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FILED

DALLAS COUNTY
5/4/2015 6:10:54 PM
FELICIA PITRE
DISTRICT CLERK

CAUSE NO. DC13-01564


SCA PROMOTIONS, INC.,
Plaintiff,
v.
LANCE ARMSTRONG, TAILWIND
SPORTS, INC., AND WILLIAM
STAPLETON,
Defendants.

IN THE DISTRICT COURT OF

DALLAS COUNTY, TEXAS

116TH JUDICIAL DISTRICT

DEFENDANTS LANCE ARMSTRONG TAILWIND SPORTS CORP.S


MOTION TO VACATE FINAL ARBITRATION AWARD
Defendants Lance Armstrong and Tailwind Sports Corp. (improperly sued as Tailwind
Sports, Inc.) file this motion to vacate a final arbitration award issued February 4, 2015 in favor
of Plaintiff SCA Promotions, Inc. Defendants respectfully show:
I. SUMMARY
1.

On February 4, 2015, in a split decision, a panel of arbitrators issued sanctions

in the amount of $10 million against Tailwind Sports Corp. and Lance Armstrong. The award
explicitly returns to SCA $7,500,000 in settlement consideration, together with fees and costs in
excess of $2,000,000 and additional costs insusceptible of precise calculation.1 The
sanction award effectively eviscerated a fully negotiated and binding settlement agreement,
and a final, agreed, confirmed arbitration award based on that settlement agreement, which fully
and finally resolved the parties disputes over nine years ago. SCAs president has repeatedly
confirmed that the settlement was intended to end the dispute.2 The Settlement Agreement states,
among other things, the following:

1
2

Exhibit K at 17.
See, e.g., Exhibit J at 81-83, 113.

a)

it is fully and forever binding on THE PARTIES, and their heirs, executors,
administrators, successors and assigns;

b)

all parties expressly waived any right to challenge, appeal, or attempt to set aside
the Arbitration Award;

c)

all parties expressly agreed that [n]o promise or representation of any kind has
been made to any Party or to anyone acting for a Party except as is expressly
stated in this SETTLEMENT AGREEMENT, and THE PARTIES execute this
SETTLEMENT AGREEMENT without reliance on any representation of any
kind or character not expressly stated in this SETTLEMENT AGREEMENT;

d)

the Parties were fully informed of the terms, contents, conditions, and effect of
the AGREEMENT; and

e)

the Parties received independent legal counsel and advice before agreeing to the
terms of this AGREEMENT.3

2.

There were sound reasons for SCA entering into the agreement to settle, including

the Confidentiality Agreement, which protected the panels finding that SCA had engaged in the
unauthorized business of insurance from disclosure to the Texas Department of Insurancean
entity that could have instituted actions against SCA itself and shut down SCAs business. That
finding subjected SCA to potential liability of over $22 million, not to mention penalties
associated with the many years of SCAs legal violations. Texas law provides that (1) an
unlicensed insurer can have a retroactive penalty imposed up to $10,000.00 for each day of
violation, and (2) an insurer may be enjoined from continuing the violation. The Texas Insurance
Code makes it clear that SCAs unauthorized practice of insurance is a third degree felony. TEX.
INS. CODE 101.106; see TEX. PEN. CODE 12.34.
3.

SCA cast its claim in arbitration as a request for sanctions for one simple reason:

SCA cannot establish a valid ground to vacate the prior, confirmed arbitration award it
3

Exhibit B at 3.

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

voluntarily agreed to so it could avoid substantial exposure from its own illegal conduct. But
SCAs strategy invited a new problem: the arbitration panel had no power to issue a sanctions
award after the settlement and the final arbitration award (which was confirmed) because there
was no agreement to arbitrate covering this claim, only a court can vacate a prior confirmed
arbitration award, and the doctrine of functus officio ended the arbitration panels jurisdiction
nearly a decade ago. Thus, the Award not only exceeded the panels authority, but was beyond
the scope of any agreement between the parties. Moreover, the panels issuance of sanctions at
this late juncture violates well-established Texas public policies, which favor settlements and
arbitrations for efficient and final resolution of disputes, finality of judgments, and the right of
corporations to wind up their businesses. This sanctions order is unprecedented and
insupportable under Texas law. For these reasons, the award must be vacated.
II. EVIDENCE IN SUPPORT OF MOTION
4.

