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13-16-00117-CV
THIRTEENTH COURT OF APPEALS
CORPUS CHRISTI, TEXAS
8/12/2016 4:45:42 PM
Dorian E. Ramirez
CLERK

No. 13-16-00117-CV

IN THE THIRTEENTH COURT OF APPEALS FILED IN
13th COURT OF APPEALS
EDINBURG, TEXAS CORPUS CHRISTI/EDINBURG, TEXAS
____________________________________________________________________________
8/12/2016 4:45:42 PM
DORIAN E. RAMIREZ
Clerk
IOC COMPANY, LLC
Appellant

v.

CITY OF EDINBURG, TEXAS
Appellee
____________________________________________________________________________

On Appeal from the 332nd District Court of Hidalgo County, Texas
Honorable, Mario E. Ramirez, Jr.
____________________________________________________________________________

APPELLEE’S RESPONSE
____________________________________________________________________________

Steven Gonzalez
SBN: 08131900
Gerald E. Castillo
SBN: 24012399

GONZALEZ CASTILLO, LLP
1317 E. Quebec Avenue
McAllen, Texas 78503
(956) 618-0115
FAX: (956) 618-0445
Email: law@valleyfirm.com
Ricardo Palacios
SBN: 24010990
Criselda Palacios
SBN: 24067812

PALACIOS GARZA & THOMPSON, P.C.
2724 West Canton Road
Edinburg, Texas 78539
(956) 318-0507
FAX: (956) 318-0575
Emails: rpalacios@pgtlawfirm.com and
cpalacios@pgtlawfirm.com

ATTORNEYS FOR APPELLEE,
CITY OF EDINBURG, TEXAS

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NAMES OF ALL PARTIES AND THEIR COUNSEL IN THE TRIAL COURT

In order that the members of the Court may determine whether they are

disqualified to serve or should recuse themselves, Appellee certifies, pursuant to

TEX. R. APP. P. 38.1(a), that the following is a complete list of the names and

addresses of all parties and their counsel in the Trial Court, to-wit:

City of Edinburg, Texas, Defendant/Appellee:

Steven Gonzalez
SBN: 08131900
Gerald E. Castillo
SBN: 24012399
GONZALEZ CASTILLO, LLP
1317 E. Quebec Avenue
McAllen, Texas 78503
Email: law@valleyfirm.com
(956) 618-0115
FAX: (956) 618-0445

Ricardo Palacios
SBN: 24010990
Criselda Palacios
SBN: 24067812
PALACIOS GARZA & THOMPSON, P.C.
2724 West Canton Road
Edinburg, Texas 78539
Emails: rpalacios@pgtlawfirm.com and cpalacios@pgtlawfirm.com
(956) 205-0848
FAX: (956) 318-0575
IOC Company, L.L.C., Plaintiff/Appellant:

Michael A. McGurk
SBN: 00797746
KITTLEMAN THOMAS, PLLC
4900-B N. 10th Street
McAllen, Texas 78504
Email: mmcgurk@ktattorneys.com
(956) 632-5018
FAX: (956) 630-5199

Jesus Garcia, Jr.
TUCKER, BARNES, GARCIA & DE LA GARZA, P.C.
JP Morgan Chase Building
712 Main, Suite 1600
Houston, Texas 77002-3297
Email: jgarcia@tbgdlaw.com
(713) 228-7425
FAX: (713) 228-7329

Apellate Counsel for Appellants

Michael A. McGurk
SBN: 00797746
Ricardo Pumarejo, Jr.
SBN: 24056168
KITTLEMAN THOMAS, PLLC
4900-B N. 10th Street
McAllen, Texas 78504
Emails: mmcgurk@ktattorneys.com and rpumarejo@ktattorneys.com
(956) 632-5018
FAX: (956) 630-5199

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TABLE OF CONTENTS

NAMES OF ALL PARTIES AND THEIR COUNSEL IN THE TRIAL COURT . . . . . . . i-ii

TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii-v

LIST OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi-vii

ISSUES PRESENTED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

1. Whether the Trial Court erred in granting a Motion to Vacate an
Arbitration Award, when it is demonstrated that (a) the Arbitrator
exceeded his powers, and (b) the Arbitrator acted by undue means . . 3

STATEMENT OF FACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-5

SUMMARY OF THE ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-9

ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-36

A. The Texas Arbitration Act requires that the Award be vacated . . . . . 10

B. The Court did not err in vacating the Arbitrator’s Award because
the Arbitrator exceeded his powers in violation of §171.088(a)(3)(A)
and the Award was obtained by undue means in violation of
§171.088(a)(1) since the Arbitrator ignored governmental
immunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-13

C. The Court did not err in vacating the Award because the Arbitrator
exceeded his powers in violation of §171.088(a)(3)(A) since the
Arbitrator ignored and re-wrote the contract and ignored the essence
of the contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13-15

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1. The Arbitrators exceeded his power because the Award does not
draw its’ essence from the contract since the Arbitrator ignored
the plain language of the contract that Appellee would not be
liable for the acts or neglect of the utility providers in violation of
§171.088(a)(3)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15-20

2. In violation of §171.088(a)(3)(A), the Arbitrator’s Award does not
draw its’ essence from the contract because the Arbitrator
ignored the plain language of the contract which required
Appellant’s written notice to Appellee of a claim for extra
compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20-22

a. The plain language of the contracts holds that failure to give
written notice to Appellee’s Engineer within the time
limitations waives Appellant’s claims to additional
compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22-26

D. The Court did not err in vacating the Arbitrator’s Award because the
Award was obtained by undue means in violation of §171.088(a)(1)
since the Arbitrator acted in bad faith by flagrantly disregarding
statutory provisions and unambiguous contractual terms . . . . . . 26-28

1. The Arbitrator disregarded unambiguous statutory provisions
under Texas Government Code §271.153(a)(1) and Texas
Utilities Code §54.203 and the contract terms which is bad faith
in violation of §171.088(a)(1). . . . . . . . . . . . . . . . . . . . . . . . 28-31

2. The Arbitrator disregarded unambiguous contractual provisions
which implies bad faith in violation of §171.088(a)(1) . . . . 31-35

E. In the alternative, the Arbitrator’s Award for the Sugar Road Project
should be modified to $191,090.82 pursuant to §179.091 . . . . . . 35

