.] 1995, no writ) ............................................................ 29

Lawrence v. CDB Servs., Inc., 44 S.W.3d at 544 (Tex. 2001) ....................... 23, 24

Lone Star Steel Co. v. Scott, 759 S.W.2d 144 (Tex.Civ.App.—Texarkana, 1988, writ denied) ................................................................................................. 18

Mann Frankfurt Stein & Lipp Advisers, Inc. v. Fielding, 289 S.W.3d 844 (Tex. 2009) ............................................................................................................ 22

Mar-Lan Industries, Inc. v. Nelson, 635 S.W.2d 853 (Tex. App. —El Paso 1982, no writ) ........................................................................................................ 17

vii Marsh USA v. Cook, 354 S.W.3d 764 (Tex. 2011) ........................................ 23, 24

Myer v. Americo Life, Inc., 232 S.W.3d 401 (Tex.App.—Dallas 2007) .............. 29

Nafta Traders, Inc. v. Quinn, 339 S.W.3d 84, 89-90 (Tex. 2011) ........................ 26

Pheng Inv., Inc. v. Rodriquez, 196 S.W.3d 322 (Tex. App.—Fort Worth 2006, no pet.) .................................................................................................. 28, 30

Printing & Numerical Registering Co. v. Sampson, LR 19 Eq 462, 465, 874 WL 16322 (1875) .................................................................................................. 24

Roe v. Ladymon, 318 S.W.3d 502 (Tex. App.—Dallas 2010, no pet.) ................ 20

Royston, Rayzor, Vickery & Williams, L.L.P. v. Lopez, 467 S.W.3d 494 (Tex. 2015) ...................................................................................................... 22, 23

Sacks v. Dallas Gold & Silver Exch., Inc., 720 S.W.2d 177, 180 (Tex.App.—Dallas 1986, no writ) ........................................................................ 24

South Hampton Co. v. Stinnes Corp., 733 F.2d 1108 (5th Cir. 1984) .................. 17

Tanox, Inc. v. Akin, Gump, Strauss, Hauer & Feld, L.L.P., 105 S.W.3d 244 (Tex. App.—Houston [14th Dist.] 2003, pet. denied) .......................................... 30

Teleometrics Int’l, Inc. v. Hall, 922 S.W.2d 189 (Tex. App.—Houston [1st Dist.] 1995, writ denied) ....................................................................................... 30

Triton 88 v. Star Electric, L.L.C., 411 S.W.3d 42 (Tex. App. —Houston (1st Dist.) 2013, no pet.) .............................................................................................. 17

Universal Computer Sys., Inc. v. Dealer Solutions, L.L.C., 183 S.W.3d 741 (Tex. App.—Houston [1st Dist.] 2005, pet. denied) ............................................ 30

Werline v. E. Tex. Salt Water Disposal Co., 209 S.W.3d 888 (Tex. App.— Texarkana 2006), aff’d, 307 S.W.3d 267 (Tex. 2010) .................................... 28, 30

Wood Motor Co. v. Nebel, 150 Tex. 86, 238 S.W.2d 181, 185 (1951) .......... 23, 24

viii Xtria L.L.C. v. Int’l Ins. Alliance Inc., 286 S.W.3d 583 (Tex. App.— Texarkana 2009, pet. denied) .............................................................. 27, 28, 29, 30

TEXAS CONSTITUTION

Tex. Const. art. I, § 16 .......................................................................................... 23

TEXAS STATUTES

Tex. Civ. Prac. & Rem. Code Ann. § 154.002 ..................................................... 25

Tex. Civ. Prac. & Rem. Code § 171.087 .............................................................. 26

Tex. Civ. Prac. & Rem. Code Ann., Title 7 .......................................................... 24

Tex. Fam. Code Ann. §§ 6.601–6.604 .................................................................. 24

AAA RULES

American Arbitration Association Rule of Commercial Arbitration, R-7 ........... 19

RECORD REFERENCES

Clerk’s Record CR[Vol.#]:[Page#]

ix No. 14-15-00610-CV ___________________________________

IN THE COURT OF APPEALS FOR THE FOURTEENTH JUDICIAL DISTRICT OF TEXAS AT HOUSTON __________________________________

D.H. GRIFFIN OF TEXAS, INC. Appellee _________________________________

BRIEF OF APPELLEE. D.H. GRIFFIN OF TEXAS, INC. _________________________________

TO THE HONORABLE FOURTEENTH COURT OF APPEALS:

Appellee, D.H. Griffin of Texas, Inc., respectfully submits this brief in

response to the brief filed by Appellant. Appellant, Southwinds Express

Construction, appeals from the entry of a Final Order Confirming Arbitration

Award entered by the 151st Judicial District Court, Honorable Michael Engelhart,

Judge Presiding. Appellee respectfully requests that this Court affirm the entry of

the Final Order Confirming Arbitration Award by the trial court.

STATEMENT OF THE CASE

Pursuant to the terms of a Subcontractor Agreement (CR1:36-47) executed

between Appellee D.H. Griffin of Texas, Inc. (“Griffin”) and Appellant

Southwinds Express Construction, LLC (“Southwinds”), Griffin initiated an

1 arbitration proceeding (CR1:26-31) against Southwinds seeking damages and

equitable relief after Southwinds walked off the job of a new construction,

renovation, and demolition project prior to completing its scope of work. During

the arbitration proceeding, Southwinds twice objected to the jurisdiction of the

American Arbitration Association (“AAA”) to administer Griffin’s claims

(CR1:32-33). On both occasions, the Arbitrator rejected Southwinds’ objections

and, following a two-day final arbitration hearing, issued an Award of Arbitration

(“the Arbitrator’s Award”) (CR1:8-12) in favor of Griffin and against Southwinds,

expressly overruling Southwinds’ objection to AAA’s jurisdiction and granting

Griffin monetary and equitable relief. After Southwinds failed to abide by the

Arbitrator’s Award, Griffin initiated an action in the 151st District Court, Harris

County, Texas to have the Arbitrator’s Award confirmed (CR1:4-12). Southwinds

objected to confirmation of the award and filed pleadings asserting the identical

lack of jurisdiction arguments and asking the trial court to vacate the Arbitrator’s

Award (CR1:15-23). The trial court requested additional briefing from Griffin

(CR1:76) and, after consideration of both parties’ briefing and arguments, entered

a final order confirming the Arbitrator’s Award (CR1:110-111). Southwinds

appeals from the entry of that final order.

