Supreme Court of Guam Upholds Harris County, Texas Court’s Order Confirming Arbitration Award

In a case of first impression, the Supreme Court of Guam has upheld a Texas court’s confirmation of an arbitration award that was issued against a Guam-based business.  In the case, Dresser-Rand Company filed a breach of contract lawsuit against Guam Shipyard in Harris County, Texas after the Guam-based company failed to pay nearly $500,000 in ship repair fees.  In response, Guam Shipyard argued the Texas court lacked personal jurisdiction over the company.  The Harris County Court disagreed and Guam Shipyard filed an interlocutory appeal.

While the interlocutory appeal was being considered, Dresser-Rand filed a motion to compel arbitration based on the arbitral provision that was included in the parties’ contract.  The district court granted the company’s motion, but did not issue a stay in the case.  The appellate court then ordered a stay of the arbitration proceedings pending the outcome of Guam Shipyard’s interlocutory appeal.

The Court of Appeals ultimately held the trial court committed error when it denied Guam Shipyard’s Amended Special Appearance, but ruled the Harris County court “retained jurisdiction to refer the case to arbitration,” because the “proceedings were not stayed at the time arbitration was ordered and initiated, and the merits of the arbitration order” were not “appealed by Shipyard.”  The lawsuit was then remanded for arbitral proceedings.

During arbitration, Guam Shipyard claimed, among other defenses, the arbitration clause included in the parties’ contract was invalid.  Despite this, the arbitral panel issued an award in favor of Dresser-Rand.  After that, Dresser-Rand filed an apparently unchallenged motion to confirm the arbitration award and the Harris County court issued a judgment confirming the award.  Dresser-Rand then filed the judgment with the Superior Court of Guam and Guam Shipyard responded by filing a motion to vacate the domesticated judgment.  The Superior Court denied Guam Shipyard’s motion and the company filed an appeal with the Supreme Court of Guam.

On appeal, the court first addressed the appropriate standard of review in the case:

The parties disagree on what standard of review applies. Compare Appellant’s Br. at 8 (arguing de novo review applies), with Appellee’s Br. at 2-3 (Aug. 23, 2018) (arguing for clear error). To the extent we are reviewing the legal question of whether the courts of Texas had personal jurisdiction over Shipyard and whether the Texas judgment should, therefore, be given effect in Guam, our review is de novo. See Larsen v. Hyatt Int’l Corp., 2011 Guam 26 ¶ 8 (stating that questions of personal jurisdiction are reviewed de novo); Coffey v. Gov’t of Guam, 1997 Guam 14 ¶ 6 (“The question as to whether a constitutional right has been violated is reviewed de novo.”). If the Uniform Enforcement of Foreign Judgments Act of 2014 (“UEFJA”) applies, see 7 GCA § 51101 (2005) et seq., we review the “interpretation of relevant statutory authority as well as resolution of [any] mixed question[s] of law and fact” de novo. Hawaiian Rock Prods. Corp. v. Ocean Hous., Inc., 2016 Guam 4 ¶ 13; see also Hare v. Starr Commonwealth Corp., 813 N.W.2d 752, 757 (Mich. Ct. App. 2011) (“We also review de novo questions concerning the applicability of the UEFJA and the Full Faith and Credit Clause of the United States Constitution.”).

Next, the Guam Supreme Court stated: “As the party seeking to prevent enforcement of a foreign judgment, Shipyard carries the burden of disproving the presumption that the Texas judgment is entitled to full faith and credit.”  The court then said:

Separately, Dresser-Rand frames the arbitration as if it proceeded on a contractual basis and not according to court order. See Appellee’s Br. at 19-22. We need not reach this issue if we find, as a threshold matter, that the Harris County District Court did not improperly exercise personal jurisdiction over Shipyard as it related to ordering arbitration and confirming the award—so it is to that inquiry that we turn.

Based on the Full Faith and Credit Clause of the United States Constitution, the Supreme Court of Guam found that Guam Shipyard “was afforded constitutional due process during the Texas proceedings.”  The court pointed out that Guam Shipyard raised the issue of personal jurisdiction before the Texas court, but later “’failed through its negligence or deliberate omission’ to appeal the final judgment confirming the arbitration award, even though it ‘was not prevented from doing so.’” The court added:

Moreover, the rules of Texas governing arbitration expressly specify circumstances under which an award may be vacated—including because “there was no agreement to arbitrate”—yet Shipyard failed to timely challenge the arbitration award on this basis, and it provides no explanation why it elected not to. See Tex. Civ. Prac. & Rem. Code Ann. § 171.088(a)(4) (West 1997) (application to vacate award on such basis may be made within 90 days after copy of award delivered to party); id. § 171.098 (party may appeal confirmation of award in same manner as an appeal from an order or judgment in a civil action).

We are not persuaded that Shipyard was not given an opportunity to fully and fairly litigate the issue it now challenges. We are also inclined to follow the reasoning of other courts that have addressed similar questions. See Ins. Corp. of Ir. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 704-05 (1982) (“[T]he requirement of personal jurisdiction may be intentionally waived, or for various reasons a defendant may be estopped from raising the issue.”); Stoll, 305 U.S. at 172 (“After a party has his day in court, with opportunity to present his evidence and his view of the law, a collateral attack upon the decision as to jurisdiction there rendered merely retries the issue previously determined.”); United States v. Van Cauwenberghe, 934 F.2d 1048, 1058 (9th Cir. 1991) (“Because no appeal of the jurisdictional issue was taken from the final judgment . . . despite [defendant’s] earlier challenge based on lack of personal jurisdiction, [defendant] cannot now collaterally attack the judgment on this jurisdictional ground.”); Midessa Television Co., 290 F.2d at 204-05; Hirsch Fabrics Corp. v. S. Athletic Co., 98 F. Supp. 436, 438-39 (E.D. Tenn. 1951) (finding foreign judgment valid where defendant in Tennessee action failed to contest, during New York proceedings, judgment by New York court confirming the arbitration award even though it had the opportunity). Shipyard has failed to meet its heavy burden of showing that the Texas judgment should not be given effect in Guam. We need not reach other arguments raised by Dresser-Rand challenging Shipyard’s appeal.

Finally, the Supreme Court of Guam affirmed the Superior Court’s order denying Guam Shipyard’s motion to vacate a domesticated judgment.

Photo by: Cameron Venti on Unsplash