May 24, 2016 Practice Points

Texas Supreme Court Rejects Manifest Disregard

By Karl Bayer

On Friday, the Supreme Court of Texas ruled that an arbitral award may not be vacated under the Texas Arbitration Act (TAA) based on common-law grounds. In Leonard K. Hoskins v. Colonel Clifford Hoskins and Hoskins, Inc., No. 15-0046 (May 20, 2016), two siblings were ordered to engage in arbitration over the allegedly improper transfer of certain mineral rights from their father’s estate. Following arbitration, Leonard, one of the siblings, asked a trial court to vacate the arbitrator’s decision under the TAA based on the arbitrator’s manifest disregard of the law. The trial court instead confirmed the award, and Leonard filed an appeal with Texas’ Fourth Court of Appeals in San Antonio. 

On appeal, the San Antonio court held that the vacatur grounds enumerated in the TAA were exclusive. As a result, the appellate court declined to consider Leonard’s manifest disregard claim. The Fourth District also rejected Leonard’s argument that he was deprived of his statutory rights during arbitral proceedings. Ultimately, the court of appeals affirmed the trial court’s order confirming the arbitral award. Leonard then filed a petition for review with the Supreme Court of Texas.  

In its written opinion, the Texas Supreme Court first examined “whether the enumerated grounds for vacatur delineated in the TAA are exclusive.” After reviewing the language in the TAA, the court stated: 

The statutory text could not be plainer: the trial court “shall confirm” an award unless vacatur is required under one of the enumerated grounds in section 171.088. Id. § 171.087. As the court of appeals correctly determined, the TAA leaves no room for courts to expand on those grounds, which do not include an arbitrator’s manifest disregard of the law.

Next, the court dismissed Leonard’s argument that the arbitration award should be vacated because the arbitrator conducted the proceedings “in a manner that substantially prejudiced” his rights in violation of § 171.047 of the TAA. According to Leonard, the arbitrator committed error by issuing a final award without considering Leonard’s supplemental complaint which was filed after the arbitrator awarded summary judgment in favor of the Leonard’s relatives. After examining the record, the Court held “the arbitrator’s failure to conduct a second hearing did not amount to a violation of the TAA’s hearing requirements, nor did it ‘substantially prejudice’ Leonard’s rights.” 

Keywords: alternative dispute resolution, adr, litigation, manifest disregard, summary judgment, prejudice, second hearing 

Karl Bayer is the founder of Karl Bayer Dispute Resolution in Austin, Texas.

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