2 STATEMENT ON ORAL ARGUMENT

Appellant requested oral argument. Appellee maintains oral argument is not

likely to add materially to the information before the Court, but, out of an abundance

of caution and to avoid waiver, requests the right to participate in any oral argument

that may be scheduled by the Court.

REPLY TO ISSUES PRESENTED

REPLY POINT ONE

In response to Issue 1.

The trial court did not err in determining the dispute between the parties was subject to arbitration because the parties’ oral agreement to expand the Subcontractor Agreement’s scope of work to include C&D haul-off constituted an oral modification of the Subcontractor Agreement and therefore fell within the scope of that agreement’s claims resolution clause which required resolution of disputes by binding arbitration. The parties agreed to submit their dispute to binding arbitration under the AAA’s rules without limit as to scope of issues to be arbitrated. Thus, the trial court correctly deferred to the Arbitrator’s findings. Moreover, mediation was not a condition precedent to arbitration.

REPLY POINT TWO

In response to Issue 2.

The trial court did not err in applying the statutory grounds for vacatur set forth in §171.088 of the Texas Civil Practice & Remedies Code when it denied Southwinds’ motion to vacate the Arbitrator’s Award because Southwinds failed to meet its statutory burden of demonstrating that there was no valid agreement to arbitrate the dispute in question.

3 REPLY POINT THREE

In response to Issue 3.

The Arbitrator’s Award is not tainted by a disregard for the law or by a gross mistake in applying the law.

STATEMENT OF FACTS

Appellee D.H. Griffin of Texas, Inc. (“Griffin”) is a demolition contractor

headquartered in Houston, Texas, since the 1990s. On occasion, Griffin is a

subcontractor for a general contractor (usually when the overall project includes

new construction and renovation as well as demolition).

In 2013, the Lemoine Company (“Lemoine”), a construction

company/general contractor headquartered in Lafayette, Louisiana, hired Griffin to

serve as the demolition subcontractor for a new construction, renovation, and

demolition project (“the Project”) on the grounds of Our Lady of Lourdes Hospital

(“the Owner”) in Lafayette (CR1:27).

At Griffin’s request, Appellant Southwinds Express Construction, LLC

(“Southwinds”) submitted a bid for removing debris and other material from the

demolition site of the Project (CR1:86). Southwinds’ bid was for concrete

excavation and haul-off, brick haul-off, and construction and demolition (“C&D”)

haul-off. Griffin accepted Southwinds’ terms for the concrete haul-off and the

brick haul-off but was unwilling to accept Southwinds’ proposed price terms

($12/cubic yard) for the C&D haul-off. So, on September 26, 2013, Griffin and

4 Southwinds entered into a Subcontractor Agreement whose scope of work

encompassed only the concrete haul-off and brick haul-off (CR1:36-47).

However, the scope of work agreed to between the parties (memorialized in Ex. A

to the Subcontractor Agreement) expressly referenced Southwinds’ original

proposal for the C&D haul-off.

Over the course of the ensuing two weeks, the Griffin and Southwinds

reached agreement on the price Griffin would agree to pay Southwinds for C&D

haul-off ($9/cubic yard) and, on October 9, 2013, reached an oral agreement to

expand Southwinds’ scope of work for the Project to include C&D haul-off for that

price (CR1:8-10). As clear evidence of the material terms of this agreement, the

very next day, Southwinds hauled and dumped 50 yards of C&D and invoiced

Griffin for the same at $9/cubic yard (CR1:10).

Five days later, Griffin attempted to reduce this agreement to writing by

sending Southwinds two unexecuted originals of a proposed new Subcontractor

Agreement whose only change from the existing Subcontractor Agreement was the

expansion of the scope of work to include C&D haul-off for $9/cubic yard (CR1:9,

48-59). Southwinds sought to unilaterally change the payment terms of the

proposed new Subcontractor Agreement by interlineating “Payment terms will be

Net 14” into the agreement and then privately executed the proposed second

Subcontractor Agreement and chose not to return it to Griffin (CR1:9).

5 Southwinds’ unilateral, private interlineation represented a material change to the

payment terms because the Subcontractor Agreement contained “pay when paid”

payment terms providing that Griffin’s obligation to pay Southwinds for its work

did not arise until after Griffin had first been paid by Lemoine for Southwinds’

work (CR1:43).

In the absence of a replacement written agreement, the agreement between

the parties whereby Southwinds’ scope of work expanded to include C&D haul-off

for $9/cubic yard became an oral modification of the existing Subcontractor

Agreement best evidenced by the parties’ subsequent course of dealing whereby,

throughout October, November and December of 2013, Southwinds hauled and

dumped C&D, invoiced Griffin at the price of $9/cubic yard, and was paid by

Griffin at that rate pursuant to the “pay when paid” terms of the Subcontractor

Agreement. – all of which transpired without an iota of complaint from

Southwinds (CR1:8-10).

The all-inclusive price which Griffin paid Southwinds for C&D haul-off

included the cost of disposal of that debris at a local landfill. However,

unbeknownst and without any notice to Griffin, in December of 2013, Southwinds

stopped paying the landfill for disposal of loads of construction debris dating back

to mid-November and had sent the landfill a check which had bounced (CR1:10).

In response, the landfill owner understandably refused to allow Southwinds to

6 bring any more construction debris for disposal there. Without a landfill available

for disposal of the debris, Southwinds ceased work on the Project (CR1:10).

In mid-January, 2014, Griffin learned that Southwinds had ceased work and

had abandoned the job before completing the scope of its work for the Project

(CR1:10). At the same time, Griffin was notified by the landfill that Southwinds

owed the landfill, in arrears, approximately $67,000.00 for debris from the Project

which Southwinds had hauled to and deposited in the landfill (CR1:10). The

landfill demanded payment from Griffin and threatened to place a lien on the

Owner’s property if Southwinds’ payment obligation to the landfill remained

unpaid (CR1:10).

When Griffin contacted Southwinds to investigate why Southwinds had

refused to fulfill its payment obligations to the landfill owner, Southwinds

deflected the conversation from its nonpayment of its obligations to the landfill and

instead suggested that Griffin was behind in its payment of Southwinds’ invoices

to Griffin. Such a suggestion was without merit because Southwinds knew that

Griffin was not obligated to pay Southwinds until Griffin had been paid by

Lemoine and Griffin had, to that date, timely paid Southwinds for all invoices for

which Griffin had been paid by Lemoine.

