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13-16-00117-CV
THIRTEENTH COURT OF APPEALS
CORPUS CHRISTI, TEXAS
7/11/2016 10:13:16 AM
Dorian E. Ramirez
CLERK

No. 13-16-00117-CV

IN THE THIRTEENTH COURT OF APPEALS FILED IN
13th COURT OF APPEALS
EDINBURG, TEXASCORPUS CHRISTI/EDINBURG, TEXAS
7/11/2016 10:13:16 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.

APPELLANT’S BRIEF

Michael A. McGurk
mmcgurk@ktattorneys.com
*Ricardo Pumarejo Jr.
rpumarejo@ktattorneys.com
KITTLEMAN THOMAS, PLLC
4900-B N. 10th Street
McAllen, Texas 78504
p. 956.632.5033
f. 956.630.5199
Counsel for Appellant
IOC Company LLC

* Lead appellate counsel
IDENTITY OF PARTIES AND COUNSEL

Appellant Appellee
IOC Company, LLC City of Edinburg, Texas

Trial Counsel for Appellant Trial/Appellate Counsel for Appellee
Michael A. McGurk Gerald E. Castillo
State Bar No. 00797746 State Bar No. 24012399
mmcgurk@ktattorneys.com Steven M. Gonzalez
KITTLEMAN THOMAS, PLLC State Bar No. 08131900
4900-B N. 10th St. law@valleyfirm.com
McAllen, TX 78504 GONZALEZ CASTILLO, LPC
p. 956.632.5018 1317 Quebec
f. 956.630.5199 McAllen, TX 78503
p. 956.618.0115
Jesus Garcia f. 956.618.0445
State Bar No. 24027389
jgarcia@gdtrialattorneys.com Ricardo Palacios
GARCIA DE LA GARZA, LLP State Bar No. 24010990
712 Main St., Ste. 1600 rpalacios@pgtlawfirm.com
Houston, TX 77002 Criselda Palacios
p. 713.228.7425 State Bar No. 24067812
713.228.7329 cpalacios@pgtlawfirm.com
PALACIOS GARZA & THOMPSON, PC
Appellate Counsel for Appellants 2724 West Canton Rd.
Michael A. McGurk Edinburg, TX 78539
State Bar No. 00797746 p. 956.205.0848
mmcgurk@ktattorneys.com f. 956.318.0575
Ricardo Pumarejo Jr.
State Bar No. 24056168
rpumarejo@ktattorneys.com
KITTLEMAN THOMAS, PLLC
4900-B N. 10th. Street
McAllen, Texas 78504
p. 956.632.5083
f. 956.630.5199

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TABLE OF CONTENTS
Identity of Parties and Counsel .................................................................................. 2
Index of Authorities ................................................................................................... 5
Record References ..................................................................................................... 7
Statement of the Case................................................................................................. 8
Statement Regarding Oral Argument ........................................................................ 9
Issues Presented ....................................................................................................... 10
Issue One: The trial court erred in vacating rather than confirming
the arbitration award.
Statement of Facts .................................................................................................... 11
I. The City breached two construction contracts that it had with IOC
and those breaches resulted in disputes and IOC incurring damages.
..................................................................................................................... 11
II. IOC and the City sought to resolve their disputes through binding
arbitration. After hearing significant evidence, the arbitrator found
that the City breached the contracts and awarded IOC damages................ 12
III. Unhappy with the arbitration’s outcome, the City sought to vacate
the arbitration award. Faced with meritless grounds for vacating the
award, the trial court nonetheless granted the City’s request to
vacate the award and denied IOC’s request to confirm the award. ............ 14
Summary of Argument ............................................................................................ 15
Argument.................................................................................................................. 17
I. The Court may presume that the arbitration award is governed by
both the Texas and federal arbitration acts. The Court must review
the trial court’s decision to vacate the award de novo and can only
consider grounds for vacating that were raised at the trial level. An
arbitrator’s mistakes of law and fact are an insufficient basis for
vacating an award........................................................................................ 17
II. The City gave the trial court three reasons for vacating the
arbitration award: (1) the award violated public policy; (2) the award
was obtained by undue means in violation of the TAA; and (3) the
arbitrator exceeded his powers in violation of the TAA. Because

3
these reasons lacked merit, the trial court erred in vacating rather
than confirming the award. ......................................................................... 19
A. The arbitration award cannot be vacated on the City’s common-
law ground because the TAA’s and FAA’s statutory grounds
for vacating an award are exclusive. ................................................... 19
B. In a misguided attempt to prove to the trial court that the
arbitration award was obtained by undue means, the City
sought to show that the award stemmed from the arbitrator’s
mistakes of law and fact. The mistakes alleged, however, are
incapable of establishing that the arbitration award was
obtained by undue means. Moreover, the City’s failure to
present the trial court with a complete record of the arbitration
proceedings precluded the trial court from recognizing any of
the alleged mistakes............................................................................. 21
C. In a misguided attempt to prove to the trial court that the
arbitrator exceeded the scope of his powers, the City sought to
show that the arbitrator committed mistakes of law and fact.
The mistakes alleged, however, are incapable of establishing
that the arbitrator exceeded his powers. Moreover, the City’s
failure to present the trial court with a complete record of the
arbitration proceedings precluded the trial court from
recognizing any of the alleged mistakes. ............................................ 24
D. The trial court was compelled to confirm the arbitration award
and erred when it failed to do so. ........................................................ 28
Prayer ....................................................................................................................... 29
Certificate of Compliance ........................................................................................ 30
Certificate of Service ............................................................................................... 30
Appendix .................................................................................................................. 31

4
INDEX OF AUTHORITIES
Case Law
AmeriPath, Inc. v. Hebert, 447 S.W.3d 319 (Tex. App.—Dallas
2014, pet. denied) ............................................................................................... 21-22
Black v. Shor, 443 S.W.3d 154 (Tex. App.—Corpus Christi 2013,
pet. denied) ............................................................................................................... 18
Commonwealth Assoc. v. Letsos, 40 F. Supp. 2d 170 (S.D.N.Y.
1999) ........................................................................................................................ 24
Eddleman v. Ocker, No. 13-15-00217-CV, 2016 Tex. App. LEXIS
4377 (Tex. App.—Corpus Christi Apr. 28, 2016, no pet.) (mem.
op.) ........................................................................................................................... 25
Framing v. BBL Builders, LP, No. 05-15-01430-CV, 2016 Tex.
App. LEXIS 6352 (Tex. App.—Dallas June 15, 2016, no pet. h.)
(mem. op.) .......................................................................................................... 25-27
Gessee v. U.S. Home Corp., No. 02-02-00405-CV, 2003 Tex. App.
LEXIS 4575 (Tex. App.—Fort Worth May 29, 2003, no pet.)
(mem. op.) ................................................................................................................ 24
Good Times Stores, Inc. v. Macias, 355 S.W.3d 240 (Tex. App.—
El Paso 2011, pet. denied)........................................................................................ 20
Hale-Mills Constr. Ltd. v. Willacy County, No. 13-15-00174-CV,
2016 Tex. App. LEXIS 340 (Tex. App.—Corpus Christi Jan. 14,
2016, no pet.) (mem. op.) ......................................................................................... 17
Hoskins v. Hoskins, No. 15-0046, 2016 Tex. LEXIS 386 (Tex.
May 20, 2016) .......................................................................................................... 19
Las Palmas Med. Ctr. v. Moore, 349 S.W.3d 57 (Tex. App.—El
Paso 2010, pet. denied) ...................................................................................... 21-22
Lefoumba v. Legend Classic Homes, Ltd., No. 14-08-00243-CV,
2009 Tex. App. LEXIS 7573 (Tex. App.—Houston [14th Dist.]
Sept. 17, 2009, no pet.) (mem. op.).................................................................... 20-22
Long Lake, Ltd. v. Heinsohn, No. 14-09-00613-CV, 2010 Tex.
App. LEXIS 2498 (Tex. App.—Houston [14th Dist.] Apr. 8, 2010,
no pet.) (mem. op.) ................................................................................................... 23

5
Parallel Networks, LLC v. Jenner & Block, No. 05-13-748-CV,
2015 Tex. App. LEXIS 10461 (Tex. App.—Dallas Oct. 9, 2015,
pet. denied) (mem. op.) ............................................................................................ 20
SCI Tex. Funeral Servs. v. Roussett, No. 13-03-00295-CV, 2005
Tex. App. LEXIS 2511 (Tex. App.—Corpus Christi Mar. 31, 2015,
no pet.) (mem. op.) .............................................................................................18, 22
Statewide Remodeling, Inc. v. Williams, 244 S.W.3d 564 (Tex.
App.—Dallas 2008, no pet.) ..............................................................................23, 28
Thomas Petroleum, Inc. v. Morris, 355 S.W.3d 94 (Tex. App.—
Houston [1st Dist.] 2011, pet. denied) ..................................................................... 20
Statutes and Rules
TEX. CIV. PRAC. & CODE § 171.087 ......................................................................... 28
TEX. CIV. PRAC. & REM. CODE §171.088................................................................. 21
TEX. CIV. PRAC. & REM. CODE § 171.091................................................................ 19
TEX. R. APP. P. 43.2 ................................................................................................. 28

6
RECORD REFERENCES

Reference Examples Meaning
1CR:22 Volume 1 of Clerk’s Record : Page 22
RR:22 Reporter’s Record : Page 22
SR:12 Supplemental Reporter’s Record : Page 12

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STATEMENT OF THE CASE

The City of Edinburg filed a petition to vacate an arbitration award in

the 332nd District Court of Hidalgo County. IOC Company, LLC responded

by filing a petition/motion asking the trial court to confirm the arbitration

award. Presiding Judge Mario E. Ramirez Jr. issued an order granting the

City’s request to vacate the arbitration award and a second order denying

IOC’s request to confirm the award. IOC timely filed a notice of appeal to

contest these orders.

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STATEMENT REGARDING ORAL ARGUMENT

The Court should not grant oral argument because the issues presented

have been authoritatively decided and are not legally complicated. This

appeal concerns the vacatur of an arbitration award. The trial court vacated

the award in response to the City’s argument that the award violated public

policy—an act that directly conflicts with legal authorities establishing that

common-law grounds cannot justify vacating an arbitration award. The trial

court also vacated the award in response to the City’s contentions that the

award was obtained by undue means and that the arbitrator exceeded his

powers, but these contentions’ only purpose was to camouflage the City’s

efforts to vacate based on the arbitrator’s purported mistakes of law and fact.

And countless legal authorities have held that this is impermissible.

Oral argument would not give the Court a more complete

understanding of the facts presented in this appeal. The reporter’s record is

nine pages. The clerk’s record contains 993 pages, but the Court will find

that approximately 90% of those pages never need to be read to dispose of

this appeal.

If the Court nonetheless wishes to hear oral argument, IOC will gladly

participate.

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ISSUES PRESENTED

Issue One: The trial court erred in vacating rather than confirming the
arbitration award.

10
STATEMENT OF FACTS

I. The City breached two construction contracts that it had with
IOC and those breaches resulted in disputes and IOC incurring
damages.

