CLAUDIA A. BRADY v. GREGORY A. BRADY AND ONE NETWORK ENTERPRISES, INC.; IN RE CLAUDIA A. BRADY
No. 02-23-00163-CV
No. 02-23-00164-CV
Court of Appeals, Second Appellate District of Texas at Fort Worth
On Appeal from the 233rd District Court, Tarrant County, Texas, Trial Court No. 233-724980-22 AND Original Proceeding, 233rd District Court of Tarrant County, Texas, Trial Court No. 233-694691-21
Before Sudderth, C.J.; Kerr and Wallach, JJ.
Memorandum Opinion by Chief Justice Sudderth
When Claudia Brady (Wife) and Gregory Brady (Husband) divorced, they signed an agreement incident to divorce (the Agreement) that provided for arbitration of certain issues, including “[t]he issue of whether a party committed one or more prohibited behaviors set out [in the Agreement].” Husband‘s company, One Network Enterprises, Inc., was a third party in the divorce proceeding, and it joined in the Agreement as well.
The divorce decree incorporated the parties’ Agreement, and after the decree became final, Husband and One Network alleged that Wife had violated the Agreement, and they demanded arbitration. Wife resisted, but the trial court granted Husband and One Network‘s motion to enforce the Agreement, and it compelled the parties to arbitrate. Upon completion of arbitration, Husband and One Network filed a new lawsuit to confirm the arbitration award. The suit was transferred to the same trial court that had granted the divorce and compelled arbitration. That court confirmed the arbitration award. But the court marked through some of the attorney‘s fees that the arbitrator had conditionally approved for Husband and One Network.
All three parties appeal the judgment confirming the arbitration award, and these appeals have been consolidated with Wife‘s request for mandamus relief from
Because the trial court had subject matter jurisdiction to compel arbitration, we will deny Wife‘s petition for mandamus relief. And because Wife failed to preserve any meritorious challenges to the court‘s judgment confirming the arbitration award, we will overrule her appellate issues. As for Husband and One Network‘s challenge to the reduction of their attorney‘s fees, we agree that the trial court was not provided with a valid statutory basis for modifying the arbitrator‘s fee award. Therefore, we will reverse the portion of the trial court‘s judgment that removed some of Husband and One Network‘s conditional attorney‘s fees, render judgment to reflect the attorney‘s fees set forth in the arbitration award, and affirm the remainder of the trial court‘s judgment.
In 2021, Husband and Wife divorced.
A. Agreement
When the 233rd District Court entered Husband and Wife‘s agreed divorce decree, the decree referenced the fact that Husband, Wife, and One Network had “entered [in]to an Agreement Incident to Divorce and Settlement of Third Party Claim,” and the trial court “approve[d] the [A]greement[,] . . . incorporate[d] it by reference as part of th[e] decre[e], and order[ed] the parties to do all things necessary to effectuate the [A]greement.” [Italics removed.]
The Agreement prohibited certain behaviors, and if a party violated its terms, it provided for an award of “the greater of actual damages or $500,000.00 liquidated damage payment per occurrence.” Moreover, if Wife was found to have engaged in certain prohibited behaviors, then “as liquidated damages, [she] forfeit[ed] all interests she ha[d] in the . . . Irrevocable Trust No. 2.”2
To determine whether a violation had occurred, the parties agreed to submit the matter to arbitration:
The issue of whether a party committed one or more prohibited behaviors set out herein, [Wife‘s] violation of [specific articles of the Agreement], and the resulting forfeiture of [Wife‘s] interest in
the... Irrevocable Trust No. 2 shall be submitted to binding arbitration, which shall take place within 90 days of notice being given to the other party an [sic] alleged violation of any prohibited behavior or violation of [specific articles] herein.... The loser shall pay the other parties’ arbitration costs and fees, including reasonable and necessary attorney‘s fees.
None of the parties appealed the divorce decree.
B. Post-Divorce Proceedings
After the divorce decree became final, Husband and One Network alleged that Wife had engaged in prohibited behaviors in violation of the decree and Agreement, and they filed a demand for arbitration with the arbitrator named in the Agreement. But Wife disagreed that arbitration was warranted, and she sought the trial court‘s intervention by filing an objection and motion to quash, arguing that the Agreement‘s liquidated-damages and forfeiture provisions were unenforceable penalties that rendered the arbitration clause unenforceable as well. Husband and One Network responded by asking the trial court to compel arbitration.
