Amberson v. McAllen (In re Amberson)
| Decision Date | 18 November 2022 |
| Docket Number | 21-50960 |
| Parties | In the MATTER OF: Jon Christian AMBERSON Jon Christian Amberson; Jon Christian Amberson PC ; Amberson Natural Resources, LLC, Appellants, v. James Argyle McAllen; El Rucio Land and Cattle Company, LLC; San Juanito Land Partnership, Ltd.; McAllen Trust Partnership, Appellees. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Jason Murray Davis, Attorney, Hayley C. Ellison, Caroline Newman Small, Davis & Santos, P.C., San Antonio, TX, for Appellants.
David R. Montpas, David McDonald Prichard, Prichard Young, L.L.P., San Antonio, TX, David S. Gragg, Natalie Friend Wilson, Esq., Attorney, Langley & Banack, Incorporated, San Antonio, TX, for Appellees.
Before Jones, Southwick, and Oldham, Circuit Judges.
A bankruptcy court confirmed an arbitrator's award. The district court affirmed. The compelling of arbitration and the commencement of proceedings to confirm the resulting arbitrator's award had been in state court. Prior to a ruling on confirmation, two of the state-court parties filed for bankruptcy, and the case was removed to bankruptcy court. The only issue before us is whether a counterclaim raised in state court should have been arbitrated. The bankruptcy and federal district courts refused to consider that argument, holding that the state court's order compelling arbitration, which had found all claims were subject to arbitration, became conclusive under state law when the objecting party did not seek mandamus review of that order before the arbitration began.
We disagree. State law allows vacatur to be sought because arbitrators exceeded their powers by resolving a claim not covered by the arbitration agreement. Losing on that argument before arbitration does not bar renewing it after. A different vacatur provision relied upon by the lower courts is confusing, but whatever it means, it does not bar reconsideration of arguments about the scope of the arbitration agreement. Thus, the question of arbitrability of the contested claim remains open. The record is sufficiently clear, though, that we address arbitrability here. We hold that the disputed claim was subject to arbitration.
The lengthy analysis that follows is not fully endorsed by the other members of the panel. There are different views as to what parts are necessary or even relevant. In a word, perhaps there are too many words. Nonetheless, Judge Jones' separate opinion concurs in the holding regarding which vacatur provision applies. The entire panel agrees the arbitration award was properly confirmed and we should AFFIRM.
The debtor and appellant, Jon Christian Amberson, was and may still be a practicing lawyer. His former father-in-law is the appellee, James Argyle McAllen, a south Texas rancher. McAllen and related entities own "the 27,000-plus acre McAllen Ranch ... once owned by [McAllen's] great-grandfather, for whom the City of McAllen, on the Rio Grande [ ] near the southern tip of Texas, is named." Forest Oil Corp. v. El Rucio Land & Cattle Co. , 518 S.W.3d 422, 426 (Tex. 2017). The ranch is part of the 97,000 acres the King of Spain granted in 1799 to Jose Manuel Gomez, whom a McAllen ancestor later married. Margaret McAllen & Mary Margaret McAllen, McAllen Ranch , in 4 NEW HANDBOOK OF TEXAS 363–64 (1996).
Forest Oil Corporation had producing oil and gas wells on over 1,500 acres of the McAllen Ranch for over 30 years; it also operated a processing plant on 5.75 acres of the ranch. Forest Oil , 518 S.W.3d at 426.
In 2004, McAllen discovered that Forest Oil had secretly been burying toxic and radioactive waste on his land. That same year, McAllen and three entities he controlled brought suit in state court against Forest Oil. The suit was successful though protracted, ending in 2017 with an affirmance by the Supreme Court of Texas of awards of over $20 million to McAllen and other entities against Forest Oil. Id. at 427, 432.
Beginning in 2004, McAllen employed Amberson's law firm, Jon Christian Amberson, P.C., to represent him in the lawsuit against the corporation. Over time, McAllen and the Amberson firm executed three attorney engagement agreements. Each had language similar to this: "[a]ny fee dispute arising under this agreement and/or the services rendered for" McAllen by the law firm would be arbitrated.
McAllen, individually, and Amberson's law firm are parties in this litigation, but there are others whom we now identify. McAllen is joined as a creditor and appellee with El Rucio Land and Cattle Company, LLC; San Juanito Partnership, LTD; and McAllen Trust Partnership, all of whom were parties to the litigation against Forest Oil. Joining the Amberson law firm as appellants are Amberson, individually, and Amberson Natural Resources, LLC ("ANR"). We will describe ANR later. Unless there is a need to distinguish, we will refer to the parties simply as McAllen and Amberson.