On February 6, 2014, Southwinds confirmed to Griffin that it would not

return to the jobsite and complete its work on the Project. The next day, Griffin’s

7 lawyer sent Southwinds a letter advising Southwinds that, pursuant to its rights

under the Subcontractor Agreement: (1) Griffin would pay the unpaid landfill bill

from funds which would otherwise have been due Southwinds, (2) Griffin would

withhold future sums paid by Lemoine for work completed by Southwinds to cover

whatever expenses Griffin would incur to complete the work which Southwinds

was refusing to perform, and (3) Griffin reserved the right to pursue Southwinds

for any and all other expenses to be incurred by Griffin as a result of Southwinds

having walked off of the job.

In response, Southwinds had its lawyer file a lien on the job project, notify

the Owner of its lien and, for the first time, sent Griffin’s lawyer the unsigned copy

of the proposed revised Subcontractor Agreement which Griffin had sent unsigned

to Southwinds back in October and onto which Southwinds’ subsequently and

unilaterally imposed handwritten interlineations seeking to add a “net 14 days”

payment term to the agreement. Griffin had never signed and, upon receipt,

expressly rejected that agreement as constituting any sort of enforceable second

agreement. That is why Southwinds’ assertion in its Statement of Facts in

Appellant Brief (p. 5) that there was a second “…Subcontractor Agreement dated

October 14, 2013….” is patently untrue and was soundly rejected by both the

Arbitrator and the trial court.

8 Thereafter, Griffin paid off the landfill bill which Southwinds had refused to

pay, hired and paid third-parties to complete the work which Southwinds had

refused to perform, and initiated an arbitration against Southwinds with the

American Arbitration Association (“the AAA”) to recover all damages to which

Griffin was entitled under the Subcontractor Agreement (CR1:25-31). The

Subcontractor Agreement contained a claims resolution provision (CR1:37) which

provided for mediation unless, in Griffin’s sole discretion, Griffin believed

mediation would be a useless exercise, in which case Griffin had the right to

directly proceed to initiate binding arbitration. Griffin concluded that Southwinds

had no interest being held accountable for its conduct and even less interest in

agreeing to compensate Griffin for the substantial damages it caused. Griffin had

the unequivocal right to skip mediation and properly exercised that right.

Here, Griffin wishes to point out to that Southwinds’ Statement of Facts,

which erroneously claims that the “facts” listed in its brief “are not disputed”,

posits as a “fact” in its Appellant’s Brief (pages 4 and 5) that “Griffin

acknowledged that at the time it instituted the arbitration proceeding, it owed

Southwinds $94,531.00”. Such a statement is entirely untrue. In point of fact, what

Griffin acknowledged was that this amount would have been due Southwinds but

for Southwinds having breached the Subcontractor Agreement by, among other

thing, walking off the job prior to its completion and requiring Griffin to incur

9 substantial damages resulting therefrom in an amount well in excess of what

Southwinds might have been due had it performed its obligations under the

Subcontractor Agreement.

After Griffin initiated binding arbitration, Southwinds sought to evade

accountability in arbitration by objecting to the jurisdiction of the AAA to

administer Griffin’s claims (CR1:32-35), even though the Subcontractor

Agreement clearly made any such dispute subject to the AAA’s Construction

Industry Arbitration Rules (CR1:37).

Southwinds has never disputed that it willingly executed the Subcontractor

Agreement and that the agreement contained a valid and enforceable claim

resolution provision which provided for binding arbitration of unresolved claims

between the parties. Nor has Southwinds ever disputed that, on October 9, 2013, it

orally agreed to perform C&D haul-off in return for a payment of $9/cubic yard,

that it thereafter performed C&D haul-off for the next three months and invoiced

Griffin at the rate of $9/cubic yard or that it subsequently abandoned the Project

prior to completion of its scope of work.

Southwinds instead sought to avoid it liability for the damages it caused

Griffin by abandoning the Project by arguing that Subcontractor Agreement’s

claims resolution clause does not reach Griffin’s claim for damages arising out of

Southwinds’ conduct because Griffin’s claims for damages arising from the C&D

10 haul-off portion of Southwinds’ scope of work somehow fell outside of the reach

of the Subcontractor Agreement’s claims resolution clause. Thus, Southwinds

claimed, the AAA did not have jurisdiction to hear these claims.

Griffin responded that Southwinds and Griffin’s oral agreement to expand

the Subcontractor Agreement’s scope of work to include C&D haul-off constituted

an oral modification of the Subcontractor Agreement (CR1:8-10). Therefore, C&D

haul-off was governed by the Subcontractor Agreement and, consequently,

resolution of Griffin’s claims arising therefrom fell within the scope of the

Subcontractor Agreement’s claims resolution clause.

After both parties briefed this issue, the Arbitrator conducted a November

17, 2014 telephonic hearing on the subject and overruled Southwinds’ objection to

the AAA’s jurisdiction over this matter but agreed to reconsider the issue at the

final arbitration hearing if any new facts presented themselves to call her ruling

into question.

At the two-day final arbitration hearing on January 29-30, 2015, both parties

exercised the opportunity to fully brief and present evidence on this issue.

Southwinds also argued that mediation was a condition precedent to arbitration

pursuant to the Subcontractor Agreement, to which Griffin responded that the

Subcontractor Agreement gave Griffin the clear right to escalate the dispute

directly to arbitration.

11 After hearing the evidence and considering the parties’ legal arguments, the

Arbitrator issued a March 12, 2015 Award of Arbitration (“the Arbitrator’s

Award”) (CR1:8-12) in favor of Griffin and against Southwinds on each of these

issues, expressly overruling Southwinds’ objection to AAA’s jurisdiction and

granting Griffin monetary and equitable relief.

Because Southwinds would not respond post-arbitration to multiple queries

as to when Griffin would be paid, Griffin initiated an action in the 151st District

Court, Harris County, Texas to have the Arbitrator’s Award confirmed (CR1:4-12).