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1. The Sugar Road Project Arbitration Award Must Be Modified to
$191,090.82 because Appellant cannot recover for delays that
are not owner caused . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35-36

PRAYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

CERTIFICATE OF COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

CERTIFICATE OF SERVICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

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LIST OF AUTHORITIES

CASES Page

Ancor Holdings, LLC v. Peterson, Goldman & Villani, Inc.,
294 S.W.3d 818 (Tex. App.—Dallas 2009, no pet.) . . . . . . . . . . . . . . . . . . . . . 15

Anderman/Smith Operating Co. v. Tenn. Gas Pipeline Co.,
918 F.2d 1215 (5th Cir. 1990) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Black v. Shor, 443 S.W.3d 154 (Tex. App - Corpus Christi 2013,
pet. denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8, 25, 26

City of Weslaco v. Borne, 210 S.W.3d 782, 789 (Tex. App.—Corpus Christi
2006, pet. denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Executone Info. Sys., Inc. v. Davis, 26 F.3d 1314 (5th Cir. 1994) . . . . . . . . . . 14

Good Times Stores, Inc. v. Macias, 355 S.W.3d 240 (Tex. App. -
El Paso 2011, pet. denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8, 26

Jernigan v. Langley, 111 S.W.3d 153 (Tex. 2003) . . . . . . . . . . . . . . . . . . . . . 21

Las Palmas Medical Center v. Moore, 349 S.W.3d 57 (Tex. App. -
El Paso 2010, pet. denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 26

Major League Baseball Players Ass’n v. Garney, 121 S. Ct. 1724
(2001).....................................................................................................................13

Nafta Traders, Inc. v. Quinn, 339 S.W.3d 84, 93 (Tex. 2011) . . . . . . . . . . . . 14

Nationsbuilders, Ins. Servs., v. Houston Int’l Ins. Grp. Ltd.,
No. 05-12-01103-CV, 2013 WL 3423755, at *4 (Tex. App. -
Dallas July 2, 2013, no pet.) (mem. op.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

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Reata Const. Corp. v. City of Dallas, 197 S.W.3d 371 (Tex. 2006) . . . . . . . . 11

Stolt-Nielson S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758
(2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Tooke v. City of Mexia, 197 S.W.3d 325 (Tex. 2006) . . . . . . . . . . . . . . . . . . . 12

Townes Telecomms, Inc. v. Travis, Wolff & Co. L.L.C., 291 S.E.3d
490 (Tex. App. - Dallas 2009, pet. denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

United Steelworkers of Am. v. Enter. Wheel & Car Corp.,
80 S. Ct. 1358 (1960) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Werline v. E. Texas Salt Water Disposal Co., Inc., 209 S.W.3d 888, 901
(Tex. App. - Texarkana 2006), aff’d, 307 S.W.3d 267 (Tex. 2010) . . . . . . . . 27

Zachry Const. Corp. v. Port of Houston Auth. of Harris County,
449 S.W.3d 98 (Tex. 2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6, 8, 10, 11, 28

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CODES AND STATUTES:

Tex. Util. Code Ann. §54.203 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8, 13, 17, 27

TEX. CIV. PRAC. & REM. CODE § 171.088...........................................5, 6, 10, 13, 25

TEX. CIV. PRAC. & REM. CODE § 171.091 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,26

Tex. Loc. Gov't Code Ann., Chapter 271 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6, 11

Tex. Loc. Gov't Code Ann. § 271.151...................................................................11

Tex. Loc. Gov’t Code Ann. § 271.152 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Tex. Loc. Gov't Code Ann. §271.153.........6, 7, 8, 9, 10, 11, 13, 15, 17, 27, 28,
31, 34, 35

-viii-
I.
ISSUES PRESENTED

Whether the Trial Court erred in granting a Motion to Vacate an Arbitration

Award, when it is demonstrated that (a) the Arbitrator exceeded his powers, and

(b) the Arbitrator acted by undue means.

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II.
STATEMENT OF FACTS

The underlying disputes arise from two (2) road construction and

improvement projects between Appellant, IOC Company, L.L.C. (IOC), and Appellee,

City of Edinburg, Texas (COE). On or about April 1, 2008, COE and IOC entered

into a formal contract entitled ‘Paving and Training Improvements for Canton

Road.’ (Canton Road project) 1C.R.: 50. Subsequently, on or about June 2, 2009,

COE and IOC entered into a formal contract entitled ‘Paving and Drainage

Improvements for Sugar Road.’ (Sugar Road project) 1C.R.:57.

Pursuant to both contracts, Appellant initiated Arbitration by making a

written demand for Arbitration to the Appellee with the American Arbitration

Association. 3C.R.:117. Appellant’s only claim arises from alleged delays and

inefficiencies as a result of Appellee’s failure to relocate utility lines, owned by

others, namely AT&T, on the Canton Road project and the Sugar Road project.

3C.R.:118. Appellant admitted that it was paid for every unit of work completed,

as well as every amendment and/or change order. On July 18, 2014, an

Arbitration Award was issued by Arbitrator, Williams Andrews. The Arbitration

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Award was for a total sum of $1,362,630 for the Canton Road project and

$673,093 for the Sugar Road project, plus attorney fees. 3C.R.:117-124.

On August 14, 2014, Appellee filed its’ Petition/Application to Vacate the

Arbitration Award pursuant to §§171.088(a)(1), 171.088(a)(3)(A), and 171.091

of the TEXAS CIVIL PRACTICE & REMEDIES CODE and pursuant to Texas Common Law.

1C.R.:12-40.

On February 11, 2016, the Trial Court granted COE’s requested relief.

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III.
SUMMARY OF THE ARGUMENT

The Trial Court did not err in vacating the Arbitrator’s Award because the

Arbitrator exceeded his authority and acted by undue means. The Texas

Arbitration Act (“TAA”) identifies specific grounds for vacating an Arbitration Award.

TEX. CIV. PRAC. & REM. CODE § 171.088. Two (2) grounds applicable in this case

are: (1) that the Arbitrator exceeded his authority, and (2) that the Arbitration

Award was obtained by undue means, are applicable here.

The Court did not err in vacating the Arbitrator’s Award because the

Arbitrator exceeded his power by issuing an Arbitration Award that strays from the

clear contractual provisions and §271.153(a)(1) of the Local Government Code.

