Bob Chambers v. John M. O'Quinn John M. O'Quinn, P.C. And John O'Quinn D/B/A O'Quinn & Laminack

Opinion issued October 19, 2006 In The Court of Appeals For The First District of Texas NO. 01-05-00635-CV BOB CHAMBERS, et al., Appellants V. JOHN O’QUINN, JOHN M. O’QUINN, P.C., & JOHN M. O’QUINN D/B/A O’QUINN AND LAMINACK, Appellees On Appeal from the 61st District Court Harris County, Texas Trial Court No. 2005-17972 MEMORANDUM OPINION This suit was brought by appellants, Bob Chambers and 182 others, against appellees, John O’Quinn, John M. O’Quinn, P.C., and John M. O’Quinn d/b/a O’Quinn & Laminack, for legal malpractice. Appellants challenge the trial court’s judgment confirming an arbitration award for appellees. We determine whether the trial court erred in confirming the arbitration award for the reasons asserted by appellants, which were that (1) the arbitration clause in appellants’ contingent-fee agreements with appellees should not have been enforced, (2) the arbitrator stated that he would treat appellees’ motion for summary judgment under the principles of state summary-judgment law and appellees did not conclusively prove that they were entitled to summary judgment under that standard, and (3) the arbitrator made gross mistakes. We affirm the trial court’s confirmation of the arbitrator’s decision. Background Appellants filed a legal-malpractice suit against appellees on November 23, 1999. Appellees filed a motion to compel arbitration. On April 14, 2000, the trial court granted appellees’ motion to compel arbitration. On December 20, 2001, appellants filed a petition for writ of mandamus in this Court, complaining of the order compelling arbitration. We issued an opinion on January 7, 2002, denying appellants’ petition for writ of mandamus because it was unverified. See In re Chambers, No. 01-01-01216-CV, 2002 WL 24567 (Tex. App.—Houston [1st Dist.] Jan. 7, 2002, orig. proceeding) (not designated for publication). On January 10, 2002, appellants filed a petition for writ of mandamus in the Fourteenth Court of Appeals, asking that court to order the trial court to withdraw its order compelling arbitration. The Fourteenth Court of Appeals issued an opinion on February 7, 2002, denying appellants’ petition for writ of mandamus. On March 18, 2002, appellants filed another petition for writ of mandamus in the Texas Supreme Court, which petition was also denied. On January 15, 2004, the trial court signed an order decreeing that “unless a final arbitration hearing on [appellants’] claims has commenced before the American Arbitration Association on or before July 9, 2004, [appellants’] claims shall be DISMISSED FOR WANT OF PROSECUTION.” On July 21, 2004, the trial court signed an order dismissing appellants’ suit for want of prosecution because no final arbitration hearing had commenced by July 9, 2004. On August 5, 2004, appellants filed a motion for reinstatement or new trial. After a hearing on August 20, 2004, the trial court denied appellants’ motion for reinstatement or new trial. After the dismissal, the parties proceeded to arbitration. Appellees filed a motion for summary judgment in those proceedings. The arbitrator granted appellees’ summary-judgment motion and entered an award that appellants take nothing on their claims. Appellants filed a new lawsuit to vacate the arbitration award. The same trial court that had dismissed appellants’ suit for want of prosecution, the 61st District Court, held a hearing on appellants’ application for vacatur. The trial court entered a final judgment on June 10, 2005 denying appellants’ request to vacate the arbitration award and confirming the arbitration award. Appellants filed this appeal from the trial court’s June 10 final judgment.Standard of Review and the Law Our review of an arbitration decision is “extremely narrow” because Texas law favors arbitration. IPCO-G. & C. Joint Venture v. A.B. Chance Co., 65 S.W.3d 252, 256 (Tex. App.