On April 1, 2008, IOC Company, LLC and the City of Edinburg

entered into a contract (“Canton Road Agreement”) whereby IOC agreed to

perform paving, drainage improvements, and expansion of a portion of

Canton Road for the City in accordance with the plans, specifications, and

information the City furnished to IOC (“Canton Road Project”). 1CR:50;

3CR:118. On June 2, 2009, IOC and the City entered into a second contract

(“Sugar Road Agreement”) whereby IOC agreed to perform paving,

drainage improvements, and expansion and widening of a portion of Sugar

Road for the City in accordance with the plans, specifications, and

information the City furnished to IOC (“Sugar Road Project”). 1CR:57;

3CR:118.

Contractual disputes arose in connection with the Canton Road

Agreement and the Sugar Road Agreement (collectively “the Agreements”).

3CR:118. IOC asserted that the City breached the Agreements, which

resulted in delays, interferences, and disruptions to the work IOC had to

perform to complete the Canton Road Project and Sugar Road Project

(collectively “the Projects”). 3CR:118. IOC thus sought to recover damages

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in the form of additional compensation for the owner-caused delays that

increased IOC’s cost to perform the work for the Projects. 3CR:118. In

response, the City argued (1) that it did not breach the Agreements; (2) that

the Agreements barred IOC from seeking additional compensation; and

(3) that any delays IOC suffered were caused by third parties over whom the

City had no control or responsibility. 3CR:118.

II. IOC and the City sought to resolve their disputes through binding
arbitration. After hearing significant evidence, the arbitrator
found that the City breached the contracts and awarded IOC
damages.

In accordance with the Agreements’ arbitration clauses, IOC and the

City sought to have their disputes resolved through arbitration.

1CR:55,59,62; 3CR:200,290. The arbitrator, William K. Andrews, held an

evidentiary hearing on claims and disputes relating to the Canton Road

Project on February 17 and 18, 2014. 3CR:660. The arbitrator held an

evidentiary hearing on claims and disputes relating to the Sugar Road Project

on April 16 and 17, 2014. 3CR:772. IOC and the City both accepted the

arbitrator’s invitation to submit post-hearing briefing. 4CR:898-969. After

receiving post-hearing briefing, the arbitrator issued his “Final Award of

Arbitrator (Reasoned)” on July 18, 2014 (“the Award”). 3CR:117-24. In the

Award, the arbitrator articulated, in small part, the following:

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Based on the evidence presented to me, the Canton Road
Agreement and the law of the State of Texas, I find the City
materially breached this Agreement without excuse and is liable
to IOC for damages in the form of additional compensation
arising from City-caused delays, disruptions and interferences.
I further find IOC did not materially breach the Agreement. . . .
The evidence concerning IOC’s efforts to perform the
scope of work for the Canton Road Project and the numerous,
serious and costly City-caused delays, interferences and
disruptions it suffered in those efforts is compelling and
supports my finding the City materially breached the
Agreement.
....
IOC faired [sic] no better on the Sugar Road Project in
terms of the delays, interferences and disruptions it suffered at
the hands of the City. Once again, the evidence the Sugar Road
Agreement and the law of the State of Texas compel me to find
the City materially breached the Sugar Road Agreement
without excuse and is liable to IOC for damages in the form of
additional compensation arising from City-caused delays. IOC
did not materially breach the Agreement. . . .
The evidence of IOC’s efforts to perform the scope of the
work for the Sugar Road Project and the numerous, serious and
costly City caused delays, interferences and disruptions it
suffered in those efforts is similarly compelling and supports
my finding the City materially breached the Sugar Road
Agreement.

3CR:118-21. The Award articulated numerous factual findings and legal

conclusions on which the arbitrator relied to justify his decision in IOC’s

favor. 3CR:118-123. The arbitrator awarded IOC the following: $1,362,630

in damages and $158,000 in attorney fees in connection with the Canton

Road Project; $673,092 in damages and $127,827 in attorney fees in

13
connection with the Sugar Road Project; and $25,905.74 as reimbursement

for IOC’s arbitration fees and expenses. 3CR:123.

III. Unhappy with the arbitration’s outcome, the City sought to vacate
the arbitration award. Faced with meritless grounds for vacating
the award, the trial court nonetheless granted the City’s request
to vacate the award and denied IOC’s request to confirm the
award.

On August 14, 2014, the City filed an original petition in the 332nd

Hidalgo County District Court that sought to vacate the Award. 1CR:12. In

its amended petition, the City advanced three reasons for why the Award

should be vacated: (1) the award was obtained by undue means; (2) the

arbitrator exceeded his powers, thus authorizing vacatur under the Texas

Arbitration Act; and (3) the award violates public policy, thus authorizing

vacatur under the Texas Arbitration Act. SR:16-17. IOC filed an answer to

the City’s petition and filed its own petition/motion seeking confirmation of

the Award. 1CR:41,44. On January 27, 2015, the trial court held a brief

hearing on the parties’ competing requests for relief. RR:4-8. On February

11, 2016, the trial court issued an order granting the City’s request to vacate

the Award and another order denying IOC’s request to confirm the award.

4CR:983-84. IOC then timely filed its notice of appeal. 4CR:985.

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SUMMARY OF THE ARGUMENT

There is a wealth of case law establishing that both the Texas

Arbitration Act and the Federal Arbitration Act preclude a court from

vacating an arbitration award on common-law grounds. Thus, the trial court

could not have properly vacated the Award in response to the City’s

contention that the Award violated public policy.

The City’s remaining two grounds for vacating the Award stemmed

from the Texas Arbitration Act, which permits a court to vacate an arbitration

award when (1) it is obtained by undue means and (2) the arbitrator exceeds

his powers. The City made passing reference to these statutory grounds to

the trial court, but the City made no actual attempt to show:

 that the Award stemmed from the arbitrator purposely engaging in

immoral, illegal, or bad-faith conduct directed at the City (i.e.,

undue means); or

 that the arbitrator decided matters that were outside the scope of

what was arbitrable (i.e., exceeded his powers).

The City’s passing references to these statutory grounds were nothing more

than cheap camouflage—intended to obscure the reality that the City was

simply seeking to vacate the Award based on the arbitrator’s purported

mistakes of law and fact. In light of the countless legal authorities

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recognizing that mistakes of law and fact are an insufficient basis for

vacating an arbitration award, the trial court could not have properly vacated

the Award in response to the City’s statutory grounds for vacatur. But even

if the City’s proffered mistakes of law and fact were capable of satisfying

the statutory grounds the City referenced, the City’s failure to present a

complete record of the proceedings before the arbitrator precludes any court

from recognizing any mistake. Both the trial court and this Court must

presume that the missing portions of the record support the Award and the

legal conclusions and factual findings contained therein.

The trial court was thus provided with no meritorious basis for

vacating the Award. As a result, the trial court was compelled to confirm the

Award. IOC thus asks the Court to issue an opinion that reverses the trial

court’s order vacating the Award and renders judgement confirming the

Award.

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ARGUMENT

I. The Court may presume that the arbitration award is governed
by both the Texas and federal arbitration acts. The Court must
review the trial court’s decision to vacate the award de novo and
can only consider grounds for vacating that were raised at the
trial level. An arbitrator’s mistakes of law and fact are an
insufficient basis for vacating an award.

The Agreements’ arbitration clauses do not specify whether the

Federal Arbitration Act (“FAA”) or the Texas Arbitration Act (“TAA”)

applies. 1CR:50-60. The City’s “Contract Documents and Specifications”

for the Sugar Road Project contains language stating that any contract

between the City and the selected contractor will be governed by the laws of

Texas, while the Canton Road Agreement appears to lack any such language.

3CR:310,348. Neither IOC nor the City contested the applicability of the

FAA and TAA to the Agreements. Under this set of facts, the Court has

deemed it appropriate to assume that both the FAA and TAA apply. See

Hale-Mills Constr. Ltd. v. Willacy County, No. 13-15-00174-CV, 2016 Tex.

App. LEXIS 340, at *9-10 n.3 (Tex. App.—Corpus Christi Jan. 14, 2016, no

pet.) (mem. op.). That said, the assumption that both the FAA and TAA

apply is only pertinent to addressing the merits of the City’s argument that

the Award should be vacated because it purportedly violates public policy.

The statutory grounds the City advanced at the trial level to justify vacating

the Award—namely, that the Award was obtained by undue means and that

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the arbitrator exceeded his powers—were specifically presented as a basis

for vacating the Award under the TAA alone. SR:16-17; 2CR:84-102.

Generally, an arbitration award is given the same effect as a final

judgment of a court of last resort. SCI Tex. Funeral Servs. v. Roussett, No.

13-03-00295-CV, 2005 Tex. App. LEXIS 2511, at *3 (Tex. App.—Corpus

Christi Mar. 31, 2015, no pet.) (mem. op.). The Court reviews a trial court’s

vacation of an arbitration award de novo. Id.

The trial court, on the other hand, must review an arbitrator’s
award with great deference. Because arbitration awards are
favored by the courts as a means of disposing of disputes, the
courts indulge every reasonable presumption in favor of
upholding the awards. A mere mistake of law or fact is
insufficient to set aside an arbitration award.
Id. at *3-4. “It is abundantly clear that a party seeking to vacate an arbitration

award must present any grounds for doing so to the trial court, otherwise,

those complaints are waived on appeal.” Black v. Shor, 443 S.W.3d 154, 163

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

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II. The City gave the trial court three reasons for vacating the
arbitration award: (1) the award violated public policy; (2) the
award was obtained by undue means in violation of the TAA; and
(3) the arbitrator exceeded his powers in violation of the TAA.1
Because these reasons lacked merit, the trial court erred in
vacating rather than confirming the award.

A. The arbitration award cannot be vacated on the City’s
common-law ground because the TAA’s and FAA’s
statutory grounds for vacating an award are exclusive.

Three months after the trial court vacated the Award, the Texas

Supreme Court issued its opinion in Hoskins v. Hoskins, wherein the

supreme court sought “to resolve a split in the courts of appeals on whether

the TAA permits vacatur of an arbitration award on common-law grounds

not enumerated in the statute.” No. 15-0046, 2016 Tex. LEXIS 386, at *8

(Tex. May 20, 2016). The supreme court held that the TAA did not permit

vacatur of an arbitration award on common-law grounds not enumerated in

the statute, explaining:

The statutory text could not be plainer: the trial court
“shall confirm” an award unless vacatur is required under one
of the enumerated grounds in section 171.088. As the court of
appeals correctly determined, the TAA leaves no room for
courts to expand on those grounds, which do not include an
arbitrator's manifest disregard of the law.
....

1
The City’s amended petition vaguely references CPRC § 171.091 as a basis for vacating
the Award, but that section must summarily be disregarded since it only sets forth grounds
for modifying or correcting an award—not vacating an award in its entirety, which is all
the City prayed for in its amended petition. See TEX. CIV. PRAC. & REM. CODE § 171.091.

