Nancy Higginson, Debbie Cheadle, Edward Cheadle, Arthur Cheadle, Wayne Carson, Finney Cheadle, Cheryl Shoop, and Keith Sawaya v. Raeanne Martin
07-15-00343-CV
| Tex. Crim. App. | Dec 18, 2015Background
- Closely held Texas corp. Russell E. Womack, Inc. had a Shareholders’ Agreement (Jan. 1, 2008) that: (1) limited transfers to contracting parties and a right‑of‑first‑refusal process; and (2) provided the exclusive remedy for a transfer in breach: the transfer is “void” (§9.2) and specific performance/injunctive relief is available.
- Martin owned 70 shares; the Byrnes offered to buy them for $3,130,000. Martin conditionally accepted; the Higginson group (other shareholders) purported to match.
- Litigation ensued and the trial court compelled arbitration between Martin and the Higginson Parties (excluding the Byrnes). The arbitration panel found the Shareholders’ Agreement valid, found Martin breached, but (after final hearing) awarded the Higginson Parties $2,000,000 in damages plus $322,023.25 in fees/costs.
- During arbitration the parties actually reached a settlement and submitted a proposed consent award (capping recovery at $400,000 to cover AAA/arbitrator fees and attorneys’ fees), but the arbitrators refused to accept/sign that consent award and proceeded to hearing.
- Martin moved in the trial court to vacate the arbitration award under the TAA/FAA on the ground arbitrators exceeded their powers (a) by awarding monetary damages despite contractually agreed exclusive remedy (voiding the transfer), and (b) by refusing to accept the parties’ settlement/consent award. The trial court vacated the award and denied confirmation; appeal followed.
Issues
| Issue | Plaintiff's Argument (Higginson Parties) | Defendant's Argument (Martin) | Held |
|---|---|---|---|
| Whether arbitrators exceeded their powers by awarding monetary damages for a transfer the Shareholders’ Agreement declared "void" | The agreement permits other remedies “in addition to” voiding and does not preclude monetary relief; alternative factual scenarios could support damages | §9.2 makes a breaching transfer void and treats it as if never occurred; once arbitrators found breach, their only power was to void, so awarding damages exceeded their authority | Trial court correctly vacated award — arbitrators exceeded powers by awarding damages inconsistent with the contract remedy |
| Whether arbitrators exceeded their powers by refusing to sign/implement the parties’ agreed consent arbitration award (settlement) and instead issuing a different award | AAA rules or arbitrator discretion allowed their conduct; the submitted consent form was not a binding Rule 11 agreement for purposes of enforcement | Parties knowingly submitted a binding settlement/consent award (signed by counsel, allocating cap on recovery); arbitrators were bound by that settlement and could not override it; refusing to accept it exceeded their powers | Trial court correctly vacated award — arbitrators impermissibly disregarded the parties’ settlement agreement |
| Whether the trial court erred by denying confirmation of the arbitration award | The Higginson Parties argued confirmation was proper under TAA and FAA and Martin had not invoked FAA grounds | Martin argued the TAA governed (choice‑of‑law in agreement) and both statutes authorize vacatur where arbitrators exceed powers; either statute supports vacatur | Trial court properly denied confirmation; vacatur under the “exceeded powers” ground is available under TAA and/or FAA |
| Whether admission of the parties’ settlement document and testimony at vacatur hearing was improper | Higginson Parties claimed evidentiary/Rule 11/ADR rules problems and that the consent award was unsigned by arbitrators so not binding | Martin showed the parties’ counsel emailed the consent award to AAA/arbitrators and later filed it with the court; even if not a court‑approved Rule 11 judgment, it was binding on arbitrators and admissible for the limited vacatur inquiry | Trial court did not abuse discretion in admitting the settlement evidence for the limited purpose of determining whether the panel exceeded its powers |
Key Cases Cited
- Gulf Oil Corp. v. Guidry, 327 S.W.2d 406 (Tex. 1959) (arbitrator exceeds jurisdiction when awarding remedies beyond matters submitted; remedial limits in agreement are binding)
- Delta Queen Steamboat Co. v. Dist. 2 Marine Engineers Ben. Ass'n, 889 F.2d 599 (5th Cir. 1989) (deference ends when arbitrator exceeds express contractual limits)
- Bakers Union Factory No. 326 v. ITT Continental Baking Co., Inc., 749 F.2d 350 (6th Cir. 1984) (arbitrator must honor parties’ settlement/consent agreement; courts will vacate awards that override party settlements)
- Nafta Traders, Inc. v. Quinn, 339 S.W.3d 84 (Tex. 2011) (arbitrators derive authority from parties’ arbitration agreement; contract governs scope)
- Townes Telecomm., Inc. v. Travis, Wolff & Co., L.L.P., 291 S.W.3d 490 (Tex. App.—Dallas 2009) (vacatur where arbitrator contravenes specific remedial limits in the arbitration agreement)