—Houston [1st Dist.] 2001, pet. denied). An arbitration award has the same effect as a judgment of a court of last resort, and a reviewing court may not substitute its judgment for that of the arbitrator merely because it would have reached a different result. J.J. Gregory Gourmet Servs., Inc. v. Antone’s Imp. Co., 927 S.W.2d 31, 33 (Tex. App.—Houston [1st Dist.] 1995, no writ). Because arbitration is favored as a means of dispute resolution, every reasonable presumption must be indulged to uphold the arbitrator’s decision, and none is indulged against it. CVN Group, Inc. v. Delgado, 95 S.W.3d 234, 238 (Tex. 2002). Review is so limited that a court may not vacate an arbitration award even if it is based upon a mistake of fact or law. Universal Computer Sys., Inc. v. Dealer Solutions, L.L.C., 183 S.W.3d 741, 752 (Tex. App.—Houston [1st Dist.] 2005, pet. denied). A trial court must confirm an arbitrator’s award unless, on application of a party, grounds are offered for vacating the award. Tex. Civ. Prac. & Rem. Code Ann. § 171.087 (Vernon 2005); see Delgado, 95 S.W.3d at 245. Under section 171.088 of the Civil Practice and Remedies Code, a court may vacate an arbitration award under only four circumstances: (1) the award was procured by fraud, corruption, or other undue means; (2) there was evident partiality, corruption, or willful misconduct by the arbitrator that prejudices the rights of a party; (3) the arbitrator exceeded its power, refused to postpone the hearing on good cause shown, or refused to hear evidence; or (4) “there was no agreement to arbitrate, the issue was not adversely determined in a proceeding under Subchapter B, and the party did not participate in the arbitration hearing without raising the objection.” Tex. Civ. Prac. & Rem. Code Ann. § 171.088(a) (Vernon 2005). Texas common law allows a reviewing court to set aside an arbitration award “only if the decision is tainted with fraud, misconduct, or gross mistake as would imply bad faith and failure to exercise honest judgment.” IPCO, 65 S.W.3d at 256 (quoting Teleometrics Int’l, Inc. v. Hall, 922 S.W.2d 189, 193 (Tex. App.—Houston [1st Dist.] 1995, writ denied)). “Gross mistake results in a decision that is arbitrary or capricious. An honest judgment made after due consideration given to conflicting claims, however erroneous, is not arbitrary or capricious.” Universal Computer Sys., Inc., 183 S.W.3d at 752. The party seeking to vacate an arbitration award has the burden of demonstrating how the arbitrators made a gross mistake. Id.; Anzilotti v. Gene D. Liggin, Inc., 899 S.W.2d 264, 267 (Tex. App.—Houston [14th Dist.] 1995, no writ). Confirmation of Arbitration Award In three points of error, appellants argue that the arbitration award should be vacated because (1) the arbitration clause in appellants’ contingent-fee agreement with appellees should not have been enforced, (2) the arbitrator stated that he would treat the appellees’ motion for summary judgment under the principles of state summary-judgment law and fact issues existed under that standard, and (3) the arbitrator made gross mistakes.A.Order Compelling Arbitration In their first point of error, appellants argue that the trial court erred because the arbitration clause in appellants’ contingent-fee agreement with appellees should not have been enforced. Under section 171.088 of the Civil Practice and Remedies Code, a court may vacate an arbitration award under