The district court found that during the years-long Forest Oil litigation, Amberson and his firm billed McAllen for a significant number of services that were not performed, some ostensibly related to the Forest Oil litigation, some not. Amberson also borrowed large sums of money from McAllen for litigation expenses that he never repaid.
A controversy about another matter — referred to as the "Cannon Grove" transaction — is at the center of this appeal. McAllen sought to defer capital gains taxes through a "Reverse 1031 Exchange," as allowed by federal statute. 26 U.S.C. § 1031. McAllen did not use Amberson to structure the transaction. McAllen needed a non-blood relative to serve as an intermediary and hold an interest in certain property. Amberson agreed to serve as the intermediary, creating ANR specifically for this transaction. The property itself was held by an entity called Cannon Grove Investments, LLC.
McAllen provided ANR with $4,500,000 on March 18, 2009. That money was intended to enable ANR to purchase a 90% stake in Cannon Grove Investments, with the other 10% to be purchased by a McAllen entity. Later, McAllen asked for his money back. Amberson refused, insisting the money had been a gift. McAllen responded the money had been a loan, with the collateral being ANR's 90% Cannon Grove interest.
In January 2015, the Amberson law firm filed suit in Hidalgo County District Court to compel McAllen to arbitrate a dispute over a contingency fee related to the Forest Oil litigation. After a nonsuit and a failed mediation, the Amberson firm refiled its petition in August 2017. McAllen answered and counterclaimed for breach of fiduciary duty, fraud, and theft, joining Amberson individually and ANR as third-party defendants. McAllen also expanded the suit from dealing only with the law firm's claim for fees relating to the Forest Oil litigation by counterclaiming for damages relating to the Cannon Grove transaction.
In October 2017, Amberson filed for summary judgment on the Cannon Grove claims, raising various affirmative defenses. Simultaneously, Amberson moved to compel arbitration on all claims except for those regarding Cannon Grove. After a hearing, the Hidalgo County District Court in April 2018 ordered all the claims to arbitration without explanatory analysis. Amberson moved to have the court reconsider or clarify its order. After another hearing, the court in October 2018 denied reconsideration, again without explanation, and reaffirmed that all claims were to be arbitrated. An arbitrator was appointed that same month.
Eight claims among the parties were then arbitrated. In a lengthy decision issued on April 30, 2020, the arbitrator awarded McAllen almost $7,300,000 and also $2,000,000 in attorneys' fees. Further, Amberson was required to convey all his Cannon Grove interests to McAllen. Amberson was awarded nothing. Later, the arbitrator awarded McAllen an additional $1,750,000. The arbitrator stated that the Ambersons "preserved their running objection to the arbitrability of the ‘Cannon Grove’ transaction." The arbitrator interpreted the court's referral order as barring consideration of arbitrability, which he stated was an atypical bar. He made no decision on whether the claims were properly subject to arbitration.
On May 14, 2020, McAllen moved in Hidalgo County District Court to confirm the award. On July 20, 2020, the day before a hearing on the motion, ANR filed a Chapter 11 petition in the Bankruptcy Court for the Western District of Texas. Three days later, Amberson himself filed under Chapter 11 in the same court. Also on July 20, ANR removed the suit for confirmation to the Bankruptcy Court for the Southern District of Texas. That adversary proceeding was soon transferred to the Western District.
In bankruptcy court, McAllen sought confirmation of the entire award and Amberson sought vacatur of the part of the award relating to Cannon Grove. The bankruptcy court concluded that the only procedure for challenging an order compelling arbitration was by seeking immediate review through a writ of mandamus, making it too late to present that argument in a motion to vacate part of the award. Amberson appealed to the district court, which affirmed. Amberson then timely appealed here.
Amberson makes no complaint here about any part of the arbitrator's award except for the portion based on the Cannon Grove claim. He argues that claim was beyond the scope of the arbitration agreement between the parties. McAllen responds that the challenge to the compelling of all claims to arbitration comes too late and also argues that Amberson invoked the wrong statutory section when seeking to overturn part of the award. Analyzing these arguments will require examining several different sources for meaning. We start, though, with two points the parties did not raise.
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