Sharifan v. Kelley
| Decision Date | 14 April 2022 |
| Docket Number | 14-20-00197-CV |
| Parties | ABDOLRAHIM SHARIFAN, Appellant v. LLOYD KELLEY, Appellee |
| Court | Texas Court of Appeals |
On Appeal from the 215th District Court Harris County, Texas Trial Court Cause No. 2019-18502
Panel consists of Justices Wise, Bourliot, and Zimmerer.
Appellant Abdolrahim Sharifan appeals the judgment against him upholding the arbitration award in favor of appellee Lloyd Kelley. In two issues appellant argues that we should vacate the arbitrator's award on the ground of evident partiality of the arbitrator and because the arbitration clause was unconscionable. We reverse and remand.
In his first issue, appellant argues that the arbitration award should be vacated on the ground of evident partiality because the arbitrator, David West, failed to disclose the prior attorney-client relationship between appellee and West or West's law firm. Appellee argues that appellant has failed to preserve error or waived his argument on appeal because appellant did not (1) object in writing prior to the first arbitration hearing pursuant to the agreement, (2) provide a full record, (3) obtain a ruling on his motion to vacate, or (4) request or obtain findings of fact and conclusions of law.
Review of an arbitration award is "extraordinarily narrow." Amoco D.T. Co. v. Occidental Petroleum Corp., 343 S.W.3d 837, 841 (Tex. App.-Houston [14th Dist] 2011, pet. denied). "Under the TAA, a trial court shall vacate an award if the rights of a party were prejudiced by the 'evident partiality of an arbitrator appointed as a neutral arbitrator.'" In re Marriage of Piske, 578 S.W.3d 625, 628 (Tex App.-Houston [14th Dist.] 2019, no pet.) ). A party seeking to vacate an arbitration award bears the burden of presenting a complete record that establishes grounds for vacatur. Id. "Courts must vacate arbitration awards when 'the rights of a party were prejudiced by . . . evident partiality by an arbitrator appointed as a neutral arbitrator.'" Forest Oil Corp. v. El Rucio Land & Cattle Co., 518 S.W.3d 422, 431 (Tex. 2017) ).
We review a trial court's legal decision of whether to vacate an arbitration award de novo. Builders First Source-S. Tex., LP v. Ortiz, 515 S.W.3d 451, 455 (Tex. App.-Houston [14th Dist.] 2017, pet. denied). We review any factual findings for legal and factual sufficiency. Marriage of Piske, 578 S.W.3d at 629.
However, when there are no "material conflicts" in the evidence, then no deference is required. Id.
"[A] prospective neutral arbitrator . . . exhibits evident partiality if he or she does not disclose facts which might, to an objective observer, create a reasonable impression of the arbitrator's partiality." Burlington N. R. Co. v. TUCO, Inc., 960 S.W.2d 629, 636 (Tex. 1997). "[T]his evident partiality is established from the nondisclosure itself, regardless of whether the nondisclosed information necessarily establishes partiality or bias." Id. "While a neutral arbitrator need not disclose relationships or connections that are trivial, the conscientious arbitrator should err in favor of disclosure." Id. at 637. "[T]o preserve the integrity of the selection process, we hold that a party who could have vetoed the arbitrator at the time of selection may disqualify the arbitrator during the course of the proceedings based on a new conflict which might reasonably affect the arbitrator's impartiality." Id.
Appellee was appellant's attorney in a litigation matter wherein appellant was awarded a judgment (Underlying Litigation). A dispute arose between appellee and appellant regarding how to calculate appellee's attorney's fees. Appellee sought to have the matter arbitrated pursuant to the arbitration provision in the fee agreement.