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In sum, the TAA mandates that, unless a statutory vacatur
ground is offered, the court shall confirm the award. Thus, a
party may avoid confirmation only by demonstrating a ground
expressly listed in section 171.088. [The appellant] complains
that “the TAA contains gaps that need common-law
supplementation” in order to foreclose arbitration awards that
are “unquestionably” improper. But we may not rewrite or
supplement a statute to overcome its perceived deficiencies.
The parties signed an agreement to arbitrate under the TAA, and
that agreement contained no limitations on the arbitrator’s
authority beyond those enumerated in the statute. Because
manifest disregard is not an enumerated vacatur ground under
section 171.088, the court of appeals correctly declined to
consider it in affirming the trial court’s confirmation order.

Id. at *11-15 (citations and brackets omitted). In accordance with Hoskins,

the Court must find that the TAA does not permit the trial court to vacate the

Award based on the City’s contention that the Award “violates public policy

pursuant to Texas Common Law.” SR:17; 2CR:84-102. The Court should

similarly find that the FAA does not permit the trial court to vacate the

Award based on its purported violation of public policy. See, e.g., Parallel

Networks, LLC v. Jenner & Block, No. 05-13-748-CV, 2015 Tex. App.

LEXIS 10461, *17 (Tex. App.—Dallas Oct. 9, 2015, pet. denied) (mem.

op.); Thomas Petroleum, Inc. v. Morris, 355 S.W.3d 94, 98 (Tex. App.—

Houston [1st Dist.] 2011, pet. denied); Good Times Stores, Inc. v. Macias,

355 S.W.3d 240, 247 (Tex. App.—El Paso 2011, pet. denied); Lefoumba v.

Legend Classic Homes, Ltd., No. 14-08-00243-CV, 2009 Tex. App. LEXIS

20
7573, at *5-6 (Tex. App.—Houston [14th Dist.] Sept. 17, 2009, no pet.)

(mem. op.).

B. In a misguided attempt to prove to the trial court that the
arbitration award was obtained by undue means, the City
sought to show that the award stemmed from the
arbitrator’s mistakes of law and fact. The mistakes alleged,
however, are incapable of establishing that the arbitration
award was obtained by undue means. Moreover, the City’s
failure to present the trial court with a complete record of
the arbitration proceedings precluded the trial court from
recognizing any of the alleged mistakes.

The City argued that the Award could be vacated pursuant to

subsection 171.088(a)(1) of the TAA, which states that “[o]n the application

of a party, the court shall vacate an award if . . . the award was obtained by

corruption, fraud, or other undue means.” TEX. CIV. PRAC. & REM. CODE

§171.088(a)(1) (emphasis added). “Whether under the Texas or federal

standard, ‘undue means’ connotes behavior that is immoral, illegal, or

otherwise in bad faith. The term describes conduct that is purposeful and

directed against another party.” AmeriPath, Inc. v. Hebert, 447 S.W.3d 319,

338 (Tex. App.—Dallas 2014, pet. denied) (citations omitted).

Because the Federal Arbitration Act uses almost identical
language to Section 171.088(a)(1), it is helpful to look to cases
considering the issue under the FAA. A mere mistake of law is
insufficient to vacate an arbitration award on the basis of ‘undue
means.’ Instead, a party who seeks to vacate an award allegedly
procured by ‘undue means’ must show immoral, illegal, or bad-
faith conduct.

21
Las Palmas Med. Ctr. v. Moore, 349 S.W.3d 57, 69 (Tex. App.—El Paso

2010, pet. denied) (citations omitted); see Lefoumba, 2009 Tex. App. LEXIS

7575, at *7.

In its petition and briefing to the trial court, the City made no effort to

establish (or even allege) that the Award stemmed from the arbitrator

purposely engaging in immoral, illegal, or bad-faith conduct directed at the

City—which is what the City needed to establish to demonstrate undue

means. See AmeriPath, 447 S.W.3d at 338; Las Palmas, 349 S.W.3d at 69.

Instead, the City misguidedly tried establishing undue means by arguing that

the Award resulted from the arbitrator’s purported mistakes of law and fact.

2CR:84-102. Because any such mistakes do not establish that an arbitration

award was obtained by undue means, and because mistakes of law and fact

are an insufficient basis for vacating an award, the trial court could not have

properly vacated the Award based on subsection 171.008(a)(1). See

Roussett, 2005 Tex. App. LEXIS 2511, at *4 (“A mere mistake of law or fact

is insufficient to set aside an arbitration award.”).

But even if the mistakes alleged were capable of establishing that the

Award was obtained by undue means, the trial court was precluded from

recognizing any such mistakes since it was not provided with a complete

record of the arbitration proceedings. Because an arbitration award is entitled

22
to great deference and every reasonable presumption must be indulged to

uphold the arbitrator’s decision, “[a] non-prevailing party seeking to vacate

an arbitrator’s award therefore bears the burden to produce a complete record

establishing the claimed basis for relief.” Long Lake, Ltd. v. Heinsohn, No.

14-09-00613-CV, 2010 Tex. App. LEXIS 2498, at *5 (Tex. App.—Houston

[14th Dist.] Apr. 8, 2010, no pet.) (mem. op.) (citations omitted). “Without

a complete record, [a court] must presume that the arbitrator’s award was

supported by evidence.” Statewide Remodeling, Inc. v. Williams, 244 S.W.3d

564, 569-70 (Tex. App.—Dallas 2008, no pet.).

In the instant case, the City provided the trial court with transcripts of

the arbitration proceedings, but failed to provide the roughly 354 evidentiary

exhibits that the arbitrator considered in issuing the Award.2 3CR:660-

770,772-853. The City’s failure to provide the trial court with a complete

record thus necessitates a determination that the Award was not obtained by

undue means—especially since the City has improperly predicated the

“undue means” finding on the trial court’s ability to conclude, through an

2
The 354 exhibits consisted of 193 exhibits presented in connection with the proceedings
on the Canton Road Project and 161 exhibits presented in connection with the
proceedings on the Sugar Road Project. The 193 exhibits relating to the Canton Road
Project entailed 44 joint exhibits, 51 exhibits from IOC, and 98 exhibits from the City.
3CR:660-63 (listing exhibits). The 161 exhibits relating to the Sugar Road Project
entailed 34 joint exhibits, 77 exhibits from IOC, and 50 exhibits from the City.
3CR:772-75 (listing exhibits). These exhibits were not presented to the trial court.

23
incomplete record, that the arbitrator made mistakes of law and fact. See

Gessee v. U.S. Home Corp., No. 02-02-00405-CV, 2003 Tex. App. LEXIS

4575, at *2 (Tex. App.—Fort Worth May 29, 2003, no pet.) (mem. op.)

(holding that there was no other choice but to reject appellant’s argument

that arbitration award was obtained by undue means when appellant failed

to furnish a complete record of arbitration proceedings); see also

Commonwealth Assoc. v. Letsos, 40 F. Supp. 2d 170, 172-75 (S.D.N.Y.

1999) (where party argued that arbitration award should be vacated because

arbitrator acted in manifest disregard of law, the trial court recognized that

the party’s failure to present the trial court with exhibits presented to

arbitrator provided sufficient cause to reject the party’s argument since “the

[c]ourt was unable to exclude the possibility that the award is supported by

evidence that [the party] has not placed before [the court]”).

C. In a misguided attempt to prove to the trial court that the
arbitrator exceeded the scope of his powers, the City sought
to show that the arbitrator committed mistakes of law and
fact. The mistakes alleged, however, are incapable of
establishing that the arbitrator exceeded his powers.
Moreover, the City’s failure to present the trial court with
a complete record of the arbitration proceedings precluded
the trial court from recognizing any of the alleged mistakes.

CPRC § 171.008(a)(3)(A) states that on the application of a party, a

court shall vacate an award if the arbitrator exceeded his powers. TEX. CIV.

PRAC. & REM. CODE §171.008(a)(3)(A).

24
An arbitrator exceeds his powers when he decides matters not
properly before him. In determining whether an arbitrator has
exceeded his power, [courts] examine the language in the
arbitration agreement, and any doubts concerning the scope of
what is arbitrable must be resolved in favor of arbitration. The
authority of an arbitrator is derived from the arbitration
agreement and is limited to a decision of the matters submitted
therein either expressly or by necessary implication. It is only
when the arbitrator departs from the agreement and, in effect,
dispenses his own idea of justice that the award may be
unenforceable.

Eddleman v. Ocker, No. 13-15-00217-CV, 2016 Tex. App. LEXIS 4377, at

*18 (Tex. App.—Corpus Christi Apr. 28, 2016, no pet.) (mem. op.) (citations

and internal quotations omitted).

The Dallas Court of Appeals recently addressed subsection

171.008(a)(3)(A) in Framing v. BBL Builders, LP, No. 05-15-01430-CV,

2016 Tex. App. LEXIS 6352 (Tex. App.—Dallas June 15, 2016, no pet. h.)

(mem. op.). In that case, Elite hired BBL, a general contractor, to complete

a construction project. Id. at *1-2. Elite and BBL went to arbitration when

disputes between them arose, which culminated in Elite obtaining a

favorable arbitration award. Id. BBL successfully petitioned the trial court

to vacate the award against it while arguing in part that “the arbitrator

exceeded his power in awarding damages for breach of contract.” Id. In

rejecting this argument, the Dallas COA provided the following analysis:

. . . BBL argued that the arbitrator exceeded his powers
by “disregarding the contract and creating a new agreement

25
between the parties.” BBL argued to the trial court that the
arbitrator based the damages award on an hourly rate of $28.50
for Elite’s employees and that the parties had never agreed to
that hourly rate. BBL argued that the contract called for
maximum payments and the arbitrator ignored those maximums
agreed upon by the parties and created a new agreement based
on this hourly rate.
Elite argued that the issue in an exceeded-his-powers
claim “is not whether the arbitrator decided an issue . . .
correctly, but instead, whether [the arbitrator] has the authority
to decide the issue at all.” Elite argued that the arbitration
agreement gave the arbitrator authority to decide the breach of
contract claim. We agree.
An arbitrator derives his authority from the arbitration
agreement. An arbitrator exceeds his authority when he decides
a matter not properly before him. We presume an arbitrator’s
actions were within his authority and we resolve all doubts in
favor of the award.
In this case, the parties agreed to arbitrate “any
controversy or claim arising out of or related to this
AGREEMENT, or the breach thereof.” This is broad language
covering any dispute between BBL and Elite arising out of their
contract. BBL did not dispute that the breach of contract claim
was properly before the arbitrator. Instead, it contended that the
arbitrator calculated damages based on an hourly rate not
agreed to by the parties and, as a result, “departed from the
parties’ agreement and dispensed his ‘own idea of justice.’”
But the arbitration agreement in this case did not place
restrictions on the arbitrator’s authority to decide the amount of
damages for the breach of contract claim. The arbitration
agreement gave the arbitrator full authority to resolve the
contract dispute. Although the arbitrator resolved the dispute in
a way that BBL believes was wrong, this “does not mean the
arbitrator acted outside the scope of his authority.” The breach
of contract claim was properly before the arbitrator. BBL’s
argument that the arbitrator erroneously determined damages
for a claim properly before him is an allegation of a mistake of
fact or law and is not a ground for vacating an arbitration award.

