Petroleum Analyzer Company, L.P. v. Franek Olstowski
(Tex.App.- Houston [1st Dist.] March 4, 2010)(Alcala)(judgment confirming arbitration award affirmed)
AFFIRM TRIAL COURT JUDGMENT: Opinion by Justice Alcala
Before Chief Justice Radack, Justices Alcala and Higley
01-09-00076-CV Petroleum Analyzer Company, L.P. v. Franek Olstowski, Individually and DBA Atomic
Analytical Consulting Services and Atom Instrument Corporation
Appeal from 269th District Court of Harris County
Trial Court Judge: John Thomas Wooldridge
MEMORANDUM OPINION
Appellant, Petroleum Analyzer Company LP (PAC), appeals the order of the trial court confirming an
arbitration award and final judgment in favor of appellee, Franek Olstowski, and a summary judgment in
favor of appellee, Atom Instrument Corporation (Atom).
Through its first, third, and fourth issues, (1) PAC contends the trial court erred when it granted Atom's
no-evidence motion for summary judgment because (1) the trial court granted Atom's motion for summary
judgment before Atom had filed an answer to PAC's original petition, (2) Atom's motion for summary
judgment is "predicated solely on the doctrine of res judicata" and the trial court erred by granting a
summary judgment based on an affirmative defense that was never pleaded, and (3) the lawsuit between
PAC and Atom had been stayed by the trial court.
In its second issue, PAC contends the trial court erred when it granted attorney's fees to Atom in
conjunction with granting Atom's summary judgment. In its fifth issue, PAC argues that the trial court erred
in granting Olstowski's motion to compel arbitration, and in its sixth issue PAC contends the trial court
erred in confirming and not vacating the arbitration award.
We affirm.
Background
This appeal arises from an ownership dispute as to certain patents and other intellectual property related
to excimer lamp technology, and a dispute as to Olstowski's right to control the excimer lamp technology
he designed while employed as a consultant for PAC and other companies. PAC contends Olstowski
breached a consultant and non-disclosure agreement by applying for patents for this technology and by
sharing and attempting to sell the technology to PAC's competitors and customers.
In June 2001, Antek Instruments, L.P. (now owned by PAC) retained Olstowski as a consultant to provide
"services for research, development and testing of products and/or technologies that may be incorporated
into products or services provided by [Antek]." This arrangement was memorialized by a "Consultant
Agreement" signed by Olstowski and Jay Szinyei, then Antek's Manager of Engineering. The Consultant
Agreement expressly required that it may not be modified except by a writing signed by both parties.
Antek knew that, while Olstowski worked on projects for Antek, he was also a consultant for other
companies that produced petroleum products. The Consultant Agreement, therefore, defined a
non-exclusive relationship for Olstowski to provide personal services to Antek. Pursuant to the Consultant
Agreement, "[a]ll [c]onfidential [i]nformation, technology, prototypes, and products developed by
[Olstowski] while providing service for Antek [would] be the exclusive property of Antek."
According to Szinyei, the principal drafter of the Consultant Agreement, the agreement covered individual
projects assigned to Olstowski by Antek. This limitation of the scope of the services enabled Antek to
control the amount of time expended by Olstowski on projects and thereby control Antek's expenses.
Thus, the Consultant Agreement required that Olstowski be assigned each consultant project. After being
assigned a consultant project, any information, technology, prototypes, or products developed by
Olstowski while providing such service then became the exclusive property of Antek.
In March 2002, Olstowski informed Szinyei about his idea to develop an excimer light source specifically
intended to measure sulfur using ultraviolet (UV) fluorescence. Thereafter, Olstowski told Tom McMullen,
Antek's president, and Szinyei about his idea. Antek did not want to assume the risk of investing its
resources into the excimer technology, and decided that Olstowski could pursue the project on his own
time. Antek informed Olstowski of this decision. Olstowski was also told that if he was successful in his
research, Antek would be interested in talking with Olstowski about using the excimer technology in its
equipment and requested "first dibs" on considering whether to license the technology.
The Consultant Agreement was never modified in writing and Olstowski was never assigned to work on
excimer technology as an Antek or PAC project. Antek had specifically discussed modifying the consultant
agreement through a "carve out" agreement that stated the excimer project was not being done pursuant
to the Consultant Agreement; however, a "carve out" agreement never materialized.
By December 2002, Olstowski had developed the excimer technology. Although Olstowski developed the
excimer technology on his own time and with his own money in his own laboratory, Olstowski performed
tests and generated data on the excimer technology using PAC employees and equipment.
On December 27, 2002, in his own name and with his own lawyer, Olstowski filed a patent application titled
"Excimer UV Fluorescence Detection." Olstowski then informed Antek that he had filed a patent
application, and that Antek, as required by the 2001 Consultant Agreement, would need to sign a
non-disclosure agreement with him before he would disclose his excimer technology to them. Antek did
not object to Olstowski's filing of the patent application.
On January 28, 2003, Antek and Olstowski entered into a Mutual Non-Disclosure Agreement (MNDA) for
Olstowski to conduct a feasibility study to investigate the possibility of incorporating the Olstowski Excimer
Technology into the Antek Technology, or to use the Olstowski Excimer Technology to develop new
products for Antek. The MNDA states:
WHEREAS, OLSTOWSKI has developed technology using excimer lamps and can detect substances
using excimer fluorescence (hereafter "Olstowski Technology"); and
WHEREAS, ANTEK had developed products for detecting substances (hereafter "Antek Technology"), but
has not developed and does not possess technology to detect substances using excimer fluorescence as
embodied in the Olstowski Technology; and
WHEREAS, ANTEK is desirous to conduct a feasibility study in association with OLSTOWSKI to investigate
the possibility of incorporating the Olstowski Technology into the Antek Technology, or to use the
Olstowski Technology to develop new products (hereafter "Project").
. . . .
If either Party brings an action to enforce the terms hereof, the prevailing Party in such action shall be
entitled to reasonable attorney's fees. . . . Any controversy or claim arising out of or relating to this
Agreement will be submitted to final and binding arbitration with the American Arbitration Association in
accordance with the Commercial Arbitration Rules. Judgment upon an award rendered by the arbitrator
may be entered in and by any court having jurisdiction.
In the latter half of 2003, Antek and Olstowski negotiated a license agreement for Antek to license the
excimer and related technology from Olstowski. Proposed licensing agreements were exchanged for over
three years while Olstowski continued to work with PAC under the Consultant Agreement, MNDA, and later
an additional Non-Disclosure/Non-Use Agreement (NDNUA). In 2004, Antek became a subsidiary of PAC.
In March 2005, PAC and Olstowski entered into the NDNUA, signed by PAC's president, McMullen. Under
the NDNUA, Olstowski agreed to continue to disclose his excimer technology to PAC, and PAC, in turn,
promised to keep the Olstowski Technology secret and promised not to use the Olstowski Technology.
The NDNUA stated in part:
In order that we may be more free and open with you, it is necessary to have your promise that you and
your employer, if any, will not use or divulge any confidential business information or proprietary designs,
processes, algorithms, machines, drawings, technical information or trade secrets which may be provided
you by Franek Olstowski for the particular field hereafter defined. [D]efining the field applicable to this
Agreement . . . excimer lamps or the detection of substances using excimer fluorescence and the like.
. .
This Agreement controls over any prior written agreements.
. . . .
Any controversy or claim arising out of or relating to this Agreement will be submitted to final and binding
arbitration with each party selecting an arbitrator, and the two party-appointed arbitrators selecting a
neutral arbitrator. The arbitration shall be conducted under the Federal Arbitration Act because the
parties agree that interstate commerce is affected, further the parties acquiesce to the jurisdiction of the
U.S. District Courts and a judgment upon an award rendered by the arbitrators may be entered in and by
the U.S. District court.
. . . .
RECEIVING PARTY ACCEPTED AND AGREED TO:
Signature: s/ Thomas McMullen
Print Name: Thomas E. McMullen
Employer: PAC
Date: 14 May 2005
Olstowski provided confidential information to PAC pursuant to the NDNUA.
Eventually, the relationship between PAC and Olstowski soured and discussions about a licensing
agreement between the two parties broke down. In August 2006, Antek, PAC, and their attorneys informed
Olstowski that Antek or PAC claimed ownership in the excimer technology. PAC and Olstowski then
asserted conflicting claims as to the ownership of the excimer technology.
In August 2006, PAC filed suit against Olstowski and Atom, Olstowski's consulting company, alleging
claims for declaratory relief, tortious interference with continuing business relations, conversion of
intellectual property, breach of oral contract, attorney's fees, restitution/unjust enrichment, fraudulent
inducement, and negligent misrepresentation. PAC also requested a temporary and permanent injunction.
Olstowski counterclaimed for breach of the NDNUA, breach of the MDNA, and breach of the Consultant
Agreement. Olstowski also filed suit against Robert Strozier, PAC's patent attorney, making an additional
claim for return of Excimer Technology files related to the prosecution of European and Japanese patents.
The Strozier case was consolidated with the suit between PAC and Olstowski and Atom; however,
Olstowski later non-suited against Strozier.