only four circumstances: (1) the award was procured by fraud, corruption, or other undue means; (2) there was evident partiality, corruption, or willful misconduct by the arbitrator that prejudices the rights of a party; (3) the arbitrator exceeded its power, refused to postpone the hearing on good cause shown, or refused to hear evidence; or (4) “there was no agreement to arbitrate, the issue was not adversely determined in a proceeding under Subchapter B, and the party did not participate in the arbitration hearing without raising the objection.” Tex. Civ. Prac. & Rem. Code Ann. § 171.088(a). The trial court necessarily determined that an enforceable arbitration agreement existed when the trial court considered appellees’ motion to compel arbitration and enforced the arbitration agreement. See Mohamed v. Auto Nation USA Corp., 89 S.W.3d 830, 835 (Tex. App.—Houston [1st Dist.] 2002, no writ) (combined appeal and orig. proceeding) (holding that burden is on movant to show existence of arbitration agreement); see also Tex. Civ. Prac. & Rem. Code Ann. § 171.021(a). Appellants then had appellate review of that ruling by petitions for writ of mandamus filed in three separate courts—the sole method for review of orders compelling arbitration. See Bates v. MTH Homes-Texas, L.P., 177 S.W.3d 419, 422 (Tex. App.—Houston [1st Dist.] 2005, no pet.) (combined appeal and orig. proceeding); Mohamed, 89 S.W.3d at 834. We thus cannot consider a challenge to vacate the confirmation order on this ground. See Tex. Civ. Prac. & Rem. Code Ann. § 171.088(a) (stating that, upon application, court shall vacate arbitration award if (1) there was no agreement to arbitrate; (2) the issue was not adversely determined in a proceeding under Subchapter B, which governs motions and proceedings to compel or to stay arbitration; and (3) the party did not participate in the arbitration hearing without raising the objection). We overrule appellants’ first point of error. B. Arbitration Summary Judgment Appellants argue in their second point of error that the trial court erred because appellees were not entitled to summary judgment at arbitration. Specifically, appellants argue that the arbitrator stated that he would treat appellees’ motion for summary judgment under the principles of state summary-judgment law, but that appellees did not meet their burden under state summary-judgment law by conclusively proving that they were entitled to summary judgment. Appellants presented to the trial court existence -of a fact-issue and error-in-the application-of-the-law arguments. In their petition to vacate the arbitration award, appellants argued that “the Arbitrator’s Award must be set aside since the evidence raised fact issues and those fact issues should have been determined by a jury” and that “the Arbitration Award shows on its face that the Arbitrator was mistaken about his authority.” Appellants argue on appeal that “appellees simply did not offer enough evidence to conclusively establish their right to summary judgment” and that “[appellees’ arbitration summary-judgment evidence] at the very least raised fact issues in this case, precluding summary judgment.” Assuming without deciding that the arbitrator actually decided appellees’ motion for summary judgment under the principles of state summary-judgment law, a trial court cannot aside an arbitration award for a mere mistake of fact or law. See Anzilotti, 899 S.W.2d at 266. Indeed, the Texas Supreme Court has held that a court reviewing an arbitration award lacks jurisdiction to review complaints that do not assert statutory, common law, or public policy grounds to vacate or to modify the award. See CVN Group, Inc., 95 S.W.3d