Humitech Development Corporation, and Emil Lippe, Jr. v. Alan Perlman, Michael Perlman
424 S.W.3d 782
| Tex. App. | 2014Background
- In 2003 Humitech International Group (HIG) — via a subsidiary Humitech Development Corp. (HDC) — purchased mining claims from Alan Perlman and family for ~$2M; Perlman had earlier agreed to pay HIG CEO C.J. Comu $500,000 if Comu produced a buyer. Perlman paid Comu $500,000 at closing.
- HIG later defaulted; King Louie Mining (KLM) foreclosed and came to control HDC; KLM (through Katz) discovered the $500,000 payment and HDC (under KLM control) initiated arbitration against the Perlman parties asserting fraud/commercial bribery and seeking rescission or recovery of the purchase price.
- The parties’ purchase agreement required binding arbitration under JAMS rules in Dallas and contained a Texas governing-law clause. The arbitrator heard evidence, found Ducote (HIG/HDC CFO) credible issues, concluded the $500,000 was a disclosed finder’s fee (not a secret kickback), and awarded HDC nothing.
- HDC filed in trial court to vacate the award (statutory and common-law grounds including manifest disregard, gross mistake, and public policy); appellees moved to confirm. The trial court confirmed the arbitration award and later (but before appeal disposition) imposed a $10,000 sanction on HDC’s lawyer Emil Lippe for alleged unsupported factual allegations.
- On appeal, the court addressed choice of law (FAA vs. TAA), whether the arbitrator exceeded powers or manifestly disregarded Texas law, public-policy and bribery arguments, trial-judge disqualification, and the sanctions imposed on Lippe.
Issues
| Issue | Plaintiff's Argument (HDC) | Defendant's Argument (Perlman parties) | Held |
|---|---|---|---|
| Choice of law: FAA vs TAA | Arbitration should be governed exclusively by Texas law (TAA). | FAA applies (transaction involves commerce); but outcome same under either. | Trial court’s determination that TAA applies was correct; outcome unchanged. |
| Arbitrator exceeded powers (procedural / substantive) | Arbitrator admitted evidence in violation of JAMS rules and ignored Texas law on commercial bribery, exceeding authority. | Arbitration clause gave broad authority to arbitrator; procedural evidence rulings and alleged legal errors are not ultra vires. | No exceedance: failing to follow procedural rules or making legal errors does not, absent express contract restriction, show arbitrator exceeded powers. |
| Manifest disregard / gross mistake / public policy | Arbitrator approved an illegal kickback; award violates public policy and shows manifest disregard or gross mistake. | Arbitrator weighed credibility and evidence and found no secret kickback; factual/credibility determinations are conclusive and do not show manifest disregard. | Rejected: appellants failed to show manifest disregard, gross mistake, or a public-policy violation; award affirmed. |
| Sanctions & recusal | Trial court erred in imposing $10,000 sanction on Lippe for unsupported allegations; judge should have been disqualified (bias toward arbitration). | Sanctions appropriate under Tex. Civ. Prac. & Rem. Code ch.10 for unsupported pleadings; judge’s prior writings/practice do not require recusal. | Affirmed confirmation; reversed the sanctions order as an abuse of discretion (trial court misapplied §10.001(3)); denial of disqualification affirmed. Cause remanded for further sanctions proceedings. |
Key Cases Cited
- Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468 (U.S. 1989) (state law choice-of-law clause can govern arbitrations absent conflict with FAA)
- Hall Street Assocs. v. Mattel, Inc., 552 U.S. 576 (U.S. 2008) (limitations on judicial review under FAA; left open state-law or contract-based review)
- Nafta Traders, Inc. v. Quinn, 339 S.W.3d 84 (Tex. 2011) (parties may contractually expand judicial review or limit arbitrator authority under TAA)
- CVN Group, Inc. v. Delgado, 95 S.W.3d 234 (Tex. 2002) (arbitration awards are presumptively valid; public-policy vacatur is narrowly applied)
- Centex/Vestal v. Friendship W. Baptist Church, 314 S.W.3d 677 (Tex. App.—Dallas 2010) (arbitration awards are conclusive on fact and law; courts cannot vacate for mere mistakes of law)