Southwinds objected to confirmation of the award and filed pleadings asserting the

identical lack of jurisdiction and mediation arguments and asking the trial court to

vacate the Arbitrator’s Award (CR1:15-23). After careful consideration of the

parties’ extensive briefing and arguments, on June 16, 2015, the trial court entered

its final order confirming the Arbitrator’s Award (CR1:110-111), ruling on the

merits of the identical arguments which Southwinds has re-asserted in this appeal

and expressly finding:

The Court is persuaded that the agreement between the parties contemplated additional potential work such as the C&D work. Thus, this work arose out of the agreement and, consequently, the arbitration agreement contemplated additional work. Further, the issue of whether there was, in fact, an enforceable oral agreement to do the C&D work was for the arbitrator to decide, not this Court. The Court will note, though, that the agreement between the parties does NOT (emphasis in original) state that no subsequent agreements could be formed; only that no oral representations prior to the written agreement existed or were relied on. Finally, this Court is not

12 persuaded that the mediation clause was a condition precedent to arbitration.”

Southwinds appeals from the entry of that final order.

SUMMARY OF ARGUMENT

When distilled to its essence, Southwinds makes but one argument with two

facets. The argument is arbitrability. The facets are that the subject matter

arbitrated did not fall under the arbitration provision of the Subcontractor

Agreement and that mediation was a condition precedent to arbitration.

Southwinds makes these same arguments in all three issues. For the reasons stated

herein, each of Southwinds’ arguments fail.

On two occasions, the Arbitrator ruled against Southwinds’ jurisdiction

argument – pre-hearing and then in the final arbitration itself. The basis for the

Arbitrator’s decision was that the parties’ agreement on the terms of the C&D

haul-off constituted an oral modification of the Subcontractor Agreement, thereby

bringing the dispute over C&D haul-off within the scope of the Subcontractor

Agreement’s dispute resolution clause which provided for arbitration. After the

subsequent filing of briefs on this issue by the parties in the trial court, the court

ruled, correctly:

…that the agreement between the parties contemplated additional potential work such as the C&D work. Thus, this work arose out of the agreement and, consequently, the arbitration agreement contemplated additional work. Further, the issue of whether there was, in fact, an enforceable oral agreement to do the C&D work was for the

13 arbitrator to decide, not this Court. The Court will note, though, that the agreement between the parties does NOT (emphasis in original) state that no subsequent agreements could be formed; only that no oral representations prior to the written agreement existed or were relied on.

The Arbitrator also ruled that mediation was not a condition precedent to

arbitrating the matter because of the plain language of the Subcontractor

Agreement, to wit:

In the event that a claim is not resolved through the negotiations of the parties, claim resolution will be resolved through mediation unless, in the sole discretion of [Griffin], [Griffin] believes mediation would be a useless exercise in which case [Griffin], unilaterally, may escalate the claims process to binding arbitration at any time” (Subcontractor Agreement, p. 2, paragraph 3).

The Arbitrator properly found that, pursuant to this contractual language,

mediation was not a condition precedent to the valid filing of an arbitration claim

by Griffin without first having resorted to mediation. After the filing of briefs by

the parties on this subject in the trial court, the court ruled, appropriately: “…this

Court is not persuaded that the mediation clause was a condition precedent to

arbitration.”

Additionally, the trial court appropriately applied the statutory grounds for

vacatur set forth in §171.088 of the Texas Civil Practice & Remedies Code when it

denied Southwinds’ motion to vacate the Arbitrator’s Award. As is discussed

herein, Southwinds failed to meet its statutory burden of demonstrating that there

was no valid agreement to arbitrate the dispute in question. The trial court

14 therefore correctly applied §171.088 when it denied Southwinds’ request for

vacatur.

Lastly, Southwinds has not established that the Arbitrator’s Award is in any

way tainted by a disregard for the law or by a gross mistake in applying the law.

Here, Southwinds simply restates its flawed argument on the arbitrability of this

dispute and asserts that, because the Arbitrator rejected the argument and ruled

against Southwinds, that ruling must necessarily constitute manifest disregard and

gross error. Such an assertion is not only contrary to the law, it ignores the very

telling fact that Southwinds voluntarily and willingly agreed in the Subcontractor

Agreement to subject itself to arbitration under the AAA’s rules and to allow an

arbitrator to rule on those very subjects. The trial court properly agreed and

correctly rejected Southwinds’ suggestion that the Arbitrator’s Award was in any

way tainted by a disregard for the law or by a gross mistake in applying the law.

The trial court did not err in determining the dispute between the parties was subject to arbitration because the parties’ oral agreement to expand the Subcontractor Agreement’s scope of work to include C&D haul-off constituted an oral modification of the Subcontractor Agreement and therefore fell within the scope of that agreement’s claims resolution clause which required resolution of disputes by binding arbitration. The parties agreed to submit their dispute to binding arbitration under the AAA’s rules without limit as to scope of issues to be arbitrated. Thus, the trial court correctly deferred to the Arbitrator’s findings. Moreover, mediation was not a condition precedent to arbitration.

15 ARGUMENTS AND AUTHORITIES

In its brief, Southwinds argues that the parties’ oral agreement to include

C&D haul-off within the scope of Southwinds’ work for the Project fell outside the

reach of the Subcontractor Agreement’s dispute resolution clause and that, as a

consequence, the Arbitrator had no jurisdiction to hear Griffin’s claims arising

from Southwinds’ breach of that agreement and the trial court erred in confirming

an award the Arbitrator had no jurisdiction to make. Southwinds also argues that

both the Arbitrator and the trial court lacked jurisdiction to hear the dispute

because mediation was a condition precedent to arbitration.

For the reasons detailed herein, both of Southwinds’ jurisdictional

arguments should be soundly rejected.

The Oral Agreement Modified The Subcontractor Agreement

On October 9, 2013, Southwinds and Griffin orally agreed to expand the

Subcontractor Agreement’s Scope of Work to include C&D haul-off for $9 per

cubic yard. That there was a clear meeting of the minds as to these material terms

supported by new consideration is evidenced by: (i) the agreement reached

between the parties, (ii) Southwinds’ immediate commencement (on October 10,

2013) of C&D haul-off and invoicing Griffin $9 per cubic yard for each load, and

(iii) the parties course of dealings throughout October, November and December of

16 2013 during which Southwinds hauled C&D, invoiced Griffin $9 per cubic yard,

and was paid by Griffin at that rate.

The parties’ October 9, 2013 oral agreement to expand Southwinds scope of

work under the Subcontractor Agreement to include C&D haul-off for $9 per cubic

yard therefore constituted a binding and enforceable oral modification of the

September 26, 2013 Subcontractor Agreement.

