Nationsbuilders Ins. Servs., Inc. v. Houston Int'l Ins. Grp., Ltd.
| Decision Date | 03 July 2013 |
| Docket Number | No. 05-12-01103-CV,05-12-01103-CV |
| Parties | NATIONSBUILDERS INSURANCE SERVICES, INC., Appellant v. HOUSTON INTERNATIONAL INSURANCE GROUP, LTD., BUNKER HILL UNDERWRITERS AGENCY, INC. f/k/a BUNKER HILL INTERNATIONAL, LTD and BUNKER HILL UNDERWRITERS AGENCY (CHICAGO), INC., STEPHEN L. WAY, KEVIN CUNNINGHAM, and MICHAEL LEAMANCZYK, Appellees |
| Court | Texas Court of Appeals |
Reverse and Remand; Opinion Filed July 3, 2013.
On Appeal from the 134th Judicial District Court
Dallas County, Texas
Before Justices Moseley, Fillmore, and Myers
Opinion by Justice Myers
Nationsbuilders Insurance Services, Inc. appeals the trial court's order vacating an arbitration award. Nationsbuilders brings five issues contending the trial court erred by vacating and refusing to confirm the arbitration award. We reverse the trial court's judgment and remand the cause to the trial court for further proceedings.
BACKGROUND
Kevin Cunningham and Michael Leamanczyk started an insurance underwriting agency specializing in the heavy-construction market, including crane, rigging, and specialized-transportation risks. In 2006, they sold the agency to Nationsbuilders and went to work there. Their employment contracts with Nationsbuilders included covenants not to compete with Nationsbuilders. In 2010, Cunningham and Leamanczyk left Nationsbuilders and went to workfor Houston International Insurance Group, Ltd. (HIIG), a holding company with numerous companies in many different lines of insurance. Nationsbuilders sued HIIG, Cunningham, Leamanczyk, and Stephen Way (HIIG's chairman and CEO) in multi-state litigation. On May 4, 2011, the parties reached a settlement agreement.
In the agreement, appellees, (who were called the "Way Parties" and the "Restricted Parties") agreed not to compete with the "NBIS Parties," i.e., Nationsbuilders:
(Emphasis added.) The parties also agreed that Delaware law would apply to "any disputes between the Parties" and that the disputes would be arbitrated.
During the restricted period, appellees did not sell, quote, bind, rate, or produce insurance in the prohibited markets. They did, however, begin planning and preparing to sell insurance in those areas as soon as the restricted period expired. They sent out marketing materials to potential customers and potential agents announcing they would be selling "Crane-Rigging, Specialized Transport" insurance beginning in May 2012. They also prepared regulatory filings for state agencies, developed underwriting guidelines for crane and rigging insurance, drafted policy and claim forms, conducted market research, negotiated with re-insurers, and developed and maintained agent/customer lists and relationships.
In January 2012, Nationsbuilders filed an arbitration demand against appellees for breach of the settlement agreement. Nationsbuilders alleged appellees breached the agreement by conducting planning and preparation to enter the crane and rigging insurance field during the restricted period in violation of their agreeing not to plan to conduct a business in competition with Nationsbuilders. Nationsbuilders sought damages as well as specific performance and an extension of the restricted period.
Following a three-day hearing, the arbitrator rendered the arbitration award on May 31, 2012. In the award, the arbitrator determined the settlement agreement:
not only prohibits the [appellees] from the active conduct of competition, during the restricted period, but also restricts them to a dormant period, which includes no planning to conduct a business that is in competition. Obviously, passive contemplation would not rise to a material level; however, the provision does clearly contemplate and prohibit planning and conduct which would give the [appellees] any business "head start" prior to the conclusion of the restricted period.
The arbitrator found appellees breached the settlement agreement by marketing and soliciting future insurance business and by planning and preparing to sell insurance at the end of the restricted period. "[Appellees'] solicitations, coupled with their planning efforts during the restrictive period, effectively denied [Nationsbuilders] of the bargained for dormant period of non-competition, as provided for in the Settlement Agreement." The arbitrator also determined that Nationsbuilders had not suffered any monetary damages because its "claims of revenue and market loss were hypothetical, inasmuch as [appellees] had not actually sold any competing insurance products during the restricted period." The arbitrator found Nationsbuilders was damaged because "[appellees'] breaches deprived [Nationsbuilders] of the benefit of its bargain, i.e., a one year restricted period with no competition, including solicitations, and no 'head start' planning for competition." The arbitrator determined that Nationsbuilders "be restored the benefit of the bargain it made pursuant to the May 4, 2011 Settlement Agreement." Heconcluded Delaware law supported an equitable extension of the restricted period, and he awarded Nationsbuilders He ordered each party to bear its own attorney's fees.
Appellees filed suit in district court to vacate the arbitration award. They alleged the arbitrator exceeded his powers under the federal, Texas, and Delaware arbitration acts by extending the restricted period. They also alleged the award represented a manifest disregard for the law and violated public policy. After a hearing, the trial court determined that appellees' "Motion to Vacate should be granted pursuant to Section 10(a)(4) of the Federal Arbitration Act because the presiding arbitrator . . . 'exceeded [his] powers' or 'so imperfectly executed them that a mutual, final and definite award upon the subject matter submitted was not made.'"
STANDARD OF REVIEW
The Federal Arbitration Act (FAA) permits a court to vacate an arbitration award "where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made." 9 U.S.C. § 10(a)(4) (2012). We review a trial court's decision to confirm or vacate an arbitration award de novo. In re Chestnut Energy Partners, Inc., 300 S.W.3d 386, 397 (Tex. App.—Dallas 2009, pet. denied). In making this review, we are mindful that arbitration of disputes is strongly favored under both federal and Texas law. Prudential Secs. Inc. v. Marshall, 909 S.W.2d 896, 898 (Tex. 1995) (per curiam). We indulge all reasonable presumptions in favor of the award and none against it. CVN Group 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 the arbitrator's merely because the court would have reached a differentdecision. Id.; Statewide Remodeling, Inc. v. Williams, 244 S.W.3d 564, 568 (Tex. App.—Dallas 2008, no pet.). Arbitration awards are entitled to great deference by the courts "lest disappointed litigants seek to overturn every unfavorable arbitration award in court." Statewide Remodeling, 244 S.W.3d at 568 (quoting Daniewicz v. Thermo Instrument Sys., Inc., 992 S.W.2d 713, 716 (Tex. App.—Austin 1999, pet. denied)). Review of an arbitration award is so limited that even a mistake of fact or law by the arbitrator in the application of substantive law is not a proper ground for vacating an award. Centex/Vestal v. Friendship W. Baptist Church, 314 S.W.3d 677, 683 (Tex. App.—Dallas 2010, pet. denied).
In this case, all parties agree the FAA applies to this case. Under the FAA, the only grounds for vacating an arbitration award are those in section 10(a) of the act:
9 U.S.C. § 10(a). The trial court vacated the award under paragraph (4).
WHETHER THE AWARD EXCEEDED THE ARBITRATOR'S POWERS
In its first issue, Nationsbuilders contends the trial court erred by vacating the arbitration award on the ground that the arbitrator exceeded his powers. Arbitrators derive their authority from the arbitration agreement, and that authority is limited to a decision of the matters submitted therein, either expressly or by necessary...
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