The arbitration agreement provided in pertinent part that:
[Appellee] will send [appellant] a list of three retired or former Texas court judges and justices. The parties will utilize the 30 days to conduct their own diligence on the proposed arbitrators. [Appellant] will then select a judge from the list and send it back to [appellee]. If [appellant] does not return the list within 30 days, then [appellee] shall select from the list and notify [appellant].... If the judge selected is unable or declines to serve, then the process will be repeated by [appellee] supplying three names, . . . and then [appellant] or [appellee] will select accordingly until an arbitrator is selected. Once selected, the arbitrator shall establish the pre-arbitration procedures and the arbitration procedure. All objections to the arbitrator must be made in writing before the first hearing set by the arbitrator is held or the parties agree that all objections to the arbitrator are thereby waived. Any objection to the arbitrator selected or to the arbitrator's fee must be made before the arbitrator renders a decision or said objection is waived. The Texas Rules of Evidence and Rules or Procedure shall guide the process and proceedings until altered by the arbitrator.
Pursuant to the arbitration provision, appellee submitted three names to appellant, one of whom was David West. Appellant agreed to West as an arbitrator but "conditioned" the agreement on his ex-wife's participation in the arbitration. Appellant's ex-wife refused to participate. Appellant then alleged that he found out that he hired West, on appellee's recommendation, as an expert witness in the Underlying Litigation. Appellant asked for a new arbitrator and appellee refused to agree to a different arbitrator.
Appellant asked the trial court to intervene in the matter and appoint an arbitrator due to appellant's concerns with West due to his involvement in the Underlying Litigation as an expert witness. After listening to arguments from the parties the trial court appointed another arbitrator. However, this arbitrator had a conflict and declined to serve. Thereafter, the trial court granted appellee's motion to compel West as arbitrator. Appellant objected to West's appointment and requested the trial court appoint another former judge as the arbitrator.
Within a few days West confirmed he would serve as the arbitrator for the dispute and set a hearing for October 22. The day before the arbitration hearing, appellant submitted written objections to West. In his objection appellant argued that West could not serve as an impartial arbitrator on a matter in which he was an expert witness. Appellant also argued that West "has a duty to evaluate and recuse himself." Appellant also requested that West provide disclosures of any prior or current financial dealings, including appellee's "use or desire of West or any member of West's firm for any purpose be fully disclosed." Attached to the objection were two exhibits: (1) a 2015 email from appellee's firm to appellant requesting money to fund expenses for their expert witness, West; and (2) a March 2012 expert witness designation filed for appellant by appellee in the Underlying Litigation designating West as an expert witness.
West rendered an order denying appellant's motion to recuse. West then set an arbitration hearing for November 12, 2019. In the afternoon on the day prior to the hearing, West emailed the parties an affidavit "[i]n response to questions regarding conflicts of interest." Therein West disclosed that he had been paid $5, 000.00 by appellant for West's services as an expert witness in the underlying litigation and that appellant still owed $4, 830.50 to West for such services. West attested that he had also served as an expert witness on a legal malpractice case with appellee in 2005. West concluded that "as I review these last fourteen years, I had about the same amount of contact with [appellant] as I had with [appellee], and I have no predetermined notions about either one of them."
At the hearing, West and the parties discussed West's disclosures. Appellant argued that he believed the financial dealings to be an issue that could affect West's impartiality: "in this particular case, we do have a situation where the financial expenses - the list of expenses as between [appellee] and [appellant] are an issue and [West's] actual expenses are part of that calculation." West indicated that the financial dealings "should be no concern . . . it may be amusing but it's not a concern" and "that's a non-issue because I don't - - it's not an issue with me." Appellant requested confirmation that West had sworn that his disclosure affidavit contained all of West's involvement with appellee over the prior fourteen years. When West confirmed that it was, appellant confronted West with a filing wherein West represented appellee as his attorney in a lawsuit (Undisclosed Lawsuit). West indicated that his son was counsel for appellee in the Undisclosed Lawsuit, but appellant pointed out that the signature line on the filings included West's name and bar number. West admitted that his name was included on the filing and that it was his law firm but indicated that his son was the one in charge of the case. West then remembered the case, stating, West remembered that he would help his son and remembered the general subject matter that was litigated. West could not remember if appellee had paid his firm or if the firm was paid by the opposing party as part of the judgment. West stated that appellee West also stated that he never appeared and never interviewed anybody in the Undisclosed Lawsuit. Appellant then...
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