Myer v. Americo Life, Inc.

• Decision Date: 07 August 2012
• Docket Number: No. 05–08–01053–CV.,05–08–01053–CV.
• Citation: 371 S.W.3d 537
• Parties: Robert L. MYER and Strider Marketing Group, Inc., Appellants, v. AMERICO LIFE, INC., Americo Financial Life and Insurance Annuity Company, Great Southern Life Insurance Company, The Ohio State Life Insurance Company, and National Farmer's Union Life Insurance Company, Appellees.
• Court: Texas Court of Appeals

371 S.W.3d 537

Robert L. MYER and Strider Marketing Group, Inc., Appellants,

v.AMERICO LIFE, INC., Americo Financial Life and Insurance Annuity Company, Great Southern Life Insurance Company, The Ohio State Life Insurance Company, and National Farmer's Union Life Insurance Company, Appellees.

No. 05–08–01053–CV.

Court of Appeals of Texas,

Dallas.

June 6, 2012.

Rehearing Overruled Aug. 7, 2012.

D. Douglas Brothers, Craig T. Enoch, Enoch Kever, PLLC, Peter E. Ferraro, The Ferraro Law Firm, P.C., Austin, TX, for Appellants.

Mike A. Hatchell, Locke Lord Bissel & Liddell LLP, John K. Schwartz, Barbara M. Ellis, Susan Kidwell, Austin, TX, Edwin R. DeYoung, Roger B. Cowie, Locke Liddell & Sapp, LLP, Dallas, TX, for Appellees.

Before Justices MOSELEY, O'NEILL, and MURPHY.

OPINION ON REMAND

Opinion By Justice O'NEILL.

Appellants Robert L. Myer and Strider Marketing Group, Inc. (collectively referred to as appellants) and Americo Life, Inc., Americo Financial Life and Insurance Annuity Company, Great Southern Life Insurance Company, The Ohio State Life Insurance Company, and National Farmer's Union Life Insurance Company (collectively referred to as appellees) participatedin arbitration. Appellants filed a petition with the district court to confirm the award, and appellees filed a motion to vacate and/or modify the award. The trial court denied appellants' motion to confirm the award and granted appellees' motion to vacate.

In our original opinion, we concluded appellees failed to preserve their issue for review regarding whether the arbitration panel was appointed under the method provided for in the arbitration agreement. We reversed and remanded for further proceedings.

The Texas Supreme Court reversed our decision because it concluded the record demonstrated appellees had properly presented their argument to the American Arbitration Association (AAA) and remanded the case back to this Court for further proceedings.¹

Accordingly, we shall address the following arguments raised by appellants: (1) whether the trial court ignored rules of contract construction regarding whether the parties' arbitration agreement was ambiguous (2) whether an arbitrator can be disqualified by the AAA and (3) whether each of appellees' remaining challenges fail as a matter of law. We reverse and remand for further proceedings consistent with this opinion.

Background

The parties acknowledge the facts are generally undisputed; therefore, we will discuss only those facts relevant to the arguments on appeal, rather than detailing the business dealings leading up to the arbitration.

Appellant Myer built a business platform for the sale and servicing of tax-sheltered insurance products. Myer sold the insurance companies to appellees in 1998. Appellees were unwilling to pay the full value up front, so the parties agreed to use “trailer agreements” as a financing mechanism. The parties entered into a new trailer agreement in October 1998, which contained the following arbitration clause:

3.3 Arbitration. In the event of any dispute arising after the date of this Agreement among the parties hereto with reference to any transaction contemplated by this Agreement the same shall be referred to three arbitrators. Americo shall appoint one arbitrator and Myer shall appoint one arbitrator and such two arbitrators shall select a third.... Each arbitrator shall be a knowledgeable, independent businessperson or professional.

...

The arbitration proceedings shall be conducted in accordance with the commercial arbitration rules of the American Arbitration Association, except that Americo and Meyer each shall be entitled to take discovery as provided under Federal Rules of Civil Procedure Nos. 28 through 36 during a period of 90 days after the final arbitrator is appointed....

Several controversies arose between the parties and in February of 2005, appellees filed a Demand for Arbitration and Complaint in Arbitration with the AAA. Appellees appointed Ernest E. Figari, Jr. as an arbitrator, and appellants appointed Rodney D. Moore. Appellants filed an objection to Figari under AAA Rule R–17, which required that “any arbitrator shall be impartial and independent and shall perform his or her duties with diligence and good faith.” In March of 2005, a AAA case manager issued a decision disqualifyingand removing Figari as arbitrator. Appellees then appointed, without objection, Richard A. Sayles as an arbitrator. The two arbitrators then selected a third arbitrator.

