461 S.W.3d 505
Tenn. Ct. App.2014Background
- Rafia Khan (individually and as trustee of the Rafia N. Khan Irrevocable Trust) and Regions Bank disputed liability and a bank lien after Mr. Khan withdrew $40,000 from a joint line of credit before the line was closed.
- The Trust owns the residence that was pledged as collateral by deed of trust; Mrs. Khan signed loan and deed documents both individually and as trustee.
- The parties agreed to arbitrate; Mr. Khan was not made a party to the arbitration.
- The arbitrator found: Mrs. Khan not personally liable for the $40,000; Regions Bank not liable under the Tennessee Consumer Protection Act (TCPA); the arbitrator would not order release of the Trust’s lien; and the Trust (and Mrs. Khan) were ordered to pay the Bank’s contractual attorney’s fees.
- The chancery court vacated the arbitration award, directing the arbitrator to decide whether application of the deed of trust to the home was an “unfair act” under the TCPA.
- The Court of Appeals reversed, holding the arbitrator reached a complete decision as to the parties before him, that the fee award rested on contractual grounds, and that the trial court erred in vacating the award as to the Trust; Mrs. Khan personally was excluded from relief because of a bankruptcy discharge.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether trial court erred in vacating arbitration award | Arbitrator failed to render a final, mutual, definite award regarding whether the lien/its application was an "unfair act" under TCPA | Arbitrator fully resolved disputes between parties before him; vacatur inappropriate under TUAA standards | Reversed vacatur; arbitrator did not exceed powers; award confirmed as to the Trust |
| Whether arbitrator exceeded authority by awarding attorney's fees in a TCPA context | TCPA governs fees and requires a showing (frivolousness) to award fees under § 47-18-109(e) | Fees were awarded under the deed-of-trust contract (contractual “defense costs”), not under TCPA | Fee award upheld as contractual and permissible as to the Trust |
| Whether appeal/proceeding is barred by Mrs. Khan’s bankruptcy discharge | Mrs. Khan contends her individual discharge bars confirmation/enforcement against her | Bank argues Trust is separate and not discharged, so enforcement as to Trust may proceed | Court held Mrs. Khan personally discharged (claims against her barred); appeal proceeds and award confirmed only as to the Trust |
Key Cases Cited
- Arnold v. Morgan Keegan & Co., 914 S.W.2d 445 (Tenn. 1996) (scope of judicial review of arbitration awards under TUAA and deference to arbitrators)
- D & E Constr. Co., Inc. v. Robert J. Denley Co., Inc., 38 S.W.3d 513 (Tenn. 2001) (standards for appellate review of arbitration decisions)
- Pugh's Lawn Landscape Co., Inc. v. Jaycon Dev. Corp., 320 S.W.3d 252 (Tenn. 2010) (TUAA governs judicial review of arbitration awards)
- Tuetken v. Tuetken, 320 S.W.3d 262 (Tenn. 2010) (reinforcing Pugh's on limiting judicial review to TUAA grounds)
- Hall Street Assocs. v. Mattel, 552 U.S. 576 (U.S. 2008) (limits on expanding judicial review beyond statutory grounds under FAA)