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Brad Herriage And Logistics Solutions Intl., LLC v. Bnsf Logistics, LLC

Court of Appeals of Texas, Fifth District, Dallas

November 17, 2017


         On Appeal from the 162nd Judicial District Court Dallas County, Texas Trial Court Cause No. DC-16-07547

          Before Justices Francis, Myers, and Whitehill



         Appellants Brad Herriage and Logistics Solutions International (LSI) appeal the trial court's order confirming an arbitration award in favor of appellee BNSF Logistics (BNSF). In four issues, appellants contend the trial court erred by confirming the award because of lack of notice; the "ex parte" arbitration substantially prejudiced the rights of Herriage and LSI; and no return receipt of notice for arbitration was obtained by the arbitrator, the American Arbitration Association, or BNSF, as required by controlling statutes. We affirm.

         Background and Procedural History

         BNSF is a third-party logistics company providing transportation services by road, rail, water, and air. Herriage is the owner of LSI. On July 24, 2013, Herriage and LSI entered into a limited and particular purpose agency agreement (the "agreement") with BNSF. Both BNSF and Herriage, individually and on behalf of LSI, signed the agreement. The agreement was for a one-year term that would "be renewed for a duration of one year, if neither party provides to the other 'notice of permitting expiration' of at least forty-five (45) days prior to the expiration, " and could terminate "at any time with no fewer than thirty (30) days written notice to the other." The "Dispute Resolution and Arbitration" section of the agreement, section 12, provided that any unresolved dispute must be submitted to arbitration in accordance with the commercial rules of arbitration of the American Arbitration Association (AAA).

         The agreement further provided that "[t]he terms and conditions of this AGREEMENT will begin on October 18, 2012 and, unless terminated by Agency or Broker, shall conclude one year later, on October 17, 2012 (the 'expiration'). . . ." Because, however, the agreement was not signed until July 24, 2013, it could not have become effective in October 2012. In addition, the agreement could not expire before its term even began. We therefore agree with appellees that this provision contains a typographical error. And as shown in the record, appellants continued to do business with BNSF until 2015, undermining any contention that the agreement terminated in 2013.

         BNSF claimed appellants breached the agreement and sent a demand letter dated September 24, 2015, to Herriage and LSI by certified mail demanding they cease engaging in conduct that violated their obligations under the agreement. BNSF further alleged it had paid appellants a commission on shipments for which BNSF never received payment from the customer, requiring appellants to refund the corresponding commissions to BNSF under the agreement. Herriage and LSI refused to accept the demand letter, but someone wrote "kiss my ass" and "refused" on the envelope that was returned to BNSF's counsel. Herriage denied writing anything on the envelope.

         In December of 2015, BNSF instituted arbitration proceedings against appellants arising out of their alleged breaches of the agreement. In accordance with the agreement, BNSF sent a copy of the demand for arbitration to Herriage and LSI by electronic mail and by regular and certified mail. On December 15, 2015, the AAA sent correspondence to BNSF's counsel and to appellants acknowledging receipt of the demand for arbitration.

         Appellants having failed to respond or object regarding the location requested by the claimant or the AAA's choice of arbitrator, the AAA confirmed the selection of Dallas as the location for the arbitration and Steven K. DeWolf as the arbitrator. Following a preliminary conference, the arbitrator issued a February 26, 2016 scheduling order notifying the parties that the arbitration would take place on May 4, 2016, in Dallas, Texas. The scheduling order stated that appellants, although "properly notified" of the preliminary conference, "chose not to attend, " and it was transmitted to Herriage via electronic mail to the email address

         On March 1, 2016, over two months before the May 4th arbitration hearing, the AAA sent notices of the hearing to Herriage via both electronic mail to the email address and certified mail to the address 1150 Mason Street, Lantana, Texas 76226, which is the address listed in the agreement. On April 28, 2016, six days before the hearing, the AAA sent an additional reminder of the hearing date to Herriage via electronic mail to the email address and first class and certified mail to the 1150 Mason Street address.

         Herriage testified that 1150 Mason Street was his residential address. Herriage subsequently moved, but he received forwarded mail at the new address and he testified that he received notice of the hearing at least the day before the hearing. Herriage recalled that a man delivered the notice and he "had to sign for it." Appellants' verified answer likewise states that Herriage received notice of the hearing on the evening before, on May 3, 2016. Herriage testified that he chose not to appear at the May 4th hearing or to contact anyone and ask for more time or ask for a new hearing.

         On May 4, 2016, the arbitrator held the arbitration hearing in Dallas and, on that same day, entered a final award in favor of BNSF. The arbitrator granted an award of $24, 811.45 in damages, $26, 213 in attorneys' fees, $8, 715.21 in costs and expenses, including AAA fees, and an injunction prohibiting Herriage and LSI from violating their non-compete and non-solicit obligations under the parties' agreement for one year from the date of the final award. The award recited that "[a]lthough Respondents received notice of the hearing by e-mail and certified mail, confirmed by a certified mail delivery receipt, they did not appear."

         Two days later, on May 6th, BNSF requested via email that the arbitrator modify the original award to (1) reduce the costs awarded by $1, 268.50 in light of the partial reimbursement by the AAA of certain fees paid by BNSF; and (2) increase the attorneys' fees award by $377 to properly account for the attorney's fees incurred by BNSF through the hearing. BNSF copied appellants on that email and sent the e-mail to the email address. The AAA responded and again copied appellants via e-mail to that same email address.

         On June 8, 2016, the arbitrator reduced the amount of arbitration costs but did not increase the award of attorneys' fees. The AAA transmitted the modified final award to appellants via e-mail to the email address and first class and certified mail to the 1150 Mason Street address. BNSF then filed suit to confirm the award. Following appellants' verified answer and motion to vacate the award, BNSF filed a first amended application to confirm the award.

         The trial court held a hearing on September 19, 2016, on BNSF's motion to confirm the award and appellants' motion to vacate. At the hearing, Herriage confirmed that "" was the correct email address. But he explained that he had not conducted business from that email address in approximately one year, and that he never closed the account and "just didn't check it." Asked whether there could have been "numerous emails" ...

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