26
Id. at *7-10 (citations, brackets, and ellipses omitted).

The Canton Road Agreement’s arbitration clause read, in pertinent

part, as follows: “Any controversy or claim arising of or relating to this

contract, or the breach thereof which cannot be resolved by mutual

agreement, shall be settled by arbitration[.]” 1CR:55 (emphasis added). The

Sugar Road Agreement’s arbitration clause—which proceeds a mediation

clause that requires non-binding mediation of “any claims, demands, or

disputes”—reads in part as follows: “If the parties fail to resolve any dispute

by mediation, the parties shall submit the dispute to [an arbitrator].” 1CR:59

(emphasis added). Both arbitration clauses thus contain broad language

covering any dispute between IOC and the City arising out of the

Agreements.

The City invited the arbitrator to resolve IOC’s breach of contract

claims. CR:923, 957. While before the trial court, the City did not contest

the arbitrator’s power to resolve IOC’s claims. CR:84-102. In seeking to

demonstrate to the trial court that the arbitrator exceeded his powers, the City

did nothing more than argue that the arbitrator committed various mistakes

of law and fact. CR:84-102. Much like the losing party in Framing, the City

has improperly conflated the contention that the arbitrator resolved claims

incorrectly with the contention that the arbitrator acted outside the scope of

27
his authority. CR:84-102. The Court must reject the City’s invitation to blur

these distinct contentions. Thus, in accordance with Framing, the Court

should find the City failed to show the arbitrator exceeded his powers in

issuing the Award. And even if the Court accepted the City’s fanciful belief

that the alleged mistakes of law and fact are capable of demonstrating that

the arbitrator exceeded his power, neither the trial court nor this Court could

recognize the existence of any such mistakes since the City failed to provide

a complete record of the arbitration proceedings. See Williams, 244 S.W.3d

at 569-70 (“Without a complete record, [a court] must presume that the

arbitrator’s award was supported by evidence.”).

D. The trial court was compelled to confirm the arbitration
award and erred when it failed to do so.

The TAA states that “[u]nless grounds are offered for vacating,

modifying, or correcting an award under Section 171.088 or 171.091, the

court, on application of the party, shall confirm the award.” TEX. CIV. PRAC.

& CODE § 171.087 (emphasis added). As explained above, the City provided

the Court with no valid ground for vacating, modifying, or correcting the

Award. In light of that analysis, the Court should find that the trial court was

compelled to confirm the Award in response to IOC’s application seeking

confirmation. Based on this finding, IOC asks the Court to render judgment

confirming the Award. See TEX. R. APP. P. 43.2(c).

28
PRAYER

IOC prays that the Court issue an opinion that reverses the trial court’s

order vacating the Award and renders judgement confirming the Award. IOC

prays for all other relief to which it is legally and equitably entitled.

Respectfully submitted,

/s/ Ricardo Pumarejo Jr.
Michael A. McGurk
State Bar No. 00797746
mmcgurk@ktattorneys.com
Ricardo Pumarejo Jr.
State Bar No. 24056168
rpumarejo@ktattorneys.com
KITTLEMAN THOMAS, PLLC
4900-B N. 10th. Street
McAllen, Texas 78504
p. 956.632.5083
f. 956.630.5199
Counsel for IOC Company, LLC

29
CERTIFICATE OF COMPLIANCE

Pursuant to Texas Rule of Appellate Procedure 9.4, I hereby certify that this
brief contains 4,415 words. This is a computer-generated document created in
Microsoft Word 2013, 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/ Ricardo Pumarejo Jr.
Ricardo Pumarejo Jr.

CERTIFICATE OF SERVICE

I hereby certify that on July 11, 2016, a true and correct copy of this document
was served upon the following persons via electronic filing service.

Gerald E. Castillo
law@valleyfirm.com
Steven M. Gonzalez
law@valleyfirm.com
Ricardo Palacios
rpalacios@pgtlawfirm.com
Criselda Palacios
cpalacios@pgtlawfirm.com
Counsel for City of Edinburg

/s/ Ricardo Pumarejo Jr.
Ricardo Pumarejo Jr.

30
CAUSE NO. 13-16-00117-CV
IOC COMPANY, LLC, § IN THE THIRTEENTH
§
VS. § COURT OF APPEALS
§
CITY OF EDINBURG § EDINBURG, TEXAS

APPELLANT’S APPENDIX

1. Order Denying IOC Company, LLC’s Petition and Motion to Confirm
Arbitrator’s Award and for Entry of Final Judgment
2. Order Granting Amended Petition/Application to Vacate Arbitration Award
3. Final Award of Arbitrator (Reasoned)
4. The City’s Amended Petition/Application to Vacate Arbitration Award
5. The City’s Brief in Support of Vacating Arbitration Award

31
Electronically Filed
2/1/20161:16:02 PM
Hidalgo County District Clerks
Reviewed By: Andrea Lopez

CAUSE NO. C-6852-14-F
CITY OF EDINBURG, TEXAS § IN THE DISTRICT COURT OF
s
vc; s l-!TnAT <.n rnTJNTY TJO)( AS
§
IOC COMPANY, LLC § 332ND JUDICIAL DISTRICT

ORDER DENYING IOC COMPANY, LLC'S PETITION AND MOTION TO
ll<d\.lUK::> IJU'<UrVl~IOl'<ll~l Ur .JI ll

After considering IOC Company, LLC's Petition and Motion to Confirm Arbitrator's

Award and for Entry of Final Judgment ("the Motion"), the response, and the arguments of

counsel, the Court hereby UJ:.NJJ:.S the Motion.
/
Signed on February 11TH 2016.

I

cc: Jesus Garcia, Jr.
~ "n
'

Michael A. McGurk
Kittlernan, Thomas, PLLC
n1ll1cgurk@ktattornevs.com

StPVPn M ]pz

Gerald E. Castillo
Gonzalez Castillo, LLP
sgonzalez@valleyfirm.com
gcastillo@valley_firm.com

Ricardo Palacios
Criselda Palacios
Palacios, Garza & Thompson, P.C.
rpalacios@pgtlawfirm.com
q~alacios@ptgJaw.firm.com

I

983
TB
Electronically Filed
1/5/2016 6:07:43 PM
Hidalgo County District Clerks
Reviewed By: Andrea Lopez

CAUSE NO. C-6852-14-F

CITY OF EDINBURG, TEXAS § IN THE DISTRICT COURT
§
v. § 332nd JUDICIAL DISTRICT
§
IOC COMPANY, L.L.C. § HIDALGO COUNTY, TEXAS

ORDER GRANTING AMENDED PETITION/APPLICATION TO VACATE
ARBITRATION AWARD #70 441 Y 00190 12

11TH
On this the _____________ FEBRUARY
day of ___________________, 2016 came on to be heard

Plaintiff CITY OF EDINBURG,TEXAS’ Amended Petition/Application to Vacate Arbitration Award

#70 441 Y 00190 12. The Court, after having heard the argument of counsel and having read

the pleadings on file, finds that the Amended Petition/Application to Vacate Arbitration Award

#70 441 Y 00190 12 should be GRANTED.

IT IS THEREFORE ORDERED that said Plaintiff CITY OF EDINBURG,TEXAS’ Amended

Petition/Application to Vacate Arbitration Award #70 441 Y 00190 12 is GRANTED.

SIGNED ON THIS THE11TH FEBRUARY
_________ day of ________________,
____________ __, 2016.
_________ 20
20
016
16
16.

PRESIDING
RESIDIN
IN
NG JUDGE
JUDGE
JU

cc: Steven Gonzalez/Gerald E. Castillo, GONZALEZ CASTILLO, LLP, 1317 E. Quebec Ave., McAllen, Texas, FAX:
(956) 618-0445; email: law@valleyfirm.com and gcastillo@valleyfirm.com

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@tuckervaughan.com

Gil Peralez, 1416 W. Dove Avenue, McAllen, Texas 78503; email: gpp@peralezfranzlaw.com

Michael A. McGurk, KITTLEMAN THOMAS, PLLC, 4900-B N. 10th St., McAllen, Texas 78504; Email
mmcgurk@ktattorneys.com

984
TB
C-6852-14-F

AMERICAN ARBITRATION ASSOCIATION
Construction Industry Arbitration Tribunal

IOC Company~ LLC, )
Claimant, )
) AAA Case Number:
v. ) 70 441 y 00190 12
)
City of Edinburg, Texas, )
Respondent. )

FINAL AWARD OF ARBITRATOR (REASONED)

I, THE UNDERSIGNED ARBITRATOR, having been designated in accordance
with the arbitration agreement entered into between the above-named parties, and
having been duly sworn, and having duly heard the proofs and allegations of the
P arties, hereby AWARD as follows:

Introdnction

The parties to this proceeding are IOC Company, LLC ("IOC''), a highway and road
contractor, and City of Edinburg, Texas ("City"), a municipality. IOC and the City
agreed to my appointment as the arbitrator in this proceeding ancl made no objections to
my continued service as arbitrator after I made disclosures.

The claims and disputes the pru'ties are arbitrating, arise out of two projects but
involve similar facts, agreements and scopes of work. In addition, the witnesses
testifying about the claims and disputes arising out of both projects were identical.
Previously, the parties agreed to consolidate these claims and disputes and present
them to me for resolution.

I conducted bifurcated hearings with respect to each project. I neard the claims
and disputes arising out of the Canton Road Project first at the evidentiary hearing
devoted to that project held on February 17 and 18, 2014 which, by consent of the
parties, was held open until the establishment of the post hearing submission sch edule
set forth in the Order Regarding Post Hearing Briefing Schedule. Next, I heard the
claims and disputes arising out of the Sugar Road Project at the evidentiary hearing
held on April 16 and 17, 2014. The hearings were declared closed on June 18, 2014.

The post hearing briefing schedule 1·equired the submission of briefs and closing
statements, replies and attorneys' fees affidavits for both projects.

In accordance with t he post heru·ing submission schedule as set forth in the above

64
C-6852-14-F

described Order and discussions memorialized in the hearing tt•anscript, I am now
rendering this Final Award with respect to the claims and disputes arising out of both
projects.

The Cla.ims, Defenses and Dz:sputes: Canton Road Project

IOC and the City enter ed into an agreement dated Ap1'il 1, 2008 under which IOC
agreed to perform paving, d1·ainage improvements and expansion of a portion of Canton
Road for tbe City in accordance with the plans, specifications and information the City
furnished to roc.

IOC seeks recovery of damages in the form of additional compensation due to the
City's claimed breach of contract, essentially consisting of delays, jnterferences and
disruptions it alleges the City caused it to suffet·. IOC also seeks recovery of attorneys'
fees, prejudgment interest and reimbursement of arbitratm• compensation and costs.

The City contests IOO's legal entitlement to recovery of damages and argues TOG's
claims are barred or excluded by the parties' agreement and § 271.153, Local
Government Code. The City stl'Ongly denies it was responsible for owner-caused delays
that increased IOC's cost to perform the work for this project. In particular, the City
argues the City was not responsible for relocating utilit-y lines, encumbrances and
obstructions that hindered, delayed or disrupted IOC's ability to timely, efficiently and
in a linear, logical and sequential manner pel'foi'm the required scope of work in
accordance with its construction plan. The City further argues any delays IOC suffered
were caused by thi1·d parties over whom :it had no coniJ.·ol or I'esponsibility.

