U.S. Supreme Court Asked to Review Texas Supreme Court Decision Overturning $26 Million Arbitral Award

The United States Supreme Court has been asked to review a Supreme Court of Texas decision overturning a $26 million arbitration award.  In Robert L. Myer, et al. v. Americo Life, Inc., et al., No. 14-774, a divided Texas court overturned a unanimous arbitration award after the American Arbitration Association (“AAA”) disqualified one party’s selected arbitrator due to partiality.  Disputing highlighted the Texas high court’s 5-4 decision in a previous blog post:

In Americo Life Inc. et al. v. Robert L. Myer and Strider Marketing Group Inc., No. 12-0739, (Tex. 2014), Americo Life purchased a number of companies from Myer and Strider Marketing Group in 1998.  As part of the sale, the parties executed an agreement that contained an arbitration clause.  The arbitration clause signed by the parties stated any future disputes would be heard by a three-member panel of “knowledgeable, independent” arbitrators and specified that any arbitral proceedings would be governed by the rules of the AAA.  At the time the agreement was executed, AAA rules did not require arbitrator impartiality.  When the clause was invoked by Americo in 2005, however, the rules required such neutrality.  During arbitral proceedings, Myer successfully asked the AAA to disqualify two partial arbitrators selected by Americo.

Following arbitration, a panel of three arbitrators unanimously returned an award for more than $26 million in favor of Myer.  When Myer sought to confirm the award before a trial court, however, Americo claimed the panel’s decision should be vacated based upon the AAA’s disqualification of the company’s preferred arbitrator.  The trial court agreed with Americo and held the disqualification violated the parties’ agreement.  Due to this violation, the court vacated the arbitral award.  Myer appealed the trial court’s decision and the Dallas Court of Appeals reversed.  In 2011, the Texas Supreme Court reversed the appellate court’s holding and remanded the case.  After Texas’ Fifth District again reversed the trial court’s vacatur, the Supreme Court of Texas agreed to review the case.

According to the Texas Supreme Court, the AAA lacked the authority to disqualify the parties’ proposed arbitrators due to alleged bias.  As a result, the court found that the arbitral panel which issued the award was created in a manner that was contrary to the express terms of the parties’ agreement.  Although four justices dissented, the Supreme Court of Texas ultimately reversed the Fifth District’s decision and vacated the arbitration award.

In their petition for certiorari, Myer and Strider Marketing Group asked the U.S. Supreme Court to determine:

Whether a court reviewing an arbitral award under the FAA should deferentially review the arbitral body’s interpretation and application of the parties’ agreement regarding the selection and qualification of an arbitration panel, or should instead decide such matters de novo.

According to the petitioners, the Texas high court was not appropriately deferential to the AAA.

Please stay tuned to Disputing for future developments in this case!

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