The HR Legal News Blog

Texas Court Declines to Hear Subsequent Claims Related to Previously Vacated Arbitration Award: Patten v. Johnson

 In 2007, a dispute arose among several partners engaged in the real estate title service business.  The parties agreed to an arbitration that was administered by JAMS in accordance with JAMS rules.  Although plaintiff had agreed to pay his lawyers a contingency fee equal to 45% of any damages awarded, the arbitrator ultimately ordered defendants to pay plaintiff $14 million in damages and awarded an additional $6 million in attorneys’ fees.

Shocked by the amount of the damages award, defendants began an investigation of the arbitrator’s relationship with plaintiff and his counsel.  The arbitrator’s initial disclosure stated that he had conducted one prior arbitration with plaintiff’s counsel.  Defendants learned that the arbitrator had failed to disclose a social relationship with plaintiff’s lawyer.  The arbitration award was ultimately vacated after the Texas Court of Appeals determined concluded that the arbitrator’s failure to disclose the relationship constituted “evident partiality” under the Texas Arbitration Act. 

Some time later, defendants filed suit against their former partner, his lawyers, the arbitrator and JAMS in the hope of recovering monetary damages and attorneys’ fees.   The trial court concluded that it lacked subject matter jurisdiction and dismissed the case without prejudice.

In April 2014, the Texas Court of Appeals affirmed the trial court’s dismissal of the case.  The court noted that in the absence of a statutory ground to vacate or modify an arbitration, a reviewing court lacks jurisdiction to review other complaints about the arbitration.   Since each of the claims in the subsequent lawsuit dependent on events and/or conduct relating to the arbitration, the trial court correctly concluded that it lacked jurisdiction to review these complaints.   Vacatur of the arbitration award, as provided in the statute, was the only remedy available with respect to these complaints.

Patten v. Johnson, 2014 Tex. App. LEXIS 4134 (Tex. App. Dallas — Apr. 15, 2014)