The Dallas Court of Appeals has affirmed a trial court order vacating an arbitration award against a Dallas-area homebuilder. William Hann and Susanne Hahn v. Vintage Estate Homes, LLC and Vintage Estate Homes of Texas, LLC (No. 05-21-00103-CV) arose over alleged construction defects in a new home purchased by the homeowners. As part of the purchase agreement, the homeowners executed two contracts containing arbitration provisions. The first, pre-closing agreement provided for a limited warranty under which disputes would be decided by an American Arbitration Association (AAA) arbitrator. The second, post-closing agreement substituted a new limited warranty under which disputes would be resolved by either of two different arbitration firms. In 2019 the homeowners filed a request for arbitration with the AAA, which proceeded to arbitration in Austin despite the objections of the homebuilder. The arbitrator returned a final award in favor of the homeowners of more than $275,000 and an additional $58,000 in attorney’s fees. The homebuilder filed a petition to vacate the award in a Dallas County court-at-law. The trial court vacated the award.

On appeal, the homeowners argued that the parties had a valid agreement requiring arbitration with the AAA, which reserved the issue of arbitrability for the arbitrator, and that the court could not vacate an arbitration award “even if it is based on a mistake of law or fact.” The court of appeals disagreed, holding that the AAA arbitrator lacked jurisdiction under the post-closing agreement that required another firm to provide the arbitration services. Thus, the arbitrator’s final award was void for lack of jurisdiction.

There is nothing really special about this case other than that the court of appeals had to remind a party of its obligations under an arbitration agreement to which it had consented. But the fact that the AAA arbitrator proceeded with the arbitration over the objections of the homebuilder, with knowledge that the post-closing agreement called for another arbitration service, is unsettling. In addition to that, it seems a bit fishy that the AAA arbitrator was an Austin attorney who conducted the hearing not in Dallas, where the home was located, but in Austin, where nobody had an interest in the case. In any event, even if this chain of events did not represent an effort to pull a fast one, it ended up costing a lot of money just to go back to the drawing board. This is the kind of thing that raises legal costs for everybody. Kudos to the trial court and Dallas Court of Appeals for shutting it down as soon as they could.

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