In Zachry, the Texas Supreme Court held that §271.153(a)(1) limits damages to

“owner caused” delays. (i.e. COE caused delays.) Zachry Const. Corp. v. Port of

Houston Auth. of Harris County, 449 S.W.3d 98, 103–04, 110–14 (Tex. 2014).

In line with the protections afforded to COE under Chapter 271, the contract

contained several provisions that informed Appellant that the utility lines that were

known and/or unknown to exist were owned by others. Despite the ample

evidence in the record that Appellant’s alleged damages were caused by others,

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and not COE, the Arbitrator nonetheless issued an Arbitration Award for damages

caused by others.

In addition, the Arbitrator ignored clear contractual provisions, contained in

both the Canton Road project and Sugar Road project, that dictated the manner

in which requests for additional compensation, including delays, must be

requested. The contracts go on to state that failure to adhere to this process is

waiver of any right to additional compensation. The record reflects that not only

did Appellant fail to submit a written change order for additional compensation

pursuant to the contract, at the time of the final Hearing Appellant could not

quantify its’ losses due to the alleged delays.

Thus, the Trial Court’s vacatur of the Arbitration Award was proper because

the Arbitrator exceeded his power in issuing an Arbitration Award that strays from

the clear contractual provisions and Texas statutes.

By the same token, the Arbitrator acted by other undue means since the

Arbitrator acted in bad faith by disregarding §271.153 of the Local Government

Code and unambiguous contractual provisions. Undue means is undefined by the

Texas Arbitration Act. Las Palmas Medical Center v. Moore, 349 S.W.3d 57, 70

(Tex. App.—El Paso 2010, pet. denied). Undue means can be shown by illegal,

-7-
immoral or bad faith. Good Times Stores, Inc.v. Macias, 355 S.W.3d 240 (Tex.

App.—El Paso 2011, pet. denied.) Gross mistake implies bad faith. Black v.

Shor, 443 S.W.3d 154, 169 (Tex. App.—Corpus Christi 2013, pet. denied.)

The Arbitrator disregarded controlling and unambiguous statutory provisions

under Texas Government Code §271.153(a)(1) and Texas Utilities Code §54.203

and the contract terms, which is bad faith. The Texas Government Code and

Zachry clearly limit a city’s liability to “owner caused” delays. The record clearly

shows that the Appellant and Appellant’s expert, Jens Baker, recognized that the

alleged delays encountered by Appellant were caused by others.

Similarly, the contractual provision contained within the Sugar Road project

and Canton Road project clearly state that delays caused by others, namely utility

companies such as AT&T and Texas Gas, are not the responsibility of COE.

Despite the overwhelming evidence on the record the Arbitrator issued the

Arbitration Award to Appellant for damages that were not “owner caused.” Thus,

once again the Arbitrator disregarded controlling law and contractual provisions,

which resulted in a decision that is arbitrary, capricious, and issued in bad faith.

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In the alternative, COE requests that the Arbitration Award be modified to

reflect only those damages that Appellant is allowed to recover under

§271.153(a)(1).

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IV.
ARGUMENT

A. THE TEXAS ARBITRATION ACT REQUIRES THAT THE AWARD BE VACATED.

The Texas Arbitration Act (“TAA”) identifies specific grounds for vacating an

arbitration award. TEX. CIV. PRAC. & REM. CODE § 171.088. Two (2) of those

grounds are applicable here. Consequently, the question before this Court is

whether the award should be vacated because:

(i) it was “obtained by ... other undue means;” and
(ii) “the arbitrator exceeded [his] powers.”

B. THE COURT DID NOT ERR IN VACATING THE ARBITRATOR’S AWARD
BECAUSE THE ARBITRATOR EXCEEDED HIS POWERS IN VIOLATION OF
§171.088(a)(3)(A) AND THE AWARD WAS OBTAINED BY UNDUE MEANS IN
VIOLATION OF §171.088(a)(1) SINCE THE ARBITRATOR IGNORED
GOVERNMENTAL IMMUNITY

The law is clear that a party cannot recover damages from a local

government entity for delays that are not “owner caused.” Tex. Gov’t Code Ann.

§271.153(a)(1). Appellant’s primary reason for seeking recovery in this matter

was for the delays due to the relocation of utility lines. The utility lines in question

are not owned by Appellee. Rather, they are owned by other entities, primarily,

AT&T and Texas Gas. This well-established law makes clear that COE cannot be

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held responsible for delays caused by others. Despite the unambiguous and

controlling statute the Arbitrator awarded damages to Appellant.

A municipality is entitled to sovereign immunity. Reata Const. Corp. v. City

of Dallas, 197 S.W.3d 371, 374 (Tex. 2006); Tex. Loc. Gov't Code Ann. §

271.151(3)(A). Sovereign immunity protects municipalities in two (2) ways: (1)

immunity from suit, which bars suit against a governmental entity altogether; and

(2) immunity from liability, which bars enforcement of a judgment against a

governmental entity. City of Weslaco v. Borne, 210 S.W.3d 782, 789 (Tex.

App.—Corpus Christi 2006, pet. denied). Immunity from suit remains unless the

Legislature has waived or abrogated sovereign immunity. Id. Texas Local

Government Code, Chapter 271, waives immunity from contract suits for local

governmental entities. Zachry Const. Corp. v. Port of Houston Auth. of Harris

County, 449 S.W.3d 98, 106 (Tex. 2014) (The Port of Houston Authority, owner of

a wharf, contracted with Zachry Construction Corporation to build a wharf.).

Specifically, § 271.152 of the Act states:

“A local governmental entity that is authorized by statute or the
constitution to enter into a contract and that enters into a contract
subject to this sub-chapter waives sovereign immunity to suit for the
purpose of adjudicating a claim for breach of the contract, subject to
the terms and conditions of this sub-chapter.” Id.

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The Texas Supreme Court in Zachry held that §271.152 uses §271.153 to

further define to what extent immunity has been waived. Id. at 110. The Texas

Supreme Court further held that §271.153(a)(1) a municipalities immunity is

waived to the extent that claimants damages arise from “owner caused” delays.

Id. at 103–04, 110–14. Stated another way, a claimant cannot recover for delay

damages that are not “owner caused.”

To allow Appellant to recover the Arbitration Award would ignore the

pragmatic purpose of governmental immunity: “to shield the public from the costs

and consequences of improvident actions of their governments.” Tooke v. City of

Mexia, 197 S.W.3d 325, 332 (Tex. 2006). Appellees and their respective

taxpayers should be shielded from the costs of a claim that has not and cannot

allege any wrongdoing or establish any liabilities on the part of COE.

