Chrysler Insurance Company v. Greenspoint Dodge of Houston, Inc., 297 S.W.3d 248, 53 Tex. S. Ct. J. 96 (Tex. 2009).
This case reverses a $1.5 mil award, based on error of law and no evidence. The parties submitted the dispute to arbitration:
The dispute was submitted to binding arbitration, which resulted in an award of approximately $1.5 million in compensatory and punitive damages to Martinez. The arbitrators found that the individuals who engaged in the campaign to defame and injure Martinez were Greenspoint vice-principals.
Id., at 97. However, the scope of the arbitration agreement was not discussed, or whether the FAA or Texas Arbitration Act, or both, applied. The District Court, Court of Appeals and Supreme Court all reviewed the award as if it were a final judgment in a regular judicial proceeding. The Supreme Court did not even discuss the case of Hall Street Associates, LLC v. Mattel, Inc. The Court of Appeals vactated part of the award based on "no evidence." Id., at 97.
However, at least under the FAA, all courts committed serious error. A recent Court of Appeals decision sets forth current law under the FAA:
[T]he United States Supreme Court recently held that the grounds listed in the statute are the exclusive grounds for vacating an arbitration award under the FAA. Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, ----, 128 S.Ct. 1396, 1403, 170 L.Ed.2d 254 (2008) (holding that statutory grounds for vacating or for modifying or correcting arbitration award are exclusive grounds for expedited vacatur and modification of award pursuant to FAA); see also Citigroup Global Mkts., Inc. v. Bacon, 562 F.3d 349, 350 (5th Cir.2009) (concluding Hall Street restricts grounds for vacatur to those set forth in section 10).
Of the issues Ancor presents for review, only two-that the arbitrator exceeded her powers by ignoring the law and by rendering an award that violates the essence of the Guaranty-arguably fall within the statutory grounds for vacatur under the FAA. See 9 U.S.C. § 10(a)(4). Ancor's remaining grounds-that the arbitrator manifestly disregarded the law and committed gross mistake implying a failure to exercise honest judgment-are common law grounds for vacating an arbitration award. See Crossmark, 124 S.W.3d at 430 n. 6; Tanox, 105 S.W.3d at 252. The parties dispute whether the Supreme Court's decision in Hall Street forecloses our review based on Ancor's non-statutory grounds. We conclude it does.
In Hall Street, the parties to the underlying lease dispute agreed to submit an indemnification claim to arbitration. Hall St. ., 128 S.Ct. at 1400. The arbitration agreement, which was negotiated by the parties and approved by the district court, required the court to “vacate, modify or correct any award: (i) where the arbitrator's findings of facts are not supported by substantial evidence, or (ii) where the arbitrator's conclusions of law are erroneous.” Id. at 1400-01. These contractually agreed grounds deviated from those prescribed in the FAA, and the Supreme Court granted review to determine “whether the grounds for vacatur and modification provided by §§ 10 and 11 of the FAA are exclusive.” Id. at 1401.
*6 Reviewing the purpose and text of the FAA, the Supreme Court held that sections 10 and 11 “provide the FAA's exclusive grounds for expedited vacatur and modification.” Id. at 1403. In so holding, the Supreme Court expressly rejected the argument that its use of the phrase “manifest disregard of the law” in Wilko v. Swan, 346 U.S. 427, 74 S.Ct. 182, 98 L.Ed. 168 (1953), expanded the grounds for vacatur beyond those listed in section 10. Hall St., 128 S.Ct. at 1403. The Supreme Court instructed that the text of the FAA “compels a reading of the §§ 10 and 11 categories as exclusive” because even assuming these sections could be supplemented, “it would stretch basic interpretive principles to expand the stated grounds to the point of evidentiary and legal review generally.” Id. at 1404. The Supreme Court further explained:
[I]t makes more sense to see the three provisions, §§ 9-11, as substantiating a national policy favoring arbitration with just the limited review needed to maintain arbitration's essential virtue of resolving disputes straightaway. Any other reading opens the door to the full-bore legal and evidentiary appeals that can “rende[r] informal arbitration merely a prelude to a more cumbersome and time-consuming judicial review process,” and bring arbitration theory to grief in post-arbitration process.
