Arbitration Trumps District Court
by Ron Davis
The sellers of a Texas shopping center will get to keep a disputed rental payment that the center’s new owners claim is rightfully theirs.
The shopping center is located in Robstown, and the new owners had, as a prelude to the sale, entered into a “commercial earnest money contract” with the sellers. That contract included an arbitration agreement that seemed to allow a settlement, through arbitration, of any dispute between sellers and buyers.
That agreement would soon be tested. After the two parties consummated the sale, both laid claim to a rental payment of more than $46,000 that a tenant—CVS Caremark—owed to the center’s owners.
Hoping to resolve the matter, the center’s previous owners reminded the new owners of the wording of the sales contract between the two parties that “disputes relating to the sale and purchase shall be resolved by arbitration….”
In response, the new owners claimed they were “not convinced” that the dispute must be settled by arbitration. “Instead,” they added, “it may be more appropriate that we resolve our dispute in district court.”
Despite the buyers’ objection, an arbitrator began an inquiry into the matter. On the eve of the arbitration hearing, however, the buyers announced that they had filed a lawsuit in district court.
That action failed to deter the arbitrator assigned to settling the matter. He went ahead with the hearing, despite the refusal of the buyers to participate. Thirteen days later, the arbitrator ruled that, based on the evidence, the disputed CVS payment of $46,587.93 should go to the center’s previous owners. That’s because, he explained, the buyers had breached the earnest money contract regarding arbitration.
Following arbitration, a Texas court reversed the findings of the arbitrator and ruled in favor of the center’s new owners.
But a Texas appellate court, in turn, reversed the lower court decision, explaining, “Because [the buyers and sellers of the shopping center] were parties to a valid arbitration agreement and the claims that were resolved by the arbitrator were within the scope of the parties’ arbitration agreement, the claims were properly arbitrated. We hold that the lower court erred in granting the [new owners’] motion to vacate the arbitration award. We reverse the order vacating the arbitration award…and instruct the trial court to enter judgment confirming the final arbitration award.”
(Rio Grande Xarin II, LTD v. Wolverine Robstown, L.P., 2010 WL 2697145 [Tex.App.—Corpus Christi])
Decision: July 2010
Published: July 2010