Upon Olstowski's motion, the trial court compelled the dispute between Olstowski and PAC to arbitration in
January 2007. Pursuant to the NDNUA, the trial court ordered PAC and Olstowski to arbitrate their
respective claims against each other, and stayed the suit between Olstowski and Strozier until the
conclusion of the Arbitration. The court did not compel Atom and PAC to arbitrate and the suit between
PAC and Atom remained active.
After the trial court denied a motion to reconsider the order compelling the dispute to arbitration, PAC filed
a petition for a writ of mandamus against the trial court with this court, claiming the trial court erred by
entering an order that included Atom in the arbitration proceedings. We denied PAC's petition. PAC then
filed a petition for a writ of mandamus with the Texas Supreme Court. The Supreme Court also denied
PAC's petition.
An arbitration hearing was held in August 2007, and the arbitration panel rendered a unanimous award in
favor of Olstowski in October 2007. The panel found, among other things, that Olstowski was the exclusive
and sole owner of all the technology in dispute, and enjoined PAC from claiming ownership in or using the
technology, and from interfering with Olstowski's use and enjoyment of the technology. The panel
declared, by its actions and by signing the MNDA, which was "all but an admission by [PAC] that it did not
develop the excimer technology, and does not own such technology," that PAC "waived any claim of
ownership of the excimer technology, if it was ever entitled to the same." The panel awarded Olstowski
declaratory relief, and fees and costs of $449,150.00, but also awarded restitution and contract damages
of $323,993.05 to PAC. The trial court confirmed the arbitration award on November 6, 2007, concluding
the case between PAC and Olstowski.
Olstowski subsequently alleged that PAC sent letters to the U.S. Patent and Trademark Office, and used
and disclosed Olstowski's trade secrets and technology, in violation of the trial court's November 2007
order. Olstowski filed a Motion for Contempt with the trial court in February 2008; however, before the
court ruled on the motion, PAC filed a notice of removal to the United States District Court, Southern
District of Texas, Houston Division. Olstowski moved to remand the case and requested Rule 11
sanctions. In May 2008, the United States District Court remanded the case back to the trial court, did not
grant Olstowski's request for rule 11 sanctions, but did grant Olstowski's request for costs and attorney's
fees because "[PAC] lacked an objectively reasonable basis for seeking removal."
In January 2008, Atom filed a no-evidence motion for summary judgment to resolve all claims by PAC
against Atom. In August 2008, the trial court ruled on the summary judgment without hearing or further
notice to the parties, granted the summary judgment in favor of Atom, and disposed of all causes of
actions between the parties. It also ordered PAC to pay Atom's attorney's fees and ordered conditional
awards in the event of an appeal by PAC. This appeal followed.
Motion to Compel Arbitration
In its fifth issue, PAC argues that the trial court erred by granting Olstowski's motion to compel arbitration.
We address (A) the controlling law; (B) the standard of review for arbitration conducted under the FAA;
and (C) PAC's arguments.
A. Controlling Law
We must determine whether the contract is controlled by the FAA or the TAA, or both. See Royce Homes,
L.P. v. Bates, No. 01-08-00191-CV, 2010 WL 184216, at *5 (Tex. App.--Houston [1st Dist.] Jan. 21, 2010,
no pet. h.). PAC contends the FAA does not apply.
The FAA preempts all otherwise applicable inconsistent state laws, including any inconsistent provisions
of the TAA, under the Supremacy Clause of the United States Constitution. U.S. Const. art. VI; see
Allied-Bruce Terminix Co. v. Dobson, 513 U.S. 265, 272, 115 S. Ct. 834, 838 (1995); Royce Homes, L.P.,
2010 WL 184216 at *6. When there is an express agreement to arbitrate under the FAA, courts have
upheld such choice-of-law provisions even though the transaction at issue does not involve interstate
commerce. In re Kellogg Brown & Root, 80 S.W.3d 611, 617 (Tex. App.--Houston [1st Dist.] 2002, orig.
proceeding). As the Kellogg court explained, when "the parties agree to arbitrate under the FAA, they are
not required to establish that the transaction at issue involves or affects interstate commerce." Id.
In the absence of an express agreement to arbitrate under the FAA, a party may establish the applicability
of the FAA by showing that the transaction affects or involves interstate commerce. Id. Interstate
commerce may be evidenced by location of headquarters in another state, manufacture of components in
a different state, transportation of goods across state lines, and billings prepared in another state, among
other factors. Stewart Title Guar. Co. v. Mack, 945 S.W.2d 330, 333 (Tex. App.--Houston [1st Dist.] 1997,
writ dism'd w.o.j.); see also Robinson v. TCI/US West Commc'ns Inc., 117 F.3d 900, 904 (5th Cir.1997)
(defining interstate commerce as "trade, commerce, transportation, or communication among the several
States, or between any foreign country and any place or ship outside thereof").
The Texas Supreme Court has held that a Texas choice-of-law provision will not be construed to select
the TAA to the exclusion of the FAA unless the clause specifically excludes the application of the federal
law. In re L & L Kempwood Assocs., 9 S.W.3d 125, 127-28 (Tex. 1999); Royce Homes, L.P., 2010 WL
184216 at *6. Texas courts have also held that a general choice-of-law clause such as the one in the
NDNUA is insufficient to invoke the TAA to the exclusion of the FAA. Royce Homes, L.P., 2010 WL 184216
at *6.
Here, the contract between PAC and Olstowski provides, "[t]he arbitration shall be conducted under the
Federal Arbitration Act because the parties agree that interstate commerce is affected." Because PAC
and Olstowski signed a contract to arbitrate under the FAA and expressly agreed that interstate
commerce is affected by the contract, they are bound to their agreement. See In re Kellogg, 80 S.W.3d at
617 (concluding that parties were "not required to establish that the transaction at issue involves or
affects interstate commerce" because parties had agreed to arbitrate under FAA); see also W. Dow Hamm
III Corp. v. Millennium Income Fund, L.L.C., 237 S.W.3d 745, 751 (Tex. App.--Houston [1st Dist.] 2007, no
pet.) (holding, in addition to other reasons, that FAA applied to arbitration agreement because parties
expressly agreed in arbitration agreement that transaction involved interstate commerce) (citing Jack B.
Anglin Co. v. Tipps, 842 S.W.2d 266, 269-70, 272 (Tex. 1992)). Moreover, even if the parties had not
expressly agreed that interstate commerce is affected, PAC is a Delaware Limited Partnership; therefore,
this agreement affects interstate commerce. See Stewart Title Guar. Co., 945 S.W.2d at 333; Royce
Homes, L.P., 2010 WL 184216 at *6. Accordingly, we apply the FAA, while recognizing that the TAA also
applies to the extent it is consistent with the FAA. See Royce Homes, L.P., 2010 WL 184216 at *6 (citing In
re D. Wilson Constr. Co., 196 S.W.3d 774, 779-80 (Tex. 2006)).
B. Standard of Review
Arbitration is a contractual proceeding by which the parties, in order to obtain a speedy and inexpensive
final disposition of disputed matters, consent to submit the controversy to arbitrators for determination.
See Porter & Clements, L.L.P. v. Stone, 935 S.W.2d 217, 221 (Tex. App.--Houston [1st Dist.] 1996, no
pet.). "Whether an arbitration agreement is enforceable is subject to de novo review." In re Labatt Food
Serv., L.P., 279 S.W.3d 640, 643 (Tex. 2009).
A party seeking to compel arbitration under the FAA must establish that there is a valid arbitration
agreement and that the claims raised fall within that agreement's scope. In re Kellogg Brown & Root, Inc.,
166 S.W.3d 732, 737 (Tex. 2005); J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003).
Under the FAA, ordinary principles of state contract law determine whether there is a valid agreement to
arbitrate. In re Kellogg Brown & Root, 166 S.W.3d at 738 (citing First Options of Chicago, Inc. v. Kaplan,
514 U.S. 938, 944, 115 S. Ct. 1920, 1924 (1995)) ("In determining the validity of an agreement to arbitrate
under the FAA, courts must first apply state law governing contract formation."). Although there is a strong
presumption favoring arbitration, that presumption arises only after the party seeking to compel arbitration
proves that a valid arbitration agreement exists. J.M. Davidson, 128 S.W.3d at 227. Because arbitration is
contractual in nature, the FAA generally does not require parties to arbitrate when they have not agreed
to do so. In re Kellogg Brown & Root, Inc., 166 S.W.3d at 738 (quoting Volt Info. Scis., Inc. v. Bd. of Trs. of
Leland Stanford Junior Univ., 489 U.S. 468, 478-79, 109 S. Ct. 1248, 1255 (1989)).
C. Arguments Presented by PAC
PAC contends the trial court erred by granting Olstowski's motion to compel arbitration because (1) the
NDNUA contract was not valid, (2) the claims raised and addressed by the arbitration panel were not
within the arbitration agreement's scope, (3) the court erred by compelling arbitration without first holding
an evidentiary hearing, and (4) Olstowski waived his right to arbitrate.