It is clear from the record that Appellant and the Arbitrator were aware that

the delays arising from the utility lines were not “owner caused.” Rather, the

delays were caused by others. 3C.R.:817 at (Pg. 183, Ln. 24 - Pg. 184, Ln. 5; Pg.

184, Ln. 23-Pg. 184,Ln. 25); 3C.R.: 819 at (Pg. 189, Ln. 20- 25); 3C.R.: 820 at

(Pg. 196, Ln. 4-23); 3C.R.: 825 at (Pg. 213, Ln. 19-Pg. 214, Ln. 11). The Trial

Court correctly vacated the Arbitrators Award because to do otherwise would

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change the manner in which contractors and municipalities do business, and moot

Texas Law with respect to the adjudication of awards against municipalities.

4C.R.:984. Had the Arbitration Award been confirmed, this case would dictate

that municipalities and contractors could no longer operate under the basic

principles that the State has mandated. The Arbitrator did not merely make a

mistake of law in this case, but his actions clearly reflect that he exceeded his

authority and acted in bad faith. Thus, the Trial Court correctly concluded that

Arbitrator, William Andrews, disregarded well established Texas Law by awarding

damages to IOC despite Local Government Code §271.153 and Texas Utilities

Code §54.203. In this case, the record clearly shows that the delays were not

“owner caused.” Rather, the fault of a third-party, namely AT&T.

C. THE COURT DID NOT ERR IN VACATING THE AWARD BECAUSE THE
ARBITRATOR EXCEEDED HIS POWERS IN VIOLATION OF §171.088(a)(3)(A)
SINCE THE ARBITRATOR IGNORED AND RE-WROTE THE CONTRACT AND
IGNORED THE ESSENCE OF THE CONTRACT.

Vacatur is appropriate because the Arbitrator ignored and re-wrote the

explicit terms of the parties' contractual contracts. An arbitration award must be

vacated when arbitrators have exceeded their powers. TEX. CIV. PRAC. & REM. CODE

§ 171.088(a)(3)(A); Townes Telecomms., Inc. v. Travis, Wolff & Co., L.L.C., 291

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S.W.3d 490, 493-94 (Tex. App. - Dallas 2009, pet. denied). “[T]he task of an

arbitrator is to interpret and enforce a contract, not to make public policy.” Stolt

-Nielsen S.A. v. AnimalFeeds Int'l Corp., 130 S. Ct. 1758, 1768 (2010). Thus,

arbitrators exceed their powers, and may render their awards unenforceable,

when they stray from interpretation and application of the parties’ contract. Id.

(quoting Major League Baseball Players Ass'n v. Garvey, 121 S. Ct. 1724, 1728

(2001) (per curiam) (in turn quoting United Steelworkers of Am. v. Enter. Wheel

& Car Corp., 80 S. Ct. 1358, 1361 (1960))); Nafta Traders, Inc. v. Quinn, 339

S.W.3d 84, 93 (Tex. 2011).

When analyzing whether an arbitrator has exceeded his authority when

interpreting a contract, Texas Courts have held that an arbitrator's award is

“legitimate only so long as it draws its’ essence” from the parties’ contract.

Nationsbuilders, Ins. Servs., Inc. v. Houston Int'l Ins. Grp. Ltd., No.

05–12–01103–CV, 2013 WL 3423755, at *4 (Tex. App.-Dallas July 3, 2013)

(mem. op.) (citing United Steelworkers of Am. v. Enter. Wheel & Car Corp., 363

U.S. 593, 597, 80 S. Ct. 1358, 1361, 4 L.Ed.2d 1424 (1960)). “To draw its’

essence from the contract, the arbitrator's award ‘must have a basis that is at

least rationally inferable, if not obviously drawn, from the letter or purpose of the

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... agreement.... [T]he award must, in some logical way, be derived from the

wording or purpose of the contract.’ ” Id. (quoting Executone Info. Sys., Inc. v.

Davis, 26 F.3d 1314, 1325 (5th Cir.1994)).

To determine whether an arbitration award is beyond the scope of the

arbitrator's powers, the Court’s look only at the result. Id. “The single question is

whether the award, however arrived at, is rationally inferable from the contract.”

Id. (quoting Anderman/Smith Operating Co. v. Tenn. Gas Pipeline Co., 918 F.2d

1215, 1219 n. 3 (5th Cir.1990)); Ancor Holdings, LLC v. Peterson, Goldman &

Villani, Inc., 294 S.W.3d 818, 829 (Tex. App.—Dallas 2009, no pet.) (“The award

must be derived in some way from the wording and purpose of the contract, and

we look to the result reached to determine whether the award is rationally

inferable from the contract.”)

1. The Arbitrators exceeded his power because the Award does not draw its’
essence from the contract since the Arbitrator ignored the plain language
of the contract that Appellee would not be liable for the acts or neglect of
the utility providers in violation of §171.088(a)(3)(A)

The essence of the Sugar Road project contract is a road improvement

project between a local government and a contractor that encapsulates the

immunity afforded to Appellee under the TEXAS LOCAL GOVERNMENT CODE §271.153.

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The terms of the contract were written in such a way to conform with the immunity

afforded to the Appellee as it relates to delays caused by others pursuant to Texas

Local Government Code §271.153. Assuming arguendo that Appellant

encountered delays and/or inefficiency damages as a result of delays due to the

re-location of the discovered utility issues, the contract specifically precludes

damages against Appellee for the delays and/or inefficiencies that are not owner

caused.

There are four (4) Articles, 4.3, 4.4, 7.1, and 12.1(D), contained in the Sugar

Road project contract that clearly address to whom the duty and responsibility of

re-locating the utility lines belongs. Article 4.3 addresses discovery and handling

of unknown physical conditions. 3C.R.:313. This Article, in part, requires that the

contractor notify the owner of the underground utilities encountered as well as to

notify Appellee, COE. Article 4.4 contemplates that the contractor may encounter

differing site conditions. 3C.R.:313. These provisions advised the contractor on

how to handle these conditions. The essence of Article 7.1, is that work,

specifically utility work, would be performed by the “utility owners.” 3C.R.:326.