Meanwhile, One Network alleged that Wife was threatening additional violations of the decree and Agreement, and it asked the trial court to issue temporary restraining and show-cause orders to prevent such violations. The trial court issued One Network‘s requested orders, and after hearings on these and the arbitration motions, it found that Wife had violated the decree, it issued a cease-and-desist order to deter her anticipated violations of the decree, and it compelled the parties to participate in binding arbitration.
In the arbitration proceeding, the arbitrator entered an agreed scheduling order that set procedural deadlines—including deadlines for the parties’ amended pleadings and exhibit lists—and that established the date of the final evidentiary hearing as August 16, 2022. The scheduling order also noted that “proof of attorneys’ fees and costs w[ould] be made by written submission following the Final Evidentiary Hearing” and set a deadline for the submission of fee-related evidence 17 days after the final hearing (September 2, 2022).
A little over a month before the final hearing was scheduled to commence, Wife‘s counsel moved to withdraw, explaining that Wife “no longer wishe[d] to retain [them] as her counsel.” Husband and One Network noted the upcoming final hearing date and “object[ed] to and oppose[d] any attempt by [Wife] to use the withdrawal as grounds for any further delay of th[e] arbitration proceeding.” The arbitrator permitted counsel‘s withdrawal but, given Husband and One Network‘s concerns, he directed Wife‘s withdrawing counsel to provide her with another copy of the scheduling order, and he reiterated that the final hearing would “not be continued.”
Wife requested a continuance anyway. A few weeks after her counsel withdrew and less than a week before the final hearing date, Wife emailed the arbitrator to complain that moving forward was “unfair” because she “d[id]n‘t even have counsel and [she] c[ould]n‘t because no one [wa]s available August 16th for arbitration.” She
On the date scheduled for the final hearing (August 16, 2022), the arbitrator heard Wife‘s motion for continuance instead. Ultimately, he granted the continuance but ordered that the various deadlines that had already expired—including the deadlines to amend pleadings and disclose exhibits—would not be extended. As the arbitrator later explained, “[t]he condition precedent of the continuance was that the case would be conducted under its then[-]current status,” and the arbitrator discussed these parameters with Wife‘s new counsel before he agreed to the continuance. The arbitration hearing was rescheduled for September 2, 2022, which was the date that had originally been set for submission of post-hearing fee-related evidence.
Despite the arbitrator‘s ruling that the case would be tried based on its August 16 status, less than 48 hours before the new hearing date, Wife filed a supplemental answer and updated her exhibit list to include 35 new exhibits. Husband and One Network immediately objected, and because Wife‘s documents were untimely “in contravention to the Scheduling Order,” the arbitrator declined to consider the supplemental answer and excluded the exhibits.
At the end of the final hearing, the arbitrator found that Wife “ha[d], on numerous occasions, committed one or more of the ‘prohibited behaviors’ in the Agreement, and “[b]ased on her commission of the... prohibited behaviors, [she]... ha[d] forfeited all interests she ha[d] in the... Irrevocable Trust No. 2.”
After Husband and One Network filed their evidence of attorney‘s fees and Wife responded, the arbitrator ordered Wife to pay Husband and One Network $122,241.25 for arbitration attorney‘s fees and $18,768.75 for arbitration costs. The arbitrator also found “the conditional fees as set out in [Husband and One Network‘s] request [for fees] to be appropriate” and stated that such conditional fees “should be included in the final order in this cause.” Those conditional fees provided $50,000 if Wife unsuccessfully sought to overturn or invalidate the arbitration award at the trial court level; an additional $75,000 if Wife unsuccessfully appealed the trial court‘s confirmation of the arbitration award to the court of appeals; and an additional $75,000 if Wife unsuccessfully appealed to the Texas Supreme Court.
D. Confirmation Proceedings
Husband and One Network sought confirmation of the arbitration award by filing a new lawsuit that was transferred to the 233rd District Court. Wife moved to vacate the award, arguing that the arbitrator (1) “refused to hear evidence material to the controversy,” denied her the opportunity to “be heard,” and “substantially prejudiced [her] rights” by excluding her exhibits and striking her supplemental
The trial court held a combined hearing on the two lawsuits and the various pending motions, and it subsequently denied Wife‘s motion to vacate in the divorce proceeding, it denied her plea to the jurisdiction and motion to vacate in the confirmation proceeding, and it entered a final judgment in the confirmation proceeding. In the final judgment, the court found that the arbitration award “should
Wife filed appeals in both the post-divorce and confirmation proceedings, and Husband and One Network filed a cross-appeal from the confirmation judgment.
