Houston’s First COA Upholds Arbitral Award Where Parties Signed Competing Agreements

Houston’s First District Court of Appeals has upheld an arbitrator’s award in a dispute that arose between an employer and a worker who was hurt on-the-job.  In Forged Components, Inc. v. Guzman, No. 01–11–00563–CV, (Tex. App. Dist. 1 – June 25, 2013), Ricky Guzman was pinned by a forklift while working at Forged Components, Inc. (“FCI”).  As a result, Guzman was hospitalized for nearly one month.  At the time of Guzman’s injury, the company was not a subscriber under the Texas Workers’ Compensation Statute.

Prior to his employment at FCI, Guzman signed the company’s Occupational Disease and Injury Employee Welfare Benefit Plan (“Plan”).  A section in the Plans included an agreement to arbitrate any disputes that arose following an accident at work or regarding Plan benefits.   Following his accident, Guzman sued FCI for negligence.  More than one year later, FCI filed a motion to compel arbitration.  A trial court denied FCI’s motion and FCI’s attorney proposed a Rule 11 agreement to arbitrate that stated:

This will serve as the agreement between Plaintiff and Defendant pursuant to TRCP 11 to abate the above-referenced matter and submit this dispute to binding arbitration before Judge Katie Kennedy of Judicial Workplace Arbitrations. If this correctly sets out our agreement, please sign where provided below and return your signature to me.

Counsel for Guzman signed the agreement, but added a note that said the parties’ Rule 11 agreement was not meant to bind Guzman to the arbitral provisions included in the Plan.  FCI then filed the agreement with the court.  Following an unsuccessful mediation, Guzman’s attorney attempted to begin Rule 11 arbitral proceedings.  FCI responded by filing a “Notice of Revocation of Consent to Proposed Rule 11 Agreement.”  According to FCI, the agreement was invalid because it was only a counter-offer after Guzman’s attorney materially altered its terms.  Despite that FCI opposed Guzman’s motion to compel arbitration under the Rule 11 agreement, the trial court ordered the parties to arbitrate Guzman’s claim.  Following arbitration, Guzman was awarded more than $1.3 million.  The trial court confirmed the arbitral award, but added post-judgment interest and taxable costs.  FCI then appealed the case to Houston’s First District Court of Appeals.

After holding that both arbitration agreements were governed by the Federal Arbitration Act because FCI is regularly engaged in activities related to interstate commerce, the appeals court found that the Rule 11 agreement to arbitrate was valid as a result of FCI’s own actions.  Next, the court dismissed FCI’s argument that Guzman waived his right to arbitrate by engaging in judicial proceedings.  The court stated “Guzman did not substantially invoke the judicial process to FCI’s detriment before seeking to enforce the Rule 11 arbitration agreement.”

The appellate court also dismissed FCI’s argument that the arbitration award should be vacated due to a gross mistake on the part of the arbitrator.  According to the court,

There is no suggestion in the record that the arbitrator refused to hear any evidence or otherwise engaged in misconduct warranting vacatur under 9 U.S.C.S § 10(a)(3). Indeed, as Guzman argues, the record demonstrates that the arbitrator heard both parties’ evidence on the intoxication issue, including Guzman’s expert’s testimony that the urinalysis results demonstrated that Guzman was not intoxicated at the time, and made the factual determination that Guzman rebutted the presumption that he was intoxicated. Indeed, the arbitrator’s award expressly states she concluded that Guzman’s evidence rebutted the presumption. See Tex. Mut. Ins. Co. v. Havard, No. 01–07–00268–CV, 2008 WL 598347, at *4 (Tex.App.-Houston [1st Dist.] Mar. 6, 2008, no pet.) (mem.op.) (finding that truck driver rebutted presumption of intoxication created by positive urine test, in part, by presenting expert testimony that test did not prove driver was suffering from effects of cocaine at time of accident). FCI’s complaint, at bottom, is that this issue, on which there was conflicting evidence, was resolved adversely to him. But the claim that the arbitrator “ignore[d] ? the rebuttable presumption of intoxication” finds no support in the record.

Finally, Houston’s First District held that the trial court committed error when it awarded post-judgment interest to Guzman.

A trial court has limited powers to modify an arbitrator’s award. See 9 U.S.C. § 11. This Court has held that neither the FAA nor the Texas Finance Code authorizes an award of pre- or post-judgment interest when the arbitrator made no such award. See Fogal v. Stature Const., Inc., 294 S.W.3d 708, 722 (Tex.App.Houston [1st Dist.] 2009, pet. denied) (prevailing party in arbitration is not entitled to pre- or post-judgment interest under FAA or pre-judgment interest under Texas Finance Code; trial court did not err by failing to modify arbitrator’s award to add pre-judgment interest); Thomas Petroleum, Inc. v. Morris, 355 S.W.3d 94, 98–99 (Tex. App .-Houston [1st Dist.] 2011, pet. denied) (trial court lacked authority to modify award by adding pre-or post-judgment interest).

Guzman acknowledges these authorities but urges us to reconsider them. We decline to do so, and we conclude that the trial court lacked authority to award post-judgment interest and correctly declined to award pre-judgment interest.

Because the Rule 11 agreement constituted an enforceable arbitration provision, Guzman did not waive his right to arbitrate, and there was nothing in the record to suggest the arbitrator committed error, Houston’s First District Court of Appeals affirmed the trial court’s order confirming the arbitrator’s award.  The court also modified the award to exclude post-judgment interest.