Under the plain language of the parties’ Contracts under Article 12.1(D),the

parties expressly agreed that:

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“In no event will owner [COE] be liable to contractor [IOC]…, for any
increase in the contract price or other damages arising out or
resulting from the following:

1. Delays caused by or within the control of Contractor; or

2. Delays beyond the control of both Owner and Contractor,
including but not limited to fires, floods, epidemics, abnormal
weather conditions, acts of God, or acts or neglect by those
performing other work including [utility owners].” 3C.R.:337.

These contractual provisions were written in this way because Texas law is

clear that rewards to claimants arising from a breach of contract are limited

against local government entity to those that directly result from “owner caused”

delays. TEXAS GOVERNMENT CODE §271.153(a)(1). The Texas Utilities Code §54.203

clearly states that the telecommunications utility is responsible for relocating its

utility lines upon notice by a city. This well-established law makes clear that COE

cannot be held responsible for the delays caused by others. The evidence

shows that Appellant had complete knowledge and understanding that the utility

lines were owned by others. Upon encountering AT&T manholes and the Texas

Gas lines, Appellant timely advised the utility owners, Texas Gas and/or AT&T, of

these issues and copied COE with these notifications as required by the contract.

3C.R.: 781 (Pg. 38, Ln.6 - Pg. 39, Ln.1). The same is reflected throughout the

- 17 -
contract. 3C.R.:312-313; 3C.R.:326. Appellant admits that the movement or re-

location of either the communication manholes, the abandoned manhole, or the

Texas Gas lines (3) were the responsibility of either AT&T and/or Texas Gas, and

not COE. 3C.R.:817 at (Pg. 183, Ln. 24 - Pg. 184, Ln. 5; Pg. 184, Ln. 23-Pg.

184,Ln. 25); 3C.R.: 819 at (Pg. 189, Ln. 20- 25); 3C.R.: 820 at (Pg. 196, Ln. 4-23);

3C.R.: 825 at (Pg. 213, Ln. 19-Pg. 214, Ln. 11).

Further, Appellant contended that it encountered unknown encumbrances

while completing its’ work on the Sugar Road project, which caused delays and

inefficiencies. 3C.R.: 781 (Pg. 38, Ln. 2 - Pg. 39, Ln. 19). The contract under

Article 4.3, in unambiguous terms, informs Appellant that the “contract documents

provided to Contractor with respect to underground utilities... are based on

information and data furnished to [COE] and [COE’s] Engineer by the owners of

such underground utilities or by others.” 3C.R.:312-313. Further, per Article

4.3(A), Appellant’s bid should have accounted for the unknown encumbrances.

3C.R.:312-313. Therefore, Appellant cannot now claim additional compensation

for the unknown encumbrances due to utility lines owned by others. Neither

Appellant, nor COE could re-locate or remove these lines. It was the responsibility

of other entities, and not Appellee’s to complete this work. That is precisely what

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occurred. Despite the unambiguous terms in the contract the Arbitrator awarded

damages for delays that were not owner caused.

Further, COE’s Engineer, Isael Posada, testified that the Sugar Road project

contract contained a special provision to ensure that the contractors understood,

beginning with the bidding phase, that they were responsible for locating all

utilities and working with the utilities to get them relocated. 3C.R.:610 at (Pg. 20,

Ln’s. 10-14); 3C.R.:618. Mr. Posadas further testified that neither IOC nor COE

were able to move these lines and that they must be moved by the utility entity.

3C.R.:618 at (Pg. 51, Ln’s. 12-20).

In rendering the Arbitration Award, Arbitrator, William Andrews, clearly

ignores these contractual provisions and states that “[t]he City failed to timely,

reasonably, and properly manage the removal of obstacles, conflicts, and

obstructions in the areas in which IOC was to perform the scope of work under the

Sugar Road project contract. COE had the duty and responsibility to manage the

removal of these in areas which IOC was to perform the scope of work.”

3C.R.:119; 3C.R.: 121.

As illustrated in the preceding paragraphs, the evidence overwhelmingly

shows that the essence of the contract was to have the utility owners re-locate

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their own utility lines. The contract specifically precludes damages arising from

the re-location of the gas lines and/or manholes, which were the responsibility of

either AT&T and/or Texas Gas, and not Appellee. Thus, the Arbitration Award is

not derived from the wording or purpose of the contract because the Arbitrator

awarded damages for delays that were not owner caused.

2. In violation of §171.088(a)(3)(A), the Arbitrator’s Award does not draw its’
essence from the contract because the Arbitrator ignored the plain
language of the contract which required Appellant’s written notice to
Appellee of a claim for extra compensation.

The record reflects that there is no evidence that Appellant complied with

the provisions in the Canton Road project contract to request additional

compensation. The record shows that Appellant admitted they never submitted

a notice or a claim under Special Provision 18 and General Provision 18. Despite

the plain language of the contract, the Arbitrator found that Appellant had not

waived its’ claim for additional compensation. Thus, the Arbitration Award is not

derived from the wording or purpose of the contract.

The Canton Road project contract, among other sections, is comprised of

two (2) parts: (1) General Provisions, and (2) Special Provisions that govern

additional compensation to a contractor. 3C.R.: 187 -222; 3C.R.: 164 -170.

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Special Provisions, Paragraph 181 required Appellant, if additional compensation

was sought, to: (1) provide the Appellee with written notice, (2) obtain a change

order agreed upon with COE, Contractor, and COE Engineer, and (3) after the work

was completed, file a claim for extra compensation within ten (10) days. 3C.R.:

169 at (Par. 18). Failure to follow these three (3) conditions was waiver of the

claims. 3C.R:169 at (Par. 18).

Similarly, General Provision, Paragraph 18 required that if Appellant claimed

additional compensation due to instructions by drawings or other media issued

after the date of the contract then Appellant: (1) must provide the Appellee with

written notice, (2) within seven [7] days after the date of the instructions.

3C.R.:194 at (Section 18). Failure to follow the conditions outlined above was

waiver of the claims. 3C.R.:194 at (Section 18). The evidence on the record

indicates that a request for additional compensation was never done.

a. The plain language of the contracts holds that failure to give written notice
to Appellee’s Engineer within the time limitations waives Appellant’s claims
to additional compensation.

1
The Sugar Road project contract contains an identical provision under Special
Provisions, Paragraph 20. 3C.R.: 286-287.