The Clairns, DefenseJJ and Disputes: Sttgar Road Project

Similarly, IOC and the City entered into an agreement dated June 2, 2009 under
which IOC agreed to perform paving, drainage improvements and expansion and
widening of a portion of Sugar Road for the City in accordance with the plans,
specifications and information tbe City furnished to IOC.

Essentially, IOC's claim and the types of damages it seeks minor those described
fo1· the Canton Road Project. The same generally holds true for the Cicy's defenses
although the City emphasizes several pt·ovisions in the Canton Road Agreement which
it asse~ts preclude IOC's claim and damages.

Findings Regarding the Oa.nton Road Project

Based on the evidence presented to me, the Canton Road Agreement and the law of
the State of Texas, I find the City materially breached this Agreement without excuse
and is liable to roc for damages in the form of additional compensation al·ising from
2

65
C-6852-14-F

City-caused delays, disruptions and interferences. I further find IOC did not materially
breach the Agreement. I discuss the facts and 1·easons in support of these findings
below.

The evidence concerning IOC's efforts to perform the scope of work for the Canton
Road Project and the numerous, serious and costly City-caused delays, interferences
and disruptions it suffered in those efforts is compelling and suppo1•ts my :finding the
City materially breached the Agreement.

This evide11ce established the following facts and supports the following reasons
for my ente1·ing an award in IOC's favor on its claim arising out of the Canton Road
Px·oject:

1. The City failed to timely and properly provide IOC with the lands necessary
for it to perform the scope of work under the Canton Road Agreement.

2. The City failed to provide IOC timely and proper access to the areas in
which it was to perform the scope of work under the Canton Road
Agreement.

3. The City failed to provide IOC with tmhindered and unobstructed access to
the areas in which it was to perform the scope of work m1de1· the Canton
Road Agreement.

4. The City failed to timely, reasonably and propel'ly manage the removal of
obstacles, conflicts and obstructions in the areas in which roc was to
perform the scope of work under the Canton Road Agreement. The City had
the duty and responsibility to manage the removal of these in the areas in
which roc was to perform the scope of work.

5. The City's preceding failures delayed IOC's ability to timely and efficiently
perform the scope of work under the Canton Road Agreement.

6. The City is responsible for owner-caused delays to IOC's ability to timely
and efficiently perf01·m the scope of work under the Canton Road
Agl'eement.

7. The City's preceding failures disrupted and interfered with IOC's ability to
timely and efficiently perform the scope of wo1·k under the Canton Road
Agreement.

8, The number and quality of the utility lines (underground and above
ground), power poles, splicing operations. gas lines and meters and

3

66
C-6852-14-F

manholes which singularly and cumulatively delayed and disrupted IO C's
work pet•formance are significant and compelling. These are City-caused
delays, disruptions and interferences.

9. The City also f:ailed to timely acquire permits and easements from the local
dnlinagc and irrigation districts which also delayed and disrupted IOC's
wo1·k performance. These, too, are City-caused delays. disruptions and
interferences.

10. As a result of the City-caused delays and the City's material breach of the
Agreement, IOC suffered increased costs in the amount of $1,362l630 to
perform the scope of work under the Canton Road Agreement. These costs
consist of labor costs in the sum of $480,682, equipment costs in the sum of
$475,639, material escalation costs in the sum of $2001 075, extended field
costs in the sum of $28,500 and mark-up of $177,734.

11. The City is liable to IOC for the increased costs totaling $1,362,630 (set
forth in the preceding subparag1·aph) as additional compensation.

12. The City is also liable to IOC for IOC's reasonable attorneys' fees in the sum
of $158,000.

13. § 271.153, Local Government Code, does not ba:r IOC's claim for additional
compensation arising out of the Canton Road Project.

14. Special Provision 18 of the Canton Road Agreement is not applicable to the
claim asse1'ted by IOC; IOC did not b1'each o1· violate this provision.
Therefore, Special Provision 18 does not bar or preclude ICC's claim.

15. IOC did not waive its claim fo1· damages·.

16. Because the City materially breached the Agreement, it cannot rely on
procedural rights, including notice provisions, in the Agreement. Indeed, by
its breach, th e City relinquished its contractual procedw·al rights Iegarding
notice, change orders and claims by roc for additional compensation.

17. By its failures and conduct as described above, tbe City wrongfully
prevented 10C from timely and efficiently peTforming its WOrk.

18. IOC's further performance under the Agreement was excused by the City's
prior material breaches.

19. The City's material breaches a1·e not excused based on the failUI·e of any

4

67
C-6852-14-F

third party to remove or relocate their lines or utilities that constitute
obstacles, conflicts and obstructions as described above.

20. The delays IOC experienced were City-caused and compensable to IOC.

Findings Regarding the Sugar Road Project

IOC's fared no better on the Sugar Road Project in terms of the delays,
interferences and disruptions it suffered at the hands of the City. Once again, the
evidence, the Sugar Road Agl'eement and the law of the State of Texas compel me to find
the City materially breached the Sugar Road Agreement without excuse and is liable to
IOC for damages in the form of additional compensation arising from City-caused delays.
IOC did not materially breach the Agreement. As before, I discuss the facts and 1·easons
in suppm·t of these findings below.

The evidence of IOC's efforts to perform the scope of work for the Sugar Road
Project and the numerous, serious and costly City caused delays, interferences and
disruptions it suffered in those efforts is similarly compelling and supports my finding
the City materially breached the Sugar Road Agreement.

Again,. this evidence supports the following facts and reasons for my entering an
award in rOC's favor on its claim arising out of the Sugar Road Project:

1. The City failed to timely and properly provide roc with the lands necessary
for it to perform the scope ofworkunderthe Suga1· Road Agreement.

2. The City failed to provide IOC timely and proper access to the. areas in
which it was to perfurm the scope of work under the SugaT Road Agreement.

3. The City failed to provide roc with unhindered and unobstructed access to
the areas in which it was to perform the scope of work under the Sugar Road
Agreement.

4. The City failed to timely, reasonably and Pl'Operly manage the removal of
obstacles, conflicts and obstructions in the areas in which roc was to
perform the scope of work under the Sugar Road Agreement. The City had
the duty and responsibility to manage the removal of these in the areas in
which roc was to perform the scope of work.

5. The City's preceding failures delayed IOC's ability to timely and efficiently
perform the scope of work under the Sugar RoadAgreement.

6. The City is responsible for owner-caused delays to lOC's ability to timely

5

68
C-6852-14-F

and efficiently perfo1'm the scope ofwork under the SugaT Road Agreement.

7. The City's preceding failures disrupted and interfered with IOC's ability to
timely and efficiently pel'form the scope of work under the Sugar Road
Agreement.

8. The number and quality of the gas lines, manholes, utility poles, and
subgrade access p roblems delayed and disrupted IOC's work performance
are significant and compelling. In addition, the City stopped IOC's
performance of work in one area south of Owassa Street which further
delayed and disrupted IOC's work. These are City-caused delays,
disruptions and interferences.

9. As a result of the City-caused delays and the City's material breach of the
Sugru· Road. Agreement, IOC suffered increased costs in the amount of
$673,092 to perform the scope of work under the Sugru· Road Agreement.
These costs consist of labor costs in the sum of $219,191, equipment costs in
the sum of $290,944, material costs in the sum of $60,163, extended field
costs in the sum of $15,000 and mark-up in the sum of $87,794.

10. The City is liable to IOC for the increased costs set forth in the preceding
subparagraph in the sum of $673,093 (as set forth in the preceding
subparagraph) as additional compensation, none of which is barred by §
271.153, Local Government Code.

11. The City is also liable to IOC for IOC's reasonable attorneys' fees in the sum
of $127,827.

12. § 271.153, Local Government Code, does not ba1· IOC's claim for additional
compensation asserted by IOC against the City arising out of the Sugal'
Road Project nor does it bru· the damages I am awarding IOC in the amount
of $673,093.

13. roc did not waive its claim for damages.
14. Because the City materially breached the Sugar Road Agreement, it cannot
rely on procedural rights, including notice provisions, in this agreement.
Indeed, by its b1·each, the City relinquished its contractual procedural rights
rega1·ding notice, change orders and claims by 100 for additional
compensation.

15. By its failures and conduct as described above, the City wrongfully
prevented roc from timely and efficiently performing the scope of work

6

69
C-6852-14-F

under the Sugar Road Agreement.

16. IOC's further pel'formance under the Agreement was excused by the City's
p1·ior material breaches.

17. The City's mateTial breaches are not excused based on the failure of any
third party to remove or relocate their lines or utilities that constitute
obstacles, conflicts and obstructions as described above.

18. Art. 12.l(D) of the Sugar Road Agreement does not bar 10C's claims or
damages. Neither Special P1·ovision 18 or 20 preclude IOC"s claims or
damages.

19. Art. 14.8A of the Sugar Road Agt·eement does not bar IOC's claim or
damages.

20. The delays IOC experienced were City-caused and compensable to IOC.

Award

1. Fo1· the Canton Road Project:

a. The City shall pay 100 the sum of $1,362,630, the components
of which are set forth in finding number 10 under the Findings
Regarding t he Canton Road Project set forth above; and

b. The City shall pay IOC reasonable attorneys' fees of $1581000.

2. For the Sugar Road Project:

a. The City shall pay IOC the sum of $$673,092, the components
of which are set forth in finding number 9 under the Findings
Regarding the Sugar Road Project set forth above; ; and

b. The City shall pay IOC reasonable attorneys' fees of $127,827.

3. The administrative fees and expenses of the American Arbit1·ation
Association totaling $11,450 shall be borne by the City and the
compensation and expenses of the arbitrator totaling $28,911.48 ·s hall
be borne by the City. Therefor·e, the City shall reimburse IOC the
sum of $25,905.74, representing that po1·tion of said fees and expenses
in excess of the apportioned costs previously incurred by IOC.

7

70
C-6852-14-F

The above sums are to be paid on or before 30 days from the date of this Award.

:::t:•::y :::·:~·not expressly gra::;· il
This Award is in full settlement of all claims and counterclaims submitted to this

William K. Andrews, Al'bitrator

8

71
Electronically Filed
8/25/2014 2:39:22 PM
Hidalgo County District Clerks
Reviewed By: Jassia De La Paz

CAUSE NO. C-6852-14-F

CITY OF EDINBURG, TEXAS § IN THE DISTRICT COURT
§
v. § 332nd JUDICIAL DISTRICT
§
IOC COMPANY, L.L.C. § HIDALGO COUNTY, TEXAS

AMENDED PETITION/APPLICATION TO VACATE
ARBITRATION AWARD #70 441 Y 00190 12

TO THE HONORABLE COURT:

NOW COMES, City of Edinburg, and files this Amended Petition/Application to Vacate an

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 and would respectfully show

the Court the following:

I.
PARTIES

City of Edinburg, Texas is a Texas Municipality.

IOC Company, L.L.C. is a Texas corporation organized and existing under the laws of the

State of Texas and is authorized to do business in the State of Texas. IOC Company, L.L.C. may

be served with Citation in this action by Service of Citation to: Jesus Garcia, Jr., TUCKER,

BARNES, GARCIA & DE LA GARZA, P.C., JP Morgan Chase Building, 712 Main, Suite 1600,

Houston, Texas 77002-3297.