In Double Diamond, Inc. v. Hilco Electric Coop., Inc., 127 S.W.3d 260, 267

(Tex. App.—Waco 2003, no pet.), the Waco Court of Appeals confirmed

longstanding Texas law when it held:

A written agreement not required by law to be in writing may be modified by a later oral agreement, even though it provides that it can be modified only in writing.

See also Mar-Lan Industries, Inc. v. Nelson, 635 S.W.2d 853, 855 (Tex. App.—El

Paso 1982, no writ). Accord, Triton 88 v. Star Electric, L.L.C., 411 S.W.3d 42, 57

(Tex. App.—Houston (1st Dist.) 2013, no pet.); Am. Garment Props., Inc. v. CB

Richard Ellis-El Paso, L.L.C., 155 S.W.3d 431, 435 (Tex.App.—El Paso 2004, no

pet.); see also South Hampton Co. v. Stinnes Corp., 733 F.2d 1108, 1118 (5th Cir.

1984).

Texas courts have long recognized and enforced oral modifications even

where the parties’ agreement contains a no-oral-modification clause, reasoning that

the written agreement is of no higher legal degree than an oral one, and either may

17 vary or discharge the other. Id.; see also Lone Star Steel Co. v. Scott, 759 S.W.2d

144, 153 (Tex.Civ.App.—Texarkana, 1988, writ denied); Group Hosp. Servcs.,

Inc. v. One and Two Brookriver Center, 704 S.W.2d 886, 890 (Tex.Civ.App.—

Dallas 1986, no writ); Hyatt Cheek Builders-Engineers v. Board of Regents of the

Univ. of Texas System, 607 S.W.2d 258, 265 (Tex.Civ.App.—Texarkana, 1980,

writ dism’d).

Here, no Texas law (e.g., the statute of frauds) required the oral modification

to be in writing. Hence, Griffin and Southwinds were perfectly free to modify their

binding September 26, 2013 Subcontractor Agreement orally to expand the

agreement’s Scope of Work to include the C&D haul-off and that is precisely what

they did when they agreed on or about October 9, 2013 that Southwinds would

haul C&D for $9 per cubic yard.

Because the binding and enforceable oral modification modified the

Subcontractor Agreement and because the Subcontractor Agreement contained a

dispute resolution clause permitting either party to invoke binding arbitration, the

oral modification, then being a part of the Subcontractor Agreement as though

written in the agreement ab initio, was subject to the arbitration provision. Thus,

when Southwinds walked off the job and failed to complete the C&D haul-off, and

when Griffin asserted its claim against Southwinds for breach of the Subcontractor

Agreement, that claim (along with Griffin’s additional claims) was subject to the

18 binding arbitration provision of the Subcontractor Agreement. That is precisely

what the Arbitrator found in her Award of Arbitration (see pp. 2-3). The trial court

affirmed that result and indicated that the decision on this subject was the province

of the Arbitrator and not the trial court; this Court should reach precisely the same

result.

On the subject of arbitrability, Texas law is clear. “The scope of the

arbitration is a matter of substantive arbitrability for a court to decide unless the

parties clearly agreed otherwise.” See Howsam v. Dean Witter Reynolds, Inc., 537

U.S. 79, 84 (2002); Burlington Res. Oil & Gas Co. LP v. San Juan Basin Royalty

Trust, 249 S.W.3d 34, 39 (Tex. App.—Houston [1st Dist.] 2007, pet. denied). In

this case, parties agreed in paragraph 3 of the Subcontractor Agreement to subject

any dispute to binding arbitration under the rules of the AAA’s Construction

Industry Dispute Resolution Procedures. Those very rules provide that the

Arbitrator “shall have the power to rule on his or her own jurisdiction, including

any objections with respect to the existence, scope or validity of the arbitration

agreement.” American Arbitration Association Rule of Commercial Arbitration, R-

7. This explains why, rather than ask a court to decide the arbitrability issue,

Southwinds raised its jurisdictional objection to the Arbitrator in the course of the

arbitration proceeding in its pleadings, pre-hearing conference, and during the final

arbitration hearing itself. The Arbitrator decided the issue, ruling at each

19 opportunity that C&D haul-off was arbitrable under the Subcontractor Agreement

and that mediation was not a condition precedent to arbitration. The trial court, in

turn, ruled that these findings, indeed, fell within the province of the Arbitrator and

that mediation was not a precedent to arbitration.

In Aspri Investments, LLC v. AFEEF and ENM Food Mart, Inc., No. 04-07-

00249-CV, 2011 Tex. App. LEXIS 7082 (Tex.App.—San Antonio August 31,

2011, pet. dism’d) (mem. op.) the Court stated:

Most courts have concluded that where the parties’ agreement did not limit the issues to be arbitrated or the applicability of the AAA rules, incorporation of the AAA rules constitutes clear and unmistakable evidence of the parties’ intent to delegate issues of arbitrability to the arbitrator. See Haddock, 287 S.W.3d at 172-73 (discussing cases); Burlington, 249 S.W.3d at 40-42 (same). We conclude the parties agreed to submit arbitrability issues to the arbitrators. Because the arbitration panel had the primary power to decide the scope of arbitration, the court’s standard for reviewing the panel’s decision on that matter is the same as the standard used in reviewing the panel’s decision on substantive matters. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943 (1995). That is, the trial court reviews the panel’s determination with great deference, indulging all reasonable presumptions in favor of the panel’s decision. See CVN Group, 95 S.W.3d at 238; Roe v. Ladymon, 318 S.W.3d 502, 511 (Tex. App.— Dallas 2010, no pet.). Any doubts concerning the scope of what is arbitrable should be resolved in favor of arbitration. Centex/Vestal, 314 S.W.3d at 684. … We conclude that Aspri has not shown grounds for the trial court to do anything other than defer to the arbitration panel’s determinations about the scope of the arbitration, and we hold the trial court did not err in failing to vacate on the ground the arbitrators exceeded their powers.

The same result should follow here.

20 Mediation as a Condition Precedent to Arbitration

In its brief, Southwinds argues that, notwithstanding its plain language, the

dispute resolution clause in the Subcontractor Agreement required mediation to be

a condition precedent to arbitration. As the Arbitrator ruled and as the trial court

agreed, this is argument is devoid of legal basis or merit.

