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Texas Appellate Court Rules Late Arbitration Awards Are Void

Parties arbitrating in Texas should set formal agreements for delayed awards and should consider whether to object to awards that are not timely.

In an arbitration case of first impression—Sims v. Building Tomorrow’s TalentLLC—the Seventh Court of Appeals of Texas held that courts have no authority to confirm an arbitration award issued after the deadline established by the arbitration agreement or ordered by the court.[1] Because many arbitration agreements have short deadlines, this decision has significant implications for all parties who arbitrate in Texas. 

Background

The dispute in Sims arose when parties to a mediated settlement agreement could not resolve a dispute related to the agreement. In lieu of further mediation, the parties agreed that the mediator would arbitrate the dispute and issue a final award within 14 days of final written submissions. The arbitrator did not make an award by the deadline, despite repeated inquiries by the parties.

Under the Texas Arbitration Act section 171.053(c)(1), (2), an arbitrator “shall make” an award either within the time established by an arbitration agreement or as ordered by the court upon a party’s application. If that award is not timely made and a party objects before the award is delivered to the objecting party, the arbitrator loses the authority make an award at all. Relying on section 171.053, the plaintiff in Sims objected to the award as not timely and withdrew consent to arbitrate.

Ultimately, the arbitrator issued an award approximately 19 months after the initial deadline. The order did not award anything to the plaintiff. The trial court then confirmed the award over the plaintiff’s objection.

The Court of Appeals’ Decision

The court of appeals reversed, holding that the arbitrator had no authority to issue the award and the trial court had no authority to confirm it. In an issue of first impression, the court of appeals relied on the plain language of the Texas Arbitration Act in concluding that the use of the term “shall” in the act affords the arbitrator no discretion to ignore the deadlines. The court of appeals thus concluded that the trial court erred in confirming the belated arbitration award, which was issued long after the deadline had passed.

Implications

Many arbitration agreements have short deadlines. If an arbitration award is not timely or appears to not be timely, parties should ensure that formal agreements are reached to permit any delayed ruling. Otherwise, the other party may be able to void the entire process by lodging a timely objection. Conversely, if there is a delay in a ruling and there is interest in objecting to the award, that objection should be made before any late award is received.


[1]. No. 07-12-00170-CV (Tex. App. Apr. 30, 2014), available here.

Copyright © 2023 by Morgan, Lewis & Bockius LLP. All Rights Reserved.National Law Review, Volume IV, Number 132
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About this Author

Allyson Ho, litigation lawyer, Morgan Lewis
Partner

Allyson N. Ho represents clients in high-stakes litigation in US state and federal trial and appellate courts nationwide, including the US Supreme Court, where she has argued multiple times as lead counsel. Co-chair of the firm’s appellate practice, Allyson has litigated cases in every federal court of appeals and in the highest courts of multiple states. She has won cases for Fortune 500 companies, represented former high-ranking US and foreign government officials in federal court, and counseled US senators and presidential candidates.

713-890-5720
David Levy, Intellectual property attorney, Morgan Lewis
Partner

David Levy focuses his practice on high-stakes commercial and intellectual property disputes. He also counsels clients on litigation avoidance and crisis management. With more than two decades’ experience as a trial and appellate lawyer, he has represented technology, financial services, energy, insurance, manufacturing, and retail clients in US federal and state courts, and before US and international arbitration tribunals. Several of these cases have involved billions of dollars at stake. He previously co-chaired the international litigation and Asia-Pacific practices...

713-890-5170
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