Beaumont COA Reverses Order Vacating Arbitration Award in Construction Dispute

The Ninth District Court of Appeals in Beaumont has reversed a trial court’s order vacating an arbitration award due to evident partiality.  In Sebastian v. Wilkerson, No. 09-18-00223-CV (Tex. App – Beaumont, February 7, 2019), a Texas couple, the Sebastians, signed a residential construction contract with Bliss Builders to erect certain improvements on the Sebastians’ land.  An officer for Bliss Builders, Wilkerson, countersigned the contract on behalf of the company.  The residential construction contract contained an arbitration provision.

Later, the Sebastians filed a lawsuit against Bliss Builders and Wilkerson in Montgomery County, Texas over several purported defects apparent in the residential construction project.  Both Wilkerson and Bliss Builders responded to the lawsuit by filing a motion to compel arbitration.  In addition, Bliss Builders filed a breach of contract counterclaim against the couple.

Following arbitration proceedings, an arbitrator, Stovall, issued an award in favor of the Sebastians and the couple filed a motion to confirm the award.  Wilkerson moved to vacate the award based on the arbitrator’s alleged evident partiality.  According to Wilkerson, the arbitrator failed to disclose she provided a judicial campaign contribution to the named attorney at the law firm representing the Sebastians, Kristin Bays.  In addition, Wilkerson complained of partiality because the arbitrator was friends with Bays on Facebook and both women were members of the “Montgomery County Republican Women” political group.  Finally, Wilkerson asserted the arbitrator demonstrated partiality based on a 15-year-old purchase she made from the couple’s business and a previously disclosed banking relationship.

The Sebastians responded by “arguing that the trial court should confirm the arbitration award because Wilkerson failed to prove a statutory ground to vacate the arbitration award as required by section 171.088 of the Texas Civil Practice and Remedies Code.”  The couple also asserted the arbitrator verbally disclosed that she conducted mediations involving Bays to Wilkerson’s former counsel prior to arbitration.  Finally, the couple stated the arbitrator made an equal campaign contribution to Bays’ judicial opponent.

Following a hearing on the matter, the trial court ultimately vacated the arbitrator’s award.  The Sebastians then filed an appeal with Texas’ Ninth District Court of Appeals.

On appeal, the Beaumont court said:

A campaign contribution, in and of itself, without an indication of communication about, or coordination of, the handling of a case, does not create bias or the appearance of impropriety. AVPM Corp. v. Childers, ___ S.W.3d ___, 2018 WL 4870931, at *2 (Tex. App.-Dallas 2018, pet. filed); Aguilar v. Anderson, 855 S.W.2d 799, 802 (Tex. App.-El Paso 1993, writ denied). A reasonable member of the public understands that trial judges commonly rely on members of the bar for campaign assistance and would not conclude that the relationship between Stovall and Kristin would translate into bias in favor of Kristin or other attorneys at her law firm. See Hansen v. JP Morgan Chase Bank, N.A., 346 S.W.3d 769, 779-80 (Tex. App.-Dallas 2011, no pet.). Additionally, a Facebook friendship does not show the degree or intensity of a judge’s relationship with a person, and thus, standing alone, provides no insight into the nature of a relationship. Youkers v. State, 400 S.W.3d 200, 206 (Tex. App.-Dallas 2013, pet. ref’d).

Based on our examination of the entire record, Wilkerson has failed to show that Stovall and Kristin have a significant social relationship or any other fact that might cause a person to reasonably doubt Stovall’s ability to be impartial, nor does the record show a pecuniary interest, direct or indirect, flowing from Kristin to Stovall. See Karsleng v. Cooke, 346 S.W.3d 85, 96 (Tex. App.-Dallas 2011, no pet.); Int’l Bank of Commerce-Brownsville, 981 S.W.2d at 46. The record also fails to show that there is any personal, social, business, or political interest that will be affected by the outcome of the arbitration. See Int’l Bank of Commerce-Brownsville, 981 S.W.2d at 46. We conclude that the facts demonstrating the relationship between Kristin and Stovall would not, to an objective observer, create a reasonable impression of Stovall’s partiality if not disclosed by Stovall. See TUCO, 960 S.W.2d at 636. We further conclude that the record does not show that the relationship between Stovall and Kristin was substantial enough to require disclosure. See Forest Oil Corp., 518 S.W.3d at 431; TUCO, 960 S.W.2d at 637.

After that, the appellate court dismissed Wilkerson’s two final complaints:

Wilkerson also complains that Stovall’s failure to disclose her relationship with the Sebastians is evidence of Stovall’s evident partiality. The record shows that Stovall first met the Sebastians during arbitration, and Stovall’s only connection to the Sebastians concerned a purchase from their business fifteen years before the arbitration occurred. We conclude that Stovall was not required to disclose her prior relationship with the Sebastians because it was a trivial and insubstantial matter. See Forest Oil Corp., 518 S.W.3d at 431; TUCO, 960 S.W.2d at 637. Additionally, the nondisclosure would not, to an objective observer, create a reasonable impression of Stovall’s partiality, because it is based on a remote relationship that has no effect on Stovall’s interest in the outcome of the arbitration. See TUCO, 960 S.W.2d at 635-36.

Wilkerson further argues that Stovall failed to disclose her relationship with First Bank of Conroe and her prior business dealings with Dan Dominy; however, the record shows that Wilkerson informed the trial court that Stovall disclosed these relationships during arbitration, and Wilkerson’s counsel did not object. Because Stovall disclosed these relationships during the arbitration and Wilkerson failed to complain, Wilkerson has waived his complaint for appeal. See Kendall Builders, Inc. v. Chesson, 149 S.W.3d 796, 804-06 (Tex. App.-Austin 2004, pet. denied); Quinn v. Nafta Traders, Inc., 360 S.W.3d 713, 719 (Tex. App.-Dallas 2012, pet. denied).

Because Wilkerson “failed to satisfy his burden of showing that Stovall’s nondisclosures would create a reasonable impression of partiality to an objective observer,” the Ninth District Court of Appeals in Beaumont reversed the trial court’s order vacating the arbitration award and remanded the case with instructions to confirm the award.

Photo by: Kai Pilger on Unsplash