law-modification-of-arb-award | FAA | agreement to arbitrate | challenge to arbitration award

Law Concerning Modification of Arbitrator's Award

Texas law favors arbitration. IPCO-G. & C. Joint Venture v. A. B. Chance Co., 65 S.W.3d 252, 255 (Tex.
App.--Houston [1st Dist.] 2001, pet. denied). Because arbitration is favored as a means of dispute
resolution, courts indulge every reasonable presumption in favor of upholding the award. Id. at 256. An
arbitration award has the same effect as a judgment of a court of last resort, and a court reviewing the
award may not substitute its judgment for the arbitrator's merely because the court would have reached a
different decision. Id. Every reasonable presumption must be indulged to uphold the arbitrator's decision,
and none is indulged against it. Id. A mistake of fact or law is insufficient to set aside an arbitration award.
Id. In the absence of a statutory or common-law ground to vacate or to modify an arbitration award, a
reviewing court lacks jurisdiction to review other complaints. Id. The FAA allows an arbitration award to be
modified in the event (1) the award has an evident material miscalculation or material mistake; (2) the
arbitrators awarded based on a matter not submitted to them; or (3) the form of the award is imperfect in a
way that does not affect the merits. 9 U.S.C.S. § 11.

The Fogals contend that the FAA allows the trial court to modify the arbitrator's award because the award
has an evident material miscalculation or material mistake, and the form of the award is imperfect in a way
that does not affect the merits. See id. "These grounds speak to errors that are clerical in nature rather
than legal." Quinn v. NAFTA Traders, Inc., 257 S.W.3d 795, 798 (Tex. App.--Dallas 2008). The Fifth Circuit
has defined "evident material miscalculation or material mistake":

"[W]here the record that was before the arbitrator demonstrates an unambiguous and undisputed mistake
of fact and the record demonstrates strong reliance on that mistake by the arbitrator in making his award, it
can fairly be said that the arbitrator 'exceeded [his] powers . . . .'" We interpret the term "undisputed" to
mean we should look to see whether there is any rational basis for disputing the truth of the fact.

McIlroy v. Paine Webber, Inc., 989 F.2d at 820 (5th Cir. 1993) (internal citation omitted); see also Valentine
Sugars, Inc. v. Donau Corp., 981 F.2d 210, 214 (5th Cir. 1993); Ehrich v. A.G. Edwards & Sons, Inc., 675
F. Supp. 559, 565-66 (D.S.D. 1987) (finding calculation of interest based on wrong number of months to
be "evident miscalculation of figures"). "One federal court of appeals has indicated that a miscalculation of
figures is 'evident' only if it appears on the face of the arbitration award itself." McGrath v. FSI Holdings,
Inc., 246 S.W.3d 796, 813 (Tex. App.--Dallas 2008, pet. denied) (citing Apex Plumbing Supply, Inc. v. U.S.
Supply Co., Inc., 142 F.3d 188, 194 (4th Cir. 1998). An award is imperfect in a matter of form not affecting
the merits of the controversy when the parties have a stipulation or agreement that the arbitrator's award
fails to take into account. See Lummus Global Amazonas, S.A., v. Aguaytia Energy Del Peru, S.R. LTDA,
256 F. Supp. 2d 594, 634-36 (S.D. Tex. 2002); see also Atl. Aviation, Inc. v. EBM Group, Inc., 11 F.3d
1276, 1283-84 (5th Cir. 1994).

B. The Fogals' Motion to Modify the Award

The Fogals contend the arbitrator improperly (1) awarded Stature attorney's fees as damages, (2) failed to
include the amount for their bill of costs and for the court reporter in those costs that Stature must pay; and
(3) failed to include pre-judgment interest in the award. (1) The Fogals have not explained how these three
rulings by the arbitrator are an evident material miscalculation or material mistake, or that these rulings do
not affect the merits. Because the rulings by the arbitrator are not evident material miscalculations or
material mistakes, and do affect the merits, we must uphold the arbitrator's award. See Babcock, 863
S.W.2d at 234-35 (holding arbitrator's calculation of damages was within arbitrator's discretion, not material
miscalculation); AIG Baker Sterling Heights, L.L.C. v. Am. Multi-Cinema, Inc., 508 F.3d 995, 999-1001 (11th
Cir. 2007) (holding no material mistake or miscalculation when award did not compensate for payments
never submitted to arbitrator); Blumberg v. Bergh, No. 02-04-00138-CV, 2005 WL 1047592, at *6 (Tex.
App.--Fort Worth May 5, 2005, no pet.) (holding trial erred by adding post-judgment interest to arbitration
award); McGrath, 246 S.W.3d at 813 (holding trial court properly refused to modify arbitrator's award by
adding attorney's fees because no evidence of material miscalculation).
We overrule the Fogals' fourth issue.
Fogal v. Stature Construction (Tex.App.- Houston [1st Dist.] Jan. 29, 2009)(Alcala)
confirmation of arbitration award, no waiver, challenges to arb award overruled, award confirmed, open
courts challenge overruled)
Justice Alcala
Before Justices Taft, Keyes and Alcala
01-07-00456-CV Mary Fogal and Robert Fogal v. Stature Construction, Inc., Jorge Casimiro, Tom
Thibodeau and Bernie Kane
Appeal from 80th District Court of Harris County
Trial Court
Judge: Hon. Lynn Bradshaw-Hull