Id. at 1405 (quoting Kyocera Corp. v. Prudential-Bache Trade Servs., Inc., 341 F.3d 987, 998 (9th Cir.2003)) (internal citations omitted). The Supreme Court also noted that expanding sections 10 and 11 is inconsistent with the language of section 9, which directs a court to grant an order confirming an arbitration award “unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of this title.” Id. (quoting 9 U.S.C. § 9). The Supreme Court emphasized that this language “carries no hint of flexibility.” Id.
Following Hall Street, the Fifth Circuit, in Citigroup Global Markets, Inc. v. Bacon, overruled its precedent holding that non-statutory grounds may support vacatur of an arbitration award under the FAA. 562 F.3d at 358. Ancor urges us to disregard Citigroup and argues the Supreme Court “has not expressly ruled that ‘manifest disregard’ is no longer a valid ground for vacating an arbitrator's award.” We disagree. We find the analysis and holding in Citigroup persuasive and conclude the Supreme Court made clear that sections 10 and 11 are the exclusive grounds for vacating and modifying an arbitration award under the FAA. See Hall St., 128 S.Ct. at 1403. Thus, our review of an arbitration award under the FAA is limited to the statutory grounds.FN4
We note that, in Hall Street, the Supreme Court suggested the possibility that a “more searching review based on authority outside the statute” could serve as bases for vacating or modifying arbitration awards. Hall St., 128 S.Ct. at 1406.FN5 This case, however, does not open the door to that possibility. Here, the parties pursued arbitration according to the terms of the Guaranty, which expressly invoked the FAA. The only arguments made in the trial court and on appeal address the FAA. Accordingly, we do not consider the viability of non-statutory grounds here and express no opinion that non-statutory grounds for vacating or modifying an arbitration award could be considered in other contexts.
*7 Because manifest disregard of the law and gross mistake are not grounds for vacating an arbitration award under the FAA, Ancor has not demonstrated trial court error as to those grounds. We overrule Ancor's first, fourth, and fifth issues.
Section 10(a)(4)
Ancor's second and third issues fall within section 10(a)(4) of the FAA, which states that an arbitration award may be vacated “where the arbitrators exceeded their powers.” 9 U.S.C. § 10(a)(4). Ancor's argument for vacatur under section 10(a)(4) has two parts. First, Ancor complains the arbitrator exceeded her powers by allowing PGV to arbitrate issues that were precluded by res judicata or collateral estoppel. Second, Ancor contends the arbitrator exceeded her powers by reaching a decision that does not draw its essence from the intended purpose of the Guaranty.
Arbitrator Authority
“An arbitrator's authority is limited to disposition of matters expressly covered by the agreement or implied by necessity.” Quinn, 257 S.W.3d at 799. Arbitrators, therefore, exceed their powers when they decide matters not properly before them. Id.; see also Gulf Oil Corp. v. Guidry, 160 Tex. 139, 327 S.W.2d 406, 408 (1959). For example, an arbitrator exceeds her powers by allocating an award of costs between the parties when the arbitration agreement specifically requires the arbitrator to designate a non-prevailing party to bear the costs of both sides. See Townes Telecomms., Inc. v. Travis, Wolff & Co., L.L.P., No. 05-08-00079-CV, 2009 WL 1844330, at *3 (Tex.App.-Dallas June 29, 2009, pet. filed).
Our inquiry under section 10(a)(4) is whether the arbitrator had the authority, based on the arbitration clause and the parties' submissions, to reach a certain issue, not whether the arbitrator correctly decided the issue. Executone Info. Sys., Inc. v. Davis, 26 F.3d 1314, 1323 (5th Cir.1994); see also DiRussa v. Dean Witter Reynolds Inc., 121 F.3d 818, 824 (2d Cir.1997). The award must be derived in some way from the wording and purpose of the agreement, and we look to the result reached to determine whether the award is rationally inferable from the contract. Anderman/Smith Operating Co. v. Tenn. Gas Pipeline Co., 918 F.2d 1215, 1219 n. 3 (5th Cir.1990). We may not vacate an arbitration award for errors in interpretation or application of the law or facts. Crossmark, 124 S.W.3d at 429.
Ancor Holdings, LLC v. Peterson, Goldman & Villani, Inc., 294 S.W.3d 818, 826-829, 2009 WL 2596120 (Tex.App. --- Dallas 2009, no pet.).
It seems when the Supreme Court wants to take a judgment away, it may in fact vacate an award "for errors in interpretation or application of the law or facts."