- 21 -
The Arbitrator exceeded his power because the Arbitrator ignored and re-

wrote the explicit terms of the parties’ contractual contracts, which required

written notice to claim additional compensation. The Arbitrator awarded damages

despite the plain language in the contract that required notice for additional

compensation and the overwhelming evidence that Appellant’s had waived their

right to seek additional compensation.

Under Texas law “waiver” is an intentional relinquishment of a known right,

or intentional conduct inconsistent with claiming the right. Jernigan v. Langley,

111 S.W.3d 153, 155 (Tex. 2003).

It is clear from the record that Appellant waived all claims for additional

compensation because Appellant never submitted a written notice to request

additional compensation. Oscar Cuellar, IOC’s Managing Member, testified that

he reviewed the contract documents, including the design documents and the

proposed contract, prior to submitting his bid. 3C.R:722 at (Pg. 250, Ln. 2 - Pg.

252, Ln. 3). He was aware of all of the encumbrances complained of by IOC at

Arbitration prior to beginning the work. 3C.R.:722 at (Pg. 250, Ln. 2 - Pg. 252, Ln.

3). Even though IOC was aware of the encumbrances, IOC did not submit an

alternate sequence of construction or submit a request for additional

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compensation. 3C.R.:722. Mr. Cuellar, by his own testimony, admits that the

known encumbrances, which he purports to have caused IOC’s delays and

inefficiencies, were identified in the design documents and were visible through

his site inspection. 3C.R.:722. Despite knowing of the potential delays and even

before the notice to proceed was issued, Appellant never submitted a written

notice to request additional compensation within the time specified under Special

Provision 18. 3C.R.: 723; 3C.R.:602. Mr. Cuellar admits that during the

construction phase of the project, up until the last pay application, IOC never

requested additional compensation, in writing, from COE. 3C.R.:625; 3C.R.:732.

Mr. Cuellar’s own testimony confirms that Appellant did not comply with

Special Provision 18 and thus, waived its’ request for additional compensation

under the contract. Appellant, in fact, never made a claim for a fixed amount of

compensation at any point during the construction phase. They could have done

so with a request for a change order or it certainly could have done so within the

last pay application. No such request was made. Further, Isael Posada was the

person at COE who was most familiar with the Canton Road project and to whom

requests for additional compensation had to be made. 3C.R.:565 at (Pg. 13, L. 21-

Pg. 14, L. 14). Mr. Posada testified that under the contract, changes to the plans

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or amount of compensation had to be done via change orders. 3C.R.: (Pg. 164,

L. 8-Pg. 165, L. 3). He also testified that any changes to the plans or to the

amount of compensation was governed by Special Provision 18, which required

that IOC submit change orders or requests for additional compensation for COE’s

consideration. 3C.R.:599-600 at (Pg. 152, L. 20-Pg. 153, L. 24). In addition, Mr.

Posada testified that no request for additional compensation was ever

communicated to COE throughout the Canton Road project. 3C.R.:602 at (Pg. 162,

Ls. 9-17).

What is accurate is that IOC was paid for every unit of work that it completed

under the contract. Furthermore, Appellant was compensated for every change

order. Every change order was agreed upon by both parties. The truth of the

matter is that IOC itself cannot and could not, at the time of the final hearing,

provide a straight answer as to whether or not IOC lost money on this project.

3C.R.:725-727. (Pg. 263, Ln. 22 - Pg. 270, Ln. 25.)

With regard to the Sugar Road project, Appellant complained that a traffic

switch caused delays and inefficiencies, but never submitted a change order

requesting additional compensation pursuant to Special Provisions, Paragraph 20.

Appellant concedes that it did not, either by change order or by pay application,

- 24 -
ever request additional compensation for the traffic switch or for any other delay

or inefficiency damage for which it now claims money. 3C.R.:814 at (Pg. 169, Lns.

9-23; Pg. 171, Ln. 1 - Pg. 172, Ln. 18). The deposition testimony of Mr. Cuellar

also reflects that Appellant never requested additional compensation in writing

from COE. 3C.R.:656 at (Pg. 20,L. 12-Pg. 21, L. 14). Further, IOC admitted that

it never quantified the amount of delay or inefficiency damage related to the traffic

switch. 3C.R.:820-821 at (Pg. 196, L. 24 - Pg. 199, Ln. 18.); 3C.R.:823at (Pg. 205,

Lns. 14-24). As the record reflects, Appellant did not submit a request for

additional compensation in any amount even though the necessary information

was available to IOC. Nonetheless, the Arbitrator issued the Arbitration Award for

unquantifiable delays that Appellant failed to request additional compensation.

The Final Arbitration Award of the Arbitrator states that “Special Provision

18 of the Canton Road project is not applicable to the claim asserted by IOC; IOC

did not breach or violate this provision. Therefore, Special Provision 18 does not

bar or preclude IOC’s claim.” 3C.R.:120. The Arbitration Award further states that

under both the Sugar Road project and Canton Road projects, “IOC did not waive

its’ claims to damages.” 3C.R.:120; 3C.R.:122.

- 25 -
Despite Appellants obvious failure to adhere to the unambiguous contract

and waiver to request additional compensation, Arbitrator, William Andrews,

clearly writes in the Arbitration Award that Appellant did not waive its’ claim for

damages. Further still, the Arbitrator disregarded Appellant’s own admission that

it never quantified the amount of money that the traffic switch issue purportedly

cost Appellant. Yet the Arbitrator awarded Appellant these damages. Thus, it is

clear from the record that the Arbitrator exceeded his authority by re-writing the

additional compensation provisions on both the Canton Road project contract and

Sugar Road project contract, which is a mistake and it implies bad faith.

D. THE COURT DID NOT ERR IN VACATING THE ARBITRATOR’S AWARD
BECAUSE THE AWARD WAS OBTAINED BY UNDUE MEANS IN VIOLATION OF
§171.088(a)(1) SINCE THE ARBITRATOR ACTED IN BAD FAITH BY
FLAGRANTLY DISREGARDING STATUTORY PROVISIONS AND
UNAMBIGUOUS CONTRACTUAL TERMS.

The Trial Court did not err in vacating the Arbitration Award because it was

obtained by “undue means” since the Arbitrator acted in bad faith in violation of

TEX. CIV. PRAC. & REM. CODE §171.088(a)(1). First, the Arbitrator flagrantly

disregarded well established statutes that limit the award against local

governments. Second, the Arbitrator disregarded unambiguous contractual

provisions, including but not limited to, provisions regarding requests for

- 26 -
additional compensation, change orders, and differing site conditions. Thus, the

Trial Court correctly granted Appellee’s Motion to Vacate because the Arbitrator

disregarded statutory authority and unambiguous contractual provisions, which

resulted in a decision that is arbitrary and capricious and implies bad faith.

