On Jurisdiction and Arbitration Awards

A long-running dispute between former business parties and their attorneys has resulted in a lengthy opinion affirming the trial court’s determination that it lacked subject matter jurisdiction over the case. The original dispute had been submitted to arbitration, which resulted in a large award of damages and attorney fees against the defendants. The Court of Appeals eventually set aside that award, holding that the arbitrator’s failure to disclose his personal relationship with plaintiffs’ counsel constituted “evident partiality” that, under the circumstances, required vacatur of the arbitration award. Karlseng v. Cooke, 346 S.W.3d 85 (Tex. App.–Dallas 2011, no pet.). Following that ruling, the defendants in the original arbitration filed suit against the lawyers and law firm that represented the plaintiffs, as well as the arbitrator and the arbitration agency, for fraud and other related claims. Despite the fairly complex set of facts, the Court of Appeals affirmed the dismissal of the new lawsuit for lack of subject matter jurisdiction, concluding that jurisdiction was preempted by the Texas Arbitration Act because the substance of the case was a prohibited collateral attack on the vacated arbitration award. Thus, the plaintiffs could not seek to hold the arbitrator, the arbitration agency, or the attorneys liable for the expenses they incurred in defense of the original arbitration proceeding.

Patten v. Johnson, No. 05-12-01695-CV