National Signs, LLC and National Signs Holding, LLC, and Louis Girard v. Ali Rassouli ( 2017 )

Affirmed and Memorandum Opinion filed December 14, 2017.
In The
Fourteenth Court of Appeals
NO. 14-15-00353-CV
NO. 14-16-00992-CV
ALI RASSOULI, Appellant/Cross-Appellee
V.
NATIONAL SIGNS HOLDING, LLC, NATIONAL SIGNS, LLC, AND
LOUIS GIRARD, Appellees/Cross-Appellants
On Appeal from the 133rd District Court
Harris County, Texas
Trial Court Cause No. 2014-42950
MEMORANDUM OPINION
In this appeal from a judgment confirming an arbitration award, the issues are
whether the trial court erred by failing to modify the award and its own judgment;
and whether we, in our own discretion, should grant a motion for sanctions under
Rule 45. Finding no error, we affirm the trial court’s judgment and deny the motion
for sanctions.
BACKGROUND
Ali Rassouli founded a successful company, which he later sold to National
Signs Holding, LLC. The sale culminated in the execution of two contracts that are
pertinent here: first, an Interest Purchase Agreement, which conveyed the old
company to the new company; and second, an Employment Agreement, which
established the terms of Rassouli’s position as an executive with the new company.
Within months of the conveyance, Rassouli was terminated from his executive
position. Rassouli sued the new company, a related entity, and a related individual
(collectively, “National”). National countersued, and the parties mutually agreed to
submit their claims to binding arbitration.
The arbitrator issued an award addressing multiple subjects. We highlight
only two of those subjects here.
First, the arbitrator found that National had terminated Rassouli without
cause, which meant that Rassouli was entitled to certain compensation. The
arbitrator articulated a formula for arriving at this compensation, but she did not
determine the dollar amount that was due under that formula. Instead, the arbitrator
left the parties to determine the dollar amount for themselves. The arbitrator also
provided that if the parties could not stipulate to the dollar amount within thirty days,
then she could resolve the dispute on the submission of written evidence.
Second, the arbitrator found that Rassouli was bound by valid non-
competition obligations under both the Interest Purchase Agreement and the
Employment Agreement. Regarding the Interest Purchase Agreement, the arbitrator
declared that the non-competition obligation ran for the five-year period between
January 1, 2012 and January 1, 2017. Regarding the Employment Agreement, the
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arbitrator declared that the non-competition obligation ran for the two-year period
between August 26, 2012 and August 26, 2014.
Neither side was satisfied with the award. National filed an application with
the trial court to modify the award, arguing that the arbitrator had made an evident
miscalculation or an evident mistake concerning Rassouli’s non-competition
obligation under the Employment Agreement. National asserted that the non-
competition period should run for five years under the plain terms of that agreement,
rather than the two years that were cited in the award. National asked the trial court
to correct that portion of the award or, in the alternative, to delete that portion of the
award, claiming that the duration of the non-competition obligation had not even
been submitted to the arbitrator.
Rassouli filed an application with the trial court that also focused on the non-
competition obligation. Citing a separate provision in the Employment Agreement,
Rassouli argued that the non-competition obligation was nullified when National
terminated him without cause. Rassouli accordingly asked the trial court to vacate
or modify the award, or simply to refer the matter back to the arbitrator so that she
could correct the award herself.
Both sides moved for summary judgment, with each side arguing that the
other’s application should be dismissed with prejudice because the relief requested
was unavailable as a matter of law. The trial court granted both motions on separate
dates and in separate orders. The second order did not contain language stating that
it finally disposed of all parties and claims, but when combined with the first order,
it appeared to have that effect. Indeed, Rassouli filed a notice of appeal, apparently
believing that the second order was final and appealable.
Before the trial court lost its plenary power, National moved the trial court to
enter a new judgment that “complie[d] with the controlling statutes.” In a footnote,
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National referred to two statutes under the TAA, but National did not explain what
those statutes required or even how the trial court had failed to comply with them.
