Southwinds Express Construction v. D.H. Griffin of Texas, Inc.
14-15-00610-CV
| Tex. App. | Dec 8, 2015Background
- Griffin (general/subcontractor) and Southwinds (subcontractor) executed a written Subcontractor Agreement (Sept. 26, 2013) covering concrete and brick haul-off; that agreement contained an AAA arbitration clause and a dispute-resolution clause allowing Griffin, in its sole discretion, to bypass mediation and proceed to arbitration.
- On Oct. 9, 2013 the parties reached an oral agreement to expand Southwinds’ scope to include C&D haul-off at $9/yd; Southwinds performed and invoiced at that rate for several months before abandoning the job in December 2013.
- Southwinds defaulted on landfill disposal payments; Griffin paid landfill charges, hired replacements to finish work, and initiated AAA arbitration asserting claims arising from the C&D work and the subcontract.
- Southwinds twice objected to AAA’s jurisdiction (arguing the C&D work fell outside the written subcontract and that mediation was a condition precedent); the arbitrator rejected the objections and awarded Griffin monetary and equitable relief.
- Southwinds sought vacatur in Harris County; the trial court confirmed the arbitration award, holding (1) the oral C&D agreement was within the subcontract/arbitration clause and (2) mediation was not a condition precedent to arbitration.
- Appellee’s brief to the Fourteenth Court of Appeals defends confirmation, arguing the oral modification was valid, arbitrability was delegated to the arbitrator (via AAA rules), statutory vacatur grounds were not satisfied, and no manifest disregard or gross mistake occurred.
Issues
| Issue | Plaintiff's Argument (Southwinds) | Defendant's Argument (Griffin) | Held |
|---|---|---|---|
| Whether the oral agreement to perform C&D work fell within the written subcontract’s arbitration clause | The C&D agreement was separate and outside the written subcontract; therefore AAA/arbitrator lacked jurisdiction | The Oct. 9 oral agreement modified the subcontract and so is subject to its arbitration clause; parties’ course of performance confirms it | Arbitrator and trial court held the oral modification made C&D work arbitrable; court deferred to arbitrator’s decision |
| Whether mediation was a condition precedent to arbitration | The contract required mediation before arbitration, so Griffin’s direct arbitration was premature | The subcontract expressly allowed Griffin, in its sole discretion, to bypass mediation and proceed to arbitration | Trial court and arbitrator held mediation was not a condition precedent and Griffin properly proceeded to arbitration |
| Whether trial court should have vacated award under Tex. Civ. Prac. & Rem. Code §171.088 because no valid arbitration agreement covered the dispute | Vacatur warranted because no valid agreement to arbitrate C&D disputes existed | Southwinds failed to meet statutory burden; arbitrability delegated to arbitrator; no statutory vacatur grounds shown | Trial court applied §171.088 correctly and denied vacatur; appellate deference to arbitration upheld |
| Whether the award should be vacated for manifest disregard or gross mistake of law | Arbitrator’s rulings on arbitrability and law were wrong and amount to manifest disregard/gross error | Result-oriented disagreement does not show manifest disregard or gross mistake; judicial review is extremely narrow | No evidence of manifest disregard or gross mistake; trial court properly refused vacatur |
Key Cases Cited
- Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (U.S. 2002) (procedural questions of arbitrability presumptively for arbitrators unless parties clearly agree otherwise)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (U.S. 1995) (standards for deference when arbitrability delegated to arbitrator)
- Double Diamond, Inc. v. Hilco Elec. Coop., Inc., 127 S.W.3d 260 (Tex. App. Waco 2003) (written agreement may be orally modified despite no-oral-modification clause)
- CVN Group, Inc. v. Delgado, 95 S.W.3d 234 (Tex. 2002) (strong deference to arbitrators and narrow judicial review of arbitration awards)
- Xtria L.L.C. v. Int’l Ins. Alliance Inc., 286 S.W.3d 583 (Tex. App. Texarkana 2009) (manifest disregard and gross mistake are narrow standards; burden on challenger)
- Royston, Rayzor, Vickery & Williams, L.L.P. v. Lopez, 467 S.W.3d 494 (Tex. 2015) (arbitration provisions that unreasonably permit one party to evade obligations can be illusory; distinguishable where parties agreed to the procedure)
- Marsh USA v. Cook, 354 S.W.3d 764 (Tex. 2011) (Texas courts strongly favor freedom of contract, including arbitration agreements)