521 S.W.3d 878
Tex. App.2017Background
- Guerra, a former L&F employee, won an arbitration award: $10,126 lost wages, $30,000 past mental anguish, and $200 arbitration costs (total $40,326); the award was silent on taxes/withholding.
- Both parties moved in district court to confirm the award; L&F also requested court authorization to withhold taxes from the back-pay portion.
- L&F paid Guerra $30,200 (mental anguish + costs) and sent a check for $10,126 labeled as gross back pay but actually for $7,060.13, withholding $3,065.87 for federal taxes; Guerra cashed the check.
- The trial court’s final judgment confirmed the arbitration award but added the phrase "less any and all federally required withholdings," and earlier entered $600 sanctions against Guerra for failing to provide tax forms.
- On appeal Guerra challenged the modification and sanctions; L&F argued the appeal was moot because Guerra cashed the check and that withholding was implied/required.
Issues
| Issue | Plaintiff's Argument (Guerra) | Defendant's Argument (L&F) | Held |
|---|---|---|---|
| Whether the trial court impermissibly modified the arbitration award by adding "less any and all federally required withholdings" | Trial court lacked authority to change the award; withholding was not decided by arbitrator and no §11 FAA ground for modification | Withholding is implied/required by federal tax law for back pay; court merely made implicit tax obligation explicit | Trial court impermissibly modified the arbitration award; deletion of withholding language required |
| Whether L&F’s unilateral withholding and payment to the government moots the appeal under the acceptance-of-benefits doctrine | Cashing the check did not constitute acquiescence to withholding; Guerra accepted only the undisputed net amount and did not accept any tax liability | Guerra accepted benefits and conceded withholding was proper by cashing the check | Appeal is not moot; acceptance did not bar review because Guerra did not acquiesce to disputed withholding or cause irremediable prejudice |
| Whether the FAA or arbitration agreement authorized the trial court to imply tax withholding under 9 U.S.C. § 11(c) | No §11(c) ground was pleaded or proved; §11(c) only allows form-type corrections, not substantive deductions | §11(c) or general necessity permits correcting award to comply with tax laws; withholding obligation is legal consequence of a wages award | §11(c) does not authorize substantive change; parties failed to show a statutory ground for modification; court exceeded authority |
| Whether sanctions ($600) against Guerra were supported | Sanctions lacked specified good cause or factual findings; no evidence of bad faith or misconduct | Sanctions were justified by Guerra’s refusal to execute tax forms and purported failure to comply with the award | Award of sanctions reversed: trial court abused discretion (no Rule 13 particulars; no record support for inherent-authority sanction) |
Key Cases Cited
- Tex. State Bank v. Amaro, 87 S.W.3d 538 (Tex. 2002) (acceptance-of-benefits doctrine bars appeal only when appellant acquiesces and causes irremediable prejudice)
- Noel v. N.Y. State Office of Mental Health Cent. N.Y. Psychiatric Ctr., 697 F.3d 209 (2d Cir. 2012) (back-pay/front-pay awards treated as wages and subject to withholding)
- Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126 (9th Cir. 2000) (confirmed arbitration awards are qualitatively different from judgments on merits)
- ARW Expl. Corp. v. Aguirre, 45 F.3d 1455 (10th Cir. 1995) (section 11(c) does not permit substantive corrections to computation of damages)
- BNSF R. Co. v. Alstom Transp., Inc., 777 F.3d 785 (5th Cir. 2015) (federal policy favors arbitration and review of awards is exceedingly deferential)