at 237–39; J.J. Gregory Gourmet Servs., 927 S.W.2d at 33, 35. The challenges that appellants assert under their second point of error are not the type of challenges over which the Texas Supreme Court allows review. Further, appellants’ contention that their arbitration summary-judgment evidence, which included affidavits of witnesses that allegedly raised fact issues, is not reviewable because the record on appeal does not reflect that this evidence was before the trial court. We may generally not evaluate a trial court’s rulings based on materials that were not before it at the time that it ruled. See Hamm v. Millennium Income Fund, L.L.C., 178 S.W.3d 256, 272 (Tex. App.—Houston [1st Dist.] 2005, pet. denied); see also Methodist Hosps. of Dallas v. Tall, 972 S.W.2d 894, 898 (Tex. App.—Corpus Christi 1998, no pet.) (“It is axiomatic that an appellate court reviews actions of a trial court based on the materials before the trial court at the time it acted.”). As the losing party seeking to vacate the arbitrators’ award, appellants had the burden in the trial court of bringing forth a complete record and of establishing any basis that would warrant vacating or modifying the arbitrator’s award. Atrium Westwood VIII Venture v. Barrick Westwood Ltd. P’ship, 693 S.W.2d 699, 700–701 (Tex. App.—Houston [14th Dist.] 1985, no writ). We overrule appellants’ second point of error. C. Gross Mistakes Appellants contend in their third point of error that the trial court erred because the arbitrator made “gross mistakes” by (1) failing to address appellants’ contention that appellees were guilty of breach of trust and malpractice by failing to advise their clients that the proposed underlying litigation was without merit and in filing a frivolous suit and (2) by finding that appellees’ handling of the underlying suit constituted collateral estoppel. First, appellants argue that the arbitrator failed to address their contention that “[appellees] were guilty of breach of trust and malpractice in failing to advise [appellants] that the proposed [underlying] litigation was without merit and in filing a frivolous case that ended up reducing [appellants’] property values and causing a great deal of mental anguish.” However, the record reflects that the arbitrator considered appellants’ malpractice and breach-of-fiduciary-duty claims, made detailed rulings, and evidenced an attempt to apply justly the applicable rules and law in a fair hearing. The final award stated, “An appellate panel of a Texas Court of Appeals, a federal district judge, and the Special Master appointed to oversee settlement are aligned on the law which governs [appellants’] underlying cause of action . . . . Therefore, [appellants’] malpractice claim based upon recommending settlement and not pursuing a retrial fails as a matter of law.” The final award further stated that “it appears to the arbitrator that all of [appellants’] causes of action against [appellees] are barred because of the fact-bound preclusive effect of the Special Master’s Report. . . . The arbitrator finds that all of the claims of [appellants], whether pleaded in malpractice, breach of fiduciary duty, or otherwise, have been determined adversely to [appellants] by virtue of the preclusive effect of the Special Master’s Report and [the federal district court’s] Order adopting the report.” The record thus shows that the arbitrator addressed appellants’ contention that “[appellees] were guilty of breach of trust and malpractice in failing to advise [appellants] that the proposed [underlying] litigation was without merit and in filing a frivolous case that ended up reducing [appellants’] property values and causing a great