Court of Appeals of Texas, Fifth District, Dallas
Appeal from the 68th Judicial District Court Dallas County,
Texas Trial Court Cause No. DC-17-01617
Justices Lang-Miers, Myers, and Boatright
ELIZABETH LANG-MIERS, JUSTICE
Solutions, Inc. appeals the trial court's judgment
confirming an arbitration award in favor of Sricom, Inc. In
one issue, C Tekk argues the arbitration award should be
vacated because the arbitrator manifestly disregarded the law
by failing to rule that Sricom lacked capacity to recover
damages. We affirm the trial court's judgment.
2012 consulting services contract, C Tekk Solutions, Inc. and
Sricom, Inc. agreed to resolve all disputes by arbitration. C
Tekk submitted a claim against Sricom to the American
Arbitration Association, and Sricom filed a counterclaim.
After a hearing, an arbitrator determined that C Tekk
breached the contract. The arbitrator awarded Sricom damages,
attorney's fees, and expenses in a written "Final
Award" on November 29, 2016. The award recites that it
is "Final and in full disposition of all claims,
defenses and counterclaims submitted to this Arbitration. All
claims, defenses and counterclaims not expressly granted
herein are hereby denied." The award does not otherwise
address C Tekk's argument that Sricom lacks capacity to
filed an application to confirm the award in the trial court.
C Tekk responded by filing a motion to vacate the award,
arguing that (1) Sricom lacked capacity to recover
affirmative relief; (2) the arbitrator failed to rule on this
defense; and (3) the arbitrator's award should be set
aside for "manifest disregard of the law" because
the award did not address the lack of capacity defense.
Tekk's motion to vacate was premised on its contention
that Sricom cannot recover damages because it was not
registered to do business in Texas. Citing Coastal
Liquids Transportation, L.P. v. Harris County Appraisal
District, 46 S.W.3d 880, 884-85 (Tex. 2001), C Tekk
contended that Sricom's attempt to cure the problem by
filing a registration of a foreign for-profit company with
the Texas Secretary of State on September 1, 2016, was
ineffective. C Tekk argued that (1) the filing was for a
different company, not the party to the contract; (2) the
filing only covered 2016, not 2012, when the parties signed
the contract; and (3) Sricom did not submit evidence that it
paid the required fee to the Texas Secretary of State.
trial court rendered judgment for Sricom on the award. This
parties disagree whether the Texas Arbitration Act
(TAA) or the Federal Arbitration Act
(FAA) applies to this case. C Tekk relies on the
FAA, and Sricom on the TAA. In addition, the arbitrator's
final award recites that "The Parties agreed that . . .
the Texas Arbitration Act governs this arbitration." But
Sricom also argues that even if the FAA applies, we should
affirm the trial court's judgment. We review de novo
a trial court's confirmation of an arbitration award
under the FAA based on the entire record. Ancor Holdings,
LLC v. Peterson, Goldman & Villani, Inc., 294 S.W.3d
818, 826 (Tex. App.-Dallas 2009, no pet.). An arbitration
award is treated the same as the judgment of a court of last
resort, is presumed valid, and is entitled to great
deference. Id. All reasonable presumptions are
indulged to uphold the arbitrator's decision, and none is
indulged against it. Id.
the terms of the FAA, an arbitration award must be confirmed
unless it is vacated, modified, or corrected under one of the
limited grounds set forth in sections 10 and 11 of the Act.
Id.; see also 9 U.S.C. §§ 9-11.
Courts may not substitute their judgment merely because they
would have reached a different decision. Ancor
Holdings, 294 S.W.3d at 826. Judicial review of the
arbitration award is "extraordinarily narrow."
Id. (quoting Myer v. Americo Life, Inc.,
232 S.W.3d 401, 408 (Tex. App.-Dallas 2007, no pet.)). Courts
may not vacate an award even if it is based upon a mistake in
law or fact. Id. Judicial scrutiny focuses on the
integrity of the process, not the propriety of the result.
Id. Although FAA section 10(a)(4) permits a trial
court to vacate an award "where the arbitrators exceeded
their powers, or so imperfectly executed them that a mutual,
final, and definite award upon the subject matter was not
made, " 9 U.S.C. § 10(a)(4), courts may not vacate
an arbitration award under section 10(a)(4) for "errors
in interpretation or application of the law or facts."
Id. at 830 (citing Crossmark, Inc. v.
Hazar, 124 S.W.3d 422, 429 (Tex. App.- Dallas 2004, pet.
on two federal appellate cases, C Tekk argues that the trial
court was required to vacate the arbitration award because it
was "in manifest disregard of the law." See Am.
Cent. E. Tex. Gas Co. v. Union Pac. Res. Grp., Inc., 93
Fed.Appx. 1 (5th Cir. Jan. 27, 2004), and Prestige Ford
v. Ford Dealer Computer Servs., Inc., 324 F.3d 391,
395-96 (5th Cir. 2003). C Tekk concedes that subsequent to
these rulings, the United States Supreme Court held that the
grounds listed in FAA section 10(a) are the exclusive grounds
for vacating an arbitration award under the FAA. Hall St.
Assocs., L.L.C. v. Mattell, Inc., 552 U.S. 576, 581
(2008); see also Citigroup Global Mkts., Inc. v.
Bacon, 562 F.3d 349, 350 (5th Cir. 2009) ("We
conclude that Hall Street restricts the grounds for
vacatur to those set forth in § 10 of the [FAA], and
consequently, manifest disregard of the law is no longer an
independent ground for vacating arbitration awards under the
FAA."). But C Tekk argues that "manifest
disregard of the law is encompassed within section
10(a)(4)'s failure to rule on a controlling issue or
ground that is a valid basis for vacating an arbitration
award." Federal courts have debated this issue. See,
e.g., Citigroup, 562 F.3d at 355- 57; Wachovia
Secs., LLC v. Brand, 671 F.3d 472, 481-82 & n.7 (4th
Cir. 2012) (collecting cases). Even assuming that
"manifest disregard of the law" is a basis for
vacating an arbitration award, C Tekk has not met the
standard for establishing it. In Citigroup, the
court explained that manifest disregard of the law
"means more than error or misunderstanding with respect
to the law." Citigroup, 562 F.3d at 354.
Instead, the term "'disregard' implies that the
arbitrator appreciates the existence of a clearly governing
principle but decides to ignore or pay no attention to
it." Id. (quoting Prestige Ford, 324
F.3d at 395). The term is "very narrow"; it
"does not include an erroneous application" of a
controlling principle of law. Id. at 357. The
parties agree that the arbitrator heard evidence and argument
offered by both parties on the question of Sricom's
capacity to recover on its counterclaim. This evidence
included Sricom's certificate of authority to do business
in Texas, the parties' contract, and evidence of the
parties' alleged breaches and when those breaches
occurred. The arbitrator's acceptance of Sricom's
arguments and evidence instead of C Tekk's, even if
erroneous, was not manifest disregard of the law.
we agree that because the arbitrator's final award did
not explicitly mention the capacity argument, the arbitrator
necessarily failed to rule on a controlling issue for
purposes of FAA section 10(a)(4). First, arbitrators need not
give reasons for their ...