Southwinds Express Constr., LLC v. D.H. Griffin of Tex., Inc.

• Decision Date: 15 November 2016
• Docket Number: NO. 14–15–00610–CV,14–15–00610–CV
• Parties: SOUTHWINDS EXPRESS CONSTRUCTION, LLC, Appellant v. D.H. GRIFFIN OF TEXAS, INC., Appellee
• Court: Texas Court of Appeals

513 S.W.3d 66

SOUTHWINDS EXPRESS CONSTRUCTION, LLC, Appellant

v.D.H. GRIFFIN OF TEXAS, INC., Appellee

NO. 14–15–00610–CV

Court of Appeals of Texas, Houston (14th Dist.).

Opinion filed November 15, 2016

Robert E. Lapin, Houston, TX, for Appellee.

Robert Joseph Killeen Jr., Houston, TX, for Appellant.

Panel consists of Chief Justice Frost and Justices Boyce and Wise.

OPINION

William J. Boyce, Justice

Southwinds Express Construction, LLC challenges the trial court's judgment confirming an arbitration award in favor of D.H. Griffin of Texas, Inc. Southwinds contends that the trial court erred in confirming the arbitrator's award because (1) the arbitration agreement between the parties did not cover the claims asserted by Griffin; (2) even if the arbitration agreement between the parties covered Griffin's claims, mediation was a condition precedent to arbitration and did not occur; and (3) the arbitrator's award was tainted by manifest disregard for the law and gross mistake in applying the law. We affirm.

BACKGROUND

The Lemoine Company contracted with Griffin in 2013 to serve as the demolition subcontractor on a construction, renovation, and demolition project for a hospital in Louisiana. Griffin, in turn, requested bids from Southwinds for the removal of construction and demolition debris from the project site.

Southwinds proposed that it would perform (1) "concrete excavation and haul off" for free; (2) brick haul-off for $40 per truckload; and (3) construction and demolition ("C&D") haul-off for $12 per cubic yard plus disposal fees. Griffin accepted Southwinds's proposal concerning concrete haul-off and brick haul-off, but declined the proposed terms for C&D haul-off.

Griffin and Southwinds entered into a Subcontractor Agreement reflecting their agreement on September 26, 2013. This agreement included a provision requiring arbitration of "a claim" made by either party.

The arbitration provision in paragraph 3 of the Subcontractor Agreement states as follows:

In the event that a claim is not resolved through the negotiations of the parties, claim resolution will be resolved through mediation unless, in the sole discretion of [Griffin], [Griffin] believes mediation would be a useless exercise in which case [Griffin], unilaterally, may escalate the claims process to binding arbitration at any time. If mediation fails, both parties agree that the claim will be resolved pursuant to binding arbitration. Any mediation or arbitration will be conducted under the rules of the American Arbitration Association's ("AAA") Construction Industry Dispute Resolution Procedures (including Mediation and Arbitration Rules) in effect at the time of the execution of this Agreement; provided, however, that where there is a conflict, if any, between those rules and this Agreement, this Agreement governs.

This written agreement included an attached "Exhibit A" that identified the scope of work under the agreement as follows:

Southwinds Express Construction LLC will remove and haul off concrete slabs, foundations and parking at the [hospital] site in Lafayette, Louisiana for No Charge . Southwinds Express Construction LLC will haul brick and concrete generated from the demolition operation for Forty Dollars ($40.00) per load.

Weeks later, Griffin and Southwinds orally agreed that Southwinds would perform C&D haul-off for $9 per cubic yard including disposal fees.¹

Southwinds performed C&D haul-off for Griffin until early 2014. Southwinds contends it ceased working because Griffin's payments were not timely.

Griffin contends that Southwinds stopped paying landfill disposal fees in November and December 2013, and that the landfill owner consequently barred Southwinds from use of the landfill. Griffin contends that with no landfill available for debris disposal, Southwinds abandoned work on the project and left Griffin with landfill fee arrearages totaling $67,000. Griffin contends that it was required to pay the landfill fees because the landfill operator threatened to place a lien on the project property if the fees were not paid. Griffin also contends that it had to hire third parties to complete the removal of construction and demolition debris.

Griffin filed a demand for arbitration in March 2014. Southwinds objected to the arbitrator's jurisdiction, contending that the arbitration provision in the written Subcontractor Agreement did not extend to any claims arising from the subsequent oral agreement to provide C&D haul-off services. The arbitrator overruled Southwinds's objection.

