Beaumont COA Upholds $460K Legal Malpractice Arbitration Award

The Ninth District Court of Appeals at Beaumont has upheld an arbitrator’s nearly $460,000 legal malpractice award despite claims the arbitrator exceeded his authority by failing to follow Texas law.  In Midani and Midani, Hinkle & Cole, LLP v. Smith, No. 09-18-00009-CV (Tex. App. – Beaumont, November 1, 2018), a woman, Smith, hired a Houston law firm, Midani, Hinkle & Cole (“MHC”), to represent her in a dental malpractice case.  Smith signed a representation agreement that included a binding arbitration provision requiring any disputes between Smith and the firm to be settled via arbitration and according to Texas law.  The contract also authorized MHC to withdraw from representation at any point and to secure outside counsel to provide assistance with Smith’s case where necessary.

While Smith’s dental malpractice case was pending, one of the two attorneys handling her case, Hutchins, left MHC.  The second attorney, Midani, remained at the firm and MHC never formally withdrew from representing Smith.  Later, Smith’s dental malpractice case was dismissed over Hutchins’ failure to appear in court.  Smith then retained new legal representation and filed a legal malpractice claim against Midani and MHC in Jefferson County, Texas.  The defendants responded to Smith’s lawsuit by filing a motion to compel arbitration.  The trial court ordered the dispute to arbitration and an arbitrator issued an award of almost $460,000 in favor of Smith.

The arbitrator found that after Hutchins left the employment of MHC, Hutchins continued to act as MHC’s agent and associate counsel to carry out and perform MHC’s and Midani’s duties to Smith. The arbitrator found that MHC and Midani are directly and vicariously liable for Hutchins’s negligence. On Smith’s negligence claim against Hutchins, Midani, and MHC, the arbitrator awarded Smith $250,000 in noneconomic damages, $100,000 in economic actual damages for loss of household services, and $8,899.86 in economic actual damages for past and future medical costs. The arbitrator also awarded Smith $100,000 in exemplary damages for gross negligence against Hutchins, but did not find that MHC is vicariously liable for Hutchins’s gross negligence. The arbitrator determined that Midani is 75% responsible for Smith’s harm and damages, MHC is 5% responsible, and Hutchins is 20% responsible. The arbitration award states that “[t]his is a final award disposing of all claims by all parties. All relief sought by any party that is not granted herein is denied.”

Next, Smith sought to confirm the arbitration award.  In response, Midani and MHC filed a motion to vacate or modify the arbitrator’s decision.  According to the attorneys, “the arbitrator exceeded the scope of his power by failing to follow Texas law.”  In addition:

Counsel for Midani and MHC argued that the arbitrator should not have held Midani and MHC vicariously liable for the act of Hutchins, and further argued that because the arbitrator held MHC liable for the acts of Hutchins, the arbitrator should not have apportioned responsibility. According to Midani’s and MHC’s counsel, the arbitrator’s allocation of the percentages of responsibility is inconsistent with the arbitrator’s finding on gross negligence.

The trial court was ultimately unpersuaded by Midani and MHC’s arguments and confirmed the arbitral award.

Midani and MHC then “filed a motion to either reform the judgment or grant a new trial.” Smith responded by stating the trial court may “not review the arbitrator’s award because the arbitration provision is final and binding and does not allow for expanded judicial review.”  The trial court denied the defendants’ motion and Midani and MHC filed a notice of appeal.

Subsequently, Smith “filed a motion for contempt and sanctions” against Midani despite the notice of appeal because he failed to respond to post-judgment discovery or purchase a supersedeas bond.   Although Midani secured a supersedeas bond soon after Smith’s request was filed, the trial court nevertheless held the man in contempt and ordered Midani to pay Smith’s legal costs related to the contempt motion.  Despite this, the lower court denied Smith’s sanctions request.

On appeal, the Beaumont court first dismissed Midani and MHC’s argument that the arbitration award should have been vacated since “the arbitrator incorrectly decided the case because he failed to properly apply the law.”  The court stated:

Because appellants’ contentions that the arbitrator decided the case incorrectly and failed to follow Texas law are not grounds to vacate the award, we conclude that the trial court did not err by failing to vacate the arbitrator’s award or by denying Midani’s and MHC’s motion to modify the arbitrator’s award or the trial court’s final judgment based on these grounds.

The appellate court next overruled Midani and MHC’s claim the arbitrator exceeded his powers after determining all matters decided during the arbitral proceedings fell within the scope of the arbitration provision.

After that, the Beaumont court considered Midani and MHC’s assertion “that the trial court denied Midani due process by entering judgment on the arbitrator’s award despite the errors and the arbitrator exceeding his powers.”  Because “the trial court did not err in confirming the arbitration award,” the Court of Appeals concluded “the appellants’ due process argument is without merit.”

Finally, the appellate court turned to the issue of whether “the trial court erred by holding Midani in contempt for failing to answer post-judgment discovery after Midani had filed a supersedeas bond.”  The court stated “post-judgment discovery is precluded if the judgment has been suspended by a supersedeas bond” even if that bond is filed after enforcement has begun under the Texas Rules of Appellate Procedure.  Since “all efforts at execution on the judgment must cease when the judgment is superseded,” the Beaumont court vacated the trial court’s order holding Midani in contempt and ordering him to pay Smith’s legal fees.

In the end, the Ninth District Court of Appeals at Beaumont affirmed the trial court’s order with regard to the $460,000 arbitration award and vacated the lower court’s order related to contempt and legal fees.

Photo by: Melinda Gimpel on Unsplash