Houston COA Overturns Harris County Court Decision Confirming Arbitral Award Without Rendering Final Judgment

The Fourteenth District Court of Appeals in Houston has reversed a lower court’s decision confirming an arbitral award without rendering a final judgment. In Leslie v. Hill, No. 14-13-00600-CV (October 16, 2014), two individuals, the Hills, entered into a contract to purchase a majority interest a company from Robert Leslie in 2007. A provision in the agreement stated all disputes related to the purchase contract would be decided through binding arbitration in Louisiana. The arbitral provision also stated the prevailing party would be entitled to recover reasonable legal fees.

Eventually, a payment dispute arose between the parties. As a result, Leslie initiated arbitral proceedings pursuant to the contract. After an arbitrator issued a damages award that included prejudgment interest and attorneys’ fees in favor of Leslie, he sought to confirm the award in Harris County, Texas. Because the court was not certain “whether Texas law allowed a trial court to confirm an arbitration award containing an award of prejudgment interest and attorneys’ fees,” the Harris County court denied Leslie’s motion to confirm the arbitration award. Leslie then filed another motion to confirm which the court also “denied because it concluded Texas law did not allow recovery of attorneys’ fees that included accrued interest.”

After Leslie filed a third motion to confirm the arbitrator’s award, the Hills asked the court to instead vacate the award because it was based on a gross mistake. Although the Harris County court held that there was no such mistake, the court stated the arbitration award contravened Texas law. Because of this, the court finally confirmed the arbitration award but refused to enter a final judgment in favor of Leslie based on the award. Leslie then filed an appeal with the Fourteenth District Court of Appeals.

The appeals court first stated it was unclear whether the Federal Arbitration Act or the Texas General Arbitration Act applied to the case. Despite this, the court said the outcome would be the same no matter which statute applied. After analyzing the language of the two laws, the Houston appellate court said,

Here, the trial court concluded the Hills had not presented any grounds on which the arbitration award could be vacated, modified, or corrected, and it therefore signed an order confirming the award. The trial court refused to sign a final judgment conforming to the confirmed award, however, because it concluded the award contravened Texas law.

We hold this refusal was error because neither the TGAA nor the FAA give a trial court any discretion to refuse to render a final judgment after confirming an arbitration award. See Tex. Civ. Prac. & Rem. Code Ann. § 171.092 (providing that when trial court grants “an order that confirms . . . an award, the court shall enter a judgment or decree conforming to the order”); Chiron Corp., 207 F.3d at 1133 (stating FAA requires entry of judgment upon confirmation of arbitration award). Even if the trial court were correct that the arbitrator awarded relief that could not have been awarded under Texas law in a non-arbitration case, that does not provide a basis for refusing to render judgment on the confirmed award. See Tex. Civ. Prac. & Rem. Code Ann. § 171.090; see also Chiron Corp., 207 F.3d at 1133 (stating FAA requires entry of judgment upon confirmed arbitration award without reviewing merits of award or legal basis supporting it); Barton v. Fashion Glass and Mirror, Ltd., 321 S.W.3d 641, 646 (Tex. App.-Houston [14th Dist.] 2010, no pet.) (reasoning that arbitrator can grant relief that trial court cannot because its authority is derived from arbitration agreement). Because the trial court erred when it refused to sign a final judgment incorporating the confirmed arbitration award, we sustain Leslie’s consolidated issues on appeal.

In the end, Texas’ Fourteenth District Court of Appeals in Houston reversed the lower court’s decision and rendered a final judgment confirming the arbitrator’s award.

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