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Click here for the full text of this decision FACTS:The dispute centered around an employment agreement between Richard Leon Werline and East Texas Salt Water Disposal Company Inc. entered into by the parties on Nov. 30, 2000. Werline, an employee of East Texas since 1996, alleges that East Texas committed a material breach of his employment contract when it transferred him to a new position. In the employment agreement, East Texas agreed to employ Werline as operations manager for five years. In the event of a breach of the agreement by East Texas, the agreement gave Werline several rights, including the right to terminate his employment and receive two years of severance pay or a lump sum payment. Werline testified that his duties included: 1. management of day-to-day field operations through supervision of field personnel; 2. approving financial transactions related to operations; 3. management representation with the union; 4. representing the company with the railroad commission; 5. supervision and management of the company engineer, including the company’s survey crew; 6. supervision and management of the purchasing department; and 7. evaluation of special projects. East Texas modified Werline’s duties in a memorandum from Adams dated April 21, 2003, assigning him to investigate the alternative businesses of a skimmed oil recovery plant and the disposal of non-Woodbine water. “Most of [Werline's] other duties as Operations Manager will be handled by myself or other people,” the memo read. Werline delivered a letter to Clements, dated July 28, 2003, notifying East Texas that the company had breached his employment agreement by removing him from the duties normally associated with the position of operations manager. Werline’s claim was submitted to binding arbitration. Following a three-day hearing, the arbitrator, in a 12-page judgment, found, inter alia, that East Texas’ primary business of disposal of salt water from East Texas oil-field production was declining. The arbitrator further concluded East Texas had materially breached the contract by not continuing to employ Werline as operations manager and awarded Werline two years of compensation under the severance provisions of the agreement, as well as attorneys’ fees and expenses. Werline filed a motion in the trial court to confirm the arbitrator’s award. East Texas filed a motion to vacate the arbitrator’s award. The trial court found that there was no evidence to support several of the arbitrator’s findings and that the material factual findings in the award were so against the evidence and the stipulated and judicially admitted facts before the arbitrator that they manifested gross mistakes in fact and law; a failure to exercise honest judgment; a lack of impartiality; and willful misconduct resulting in an award that was arbitrary and capricious. The trial court denied Werline’s motion to confirm, vacated the arbitration award, and ordered a rehearing. Werline sought an interlocutory appeal. HOLDING:Reversed and rendered. Because arbitration is favored as a means of dispute resolution, every reasonable presumption must be indulged to uphold the arbitrator’s decision, the court stated. Review is so limited that an arbitration award may not be vacated even if there is a mistake of fact or law, the court further stated. The common-law grounds for vacating an arbitration award, the court stated, are: 1. fraud; 2. misconduct; or 3. such gross mistake as would imply bad faith and failure to exercise honest judgment. A gross mistake, the court explained, is a mistake that implies bad faith or a failure to exercise honest judgment and results in a decision that is arbitrary and capricious. A judgment rendered after honest consideration given to conflicting claims, no matter how erroneous, is not arbitrary and capricious, the court added. The court found more than a scintilla of evidence to support the arbitrator’s conclusion that East Texas materially breached the contract. A reasonable person, the court stated, could have concluded from the evidence that Werline was no longer responsible for the duties normally associated with the position of operations manager. The trial court further erred, the court held, in concluding the arbitrator committed a gross mistake. The question before the trial court was not whether the arbitrator reached the correct conclusion, but merely whether the arbitrator erred so egregiously that bad faith can be inferred. The arbitrator’s conclusion, the court stated, that the board of directors’ action was a material breach of the agreement was clearly not so erroneous as to indicate bad faith or a failure to exercise honest judgment. OPINION:Ross, J.; Morriss, C.J., and Ross and Carter, J.J.

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