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Click here for the full text of this decision FACTS:The case arose from a dispute over control of a company called Fiber Systems International Inc. The appellants owned a minority of the shares in that company, while a company named CCR Ltd. owned a majority. The dispute resulted in litigation settled by means of a stock purchase agreement. In that agreement, the appellants agreed to sell their shares in Fiber Systems International Inc. to CCR Ltd. and Michael Roehrs. The purchasers later assigned all their rights under the agreement to FSI. The agreement contained a mandatory arbitration clause. The agreement marked a cease-fire instead of a lasting peace. Less than a year later, FSI demanded arbitration with the American Arbitration Association (AAA). In its arbitration demand, FSI accused the appellants of breaching warranties and representations contained in the agreement, and it sought damages totaling about $1.15 million. The parties then skirmished over the make-up of the arbitration panel. The agreement called for each side to appoint one arbitrator to the panel and for the two party-appointed arbitrators to appoint the third. At first, FSI selected John A. Chalk, and the appellants selected Mark A. Shank. FSI asked the AAA to disqualify Shank, which the AAA eventually did over Daniel’s and McGrath’s protest. The appellants then selected Judge Karen Willcutts as their party-appointed arbitrator and objected to Chalk. The AAA disqualified Chalk and FSI replaced him with Richard Faulkner. The AAA appointed Mike Tabor, a third arbitrator. Tabor arbitrated the dispute over several days. The arbitration ended in a split decision. The panel unanimously concluded that FSI did not establish its claims against appellants Simacek, Flower, Hazelton and Hobbs, and it ordered that FSI take nothing on its claims against them. A majority of the panel found that FSI had established its breach-of-warranty claim against appellants Daniel Roehrs and Kieran McGrath, and it awarded FSI $576,118 against those two parties jointly and severally. Willcutts dissented from this part of the award, opining that FSI had failed to prove its damages and that it should take nothing. The panel majority further found that each side had incurred exactly the same amount of attorneys’ fees and expenses ($612,000). It ruled that each side was entitled to recover half of its fees and expenses to reflect the parties’ “relative success on the merits,” and that the resulting awards should be offset so that no one recovered any fees or expenses. Willcutts would have awarded appellants all of their fees and costs. Simacek, Flower, Hazelton and Hobbs filed a motion with the AAA asking the panel to reconsider its award and to award them their attorneys’ fees and expenses, but the panel unanimously denied their motion. FSI filed suit against Roehrs and McGrath to confirm its arbitration award against them. They answered and counterclaimed for vacatur of the arbitration award on the ground that the arbitration panel exceeded its powers or was unlawfully assembled. FSI then amended to join appellants Simacek, Flower, Hazelton and Hobbs (the prevailing defendants). It still sought confirmation of the award against Roehrs and McGrath, but it prayed alternatively for vacatur of the entire award, including the take-nothing award in favor of the prevailing defendants, in the event Roehrs and McGrath succeeded in their counterclaim. The prevailing defendants answered and counterclaimed for the attorneys’ fees and expenses that they had incurred in the arbitration. They styled their counterclaim as one for modification or, in the alternative, partial vacatur of the arbitration award. FSI filed a Motion to Confirm, Motion for Summary Judgment, No Evidence Motion for Summary Judgment, and Brief in Support in which it addressed all of the counterclaims that appellants had then pleaded. The appellants filed their own competing motions for summary judgment, one by Roehrs and McGrath and one by the prevailing defendants. Roehrs and McGrath amended their pleadings to assert fraud, misconduct and misbehavior as additional grounds for vacatur. FSI then filed a supplemental motion to confirm and for summary judgment. All parties filed responses. After two hearings, the trial court granted FSI’s motion and supplemental motion, denied the appellants’ motions and confirmed the arbitration award in its entirety. The court later signed a final judgment awarding FSI $576,118 against Roehrs and McGrath jointly and severally. In keeping with the arbitration award, the court awarded no attorneys’ fees to any party. Roehrs, McGrath and the prevailing defendants appealed. FSI filed a notice of conditional cross-appeal. HOLDING:Affirmed in part, reversed and remanded in part. Roehrs and McGrath raised two issues. First, they contended that the trial court erred by refusing to vacate the arbitration award based on the AAA’s disqualification of appellants’ initial chosen arbitrator. Second, they contended that the trial court erred by refusing to vacate the arbitration award based on fraud or misconduct by FSI’s chosen arbitrator. The prevailing defendants contended that the trial court erred by refusing to modify or vacate the portion of the award denying them recovery of their attorneys’ fees and expenses incurred in defending the arbitration. FSI argued that the judgment should be affirmed but asserted two alternative positions in the event of reversal. First, it contended that a reversal of the judgment against Roehrs and McGrath should result in the vacating of the entire arbitration award. Second, it contends that a reversal of the judgment only as to the prevailing defendants should result in the vacating of the award as to attorneys’ fees and rearbitration of that issue. The court found that the evidence conclusively established that the appellants did agree to abide by the AAA’s standards regarding the impartiality of party-selected arbitrators. Second, the court found that the evidence established that the AAA’s disqualification of Shank was not so irrational or in such manifest disregard of its own rules as to permit vacatur under the FAA. The case did not involve an arbitrator who actually served despite “evident partiality,” the court stated. Roehrs and McGrath contended that the trial court should not have confirmed the award, because Faulkner failed to disclose the fact that he was not licensed to practice law in Texas. They contended that Faulkner thereby committed fraud, misconduct or misbehavior justifying vacatur under the FAA. The court concluded that Roehrs and McGrath adequately pleaded grounds for vacatur. The trial court properly concluded that the evidence did not raise a genuine issue of material fact that Faulkner committed fraud in connection with his CV. Nonetheless, the court reversed and remanded to determine whether misconduct or misbehavior occurred. Thus, the court found that the trial court correctly granted summary judgment against appellants Simacek, Flower, Hazelton and Hobbs on their counterclaim. The court also found that the trial court correctly rejected as a matter of law the counterclaims by Roehrs and McGrath that the arbitrators exceeded their authority by proceeding without Shank and that the award was procured by fraud. The court, however, held that the trial court erred by granting summary judgment on Roehrs and McGrath’s counterclaim based on alleged misconduct or misbehavior by arbitrator Faulkner, and it reversed and remanded as that counterclaim only. OPINION:Mazzant, J.; Moseley, FitzGerald and Mazzant, JJ.

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