1. Validity of NDNUA Contract
Contending that the NDNUA was not a valid contract, PAC asserts that the trial court erred in compelling
arbitration. PAC does not challenge the arbitration provision contained within the NDNUA, but instead
focuses on the validity of the NDNUA generally. PAC contends the NDNUA is invalid because it asserts its
president, Thomas McMullen, did not sign the NDNUA in a representative capacity, and that there was no
consideration for the contract.
The Texas Supreme Court has held that the validity of the contract as a whole must be submitted to
arbitration as long as the arbitration provision is valid. See In re FirstMerit Bank, N.A., 52 S.W.3d 749, 753
(Tex. 2001) (orig. proceeding); Women's Regional Healtcare, P.A. v. FemPartners of N. Tex., Inc., 175
S.W.3d 365, 368 (Tex. App.--Houston [1st Dist.] 2005, no pet.) ("Only if the arbitration clause is attacked
on an independent basis can the court decide a [validity of the contract] dispute; otherwise, general
attacks on the agreement are for the arbitrator.") (quoting Will-Drill Res., Inc. v. Samson Res. Co., 352
F.3d 211, 218-19 (5th Cir. 2003)); In re H.E. Butt Grocery Co., 17 S.W.3d 360, 367 (Tex. App.--Houston
[14th Dist.] 2000, orig. proceeding) ("As a general rule, 'questions related to the enforcement of a
contract as a whole are properly referable to an arbitrator; it is only when attack is made on the arbitration
clause itself that a court, rather than an arbitrator, should decide questions of validity.'") (quoting Prima
Paint Corp. v. Flood & Conklin Mgf. Co., 388 U.S. 395, 402-04, 87 S. Ct. 1801, 1805-06 (1967)). Because
the issue regarding the validity of the NDNUA as a whole is an issue for the arbitrators, and PAC attacks
the validity of the contract only and not the arbitration provision, we hold the court did not err in
compelling arbitration under the NDNUA. See Dewey v. Wegner, 138 S.W.3d 591, 601 (Tex.
App.--Houston [14th Dist.] 2004, no pet.) (holding validity of entire agreement at issue between parties
must be submitted to arbitration because Wegner did not attack arbitration agreement specifically).
2. Scope of Arbitration Agreement
PAC also contends that the claims decided by the arbitrators that were at issue between Olstowski and
PAC were not within the scope of the arbitration agreement. Federal and state law strongly favors
arbitration. Cantella & Co. v. Goodwin, 924 S.W.2d 943, 944 (Tex. 1996) (orig. proceeding). Under the
FAA, any doubt as to whether a plaintiff's claims fall within the scope of the arbitration agreement must be
resolved in favor of arbitration. Id. Once an agreement is established, "a court should not deny arbitration
'unless it can be said with positive assurance that an arbitration clause is not susceptible of an
interpretation which would cover the dispute at issue.'" Prudential Sec. Inc. v. Marshall, 909 S.W.2d 896,
899 (Tex. 1995) (per curiam) (orig. proceeding) (emphasis in original).
The NDNUA contains a broad arbitration clause that does not include any exclusions from arbitration. The
NDNUA requires arbitration of "[a]ny controversy or claim arising out of or relating to this Agreement . . . ."
The NDNUA is an agreement allowing Olstowski to disclose his technology to PAC in exchange for PAC's
promise not to use the technology. In this dispute, each of PAC's claims against Olstowski, and Olstowski's
counterclaims against PAC, derive from the conflicting claims between PAC and Olstowski over who
owned the intellectual property rights to the excimer technology. Because the claims between PAC and
Olstowski each concern the disputed ownership rights to the excimer technology, we hold that their claims
against each other are subject to the arbitration provision of the NDNUA, and that the trial court properly
compelled arbitration. See In re D. Wilson Constr. Co., 196 S.W.3d at 783 (holding that where claims were
related to contract containing arbitration clause, claims "fall squarely within the scope of the arbitration
agreements").
3. Evidentiary Hearing
PAC further contends that the trial court erred by failing to conduct an evidentiary hearing before
compelling PAC and Olstowski to arbitration. PAC asserts a hearing was required because of allegedly
contradictory affidavits and testimony presented by PAC.
When Texas courts are called on to decide if disputed claims fall within the scope of an arbitration clause
under the FAA, Texas procedure controls that determination. Jack B. Anglin Co., 842 S.W.2d at 269
(citing Southland Corp. v. Keating, 465 U.S. 1, 16, n.10, 104 S. Ct. 852, 861, n.10 (1984)). Texas Civil
Practice and Remedies Code section 171.021 allows trial courts to "summarily determine" the issue of
whether to compel a party to arbitrate its claims. Civ. Prac. & Rem. Code Ann. § 171.021 (Vernon 2005);
Jack B. Anglin Co., 842 S.W.2d at 269 ("We hold that the trial court may summarily decide whether to
compel arbitration on the basis of affidavits, pleadings, discovery, and stipulations."). However, if the
material facts necessary to determine the proper disposition of a motion to compel arbitration are
controverted by an opposing affidavit or otherwise admissible evidence, the trial court must conduct an
evidentiary hearing to determine the disputed material facts. Jack B. Anglin Co., 842 S.W.2d at 269.
Here, any inconsistencies in the affidavits are not material facts to the issue of arbitrability. We hold the
trial court did not err in failing to hold an evidentiary hearing under these circumstances where the
material facts are found in documents exchanged between the parties. See Stewart & Stevenson, LLC v.
Galveston Party Boats, Inc., No. 01-09-00030-CV, 2009 WL 3673823, at *12 (Tex. App.--Houston [1st
Dist.] Nov. 05, 2009, no pet.) (holding that trial court did not err in failing to hold evidentiary hearing
regarding allegedly opposing affidavits, where appellate court could rely solely on material facts found in
documents exchanged between parties to determine validity of arbitration agreement).
4. Waiver
PAC asserts that Olstowski waived his right to enforce the arbitration provision by engaging in discovery
and by filing a motion to dismiss. There is a strong presumption against finding that a party has waived its
right to arbitration; the burden to prove waiver is thus a heavy one. In re Bank One, N.A., 216 S.W.3d 825,
827 (Tex. 2007); In re D. Wilson Const. Co., 196 S.W.3d at 783 ("There is a strong presumption against
waiver under the FAA."). Any doubts regarding waiver are resolved in favor of arbitration. In re Bruce
Terminix Co., 988 S.W.2d 702, 705 (Tex. 1998).
Waiver may be express or implied, but it must be intentional. EZ Pawn Corp. v. Mancias, 934 S.W.2d 87,
89 (Tex. 1996). "A party waives an arbitration clause by substantially invoking the judicial process to the
other party's detriment." In re Citigroup Global Mkts., Inc., 258 S.W.3d 623, 625 (Tex. 2008) (orig.
proceeding) (quoting Perry Homes v. Cull, 258 S.W.3d 580, 589-90 (Tex. 2008), cert denied, 129 S. Ct.
952 (2009)). Waiver is a question of law based on the totality of the circumstances. The test for waiver is
whether the party moving for arbitration "has substantially invoked the judicial process to an opponent's
detriment, the latter term meaning inherent unfairness caused by 'a party's attempt to have it both ways
by switching between litigation and arbitration.'" In re Citigroup Global Mkts., Inc., 258 S.W.3d at 625
(quoting Perry Homes, 258 S.W.3d at 597).
In determining whether a party waived an arbitration clause, the courts can consider, among other factors:
(1) whether the movant for arbitration was the plaintiff (who chose to file in court) or the defendant (who
merely responded), (2) when the movant learned of the arbitration clause and how long the movant
delayed before seeking arbitration, (3) the amount of pretrial activity related to the merits rather than
arbitrability or jurisdiction, (4) the amount of discovery conducted, and (5) whether the movant sought
judgment on the merits. See Perry Homes, 258 S.W.3d at 591-92; In re Hawthorne Townhomes, L.P., 282
S.W.3d 131, 141 (Tex. App.--Dallas 2009, no pet.).
The Texas Supreme Court has found waiver of arbitration in only one case, Perry Homes v. Cull. See 258
S.W.3d at 591-92; Hawthorne Townhomes, L.P., 282 S.W.3d at 142. In that case, the plaintiffs initially
"vigorously opposed" the defendants' motion for arbitration, the parties conducted nearly complete
discovery, and the case was set for trial. See Perry Homes, 258 S.W.3d at 585. Then, after fourteen
months of litigation, the plaintiffs changed their minds and moved for arbitration. The trial court granted
the motion four days before the date the case was set for trial. Id. The Texas Supreme Court held the
arbitration was waived, set aside the arbitration award, and remanded the case for trial. Id. at 601.
This case is unlike Perry Homes. The record shows that PAC filed its original petition August 25, 2006,
and that on November 21, 2006, Olstowski filed his first expedited motion to refer the case to arbitration.
In interim period, Olstowski filed his original answer and counterclaim, a request for a permanent
injunction against PAC, and a motion for a protective order.
PAC has not shown that Olstowski waived his right to arbitration under the factors listed in Perry Homes.
First, it was the defendant, Olstowski, who moved for arbitration. See id. at 591-92. Second, the record
shows that Olstowski did not delay before seeking arbitration as his first motion to compel arbitration came
less than three months after PAC's initial petition. See id. Under the third and fourth factors, PAC fails to
demonstrate, and the record does not show, that any significant amount of pretrial activity or discovery
related to the merits of the case occurred prior to Olstowski's first expedited motion to compel arbitration.