Hearings on motions to vacate arbitration awards are evidentiary in nature, and

Defendants respectfully request an evidentiary hearing in this matter.4 In addition to any exhibits
and live testimony to be offered at the hearing, Defendants attach the Affidavit of Roni Wilson
and the following attached exhibits as support for this motion:
Exhibit A

SCA Promotions, Inc.s Motion to Reconvene Arbitration and


Request for Sanctions and Forfeiture Against Claimants dated
June 10, 2013

[A]pplications to confirm or vacate an arbitration award should be decided as other motions in civil cases;
on notice and an evidentiary hearing if necessary. Crossmark, Inc. v. Hazar, 124 S.W.3d 422, 430 (Tex. App.
Dallas 2004, pet. denied). Defendants attach relevant evidence to this motion for the Courts review; however, the
complete arbitration transcript and exhibits are so voluminous that it impossible to submit the complete record
through the electronic filing system. Accordingly, Defendants intend to admit the complete record into evidence at
the hearing in a format that will be readily usable and easily reviewed. Defendants respectfully request an
evidentiary hearing on this motion.

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

Exhibit B

Compromise Settlement Agreement dated February 8, 2006


(SCA Arbitration Exhibit 51)

Exhibit C

Final Arbitration Award dated February 8, 2006 (SCA


Arbitration Exhibit 52)

Exhibit D

Partial Final Award on Jurisdiction dated October 29, 2013

Exhibit E

Concurrence in Part and Dissent from Partial Final Award on


Jurisdiction dated December 17, 2013

Exhibit F

Interim Award Determining the Issue of Business of Insurance


dated November 23, 2005 (Armstrong/Tailwind Arbitration
Exhibit 12A)

Exhibit G

Contingent Prize Contract


Arbitration Exhibit 10A)

Exhibit H

Tailwind Sports Corp.s Verified Plea to the Jurisdiction and


Alternative Plea in Abatement in Cause No. D-1-GN-13-000761,
Acceptance Insurance Co. v. Armstrong et al., and Attached
Affidavit of Laura Hundley Ritts (Armstrong/Tailwind
Arbitration Exhibit 25A)

#31122

(Armstrong/Tailwind

Exhibit 1: Certificate of Dissolution and Vote of Stockholders


Exhibit 2: Liquidating Trust Agreement
Exhibit I

Transcript of arbitration hearing September 4, 2014

Exhibit J

Transcript of arbitration hearing September 5, 2014

Exhibit K

Final Arbitration Award dated February 4, 2015

Exhibit L

Agreed Order Authorizing Deposit Into Registry of the Court


dated October 4, 2004 (SCA Arbitration Exhibit 44)

Exhibit M

Order Abating and Administratively Closing Case dated July 29,


2005 (Armstrong/Tailwind Arbitration Exhibit 11A)

Exhibit N

Claimants' Response To The Panel's Questions Regarding


Attorneys' Fees And Damages dated February 3, 2006
(Armstrong/Tailwind Arbitration Exhibit 33A)

Exhibit O

Claimants Motion to Require Deposit of Security dated


February 3, 2006 (Armstrong/Tailwind Arbitration Exhibit 14A)

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

Exhibit P

Agreed Order dated February 9, 2006 (Armstrong/Tailwind


Arbitration Exhibit 13A).

Exhibit Q

June 14, 2013 Letter to Panel Objecting to Jurisdiction (without


exhibits)5

Exhibit R

Response to SCA Promotions, Inc.s Brief in Support of Its


Motion to Reconvene Arbitration and Request for Sanctions And
Forfeiture Against Claimants dated July 24, 2013

Exhibit S

Motion For Default Or, Alternatively. Motion To Compel dated


March 21, 2006 (SCA Arbitration Exhibit 76)

Exhibit T

Procedural Order No. 3 Dated July 7, 2006 (SCA Arbitration


Exhibit 72)

