Is a transcript of an arbitration proceeding required to argue that the award should be vacated on appeal?  Matthew Rindt, a Partner at Gerstle Snelson, successfully argued to the Fort Worth Court of Appeals that vacatitur is not appropriate without one.

In Spears Construction Management, LLC v. Physical Therapy Dynamics, PLLC, Spears Construction Management, LLC (Spears) entered into a contract with Physical Therapy Dynamics (PTD) to construct a physical therapy facility in Crowley, Texas (Project). The contract contained a binding arbitration clause, requiring any disputes between Spears and PTD be resolved through arbitration.

Spears initiated arbitration, asserting claims against PTD and others (collectively, PTD) for breach of contract, foreclosure of a mechanic’s lien, violation of the Prompt Payment Act and other causes of action relating to non-payment for labor and materials supplied for the Project. PTD counterclaimed, asserting that Spears delayed completion of the Project, the payment applications included items for which Spears was not owed, and Spears’ work was defective.

The Arbitrator entered a final award ordering PTD pay Spears $217,497 for amounts owed for the Project, pre-judgment interest, attorney’s fees, and reimbursement of Spears’ share of the arbitration costs.  Spears, filed a motion to confirm the award.  In response, PTD filed a motion to vacate the award or alternatively correct it, arguing that the Arbitrator improperly denied a motion for continuance that would have allowed PTD to subpoena Spears’ bank records and show that Spears had in fact received payment for the claimed work.

Notably, at neither the telephonic hearing on PTD’s motion for continuance nor the final evidentiary hearing in arbitration was a transcript made of the proceedings. Nonetheless, the trial court vacated the arbitration award and remanded the case to the Arbitrator for further proceedings.  Spears appealed.

The Fort Worth Court of Appeals, in its February 2023 opinion, affirmed the arbitration award and reversed the trial court.  The Court held that without a record from the final hearing, the Court must presume the evidence presented at the time of arbitration was adequate to support the award. As such, PTD failed to provide evidence showing the award was deficient and/or that the arbitrator failed to hear all the evidence.

As the Spears case indicates, decisions made early in the life of a claim can have profound consequences.  For instance, PTD’s decision not to retain a court reporter to transcribe the hearing on the motion for continuance or the final evidentiary hearing undermined its much later attempts to vacate the award.

The attorneys in our Austin and Dallas office have significant experience litigating and arbitrating payment disputes on behalf of almost every member of the design and construction industry.  Please contact us at info@gstexlaw.com with any questions you may have.

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