II.
VENUE

This Petition is filed as an initial application in Hidalgo County, the county in which the hearing

before the arbitrator was held.

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III.
REQUIREMENTS FOR A PETITION TO VACATE ARBITRATION AWARD

A Petition to Vacate an Arbitration Award must comply with the requirements set forth

by the Texas Civil Practice and Remedies Code §171.085(a) so that City of Edinburg must:

(1) Show the jurisdiction of the court;

(2) Attach a copy of the Agreement to Arbitrate;

(3) Define the issue subject to arbitration between the parties under the
Agreement;

(4) Specify the status of the Arbitration before the arbitrator; and

(5) Show the need for the Court Order sought by the applicant.

IV.
JURISDICTION

The amount in controversy is with the jurisdictional limits of the District Court.

V.
AGREEMENT TO ARBITRATE

On or about April 1, 2008, the City of Edinburg and IOC Company, L.L.C. entered into a

formal contract entitled ‘Paving and Training Improvements for Canton Road’ (Canton Road

Project). The Parties’ Agreement is attached hereto as Exhibit “A” and incorporated by reference

as if set forth fully and at length. In Section 36 of the Agreement, the parties agreed to arbitrate

any dispute concerning the contract pursuant to the rules of the American Arbitration

Association.

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In addition, on or about June 2, 2009, the City of Edinburg and IOC Company, L.L.C.

entered into a formal contract entitled ‘Paving and Drainage Improvements for Sugar Road’

(Sugar Road Project). The Parties Agreement is attached hereto as Exhibit “B” and incorporated

by reference as if set forth fully and at length.

In paragraph IX of the Agreement, the parties agreed to arbitrate any dispute concerning

the contract in Hidalgo County, Texas.

Pursuant to these agreements, IOC Company, L.L.C. initiated arbitration by making a

written demand for arbitration to the City of Edinburg and with the American Arbitration

Association. A copy of the parties’ written agreement is attached as Exhibit “C” and incorporated

by reference.

IV.
ISSUE IN CONTROVERSY

IOC Company, L.L.C. seeks damages as a result of the City of Edinburg’s alleged failure

to perform its duties under contracts with IOC for both the Sugar and Canton Road Projects. IOC

Company, L.L.C. claims that during the performance of both projects, the City of Edinburg’s

unwillingness and inability to provide right-of ways, easements, and coordinate with third parties

caused significant delays and damages to IOC Company, L.L.C. As such, IOC Company, L.L.C.

filed a Demand for Arbitration asserting claims for breach of contract. The Arbitration Agreement

described above required the parties to arbitrate this controversy.

VII.
STATUS OF THE ARBITRATION

IOC Company, L.L.C. initiated an arbitration proceeding against the City of Edinburg for

two (2) projects referred to as the Canton Road Project and the Sugar Road Project. On July 18,

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2014, an arbitration award was issued by William Andrews, Arbitrator. The arbitration award

was for a total sum $1,362,630 for the Canton Road Project and $673,093 for the Sugar Road

Project, plus attorneys fees. See attached Exhibit “D.”

VIII.
NEED FOR COURT ORDER

The City of Edinburg hereby submits that the arbitration award needs to be vacated for

the reasons including, but not limited to the following:

1. The award was obtained by undue means in violation of §171.088(a)(1) of the

Texas Civil Practice and Remedies Code;

2. The arbitrator exceed their powers in violation of 171.088(a)(3)(A) of the Texas

Civil Practice and Remedies Code; and

3. The award violates carefully articulated, fundamental policy in violation of the

Texas Common Law.

The City of Edinburg hereby submits that the arbitration award needs to be vacated as

the award was obtained by “undue means” so far so that the City of Edinburg’s rights at the

hearing were affected and deprived them of a fair hearing. In addition, the arbitrator exceeded

his powers in granting of the award. Specifically, the arbitrator failed to honor and recognize

contractually agreed upon provisions between IOC Company, L.L.C. and the City of Edinburg,

including but not limited to, provisions regarding requests for additional compensation, change

orders, differing site conditions, and the responsibility of the City of Edinburg for the actions of

“others.” Failure of the arbitrator to honor and recognize contractually agreed upon provisions

deprived the City of Edinburg a fair hearing. Implementing the arbitrator's award in this case

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would stand for the proposition that contractors are not bound by contractually agreed upon

provisions in the handling of construction projects with the City of Edinburg and/or other

municipalities. Thus, the arbitrator exceeded his powers in granting the award.

Further, the City of Edinburg also submits that the arbitration award violates public policy

pursuant to Texas Common Law. Specifically, it is established law, pursuant to Local

Government Code §271-153, that a municipality cannot be adjudicated an award for the

actions of others. The facts of this matter clearly illustrated that the problems that IOC

Company, L.L.C. complained of in the construction project of Canton Road and Sugar Road were

issues caused by others, specifically utility companies such as AT&T and Texas Gas Service.

Despite facts clearly illustrating this, the arbitrator disregarded this fact and issued the award

against the City of Edinburg contrary to established law. The results of such action in 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 are so contrary to established law and public policy 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. Therefore, vacating the award

is appropriate pursuant to Texas Civil Practice & Remedies Code §§ 171.088(a)(1),

171.088(a)(3)(A), 171.091 and Texas common law.

WHEREFORE, PREMISES CONSIDERED, the City of Edinburg, Texas, requests that IOC

Company, L.L.C. be cited to appear and answer, and that on final trial, City of Edinburg, Texas,

Movant herein, have the Court enter a Judgment to Vacate the Arbitration Award given in

#70 441 Y 00190 12.

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Respectfully submitted,

GONZALEZ CASTILLO, LLP

By: /s/Gerald E. Castillo
Steven Gonzalez
SBN: 08131900
Gerald E. Castillo
SBN: 24012399

1317 E. Quebec Avenue
McAllen, Texas 78503
(956) 618-0115
FAX: (956) 618-0445
law@valleyfirm.com

PALACIOS GARZA & THOMPSON, P.C.

Ricardo Palacios
SBN: 24010990
Criselda Palacios
SBN: 24067812
2724 West Canton Road
Edinburg, Texas 78539
(956) 318-0507
FAX: (956) 318-0575
rpalacios@pgtlawfirm.com
cpalacios@pgtlawfirm.com

ATTORNEYS FOR RESPONDENT,
CITY OF EDINBURG, TEXAS

CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the above and foregoing document has
been forwarded as a courtesy copy to attorney for Defendant via electronic mail, on this 25th day
of August, 2014.

/s/Gerald E. Castillo
Gerald E. Castillo

F:\data\WPDOCS\C\CITY OF EDINBURG\IOC v. COE\petition application to vacate arbitration award 082014 1st amended.sm.wpd

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CAUSE NO. C-6852-14-F

CITY OF EDINBURG, TEXAS § IN THE DISTRICT COURT
§
v. § 332"d JUDICIAL DISTRICT
§
IOC COMPANY, L.L.C. § HIDALGO COUNTY, TEXAS

CITY OF EDINBURG, TEXAS' BRIEF IN SUPPORT OF VACATING
ARBITRATION AWARD #70 441 Y 00190 12

TO THE HONORABLE COURT:

NOW COMES, CITY OF EDINBURG, and files this their Brief in Support of Vacating

Arbitration Award# 70 441 Y 00190 12, pursuant to §§171.088(a)(1) and 171.091 of the

TEXAS CIVIL PRACTICE & REMEDIES CODE and pursuant to Texas Common Law and would respectfully

show the Court the following:

I.
BACKGROUND

IOC Company, L..L.C. (IOC) initiated an arbitration proceeding against the City of

Edinburg, Texas (COE) for its alleged failure to perform its duties under contracts with IOC for

both the Canton Road Project and Sugar Road Project, collectively called "Projects." IOC claims

that COE's unwillingness to provide right-of-ways, easements, and coordinate with third parties

caused significant delays and damages to IOC.

On July 18, 2014, an Arbitration Award was issued by Arbitrator, Williams Andrews. The

Arbitration Award was for a total sum of$1,362,630forthe Canton Road Project and $673,093

for the Sugar Road Project, plus attorney fees. See attached Exhibit "A."

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On August 14, 2014, COE filed its Petition/Application to Vacate an 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. See attached Exhibit "B."

II.
EXHIBITS BY COE IN SUPPORT OF BRIEF TO VACATE ARB ITRATION AWARD

• Exhibit A: Final Award of Arbitrator for Canton and Sugar Road Projects;

• Exhibit B: Petition;Application to Vacate Arbitration Award;

• ExhibitC: Paving and Draining Improvements for Canton Road (Canton Road
Project Contract);

• Exhibit D: Paving and Draining Improvements for Sugar Road (Sugar Road
Contract);

• Exhibit E: lsael Posada Deposition pertaining to Canton Road Project;

• Exhibit F: lsael Posada Deposition pertaining to Sugar Road Project;

• Exhibit G: Oscar Cuellar Deposition pertaining to Canton Road Project;

• Exhibit H: Oscar Cuellar Deposition pertaining to Sugar Road Project;

Exhibit 1: Final Transcript Hearing for Canton Road Project;

• ExhibitJ: Final Transcript Hearing for Sugar Road Project;

Exhibit K: Texas Local Government Code §271.153;

• Exhibit L: Texas Civil Practice and Remedies Code §171.088; and

• Exhibit M: Texas Civil Practice and Remedies Code §171.091.

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Ill.
ARGUMENTS

COE hereby submits that the Arbitration Award by Arbitrator, Williams Andrews for the

Projects needs to be vacated for the following reasons:

• The award was obtained by undue means in violation of §171.088(a)(1)
of the Texas Civil Practice and Remedies Code; and

• The award violates carefully articulated, fundamental policy in violation
of the Texas Common Law.

A. The award was obtained by undue means in violation of§ 171.088{a)(1) fthe Texas
Civil Practice and Remedies Code:

The award was obtained by undue means in violation of §171.088(a)(1) of the TEXAs

CIVIL PRACTICE & REMEDIES CODE so far so that COE's rights at the hearing were affected and

deprived them of a fair hearing. Specifically, the Arbitrator failed to honor and recognize

contractually agreed upon provisions between IOC and COE, including but not limited to,

provisions regarding requests for additional compensation, change orders, and differing site

conditions. Failure of the Arbitrator to honor and recognize contractually agreed upon

provisions deprived COE of a fair hearing. We will first address tile issues in the Canton Road

Project followed by the issues in the Sugar Road Project.

1. Short Background and Overview of Canton Road Project

IOC claims in this Arbitration that it is owed additional compensation due to delay and

inefficiency damages as a result of the work performed on the Canton Road Project. The

original contract was a unit based contract and IOC admits that it was paid for every unit of work

completed. It was additionally compensated for every change order agreed upon by both the

COE and IOC. IOC only claims that it is owed money because of delays and inefficiencies that

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it allegedly experienced due for the most part to un-relocated utility lines which were owned by

AT&T.

