Pullara v. American Arbitration Assoc. Inc.

191 S.W.3d 903

Michael PULLARA, Appellant, v. AMERICAN ARBITRATION ASSOCIATION, INC., Paxson & Associates, P.C., and Stephen B. Paxson, Appellees.

No. 06-05-00087-CV.

Court of Appeals of Texas, Texarkana.

Submitted April 20, 2006.

Decided May 11, 2006.

Rehearing Overruled May 31, 2006.

James T. Evans and Victoria Fair Woo, Evans & Fair, Houston, for appellant.

James J. McConn, Jr., Ruth E. Piller, Hays, McConn, Rice & Pickering, Stephen Paxson, Paxson & Associates, PC, Houston, for American Arbitration Association, Inc.

Before MORRISS, C.J., ROSS and CARTER, JJ.

OPINION

Opinion by Chief Justice MORRISS.

The arbitration of Michael Pullara's dispute with Becker Fine Builders, Inc. (Becker), a Houston builder, arising out of an agreement for remodeling Pullara's apartment, did not turn out as Pullara had hoped.¹ The American Arbitration Association (AAA) arbitrator, Stephen B. Paxson, awarded Becker a total of $97,442.29² against Pullara. Approximately one year later, however, Pullara discovered something Paxson had allegedly not disclosed before being selected as arbitrator — that, for many years, Paxson had acted as general counsel for the Greater Houston Builders Association (GHBA). Before being selected as arbitrator, Paxson had disclosed his membership in GHBA, but apparently not his representation of that organization.³

Finding himself beyond the standard ninety-day deadline to seek to vacate the award under Section 171.088 of the Texas Civil Practice and Remedies Code, Pullara did not move to set aside the award. Instead, he sued Paxson and the AAA for damages he alleges were caused by Paxson's failure to disclose his work as general counsel for the GHBA. Pullara contends Paxson's alleged failure to disclose the attorney-client relationship with GHBA revealed a bias in Becker's favor, which Pullara believes was a material fact he was entitled to know when he chose the arbitrators to strike from the AAA's list.

Pullara appeals the trial court's granting summary judgment⁴ against him in favor of the defendants. We affirm the judgment of the trial court because Pullara's claims are barred by the doctrine of arbitral immunity.

The propriety of a summary judgment is a question of law. Therefore, review of the trial court's decision is de novo. Natividad v. Alexsis, Inc., 875 S.W.2d 695, 699 (Tex.1994). Summary judgment for a defendant is proper when the defendant negates at least one element of each of the plaintiff's theories of recovery or pleads and conclusively establishes each element of an affirmative defense. Science Spectrum v. Martinez, 941 S.W.2d 910, 911 (Tex.1997); Wornick Co. v. Casas, 856 S.W.2d 732, 733 (Tex.1993).

A summary judgment movant has the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex.1985). Once a movant establishes entitlement to summary judgment, the burden shifts to the nonmovant to show why summary judgment should not be granted. Casso v. Brand, 776 S.W.2d 551, 556 (Tex.1989).

When a trial court's order granting summary judgment does not specify the ground or grounds on which it relied for its ruling, summary judgment will be affirmed on appeal if any of the theories advanced are meritorious. Star-Telegram, Inc. v. Doe, 915 S.W.2d 471, 473 (Tex.1995). In this case, the trial court did not specify the grounds on which it relied for its ruling. Therefore, reversal is proper only if each theory presented by Paxson and the AAA fails.

Appellees assert that Pullara's claims are barred by the doctrine of arbitral immunity. We agree.

The doctrine of arbitral immunity emanates from judicial immunity. Judicial immunity provides judges with absolute immunity for their judicial acts. See Stump v. Sparkman, 435 U.S. 349, 355-56, 98 S.Ct. 1099, 55 L.Ed.2d 331 (1978). The doctrine was first recognized by the English courts to protect "that independence without which no judiciary can either be respectable or useful." Butz v. Economou, 438 U.S. 478, 509, 98 S.Ct. 2894, 57 L.Ed.2d 895 (1978). Judicial immunity allows a judge to make an unbiased determination on the merits of a controversy without being swayed by the specter of litigation against the judge personally.

An arbitrator's role is functionally equivalent to that of a judge. Olson v. NASD, 85 F.3d 381, 382 (8th Cir.1996). As with the judiciary, it is necessary to protect arbitrators from undue influence and safeguard their independence. To those ends, judicial immunity has been extended to arbitrators as well as their sponsoring organizations. See id.; Austern v. Chicago Bd. Options Exch., Inc., 898 F.2d 882, 886 (2d Cir.1990).

