Houston COA Confirms Arbitration Award in Construction Dispute

In Mega Builders, Inc. v. Paramount Stores, Inc., No. 14-14-00744-CV (Tex. App. – Houston [14th], May 28, 2015), a general contractor, Mega Builders, agreed to build a convenience store for a property owner, Paramount. Near the end of the project, Mega Builders sought payment for the final portions of the construction contract as well as several change orders. Paramount apparently disputed some of the charges submitted by Mega Builders and refused further payment.

Next, Mega Builders sued both Paramount and its construction lender for damages in Harris County. Additionally, Mega Builders sought a mechanic’s lien under Chapter 53 of the Texas Property Code. In response to the lawsuit, Paramount filed a breach of contract counterclaim. In the property owner’s counterclaim, Paramount argued it incurred added costs when it secured the services of another builder to finish the convenience store and repair defective work that was performed by Mega Builders.

Instead of litigating their claims, the two companies engaged in arbitration before an American Arbitration Association (“AAA”) neutral. Following a hearing, the arbitrator ordered Paramount to pay Mega Builders about $15,000 in damages and pre-judgment interest and provided the contractor with a mechanic’s lien. Despite this, the arbitrator did not award either party reimbursement for legal fees. Next, Mega Builder asked the trial court to modify the allegedly erroneous arbitral award under Section 171.091 of the Texas General Arbitration Act (“TGAA”). After denying the contractor’s motion, the Harris County court confirmed the arbitrator’s decision. Mega Builders then filed an appeal with Texas’ 14^th District Court of Appeals in Houston.

On appeal, the Houston court first stated “Texas law favors arbitration of disputes.” After that, the court said a Texas court is required to confirm an arbitral award unless there are valid grounds for modifying, vacating, or correcting it under the TGAA. In addition, the court stated a mistake of fact is not sufficient cause to alter an arbitration award. Without a sufficient record to demonstrate arbitrator error, the Court of Appeals said it was required to presume “adequate evidence was presented to support the arbitrator’s award.”

According to the contractor, the arbitrator’s award should have been modified for a variety of reasons. In its first claim, Mega Builders alleged the neutral made an “evident mistake” under Section 171.091 when she calculated the contractor’s award. The appellate court stated an evident mistake “must be clear, concise, and conclusive from the record.” The Houston court continued:

In this case, the face of the amended arbitration award does not reflect an obvious mathematical miscalculation that is “clear, concise and conclusive from the record.” Vernon E. Faulconer, Inc., 970 S.W.2d at 40; Riha, 843 S.W.2d at 293. And because we have no record of the arbitration proceedings, we cannot determine whether the two entries constitute a double counting, as Mega Builders alleges, or whether the two entries were intentionally included in the calculation of the award based on the evidence submitted to the arbitrator, as Paramount argues. Absent a record, we must presume that the record supports the arbitrator’s determination of the proper amount of the award. See Anzilotti, 899 S.W.2d at 267; Kline, 874 S.W.2d at 783; see also Long Lake, Ltd. v. Heinsohn, No. 14-09-00613-CV, 2010 WL 1379979, at *2 (Tex. App.-Houston [14th Dist.] Apr. 8, 2010, no pet.) (mem. op.) (holding that contractor’s claims that arbitrator relabeled damages as other types of awards could not be evaluated in absence of a complete record of the arbitration). We overrule Mega Builders’s first issue.

Next, Mega Builders claimed the arbitrator exceeded her authority by applying a pre-judgment interest rate that was different than the rate included in the parties’ agreement and Section 171.091. According to the appellate court:

Although Mega Builders argues that the arbitrator exceeded her authority by disregarding the contract, Mega Builders’s argument acknowledges that the arbitrator was empowered to award pre-judgment interest. The amended arbitration award reflects that the arbitrator reviewed the contract to determine whether it expressed an applicable rate and determined that it did not. Whether the arbitrator misinterpreted the contract or misapplied the law does not mean that she exceeded her authority. See Bernhard, 423 S.W.3d at 534; Anzilotti, 899 S.W.2d at 266. Moreover, because the appellate record does not include either a copy of the arbitration agreement or a record of the arbitration, Mega Builders cannot show that the arbitrator exceeded her authority. See Carreon, 295 S.W.3d at 44. We overrule Mega Builders’s second issue.

Finally, the contractor argued the arbitrator exceeded her authority by refusing to award legal fees to the company. Mega Builders claimed such an award was not only authorized but also required by Texas law. After examining the record, the court held:

On this record, we conclude that Mega Builders has failed to demonstrate that the arbitrator exceeded her authority by failing to award $60,000.00 in attorney’s fees to Mega Builders. See Cooper v. Bushong, 10 S.W.3d 20, 26 (Tex. App.-Austin 1999, pet. denied) (when issue of attorney’s fees was submitted to arbitrator, trial court was not permitted to second-guess arbitrator’s decision to award no attorney’s fees); Babcock & Wilcox Co. v. PMAC, Ltd., 863 S.W.2d 225, 235-36 (Tex. App.-Houston [14th Dist.] 1993, writ denied) (trial court correctly denied request for attorney’s fees related to confirmation of arbitration award under the FAA because the issue of attorney’s fees had already been submitted to and decided by the arbitrator). We overrule Mega Builders’s third issue.

Ultimately, Houston’s 14^th District Court of Appeals affirmed the trial court’s order confirming the arbitrator’s award.

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