A two-day arbitration hearing was held in January 2015. The arbitrator issued an Award of Arbitration on March 12, 2015. In its award, the arbitrator found that the oral agreement was a modification of the Subcontractor Agreement; the oral agreement caused the C&D haul-off to be included within the scope of work of the Subcontractor Agreement; and any claim relating to the C&D haul-off therefore was a claim under the Subcontractor Agreement subject to the Subcontractor Agreement's arbitration provision.

Concluding she had jurisdiction to consider this dispute, the arbitrator determined that Southwinds breached its agreement with Griffin. The arbitrator awarded Griffin $42,251.20 in actual damages, $36,851.08 in attorney's fees, and $8,800 in arbitration fees and expenses; she also ordered Southwinds to release a lien it had filed against the project.

Griffin sought to have the arbitration award confirmed in district court in April 2015. After briefing and argument from the parties, the trial court signed a final judgment confirming the arbitration award on June 16, 2015. Southwinds appealed.

STANDARD OF REVIEW

We review a trial court's decision to confirm or vacate an arbitration award under a de novo standard of review. D.R. Horton–Tex., Ltd. v. Bernhard , 423 S.W.3d 532, 534 (Tex. App.–Houston [14th Dist.] 2014, pet. denied). "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) (quoting Statewide Remodeling, Inc. v. Williams , 244 S.W.3d 564, 568 (Tex. App.–Dallas 2008, no pet.) ). We give an arbitration award great deference and indulge every reasonable presumption in favor of the award and none against it. CVN Grp., Inc. v. Delgado , 95 S.W.3d 234, 238 (Tex. 2002) ; Amoco D.T. Co. , 343 S.W.3d at 841.

ANALYSIS

I. Arbitrability of the C&D Claims

Southwinds contended below that the C&D haul-off claims were not covered by a valid arbitration agreement because they were the subject of the parties' oral agreement—which, according to Southwinds, constituted a separate agreement distinct from the original Subcontractor Agreement containing the arbitration provision. Overruling Southwinds's objection, the arbitrator determined instead that (1) the oral agreement was a modification of the Subcontractor Agreement; and (2) the C&D haul-off claims therefore fell within the parties' arbitration agreement.

After the arbitrator ruled in Griffin's favor on the merits, Griffin filed an action in district court seeking confirmation of the arbitrator's award. Southwinds moved to vacate the award, contending the arbitrator exceeded her power by deciding matters outside the scope of her authority—namely, the C&D haul-off claims.

In its final judgment confirming the arbitrator's award, the trial court stated:

The Court is persuaded that the agreement between the parties contemplated additional potential work such as the C&D work. Thus, this work arose out of the agreement and, consequently, the arbitration agreement contemplated additional work. Further, the issue of whether there was, in fact, an enforceable oral agreement to do the C&D work was for the arbitrator to decide, not this Court. The Court will note, though, that the agreement between the parties does NOT state that no subsequent oral agreements could be formed; only that no oral representations prior to the written agreement existed or were relied upon.

On appeal, Southwinds contends the trial court erred in determining that C&D haul-off claims fell within the scope of the Subcontractor Agreement's arbitration provision. Griffin responds that the Subcontractor Agreement's arbitration provision governed at least a portion of the dispute between the parties; the arbitration provision referenced that any arbitration would be conducted pursuant to the American Arbitration Association ("AAA") rules, which state that determinations of arbitrability shall be made by the arbitrator; and the parties therefore clearly and unmistakably agreed to submit the determination of arbitrability of the C&D haul-off claims to the arbitrator rather than the trial court.

A. Who Determines Arbitrability?

Arbitration is a matter of contract. Howsam v. Dean Witter Reynolds, Inc. , 537 U.S. 79, 83, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002).² The question of arbitrability addresses which claims must be arbitrated. Leshin v. Oliva , No. 04–14–00657–CV, 2015 WL 4554333, at *5 (Tex. App.–San Antonio July 29, 2015, no pet.) (mem. op.); see also Saxa Inc. v. DFD Architecture Inc. , 312 S.W.3d 224, 229 (Tex. App.–Dallas 2010, pet. denied) (questions of arbitrability include "whether the parties agreed to arbitrate and whether a claim or dispute is encompassed in the agreement to arbitrate").

When there is an undisputed arbitration provision in an agreement between the parties, we ordinarily look to the arbitration provision's language to determine whether the parties "clearly and unmistakably" intended for the arbitrator to determine arbitrability or instead left that decision to the trial court. See Howsam , 537 U.S. at 83, 123 S.Ct. 588 ; First Options of Chicago, Inc. v. Kaplan , 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995).

This case presents a different circumstance in which a subsequent oral agreement governs some of the claims. Griffin contends the arbitration provision applies to all claims at issue because the oral...