II. Order Compelling Arbitration
After receiving Wife‘s notice of appeal in the post-divorce proceeding, we expressed concern that we lacked jurisdiction over the appeal. We noted that the judgment confirming the arbitration award had been entered in a different case—the confirmation case—and because the time to appeal the divorce decree had passed, we directed Wife to identify an appealable final judgment in the divorce proceeding or to show other grounds for continuing her appeal. See Johnson v. U-Haul Corp, No. 05-18-00945-CV, 2018 WL 6839573, at *1 (Tex. App.—Dallas Dec. 31, 2018, no pet.) (mem. op.) (noting that “an order compelling arbitration is reviewable on appeal only upon final judgment” and dismissing appeal). In her jurisdictional response and briefing, Wife urged us to construe her challenge to the order compelling arbitration
A. Governing Law and Standard of Review
Mandamus is an extraordinary remedy and will issue only if the trial court clearly abuses its discretion and the relator has no adequate remedy by appeal. In re Sw. Bell Tel. Co., L.P., 235 S.W.3d 619, 623 (Tex. 2007) (orig. proceeding). A trial court clearly abuses its discretion if it issues an order without subject matter jurisdiction. See In re Pixler, 584 S.W.3d 79, 83-84 (Tex. App.—Fort Worth 2018, orig. proceeding) (stating that “mandamus is generally proper if a trial court lacks subject[]matter jurisdiction“).
B. Wife‘s Mandamus Petition: Subject Matter Jurisdiction
Generally, “[t]he court that rendered the decree of divorce... retains the power to enforce any contractual provisions under the terms of an agreement incident to divorce... that was approved by the court.”
But the premise of Wife‘s argument—that none of the parties had filed a new lawsuit—is incorrect. Husband and One Network‘s motion to enforce the decree by compelling arbitration was “the equivalent of a new suit.” Allmond v. Loe, Warren, Rosenfield, Kaitcer, Hibbs & Windsor, P.C., No. 2-09-132-CV, 2010 WL 1267786, at *1 (Tex. App.—Fort Worth Apr. 1, 2010, pet. denied) (mem. op.) (rejecting argument that trial court lacked subject matter jurisdiction to issue fee award because, although “the trial court‘s plenary power over the divorce decree had expired, [wife] filed a motion to enforce, which under the family code is the equivalent of a new suit“); see
It is “the substance of [the] plea for relief t[hat] determine[s] the nature of the pleading, not merely the form [or] title given to it.” State Bar of Tex. v. Heard, 603 S.W.2d 829, 833 (Tex. 1980); see
Wife protests, though, that Husband and One Network were not charged the filing fee corresponding to a new enforcement suit.8 However, “the payment of a filing fee is not generally a prerequisite to [subject matter] jurisdiction.” Nolte v. Flournoy, 348 S.W.3d 262, 268 (Tex. App.—Texarkana 2011, pet. denied) (internal quotation marks omitted) (quoting J. Allen Fam. Partners, Ltd. v. Swain, No. 04-09-00384-CV, 2010 WL 2103228, at *3 (Tex. App.—San Antonio May 26, 2010, no pet.) (mem. op.)); see Mech v. GXA Network Sols., No. 05-16-00270-CV, 2017 WL 3634275, at *5-6 (Tex. App.—Dallas Aug. 24, 2017, no pet.) (mem. op.) (concluding trial court had jurisdiction to rule on motion despite party‘s failure to pay filing fee); Kapur v. Fondren Sw. Tempos Ass‘n, No. 01-13-00138-CV, 2013 WL 5636685, at *4 (Tex. App.—Houston [1st Dist.] Oct. 15, 2013, no pet.) (mem. op.) (“A party need not pay a filing fee for the trial court to exercise jurisdiction over the claims.“); Kujawa v. Kujawa, No. 01-11-00963-CV, 2012 WL 1753637, at *2–3 (Tex. App.—Houston [1st Dist.] May 17, 2012, no pet.) (mem. op.) (concluding that trial court had discretion to consider or not consider counterclaim when party failed to pay filing fee); J. Allen Fam. Partners,
Wife further contends that the motion to compel was not an enforcement suit because neither Husband nor One Network requested service of citation.
We deny her petition.
III. Confirmation Judgment
The remainder of the parties’ issues relate to the trial court‘s judgment confirming the arbitration award but modifying the attorney‘s fees authorized by the arbitrator.
