Americo Life, Inc. v. Myer
440 S.W.3d 18
| Tex. | 2014Background
- In 1998 Myer sold insurance businesses to Americo and signed a trailer agreement prescribing arbitration by a three‑arbitrator panel: each party names one arbitrator and the two select a third; each arbitrator must be a “knowledgeable, independent businessperson or professional.”
- The agreement incorporated the AAA commercial arbitration rules to govern proceedings.
- When Americo invoked arbitration in 2005, Myer challenged Americo’s first two appointees; the AAA disqualified both for partiality under then‑current AAA rules, and Americo’s third appointee served. The panel issued a unanimous award for Myer of ~$26 million.
- Americo moved to vacate the award, arguing the AAA improperly disqualified its first appointee contrary to the parties’ agreed selection method; the trial court vacated the award; the court of appeals reversed; this Court granted review.
- The Supreme Court majority held the parties’ agreement did not require impartial party‑appointed arbitrators and that incorporated AAA rules cannot supplement a contract where the contract already speaks to the same point; because the AAA disqualified Americo’s appointee, the panel was formed contrary to the agreement and the award was vacated.
Issues
| Issue | Americo's Argument | Myer's Argument | Held |
|---|---|---|---|
| Whether the term “independent” in the agreement requires an arbitrator to be impartial | "Independent" does not mean impartial; parties only prohibited close relationships, not partiality | "Independent" implies impartiality; parties intended impartial arbitrators | Held for Americo: "independent" is not synonymous with "impartial" in this tripartite context; party‑appointed arbitrators need not be impartial |
| Whether AAA rules incorporated by reference can add an impartiality requirement that the agreement omitted | Incorporated rules cannot alter or supplement express qualifications the parties chose | AAA rules govern proceedings and supply standards (including impartiality) unless parties specifically agreed otherwise | Held for Americo: incorporated rules do not supplement the agreement on points the agreement already addresses; the agreement controls |
| Whether AAA’s disqualification of Americo’s appointee complied with the parties’ selection method | AAA’s impartiality rule should apply and its disqualification was proper under the rules governing proceedings | AAA disqualification altered the parties’ agreed selection method and thus improperly changed the panel composition | Held for Americo: AAA disqualification conflicted with the contract‑specified selection method and thus was improper for supplanting the agreement |
| Remedy when arbitrators are appointed contrary to contract | Vacatur of the award | Confirm the award or defer to arbitration rules | Held: award vacated because the panel was constituted in violation of the parties’ agreement and therefore exceeded authority |
Key Cases Cited
- City of Pasadena v. Smith, 292 S.W.3d 14 (Tex. 2009) (arbitrators derive power from parties’ agreement)
- I.S. Joseph Co. v. Mich. Sugar Co., 803 F.2d 396 (8th Cir. 1986) (arbitrators have no independent source of jurisdiction)
- Brook v. Peak Int’l, Ltd., 294 F.3d 668 (5th Cir. 2002) (arbitrators must be selected pursuant to the parties’ agreed method)
- Bulko v. Morgan Stanley DW, Inc., 450 F.3d 622 (5th Cir. 2006) (award may be vacated when arbitrator not selected per contract)
- Szuts v. Dean Witter Reynolds, Inc., 931 F.2d 830 (11th Cir. 1991) (incorporated arbitration rules yield to specific agreement provisions)
- Burlington N. R.R. Co. v. TUCO Inc., 960 S.W.2d 629 (Tex. 1997) (tripartite arbitration method often leaves party‑appointed arbitrators nonneutral)
- Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323 (Tex. 2011) (contract interpretation focuses on express language)