See id. Instead, the record shows that during the 58 days between Olstowski's answer and his filing the
motion to compel arbitration, Olstowski's actions were only to respond to PAC and to protect his claim to
intellectual property rights. Had Olstowski not responded to PAC's petition, he would have faced a default
judgment. Fifth, the record does not show that Olstowski sought judgment on the merits. See id.
PAC contends that Olstowski, nevertheless, waived the arbitration clause by moving to dismiss the claims
for lack of standing, yet the Texas Supreme Court has held that a motion to dismiss for lack of standing
does not sufficiently invoke the judicial process to overcome the strong presumption against waiver. See
In re Vesta Ins. Group, Inc. 192 S.W.3d 759, 764 (Tex. 2006); In re Hawthorne Townhomes, L.P., 282
S.W.3d at 142. We hold that PAC has failed to show that Olstowski "substantially invok[ed] the judicial
process to [PAC]'s detriment." See Perry Homes, 258 S.W.3d at 589-90; In re Hawthorne Townhomes,
L.P., 282 S.W.3d at 142 (holding that totality of circumstances did not show that defendants had
substantially invoked judicial process to Branch's detriment).
We overrule PAC's fifth issue.
Confirmation and Vacation of Arbitration Award
In its sixth issue, PAC contends the trial court erred in confirming and not vacating the arbitration award. It
asserts the trial court erred because the claims at issue were exclusive to federal jurisdiction; the award
violated due process; the arbitration panel did not make the necessary findings to support injunctive relief;
the award was ambiguous and contradictory; the arbitration panel miscalculated damages due to PAC; the
arbitration panel refused to follow Texas law; the order granted more relief to Olstowski than what was
awarded by the panel; the arbitration panel granted relief outside the NDNUA; the arbitration panel
exceeded its authority for not finding Olstowski liable for conversion; and, the trial court did not have
jurisdiction to confirm the arbitration award.
A. Vacatur
We review de novo a trial court's confirmation of an arbitration award under the FAA based on the entire
record. Royce Homes, L.P., 2010 WL 184216 at *6; Myer v. Americo Life, Inc., 232 S.W.3d 401, 407 (Tex.
App.--Dallas 2007, no pet.); Tanox, Inc. v. Akin, Gump, Strauss, Hauer & Feld, L.L.P., 105 S.W.3d 244,
250 (Tex. App.--Houston [14th Dist.] 2003, pet. denied). All reasonable presumptions are indulged to
uphold the arbitrator's decision, and none are indulged against it. Royce Homes, L.P., 2010 WL 184216
at *6; Bailey & Williams v. Westfall, 727 S.W.2d 86, 90 (Tex. App.--Dallas 1987, writ ref'd n.r.e.).
An arbitration award is presumed valid and entitled to great deference. Myer, 232 S.W.3d at 407-08.
When reviewing an arbitration award, we may not substitute our judgment merely because we would have
reached a different decision. Bailey, 727 S.W.2d at 90. Because judicial review of an arbitration award
adds expense and delay that diminishes the benefits of arbitration as an efficient, economical system for
resolving disputes, our review of the arbitration award is "extraordinarily narrow." See Myer, 232 S.W.3d at
408. Accordingly, we may not vacate an award even if it is based upon a mistake in law or fact. Royce
Homes, L.P., 2010 WL 184216 at *7.
The United States Supreme Court recently foreclosed any common law ground for vacatur of an
arbitration award and held that the statutory grounds provided in sections 10 and 11 of the FAA for
vacating, modifying, or correcting an arbitration award are the exclusive grounds for vacating an
arbitration award. Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 582, 128 S. Ct. 1396, 1402 (2008);
Royce Homes, L.P., 2010 WL 184216 at *7, 11; see also Citigroup Global Mkts., Inc. v. Bacon, 562 F.3d
349, 350 (5th Cir. 2009) (holding that Hall Street restricts grounds for vacatur to those set forth in section
10 of FAA); Anzilotti v. Gene D. Liggin, Inc., 899 S.W.2d 264, 266 (Tex. Ap.--Houston [14th Dist.] 1995, no
writ.) (holding that courts may not vacate arbitration award even if it is based upon mistake in law or fact).
Section 10(a) permits a court to vacate an arbitration award:
(1) where the award was procured by corruption, fraud, or undue means;
(2) where there was evident partiality or corruption in the arbitrators, or either of them;
(3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient
cause shown, or in refusing to hear evidence pertinent and material to the controversy; or, of any other
misbehavior by which the rights of any party have been prejudiced; or
(4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and
definite award upon the subject matter was not made.
9 U.S.C. § 10(a); Royce Homes, L.P., 2010 WL 184216 at *7. (2)
On appeal, PAC lodges multiple assertions why the trial court erred in refusing to vacate the arbitration
award. It, however, does not assert any of the four statutory grounds listed in sections 10 and 11 as
grounds for why the trial court erred in refusing to vacate the arbitration award. Furthermore, PAC's
statements that the arbitration panel "exceeded its powers" in granting an award against public policy or
that the arbitrators did not make necessary findings resulting in an award that is "not final and definite,"
are statements couched in common law arguments that do not provide valid ground for vacatur of the
arbitrators' award. We hold, therefore, that the trial court did not err in confirming and refusing to vacate
the arbitration award. See Royce Homes, L.P., 2010 WL 184216 at *11 (holding common law arguments
made by appellant, such as manifest disregard of law and gross mistake, were not valid grounds for
vacatur of arbitration award as Hall Street forecloses any common law grounds for vacatur, and statutory
grounds in sections 10 and 11 of FAA are only grounds available for vacating, modifying, or correcting
arbitration award) (citing Hall Street, 1552 U.S. at 583, 128 S. Ct. at 1403; Citigroup Global Mkts., Inc.,
562 F.3d at 350).
B. Trial Court's Jurisdiction
PAC contends the trial court had no jurisdiction to confirm the arbitration award because the NDNUA
states, "the parties acquiesce to the jurisdiction of the U.S. District Courts and a judgment upon an award
rendered by the arbitrators may be entered in and by the U.S. District Court."
The plain meaning of the parties' agreement in the NDNUA to "acquiesce to the jurisdiction of the U.S.
District Court," means that a U.S. District Court may confirm an award. The agreement fails to specify that
the U.S. District Court is exclusive to other courts. State courts may confirm arbitration awards pursuant to
the FAA. See, e.g., Royce Homes, L.P., 2010 WL 184216 at *11 (upholding state trial court's confirmation
of arbitration award arbitrated pursuant to FAA). We hold the district court had jurisdiction to confirm the
arbitration award.
C. Trial Court's Relief
PAC contends the trial court awarded greater relief than the arbitration award. It asserts the court erred
when it stated PAC is "enjoined from interfering with Olstowski's use and enjoyment of his excimer
technology and closed-loop technology." It states this was an error because the "Arbitration Panel never
awarded Olstowski with ownership of closed loop technology."
In its award, the arbitration panel states, "The Panel DECLARES that Olstowski is the exclusive and sole
owner of:
a. the technology and methods embodied in the patent applications styled "Improved Ozone Generator
with Duel Dielectric Barrier Discharge;" [sic] Improved Closed-Loop Light Intensity Control and Related
Fluorescence Application Method;[fn. 4] and "Excimer UV Fluorescence Detection";
b. all the accompanying drawings, blueprints, schematics and formulas created or drawn by either
Olstowski or Virgil Stamps of the application identified in or in support of ((a) and (b) hereinafter referred
to as the "Excimer Technology"); and
c. Issued Patents and/or Patent Applications pending entitled: Ozone Generator with Dual Dielectric
Barrier Discharge and Methods for Using Same, Improved Closed-Loop Light Intensity Control and
Related Fluorescence Application Method, and Excimer UV Fluorescence Detection (as amended).
. . . .
fn.4 However, the general closed-loop technology is not new or unique as noted in finding no. 20.
In the trial court's order confirming the arbitration award, the trial court noted:
(1) Olstowski is the exclusive and sole owner of all technology in dispute,
. . . .
(3) Further, PAC is enjoined from interfering with Olstowski's use and enjoyment of his excimer and
closed-loop technology, . . . .
Because the trial court used the word "his" to modify "closed-loop technology," the trial court's order, read
in conjunction with the arbitration award, plainly refers to the "Improved Closed-Loop technology"
referenced by the arbitration panel, and not to "the general closed-loop technology" expressly excluded
by the arbitration panel in its footnote four. We conclude the trial court's relief was consistent with the
arbitrator's award.
We overrule PAC's sixth issue.
Atom's Motion for Summary Judgment
Through three issues, PAC contends the trial court erred when it granted Atom's no-evidence motion for
summary judgment against PAC.
A. Standard of Review
We review summary judgments de novo. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex.
2005). A no-evidence motion for summary judgment must be granted if, after adequate time for discovery,
the moving party asserts there is no evidence of one or more specified elements of a claim or defense on
which the adverse party would have the burden of proof at trial, and the respondent produces no
summary judgment evidence raising a genuine issue of material fact on those elements. Tex. R. Civ. P.
