Opinion
No. 05-07-00893-CV
Opinion Filed August 14, 2008.
On Appeal from the 101st Judicial District Court Dallas County, Texas, Trial Court Cause No. DC 05-03391-E.
Before Justices FITZGERALD, RICHTER and LANG-MIERS.
MEMORANDUM OPINION
This case involves the trial court's clarification of an arbitration award. Urszula Rowinska sued Esmail Ilami, Import Export Enterprises, Inc. and Global Contemporary Furniture (collectively, "Furniture Sellers"). The parties agreed to arbitrate their claims since the dispute arose from contracts requiring them to submit all claims to binding arbitration. The arbitrator found for Ms. Rowinska in the amount of $7,195.88 of actual damages and $20,000 in reasonable attorneys' fees ("Original Award"). He also specifically found "all defendants have conspired to be part of a fraudulent scheme intended to avoid creditors such as [Ms. Rowinska]. Accordingly, all defendants are jointly and severally liable for all amounts. . . ." All parties asked the arbitrator to reconsider his Original Award and, in response, the arbitrator issued his Amended and Clarified Arbitrator's Award ("Second Award") in which he increased the amount of reasonable attorneys' fees to be recovered but limited such recovery to the defendant who had executed the sued-upon contracts. The Second Award also added exemplary damages of $14,391.76, and expanded the arbitrator's findings as to the Furniture Sellers' conspiracy and joint and several liability.
Both the Furniture Sellers and Ms. Rowinska applied to the trial court for relief. The Furniture Sellers asked the trial court to vacate the Second Order and order a rehearing. Ms. Rowinska requested the trial court modify and confirm the Original Award. The trial court vacated the Second Award and reinstated the Original Award with a clarification of its conclusion that all damages are jointly and severally recoverable against all defendants. The Furniture Sellers raise three issues. First, they contend that once the trial court concluded the arbitrator exceeded his authority in issuing the Second Order, a rehearing was required. In their second and third issues, the Furniture Sellers argue the trial court's clarification of the Original Award constituted an impermissible alteration of the arbitrator's decision. Finding no reversible error, we affirm the trial court's judgment.
Discussion
After hearing the Furniture Sellers' application to vacate the Second Award, and Ms. Rowinska's applications to modify the Original Award, and confirm it as modified, the trial court:
1. found the arbitrator had exceeded his authority in rendering the Second Award and granted the Furniture Sellers' motion to vacate the Second Award;
Since the Furniture Sellers asked for, and received, vacatur of the Second Award, the trial court's decision to vacate the Second Award is not at issue in this appeal. Accordingly, the issue of whether the arbitrator exceeded his powers when he rendered the Second Award also is not an issue raised in this appeal. Tex. Civ. Prac. Rem. Code Ann. § 171.088(a)(3)(A) (Vernon 2005).
2. denied the Furniture Sellers' request for rehearing; and
3. affirmed and reinstated the Original Award with a modification requested by Ms. Rowinska that the term "conspiracy" be clarified to include the following language from the Second Award:
". . . [t]he Arbitrator found a fraudulent scheme to damage Plaintiff in which Defendant Ilami was the all-controlling centerpiece and the only decision maker. The scheme included using the same inventory, the same employees, the same equipment, the same ads, the same phone number, the same website, even the same `Celebrating its 20th year in the business' marketing theme. The ultimately undisputed evidence — even though he denied it at trial — was that Mr. Ilami even directed his subordinate to draft a letter to Plaintiff claiming `our records do not indicate that you have ever purchased anything from us.' Perhaps more tellingly, the letter even goes so far as to affirmatively represent that Mr. Ilami `is not affiliated with our company' (Bellagio) when, in fact, he was the sole shareholder. Based on this and other evidence, therefore, the Arbitrator has found all defendants to be one and the same, the alter ego of each other, with no legitimate distinctions. To find otherwise would be to perpetuate injustice by validating manufactured and fictitious corporate distinction."
In their first issue, the Furniture Sellers argue that, once the trial court concluded the arbitrator exceeded his authority in rendering the Second Award, the judge was required to order a rehearing. However, a rehearing is not mandatory. It is within the trial court's discretion to decide against a rehearing and reinstate the Original Award. Tex. Civ. Prac. Rem. Code Ann. § 171.089 (Vernon 2005); Tri-Star Petroleum Co. v. Tipperary Corp., 107 S.W.3d 607, 614-15 (Tex.App.-El Paso 2003, pet. denied) ("[W]e interpret the word `may' in section 171.089(a) in its ordinary, reasonable, permissive sense. The statute thus did not require the trial court to order rearbitration.").
In addition, when the trial court considered Ms. Rowinska's motion to modify the Original Award and confirm it as modified, the judge was required to follow Section 171.091(c) which prescribes that whether or not an award is modified, the court must confirm the award either as originally written or as the trial court has modified it. Tex. Civ. Prac. Rem. Code Ann. § 171.091(c) (Vernon 2005). The statute does not give the trial court the power to order a rehearing when it considers a motion to modify. We overrule the first issue. We construe the Furniture Sellers' second and third issues to argue the trial court's clarification of the Original Award constitutes error. They contend the trial court's inclusion of language from the Second Award explaining the conspiracy among the Furniture Sellers affected the merits of the controversy in violation of Section 171.091(a) which governs the scope of a trial court's permissible modification or correction of an arbitration award. Tex. Civ. Prac. Rem. Code Ann. § 171.091(a) (Vernon 2005). Specifically, subpart (a)(3) allows a court to modify or clarify an award ". . . in a manner not affecting the merits of the controversy." Id. Where a trial court modified an award to correct the arbitrator's omission of prejudgment interest in the final calculations, the modification was permissible. Sydow v. Verner, Liipfert, Bernhard, McPherson and Hand, Chartered, 218 S.W.3d 162, 170 (Tex.App.-Houston[14th Dist.] 2007, no pet.); see also Baker Hughes Oilfield Op. v. Hennig Prod. Co., Inc., 164 S.W.3d 438, 447 (Tex.App.-Houston[14th Dist.] 2005, no pet.) (trial court's addition of date to award when recovered prejudgment interest would begin to accrue is a permissible clarification). When, however, the Sydow court tried to modify the award to include attorney's expenses, it exceeded the scope of modification allowed by the statute. Sydow, 218 S.W.3d at 169-70. See also, Barsness v. Scott, 126 S.W.3d 232, 238-39 (Tex App.-San Antonio 2003, pet. denied) (inclusion of indemnity claim was an impermissible modification).
The Original Award contained (1) a finding that "all defendants have conspired to be part of a fraudulent scheme intended to avoid creditors such as Plaintiff," and (2) a corresponding legal conclusion that "all defendants are jointly and severally liable for all amounts. . . ." The Second Award tried "[t]o clarify the intent of the original award . . . [because] the arbitrator has never specifically found that Defendants were separate and distinct entities, though it is acknowledged that the finding of a `conspiracy' implies that separation." When the trial court modified the reinstated Original Award to include the Second Award's additional findings supporting joint and several liability, it did not add any damages or remedies. We conclude the additional language did not affect the merits of the controversy and, accordingly, overrule the Furniture Sellers' second and third issues.
Conclusion
Finding no reversible error, we affirm the trial court's judgment.