COE argues that the facts as presented at the Final Hearing, and the evidence, illustrate

that COE was not responsible for relocating the utility lines but only bore the responsibility to

notify AT&Tthat the lines needed to be relocated. There Is no evidence or any argument by IOC

that AT&T was not notified of the need for AT&T to relocate its utility lines. Furthermore, the

contract at issue governed the contractor's manner in which to request additional

compensation. The evidence presented illustrates that at no point prior to the completion of

this project did lOC ever request, in writing, a specific amount of additional compensation from

COE. It is COE's position that IOC has waived any request for additional compensation under

the contract.

2. Failure of Arbitrator to Recognize Contractually Agreed Upon Provisions

Special Provision 18 of the contract (Exhibit "C") 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 l1im 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."

Let us examine this provision as it relates to the evidence presented by IOC. Mr. Cuellar

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

proposed contract, prior to submitting his bid. He knew of a II of the encumbrances com pia i ned

of by IOC prior to beginning the work. Furthermore, prior to the notice to proceed, IOC did not

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submit an alternate sequence of construction or a request for additional compensation. (See

Exhibit "I," Page 249, Line 23- Page 249, Line 1). 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. (See Exhibit "I.'' Page 250, Line 6 - Page 251, Line 25.) He further admits that he

did not propose any alternate sequence of construction or seek additional compensation at that

time.

This testimony illustrates that IOC is in direct violation of Special Provision 18, which

requires a contractor to make a claim, in writing, of his intention to seek extra compensation

before work begins. Mr. Cuellar knew that beginning the project with the reported known

encumbrances would create delays and inefficiencies, but nonetheless chose to proceed and

made a conscious decision not to seek extra compensation or advise COE, in writing, of his

intention to later seek extra compensation because of these "known" encumbrances.

Special Provision 18 goes further on to state that ''failure on the part of the contractor

to give such notification or to afford the engineer proper facilities for keeping strict account of

actual costs shall constitute a waiver of the claim for such extra compensation." 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. (See Page 278, Line 13- Page

279, Line 4; and Page 292, Line 1- Page 292, Line 9.) Special Provision 18 goes further on

to say that "when the work has been completed, the contractor shall, within ten (10) days, file

his claim for extra compensation with the engineer. IOC, in fact. never made a claim for a fixed

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

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with a request for a c11ange order or it certainly could have done so within the last pay

application. No such request was made.

Mr. Cuellar's own testimony verifies that IOC did not comply with Special Provision 18

and thus, has waived its request for additional compensation under the contract.

Further, the testimony of lsael Posada, COE Engineer, who indicates he was the person

at COE who was most familiar with Canton Road Project during his tenure with COE. (See Exhibit

"E1" Page 14, Lines 11-14). He also testifies that any changes to the plans or to the amount

of compensation that may be given for a project, needs to be done through change orders and

that the contract, through Special Provision 18, requires that IOC submit any request for

additional compensation to COE for COE's consideration (See Exhibit ''E, '' Page 152, Line 20 -

Page 153, Line 14). In addition, Mr. Posada testified that no request for additional

compensation was ever communicated to COEthroughoutthe Canton Road Project (See Exhibit

"E," Page 162, Lines 9-15).

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

contract. Furthermore, they were 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. (See Page 263, Line 22- Page 270, Line 25.)

In fUrther support of COE's position that IOC is not owed additional compensation

pursuant to the contract, COEwould point to the General Conditions ofthe contract, specifically

Section 18 entitled Claims. Section 18 requires that "any claim involving extra cost under the

contract shall begin within seven (7) days, and in any event, before proceeding to execute tl1e

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work. No such claim shall be valid unless so made." See Exhibit "C" There is no evidence that

IOC complied witl1 this provision, and in fact as stated earlier, IOC never made a request for a

specific amount of compensation prior to the completion of the project.

As an excuse, IOC claims that it could not quantify the delay or inefficiency damages

wh ile the delays and inefficiencies were allegedly occurring. This excuse fails factual ly since

IOC admits that prior to the completion ofthe project, there was a point in time where.the actual

pl1ysical construction of the roadway was completed but the project was still open. The last pay

application was submitted after tl1e construction portions of the project were completed but

prior to the closing of the project. IOC did not submit a request for additional compensation in

any amount even though the necessary information was available to IOC.

The fact that the Final Award of Arbitrator clearly states that 11Special Provision 18 of the

Canton Road Agreement is not applicable to the claim asserted by IOC; IOC did not breach or

violate this provision. Therefore 1 Special Provision 18 does not bar or preclude IOC's claim''

shows Arbitrator, Williams Andrews' blatant disregard contractually and recognized agreed upon

provisions between IOC and COE and deprived COE a right to a Fair Hearing in awarding

damages to IOC (See Exhibit "A," Page 4, Line 14).

a. Short Background and Overview of Sugar Road Project

This dispute pertains to the Sugar Road Project, which was a paving and drainage

improvement project for Sugar Road beginning at the Trenton Road intersection and ending at

the Owassa Road intersection. COE awarded the bid to perform this work to IOC. IOC claims,

in the Arbitration , that it is owed additional compensation due to delay and inefficiency

damages as a result of the work performed on the Sugar Road Project The original contract was

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a unit based contract and IOC concedes that it was paid for every unit of work performed, as

well as every amendment and/or change order. IOC claims that It is owed additional

compensation due to delays and inefficiencies that it allegedly encountered due to various

issues, which will be discussed below.

COE contends that the facts and evidence, as presented, illustrate that any of the

complained about encumbrances that IOC encountered were promptly and reasonably resolved.

Additionally, the complained about encumbrances, including the relocation of Texas Gas lines,

as well as the relocation of an AT&T communication manholes, and were not within the control

of COE. Tile entities responsible for resolution of these issues were either AT&T and/or Texas

Gas. COE contractually is not responsible for the work and/or lack of worl< of others and, by

statute, cannot be held responsible for increased cost to perform work which was not caused

by COE.

In addition, COE contends, and will illustrate below, that IOC has waived any request for

additional compensation pursuant to tl1e agreed upon provisions of the contract at issue

b. Failure of Arbitrator to Recognize Contractually Agreed Upon Provisions

IOC maintains that it encountered unknown encumbrances while completing its work on

the Sugar Road Project. Specifically, IOC details approximately seven (7) issues it encountered,

which it claims impacted their work detrimentally. Discovery and handling of unknown physical

conditions as handled by General Condition Article 4.3(8) of the contract (Exl1ibit "D"). This

provision contemplates unknown physical conditions and Article 4.4 contemplates that the

contractor may encounter differing site conditions. These provisions advised the contractor on

how to handle these conditions. Article 4.3(8), in part, requires that the contractor notify the

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owner of such underground encountered utility as well as to notify COE. COE makes no

contention tl1at IOC failed to meet this requirement. In fact, the evidence indicates that IOC,

upon encountering the AT& T man holes, or the Texas Gas Ii nes, timely advised Texas Gas and/ or

AT&T of these issues and copied COE with these notifications. IOC admits that the movement

or relocation of either the communication manholes, the abandoned manhole, or the Texas Gas

lines (3)werethe responsibility of either AT&T andjorTexas Gas and not COE. (See Exhibit "J,"

Page 183, Line 24- Page 184, Line 5; Page 184, Line 23- Page 184, Line 25; Page 188, Line

7- Page 188, Line 108; Page 189, Line 18- Page 189, Line 25; Page 196, Line 4- Page 196,

Line 23; and Page 213, Line 19- Page 214, Line 11.). Neither IOC nor the City could relocate

or remove these lines. It was tl1e responsibility of other entities, and not COE to complete this

work. That is precisely wl1at occurred.

The contract contemplates that work, specifically utility work, will be conducted by

others. Please see Article 7.1 of attached Exhibit "D."

While COE maintains that the relocation of the discovered utility issues with Texas Gas

and AT&T were done in a reasonably timely manner (AT&T manhole issue resolved in twenty-

four (24) days, Texas Gas line issue (1) resolved in thirty-seven (37) days, Texas Gas line issue

(2) resolved in fifteen (15) days, and Texas Gas line issue (3) resolved in thirty-six (36) days),

even if IOC did encounter delay and/or inefficiency damages due to these issues, the contract

specifica lly precludes damages against COE under these circumstances. COE would refer the

Court to Article 12.1(0), which states in part:

"In no event will owner be liable to contractor... , for any increase in the contract
price or other damages arising out or resulting from the following:

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2. Delays beyond the control of both owner and contractor... , or acts or neglect by
those performing other work as contemplated by Article 7 ."

The contract certainly contemplated work by others, specifically utility companies. Even

further, the contract specifically precludes COE from liability as a result of any damages or

increased contract time from the work of others. Even further, as indicated above, IOC

concedes that the relocation ofthe utility encumbrances were either the responsibility of AT&T

andjor Texas Gas service. Therefore, for these issues, COE cannot be held responsible and is

not liable, even in the event that these issues have caused delay and/or inefficiency damages.

In the Final Award, Arbitrator, William Andrews, clearly ignores these provisions of the

contract and states"[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 Agreement. The City had the duty and responsibility to manage the

removal of these in the areas which IOC was to perform the scope of work." As illustrated in the

preceding paragraphs, JOC admitted that the relocation of the gas lines and/or manholes were

the responsibility of either AT&T and/or Texas Gas and not COE. Further, the contract

specifically precludes damages under these circumstances.

In fact, the testimony of lsael Posada, COE Engineer, clearly illustrates that the contract

between IOC and COE entered into for the Sugar Road Project had a special provision to ensure

that the contractors understood when they bid they are responsible for locating all utilities and

working with the utilities to get them relocated. (See Exhibit "F,'' Page 20, Lines 10-14, and

Page 51, Lines 4-11). Mr. Posadas further testified that neither IOC nor COE is able to move

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these lines and they must be moved by the utility entity. (See Exhibit "F," Page 51, Lines 12-

20).

The fact that Arbitrator, William Andrews, ignored these provisions and awarded IOC

damages clearly deprived COE a right to a Fair Hearing in this Arbitration.

Traffic Switch

The next issue complained of by IOC is for a delay regarding the traffic switch at the

Sugar Road and Owassa Road intersection. This issue had to do indirectly with the reduction

in the work to be performed by IOC In constructing the Sugar Road and Owassa Road

intersection. IOC concedes that they are not making a claim for the reduction in work, and

further concede that they were paid for all the work actually performed at that intersection.

Again, IOC's claim is limited to purported delays and inefficiencies that they encountered While

completing its' work.

In this respect, IOC is claiming additional compensation for tt1ose delays and

inefficiencies related to the traffic switch. IOC admits that IOC has not, and still had not at the

time of the Final Hearing, ever quantified the amount of delay or inefficiency damage related

to the traffic switch. (See Exhibit ''J,'' Page 172, Line 16- Page 172, Line 21; Page 205, Line

19 - Page 205, Line 24; Page 200, Line 8- Page 200, Line 21.)

IOC claims that it submitted a request for payment in their November 24, 2010 letter

to COE Manager, Ramiro Garza, for the traffic switch issue. Despite IOC's contentions to the

contrary, the November 24, 2010 letter is not a proper method for requesting additional

compensation under the contract. The contract governs the manner in which additional

compensation for work performed is to be requested. Providing COE Manager with a letter is

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not the appropriate means to do so. In fact, IOC concedes that it did not, either by change order

or by pay application, ever request additional compensation for the traffic switch or for any

other delay or inefficiency damage that it now claims money for (See Exhibit "J," Page 172, Line

16 - Page 172, Line 21). The deposition testimony of Oscar Cuellar also reflects that IOC never

requested additional compensation in writingfrom COE (See Exhibit 11 H," Page 20, Lines 16-20).