deal of mental anguish.” Next, appellants assert that “the Arbitrator’s holding that the Special Master’s gratuitous remarks about [appellees’] handling of the [underlying litigation] somehow translated into collateral estoppel is clearly a ‘gross mistake.’” The “gross mistake” of which appellants complain is not such a mistake “as would imply bad faith and failure to exercise honest judgment.” See IPCO, 65 S.W.3d at 256. Instead, appellants attack the arbitrator’s decisions regarding legal malpractice and breach of fiduciary duty by asserting that the arbitrator erred in applying the law of collateral estoppel. However, this alleged error in the application of substantive law by the arbitrator during the proceedings in arbitration is not reviewable by the court on a motion to vacate an award. See Universal Computer Sys., Inc., 183 S.W.3d at 752; see also Baker Hughes Oilfield Operations, Inc. v. Hennig Prod. Co., 164 S.W.3d 438, 443 (Tex. App.—Houston [14th Dist.] 2005, no pet.) (“Any error of law made by the arbitrators . . . cannot be reviewed by a court confirming the award.”); Monday v. Cox, 881 S.W.2d 381, 385 (Tex. App.—San Antonio 1994, writ denied) (“The courts are not permitted to second-guess the correctness of an arbitrator’s decision on the merits.”). Rather, our review is confined to whether the record indicates that the arbitrator acted in bad faith or failed to exercise honest judgment—not whether we agree or disagree with the arbitrator’s application of the law. Here, the arbitrator based its finding that appellants’ claims of legal malpractice and breach of fiduciary duty were barred because of “the fact-bound preclusive effect of the Special Master’s Report.” Mickey Mills was appointed Special Master for the mediation by the federal district court in the underlying litigation. Mills filed a report dated March 24, 2000, in which he stated that he had conducted an independent investigation of the facts related to the settlement. Mills made specific findings that the settlement was fair and reasonable, that appellees’ expenses were fair and reasonable, and that appellees’ representation of appellants in the representation of the case had been fair and reasonable and in the best interest of appellants. In regard to all of these matters, Mills determined that appellees’ representation was adequate. Appellants did not object to the findings made in the Special Master’s report; accordingly it was adopted by the federal district court in an order signed on April 7, 2000. See 9A Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 2615 (2ed. 1995) (stating that “[t]he findings of a master appointed under Rule 53, to the extent that they are adopted by the court in a nonjury case, are the findings of the district court.”); compare Robles v. Robles, 965 S.W.2d 605, 612 (Tex. App.—Houston [1st Dist.] 1998, pet. denied) (citing Novotny v. Novotny, 665 S.W.2d 171, 173 (Tex. App.—Houston [1st Dist.] 1983, writ dism’d) (concluding that “the Master’s report is conclusive on the issues considered by the Master in the absence of a proper objection.”). Appellants have not pointed to any evidence that the arbitrator acted with bad faith or failed to exercise honest judgment or that the award that he entered wass arbitrary or capricious. Therefore, appellants have not met their burden of demonstrating how the arbitrator acted in bad faith or exercised dishonest judgment. See Anzilotti, 899 S.W.2d at 267. We overrule appellants’ third point of error. Conclusion We affirm the judgment of the trial court confirming the arbitration award. Tim Taft Justice Panel consists of Justices Taft, Keyes, and Hanks. Appendix A 1. ALLEN, ANGELESTINE 2. ALLEN, ALTON 