Texas Supreme Court Rules on Interlocutory Appeal of an Arbitration Dispute

The Texas Supreme Court held that Texas Civil Practice and Remedies Code Section 51.016 does not allow an interlocutory appeal of an order appointing an arbitrator.

In CMH Homes,et al.v. Adam Perez, No. 10-0688 (Tex., May 27, 2011), Adam Perez purchased a manufactured home from CMH Homes , Inc. from salesman Bruce Robinson Moore, Jr. and Vanderbilt Mortgage and Finance financed the purchase.

The contract between CMH Homes and Perez contained an arbitration clause which provides that “All disputes, claims or controversies arising from or relating to this contract . . . shall be resolved by mandatory binding arbitration by one arbitrator selected by Seller with Buyer’s consent.”

In November, 2009, Perez sued CMH Homes, the mortgage company, and the salesman for fraud and violations of the Texas Debt Collection Act. In January, 2010, Perez filed a motion to compel arbitration. The parties agreed to arbitration under the Federal Arbitration Act (“FAA”) but could not agree on the arbitrator. In March, 2010, the trial court issued an order appointing Gilberto Hinojosa as the arbitrator.

The Texas Supreme Court now considers two issues:

(1) Whether the court of appeals lacked jurisdiction under Texas Civil Practice and Remedies Code Section 51.016 of an interlocutory appeal of an order appointing an arbitrator. The court first explained that prior to the Legislature’s 2009 amendment (S.B. 1650) to the Texas Arbitration Act (“TAA”), parties seeking to appeal an order refusing to compel arbitration would file two separate appellate proceedings: (a) Under the TAA, a party could bring an interlocutory appeal of an order denying arbitration; and (b) Under the FAA, a party could only challenge an order denying arbitration by mandamus. Section 51.016 now provides that a party may appeal a judgment or interlocutory order “under the same circumstances that an appeal from a federal district court’s order or decision would be permitted by 9 U.S.C. Section 16.” The court then concluded that the court of appeals correctly determined it was without jurisdiction to hear an interlocutory appeal pursuant to Section 51.016.

(2) Whether the court of appeals should have considered CMH’s interlocutory appeal as a petition for writ of mandamus. The Texas Supreme Court, although CMH had not filed a separate petition for writ of mandamus, the court of appeals nonetheless should have acted as though such a petition had been filed: “We will not unnecessarily waste the parties’ time and further judicial resources by requiring CMH to file a separate document with the title “petition for writ of mandamus” listed on the cover where the party has expressly requested mandamus treatment of its appeal in an uncertain legal environment.”

The Texas Supreme Court reversed and remanded for the court of appeals to consider this appeal as though it had been filed as a mandamus proceeding.

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