Pursuant to §171.088(a)(1), a court may vacate an arbitration award if the

award was obtained by fraud, corruption, or other undue means. TEX. CIV. PRAC. &

REM. CODE §171.088(a)(1). The Texas Arbitration Act does not define “other

undue means.” Las Palmas Medical Center v. Moore, 349 S.W.3d 57, 70 (Tex.

App.—El Paso 2010, pet. denied). Texas Court’s have defined undue means to

be actions that are immoral, illegal, or bad-faith conduct. Good Times Stores, Inc.

v. Macias, 355 S.W.3d 240 (Tex. App.—El Paso 2011, pet. denied).

A gross mistake is a mistake that implies bad faith or a failure to exercise

honest judgment and results in a decision that is arbitrary and capricious. Black

v. Shor, 443 S.W.3d 154, 169 (Tex. App.—Corpus Christi 2013, pet. denied)

A gross mistake is shown when the arbitrator disregards and fails to apply

the plain terms of a contract and controlling law. Werline v. E. Texas Salt Water

Disposal Co., Inc., 209 S.W.3d 888, 901 (Tex. App.—Texarkana 2006), aff'd, 307

S.W.3d 267 (Tex. 2010). Such egregious conduct warrants the inference that the

- 27 -
arbitrator acted in bad faith or failed to exercise honest judgment. Id. The

questions to be answered by the Court is merely whether the Arbitrator erred so

egregiously that bad faith can be inferred. Id.

It is obvious from the record that the Arbitrator disregarded the specific

mandates of the law and the plain terms of the contract. This egregious conduct

warrants the inference that the Arbitrator acted on bad faith. Thus, vacatur of the

Arbitration Award is required.

1. The Arbitrator disregarded unambiguous statutory provisions under Texas
Government Code §271.153(a)(1) and Texas Utilities Code §54.203 and
the contract terms which is bad faith and in violation of §171.088(a)(1).
As outlined previously in this Brief, the law is clear that a party cannot

recover damages from a local government entity for delays that are not “owner

caused” pursuant to the Texas Local Government Code §271.153(a)(1). The

Texas Supreme Court reiterated in Zachry that a claimant cannot recover for

delays that are not “owner caused.” In contravention of well established Texas

law, the Arbitrator ignored the law and issued Appellant an Arbitration Award for

delays that were not caused by COE. Thus, Arbitrator, William Andrews, erred so

egregiously that bad faith can be inferred.

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The majority, if not all, of IOC’s claimed encumbrances were delays or

inefficiencies caused by other entities, namely AT&T and Texas Gas. The same

argument for the Canton Road project applies to the Sugar Road project with

respect to COE’s liability for the actions of others. Despite this well established

precedent and the testimony from Appellant’s own expert, the Arbitrator ignored

the statute.

At the Final Hearing on the Sugar Road project, Appellant’s own expert, Jens

Baker, testified that IOC complained that the delays were primarily caused by

AT&T. 3C.R.:813. Mr. Baker, further testified that he identified 384 days of delays

on the job, 174 of which were attributable to the late start and manhole issues of

AT&T, and 101 days, which were attributable to Texas Gas changes. 3C.R.:844 (P.

289, L. 6-25). He also testified that he could portion those damages attributable

to third parties versus those directly caused by COE. 3C.R.:844 (P. 290, L.1 -

P.291, L. 24). Thus, in essence, Appellant’s retained expert testified that 71.61%,

or 275 delay days out of the 384 alleged delay days, of Appellant’s damages were

not directly caused by COE.

Despite Appellant’s expert own admission that the delays were caused by

others, the record shows Arbitrator, William Andrews, clearly ignored §271.153.

- 29 -
The Arbitrator’s Award states “§271.153, Local Government Code, does not bar

IOC’s claim for additional compensation arising out of the Canton Road project.”

3C.R.:120.

Despite the clear statutory language and Texas Supreme Court precedent,

that a city cannot be liable for damages caused by others, the Arbitrator awarded

damages to Appellant. The Court’s record further reflects that Arbitrator, William

Andrews, flagrantly disregarded §271.153 and based his Final Award of Arbitrator

on the premise that “[t]he City’s material breaches are not excused based on the

failure of any third party to remove or re-locate their lines or utilities that constitute

obstacles, conflicts, and obstructions as described above.” 3C.R.:120-121.

The result of the Arbitration Award, in this case, disregards what otherwise

has been a well settled principal between municipalities and contractors. The

Arbitrator did not merely make a mistake of law in this case, but his actions are

so contrary to well established law that it would change the manner in which

contractors and municipalities do business, and moot Texas Law with respect to

the adjudication of awards against municipalities. The disregard of the law and

Texas Supreme Court precedent is bad faith.

- 30 -
It is clear from the record the Arbitrator acted in bad faith because despite

the overwhelming evidence that the delays were caused by others nonetheless

awarded damages to Appellant. Thus, the Arbitrator disregarded statutory

authority and contractual provisions which resulted in a decision that is arbitrary

and capricious and issued in bad faith.

2. The Arbitrator disregarded unambiguous contractual provisions which
implies bad faith in violation of §171.088(a)(1).

The Arbitrator disregarded clear contractual provision contained within the

Sugar Road project contract and Canton Road project contract. The Sugar Road

project contract clearly outlines that COE is not liable for damages caused by

others. The Canton Road project contract clearly outlined the manner in which

Appellant was required to request additional compensation and failure to follow

the terms was waiver of future claims for additional compensation. Thus, the

Arbitrator failed to apply the plain language of the contract, which implies bad

faith.

As stated previously, the Sugar Road project contract contains four (4)

Articles, 4.3(B), 4.4, 7.1, and 12.1(D), that clearly state that the duty and

responsibility of re-locating the utility lines belonged to the utility owners. They

- 31 -
also contemplate that unknown encumbrances could be encountered during the

road improvement projects.

