Myer v. Americo Life, Inc.

• Decision Date: 30 August 2007
• Docket Number: No. 05-06-01013-CV.,05-06-01013-CV.
• Citation: 232 S.W.3d 401
• Parties: Robert L. MYER, Appellant v. AMERICO LIFE, INC., Appellee.
• Court: Texas Court of Appeals

232 S.W.3d 401

Robert L. MYER, Appellant v. AMERICO LIFE, INC., Appellee.

No. 05-06-01013-CV.

Court of Appeals of Texas, Dallas.

August 30, 2007.

Peter E. Ferraro, Austin, for appellant.

Edwin R. DeYoung, Barbara M. Ellis, Locke Liddell & Sapp LLP, Dallas, for appellee.

Before Justices WRIGHT, RICHTER, and SMITH.¹

OPINION

Opinion by Justice RICHTER.

Robert L. Myer appeals the trial court's judgment confirming an arbitration award under the Federal Arbitration Act in favor of appellee Americo Life, Inc. Myer raises fourteen issues on appeal that generally argue the trial court erred when it refused to vacate the arbitration award because: (1) the arbitration panel exceeded its authority; (2) the award was made in "manifest disregard" for the law; (3) the award failed to meet the "fundamental rationality" test; and (4) the award contravened public policy. Myer also contends there was no basis for the recovery of attorneys' fees because the entire award should have been vacated. Finding no reversible error, we affirm the judgement of the trial court.

I. BACKGROUND

A. The Underlying Transaction

In 1998, Myer agreed to sell several insurance-related companies he owned to Americo.² Americo acquired these assets for a purchase price of over $20 million dollars. In conjunction with the sale, the parties entered into a consulting agreement with a fifteen-year term. The stated purpose of the consulting agreement was twofold: (1) to retain Myer with respect to the marketing of life insurance and annuity products; and (2) to provide for Myer's agreement not to compete against Americo or any of its affiliates. The consulting agreement detailed these general objectives in nonsolicitation and noncompetition provisions. In essence, Myer agreed to provide consulting services if requested by Americo, to use his best efforts to achieve $515 million in qualifying production, and not to compete with Americo or solicit its agents, in exchange for which Americo agreed to pay Myer periodic payments.³ Although Myer agreed not to compete with Americo, there was an express carve-out for certain transactions with the Equita companies, a group of companies that market insurance for Americo. Myer is a 50% owner of the Equita companies. Rick Wolfe ("Wolfe") owns the remaining 50% interest. Under the carve-out, Myer was permitted to retain an ownership interest in the companies, but promised not to be actively involved in management other than as a Director, as Secretary, and as necessary to fulfill his fiduciary obligations in these capacities. Myer also agreed to use his best efforts to assure the Equita companies continued their relationships with Americo, and not to take any action that would cause the discontinuation of any relationship.

The consulting agreement contained an arbitration provision in which the parties agree to submit disputes to binding arbitration. Specifically, the consulting agreement provided:

In the event of any dispute arising after the date of this agreement between Americo and Myer, the same shall be submitted to binding arbitration to the extent, and in the manner, described in Section 11.5 of the Purchase Agreement, which Section is incorporated herein by this reference.

Section 11.5 of the purchase agreement stated in pertinent part:

(a) In the event of a dispute arising after the date of this Agreement with reference to any transaction contemplated by the Agreement . . . or by any of the Transaction Documents among the parties hereto or thereto, the same shall be referred to three arbitrators for binding arbitration . . .

(c) the arbitration proceedings shall be conducted in accordance with the commercial arbitration rules of the American Arbitration Association. . . .

The arbitration provision further required that the Panel's decision be made by a majority vote of two out of the three panel members and include detailed findings of fact and conclusions of law. Arbitration was to be conducted in Dallas, Texas or a location mutually agreeable to the parties.

The consulting agreement also contained a choice of law provision. Myer is a Texas resident and Americo is a Missouri corporation. The agreement acknowledged that a substantial portion of the services would be performed by Myer in Texas or another jurisdiction. Nonetheless, the parties agreed that any dispute would be governed by Missouri law.

B. The Dispute

From 1998-2004, Americo made annual payments to Myer pursuant to the terms of the consulting agreement, but did not request that Myer provide any consulting services. The parties' dispute has its genesis in certain transactions which commenced in 2002.

