Texas Supreme Court Update: "Arbitration Review Under the Texas Arbitration Act - Are Common Law Grounds for Review Dead?"

In Hoskins v. Hoskins, et al, (2016 WL 2993929) the Texas Supreme Court held that the sole grounds available to set aside an arbitration award under the Texas Arbitration Act (“TAA”) are found in Section 171.008 of the TAA, absent contract language expanding these grounds.   In a case of first impression, the Court reasoned that judicial review of an arbitration award is extraordinarily narrow, and unless a statutory ground to set aside an award (vacatur) is offered, a court shall confirm the award. 

When faced with a prior decision of the Court allowing review outside of the statutory grounds, the Court focused on the contractual language of that case, reasoning that an arbitrator derives his power from the parties’ agreement to submit to arbitration, and thus, there is no reason to foreclose the parties’ agreed modification or limitation of those powers even under the TAA. 

After noting that the arbitration clause in the Hoskins case had no such language or limitation, the Court held that even the movant’s complaint of manifest disregard of the law related to procedural issues in the underlying arbitration (an arbitrator’s refusal to hold a hearing on a supplemental complain after granting summary judgment) was not a viable statutory ground to review/set aside an arbitration award.  In short the Court held that absent contractual language, the TAA leaves no room for Courts to expand on the statutory vacatur grounds.         

Lessons to learn from the Hoskins case

First, in drafting arbitration clauses which are subject to the TAA, review the statutory grounds allowed to set aside an award.  If you believe you want additional protection or the ability to review an award outside of those grounds, draft your contractual clause accordingly. 

Second, if you find yourself dealing with an arbitration clause which does not have any language related to the review of an arbitrator's conduct or award, make sure any complaint or challenge you make is couched in terms of the grounds to vacate an award found in Section 171.008 of the TAA.  If you do not, even arguments that an arbitrator manifestly disregarded the law may not be sufficient to overturn an unfavorable ruling or award.

Porter Hedges continues to counsel clients in all aspects of commercial law, and has a very active arbitration practice. For more information, feel free to contact Mr. Steely at the number above.