In yet another case involving the boundary between the authority of courts and that of arbitrators, a homebuilder has asked the Texas Supreme Court to review a Corpus Christi Court of Appeals decision upholding an arbitrator’s award of attorney’s fees despite language in the contract specifying that the parties would pay their own fees separately.
Taylor Morrison of Texas, Inc. and Taylor Woodrow Communities-League City, Ltd. v. Michael Fulcher and Lisa Fulcher (No. 22-1024) arose from a construction defect lawsuit brought by the Fulchers against Taylor Morrison in 2015. The Fulchers asserted breach of contract, DTPA, breach of implied warranties, and negligent construction claims against the builder and sought damages for a mold infestation of their home. The purchase agreement contained an arbitration clause submitting the claims to arbitration, but the clause specifically provided that in an arbitration action under the agreement “all fees and costs shall be borne separately by the parties, including but not limited to all attorney’s fees and expert witness costs resulting from the “Dispute.” The clause went on to say that “[t]he arbitrator shall be authorized to provide all recognized remedies available in law or in equity for any cause of action that is the basis of the arbitration.”
The parties went to arbitration, and, after a four-day proceeding, the arbitrator awarded the Fulchers more than $500,000, including $166,000 in attorney’s fees and almost $33,000 in expert witness fees. When the Fulchers filed an application to confirm the arbitration award with the district court, the builder requested the court, among other things, to vacate the arbitrator’s award of attorney’s fees and expert witness fees. The trial court denied the requests and adopted the award. The builder appealed to the Houston [14th] Court of Appeals. The appeal was then transferred to the Corpus Christi Court of Appeals.
Pertinent to the matter under review at SCOTX, the court of appeals affirmed the trial court’s denial of the builder’s request to vacate the award of attorney’s fees. Although the purchase agreement did say that the parties would pay their own fees, it also said that the arbitrator was authorized to “provide all recognized remedies available in law or in equity.” One of those remedies is an award of attorney’s fees as part of the economic damages available to a prevailing party under § 27.004(g)(6), Property Code (the Residential Construction Liability Act, or RCLA). Applying the precedent of the 14th Court of Appeals in D.R. Horton-Texas, Ltd. v. Bernhard, 423 S.W.3d 532 (Tex. App.—Houston [14th Dist.] 2014, pet. denied), the court concluded that the arbitrator did not exceed his authority with respect to the award of attorney’s fees.
The court rejected the builder’s argument that it should rely on contrary decision by the Houston [1st] Court of Appeals in a similar case, Mitchell v. D.R. Horton-Emerald, Ltd., 579 S.W.3d 135 (Tex. App.—Houston [1st Dist.] 2019, pet. denied). In both D.R. Horton cases, the purchase agreements contained arbitration provisions virtually identical to the purchase agreement in this case, but the two Houston courts came to different conclusions about the arbitrator’s attorney’s fee award. In Mitchell, the court ruled that the Mitchells were not entitled to recover attorney’s and expert fees as a matter of law because RCLA “is not an independent basis for the recovery of such fees.” Here, however, the Corpus court distinguished Mitchell on the basis that the Fulchers pleaded not only a cause of action under RCLA, but a breach of implied warranties as well, an underlying cause of action entitling a prevailing party to attorney’s fees. The Corpus court, however, threw out the arbitrator’s award of expert witness fees on the basis that none of the Fulchers’ asserted causes of action entitled them to such an award.
This case is of interest because the court of appeals permitted an arbitrator to award a party attorney’s fees where the arbitration agreement appeared to specifically prevent that from happening. The obvious reason that an arbitration clause in a purchase agreement for a residential home would require the parties to pay their own attorney’s fees is to prevent a prevailing builder from collecting attorney’s fees from the homeowner. If the shoe were on the other foot and the arbitrator awarded Taylor Morrison attorney’s fees from the Fulchers, how do you think this case might have turned out?