166a(i); LMB, Ltd. v. Moreno, 201 S.W.3d 686, 688 (Tex. 2006). When the movant files its motion in
proper form, the burden shifts to the nonmovant to defeat the motion by presenting evidence that raises
an issue of material fact regarding the elements challenged by the motion. LMB, Ltd., 201 S.W.3d at 688;
Landers v. State Farm Lloyds, 257 S.W.3d 740, 744 (Tex. App.--Houston [1st Dist.] 2008, no pet.).
In a Rule 166a(i) no-evidence summary judgment, the movant represents that no evidence exists as to
one or more essential elements of the non-movant's claims, upon which the non-movant has the burden
of proof at trial. Tex. R. Civ. P. 166a(i). The non-movant then must present evidence raising a genuine
issue of material fact on the challenged elements. Id. A party who files a no-evidence summary judgment
motion pursuant to rule 166a(i) has essentially requested a pretrial directed verdict. Mack Trucks, Inc. v.
Tamez, 206 S.W.3d 572, 581 (Tex. 2006). A fact issue exists if the evidence "rises to a level that would
enable reasonable and fair-minded people to differ in their conclusions." King Ranch, Inc. v. Chapman,
118 S.W.3d 742, 751 (Tex. 2003) (quoting Merrell Dow Pharms., Inc. v. Havner, 953 S.W.2d 706, 711
(Tex. 1997)). If the evidence does no more than create a mere surmise or suspicion of fact, less than a
scintilla of evidence exists, and summary judgment is proper. Transp. Ins. Co. v. Faircloth, 898 S.W.2d
269, 282 (Tex. 1995); Macias v. Fiesta Mart, Inc., 988 S.W.2d 316, 317 (Tex. App.--Houston [1st Dist.]
1999, no pet.). A respondent is not required to marshal its proof to defeat a no-evidence motion for
summary judgment; it need only point out evidence that raises a fact issue on the challenged elements.
Tex. R. Civ. P. 166a(i). cmt. (1997). Because the trial court's summary judgment does not specify the
ground on which the court relied for its ruling, we should affirm it if any theory advanced by Atom has
merit. See Weiner v. Wasson, 900 S.W.2d 316, 317 n. 2 (Tex. 1995).
B. No Answer
In its first issue, PAC contends the trial court erred because it granted Atom's summary judgment motion
before Atom filed an answer to PAC's original petition. PAC asserts, "[a]lthough Atom did make an
appearance in the case, Atom never filed a general denial, affirmative defense or counter-claim before
summary judgment was filed and granted." PAC notes that Atom was not included as a defendant in
Olstowski's original answer filed October 3, 2006, but was included in an amended answer that included
both Olstowski and Atom filed on October 30, 2008, two months after the trial court granted Atom's
summary judgment motion. PAC also notes Atom made an appearance in the case.
PAC waived this error, if any. As a prerequisite to presenting a complaint for appellate review, the record
must show that a complaint was made to the trial court by a timely request, objection, or motion and that
the trial court (1) ruled on the request, objection, or motion, either expressly or impliedly, or (2) refused to
rule on the request, objection, or motion, and the complaining party objected to the refusal. See Tex. R.
App. P. 33.1. Under rule 166a(c) of the Rules of Civil Procedure, in the context of summary judgment,
issues that are not expressly presented to the trial court by written motion, answer, or response will not
serve as grounds for reversal of a summary judgment on appeal. Tex. R. Civ. P. 166a(c); Roark v.
Stallworth Oil & Gas, Inc., 813 S.W.2d 492, 495 (Tex. 1991); City of Houston v. Clear Creek Basin Auth.,
589 S.W.2d 671, 678 (Tex. 1979) (summary judgment non-movant could not raise for first time on appeal
additional fact issue that was not raised in its response). The party who allows an issue to be tried by
consent and who fails to raise the lack of a pleading before submission of the case cannot later raise the
pleading deficiency for the first time on appeal. Roark, 813 S.W.2d at 495 (citing Tex. R. Civ. P. 67, 90).
As the Supreme Court has noted, "[t]here is no valid reason why these rules should not apply to issues
raised in the motion for summary judgment." Id. "[I]t would advance no compelling interest of the parties or
of our legal system to reverse a summary judgment simply because of a pleading defect." Id.
An opposing party should use special exceptions to identify defects in a pleading so that they may be
cured, if possible, by amendment. Horizon/CMS Healthcare Corp. v. Auld, 34 S.W.3d 887, 897 (Tex.
2000). When a party fails to specially except, courts should construe the pleadings liberally in favor of the
pleader. Id.
In this case, the trial court set the submission date for the motion for summary judgment on August 18,
2008. Prior to that date, the record shows that PAC failed to raise the issue regarding any deficiencies in
Atom's pleadings. PAC did not file any special exceptions, and did not raise the issue in any motions. The
first time the record shows that PAC raised this issue is in PAC's motion for reconsideration, filed after the
trial court granted the summary judgment. Because the record does not show that PAC brought this issue
to the attention of the trial court or that the trial court ruled on it before it granted summary judgment, we
hold that PAC failed to preserve error, if any, on this issue. See Tex. R. App. P. 33.1; Tex. R. Civ. P. 67,
166a(c); Roark, 813 S.W.2d at 495 (holding that because Roark failed to direct trial court's attention to
absence of pleading in his written response or before court rendered judgment, complaint may not be
raised on appeal); Hainsworth v. Berry, 485 S.W.2d 934, 934-35 (Tex. Civ. App.--Houston [1st Dist.] 1972,
no writ) (holding failure to object to absence of answer at trial level prevents contention on appeal that
pleadings were insufficient).
We overrule PAC's first issue.
C. Res Judicata
In its second issue, PAC states the trial court erred when it granted Atom's motion for summary judgment
based on "an affirmative defense and counter-claim that was never pled." PAC contends the summary
judgment for Atom was premised on the affirmative defense of res judicata, which was never pleaded by
Atom, and, therefore, an improper ground for summary judgment.
The record shows Atom's no-evidence motion for partial summary judgment requests judgment against
PAC for "all causes of action against Atom" and it cites to rule 166a(i) of the Texas Rules of Civil
Procedure, the rule pertaining to no-evidence motions for summary judgment. See Tex. R. Civ. P. 166a(i).
In its motion, Atom states:
Atom is entitled to summary judgment because PAC cannot, by depositions, answer to interrogatories,
admissions on file, or other admissible evidence, demonstrate there is any evidence to support its causes
of action for declaratory relief, tortious interference with continuing business relations, conversion of
intellectual property, breach of oral contract, attorney fees, restitution/unjust enrichment (alternative to
breach of contract), fraudulent inducement, negligent misrepresentation (alternative to fraudulent
inducement), and application for temporary and permanent injunction.
In addition to challenging the absence of any evidence to establish PAC's claims, Atom also asserts that
the motion for summary judgment should be granted because each of the causes of action were the same
as those that had been fully and completely adjudicated in the arbitration. Atom's no-evidence motion for
summary judgment, therefore, makes two alternative challenges, (1) that there is no evidence on each of
PAC's claims, and (2) it asserts the arbitration between Olstowski and PAC fully and completely
adjudicated PAC's claims against Atom. Without stating the basis for its decision, the trial court granted
summary judgment against PAC, which disposed of all claims between PAC and Atom.
When there are multiple grounds for summary judgment and the order does not specify the ground on
which the summary judgment was rendered, the appealing party must negate all grounds on appeal. Ellis
v. Precision Engine Rebuilders, Inc., 68 S.W.3d 894, 898 (Tex. App.--Houston [1st Dist.] 2002, no pet.)
(citing State Farm Fire & Cas. Co. v. S.S., 858 S.W.2d 374, 381 (Tex. 1993)). If summary judgment may
have been rendered, properly or improperly, on a ground not challenged, the judgment must be affirmed.
Id. (citing Holloway v. Starnes, 840 S.W.2d 14, 23 (Tex. App.--Dallas 1992, writ denied)).
In this appeal, PAC does not challenge each of the grounds under which the no evidence motion for
summary judgment could have been granted. Excluding its arguments concerning attorney's fees that we
address separately in this opinion, PAC's entire argument challenging the summary judgment is, as
follows:
To obtain summary judgment, a movant must either negate at least one element of the plaintiff's theory of
recovery, or plead and conclusively establish each element of an affirmative defense. Pursuant to Texas
Rule of Civil Procedure 94, res judicata is an affirmative defense that must be pled. Atom's Motion was
predicated on and granted solely on the doctrine of res judicata. Because the affirmative defense upon
which Atom based its Motion was never pled, the trial court erred in granting summary judgment on this
basis and it must be reversed.
(citations omitted) (emphasis in original).
In this appeal, PAC challenges the res judicata portion of the no-evidence summary judgment, but it fails
to address Olstowski's alternative challenge that there exists no evidence on each of PAC's claims.
Because, summary judgment may have been rendered on a ground not challenged on appeal, we uphold
the summary judgment, whether it may have been rendered properly or improperly. See Ellis, 68 S.W.3d
at 898.
We overrule PAC's second issue.
