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ACCEPTED

13-16-00117-CV
THIRTEENTH COURT OF APPEALS
CORPUS CHRISTI, TEXAS
FILED 9/8/2016 10:59:27 AM
IN THE 13TH COURT OF APPEALS Dorian E. Ramirez
CORPUS CHRISTI - EDINBURG CLERK

09/08/16 No. 13-16-00117-CV

DORIAN E. RAMIREZ, CLERK
IN THE THIRTEENTH COURT OF APPEALS RECEIVED IN
13th COURT OF APPEALS
EDINBURG, TEXAS CORPUS CHRISTI/EDINBURG, TEXAS
____________________________________________________________________________
9/8/2016 10:59:27 AM
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 AMENDED SUR-REPLY BRIEF
____________________________________________________________________________

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

LIST OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

SUMMARY OF FACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

1. TEXAS COURTS HAVE INTERPRETED UNDUE MEANS AS BAD FAITH
CONDUCT THAT CAN BE IMPLIED BY GROSS MISTAKE . . . . . . . . . . . . . 5

2. THE ARBITRATOR EXCEEDED HIS POWER BECAUSE THE AWARD IS NOT
RATIONALLY INFERABLE FROM THE CONTRACT AND BY ISSUING AN
AWARD IN CONTRAVENTION OF THE ARBITRATION AGREEMENT IN
VIOLATION OF §171.088(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

PRAYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

CERTIFICATE OF COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

CERTIFICATE OF SERVICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

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LIST OF AUTHORITIES

CASES Page

Black v. Shor,
443 S.W.3d 154 (Tex. App.—Corpus Christi 2013)...........................................5, 7

E. Tex. Salt Water Disposal Co. v. Werline,
307 S.W.3d 267 (Tex. 2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Good Times Stores, Inc. v. Macias,
355 S.W.3d 240 (Tex. App.— El Paso 2011, pet. denied).....................................6

Hoskins v. Hoskins,
No. 15-0046, 2016 Tex. LEXIS 386 (Tex. May 20, 2016) . . . . . . . . . . . . . . . . . 5

Las Palmas Medical Center v. Moore,
349 S.W.3d 57, 70 (Tex. App.— El Paso 2010, pet. denied)................................6

Major League Baseball Players Ass'n v. Garvey,
121 S. Ct. 1724, 1728 (2001)................................................................................9

Nationsbuilders, Ins. Servs., Inc. v. Houston Int'l Ins. Grp. Ltd.,
No. 05–12–01103–CV, 2013 WL 3423755
(Tex. App.-Dallas July 3, 2013) (mem. op.)...................................................7,8,10

Zachry Const. Corp. v. Port of Houston Auth. of Harris County,
449 S.W.3d 98, 110 (Tex. 2014).........................................................................10

STATUTES

Tex. Loc. Gov't Code Ann. § 271.153(a)(1)..........................................................10

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I.
Introduction

COMES NOW, Appellee City of Edinburg, (“COE”), and submits this Sur-Reply

to Appellant’s Reply Brief to concisely address two (2) arguments affecting the

vacatur of the Arbitration Award. COE shall address the arguments in the same

order in which the Appellant made its’ assertions. COE requests that this Court of

Appeals affirm the Trial Court's ruling to vacate the Arbitrator’s Award.

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II.
Summary of Facts

COE hereby incorporates by reference the relevant facts as set forth in its’

Response Brief submitted to this Court on August 10, 2016.

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III.
Argument

1. TEXAS COURTS HAVE INTERPRETED UNDUE MEANS AS BAD FAITH
CONDUCT THAT CAN BE IMPLIED BY GROSS MISTAKE

The public policy argument was not urged before this Court because

Hoskins v. Hoskins, No. 15-0046, 2016 WL 2993929, at *2 (Tex. May 20, 2016)

is clear that vacatur of an Arbitration Award cannot be based on an independent

non-statutory common law ground. Rather, the grounds enumerated in the statute

are exclusive. In Hoskins, the Petitioner sought to vacate the Arbitrator’s Award

based on the Texas General Arbitration Act enumerated grounds and on the non-

statutory independent common law ground of “manifest disregard of the law.” Id.

Since COE is not urging its' public policy independent statutory common law

ground Hoskins is not controlling in this case.

Werline and Black are distinguishable from the present case. In both cases

outlined above, a basis for seeking to vacate the underlying Arbitration Award were

independent non-statutory common law grounds. E. Texas Salt Water Disposal

Co., Inc. v. Werline, 307 S.W.3d 267, 268 (Tex. 2010); Black v. Shor, 443 S.W.3d

154, 158 (Tex. App.— Corpus Christi 2013, pet. denied).

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Here, COE does not proffer the independent non-statutory common law

ground of “gross mistake” despite Appellant’s attempt to frame COE’s argument

as a common law argument. Rather, the Texas common law cited is used to show

how Texas Courts, including this Court, have defined the phrase “undue means”

as allowed under the Texas Code Construction Act Chapter 311. It is undisputed

that the term “undue means” is undefined by the statute. The Texas Code

Construction Act, §311.011(b) states that words or phrases that have acquired

a technical or particular meaning, whether by legislative definition or otherwise,

shall be construed accordingly. See Exhibit “A.” Further, common law can be

used to interpret the technical meaning of statutory words or phrases. TEX. GOV’T

CODE ANN., §311.023(4). See Exhibit “B.”

The phrase “undue means” has been given a particular meaning by Texas

Court’s and “undue means” should be construed accordingly. Texas case law has

held that “undue means” must be shown by immoral, illegal, or bad faith conduct.