3. ALLEN, BERTRAND 4. ANDERSON, DONALD 5. ARCLESSE, ANDRE 6. ARCLESSE, FRANKIE 7. ARCLESSE, CLARENCE 8. ARCLESSE, CLARENCE (JR.) 9. AUGUST, ANTHONY 10. BABERS, HENRY 11. BABERS, ABDULAH 12. BABERS, RODERICK 13. BABERS, MARIE 14. BANKS, PARIS 15. BELL, DOROTHY 16. BELL, ALECIA 17. BLACKSHEAR, JERRY 18. BLACKSHEAR, OLEVIA 19. BLACKSHEAR, THELMA 20. BOLDEN, SHERRY 21. BOUGERE, CECILIA 22. BOUGERE, ROME 23. BOUGERE, ROME (JR.) 24. BOYD, BIRDIE 25. BOYD, WILLIAM (JR.) 26. BOYD, ANGELA 27. BOYD, RODERICK 28. BOYD, RYAN 29. BROADNAX, EZELL 30. BROADNAX, IRENE 31. BROADNAX, SHARON 32. BROWN, CEDRIC 33. BROWN, LATREYA 34. BROWN, LATANYA 35. BRYANT, EARNESTINE 36. BUCKNER, ARTHUR (II) 37. BUCKNER, SANCHA 38. BUCKNER, ARTHUR (III) 39. BUCKNER, MARTHA 40. CAMPBELL, JOHN 41. CARMEN, LEVON 42. CARMEN, MARVI 43. CARMEN, LIONEL 44. CHAMBERS, BOB 45. CHAMBERS, DANIEL 46. CHAMBERS, KEVIN D. 47. CHAMBERS, KENNETH W. (SR.) 48. CHAMBERS, KENNETH W. (JR.) 49. CHAMBERS, BOBBY 50. CHAMBERS, SANDRA 51. CHAMBERS, CHRISTINA 52. CHAMBERS, COURTNEY 53. COMEAUX, ANN GELL 54. COMEAUX, REV. LEARON 55. COMEAUX, SANDRA 56. COMEAUX, LEARON (JR.) 57. COTTON, MARILYN 58. DAVIS, JAMES 59. DAVIS, JASON 60. DAVIS, NIKIA 61. DAVIS, LOIS 62. DEMBY, HERBERT 63. DEMBY, ROSA 64. DIXON, LAWRENCE 65. DUGAR, JOSEPH 66. DUPLECHAIN, PATRICIA 67. DUPLECHAIN, LAWRENCE 68. ERZELL, KIRK 69. ETIENNE, PEARLEY 70. ETIENNE, D. DYRON 71. ETIENNE, ADAM 72. ETIENNE, DEANDRA 73. FACTOR, JERRY 74. FACTOR, JACQUELINE 75. FIELDER, VIVIAN 76. FIELDER, OTIS 77. FOSTER, JANISHA 78. FOSTER, RAIMON 79. FOSTER, JANICE 80. FREEMAN, BETTY 81. GANTS, BARTHOLOMEW 82. GARDNER, ANITA 83. GARRETT, JAMES 84. GEORGE, KENNETH 85. GEORGE, ALICE, 86. GIPSON, LATRICE 87. GIPSON, REGINALD 88. GLOVER, PERRY 89. GLOVER, ROSA 90. GLOVER, TELISHA 91. GLOVER, TRACY 92. GRADY, WILLIAM 93. GREEN, LUCY 94. GREER, VERONICA 95. GREER, LACHEA 96. GUILLORY, FALONIA 97. GUILLORY, JOHN 98. GUY, JOHN 99. GUY, BETTIE 100. HAMILTON, HELEN 101. HOLLEY, CATHRESHA 102. JACKSON, OLETHA 103. JOHNSON, DIMITRIA 104. JOHNSON, MONTIQUE 105. JOHNSON, RUFUS 106. JOHNSON, FERDANA 107. JOHNSON, DOROTHY 108. JOHNSON, FREDDIE (JR.) 109. JONES, DARRELL 110. JORDAN, DARRELL 111. JORDAN, VERNA 112. JORDEN, BOBBY (JR.) 113. JORDEN, EBONY 114. JORDEN, ROSA 115. JORDEN, ROSALYN 116. JORDEN, BOBBY 117. JORDEN, BOBBY (SR.) 118. JOSEPH, LEROY 119. KINNERSON, TERRENCE 120. KINNEY, DAVIS 121. LEE, LILLYANN 122. LEWIS, RODNEY 123. LEWIS, RUBY 124. LEWIS, JOHN 125. LINER, BETTY 126. LINER, LEON 127. LOTT, WILLIAM 128. MAYS, CHERYL 129. MAYS, TERRENCE 130. MAYS, GREGORY 131. MCGREW, HELEN 132. MCGREW, JOHNNIE 133. MILLS, MARION 134. MILLS, ROBRIAN 135. MINOR, GENTRY (SR.) 136. MINOR, HORACE 137. MINOR, HAZEL 138. MINOR, TRENT 139. MINOR, GENTRY (JR.) 140. MINOR, MARTHA 141. MINOR, SCHERAZADE 142. PAGE, FRANK 143. PICKENS, ALFRED 144. PICKENS, ROSHALETTE 145. PICKENS, CONSTANCE 146. RANDLE, DANIEL 147. RANDLE, KIMBERLY 148. RANDLE, GWEN 149. RANDLE, ANGELA 150. REDMOND, LILLIE 151. REDMOND, ALBERT 152. RICHARDSON, CYNTHIA 153. RICHARDSON, ROBERT 154. ROBERTS, RODERIC 155. ROBERTS, CREIGHTON 156. ROBERTS, DELORES 157. ROBERTS, CURTIS 158. ROBINSON, JEROME 159. ROGERS, XAVIER 160. ROSETTE, BERNISE 161. SHAW, DEBRA 162. SMITH, NORLEAN 163. STEWART, JOHN W. 164. STEWART, NORMA 165. STEWART, RODNEY 166. TAYLOR, MARY 167. THOMAS, ELLEN 168. THOMAS, ERICKA 169. THOMPSON, JERRY 170. THOMPSON, MARY E. 171. THOMPSON, ANITRIA 172. THOMPSON, MARGIE 173. WARD, CHRISTINA 174. WARD, CLARENCE (III) 175. WICKS, WANDA 176. WILCOX, CHARLES 177. WILCOX, CHARLES D. 178. WILCOX, LATOYA 179. WILCOX, JOAN 180. WILLIAMS, LOLA ANN 181. WILLIAMS, JAMES 182. WILSON, THERIS 183. WRIGHT, WILMA