Exhibit U

Book excerpt (Armstrong/Tailwind Arbitration Exhibit 35A)

Exhibit V

SCAs Post-Hearing Brief dated September 29, 2014

Exhibit W

Respondent Lance Armstrongs Post-Hearing Brief dated


October 20, 2014

Exhibit X

Real Party In Interest SCA Promotions, Inc.s Response To


Relators Petition For Writ of Mandamus in Cause No. 05-14002520CV, In re Tailwind Sports Corp., in the Dallas Court of
Appeals

Exhibit Y

Procedural Order No. 2 dated April 18, 2005

III. BACKGROUND
A.

2005-06: Initial Dispute and Arbitration


5.

SCA is engaged in the business of insuring and indemnifying sponsors and team

owners against certain risks of payment for prizes and performance awards, primarily in sporting
events.6 On or about June 9, 2001, Tailwind Sports Corp. (through its predecessor-in-interest,
Disson Furst & Partners) purchased Contingent Prize Contract #31122 from SCA for $420,000.7

The Exhibits to this letter are in the Courts pleading file. They include the original petition SCA filed in
this lawsuit, Defendants Rule 91a motions, and Defendants pleas to the jurisdiction. Defendants request that the
Court take judicial notice of the documents filed in this case.
6
See Plaintiffs Original Petition at 10, on file; Exhibit F.
7
See Exhibit G.

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

Under this contract, SCA indemnified Tailwind for certain incentives under an employment
agreement between Tailwind and Armstrongnamely, performance awards tied to the Tour de
France.8
6.

A dispute arose regarding SCAs obligations under the Contingent Prize Contract.

As acknowledged in Plaintiffs Original Petition, this dispute was previously the subject of a
legal proceeding in the 298th District Court of Dallas County, in Cause No. 04-9557, Armstrong
and Tailwind Sports, Inc. v. SCA Promotions.9 In that proceeding, SCA alleged that Armstrong
cheated in connection with the 2002, 2003, and 2004 Tour de France races by using
performance-enhancing drugs (PEDs).10 As such, SCA claimed it was not required to honor
the insurance contract.11
7.

On October 4, 2004, through an agreed order, SCA deposited $5,000,000 into the

registry of the 289th District Court.12 The case was sent to arbitration under the TAA, and the
298th District Court issued an order abating and administratively closing the case pending the
final outcome of the arbitration proceeding.13 That order provided that no further actions could
take place until the case was returned to active status and created a thirty-day window to reopen
the case after a final decision from the arbitrators.14
8.

An arbitration proceeding commenced with Armstrong and Tailwind as claimants

and SCA as respondent.15 The arbitration panel consisted of Richard D. Faulkner, Richard

See id.
See Plaintiffs Original Petition at 9, 13-14.
10
Id. at 2-6, 8.
11
Id.
12
Exhibit L.
13
Exhibit M.
14
Id.
15
See Plaintiffs Original Petition at 9, 14; see also Exhibit G 9. Though not a party to the prior proceeding,
Defendant William Stapleton was Tailwinds CEO and served as its corporate representative during the arbitration.
See Plaintiffs Original Petition at 10, 18. Because the arbitrators did not attempt to assume jurisdiction over
Stapleton in the reconvened proceeding, he has not joined in this motion. See Exhibit K at 8-9.
9

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

Chernick, and Ted B. Lyon.16 In this first arbitration, Armstrongs alleged use of PEDs was the
primary topic of consideration.17 SCA accused Armstrong of concealing his use of PEDs and
questioned him extensively about those allegations.18
9.

Another major issue in the prior arbitration was whether SCA was engaged in the

business of insurance and therefore subject to Texas Insurance Code requirements.19


Specifically, Armstrong and Tailwind alleged that SCA was acting as an unlicensed insurer,
conduct for which the State of Texas adopted a no tolerance policythe governing statute
imposed a penalty of up to $10,000 for each violation and for each day of violation, and provided
that an unauthorized insurer may be enjoined from continuing the violation or threat of
violation.20 In fact, had this penalty been applied only to the Contingent Prize Contract, the total
civil penalty as of the date of the Final Arbitration Award in 2006 would have approximated
$18.25 million simply for writing the Contingent Prize Contract, regardless of whether SCA was
ultimately liable under the contract.21 SCA also could have been ordered to cease and desist its
business.22 Moreover, SCA faced potential criminal penalties for its violations.23 In other words,
SCA engaged in conduct that could have resulted in substantial civil and criminal penalties, as
well as liability to its other insureds.
10.

