Parties to a high net worth Texas divorce may choose to arbitrate disputes because arbitration can be less expensive, less contentious, and more private than litigation. An arbitration award can be difficult to challenge, however. Under the Texas Arbitration Act, a trial court may only vacate an arbitration award based on one of the grounds listed, including the arbitrator exceeding his authority. Tex. Civ. Prac. & Rem. Code Ann. § 171.088. The arbitrator’s power is based on the arbitration agreement between the parties. In Texas, arbitration awards are presumed to be valid. When a party seeks to vacate an arbitration award, they have the burden of establishing the grounds based on the complete record. An appeals court presumes there was sufficient evidence to support the arbitration award if there is not a transcript of the arbitration hearing. A Texas appeals court recently considered a wife’s challenge to an arbitration award addressing the division of certain disputed personal property after the parties reached a mediated settlement agreement as to the property division.
The parties entered into a mediated settlement agreement (“MSA”) and memorialized it in an agreement incident to divorce (“AID”). Pursuant to the AID, the wife would receive $17 million in cash, in addition to multiple pieces of real property, vehicles, and multiple accounts. The parties were to agree in writing to the division of personal property from two of their homes and submit any items they could not agree on to arbitration. The court incorporated the AID into the final divorce decree.
Arbitration Proceedings
They later signed a binding arbitration agreement to address the disputed personal property from the two homes. Pursuant to the arbitration agreement, each party would be allowed to present a position statement orally in writing. The wife submitted a list of disputed personal property she sought to be awarded to her, including some items that were to go to her pursuant to the AID.
The wife requested a continuance. She alleged the continuance was denied, but there was nothing in the record showing it had been denied.
The wife’s attorney emailed the husband’s attorney and the arbitrator, stating they were “in agreement to proceeding informally. . .” The email also stated the court reported had been cancelled.
Following the arbitration, the arbitrator signed an award that listed the items awarded to the wife. It did not award her all of the items she requested and stated those items were awarded to the husband.
The trial court confirmed the award on the husband’s motion. The wife’s attorney conceded that the wife had created the list that the arbitrator used to determine the award.
Disputed Property
The wife appealed, arguing the arbitrator exceeded his authority by not awarding her property she was entitled to receive pursuant to the AID, including items such as a plunger, an egg timer, and pots and pans.
In this case, there was not a record of the hearing. The appeals court pointed out the wife had cancelled the court reporter. On appeal, the wife argued some items on the list should not have been considered. The wife, however, had created the list of disputed personal property that was submitted to the arbitrator. The appeals court pointed out a party cannot claim the arbitrator exceeded their authority by deciding an issue that party submitted.
Denied Continuance
The wife also argued the award should be vacated because the arbitrator refused to continue the arbitration hearing. Although a court shall vacate an arbitration award if the arbitrator refused a continuance upon a showing of sufficient cause, there was not a reporter’s record in this case. Without anything in the record to show error, the award is presumed to be correct.
The husband argued the court should consider the wife’s testimony in two hearings outside the arbitration, but the court noted there was nothing showing that evidence had been before the arbitrator. Even if the arbitrator had heard and considered that evidence, there was nothing in the record to show if that it represented the full extent of the arguments and evidence related to the continuance. The court therefore could not determine if there was sufficient cause for a continuance.
No Modification of Property Division
The wife also argued the trial court did not have the authority to confirm the award because the award changed the division of property set forth in the AID and incorporated the divorce decree.
If parties to a divorce enter into an agreement that is approved by the court, the court can incorporate the agreement into the divorce decree. Tex. Fam. Code § 7.006. A court can render orders to enforce or implement the property division stated in the divorce decree, but generally cannot modify the division once it is final. Tex. Fam. Code § 9.006.
According to the AID, disputed personal property in the two houses was subject to arbitration. The AID was incorporated into the decree. So, the appeals court reasoned, the personal property that was disputed was not included in the divorce decree. The arbitration agreement provided that “disputed personal property” was subject to arbitration, without any other restrictions. The wife included items on the list that she was to receive pursuant to the AID, indicating they were in dispute. The appeals court concluded the trial court’s order confirming the arbitration award implemented the parties’ arbitration agreement and did not modify the property division.
The appeals court also rejected the wife’s argument that the property division in the decree was res judicata. The appeals court noted that the AID had not disposed of all of the marital property, but instead provided that certain disputed personal property would be resolved in arbitration. The appeals court concluded the decree was not the final judgment and the trial court had the power to confirm the arbitration award that divided the disputed property.
The appeals court affirmed the trial court’s confirmation of the arbitration award.
Contact an Experienced Dallas Divorce Attorney
This case illustrates how contentious a high asset divorce can be. Although the parties reached agreement on the division of millions of dollars in assets, the dispute over certain personal property led not just to arbitration, but an appeal of the arbitration award. If you are considering ending your marriage, a skilled Texas high net worth divorce attorney can review your circumstances and advise you on whether arbitration may be appropriate for you. Call McClure Law Group at 214.692.8200.