National appeared to suggest that the trial court still needed to confirm the arbitration
award, which both statutes mandate under certain circumstances.
The trial court granted National’s motion and signed an order saying that it
“will enter a final judgment that . . . complies with the controlling statutes.” Despite
that order, the trial court did not enter a new judgment or confirm the award. Thus,
the parties proceeded with their appeal.
In his brief before this court, Rassouli argued that the arbitration award was
defective because it was not final. This point focused on the compensation issue,
which Rassouli had not challenged in his application to the trial court. Rassouli
argued that the award contained “a blank” because the dollar amount had not been
determined. Rassouli also explained that the parties had attempted to resubmit the
compensation issue to the arbitrator, but the arbitrator expressed reluctance to do
anything further without a court order authorizing her jurisdiction.
National responded that the compensation issue was ministerial, and that an
appellate court could resolve the issue on its own. In a cross-appellant’s brief,
National argued that the trial court had erred by failing to modify the portion of the
award addressing Rassouli’s non-competition obligations. National also argued that
the trial court had erred by failing to confirm the award as required by the TAA.
The case submitted with oral argument before a different panel of this court,
and that panel promptly abated the appeal because it was uncertain about its own
appellate jurisdiction. The panel requested the trial court to clarify its intent to finally
dispose of all parties and claims through its summary-judgment order. The panel
instructed the trial court that it could modify this order by expressly making it final
and appealable, if modification were necessary. The panel also indicated that the
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trial court could consider any additional requests for relief presented by the parties,
including a motion to confirm the arbitrator’s award.
Back before the trial court, National moved to enter a new judgment
confirming the award, and Rassouli moved to refer the case back to the arbitrator.
The trial court granted Rassouli’s motion. In its referral order, the trial court
authorized the arbitrator to make a final determination on the compensation issue
and on “any other issues the parties feel needs clarification.”
The parties submitted their evidence on the compensation issue to the
arbitrator. In addition to that evidence, National submitted a request to the arbitrator
that she modify the portion of her earlier award regarding Rassouli’s non-
competition obligation under the Employment Agreement.
After taking those matters under advisement, the arbitrator issued a new
award. Regarding the compensation issue, the arbitrator credited Rassouli’s
evidence and granted him the exact dollar amount that he had requested. Regarding
the non-competition issue, the arbitrator made the following declaration:
The Employment Agreement and Interest Purchase Agreement require
that the period of non-competition will be the later of five years after
the Closing Date or two years after [Rassouli’s] employment is
terminated. Here, the termination of [Rassouli] took place in July, 2012;
therefore, his period of [non-competition] is 5 years after the effective
date of closing, or January 1, 2017.
The parties returned to the trial court, where Rassouli moved to confirm the
new award and National moved to modify it. National argued that the arbitrator had
made an evident miscalculation or evident mistake in its description of the Closing
Date, which was when the non-competition period was set to begin. National asked
the trial court to correct this date, or in the alternative, to just delete this portion of
the award.
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The trial court granted Rassouli’s motion, denied National’s motion, and
entered a final judgment confirming the new award. National then moved to modify
that judgment, asking the trial court to “clearly and adequately set forth the relief
granted by the Award.” No action appears to have been taken on that motion.
National now brings this latest appeal, challenging the trial court’s failure to
modify both the award and the judgment confirming the award. Rassouli, apparently
satisfied after his return to the arbitrator, does not challenge any part of the trial
court’s new judgment. Instead, he argues that National should be sanctioned because
its appeal is frivolous.
MOTION TO MODIFY THE ARBITRATION AWARD
When considering a trial court’s ruling on a motion to modify an arbitration
award, our review is de novo. See Southwinds Express Constr., LLC v. D.H. Griffin
of Tex., Inc., 513 S.W.3d 66, 70 (Tex. App.—Houston [14th Dist.] 2016, no pet.).
