Dallas COA Holds TAA Preempts Collateral Fraud Claims

Last month, the Dallas Court of Appeals held that fraud claims brought against opposing parties in an arbitration proceeding, counsel for the opposing parties, an arbitrator, and JAMS are preempted by the Texas Arbitration Act (TAA).   In Patten et al. v. Johnson et al., No. 05-12-01695-CV (Tex. App – 5th, April 15, 2014), a JAMS arbitrator issued an award in favor of Johnson following a business dispute with Patten.  That award was later vacated and remanded for a new hearing as a result of a previously undisclosed relationship between the arbitrator and Johnson.

After Patten prevailed at the new hearing, he filed a fraud claim against Johnson, the law firm of Fish & Richardson, the arbitrator in the vacated case, and JAMS.  A trial court dismissed the case for lack of subject matter jurisdiction and Patten appealed the lower court’s decision to Texas’ Fifth Appeals Court.

According to the Dallas Court of Appeals, the trial court properly dismissed Patten’s lawsuit.  The appeals court held the trial court had no statutory jurisdiction to review additional complaints about arbitral proceedings after the arbitration award was vacated due to preemption by the TAA.  The court stated,

Further, the record shows each of appellants’ claims is dependent upon events and/or conduct pertaining to the arbitration in the underlying business dispute. Therefore, on this record, we conclude appellants’ complaints are “about” the arbitration in the underlying business dispute. See Juneau, 114 S.W.3d at 135. Consequently, because appellants’ complaints in this case did not present “a statutory ground to vacate or modify an arbitration award,” the trial court lacked jurisdiction to review those complaints. See id. Thus, we conclude the trial court properly granted appellees’ pleas to the jurisdiction.

Because the court had no jurisdiction to hear Patten’s fraud claims, the appellate court affirmed the decision of the trial court.