D. Stay
In its fourth issue, PAC asserts the trial court erred in granting Atom's motion for summary judgment
because the lawsuit between PAC and Atom had been stayed by the trial court. In its response to Atom's
summary judgment motion at trial, PAC does not directly raise or identify evidence to counter Atom's no
evidence motion for summary judgment. PAC's sole response to the motion is its assertion that the trial
court should not grant the motion because the trial court stayed the case between PAC and Atom.
The record shows that there was only one order that stayed proceedings. The order granted Olstowski's
motion to stay the cause of action between Olstowski and Strozier. The order states:
After considering the Defendant/Counter-plaintiff Franek Olstowski's motion to stay proceeding arbitration,
the court GRANTS the motion and ORDERS this matter is stayed as to cross-defendant Strozier until the
arbitration proceeding is complete. . . .
Although no written order shows a stay of the Atom proceedings, PAC claims the court verbally ordered a
stay. At the hearing to which PAC cites, the court states, "This [arbitration agreement] only refers to Mr.
Olstowski. Just set [the arbitration] for Mr. Olstowski. Everybody else will be stayed. I think [the arbitration
proceeding] will resolve it anyway." At the same hearing, however, the court also states, "The Court grants
the motion. So you go back to the subject matter of the motion, which was only as to Mr. Olstowski - I
mean - Strozier."
A judgment or order that is rendered in writing and signed by the trial judge becomes the official judgment
of the court. Capital Fin. & Commerce AG v. Sinopec Overseas Oil & Gas, Ltd., 260 S.W.3d 67, 85 (Tex.
App.--Houston [1st Dist] 2008, no pet.). Anytime there is a conflict between oral pronouncements made by
a trial judge and his written judgment or order, the matters set forth in the written order control. In re JDN
Real Estate-McKinney L.P., 211 S.W.3d 907, 914 (Tex. App.--Dallas 2006, pet. denied); see also Capital
Fin., 260 S.W.3d at 85 ("Recitals in a judgment or signed order of the court thus control over conflicting
recitals in the record.").
In this case, the trial court's written order clearly stays only those matters between Olstowski and Strozier.
This order controls over any conflicting oral pronouncements, if any exist. See In re JDN Real
Estate-McKinney L.P., 211 S.W.3d at 914. We hold the proceedings between Atom and PAC were never
stayed, and that the trial court, therefore, did not err in granting Atom's motion.
We overrule PAC's fourth issue.
Attorney's Fees
In its second issue, PAC contends the trial court erred when it granted attorney's fees to Atom in
conjunction with granting Atom's summary judgment. The trial court awarded Atom $240,379.66 in
attorney's fees and conditional awards in the event of a successful appeal. See Hunsucker v. Fustok, 238
S.W.3d 421, 431 (Tex. App.--Houston [1st Dist.] 2007, no pet.) ("The general rule is that a trial court's
award of attorney's fees may include appellate attorney's fees.").
A. Standard of Review
Generally, we review a trial court's decision to grant or deny attorney's fees for an abuse of discretion.
See Bocquet v. Herring, 972 S.W.2d 19, 21 (Tex. 1998); EMC Mortgage Corp. v. Davis, 167 S.W.3d 406,
418 (Tex. App.--Austin 2005, pet. denied). A trial court abuses its discretion if its decision is arbitrary,
unreasonable, and without reference to guiding principles. Goode v. Shoukfeh, 943 S.W.2d 441, 446
(Tex. 1997). When reviewing a trial court's decision under this standard, we must view the evidence in the
light most favorable to the trial court's ruling and indulge every presumption in its favor. Aquaduct, L.L.C.
v. McElhenie, 116 S.W.3d 438, 444 (Tex. App.--Houston [14th Dist.] 2003, no pet.); Phillips & Akers, P.C.
v. Cornwell, 927 S.W.2d 276, 279 (Tex. App.--Houston [1st Dist.] 1996, no writ.).
The statute authorizing attorney's fees in this case is the Declaratory Judgment Act, which states, "In an
proceeding under this chapter, the court may award costs and reasonable and necessary attorneys' fees
as are equitable and just." Tex. Civ. Prac. & Rem. Code Ann. § 37.009 (Vernon 2008). The grant or denial
of attorney's fees in a declaratory judgment lies within the discretion of the trial court, and its judgment will
not be reversed on appeal absent a clear showing that it abused its discretion. Oake v. Collin County, 692
S.W.2d 454, 455 (Tex. 1985). Any fees must be reasonable and necessary, which are questions of fact,
as well as equitable and just, which are questions of law. Bocquet, 972 S.W.2d at 21. Although what
constitutes reasonable attorney's fees is a question of fact, clear, direct, and uncontroverted evidence,
even evidence from an interested witness, will establish that attorney's fees sought are reasonable,
necessary, and credible, where the opposing party had means and opportunity to disprove the testimony
but failed to do so. See Smith v. Patrick W.Y. Tam Trust, 296 S.W.3d 545, 547-48 (Tex. 2009) (citing
Ragsdale v. Progressive Voters League, 801 S.W.2d 880, 882 (Tex. 1990); Rosenblatt v. Freedom Life
Ins. Co. of Am., 240 S.W.3d 315, 321 (Tex. App.--Houston [1st Dist.] 2007, no pet.)).
B. Arguments Presented by PAC
PAC asserts the court erred in awarding fees because (1) Atom failed to plead for attorney's fees, (2) the
action between PAC and Atom was stayed by the trial court, (3) Atom's attorney's affidavit was
inadmissible, (4) there was no statutory basis for the award, (5) Atom failed to segregate between those
fees generated for Olstowski and those generated for Atom, and (6) there was insufficient evidence to
support the trial court's award of attorney's fees.
1. Failure to Plead for Attorney's Fees
PAC asserts the trial court erred in awarding attorney's fees to Atom because "Atom failed to plead for the
recovery of attorney's fees." PAC notes that Olstowski's amended answer including Atom as a defendant
was not filed until after the trial court granted Atom's motion for summary judgment.
Absent a mandatory statute, a trial court's jurisdiction to render a judgment for attorney's fees must be
invoked by pleadings, and a judgment not supported by pleadings requesting an award of attorney's fees
is a nullity. Alan Reuber Chevrolet, Inc. v. Grady Chevrolet, Ltd., 287 S.W.3d 877, 884 (Tex. App.--Dallas
2009, no pet.). However, the issue must not be waived or tried by consent. Id. (citing In re Pecht, 874
S.W2d 797, 803 (Tex. App.--Texarkana 1994, no writ)).
As discussed above, we hold this issue was waived when PAC failed to bring the issue before the trial
court until after the summary judgment was granted. See Tex. R. App. P. 33.1; Tex. R. Civ. P. 67, 166a(c);
Roark, 813 S.W.2d at 495 (holding that because Roark failed to direct trial court's attention to absence of
pleading in his written response or before court rendered judgment, complaint may not be raised on
appeal).
2. Stay
PAC also asserts that the court erred in awarding attorney's fees because the action between PAC and
Atom was stayed, and additionally, Atom could not have incurred attorney's fees during the time period of
the arbitration proceeding because the claims between PAC and Atom were stayed from January 19, 2007
though at least the conclusion of the arbitration in November 2007. As discussed above, the claims
between Atom and PAC were not stayed, and therefore the court did not err in granting summary
judgment. Additionally, because the case between PAC and Atom was not stayed, Atom could have
incurred fees generated during the time period of the arbitration proceeding to time the summary
judgment was rendered.
3. The Affidavit
PAC next contends that Atom's attorney's affidavit regarding the amount of attorney's fees generated was
inadmissible because (a) it was not sworn before a notary public and the date on the jurat of the
notarization makes the affidavit inadmissible, and (b) Atom's attorney's affidavit was conclusory and the
motion was based upon hearsay.
a. Defects in the Affidavit
PAC asserts the trial court erred in awarding fees because the affidavit supplying evidence of the fees
was never sworn to before a notary public. As we construe PAC's argument, it next asserts that even if
sworn, the affidavit was sworn to on February 9, 2008, over a month after Atom filed its summary
judgment. It contends that because of the incorrect date on the jurat of the notarization, the affidavit is
inadmissible.
Texas Government Code section 312.01 sets out the requirements for an affidavit: "'Affidavit' means a
statement in writing of a fact or facts signed by the party making it, sworn to before an officer authorized to
administer oaths, and officially certified to by the officer under his seal of office." See Tex. Gov't Code
Ann. § 312.011(1) (Vernon 2005). Without notarization or a jurat, an unsworn statement is not an affidavit,
and it is not proper summary judgment evidence. Coastal Cement Sand Inc. v. First Interstate Credit
Alliance, Inc., 956 S.W.2d 562, 567 (Tex. App.--Houston [14th Dist.] 1997, writ denied). When an affidavit
admitted in support of summary judgment is not properly authenticated by notarization, the party may
raise this "substantive" complaint for first time on appeal. Blanche v. First Nationwide Mortg. Corp., 74
S.W.3d 444, 451 (Tex. App.--Dallas 2002, no pet.).