And, as Tailwind and Armstrong pointed out, given SCAs Insurance Code

violations, SCA was precluded from raising any defenses to payment under the Contingent Prize
16

See Exhibit C. There is no dispute that the arbitration was conducted under the TAA, that the TAA governs
the arbitrability issues in this proceeding, or that this Court has jurisdiction to render orders under the statute.
17
See Plaintiffs Original Petition at 2-6, 8.
18
Id.; see Exhibit E at 1.
19
Exhibit F.
20
Exhibit N at 4-5 (citing former TEX. INS. CODE art. 1.14-1, et seq., now codified at TEX. INS. CODE
101.105)
21
See TEX. INS. CODE 101.105; Exhibit G (showing date of Contingent Prize Contract was January 14,
2001); Exhibit C (date of Arbitration Award February 8, 2006).
22
TEX. INS. CODE 101.153.
23
Exhibit N at 9; see TEX. INS. CODE 101.106 (providing that engaging in the unauthorized business of
insurance is a third-degree felony); TEX. PENAL CODE 12.34 (providing for imprisonment and a criminal fine as
punishment for a third-degree felony).

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

Contract.24 Accordingly, even if the arbitrators had ruled in 2006 that Armstrong used PEDs and
had misrepresented that fact, the arbitrators could nevertheless have ordered SCA to pay
Tailwind for its loss.25
11.

On November 23, 2005, after hearing evidence, the arbitration panel issued its

Interim Award Determining the Issue of Business of Insurance.26 The panel determined, with
one arbitrator dissenting, that SCA was engaged in the business of insurance in their
transactions with Claimant, Tailwind Sports, Inc., and Contingent Prize Contract Number 31122
is a contract of insurance under Texas law.27 But because of the confidentiality order in place
and its prior orders, the arbitration panel held that nothing in this decision is intended to or
should be utilized to influence or predetermine any possible agency consideration should these
issues ever be subsequently addressed.28
12.

Thus, SCA reaped a substantial benefit from the arbitration panels confidentiality

rulings: the arbitrators determination that SCA was violating the Insurance Code would be
shielded from public and Texas Department of Insurance scrutiny, allowing SCA to avoid the
civil and criminal penalties raised by Tailwind and Armstrong as well as a host of problems with
its insureds and reinsurers.29
13.

In accordance with the Interim Award, Tailwind and Armstrong asked the Panel

to require that SCA post a bond.30 Tailwind and Armstrong, pursuant to the Texas Insurance

24

See Exhibit N at 6.
See id.
26
Exhibit F.
27
Id.
28
Id.
29
See id.; see also Exhibit N at 7 (asserting that [t]he day after Armstrong won the 2004 Tour de France and
Tailwinds liability was clear, SCA filed its own claim based on Armstrong winning the Tour de France. SCA filed
that claim with PIL, its reinsurer, who paid SCA 1.2 Million dollars on that claim.).
30
Exhibit O (citing TEX. INS. CODE 101.353).
25

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

Code, requested that the arbitrators set the amount of the bond at $19.825 millionthe amount
sufficient to pay any final judgment that might have been rendered in the proceeding.31
B.

2006: Settlement and Agreed Award


14.

After hearing testimony on liability, although the arbitrators were prepared to

rule, the parties elected to settle their dispute before the arbitrators could issue a decision on the
merits.32 Robert Hamman, CEO of SCA Promotions, Inc., testified during the reconvened
arbitration that he settled the prior arbitration even though he never believed Armstrongs denials
that he used PEDs.33 Nevertheless, as part of the Compromise Settlement Agreement, which
became effective on February 8, 2006, SCA explicitly disclaimed reliance on any testimony or
statements of the Armstrong, Tailwind, or any witnesses, and the parties consented to a Final
Arbitration Award in Armstrong and Tailwinds favor.34
15.