The only Texas case to decide arbitral immunity is Blue Cross Blue Shield v. Juneau, 114 S.W.3d 126 (Tex.App.-Austin 2003, no pet.). The facts in Juneau are strikingly similar to those with which we are confronted. Blue Cross Blue Shield had a dispute with HealthCor Liquidation Trust over payments involved with medical services and supplies. The matter was submitted to arbitration. James J. Juneau, as a member of the arbitration panel, rendered an award in favor of HealthCor. Blue Cross filed suit against Juneau alleging he had failed to disclose a prior relationship with a HealthCor attorney. Juneau had previously worked at the same law firm as Jeffrey Seckel, an attorney employed by HealthCor. Blue Cross asserted that, had it known of the relationship before the arbitration began, it would have sought Juneau's disqualification from the arbitration panel. The trial court held that Blue Cross' claims were barred by the doctrine of arbitral immunity and dismissed the suit for want of subject-matter jurisdiction. Juneau, 114 S.W.3d at 128-30. The Juneau court affirmed the trial court's judgment. Id. at 133, 136.

Pullara contends Juneau erroneously recognized the doctrine of arbitral immunity and asks this Court to issue a contradictory holding. We decline this invitation believing the conclusion reached by the Juneau court is ultimately correct.

The parties do not dispute that the arbitration in this case was governed by the Texas Arbitration Act. See TEX. CIV. PRAC. & REM.CODE ANN. §§ 171.001-.098 (Vernon 2005). That Act prescribes that Texas law regarding arbitration "shall be construed to effect its purpose and make uniform the construction of other states' law applicable to an arbitration." TEX. CIV. PRAC. & REM.CODE ANN. § 171.003. This provision requires us to interpret our law as it regards arbitration in a manner that is consistent with the law of the other states, so long as that does not lead to a conflict with the statutory framework.

Arbitral immunity is recognized by virtually all of the various states, as well as by the federal courts. See Feichtinger v. Conant, 893 P.2d 1266, 1267 (Alaska 1995) ("Arbitral immunity is the rule in virtually all jurisdictions, and we now adopt it." (Footnote omitted.)); Baar v. Tigerman, 140 Cal.App.3d 979, 211 Cal.Rptr. 426, 428 (Ct.App.1983) ("Courts of this country have long recognized immunity to protect arbitrators from civil liability for actions taken in the arbitrator's quasi-judicial capacity."); Seligman v. Allstate Ins. Co., 195 Misc.2d 553, 756 N.Y.S.2d 403, 405 (Sup.Ct.2003) ("rules precluding lawsuits against arbitration tribunals and arbitrators have been upheld by the courts of this state and other jurisdictions"); Olson, 85 F.3d at 382 ("courts of appeals have uniformly extended judicial and quasi-judicial immunity to arbitrators"); see also Peter B. Rutledge, Toward a Contractual Approach for Arbitral Immunity, 39 Ga. L.Rev. 151, 151-52 (2004).

This case is predicated on the claim that an arbitrator failed to disclose a source of possible bias. Other jurisdictions have scrutinized nondisclosure claims and have held that arbitrators are immune from such claims. In L & H Airco, Inc. v. Rapistan Corp., the Minnesota Supreme Court stated:

Failure to disclose possible conflicts of interest creates at the least an impression of bias. An impression of bias contaminates the decision making process when neutrality is essential and is not condoned by this court. Nevertheless, we decline to permit a civil suit against the arbitrator for failure to disclose prior business or social contacts because of our policy of encouraging arbitration and of protecting the independence of the decision made. Permitting civil suit for a lapse in disclosure would chill the willingness of arbitrators to serve because of the difficulty of remembering all contacts, however remote, with parties to the arbitration.

446 N.W.2d 372, 377 (Minn.1989).

A California court succinctly stated, "California and other jurisdictions recognize that arbitral immunity applies where one of the parties to the arbitration seeks to impose liability based on the alleged bias of the arbitrator or the sponsoring organization." Stasz v. Schwab, 121 Cal. App.4th 420, 441, 17 Cal.Rptr.3d 116 (Cal. Ct.App.2004). As already noted, this same decision has already been reached in Texas. See Juneau, 114 S.W.3d 126.

Were we to adopt Pullara's position and declare that the doctrine of arbitral immunity is unavailable in this state, we would run counter to, not only our sister courts of appeals, but also virtually all other states and the federal system. This would directly contravene the legislative mandate set forth in Section 171.003 quoted above.

In sum, it is the general principle that arbitrators and their sponsoring organizations are immune from civil liability for bias or the failure to disclose a possible source of bias. We adopt that principle.

Pullara asserts that recognition of arbitral immunity conflicts with the legislative intent behind Section 154.055 of the Texas Civil Practice and Remedies Code. Section 154.055 grants immunity to volunteer arbitrators and mediators so long as they do not receive any compensation and do not "act with wanton...