Southwinds suggests that the contractual dispute-resolution process required

negotiation, followed by mediation, followed by arbitration (assuming no

settlement). Not so. The dispute resolution process agreed to between the parties in

paragraph 3 of the Subcontractor Agreement called for negotiation (which Griffin

attempted on various occasions but which Southwinds absolutely and steadfastly

rebuffed), followed by mediation unless Griffin, at its sole discretion, decided to

bypass mediation by escalating the dispute straight to arbitration.

Paragraph 3 of the Subcontractor Agreement clearly and unambiguously

provides:

In the event that a claim is not resolved through the negotiations of the parties, claim resolution will be resolved through mediation, unless in the sole discretion of [Griffin], [Griffin] believes mediation would be a useless exercise in which case [Griffin], unilaterally, may escalate the claims process to binding arbitration at any time.

While this contract language in no way requires Griffin to justify why it

decided to forego mediation and escalate the dispute directly to binding arbitration

by filing an arbitration claim against Southwinds, Griffin notes here that, given the

21 chronology of events detailed at the arbitration, Griffin understandably concluded

that Southwinds had no interest being held accountable for its conduct and even

less interest in agreeing to compensate Griffin for the substantial damages it

caused. Griffin had the unequivocal right to skip mediation and properly exercised

that right.

The cases relied upon by Southwinds in support of its suggestion that this

Court should brand the dispute resolution clause in the Subcontractor Agreement

as illusory are inapplicable here.

In Mann Frankfurt Stein & Lipp Advisers, Inc. v. Fielding, 289 S.W.3d 844

(Tex. 2009), for example, the question was whether a promisor could unilaterally

discontinue or change performance. The case concerned the enforceability of a

covenant-not-to-compete and is far afield from this dispute. The dispute resolution

clause in this case does not grant Griffin the right to change its performance of the

Subcontractor Agreement, only to escalate from mediation to arbitration. Griffin

was not discontinuing or changing anything. The Subcontractor Agreement gave

Griffin the right to do exactly what it did.

Citing Royston, Rayzor, Vickery & Williams, L.L.P. v. Lopez, 467 S.W.3d

494 (Tex. 2015), Southwinds argues that the Supreme Court of Texas recently

stated that an arbitration provision that permits one party to amend or change the

agreed-upon procedure so as to avoid its obligations is illusory, but that is simply

22 not what happened in this case. Griffin had no right to change or to amend the

agreed-upon procedure because the agreed-upon procedure plainly was spelled out

in the dispute resolution clause itself; i.e., it was agreed upon. By executing the

Subcontractor Agreement, Southwinds agreed to the precise procedure which was

followed: failed negotiation moving to mediation unless Griffin chose to move

straight from negotiation to arbitration. There is nothing illusory or unenforceable

about that. In Royston, the Court found that the arbitration provision in question

was not illusory.

Freedom of contract is fundamental to the conduct of business in Texas. As

the Supreme Court of Texas stated in Marsh USA v. Cook, 354 S.W.3d 764 (Tex.

2011): “The Texas Constitution protects the freedom to contract.” See Tex. Const.

art. I, §16; Fairfield Ins. Co. v. Stephens Martin Paving, LP, 246 S.W.3d 653, 663–

64 (Tex. 2008); see also In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 128–29

(Tex. 2004).

In Fairfield, the Court stated: “This Court has long recognized Texas’ strong

public policy in favor of preserving the freedom of contract.” Tex. Const. art. I, §

16 (“No bill of attainder, ex post facto law, retroactive law, or any law impairing

the obligation of contracts, shall be made.”); see also Churchill Forge, Inc. v.

Brown, 61 S.W.3d 368, 371 (Tex. 2001); Lawrence, 44 S.W.3d at 553 (citations

omitted); Wood Motor Co. v. Nebel, 150 Tex. 86, 238 S.W.2d 181, 185 (1951).

23 Sophisticated businesspersons, as here, have every right to enter into the

contracts and contractual language of their choosing. On that subject, the Fairfield

Court quoted law well-settled since at least 1875:

[I]f there is one thing which more than another public policy requires, it is that men of full age and competent understanding shall have the utmost liberty of contracting, and that their contracts when entered into freely and voluntarily shall be held sacred and shall be enforced by Courts of justice. Therefore, you have this paramount public policy to consider — that you are not lightly to interfere with this freedom of contract. Nebel, 238 S.W.2d at 185 (quoting Printing & Numerical Registering Co. v. Sampson, LR 19 Eq 462, 465, 1874 WL 16322 (1875)).

Of course, as the Marsh Court also stated: “[T]he Legislature may impose

reasonable restrictions on the freedom to contract consistent with public policy.”

See Fairfield at 664-65.

In In re Mabry, 355 S.W.3d 16, 29 (Tex. App.—Houston [1st Dist.] 2010,

orig. proceeding [mand. denied]), this Court stated: “[In various areas of the law],

Texas public policy permits and encourages parties to enter into agreements to

submit disputes to various forms of alternative dispute resolution.” See, e.g., Tex.

Fam. Code Ann. §§ 6.601–6.604; Tex. Civ. Prac. & Rem.Code Ann., Title 7.

Texas public policy, this Court also stated, strongly favors “preserving the freedom

to contract.” Lawrence, 44 S.W.3d at 553. But “[t]he courts will not enforce a

contract whose provisions are against public policy.” Sacks v. Dallas Gold &

Silver Exch., Inc., 720 S.W.2d 177, 180 (Tex.App.-Dallas 1986, no writ).

24 This Court continued:

We can see no reason why we should hold that cooperative law agreements violate public policy in Texas. Neither the collaborative law statute nor common law prohibit the practice of cooperative law in Texas, and [Mabry] has offered no persuasive evidence as to why cooperative law agreements cannot be negotiated by parties within Texas’s generous ADR ambit. See Tex. Civ. Prac. & Rem.Code Ann. § 154.002.

Nothing in the Subcontractor Agreement, specifically including its dispute-

resolution clause, is against or violates public policy and the Legislature has not

seen fit so to say. Southwinds had every opportunity to negotiate changes to the

dispute-resolution provision of the Subcontractor Agreement but engaged in

absolutely no effort to do so; it must be so, therefore, that Southwinds was just as

much in agreement with the exact language of the dispute-resolution provision as it

was with any other provision in the Subcontractor Agreement.