The Compromise Settlement Agreement expressly states that [n]o party may

challenge, appeal or attempt to set aside the Arbitration Award, and that [n]o promise or
representation of any kind has been made to any Party or to anyone acting for a Party, except as
is expressly stated in this SETTLEMENT AGREEMENT, and THE PARTIES execute this
SETTLEMENT AGREEMENT without reliance on any representation of any kind or character
not expressly stated in this SETTLEMENT AGREEMENT . . . .35 The Agreement likewise
states that [b]efore executing this SETTLEMENT AGREEMENT, THE PARTIES became
fully informed of the terms, contents, conditions, and effect of this AGREEMENT, and received
independent legal counsel and advice before agreeing to the terms of this AGREEMENT, and
that the parties entered the agreement freely, by THE PARTIES own choice and judgment, and
31
32

33
34
35

Id.
See Exhibit B; Exhibit E at 1-2; Plaintiffs Original Petition at 9, 23-24.
See Exhibit J. at 29, 74, 88-90.
See Exhibit B 1.1(f); Exhibit C; Exhibit E at 1-2; see also Plaintiffs Original Petition at 15.
Exhibit B 1.1(g), 3.1(e).

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

without duress or other influence . . . .36 Finally, the Agreement provides for arbitration of a
very narrow class of future claims:
This SETTLEMENT AGREEMENT shall be governed by, construed,
interpreted and the rights of the parties determined in accordance with the laws of
the State of Texas, without regard to conflict of law principles thereof. The
Arbitration Panel consisting of Richard Faulkner, Richard Chernick and Ted Lyon
shall have exclusive jurisdiction over the parties hereto with respect to any dispute
or controversy among them arising under or in connection with, this
SETTLEMENT AGREEMENT or Contingent Prize Contract #31122 and, by
execution and delivery of this SETTLEMENT AGREEMENT, each, of the
parties hereby submits to the jurisdiction of that Panel and waives any objection
to such jurisdiction on the grounds of venue or forum non conveniens, the absence
of in personam or subject matter jurisdiction and any similar grounds, consents to
service of process by mail or any other manner permitted by law, and irrevocably
agrees to be bound by any order or award issued or tendered thereby in
connection with this SETTLEMENT AGREEMENT. 37
16.

In the Final Arbitration Award executed on February 8, 2006, the arbitrators

ordered SCA to pay $7.5 million to Tailwind and Armstrong.38 This amount represented
insurance proceeds reimbursing Tailwind for a $5 million bonus it owed Armstrong under
Contingent Prize Contract #31122, plus $2.5 million in interest and costs.39
17.

Pursuant to the Compromise Settlement Agreement, the arbitrators did not state

any reasons for their decision, but merely announced the result. That is because the Award was
one agreed to by the parties and was a material element of the Compromise Settlement
Agreement.40 The arbitrators were thus not able, nor required, to evaluate the testimony and
evidence presented by the parties, and that evidence and testimony did not, and indeed could not,
play any part in their entry of the agreed Final Arbitration Award.41

36

Id. 3.1(b), (f).


Id. 5.6.
38
See Exhibit C.
39
See Exhibit B 1.1 (providing for payment of all sums to Tailwind); Exhibit G (tying amount of bonus to
2004 Tour de France); see also Exhibit A at 14 (acknowledging composition of settlement payment).
40
See Exhibit C.
41
See generally Exhibits B, C & E.
37

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

10

18.

Moreover, by their express admissions, the parties made it crystal clear that the

testimony or pleadings in the underlying matter played no part whatsoever in the decision to
settle the case and that there was no provision or option for either party to later change its mind
about the settlement or try to claw back the settlement consideration, no matter what the
circumstances or allegations.42 By settling the arbitration proceedings, SCA gave up its claims
against Armstrong, but it also avoided substantial liability and potential penalties for engaging in
unauthorized insurance practices.
19.

