SCOTX Declines to Hear Challenge to Arbitration Award

Last Friday, the Supreme Court of Texas denied an investment company’s petition for review of an arbitration award.  In Infinity Capital II LLC et al. v. Strasburger & Price LLP, No. 16-0947, the heirs of a member of a real estate investment company, Infinity Capital, sued the company for fraud and negligence.  After the heirs entered into a confidential settlement agreement that contained an arbitration clause with Infinity Capital, the heirs assigned all related rights to their law firm, Strasburger & Price.

The law firm later demanded arbitration over Infinity Capital’s purported fraudulent transfer of property that was held by the company and failure to comply with the settlement contract.  Strasburger & Price ultimately prevailed in arbitration and received a $1.7 million arbitration award which was then confirmed by a trial court.

In August, Infinity Capital filed an interlocutory appeal with the Court of Appeals of Texas, First District in Houston.  According to the company, the trial court committed error when it refused to vacate the arbitration award.  After reviewing the facts of the case, the appellate court affirmed the lower court’s order confirming the award in a memorandum opinion, No. 01-15-00691-CV.  Infinity Capital next sought review by the Supreme Court of Texas.

The issues presented to the high court included:

Issue No. 1:

Under Texas law, courts do not enforce contracts that are against public policy because these contracts injure the public good. Does Texas Civil Practices & Remedies Code Section 171.088 preclude vacating an arbitration award for public policy reasons?

Issue No. 2:

Under Texas law, issues of contract formation are decided by the court before sending a case to arbitration. Should a court vacate an arbitration award when the arbitrator, rather than the court, decided an issue of contract formation?

On March 31st, the Supreme Court of Texas denied Infinity Capital’s petition without comment.

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