Even under a de novo standard, the scope of our review is “extraordinarily narrow.”
See E. Tex. Salt Water Disposal Co. v. Werline, 307 S.W.3d 267, 271 (Tex. 2010).
We presume that an arbitration award is valid, and we treat the award as having the
same effect as a judgment from a court of last resort. See CVN Group, Inc. v.
Delgado, 95 S.W.3d 234, 238 (Tex. 2002). Thus, we will not disturb an award even
if, in our view, the arbitrator misapplied the law. See D.R. Horton-Tex., Ltd. v.
Bernhard, 423 S.W.3d 532, 534 (Tex. App.—Houston [14th Dist.] 2014, pet.
denied).
Under the TAA, a trial court may only modify or correct an award if:
(1) the award contains:
(A) an evident miscalculation of numbers; or
(B) an evident mistake in the description of a person, thing, or
property referred to in the award; [or]
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(2) the [arbitrator has] made an award with respect to a matter not
submitted to [her] and the award may be corrected without affecting the
merits of the decision made with respect to the issues that were
submitted.
Tex. Civ. Prac. & Rem. Code § 171.091(a).
National moved to modify the award based on both of these grounds. We
address each ground separately, but in reverse order, because the first ground
assumes that the arbitrator had the authority to decide the issue submitted to her.
Matter Not Submitted. National argues that the trial court should have
modified the award by excising the portion addressing the non-competition issue
because that issue was never submitted to the arbitrator.
When considering whether an issue has been submitted to the arbitrator, we
look at the agreement to arbitrate. See In re S.M.H., 523 S.W.3d 783, 789 (Tex.
App.—Houston [14th Dist.] 2017, no pet.). The arbitrator derives her power from
that agreement, which limits her decision to the “matters submitted therein either
expressly or by necessary implication.” See Nafta Traders, Inc. v. Quinn, 339
S.W.3d 84, 90 (Tex. 2011); Gulf Oil Corp. v. Guidry, 327 S.W.2d 406, 408 (Tex.
1959).
In their arbitration agreement, the parties agreed that the arbitrator would have
the power to resolve “any dispute . . . arising under or relating to this Agreement or
any other matters existing between them, including the agreements identified
below.” The arbitration agreement then identifies the Interest Purchase Agreement
and the Employment Agreement as two of the agreements existing between the
parties.
The arbitration agreement does not specifically identify the disputes between
the parties, but it does provide a mechanism for submitting those disputes to the
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arbitrator. The agreement says: “Either party to this Agreement may submit any
dispute that is subject to arbitration by giving written notice to the other party with
a copy to [the arbitrator].”
National invoked this provision on at least two separate occasions: the first
occurring before the initial award; and the second occurring before the amended
award, just after the trial court referred the parties back to arbitration. On that second
occasion, National sent a letter to the arbitrator complaining about her initial award,
which said that Rassouli’s non-competition obligation under the Employment
Agreement lasted for the two-year period between August 26, 2012 and August 26,
2014. Believing that both the duration and the dates were wrong, National requested
the arbitrator to extend the period to five years and “to modify the date on which
[Rassouli’s] non-compete obligations under the Employment Agreement expire to
the correct date, April 12, 2017.” By this letter, National plainly submitted the term
of Rassouli’s non-competition obligation to the arbitrator for determination.
Nevertheless, National argues that this issue was not submitted to the
arbitrator, citing only the letter that was sent before the initial award. That argument
is immaterial because this appeal concerns the amended award, not the initial award.
Evident Miscalculation or Evident Mistake. As an alternative basis for
modification, National argues that the arbitrator made an evident miscalculation or
evident mistake by beginning Rassouli’s period of non-competition on January 1,
2012, which was the effective date of closing, rather than on April 12, 2012, which
was the actual date of closing. This argument is based on an interpretation of the
parties’ two agreements.
