SCOTX Will Not Consider $16 Million Arbitration Award Arising Out of Energy Dispute

Originally published by Beth Graham.

On Friday, the Supreme Court of Texas declined to consider whether a Travis County trial court’s order confirming an arbitration award should be overturned because no transcription of the arbitration hearing was created.  In Dixie Equipment, LLC v. Energia de Ramos, S.A.P.I. de C.V., No. 18-0901, the Third District Court of Appeals affirmed the trial court’s order confirming a $16 million arbitration award that was issued following a dispute between two energy companies.

A detailed background on the case is available in an August Disputing blog post:

Dixie Equipment, LLC and Dixie Turbine Services, LLC (“Dixie”) entered into two contracts with Energia de Ramos, S.A.P.I. de C.V. f/k/a Deacero Power S.A.P.I. de C.V. (“Deacero”) to procure and assemble certain equipment for a power plant located in Nuevo Leon, Mexico.  Both contracts contained an arbitration clause.  After Dixie purportedly abandoned the project, Deacero filed a demand for arbitration.  In response, Dixie filed a counterclaim against Deacero.

The two companies selected an arbitration panel, agreed to a discovery timeline, and scheduled a final arbitration hearing to take place in Austin, Texas using International Centre for Dispute Resolution (“ICDR”) procedures.  About five months before the hearing, however, Dixie notified the arbitration panel and Deacero that the company was no longer financially capable of participating in arbitral proceedings or paying its share of the arbitration fees.  Despite this, the final arbitration hearing took place as scheduled.

Dixie’s legal counsel failed to attend a portion of the arbitration proceedings and the hearing was not transcribed.  The arbitral panel ultimately issued a default award of more than $16 million in favor of Deacero.  A Travis County trial court confirmed the arbitration award against Dixie and the company filed an appeal with the Third District Court of Appeals in Austin.

The Austin appellate court was unpersuaded by Dixie’s assertion that the trial court’s order should be reversed because there was no record of the final arbitration hearing.  The Court of Appeals also held Dixie’s claim the company’s due process rights were violated “because lack of financial resources barred it from presenting its counterclaim” lacked merit.

In September, Dixie filed a petition for review with the Supreme Court of Texas.  According to Dixie’s petition, the issues presented in the case were:

1. Whether the district court erred in confirming an arbitration award and declining to vacate such award when an arbitration panel received evidence with only one party present and without an official record, and thus in an ex parte fashion, such that it constituted misbehavior by arbitrators sufficient to vacate an arbitration award as prejudicial to the rights of the party that was not present under the Federal Arbitration Act, 9 U.S.C. § 10 (c).

2. Whether, as in a judicial proceeding, a default judgment granted in an arbitration must be vacated if a party that did not participate wishes to appeal, but cannot, because the other party’s failure to record the proceedings makes it impossible to secure a statement of facts.

3. Whether a corporation’s inability to appear in an arbitration proceeding to present its counterclaims, due to the prohibitive cost of the proceedings, is a violation of its due process rights such that the arbitration award should have been vacated.

Last week, the Texas Supreme Court denied Dixie’s petition for review without comment.

Photo by: Karsten Würth (@inf1783) on Unsplash

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