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Dotcom Ltd Co. v. DP Solutions, Inc.

Court of Appeals of Texas, Twelfth District, Tyler

July 31, 2017

DOTCOM LTD CO D/B/A DOTCOM LTD (ALSO KNOWN AS DOTCOM INTERNET SERVICES) AND PETER FERNANDEZ, APPELLANTS
v.
DP SOLUTIONS, INC., APPELLEE

         Appeal from the 159th District Court of Angelina County, Texas (Tr.Ct. No. CV-42935-10-02)

          Panel consisted of Worthen, C.J., Neeley, J., and Bass, Retired J., Twelfth Court of Appeals, sitting by assignment.

          MEMORANDUM OPINION

          Bill Bass Justice.

         Appellants, Dotcom Ltd. Co. d/b/a Dotcom Ltd, also known as Dotcom Internet Services, (hereinafter Dotcom) and Peter Fernandez (Fernandez), appeal from a judgment confirming an arbitration award in favor of DP Solutions, Inc. (DP). In five issues, Appellants claim that the trial court erred in confirming the award because (1) the arbitrator exceeded his authority, (2) the arbitrator's failure to disclose a relationship with opposing counsel's family denied Appellants a neutral arbitrator, (3) the arbitrator demonstrated evident partiality to DP, (4) the arbitrator based the award on facts and factors not presented at arbitration, and (5) the arbitrator refused to allow Appellants adequate time to study and interpret relevant information late produced by DP. We affirm the judgment confirming the award.

         Background

         In late 2005, Fernandez contacted DP to "explore a mutually beneficial relationship between Dotcom and DP[.]" Both companies were in the internet dial up business. DP was in the Lufkin market and Dotcom was in the Nacogdoches market. DP agreed to sell its dial up customers to Dotcom. The parties signed three contracts. The first was a confidentiality agreement entered into by Fernandez and DP on February 9, 2006. Dotcom and DP entered into a professional services agreement (PSA) on February 25. The third agreement was the personal guaranty of Fernandez, also signed February 25.

         This dispute arises from the parties' conflicting interpretations of Section 16 of the PSA. Section 16 provides in relevant part, as follows:

Initial Scope.
The initial scope of this agreement shall be for DPS staff to work with Client to migrate approximately 1042 users from Internet Unlimited's Platipus Database to Client's Platipus Database. Successful migration of users should be accomplished within (7) days [of] the signing of this document. At that point, client should be fully capable of functioning with the INU users dialing into Client's infrastructure. Client shall be responsible for ensuring adequate authentication or PRI's for INU users to dial into the Client's as well as appropriate infrastructure requirements on Client's network and servers.

         In consideration of the transfer of the dial up customers to Dotcom by DP, Dotcom agreed to pay $8, 000 per month for eighteen months and a payment of $11, 500 for DP's continued provision of connectivity to the customers during the March 2006 transition period.

         Included as Exhibit "A" to the PSA was an addendum describing the transaction and setting forth the applicable dispute resolution procedure. The addendum provided for binding arbitration pursuant to the Federal Arbitration Act., 9 U.S.C. ch. 1, et seq. The arbitration clause provided that the "arbitrator shall within sixty days of the conclusion of the last mediation session render a written order and award in arbitration."

         Shortly after entering into the contract, Appellants fell behind on the payments under the contract. Appellants indicate that they temporarily stopped making the payments under the contract because instead of the approximately 1, 042 users promised by DP, DP only delivered 700 active customers. They claim to have resumed payments at a reduced rate of $4, 000 per month. In total, Appellants claim they made payments to DP in the amount of $85, 251.

         On February 18, 2010, DP filed suit alleging various causes of action arising from Appellants' failure to make the payments under the contract. Appellants filed counterclaims alleging breach of contract, fraud, negligent misrepresentation, and promissory estoppel.

         The interpretation of section 16 of the contract was the primary source of the parties' dispute. Appellants insisted that it contained DP's promise to deliver 1, 042 INU users. DP argues that the paragraph merely defined the scope of initial work to be accomplished within a specified time and required Appellants to have all the infrastructure in place.

         The dispute was submitted to mediation. Within twenty days of the first failed mediation on August 8, 2014, DP sent notice to Appellants of its intent to refer the dispute to arbitration in accordance with their arbitration agreement and filed a motion to compel arbitration on August 12. After numerous delays, the matter was called for a final arbitration hearing on July 8, 2016 before Arbitrator Robert Black. Dotcom's counsel selected Black.

         On July 27, 2016, Black issued an award in favor of DP. Black's award included the following findings:

a. There was no breach of contract by DP;
b. The contract is unambiguous and contains a merger clause supported by consideration;
c. Dotcom and Fernandez fell behind on payments under the contract soon after entering into the contract;
d. The contract was based in part upon the transfer of "approximately 1, 042 users" from DP to Dotcom;
e. The term "approximately" is clear and unambiguous;
f. The "Points of Presence Chart" does not specify between active and ...

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