National starts with the Employment Agreement, which provides that
Rassouli’s non-competition obligation ends “on the date which is the later of five
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years after the Closing Date (as defined in the Interest Purchase Agreement) or two
years after [Rassouli’s] employment with the Company terminates for any reason.”
Believing that the five-year period applies, National then turns to the Interest
Purchase Agreement for a definition of “Closing Date,” which appears in the
following provision:
This Agreement, and transfer of beneficial title to the Purchased
Interests, shall be effective on the Effective Date, even though
completion and Closing occurs after that date. Consummation of the
transactions contemplated by this Agreement (the “Closing”) shall take
place at the offices of Porter Hedges LLP, 1000 Main Street, 36th Floor,
Houston, TX 77002 at 10:00 a.m., local time, on April 12, 2012, or such
other date and time as the Parties shall otherwise agree. The date upon
which the Closing occurs is referred to herein as the “Closing Date.”
After reciting these contractual provisions, National presents the entirety of
its appellate argument in just two sentences, which we reproduce here:
The arbitrator applied the effective date of the contract instead of the
Closing Date; this constitutes an evident miscalculation that this Court
can correct under Section 171.091(a)(1)(A) of the Texas Civil Practice
& Remedies Code, and not a substantive determination of the parties’
rights. Likewise, or alternatively, calculating the five-year period from
the effective date of the contract instead of the Closing Date constitutes
an “evident mistake” that this Court can correct under Section
171.091(a)(1)(B) of the Texas Civil Practice & Remedies Code.
As can be seen from this reproduction, National’s argument relies on only two
statutory provisions for authority. We overrule National’s argument because, under
the plain language of those provisions, neither applies.
Section 171.091(a)(1)(A) requires the modification of an award containing an
evident miscalculation of numbers. E.g., Sydow v. Verner, Liipfert, Bernhard,
McPherson & Hand, Chartered, 218 S.W.3d 162, 169–70 (Tex. App.—Houston
[14th Dist.] 2007, no pet.) (the arbitrator made an evident miscalculation of numbers
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when the arbitrator expressly awarded damages and interest, but failed to include the
interest amount in the award’s final summation). National’s complaint here is about
dates, not numbers. Even if this case involved an evident miscalculation of numbers,
National’s argument would still fail because National did not produce a complete
record of the arbitration proceedings, which is necessary to establish the
miscalculation. See Riha v. Smulcer, 843 S.W.2d 289, 293 (Tex. App.—Houston
[14th Dist.] 1992, writ denied) (holding that an evident miscalculation of numbers
“must be clear, concise and conclusive from the record”); see also Anzilotti v. Gene
D. Liggin, Inc., 899 S.W.2d 264, 267 (Tex. App.—Houston [14th Dist.] 1995, no
writ) (“When a non-prevailing party seeks to modify or vacate an arbitrator’s award,
he bears the burden to bring forth a complete record that establishes his basis for
relief.”).
As for National’s other argument regarding Section 171.091(a)(1)(B), that
provision only requires the modification of an award containing an evident mistake
in the description of a thing. National’s complaint here is that the arbitrator
misinterpreted the Closing Date, not that she mistakenly described the Closing Date.
Even if we were to agree that the arbitrator’s interpretation of the Closing Date were
erroneous, that type of error provides no basis for disturbing the award. See Perry
Homes v. Cull, 258 S.W.3d 580, 607 (Tex. 2008) (“If arbitrators simply misinterpret
a contractual clause such as the reimbursement clause, that type of error is not one
which will justify setting aside an award.”); Denbury Onshore, LLC v. Texcal
Energy S. Tex., L.P., 513 S.W.3d 511, 520 (Tex. App.—Houston [14th Dist.] 2016,
no pet.) (“Because the parties bargained for the arbitrator’s construction of their
agreement, an arbitral decision even arguably construing or applying the contract
must stand, regardless of a court’s view of its (de)merits.”); Patel v. Moin, No. 14-
15-00851-CV, 2016 WL 4254016, at *5 (Tex. App.—Houston [14th Dist.] Aug. 11,
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2016, pet. denied) (mem. op.) (“These contentions provide no basis for reversal
because, at most, they assail the arbitrator’s reasoning as being legally erroneous or
internally inconsistent. Contentions that the arbitrator misinterpreted the contract or
misapplied the law provide no basis for disturbing an arbitration award.”).