As is set forth above, the parties agreed to abide by arbitration rules which

let the Arbitrator decide the arbitrability issues. Beyond any doubt, the Arbitrator

had the authority to decide arbitrability, the Arbitrator did so, the trial court upheld

the Arbitrator’s decisions with respect to arbitrability. Arbitrability was properly

decided by the Arbitrator, affirmed by the trial court and should not be disturbed.

The trial court did not err in applying the statutory grounds for vacatur set forth in §171.088 of the Texas Civil Practice & Remedies Code when it denied

25 Southwinds’ motion to vacate the Arbitrator’s Award because Southwinds failed to meet its statutory burden of demonstrating that there was no valid agreement to arbitrate the dispute in question.

ARGUMENTS AND AUTHORITIES

The Arbitrator’s Award must be confirmed unless there are grounds for

modifying, correcting or vacating the award. Texas Civil Practice & Remedies

Code §171.087; Nafta Traders, Inc. v. Quinn, 339 S.W.3d 84, 89-90 (Tex. 2011);

City of Baytown v. C.L. Winter, Inc., 886 S.W.2d 515, 520 (Tex. App. - Houston

[1st Dist.] 1994, writ denied).

Southwinds’ brief argues that the trial court should have vacated the

Arbitrator’s Award in this case because there was no valid agreement to arbitrate

the C&D haul-off claims.

Griffin incorporates herein the evidence, arguments and authorities detailed

above in response to Issue No. 1 wherein Griffin demonstrated that there was

indeed a valid and enforceable agreement between the parties to arbitrate the C&D

haul-off claims. Therefore, the trial court did not err by failing to apply the

§171.088 statutory grounds for vacating an arbitration award because Southwinds

failed to meet its legal burden of demonstrating no valid agreement to arbitrate.

Southwinds also suggests that vacatur of the Arbitrator’s Award was

justified under §171.088(a)(3)(A) because the Arbitrator exceeded her powers by

deciding matters outside the scope of her authority. Here, as the only basis for this

26 argument, Southwinds rehashes its suggestion that that the arbitrator exceeded her

authority because she did not have jurisdiction to hear the claims she decided.

In response, Griffin again incorporates herein the evidence, arguments and

authorities detailed above in response to Issue No. 1 wherein Griffin demonstrated

that arbitrability, including issues of jurisdiction, may be decided by the Arbitrator

where the parties have requested, as here, that the Arbitrator so decide. In Aspri, p.

6, the Court stated clear and well-settled Texas law:

We review de novo the trial court’s judgment confirming an arbitration award “while giving strong deference to the arbitrator with respect to issues properly left to the arbitrator’s resolution.” Xtria L.L.C. v. Int'l Ins. Alliance Inc., 286 S.W.3d 583, 591 (Tex. App.— Texarkana 2009, pet. denied); see Centex/Vestal v. Friendship W. Baptist Church, 314 S.W.3d 677, 683 (Tex. App.—Dallas 2010, pet. denied); GJR Mgmt. Holdings, L.P. v. Jack Raus, Ltd., 126 S.W.3d 257, 262 (Tex. App.—San Antonio 2003, pet. denied). Judicial review of arbitration awards is “extraordinarily narrow.” E. Tex. Salt Water Disposal Co. v. Werline, 307 S.W.3d 267, 271 (Tex. 2010). Courts are to indulge all reasonable presumptions in favor of the award…. CVN Group, Inc. v. Delgado, 95 S.W.3d 234, 238 (Tex. 2002); Centex/Vestal, 314 S.W.3d at 683.

In essence, Southwinds admits in its brief that this argument arises from the

suggestion that the Arbitrator “dispensed her own justice” by carefully considering

the facts and ruling in Griffin’s favor. In other words, because Southwinds lost,

the Arbitrator somehow exceeded her own powers. Such a suggestion is without

any legal basis and should be rejected.

27 Since Southwinds failed to meet its burden of proving all three elements

with respect to the §171.088 statutory grounds for seeking vacatur of the

Arbitrator’s Award, the trial court committed no error in failing to vacate the

award.

REPLY POINT THREE

The Arbitrator’s Award is not tainted by a disregard for the law or by a gross mistake in applying the law.

Southwinds’ third and final argument relies yet again on the notion that the

Arbitrator decided matters not covered by a valid arbitration agreement, arguing

that this constitutes manifest disregard of the law and gross error.

Other than the naked assertion and conclusion that not ruling in its favor on

the arbitrability issue constitutes manifest disregard for the law and gross error,

Southwinds has offered no proof whatsoever of any semblance of manifest

disregard or gross error.

In Aspri, supra, the Court stated, at 20-21:

[A] party challenging an arbitration award on the ground of gross mistake has the burden of demonstrating the arbitrators acted in bad faith or failed to exercise honest judgment. Xtria, 286 S.W.3d at 598; Werline, 209 S.W.3d at 898; Pheng Inv., Inc. v. Rodriquez, 196 S.W.3d 322, 330-31 (Tex. App.—Fort Worth 2006, no pet.). “Gross mistake results in a decision that is arbitrary and capricious;” whereas “a judgment rendered after honest consideration given to conflicting

28 claims, no matter how erroneous, is not arbitrary or capricious.” Xtria at 598. An arbitrator’s decision is arbitrary and capricious if it is the product of “willful and unreasoning action, action without consideration and in disregard of the facts and circumstances of the case.” Grand Int’l Bhd. Of Locomotive Eng’rs v. Wilson, 341 S.W.2d 206, 211 (Tex. Civ. App.—Fort Worth 1960, writ ref’d n.r.e.).

That Aspri may disagree with the panel’s credibility determinations or the weight to be given to particular evidence does not render the panel’s decision arbitrary and capricious, evidence bad faith, or show a failure to exercise honest judgment. Aspri’s arguments amount to nothing more than challenges to the legal and factual sufficiency of the evidence and alleged errors in the application of the substantive law, which we have no power to review. See id.; Crossmark, Inc. v. Hazar, 124 S.W.3d 422, 435 (Tex. App.—Dallas 2004, pet. denied); J.J. Gregory Gourmet Servs, Inc. v. Anton’s Imp. Co., 927 S.W.2d 31, 35 (Tex. App.—Houston [1st Dist.] 1995, no writ). Aspri has not pointed to anything other than the result as evidence of bad faith or bad motive. It did not establish gross mistake and the trial court therefore did not err in denying the motion to vacate on that ground.