The dispute centers around Financial Industries Corporation ("FIC"), a publicly-held company and competitor of Americo in the insurance products market. In 2002, Pat Tedrow ("Tedrow"), a friend and close business associate of Myer, approached Myer with a plan to acquire a substantial portion of FIC. To this end, Tedrow authored a marketing plan that was circulated to the FIC board of directors in 2003. The marketing plan was an exclusive arrangement which provided for Equita to market and sell insurance and annuity products for FIC affiliates. The grant to Equita of the marketing agreement was conditioned on the purchase of FIC stock.

Myer initially planned to purchase the FIC stock himself. But his attorney advised him that such a purchase would run afoul of the terms of the consulting agreement. Thereafter, an Equity affiliate company called M & W Insurance Services, Inc. ("M & W") acquired the FIC stock. M & W also entered into a marketing agreement with FIC which allowed Equita to place product with FIC.

Americo claimed that Myer actually negotiated the deal with FIC, and then arranged for Wolfe and the Equita company to assume his position and purchase the FIC stock. Americo asserted that Myer participated in the transaction, granted a security interest in personal assets to secure a loan for the stock purchase, guaranteed the loan, and arranged for the loan through his personal banking relationships. Americo also claimed Myer recruited R.A. Lotter, a top Americo agent, to work for FIC. According to Americo, these actions constituted a breach of the consulting agreement and of the duty of good faith and fair dealing.

Myer maintained his conduct did not contravene the provisions of the consulting agreement. Myer allowed Equita management to do what it thought best, and the FIC arrangement promised to be lucrative for Equita. According to Myer, this hands-off approach was consistent with the fiduciary duties he owed to Equita, and had he done otherwise, could have been challenged as interference with a corporate opportunity. Myer further maintained there was no impermissible competitive activity, and denied the solicitation of Americo agents.

C. The Arbitration

In 2004, Americo initiated an arbitration proceeding against Myer seeking damages and injunctive relief based on Myer's alleged violation of the nonsolicitation and noncompetition provisions of the consulting agreement. After the parties selected an arbitration panel (the "Panel"), Myer filed a motion to stay the proceedings. The motion asserted Americo failed to give proper notice of its claim under the purchase agreement and that such notice was a condition precedent to arbitration. The Panel denied the motion.

On August 11, 2004, Myer initiated an action in the Dallas County district court. Myer then requested a stay of the arbitration. In support of his request for a stay, Myer initially argued the Panel lacked jurisdiction to determine the claim for injunctive relief. Myer subsequently amended to include the additional argument that Americo failed to give proper notice of the claim.

While the application to stay was still pending in the district court, Myer filed a motion for summary judgment in the arbitration proceeding. In the motion for summary judgment, Myer argued: (1) there was no proof of causation of any damages; and (2) the measure of damages was not recoverable at law because the remedy was in the nature of rescission, and rescission was not available unless there was a repudiation or total breach of the contract. After a hearing, the Panel denied the motion for summary judgment. The district court also denied the motion to stay. Thereafter, Myer non-suited the action in the district court.

In March and April 2005, the Panel conducted a hearing on the merits of the dispute. On June 8, 2005, after seven days of hearings, the Panel issued an award (the "Award") in favor of Americo. The Panel found that Myer violated the nonsolicitation and noncompetition provisions of the consulting agreement as well as the duty of good faith and fair dealing he owed to Americo under Missouri law. The Award was signed by two of the three arbitrators and contained detailed findings of fact and conclusions of law. The Award ordered Myer to use his best efforts to cause M & W to divest itself of the FIC stock, and relieved Americo of the obligation to make payments to Myer under the consulting agreement until such divestiture is confirmed. Myer was also enjoined from further violations of the noncompetition and nonsolicitation provisions of the consulting agreement. The Award further ordered Myer to make restitution to Americo for the payments Americo made to him "during the period Myer, through M & W, owned or owns FIC stock". Myer was also ordered to pay attorney's fees, certain arbitration costs, and interest on all sums awarded.

D. Post Arbitration Proceedings

On August 10, 2005, Myer initiated a proceeding to vacate the Award in the United States District court in Missouri. On August 11, 2005, Americo filed a petition in the state district court to confirm the Award and then moved the federal court to dismiss the federal court action or transfer it to the state district court in Texas. The federal district court dismissed the action.⁴ Myer subsequently amended...