A. Governing Law and Standard of Review
“[B]ecause Texas law favors arbitration, judicial review of an arbitration award is extraordinarily narrow.” Hoskins v. Hoskins, 497 S.W.3d 490, 494 (Tex. 2016) (quoting E. Tex. Salt Water Disposal Co. v. Werline, 307 S.W.3d 267, 271 (Tex. 2010)); see City of Arlington v. Kovacs, 508 S.W.3d 472, 476 (Tex. App.—Fort Worth 2015, pet. denied). An arbitration award is given the same effect as a judgment of a court of last resort, and a trial court‘s ruling on a motion to confirm or vacate an arbitration award “serves an appellate function” by “reviewing the award for reversible error.” Nafta Traders, Inc. v. Quinn, 339 S.W.3d 84, 101 n.79 (Tex. 2011); CVN Grp., Inc. v. Delgado,
By default, “[u]nless grounds are offered for vacating, modifying, or correcting an [arbitration] award,” the trial court “shall confirm the award.”
Under the TAA, and as relevant here, a trial court must vacate an arbitration award on application of a party if the arbitrator is shown to have “refused to hear evidence material to the controversy“; “conducted the hearing, contrary to ... Section 171.047, in a manner that substantially prejudiced the rights of a party“; or “exceeded [his] powers.”
A trial court‘s decision to confirm, modify, or vacate an arbitration award is reviewed de novo. City of Arlington, 508 S.W.3d at 476. But in our review, “[a]ny ground for vacatur not presented to the trial court is waived and cannot be argued on appeal.” Saiz v. Susser Holdings Corp., No. 04-14-00487-CV, 2015 WL 1089605, at *2 (Tex. App.—San Antonio Mar. 11, 2015, no pet.) (mem. op.); see
B. Wife‘s Appeal
Wife raises what we construe as five challenges to the confirmation judgment. She claims that the arbitration award should have been vacated rather than confirmed because (1) the trial court‘s and arbitrator‘s refusals to consider her “threshold” challenge to the Agreement‘s forfeiture provision denied her due process; (2) Husband and One Network waived the right to arbitrate; (3) the arbitrator‘s consideration of the trial court‘s temporary restraining order, show-cause orders, and cease-and-desist order substantially prejudiced her; (4) the arbitrator refused to consider material evidence, failed to comply with statutory procedure, and substantially prejudiced her by excluding her exhibits and striking her supplemental answer; and (5) the arbitrator exceeded his authority by allowing her counsel to withdraw and by extending the deadline for submission of fee-related evidence and then awarding attorney‘s fees based on that evidence.
1. Denial of Due Process
First, Wife argues that she was denied due process because, when she resisted arbitration by challenging the forfeiture provision‘s enforceability, the trial court refused to rule on the issue and referred it to arbitration, where the arbitrator similarly refused to consider it. She claims that this alleged denial of due process required the trial court to vacate the arbitration award.
2. Husband and One Network‘s Waiver
Wife next argues that Husband and One Network waived their right to arbitrate and that because of this waiver, the trial court should have vacated the arbitration award. This argument fails for two reasons.
First, Wife again failed to raise the issue as a ground for vacatur before the trial court. She thus failed to preserve it for appellate review. See Thiessen, 2018 WL 5993316, at *2-3.
And second, even if Wife had preserved her waiver argument, “an alleged waiver of the right to arbitrate is not a statutory ground for vacating, modifying, or correcting an arbitration award.” Ewing v. Act Catastrophe-Tex. L.C., 375 S.W.3d 545, 552 (Tex. App.-Houston [14th Dist.] 2012, pet. denied); see Baty v. Bowen, Miclette & Britt, Inc., 423 S.W.3d 427, 432-33 (Tex. App.-Houston [14th Dist.] 2013, pet. denied) (“[W]aiver of arbitration is not a valid basis for vacating an arbitration award, under either the Federal Arbitration Act [(FAA)] or the [TAA].“).
We overrule this issue.
Wife also contends that the arbitration award should have been vacated because she was substantially prejudiced by the arbitrator‘s consideration of the trial court‘s temporary restraining order, show-cause orders, and cease-and-desist order. Wife claims that these orders amounted to “finding[s that] she willfully violated the [divorce decree and [Agreement]” and that such findings were improper comments on the weight of the evidence and left “nothing . . . for the [a]rbitrator to decide.”
Once again, Wife did not raise this as a ground for vacatur in the trial court, so she has not preserved it for appellate review. See Thiessen, 2018 WL 5993316, at *2-3. Although she claims that
We overrule this issue.