In Humitech Dev. Corp. v. Perlman, 424 S.W.3d 782, 795-96 (Tex.App.—Dallas

2014, no pet.), the Court stated:

Manifest disregard is a “very narrow” or “extremely limited” standard of review. Xtria L.L.C. v. Int'l Ins. Alliance Inc., 286 S.W.3d 583, 594 (Tex. App.—Texarkana 2009, pet. denied) (“very narrow” standard); Home Owners Mgmt. Enters., Inc. v. Dean, 230 S.W.3d 766, 768-69 (Tex. App.—Dallas 2007, no pet.) (“extremely limited” standard). It is more than error or misunderstanding of the law. Xtria L.L.C., 286 S.W.3d at 594; Home Owners, 230 S.W.3d at 768. The disregarding of the law is “manifest” if it was “obvious and capable of being readily and instantly perceived by the average person qualified to serve as an arbitrator.” Xtria L.L.C., 286 S.W.3d at 594; Myer v. Americo Life, Inc., 232 S.W.3d 401, 411. The term “disregard” implies that the arbitrator “appreciate[d] the existence of a clearly governing principle but decided to ignore or pay no attention to it.” Myer, 232 S.W.3d at 411. “In other words, the issue is not whether the arbitrator correctly interpreted the law, but whether

29 the arbitrator, knowing the law and recognizing that the law required a particular result, simply disregarded the law.” Xtria L.L.C., 286 S.W.3d at 594; see Pheng Invs., Inc. v. Rodriquez, 196 S.W.3d 322, 332 (Tex. App.—Fort Worth 2006, no pet.)) (“Under this standard, the arbitrator clearly recognizes the law but chooses to ignore it or refuses to apply it correctly.”). It is appellants’ burden to demonstrate that the arbitrator manifestly disregarded the law. Xtria L.L.C., 286 S.W.3d at 594; Tanox, Inc. v. Akin, Gump, Strauss, Hauer & Feld, L.L.P., 105 S.W.3d 244, 253 (Tex. App.—Houston [14th Dist.] 2003, pet. denied).

Gross mistake is conceptually analogous to manifest disregard. See Int’l Bank of Commerce v. Int’l Energy Dev. Corp., 981 S.W.2d 38, 48 (Tex. App.—Corpus Christi 1998, pet. denied). A gross mistake is a mistake that implies bad faith or a failure to exercise honest judgment and results in a decision that is arbitrary and capricious. Xtria L.L.C., 286 S.W.3d at 598; Werline v. E. Tex. Salt Water Disposal Co., 209 S.W.3d 888, 898 (Tex. App.—Texarkana 2006), aff'd, 307 S.W.3d 267, 268 (Tex. 2010); Teleometrics Int'l, Inc. v. Hall, 922 S.W.2d 189, 193 (Tex. App.—Houston [1st Dist.] 1995, writ denied). “A judgment rendered after honest consideration given to conflicting claims, no matter how erroneous, is not arbitrary or capricious.” Xtria L.L.C., 286 S.W.3d at 598. The doctrines of manifest disregard and gross mistake do not extend to mere mistakes of fact or law. Judicial review of an arbitration award “is so limited that even a mistake of fact or law by the arbitrator in the application of substantive law is not a proper ground for vacating an award." Centex/Vestal, 314 S.W.3d at 683; Xtria L.L.C., 286 S.W.3d at 591; Universal Computer Sys., Inc. v. Dealer Solutions, L.L.C., 183 S.W.3d 741, 752 (Tex. App.—Houston [1st Dist.] 2005, pet. denied).

Here, Southwinds has utterly failed to provide a semblance of evidence that

the Arbitrator in any way manifestly disregarded the law or committed any gross

error. Here, Southwinds simply restates its flawed argument on the arbitrability of

this dispute and asserts that, because the Arbitrator rejected the argument and ruled

against Southwinds, that ruling must necessarily constitute manifest disregard and

30 gross error. Such an assertion is not only contrary to the law, it ignores the very

telling fact that Southwinds voluntarily and willingly agreed in the Subcontractor

Agreement to subject itself to arbitration under the AAA’s rules and to allow an

arbitrator to rule on those very subjects. The trial court properly agreed and

correctly rejected Southwinds’ suggestion that the Arbitrator’s Award was in any

way tainted by a disregard for the law or by a gross mistake in applying the law.

Finally, and importantly, Southwinds did not ask the trial court to vacate the

arbitrator’s award on the basis of manifest disregard of the law or gross error, and,

therefore, Southwinds has waived its right to raise this issue on appeal.

CONCLUSION AND PRAYER

The trial court committed no error. The Arbitrator’s Award is not tainted by

a disregard for the law or by a gross mistake in applying the law. The trial court’s

Final Order Confirming Arbitrator’s Award should be affirmed.

WHEREFORE, PREMISES CONSIDERED, Appellee D.H. Griffin of

Texas, Inc. respectfully prays that this Court affirm the judgment of the trial court,

and for such other and further relief to which it may show itself justly entitled.

31 Respectfully submitted,

LAPIN & LANDA, L.L.P.

By: /s/ Robert E. Lapin Robert E. Lapin Bar Card No. 11945050 500 Jefferson, Suite 2000 Houston, Texas 77002 Phone: (713) 756-3232 Fax: (713) 654-8704 blapin@lapinlanda.com

LAW OFFICE OF DON TOMLINSON

Don Tomlinson State Bar No. 24039507 8 Loggerhead Hitchcock, TX 77563 Phone (832) 444-4848 don@dontomlinsonlaw.com

ATTORNEYS FOR APPELLEE, D.H. GRIFFIN OF TEXAS, INC.

CERTIFICATE OF SERVICE

I hereby certify that on the 8th day of December, 2015, a true and correct copy of the above and foregoing Brief of Appellee was delivered to Appellant’s counsel of record, Robert J. Killeen, Jr., Robert C. Stern, and Gerald M. Johnson, III, 1811 Bering Drive, Suite 120, Houston, TX 77057, pursuant to the Texas Rules of Appellate Procedure via e-service and via e-mail.

/s/ Robert E. Lapin Robert E. Lapin

32 CERTIFICATE OF COMPLIANCE

I hereby certify that this brief contains 6,851 words.