The Settlement Agreement provided that part of the settlement amount would be

paid from funds SCA had previously deposited into the 298th District Courts registry.43 On
February 9, 2006, after causing the arbitration panel to render the award, SCA, Tailwind, and
Armstrong submitted a joint, agreed order to the 298th District Court providing that SCAs funds
in the courts registry would be transferred to Tailwind.44 The agreed order stated that the court
found that the transfer and assignment of the registry funds to Tailwind was appropriate.45
20.

In light of the previous agreement to maintain the funds in the 298th District

Courts registry until the arbitration concluded in one partys favor, this agreed order releasing
the funds to Tailwind notified the court that the arbitration was concluded and jointly asked the
court to approve and effectuate the award.46 Because the award was agreed, SCA did not move to
modify or vacate the Final Arbitration Award under the TAA within 90 days after the award.47

42

See generally Exhibit B.


Id.
44
Exhibit P.
45
Id.
46
Id.; Exhibit L.
47
See TEX. CIV. PRAC. & REM. CODE 171.054 (allowing arbitrators to modify or correct award on limited
grounds on application filed not later than the 20th day after the date the award is delivered to the applicant); id.
171.088 (authorizing application for court to vacate arbitration award not later than the 90th day after the date of
delivery of a copy of the award to the applicant); id. 171.091 (authorizing application for court to modify award
on limited grounds within 90 days); see also Exhibit E.
43

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

11

C.

2006: Post-arbitration Motions for Sanctions Arising from Violations of the


Payment and Confidentiality Provisions in the Compromise Settlement Agreement
21.

With the ink still wet on the Settlement Agreement, SCA began breaching it. On

March 21, 2006, a little over a month after the Settlement Agreement was signed, Tailwind and
Armstrong were forced to raise breaches of the payment provisions by SCA through a motion
For Default or, Alternatively, Motion to Compel.48 This was despite numerous requests for
compliance.49
22.

Later, Tailwind and Armstrong filed a motion raising SCAs breaches of the

Compromise Settlement Agreements confidentiality provisions, as well as the arbitration


panels confidentiality orders.50 For example, SCA provided information to a reporter and to
USADA (without any formal legal process), in direct violation of SCAs confidentiality
obligations.51
23.

Notably, the failure of SCA to comply with the Settlement Agreements payment

provisions, as well as violations of the Agreements confidentiality provisions and the Panels
confidentiality orders, were new claims arising directly from the Settlement Agreement itself.
These claims did not exist prior to the Settlement Agreement, and were expressly contemplated
as within the Agreements arbitration clause.52 These claims were not resolved by the Settlement

48

See Exhibit S. SCA complained during the reconvened arbitration about Tailwind and Armstrongs onesentence request to the Panel in that motion stating: Should Respondents be in default or fail to cure their existing
default pursuant to compulsion by the Panel, Claimants request that they be entitled to file the arbitration Award,
seek approval by the District Court of Dallas County, Texas and pursue post-judgment remedies as are available
under Texas law. Id.; see Exhibit I at 194-195. For purposes of obtaining a writ of execution and other procedural
remedies through the court system, this requested procedure was a reasonable precaution, and there is no deadline
for seeking express confirmation of the award. See TEX. CIV. PRAC. & REM. CODE 171.087-.088. In contrast, there
are express deadlines to seek to vacate an award, and a prior implied confirmation can bar a later-filed motion to
vacate. See infra Parts IV.B.8, IV.C.3.
49
Exhibit S.
50
Exhibits S, T, W, Y; Exhibit I at 192-193; Exhibit J at 68-69. SCA submitted the additional motion as an
exhibit to its post-hearing brief. See Exhibit V.
51
Exhibit J at 96-99, 163-164, 167-169; Exhibit U.
52
Exhibit B.

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

12

Agreement, as they did not and could not have previously existed, in contrast to the claims SCA
makes in the present proceedings.
D.

2007: Tailwind Winds Up


24.

Tailwind Sports Corp. (sometimes incorrectly referred to in prior proceedings as

Tailwind Sports, Inc.) was incorporated as a Delaware Corporation registered to do business in


Texas.53 Tailwinds directors dissolved the corporation on December 31, 2007.54 On the same
day, a liquidating trust was created, but it was subsequently dissolved on June 1, 2010.55 Neither
the creation nor existence of the liquidating trust affected, in any material way, the dissolution of
Tailwind or the survival of claims against Tailwind for only three years, as provided by statute.56
E.