MOTION TO MODIFY THE JUDGMENT
In its next issue, National argues that the trial court erred by failing to modify
its own judgment to expressly state the relief granted in the award. Once again,
National condenses its entire argument into just two sentences:
[National] also moved the trial court to modify the judgment to address
the parties’ apparent confusion over the relief afforded to [Rassouli]
under the amended award. The trial court should have modified its
judgment to clarify by decretal language the relief granted to the
parties.1
In its main brief, National does not explain what was meant by “apparent
confusion,” nor does National identify what decretal language the trial court should
have given. However, in a reply brief, National expands on its argument by
providing some factual context. National asserts that, after the trial court confirmed
the award, the parties disagreed about how much money was actually owed to
Rassouli after interest, offsets, and other liabilities. But again, National offers no
suggestion as to what specific decree that the trial court should have made.
The trial court’s judgment contains a decree confirming the arbitration award.
The trial court complied with the TAA by making that decree. See Tex. Civ. Prac.
& Rem. Code § 171.087 (“Unless grounds are offered for vacating, modifying, or
correcting an award under Section 171.088 or 171.091, the court, on application of
1
Record citation omitted.
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a party, shall confirm the award.”). National has supplied no authority for showing
that this decree is somehow erroneous or insufficient.
A brief must contain a clear and concise argument, with appropriate citations
to authorities. See Tex. R. App. P. 38.1(i). Because National has not cited to any
authorities, statutory or otherwise, we could not grant relief to National without
making legal arguments on its behalf, which we decline to do. We overrule
National’s complaint as inadequately briefed.
MOTION FOR SANCTIONS
If we determine that an appeal is frivolous, we have the discretion to award
the prevailing party just damages. See Tex. R. App. P. 45; Glassman v. Goodfriend,
347 S.W.3d 772, 782 (Tex. App.—Houston [14th Dist.] 2011, pet. denied) (en banc).
We exercise such discretion “with prudence, caution, and after careful deliberation,”
imposing sanctions only when the circumstances are “truly egregious.” See Baker
Hughes Oilfield Operations, Inc. v. Hennig Prod. Co., 164 S.W.3d 438, 448 (Tex.
App.—Houston [14th Dist.] 2005, no pet.). Such circumstances include failing to
present a complete record, raising unpreserved errors that were not asserted in the
trial court, failing to file a response to a request for appellate sanctions, and filing an
inadequate brief. See Tate v. E.I. Du Pont de Nemours & Co., 954 S.W.2d 872, 875
(Tex. App.—Houston [14th Dist.] 1997, no pet.).
Rassouli argues that National is deserving of sanctions because National did
not produce a record of the arbitration proceedings, National knew that the
arbitrator’s award could not be disturbed on a simple mistake of law, and National
engaged in litigation tactics to delay the execution of the award.
Although National failed to produce a record of the arbitration proceedings
and its brief is inadequate in certain respects, National has not attempted to raise new
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issues on appeal, and National responded to Rassouli’s motion for sanctions.
Without commenting on whether National’s appeal is frivolous, we do not believe
that egregious circumstances are present here, and we deny the motion for sanctions.
See Long Lake, Ltd. v. Heinsohn, No. 14-09-00613-CV, 2010 WL 1379979, at *4
(Tex. App.—Houston [14th Dist.] Apr. 8, 2010, no pet.) (mem. op.).
CONCLUSION
The trial court’s judgment is affirmed.
/s/ Tracy Christopher
Justice
Panel consists of Justices Christopher, Brown, and Wise.
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