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” as bad faith

conduct, which can be implied by a gross mistake or a failure to exercise honest

judgment. Good Times Stores, Inc. v. Macias, 355 S.W.3d 240 (Tex. App.— El

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Paso 2011, pet. denied); Black v. Shor, 443 S.W.3d 154, 169 (Tex. App.— Corpus

Christi 2013, pet. denied).

Based on the meaning given to the phrase “undue means” by Texas Court’s

it is obvious 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.

2. THE ARBITRATOR EXCEEDED HIS POWER BECAUSE THE AWARD IS NOT
RATIONALLY INFERABLE FROM THE CONTRACT AND BY ISSUING AN
AWARD IN CONTRAVENTION OF THE ARBITRATION AGREEMENT IN
VIOLATION OF §171.088(a)(1)

The Arbitrator exceeded his authority by issuing an award that is not

rationally inferable from the contract and the Arbitrator exceeded his authority by

issuing an award not allowed under Texas law. The result in this case was that the

Arbitrator awarded damages to Appellant for non-owner caused delays. The single

question is whether the award is rationally inferable from the contract considering

the wording and purpose of the contract. Nationsbuilders, Ins. Servs., Inc. v.

Houston Int'l Ins. Grp. Ltd., No. 05–12–01103–CV, 2013 WL 3423755 (Tex.

App.-Dallas July 3, 2013) (mem. op.); Ancor Holdings, LLC v. Peterson, Goldman

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

contends that Nationsbuilder stands for the proposition that this Court should look

only to the result and not determine whether the remedy is rationally inferable.

In Nationsbuilder, the Court reasoned that the remedy was rationally

inferable from the contract by looking to the wording and purpose of the contract.

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

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

op.). The Court reasoned:

The agreement required appellees for one(1) year to do no planning
to conduct a business in competition with Nationsbuilders. The
Arbitrator found appellees violated this provision.

The remedy of a one (1) year extension of the restricted period gave
Nationsbuilders the benefit of its’ bargain of a one (1) year period
without Appellees preparing to conduct a business in competition
with Nationsbuilders. The remedy “[drew] its’ essence” from this
provision and is rationally based on that provision. Id. at *4.

As shown above, the Court did not reach its’ holding by simply looking at the

result as Appellant’s urge. Instead, the Court looked to the underlying contract to

determine whether the result/remedy was rationally inferable.

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Here, the result/remedy awarded to Appellant for the Sugar Road Project

and Canton Road Project is not rationally inferable. The purpose and wording of

the contract protected COE from having to pay damages arising from non-owner

caused delays pursuant to the TEXAS GOVERNMENT CODE §271.153(a)(1). There are

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

contract that clearly state that the duty and responsibility of re-locating the utility

lines belongs to others and that COE would not be responsible for delays caused

by others. Despite the contractual provision, the Arbitrator issued a remedy for

delays caused by others. Unlike, Nationsbuilder, the result in this matter is not

rationally inferable from the contract.

With regard to the Canton Road Project and Sugar Road Project, the

result/remedy is not rationally inferable from the contract. The Sugar Road

Project and the Canton Road Project contracts each outline the process that

Appellant was required to follow to request additional compensation. Appellant,

prior to the Arbitration, did not seek additional compensation for delays. Despite

the clear contractual provisions, the Arbitrator awarded additional compensation

for delays because the contractual provision that governed did not apply.

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COE is not asking that the Court reconsider its’ liability under the contract.

Rather, COE asks the Court to determine whether the Arbitrator strayed from the

interpretation of the Agreement and dispensed his own brand of justice. Thus,

the only question before the Court is: Did the Arbitrator stray from the

interpretation of the Agreement? The answer is unequivocally, Yes.

In addition, the arbitrator exceeded his authority in issuing an award in

contravention with Texas law. The Court in Nationsbuilder, held that the remedy

issued by the arbitrator- an equitable extension of a non-competition period-- was

within the arbitrators authority because the governing law allowed an equitable

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

05–12–01103–CV, 2013 WL 3423755, at *7 (Tex. App.-Dallas July 3, 2013)

(mem. op.). Thus, the Court concluded that the arbitrator did not exceed his

power. Id.

Here, unlike Nationsbuilder, the Arbitrator exceeded his power because

Texas law does not allow Appellant to recover for non-owner caused delays. Texas

law does not permit waiver of sovereign immunity for non-owner caused delays.

Zachry Const. Corp. v. Port of Houston Auth. of Harris County, 449 S.W.3d 98,

110 (Tex. 2014); Tex. Loc. Gov't Code Ann. § 271.153(a)(1). It is undisputed that

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Texas law governs in this case. The Arbitrator had authority to apply Texas law

pursuant to the arbitration agreement. Despite the applicable Texas law, the

Arbitrator issued an award to Appellant's based on non-owner caused delays.

Therefore, unlike Nationsbuilder, the Arbitrator’s award based on non-owner

caused delays is not within the arbitrators authority. Thus, the Arbitrator exceeded

his power in violation of §171.088(a)(1).

IV.
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.

Respectfully Submitted,

By: /s/Gerald E. Castillo
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

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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

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 September 8, 2016, contains 1,418 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
Gerald E. Castillo

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CERTIFICATE OF SERVICE

I hereby certify that on September 8, 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

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CAUSE NO. 13-16-00117-CV

IOC COMPANY, LLC § IN THE THIRTEENTH
§
v. § COURT OF APPEALS
§
CITY OF EDINBURG § EDINBURG, TEXAS
_______________________________________________________________________________

APPELLEE’S APPENDIX
_______________________________________________________________________________

A. TEX. GOV’T ANN., §311.023

B. TEX. GOV’T CODE ANN., §311.023(4)

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