February 2013: SCA Files a Lawsuit Attempting to Set Aside the Arbitration Award
25.

On February 7, 2013seven years after the arbitration concluded (as a result of

the parties voluntary settlement of their differences) and explicitly contrary to the plain
language in the voluntary settlement agreementSCA filed the instant lawsuit, naming
Armstrong, Tailwind, and William Stapleton as defendants.57 Although SCA has asserted several
different claims in this action, the common thread throughout the petition is its allegation that
Armstrong, Tailwind, and Stapleton procured the Compromise Settlement Agreement and
resulting Arbitration Award by extrinsic fraud.58
26.

SCA principally contends that Defendants satisfied a condition rendering SCA

liable under Contingent Prize Contract #31122Armstrongs status as Official Winner of the
53

See Exhibit H and attachments.


See id.
55
See id.
56
See TEX. BUS. ORGS. CODE 11.359, 11.351; DEL. CODE ANN. tit. 8 278; see Frederic G. Krapf & Son,
Inc. v. Gorson, 243 A.2d 713, 715 (Del. 1968); United States v. McDonald & Eide, Inc., 670 F. Supp. 1226, 1231
(D. Del. 1987), aff'd, 865 F.2d 73 (3d Cir. 1989); City Investing Co. Liquidating Trust v. Contl Cas. Co., 624 A.2d
1191, 1197 (Del. 1993) (describing and treating a liquidating trust as a separate entity from the dissolved corporation
to which Section 278 does not apply).
57
See generally Plaintiffs Original Petition.
58
See id. at 9, 12-16, 23, 27-28.
54

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

13

2002, 2003, and 2004 Tour de France racesby concealing Armstrongs use of PEDs from
racing officials. While SCA asserts in its petition that it settled because of things Defendants did
or said, the Compromise Settlement Agreement conclusively and explicitly bars that allegation.
27.

For example, SCA filed the present lawsuit despite (a) previously settling and

specifically disavowing that it relied on anything any of these Defendants ever said or
represented; and (b) despite SCAs contractual agreement that it would never challenge, appeal,
or attempt to set aside the Final Arbitration Award in any way.59
28.

SCAs petition also alleges a putative cause of action for Vacating Award and

Settlement Agreement as Procured by Fraud.60 The basis for this cause of action is that
Defendants maintained in the legal proceeding with SCA that only outside entities such as [the
United States Anti-Doping Agency (USADA)] and the [Union Cycliste International] could
adjudicate whether Mr. Armstrong had properly been declared the official winner of the 20022004 Tour de France races.61 SCA claims that it and the Arbitration Panel were unaware that
Defendants had actively engaged in fraud with respect to those regulatory bodies, and claims
that it could not have uncovered this fraud in the earlier arbitration proceeding.62 Specifically
referencing Armstrongs concealment of his use of PEDs, SCA also claims that Defendants
extrinsic fraud resulted in an arbitration process, award and settlement procured by extrinsic
fraud and malfeasance and that Mr. Armstrong was able to successfully hide his illegal use of
[PEDs] from SCA and the arbitrators.63 Again, notably, Robert Hamman expressly testified that

59
60
61

62
63

See generally Exhibit B.


See Plaintiffs Original Petition at 27.
Id.
Id.
Id.

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

14

he never believed Armstrong during the prior arbitration proceeding, and still does not believe
him to this day. Yet he settled anyway.64
F.

June 2013: After Defendants File Dispositive Motions, SCA Changes Course and
Asks the Arbitrators to Reconvene the 2006 Proceeding
29.

Defendants Armstrong and Stapleton timely sought dismissal of this lawsuit under

Texas Rule of Civil Procedure 91a, which authorizes trial courts to dismiss a cause of action on
the grounds that it has no basis in law or fact.65 All Defendants also asserted pleas to the
jurisdiction based on SCAs failure to plead a valid ground for vacating the arbitration award,
this Courts lack of jurisdiction to vacate a confirmed arbitration award, and other grounds.
These motions remain pending before the Court.66
30.