In this case, Atom's attorney, Alton W. Payne, made statements in writing and signed the affidavit. The
statements are sworn to because the affidavit begins, "Before me, the undersigned authority, personally
appeared Alton W. Payne . . . ." See Norcross v. Conoco, Inc., 720 S.W.2d 627, 630 (Tex. App.--San
Antonio 1986, no writ) (holding affidavit that expressly stated affiant was duly sworn was valid affidavit).
The record shows Payne's statement is sworn to before a notary, who is an officer authorized to
administer oaths. See Tex. Gov't Code Ann. § 602.002(4) (Vernon 2003). Finally, the statement is
officially certified by the notary under her seal of office. The record shows that in its response to Atom's
summary judgment, PAC's only objection regarding the issue of the affidavit's validity was that the affidavit
"was never sworn to and subscribed to before a notary public." Because the record shows that the
affidavit was notarized by a notary public, we hold PAC's objection at trial and assertion on appeal lack
merit.
PAC next contends that the error in the date of the jurat of the notarization renders the notarization
invalid. Error in the date of the notarization is a defect of form, not substance. Nortex Drug Distrib., Inc. v.
Sunset Trails, Inc., No. 05-98-00676-CV, 2000 WL 1230766, at *4 (Tex. App.--Dallas Aug. 31, 2000, no
pet.) (mem. op. not designated for publication). By failing to object to the trial court, PAC waived this error
if any. See id. Rule 166a(f) states that reversal cannot be predicated on defects in the form of an affidavit
or attachment unless the opposing party objects and the proponent of the proof has the "opportunity" to
amend, but refuses. See Tex. R. Civ. P. 166a(f); Vice v. Kasprzak, No. 01-08-00168-CV, 2009 WL
3152122, at *6 (Tex. App.--Houston [1st Dist.] Oct. 1, 2009, no pet. h.) (citing Grand Prairie Indep. Sch.
Dist. v. Vaughan, 792 S.W.2d 944, 945 (Tex. 1990)). The notarization on Payne's affidavit is dated
February 8, 2008. PAC had until August 18, 2008, the submission date, to raise the issue regarding the
date of the notarization before the trial court. Because it failed to object to the date, we hold PAC waived
any error regarding the date of the notarization. Eberstein v. Hunter, 260 S.W.3d 626, 629 (Tex.
App.--Dallas 2008, no pet.) (holding appellant waived right to complain about evidence on appeal due to
failure to object to summary judgment evidence).
b. Objections to Payne's Affidavit
Without pointing to any specific statements within Payne's affidavit, PAC generally objected at trial on the
basis that the affidavit "misstates the contents of the various attachments," "is conclusory," is "without
foundation," and that the attachments are "hearsay." PAC's arguments on appeal are the same.
An objection based on a summary judgment affidavit's conclusory statements is an objection to
substance, which may be raised for the first time on appeal; whereas, an objection based on lack of
foundation or hearsay is an objection to form, which requires a written ruling for appellate review. See
Green v. Indus. Specialty Contractors, 1 S.W.3d 126, 130 (Tex. App.--Houston [1st Dist] 1999, no pet.).
At the outset, we note that the trial court did not rule on PAC's objections to the affidavit. As a result,
PAC's objections as to the form of the affidavit are waived. See Hogan v. J. Higgins Trucking, Inc., 197
S.W.3d 879, 883 (Tex. App.--Dallas 2006, no pet.) ("there must be some indication that the trial court
ruled on the objections in the record or in the summary judgment itself, other than the mere granting of
the summary judgment."). Moreover, PAC's general objections of "hearsay" or "without foundation," as
well as objections not specifically identifying statements, would be too general to present an issue for
review, even if it had been preserved for appeal through an adverse ruling. See Tex. R. App. P.
33.1(a)(1)(a) (requiring that complaint be sufficiently specific to make trial court aware of complaint).
PAC's objection on appeal that the affidavit is conclusory is an objection to the substance of the affidavit,
which may be raised for the first time on appeal. See Green, 1 S.W.3d at 130 (citing City of Wilmer v.
Laidlaw Waste Sys., Inc., 890 S.W.2d 459, 467 (Tex. App.--Dallas 1994), aff'd, 904 S.W.2d 656, 660-661
(Tex. 1995). Thus, PAC did not need to obtain a ruling to raise this objection on appeal. See id.
Nevertheless, PAC's argument on appeal is vague and overbroad. PAC fails to cite to the record,
presents no argument to explain how the affidavit is conclusory, and cites no authority to support its
allegation that the affidavit is conclusory. Accordingly, we hold this contention is waived. Tex. R. App. P.
38.1(h) (stating that brief must contain clear and concise argument for contentions made with appropriate
citations to authorities and record); Fredonia State Bank v. Gen. Am. Life Ins. Co., 881 S.W.2d 279,
284-85 (Tex. 1994) (holding appellate court has discretion to deem points of error waived due to
inadequate briefing); see Kyle v. Countrywide Home Loans, Inc., 232 S.W.3d 355, 359, 361 (Tex.
App.--Houston 2007, pet. denied) (holding objection inadequate when it fails to identify specific language
that is objectionable, fails to explain basis for the objection, and fails to show how alleged deficiencies
defeat motion for summary judgment); Stewart v. Sanmina Tex., L.P., 156 S.W.3d 198, 207 (Tex.
App.--Dallas 2005, no pet.) (objections insufficient if they do not state specific basis for objection to
particular statement). 4. Statutory Basis for Award
PAC asserts the trial court's award of attorney's fees was based upon section 38.001 of the Texas Civil
Practice and Remedies Code. PAC contends the trial court erred by awarding attorney's fees under
section 38.001 of the Civil Practice and Remedies Code because the Code does not permit recovery of
attorney's fees for defending a breach of contract claim.
A party may not recover attorney's fees unless such recovery is authorized by statute or provided for by
contract between the parties. State v. Mid-South Pavers, Inc., 246 S.W.3d 711, 730 (Tex. App.--Austin
2007, pet. denied) (citing Travelers Indem. Co. of Conn. v. Mayfield, 923 S.W.2d 590, 593 (Tex.1996)).
Under section 38.001(8) of the Texas Civil Practice and Remedies Code, a party "may recover"
reasonable attorney's fees if the claim is for an oral or written contract. See Tex. Civ. Prac. & Rem. Code
Ann. § 38.001(8). Chapter 38 does not provide for the recovery of attorney's fees by a defendant who
only defends against a plaintiff's contract claim and presents no contract claim of its own. Energen Res.
MAQ, Inc. v. Dalbosco, 23 S.W.3d 551, 558 (Tex. App.--Houston [1st Dist.] 2000, pet. denied) (citing Am.
Airlines, Inc. v. Swest, Inc., 707 S.W.2d 545, 547 (Tex. 1986) (holding defendant could not recover
attorney's fees under predecessor to section 38.001 when defendant presented no contract claim of its
own)).
In its motion for summary judgment, Atom requested attorney's fees under both section 38.001 and under
the Texas Declaratory Judgments Act (TDJA), as found in section 37.003(a) of the Civil Practices and
Remedies Code. The Declaratory Judgments Act provides that in any proceeding under the Act "the court
may award costs and reasonable and necessary attorney's fees as are equitable and just." Tex. Civ. Prac.
& Rem. Code Ann. § 37.009
Although Atom requested fees under section 38.001, it is clear from the summary judgment that the trial
court awarded Atom fees under section 37.003. Atom sought summary judgment to dispose of "all causes
of action against Atom." PAC sought declaratory relief against Atom in its original petition. In its summary
judgment motion, Atom was defending against PAC's claims, and it sought fees under section 37.003
because PAC's suit "is a suit seeking declaratory relief." When the trial court granted the summary
judgment, it stated in the order that "Atom is entitled to attorney's fees incurred in the defense of this suit
that were reasonable and necessary, and Atom is entitled to attorney fees incurred in the defense of this
suit in the amount of $240, 379.66." (emphasis in original). Atom was defending against a suit for
declaratory judgment, and the trial court awarded Atom attorney's fees based only upon his defense, and
not upon any alternative claims of Atom against PAC. We conclude that the trial court did not grant
attorney's fees under section 38.001(8). We hold the trial court properly awarded fees under section
37.009 by exercising its discretion to award fees to a party defending a claim for declaratory relief. Cf.
Flagship Hotel,Ltd. v. City of Galveston, 117 S.W.3d 552, 566 (Tex. App.--Texarkana 2003, pet. denied)
(holding that, where party claimed it was entitled to attorney's fees under both sections 38.001 and
37.009 of the Texas Civil Practice and Remedies Code, and order granting attorney's fees did not state
basis for the award, it was not abuse of discretion to award attorney's fees under section 37.009 to party
that did not prevail on contract claim if that is equitable and just under circumstances).
5. Segregation
PAC contends that Atom failed to segregate its attorney's fees between those generated for Olstowski
and those generated for Atom.
a. Applicable Law
A party seeking attorney's fees has a duty to segregate nonrecoverable fees from recoverable fees, and
to segregate the fees owed by different parties. French v. Moore, 169 S.W.3d 1, 17 (Tex. App.--Houston
[14th Dist.] 2004, no pet.). If any attorney's fees relate solely to a claim for which such fees are
unrecoverable, a claimant must segregate recoverable from unrecoverable fees. Tony Gullo Motors v.