Therefore, with respect to the issues encountered and/or com pia i ned of by IOC, they fa II

Into two (2) categories, which in fact do overlap. Tl1e first category is the purported delay in the

relocation of the utilities owned and/ or under the control of either AT&T and/ or Texas Gas.

COE, nor IOC, were responsible or could move these lines on their own. The contract specifically

precludes liability on COE for the work to be performed by others, which work is also

contemplated by the contract. The second area of issue is illustrated by the "traffic switch "

issue complained of by IOC. IOC admits that it never quantified the amount of money that the

traffic switch Issue purportedly cost IOC. If it was never quantified, then it would stand to

reason that it could never have been submitted to COE for consideration andjor payment.

Therefore, the facts illustrate that any additional compensation associated with the traffic

switch was never submitted to COEfor consideration and/or payment. This is precisely why IOC

has to admitthat it never submitted a request for payment, either through change order or final

pay application. The contract dictates that these are the methods in Which the contractor is to

submit requests for payment. Additionally, any request for payment outside of the contract

amount would have to be done through a change order.

The change order provision in the contract is Special Provision 20. (See Exhibit ''D. ")

COE maintains that. pursuant to this provision, IOC has waived its' right to additional

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compensation due to its failure to submit a timely request. The fact that Arbitrator, William

Andrews, clearly writes that IOC did not waive its' claim for damages show tl1at COE was

deprived of a Fair Hearing and Arbitrator, William Andrews, ignored contractually agreed upon

provisions between IOC and COE in the Sugar Road Project.

B. The Award Violates Carefully Articulated, Fundamental Policy ln Violation of the Texas
Common Law:

1. COE Cannot Be Held Liable for the Actions of "Others"

The requested areas of damages asked for by IOC, include items of damages, which are

not allowed by statute to be adjudicated against a municipality. These include: delay damages,

home office overhead damages, and lost bonding capacity debts. §271.153, of the Texas

Local Government Code specifical ly precludes any adjudication of consequentia l damages

against a municipality. (See Exhibit "K.'') Therefore, $905,903.28 of the Claimant's requested

damages are specifically precluded by statute.

If we examine IOC's labor overrun calculations presented by paid expert, Jens Baker, it

includes hours submitted for employees of a different company, IOC Trucking, L.L.C. Mr. Cuellar

admitted that IOC Trucking, L.L.C. is a separate company with separate employees (see Exhibit

"C," Page 244, Lines 12-16) yet the pay tickets submitted by IOC to Mr. Baker for calculating

his labor overrun hours Include an unspecified amount of IOC Trucking, L.L.C. employee hours.

Since no alternative amount has been given excluding the IOC Trucking, L.L.C. hours, it is COE's

position that IOC has not met its burden to submit an actual specified amount of alleged labor

overrun costs. That leaves the purported calculations for equipment overrun and material

escalation, which according to Mr. Baker's calculations, totaled $675,750.23.

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As described in the previous section of this Brief, the amount of materials used and paid

for by IOC, as well as the equipment used and paid for by IOC to construct the Canton Road

Project, was information available to IOC during the project time frame. Despite l1aving the

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

compensation within a specified time period, IOC 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 tl1e information regarding the alleged "known" encumbrances prior to

beginning their work on Canton Road 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.

Furthermore, the duty to move the utility lines in question was AT&T's. It was not COE's

responsibility to move the utility lines. §271.153(a)(1) holds that a City can only be held Hable

for "owner-caused" delays. If there was a delay in this project, it was not caused by COE, but

by AT&T. COE cannot be held responsible for the failures of AT&T in moving its lines. AT&T

clearly has the responsibility of relocating its utilities pursuant to §54.203 of the Texas Utilities

Code. This is the responsibility of AT&Tand not COE. Once again, Arbitrator, William Andrews,

clearly ignores this and states in his Final Award of Arbitrator "The City's material breaches are

not excused based on the failure of any third party to remove or relocate their lines or utilities

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that constitute obstacles, conflicts, and obstructions as described above." (See Exhibit "A,"

Page 4- Page 5, Line 19).

Further, Arbitrator, William Andrews, clearly ignored §271.153 and stated "§271.153,

Local Government Code, does not bar IOC's claim for additional compensation arisingoutofthe

Canton Road Project" (See Exhibit ''A," Page 4, Line 13). This clearly illustrates that Arbitrator,

William Andrews, disregarded well established Texas Law and awarded damages to IOC despite

§271.153 of the Loca l Government Code. §271.153 of the Local Government Code l'lolds that

a contractor can make a claim for additional compensation for "owner-caused delays" (See

Exhibit "K"). In this case, the delays were clearly not owner-caused but were the fault of a third-

party, namely AT&T. The results of such actions in this case would dictate that municipalities

and contractors could not 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 are

so contrary to well established law and public policy that it would change the manners in which

contractors and municipalities do business, and moot Texas Law witl1 respect to the

adjudication of awards against municipalities.

2. Conclusion as to Canton Road Project

IOC had obligations under the contract to request in a specified manner and within a

specified time, additional compensation it deemed warranted. IOC failed to meet its obligations

under the contract. IOC contends that COE failed to provide the necessary lands in order to

complete the project, but tile truth of the matter is that IOC was aware of all of the

circumstances surrounding the project, including the alleged "known encumbrances" that it

encountered. The encumbrances referred to are utility lines which were not owned by COE but

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were, in fact, owned and under the control of another entity, specifically AT&T. The evidence

indicates that AT&T was timely notified of tl1e project and COE met its' obligations to notify

AT&T.

The damages that IOC seeks are either consequential in nature and precluded by

statute, have not been properly proven (labor overrun) or are excluded by IOC's own actions and

failures (material escalation and equipment overrun). Further, if the Arbitration Award stands,

it would violate clear established law and public policy that it would change the manners in

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

adjudication of awards against municipalities.

For these reasons, COE requests that this Court Vacate the Arbitration Award in favor

of IOC for the Canton Road Project in the amount of $1,362,630 plus $158,000 in attorney

fees.

a. COE Cannot Be Held Liable for the Actions of uOthers"

As outlined above in III(A)(2)(a+b), the majority, if notal I, 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

being held liable for the actions of others. §271.153(a)(1) ofthe Local Government Code holds

that a City can only be held liable for ''owner-caused" delays.

Arbitrator, William Andrews, clearly Ignored §271.153 and stated "§271.153, Local

Government Code, does not bar IOC's claim for additional compensation asserted by IOC

against COE arising out of the Sugar Road Project" (See Exhibit "A," Page 6, Line 12). This

clearly illustrates tl1atArbitrator, William Andrews, disregarded well established Texas Law and

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awarded damages to IOC despite §271.153 of the Local Government Code. §271.153 of the

Local Government Code holds that a contractor can make a claim for additional compensation

for ''owner-caused delays" (See Exhibit "K"). In this case, the delays were clearly not owner-

caused but were the fault of a third-party, namely AT&T and Texas Gas. Further, these delays

were resolved in a timely and efficient manner as illustrated above. The results of such actions

in this case would dictate that municipalities and contractors could not 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 are so contrary to well established law and public policy that

it would change the manners in which contractors and municipalities do business, and moot

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

b. Conclusion as to Sugar Road Project

While COE maintains that IOC is not owed any damages resulting from delays or

inefficiencies for the reasons stated above and for the reasons presented at the Final Hearing,

the following will address certain issues related to the IOC's claim for damages.

First, IOC is not entitled to any consequential damages claimed pursuant to §271.153

of the Texas Loca l Government Code. Specifically, damages awarded against a municipality

arising under a contract may not include consequential damages, exemplary damages, or

damages and/or unabsorbed home office overhead. COE maintains that, of the items of

damages requested by IOC, all damages, except for labor overrun material escalation, and

equipment overrun, would be precluded on under §271.153 of the Texas Local Government

Code. This was followed by Arbitrator, William Andrews, in his awarding of $673,093 to IOC.

However, §271.15(a)(1) limits the amount of damages whicll can be adjudicated against a

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municipality to amounts owed as compensation for the increased cost to perform the work as

a direct result of owner-caused delays or acceleration. As lllustrated earlier In th is Brief, the

majority, if not all, of IOC's claimed encumbrances were delays or inefficiencies caused by other

entities, namely AT&T and Texas Gas.

Further, the testimony of Jens Baker, IOC's expert, during the Final HearingontheSugar

Road Project further substantiates our position tl1at IOC's complained of delays were primarily

caused by AT&T. (See Exhibit "J," Page 238, Lines 8-14). He further testified that he Identified

384 days of delays on the job, 174 of which were attributable to the lat e start and manhole

issues of AT&T, and 101 days which were attributable to Texas Gas changes. (See Exhibit "J,"

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

third parties versus those directly caused by COE. (See Exhibit "J," Page 290- Page 291, Line

24). Thus, in essence, he essentially testified that 71.61% (275/384) of his damages was not

directly caused by COE.

Based on U1e above, COE maintains that the damages complained of by IOC are either

precluded by the contract itself (Art. 12.1(D), Special Provision 18, Art. 14.8(A)), by §271.153

of the Texas Local Government Code, or reduced by 71.61% as testified by IOC's expert, Jens

Baker.

IV.
CONCLUSION

WHEREFORE, PREMISES CONSIDERED, CITY OF EDINBURG, TEXAS, requests that the

Court Vacate and/ or Modify the Arbitration Award by Arbitrator, William Andrews for both the

Canton Road Project and Sugar Road Project pursuant to §§171.088(a)(1) and 171.091 of the

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TEXAs CIVIL PRACTICE & REMEDIES CODE and pursuant to Texas Common law, and grant such other

and further relief to which CITY OF EDINBURG, TEXAS may show itself justly entitled.

Respectfully submitted,

GONZALEZ CASTILLO, LLP

By: Is/Gerald E. Castillo
Steven M. Gonzalez
SBN: 08131900
Gerald E. Castillo
SBN: 24012399

1317 E. Quebec Avenue
McAllen, Texas 78503
(956) 618-0115
FAX: (956) 618-0445
law@vallevfirm.coln

PALACIOS GARZA & THOMPSON, P.C.

Ricardo Palacios
SBN:24010990
Criselda Palacios
SBN:24067812
2724 West Canton Road
Edinburg, Texas 78539
(956) 318-0507
FAX: (956) 318-0575
roalacios@pgtlawfirm.com
cpalaclos@pgtlawfirm.com

ATTORNEYS FOR RESPONDENT,
CITY OF EDINBURG, TEXAS

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CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the above and foregoing document has
been forwarded as a courtesy copy to attorney for Defe.ndant via electronic mail, on this 13u,
day of January, 2015.

Is/Gerald E. Castillo
Gerald E. Castillo

f:\data\WPOOCS\C\CIN OF EOINOURG\IOC v. COE\brlef In support of vacatlng award<l 22914.sm.wpd

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