Superior Healthplan, Inc. and Bankers Reserve Life Ins. Co. of Wisconsin v. Legacy Home Health Agency, Inc., Legacy Therapy Center, Inc., Legacy Home Care Services, Inc., and Legacy Adult Day Care, Inc.
13-20-00160-CV
| Tex. App. | Mar 24, 2022Background
- Superior Healthplan (managed-care org.) contracted with Legacy and related Ancillary Entities under agreements containing a Texas choice-of-law clause and an arbitration clause stating arbitrators "shall be bound by controlling [Texas] law" and that "each party shall bear its own costs" (AAA costs shared).
- Superior terminated the provider contracts "for cause;" Legacy sued for breach/retaliation; Superior counterclaimed. Parties agreed to arbitrate by court order.
- After an 18-day arbitration, the arbitrator awarded Legacy $3,463,401 on its breach claim and directed statutory attorney’s fees; Ancillary Entities prevailed on breach finding but were awarded no damages.
- On fees/costs, the arbitrator found the prevailing and non‑prevailing claims were inextricably intertwined, making precise segregation impractical, reduced Legacy’s fees/costs by 10% as attributable to Ancillary Entities, and denied fees for Ancillary Entities.
- Legacy moved to confirm; Superior sought vacatur of the fees/costs portions. The trial court confirmed the entire award; Superior appealed, arguing the arbitrator exceeded his authority as to costs and attorney’s fees.
Issues
| Issue | Plaintiff's Argument (Legacy) | Defendant's Argument (Superior) | Held |
|---|---|---|---|
| Whether arbitrator exceeded authority by awarding costs despite contract provision that "each party shall bear its own costs" | Superior requested costs in arbitration and failed to object; therefore the issue is waived; parties sought costs so arbitrator had authority | Award of costs contradicted the contract term and was outside arbitrator's authority | Waived — Superior invited/failed to preserve objection; cannot complain on appeal |
| Whether arbitrator exceeded authority by awarding attorney's fees in excess of what Texas law permits (including segregation) | Arbitrator properly awarded fees; claims were intertwined so precise segregation was impossible; arbitrator reduced award 10% for Ancillary Entities | Arbitrator misapplied Texas law on segregation; parties' clause that arbitrator be "bound by controlling [Texas] law" shows they contracted for expanded judicial review allowing legal-error reversal | Overruled — arbitrator had authority to award fees; mere requirement to follow Texas law did not create a clear agreement for expanded judicial review, so court applies narrow review and affirms award |
Key Cases Cited
- Forest Oil Corp. v. McAllen, 268 S.W.3d 51 (Tex. 2008) (Texas public policy strongly favors arbitration; judicial review is narrow)
- Nafta Traders, Inc. v. Quinn, 339 S.W.3d 84 (Tex. 2011) (parties may contract for expanded judicial review but must do so clearly)
- Forest Oil Corp. v. El Rucio Land & Cattle Co., 518 S.W.3d 422 (Tex. 2017) (arbitrator exceeds authority only if he lacked power to decide the issue at all)
- Hoskins v. Hoskins, 497 S.W.3d 490 (Tex. 2016) (distinguishing authority-to-decide from correctness of ruling)
- Pleasant Glade Assembly of God v. Schubert, 264 S.W.3d 1 (Tex. 2008) (judicial admission doctrine bars self-contradiction to gain advantage)
- Tittizer v. Union Gas Corp., 171 S.W.3d 857 (Tex. 2005) (invited-error doctrine: a party cannot complain about an action it requested)
- Nafta Traders, Inc. v. Quinn (on remand), 360 S.W.3d 713 (Tex. App.—Dallas 2012) (waiver of arbitration objections where not raised before arbitrator)