Based on the articles in the Sugar Road project contract, COE is precluded

from liability resulting for damages or increased contract time due to the work of

others in line with §271.153. At the Arbitration Hearing, Appellant complained

that the alleged delays were caused by utility lines, man holes, and utility poles

owned by AT&T and Texas Gas. Even further, as indicated previously, Appellant

concedes that the re-location of the utility encumbrances were either the

responsibility of AT&T and/or Texas Gas service. 3C.R.:817-820; 3C.R.:825.

Therefore, COE cannot be held responsible, even if these issues caused delays

and/or inefficiency damages. Based on the evidence, Appellee was not

responsible for re-locating the utility lines but only bore the responsibility to notify

AT&T that the lines needed to be re-located. Appellant did not proffer any

evidence or argument that Appellee did not notify AT&T to re-locate its’ utility lines.

Further, the contract terms of both the Sugar Road project and Canton Road

project clearly outlined the manner in which a contractor should have used to

collect additional compensation. With regard to the Sugar Road project, Appellant

- 32 -
claimed that COE delayed in re-locating the traffic switch at the Sugar Road and

Owassa Road intersection. Therefore, it was owed additional compensation. To

request additional compensation, Appellant was required to comply with Special

Provision 20 of the Sugar Road project contract. Special Provision 20 required

that Appellant: (1) provide the Appellee with written notice, (2) obtain a change

order agreed upon by COE, Contractor, and COE’s Engineer, and (3) after the work

was completed, file a claim for extra compensation within ten (10) days. 3C.R.:

286-287.

Appellant admitted that it had not at the time of the Final Hearing, and still

had not, quantified the amount of delay or inefficiency damage related to the

traffic switch. 3C.R.: 822-823 (Pg. 204, Ln. 21 - Pg. 205, Ln. 24).

With regard to the Canton Road project, Special Provision and General

Provision 18 controls the request for additional compensation by the contractor.

Special Provision 18 states in part: “in cases where the contractor deems extra

compensation is due him for materials not clearly covered in the contract, or not

ordered by the engineer as an extra item, the contractor shall notify the engineer

in writing of his intention to make a claim for such extra compensation before he

begins the work.”

- 33 -
As described in the previous section of this Brief, the amount of materials

used and paid for by Appellant, as well as the equipment used and paid for by

Appellant to construct the Canton Road project, was information available to

Appellant during the project time frame. Despite having the requirement under

Section 18 of the Special Provisions to submit any request for extra compensation

within a specified time period, Appellant failed to do this and, by contract, its’

alleged damages have been waived. Even further, as stated previously, IOC had

all of the information available, including the information regarding the alleged

“known” encumbrances prior to beginning their work on the Canton Road project.

They chose not to submit an alternate sequence of construction and they chose

not to submit a request for additional compensation prior to commencing the

project. After completing the construction of the roadway, IOC chose not to make

a detailed request with a specified amount or, in fact, any request at all prior to

the completion and closing out of the project. For these reasons, IOC’s request

for additional compensation and damages fails.

Thus, once again the Arbitrator disregarded statutory authority and

contractual provisions, which resulted in a decision that is arbitrary, capricious,

and issued in bad faith.

- 34 -
E. IN THE ALTERNATIVE, THE ARBITRATOR’S AWARD FOR THE SUGAR ROAD
PROJECT SHOULD BE MODIFIED TO $191,090.82 PURSUANT TO
§179.091.

1. The Sugar Road Project Arbitration Award Must Be Modified to
$191,090.82 because Appellant cannot recover for delays that are not
owner caused

COE maintains that IOC cannot recover any damages arising from the Sugar

Road project because the damages are not “owner caused” and the award

represents consequential damages not recoverable under §271.153. However,

should this Court find that the Arbitration Award is proper, then COE requests that

the Arbitration Award be modified under §171.091. The Arbitrator’s Award of

$673, 092 in damages must be reduced to $191,090.82 for the reasons shown

below.

As stated previously, Texas law is clear that a party cannot recover damages

from a local government entity for delays that are not “owner caused.” Texas

Government Code §271.153(a)(1).

Appellant’s expert, Jens Baker, testimony during the Final Hearing on the

Sugar Road project further substantiates our position that IOC’s complaints of

delays were primarily caused by others, namely AT&T. 3C.R.:813 (Pg. 238, Lns. 8-

14). Mr. Baker testified that he identified 384 days of delays on the job of which

- 35 -
275 days were caused by others, specifically, AT&T and Texas Gas. 3C.R.:844( Pg.

89, Lns. 6-25). He also testified that he could portion those damages attributable

to third parties versus those directly caused by COE. 3C.R.:844 (Pg. 290, Ln.1 - Pg.

291, Ln. 24). Thus, in essence, Appellant admitted that 71.61% or 275 days out

of the 384 alleged delay days were not directly caused by COE.

Therefore, since 28.39% of the delay days or 109 days were allegedly

caused by COE, the Arbitration Award must be reduced to $191,090.82. Thus,

the modification award would conform to §271.153(a)(1) of the local government

code because $191,090.82 represents “owner caused” delays.

- 36 -
V.
PRAYER

For the foregoing reasons, Appellee, COE, prays that the Trial Court's

judgment be in all things affirmed. COE prays for such other legal and equitable

relief to which it may show itself to be justly entitled.

- 37 -
CERTIFICATE OF COMPLIANCE

At the request of the Court and pursuant to Texas Rule of Appellate
Procedure 9.4(i)(3), I hereby certify that the Brief of Appellee, City of Edinburg
Texas filed on August 12, 2016, contains 6,588 words (excluding the caption,
table of contents, table of authorities, signature, proof of service, certification, and
certificate of compliance). This is a computer-generated document created in
Microsoft Word, using 14-point typeface for all text, except for footnotes, which are
in 12-point typeface. In making this Certificate of Compliance, I am relying on the
word count provided by the software used to prepare the document.

/s/Gerald E. Castillo
(Signature of filing party)

Gerald E. Castillo
(Printed name)

Gonzalez Castillo, L.L.P.
(Firm)

August 12, 2016
(Date)

- 38 -
CERTIFICATE OF SERVICE

I hereby certify that on August 12th, 2016, a true and correct copy of this
document was served upon the following persons via electronic filing service:

Ricardo Pumarejo, Jr.
rpumarejo@ktattorneys.com

Michael McGurk
mmcgurk@ktattorneys.com

Jesus Garcia
jgarcia@tbgdlaw.com

/s/Gerald E. Castillo
Gerald E. Castillo

- 39 -