Chapa, 212 S.W.3d 299, 313 (Tex. 2006). It is only when legal services advance both recoverable and
unrecoverable claims that the services are so intertwined that the associated fees need not be
segregated. Id. at 313-14; see also A.G. Edwards & Sons Inc. v. Beyer, 235 S.W.3d 704, 710 (Tex. 2007).
To preserve a complaint for review on appeal, a party must present to the trial court a timely request,
motion, or objection that states the specific grounds for the ruling requested and conforms to the
requirements of the Rules of Procedure and Evidence. Tex. R. App. P. 33.1(a)(1)(A)-(B); see Wal-Mart
Stores, Inc. v. McKenzie, 997 S.W.2d 278, 280 (Tex. 1999). The complaining party must also show that
the trial court ruled on the request, objection, or motion "either expressly or impliedly." Tex. R. App. P.
33.1(a)(2)(A).
b. Analysis
In PAC's original brief on appeal, PAC makes the following argument regarding segregation,
In addition, the claims and defenses Atom asserted are different from the claims and defenses asserted
by Olstowski; therefore, pursuant to the holding of Stewart Title Guaranty Company v. Aiello, the fees
must be segregated. Atom failed to demonstrate, as a matter of law, that the causes of action involved in
the suit are dependent upon the same set of facts or circumstances and thus are "intertwined to the point
of being inseparable." Because it failed to segregate the fees or provide proper evidence, the court erred
in awarding any attorney's fees. (citations omitted) (emphasis omitted).
This argument was never made by PAC in its response to Atom's motion for summary judgment. The
response states:
Additionally, there is no competent summary judgment evidence to support a claim of attorneys' fees and
PAC objects to Exhibit C to Atom's Motion and its attachments. First, Exhibit C, the affidavit of Alton Payne,
is not an affidavit. As can be seen, it was never sworn and subscribed to before a Notary Public.
Therefore, it cannot be considered at all. Second, Mr. Payne's affidavit misstates the contents of the
various attachments and is conclusory without foundation. Third, since Exhibit C is not proper summary
judgment proof, the various attachments cannot be considered as they are hearsay and without
foundation. Fourth, all of the attorneys' fees Atom seeks to recover are fees that were generated for
Olstowski as part of the arbitration. In that proceeding, Olstowski was awarded $375[,]000 in attorneys
fees. Any additional award of attorneys fees to Atom would amount to a double recovery. Therefore,
Atom's request for attorneys' fees must be declined. (citation omitted).
The argument on appeal is different from the argument in PAC's response to Atom's motion for summary
judgment. At trial, PAC's position was that the attorney's fees to Atom would be a "double recovery"
because the arbitration awarded Olstowski those same fees. On appeal, however, PAC's argument is that
the fees must be segregated because the claims and defenses asserted by Atom and Olstowski are not
intertwined. We hold PAC has waived any complaint regarding segregation by failing to raise this issue
before the trial court. See Tex. R. App. Proc. 33.1 (a prerequisite to presenting complaint on appeal is
timely complaint to the trial court); Green Intern., Inc. v. Solis, 951 S.W.2d 384, 389 (Tex. 1997) ("If no one
objects to the fact that the attorney's fees are not segregated as to specific claims, then the objection is
waived.") (citing Hruska v. First State Bank of Deanville, 747 S.W.2d 783, 785 (Tex. 1988).
6. Sufficiency of the Evidence
On appeal, PAC challenges the evidence offered by Atom to support the award of attorney's fees, and
contends the evidence is insufficient to support the award. It asserts that because Atom failed to provide
proper evidence, the court erred in awarding any attorney's fees to Atom. For support, it maintains its
argument that the action between Atom and PAC was stayed, and that any fees were, therefore,
generated for Olstowski and not Atom.
The amount of an award for attorney's fees rests in the sound discretion of the trial court, and its
judgment will not be reversed on appeal absent a clear showing of abuse. Owen Elec. Supply, Inc. v. Brite
Day Constr., Inc., 821 S.W.2d 283, 288 (Tex. App.--Houston [1st Dist.] 1991, writ denied). When a movant
includes a prayer for attorney's fees in its summary judgment motion, an attached affidavit is "expert
opinion testimony" that may be considered as proof of the attorney's fees incurred. Id. To create a fact
issue, the non-movant must file a counter affidavit contesting the reasonableness of the movant's
attorney's fee claim. Id. (citing Tesoro Petrol. Corp. v. Coastal Ref. & Mktg., Inc., 754 S.W.2d 764, 767
(Tex. App.--Houston [1st Dist.] 1988, writ denied)); see also Tex. Civ. Prac. & Rem. Code Ann. § 18.001
(Vernon 2008). Unless a controverting affidavit is filed, an affidavit as to the amount of attorney's fees is
presumed reasonable. Tex. Civ. Prac. & Rem. Code Ann. § 18.001(b) (Vernon 2008); Hunsucker, 238
S.W.3d at 432. Even if the testimony comes from an interested witness, the movant establishes the
amount of attorney's fees as a matter of law when the testimony is clear, direct, positive, not contradicted
by any other witness or attendant circumstances, and could have been easily controverted by the
non-movant. See Smith, 296 S.W.3d at 547-48 (citing Ragsdale, 801 S.W.2d at 882). The trial court
abuses its discretion in denying attorney's fees when the movant files an affidavit for fees and no fact
issue is created by the non-movant. See Hunsucker, 238 S.W.3d at 432 (citing Ragsdale, 801 S.W.2d at
882).
Here, Atom attached to its motion for summary judgment the affidavit of its attorney. Attached to the
affidavit is a 51-page invoice of fees. In this affidavit, Atom's attorney, Payne, detailed the specific work he
and his law firm performed in the defense of Atom and Olstowski, including hundreds of specific tasks,
total number of hours worked, and estimates of charges for any appellate work. Payne stated that the
total fees his law firm had incurred in the defense of Atom and Olstowski against PAC's claims were
$689,529.66. He then noted that the arbitration award to Olstowski was $449,150 in attorney's fees, and
that there was a remaining $240,379.66 balance still due from Atom. In the 51-page invoice attached to
the affidavit, the total fees listed by the invoice was $690,729.60. Almost every invoice page specifies that
the invoice was generated "[i]n reference to . . . Franek Olstowski and Atom Instrument Corp."
PAC fails to cite, and the record does not show, that it filed an affidavit controverting Payne's testimony.
PAC, therefore, failed to raise a material fact issue as to the reasonableness of the fees set forth in the
affidavit because it filed no affidavit controverting Payne's testimony, even though it could have readily
done so if it believed his claimed fee was unreasonable. Such uncontroverted testimony will be taken as a
matter of law, when, as here, the opposing party has means and opportunity to disprove it. Ragsdale, 801
S.W.2d at 882. The amount requested by Atom was clear, direct, and positive in this case. Although the
trial court had discretion to award less than the requested amount if the amount requested was
unreasonable, not credible, or questionable, the court here would abuse its discretion if it had not
awarded any attorney's fees at all in the face of uncontroverted evidence of fees incurred and anticipated.
See Hunsucker, 238 S.W.3d at 432; Ragsdale, 801 S.W.2d at 882.
Although Payne included an itemized invoice of the services and charges he billed to Atom and Olstowski,
PAC asserts that the affidavit was still insufficient because did not identify how many hours were spent on
Atom's defense specifically. However, an attorney's fee affidavit need not do this. See, e.g., Hugh Wood
Ford, Inc. v. Galoway, 830 S.W.2d 296, 298 (Tex. App.--Houston [14th Dist.] 1992, writ denied) (holding
that attorney's detail concerning work he had done, together with his total estimate of hours worked, was
sufficient to support award of attorney's fees). Here, Atom's attorney provided an affidavit which
sufficiently detailed the nature and extent of the services rendered, with Atom listed in the subject area on
nearly every page of the invoice.
PAC also complains the trial court awarded Atom fees that had already been awarded to Olstowski by the
arbitration panel so that it is paying twice for the same fees. In its motion, Atom requested attorney's fees
for the amount of fees generated in excess of those awarded to Olstowski by the arbitration award.
Double award does not occur because PAC is ordered to pay fees that are not part of the amount
awarded by the arbitrators to Olstowski.
Taking into consideration (1) the evidence presented to the trial court regarding attorney's fees and (2)
the fact that no controverting affidavit or other evidence was submitted regarding the reasonableness of
legal fees, we hold that the court did not abuse its discretion by awarding attorney's fees to Atom in the
amount of $240,379.66, and conditional attorney's fees in the event of a successful appeal.
We overrule PAC's second issue.
Conclusion
We affirm the judgment of the trial court.
Elsa Alcala
Justice
Panel consists of Chief Justice Radack, and Justices Alcala, and Higley.
1. For clarity, we have numbered the issues one through six. Roman numeral one with subissues A, B, C,
and D, are numbered issues one through four, respectively. Roman numeral two with subissues A and B
are numbered issues five and six, respectively.
2. Section 11 of the Federal Arbitration Act refers to modification or correction of an arbitration award.
See 9 U.S.C. § 11.