Prescription Health Network, LLC, and William M. Blackshear Jr., M.D. v. Toby R. Adams, Lisa B. Adams, and Adams Marketing Consulting, Inc.
02-15-00279-CV
| Tex. App. | Apr 20, 2017Background
- Adams Plaintiffs (Toby and Lisa Adams and AMC) sued PHN and Dr. Blackshear alleging fraud, negligent misrepresentation, breach of contract, tortious interference, conspiracy, and DTPA violations arising from a June 2012 franchise agreement and a related social-media services agreement.
- PHN moved to compel arbitration under the Franchise Agreement’s arbitration clause; the trial court stayed the litigation and compelled arbitration.
- A three-member arbitration panel conducted a hearing and issued a reasoned award finding PHN liable under Florida’s FDUTPA and for breach of the social-media agreement, awarding AMC roughly $38,945.65 in actual damages and later awarding $90,150 in attorneys’ fees and $45,402 in costs.
- PHN moved in district court to vacate or modify the award, arguing (among other things) that the panel exceeded its authority, manifestly disregarded the law by applying Florida law to tort claims after stating Texas law governed, and awarded on matters not submitted.
- The trial court denied PHN’s motion and confirmed the arbitration award; PHN appealed.
Issues
| Issue | Adams' Argument | PHN's Argument | Held |
|---|---|---|---|
| Whether arbitrators exceeded their powers (§10(a)(4)) | Arbitrators had authority to decide claims arising under/connected to the Franchise Agreement, including DTPA/FDUTPA claims | Panel exceeded powers by applying FDUTPA after deciding Texas law applied to tort claims | Panel did not exceed powers; claims were submitted and within arbitration clause authority |
| Whether award should be vacated for "manifest disregard" | FAA’s statutory vacatur grounds control; manifest disregard not an independent ground | Award must be vacated for manifest disregard because panel ignored its own choice-of-law conclusion | Manifest disregard is not an independent basis under FAA; claim rejected |
| Whether award should be modified for deciding a matter not submitted (§11) | FDUTPA was submitted as an alternative in pre/posthearing briefs | Panel awarded on FDUTPA without submission | No modification; FDUTPA was submitted to arbitrators |
| Whether attorneys’ fees/costs award should be vacated or reallocated | AMC was prevailing party and entitled to fees and costs | PHN claims it prevailed on more claims and thus should get fees/costs | Fees/costs award affirmed; trial court implicitly accepted panel’s prevailing-party determination |
Key Cases Cited
- Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010) (arbitrator exceeds powers when imposing rules not grounded in parties’ agreement or applicable law)
- Hall Street Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008) (FAA §10 statutory grounds are exclusive bases for vacatur)
- Citigroup Glob. Mkts., Inc. v. Bacon, 562 F.3d 349 (5th Cir. 2009) (post-Hall decision rejecting nonstatutory vacatur doctrines in Fifth Circuit)
- Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064 (2013) (parties bargain for arbitrator’s construction of their agreement; courts must defer)
- Wilko v. Swan, 346 U.S. 427 (1953) (early articulation of manifest-disregard language)
- CVN Grp., Inc. v. Delgado, 95 S.W.3d 234 (Tex. 2002) (courts indulge reasonable presumptions in favor of arbitration awards)