4. Arbitrator‘s Refusal to Hear Wife‘s Evidence
This brings us to Wife‘s contention that the trial court should have vacated the arbitration award because the arbitrator excluded “all of [her] exhibits” and declined to consider her supplemental answer. Wife complains that these rulings were “contrary to
But as Wife concedes, “[a]n arbitrator is not bound to hear all the evidence tendered by the parties as long as each party is given an adequate opportunity to
The scheduling order, which was entered at the beginning of June 2022, gave all of the parties until mid-June to amend their pleadings and until early August to exchange exhibits lists. The parties were not only aware of this order but—as Wife reminds us in other portions of her appellate brief—they agreed to it. Indeed, the order recites that the parties had “conferred and agreed on a schedule for th[e] arbitration proceeding” and had “jointly requested” the order‘s entry.
When Wife‘s counsel withdrew in early July, the arbitrator directed counsel to provide Wife with another copy of the scheduling order, reminding her of the
Wife‘s failure to take advantage of the opportunity to present her case, i.e., her decision to ignore the scheduling order‘s deadlines, does not constitute reversible error by the arbitrator, nor is it equivalent to the arbitrator‘s refusing to consider material evidence. See Elite Framing v. BBL Builders, L.P., No. 05-15-01430-CV, 2016 WL 3346041, at *2-3 (Tex. App.-Dallas June 15, 2016, pet. denied) (mem. op.) (holding no grounds for vacatur under TAA when arbitrator, “in accordance with his rule established at the beginning of the hearing,” excluded exhibits that had not been produced during discovery); Sanders v. Newton, 124 S.W. 482, 483 (Tex. App.-Fort Worth 1909, writ ref‘d) (noting that “[t]he arbitrators adopted as a rule of procedure that neither party to the controversy should be present while any other witness was testifying, [and] the evidence conclusively shows that the parties were informed of this rule at the outset, and that they acquiesced in it, and thereafter proceeded with the submission of their respective claims,” so “[i]f such action would ordinarily constitute
We overrule this issue.
5. Arbitrator‘s Exceeding Authority
In her final challenge to the judgment confirming the arbitration award, Wife argues that the arbitrator exceeded his authority by allowing her counsel to withdraw a month before the final hearing date and by extending the deadline for Husband and One Network‘s submission of fee-related evidence. See
Regarding Wife‘s counsel‘s withdrawal, Wife did not request vacatur of the arbitration award on this basis, so she failed to preserve that challenge to the confirmation judgment. See Thiessen, 2018 WL 5993316, at *2-3.
As for the arbitrator‘s extension of the deadline for evidence of attorney‘s fees, Wife appears to assert that because the parties agreed to the scheduling order, the matters presented to the arbitrator were contingent upon the agreed deadlines in that
But “[t]he scope of an arbitrator‘s authority to adjudicate a dispute is determined by the scope of the controlling arbitration clause,” City of Beaumont v. Int‘l Ass‘n of Firefighters, Loc. Union No. 399, 241 S.W.3d 208, 212 (Tex. App.-Beaumont 2007, no pet.)—not the arbitrator‘s scheduling order. Nothing in the Agreement conditioned the arbitrator‘s authority on his compliance with the procedural dates he set forth in his own scheduling order. See Elite Framing, 2016 WL 3346041, at *3-4 (rejecting argument that arbitrator exceeded his authority by calculating contract damages using hourly rate that parties had not agreed to and noting that “the arbitration agreement . . . did not place restrictions on the arbitrator‘s authority to decide the amount of damages for the breach of contract claim“). Nor did the scheduling order itself indicate that the arbitrator‘s authority to hear the controversy was conditioned on the deadlines established therein. And Wife has not cited, nor have we found, any case law to support the idea that, as a general rule, an arbitrator‘s
In fact, Wife‘s actions show that she knows better. Wife herself urged the arbitrator to deviate from the scheduling order by seeking and obtaining a continuance of the final arbitration hearing date. Wife cannot have her cake—by requesting a continuance of the scheduling order‘s final hearing date—and eat it,
We overrule Wife‘s final challenge to the judgment confirming the arbitration award.
C. Husband and One Network‘s Appeal: Attorney‘s Fees
Turning to Husband and One Network‘s appeal, they argue that the trial court erred by striking the $50,000 in attorney‘s fees that the arbitrator had conditionally awarded to them if Wife contested confirmation of the arbitration award in the trial court. We agree.
“Unless grounds are offered for vacating, modifying, or correcting an [arbitration] award,” the trial court “shall“—i.e., must—“confirm the award.”
Because no meritorious “grounds [we]re offered” to the trial court to justify vacating or modifying the arbitration award, it was required to confirm the award.
IV. Conclusion
Because the trial court had subject matter jurisdiction to enforce the divorce decree by compelling arbitration, we deny Wife‘s petition for mandamus relief.
/s/ Bonnie Sudderth
Bonnie Sudderth
Chief Justice
Delivered: February 15, 2024