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IOC Company, LLC v. City of Edinburg

Court of Appeals of Texas, Thirteenth District, Corpus Christi-Edinburg

July 20, 2017

IOC COMPANY, LLC, Appellant,
v.
CITY OF EDINBURG, TEXAS, Appellee.

         On appeal from the 332nd District Court of Hidalgo County, Texas.

          Before Justices Rodriguez, Benavides, and Longoria

          MEMORANDUM OPINION

          GINA M. BENAVIDES, Justice

         This appeal concerns the trial court's orders: (1) granting appellee's, the City of Edinburg (the City), motion to vacate an adverse arbitration award rendered in favor of appellant, IOC Company, LLC (IOC); and (2) denying IOC's motion to confirm the same arbitration award. By one issue, IOC contends that the trial court erred in vacating rather than confirming the arbitration award. We reverse and render.

         I. Background

         A. The Parties and the Agreements

         IOC is a Texas limited liability company that is in the business of highway and road construction. The City is a municipality located in Hidalgo County.

         On April 1, 2008, IOC and the City entered into an agreement regarding engineering and architectural construction for paving and drainage improvements for Canton Road located in the City (the Canton Road Project). The Canton Road Project agreement contained a section which required "any controversy or claim arising out of or relating to [the Canton Road Project], or the breach thereof" which could not be resolved by mutual agreement to be settled by arbitration.

         On June 2, 2009, IOC and the City entered into a second, separate agreement related to engineering and architectural construction for paving and drainage improvements for Sugar Road located in the City (the Sugar Road Project). The Sugar Road Project agreement contained separate mediation and arbitration clauses. The mediation clause called first for a "quick resolution of any and all disputes, if any" under the contract, and the agreement provided that if the dispute failed to resolve at mediation, the parties were required to submit the dispute to arbitration.

         B. The Arbitration Proceeding and Award

         Subsequently, claims and disputes by IOC against the City arose related to both the Canton Road Project and the Sugar Road Project. Both matters were consolidated and arbitrated by the same arbitrator, who conducted bifurcated evidentiary hearings for each contract during the months of February 2014 and April 2014. The hearings were closed on June 18, 2014.

         1. The Canton Road Project

         According to the record, IOC sought recovery for damages "in the form of additional compensation due to the City's claims breach of contract, essentially consisting of delays, interferences, and disruptions" caused by the City during its work on the Canton Road Project. IOC also sought recovery of attorneys' fees, prejudgment interest, and reimbursement of arbitrator compensation and costs.

         In response to IOC's claims, the City contested IOC's entitlement to recovery of damages under section 271.153 of the local government code. See Tex. Local Gov't Code Ann. § 271.153 (West, Westlaw through Ch. 49, 2017 R.S.) (placing limitations on adjudication awards against local governmental entities for breach of contract). Further, the arbitrator's award notes that the City "strongly denie[d] it was responsible for owner-caused delays" and claimed that it was "not responsible for relocating utility lines, encumbrances[, ] and obstructions that hindered, delayed[, ] or disrupted IOC's ability to timely, efficiently . . . perform the required scope of work" under the Canton Road Project construction plan. Further, the City argued that any delays that IOC suffered were caused by third parties "over whom it had no control or responsibility."

         The arbitrator found that the City materially breached the Canton Road agreement "without excuse" and was liable to IOC "for damages in the form of additional compensation arising from City-caused delays, disruptions and interference." The arbitrator found that IOC did not materially breach the agreement. To support these findings, the arbitrator made specific findings that:

(1) The City failed to timely and properly provide IOC with the lands necessary for it to perform the scope of work . . . .
(2) The City failed to provide IOC timely and proper access to the areas in which it was to perform the scope of work . . . .
(3) The City failed to provide IOC with unhindered and unobstructed access to the areas in which it was to perform the scope of work . . . .
(4) The City failed to timely, reasonably[, ] and properly manage the removal of obstacles, conflicts[, ] and obstructions in the areas in which IOC was to perform the scope of work . . . . The City had the duty and responsibility to manage the removal of ...

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