The arbitration commenced on March 27, 2007 and a final award was rendered on June 29, 2007. The arbitrators reached a 3–0 decision in appellants' favor and awarded declaratory relief, $9.29 million in breach of contract damages, $15.8 million in damages for amounts wrongfully withheld under the new trailer agreement, and $1.29 million in attorneys' fees and costs.

On July 9, 2008, appellants filed a petition to confirm the arbitration award in the district court. Appellees later filed a motion to vacate and/or modify the arbitration award. They argued the award was not by arbitrators appointed under the method required in the agreement, and the panel exceeded its authority. On July 15, 2008, the trial court denied the motion to confirm and granted appellees' motion to vacate the arbitration award. In its conclusions of law, it stated the AAA failed to follow the arbitration selection method contained in the first paragraph of section 3.3 of the new trailer agreement by not allowing appellees to appoint Figari, and because the award was not issued by a properly appointed and authorized panel, it was void and had no binding effect. The trial court did not consider appellees remaining grounds for vacating the award because it concluded any remaining arguments were moot.

Appellants filed a motion to reconsider. The trial court denied the motion on September 8, 2008. This appeal followed.

Standard of Review

A review of a trial court's decision to confirm or vacate an arbitration award is de novo; therefore, we review the entire record. Statewide Remodeling, Inc. v. Williams, 244 S.W.3d 564, 566 (Tex.App.-Dallas 2008, no pet.). However, all reasonable presumptions are indulged in favor of the award and none against it. Id. (citing CVN Group, Inc. v. Delgado, 95 S.W.3d 234, 238 (Tex.2002)). An arbitration award has the same effect as a judgment of a court of last resort, and a court reviewing the award may not substitute its judgment for that of the arbitrators merely because it would have reached a different decision. Williams, 244 S.W.3d at 566. Arbitration awards are entitled to great deference by the courts “lest disappointed litigants seek to overturn every unfavorable arbitration award in court.” Id. (citing Daniewicz v. Thermo Instrument Sys., Inc., 992 S.W.2d 713, 716 (Tex.App.-Austin 1999, pet. denied)).

Judicial review of arbitration awards adds expense and delay, thereby diminishing the benefits of arbitration as an efficient, economical system for resolving disputes. Id. Therefore, review of an arbitration award is quite narrow. Id. Review is so limited that an arbitration award may not be vacated even if there is a mistake of fact or law. Crossmark, Inc. v. Hazar, 124 S.W.3d 422, 429 (Tex.App.-Dallas 2004, pet. denied). Because of the deference given to arbitration awards, judicial scrutiny focuses on the integrity of the process, not the propriety of the result. Ancor Holdings, LLC v. Peterson, Goldman & Villani, Inc., 294 S.W.3d 818, 826 (Tex.App.-Dallas 2009, no pet.). When as here, a non-prevailing party seeks to vacate an arbitration award, it bears the burden in the trial court of bringing forth a complete record that establishes its basis for vacating the award. Williams, 244 S.W.3d at 566.

It is undisputed the Federal Arbitration Act (“FAA”) applies to this case. Under the FAA, an arbitration award must be confirmed unless it is vacated, modified, or corrected under one of the limited grounds set forth in sections 10 and 11 of the Act. See9 U.S.C. §§ 9–11. Section 10(a) permits a court to vacate an arbitration award (1) where the award was procured by fraud, corruption, or undue means; (2) where there was evident partiality or corruption in the arbitrators, or either of them; (3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence material and pertinent to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or (4) where the arbitrators exceeded their power, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made. Id. § 10(a).

Although courts have recognized certain common law exceptions for vacating an arbitration award, the United States Supreme Court has held the grounds listed in the statute are the exclusive grounds for vacating an arbitration award under the FAA. Hall St. Assocs., LLC v. Mattel, Inc., 552 U.S. 576, 128 S.Ct. 1396, 170 L.Ed.2d 254 (2008).

Discussion

Appellants argue the trial court erred by concluding the arbitration agreement is ambiguous and determining the parties agreed to its own procedures for appointing arbitrators thereby eliminating the procedures under the AAA for selecting arbitrators. The paragraphs at issue in the arbitration agreement are as follows:

3.3 Arbitration. In the event of any dispute arising after the date of this Agreement among the parties hereto with reference to any transaction contemplated by this Agreement the same shall be referred to three arbitrators. Americo shall appoint one arbitrator and Myer shall appoint one arbitrator and such two arbitrators shall select a third.... Each arbitrator shall be a knowledgeable, independent businessperson or professional.

...

The arbitration proceedings shall be conducted in accordance with the commercial arbitration rules of the American Arbitration Association, except that...