Rather than respond to any dispositive motion, SCA changed strategies and asked

the arbitrators to reconvene the prior arbitration proceedings.67 In doing so, SCA attempted to
cherry-pick the theories it wanted to arbitrate, intending to reserve some of its claims for this
lawsuit. See id. at 2-3.68 Specifically, in the reconvened arbitration, SCA limited its claims to: (1)
a request that the arbitration panel sanction Armstrong and Tailwind; and (2) a request for
forfeiture of prize money paid by SCA based on the USADA Reasoned Decision.69

64

Exhibit J at 74, 88-90.


See TEX. R. CIV. P. 91a; see Defendants Lance Armstrong and William Stapletons Rule 91a Motion to
Dismiss, on file.
66
See Defendants Lance Armstrong and William Stapletons Plea to the Jurisdiction, on file; Defendant
Tailwind Sports Corps Joinder to Defendants Lance Armstrong and William Stapletons Plea to the Jurisdiction, on
file.
67
See Exhibit A.
68
In fact, during the arbitration, SCA indicated that is exactly what it intends to do. SCAs counsel stated:
Step one is we are here before the Panel to seek sanctions and forfeiture based on Mr. Armstrongs outrageous
conduct and USADA's ruling, which stripped him of his title, which was a precondition for him to be owed any
bonus, prize or award money. And, of course, step two is proceed with our court challenge for any remaining aspects
we have of the case. We filed the court challenge first because there was time limits and then we referred out the
various matters of the arbitration to this Panel, the procedural part. So there remains a lawsuit pending in Dallas
State District Court Tonya Parker." See Exhibit I at 35.
69
Exhibit A.
65

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

15

31.

Defendants objected to reconvening the arbitration.70 Nevertheless, on October

29, 2013, two of the three arbitrators issued a Partial Final Award on Jurisdiction declaring their
intent to assert jurisdiction and issue another final award.71 (The majoritys reasoning is
incorporated into the final award, which is addressed fully below.). One arbitrator dissented and
would have held that the arbitration panel lacked jurisdiction to reconvene the arbitration.72
G.

This Court Refuses to Stay the Arbitration


32.

Tailwind and Armstrong brought separate motions, and later amended motions, to

stay the re-convened proceeding under TAA section 171.023 and to vacate the panels partial
award on jurisdiction.73 This Court heard the amended motions on February 21, 2014.
33.

In an order signed on February 25, 2014 and transmitted to the parties the next

day, the Court denied Defendants motions without stating any grounds, and later issued findings
of fact and conclusions of law.74 The Dallas Court of Appeals refused review of the partial award
on jurisdiction, finding that it lacked jurisdiction over the interlocutory appeal, and it denied
Defendants request for a mandamus.75

70

Exhibits Q, R.
See Exhibit D, E. The Partial Final Award on Jurisdiction was transmitted to the parties via email on
October 30, 2013. See Exhibit D.
72
Exhibit E.
73
See Defendant Tailwind Sports Corp.s Amended Motion to Stay Arbitration Proceedings and Alternative
Motion to Vacate Partial Final Award on Jurisdiction, on file; Defendant Lance Armstrongs Amended Motion to
Stay Arbitration Proceedings and Alternative Motion to Vacate Partial Final Award on Jurisdiction, on file.
74
See Order dated February 25, 2014, on file; Findings of Fact and Conclusions of Law dated March 19,
2014, on file.
75
Armstrong v. SCA Promotions, Inc., No. 05-14-00300-CV, 2014 WL 1678988 (Tex. App.Dallas Apr. 24,
2014, no pet.) (mem. op.); In re Tailwind Sports Corp., No. 05-14-00252-CV, 2014 WL 1678962 (Tex. App.
Dallas Apr. 24, 2014, orig. proceeding) (mem. op.).
71

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

16

H.

The Arbitration Proceeds Over Defendants Objection, and the Panel Issues an
Unprecedented $10 Million Sanctions Award
34.

Over Armstrong and Tailwinds repeated objections, the arbitration hearing took

place over the course of two days in September 2014.76 On February 4, 2015, the panel issued its
decision.77
35.

Two members of the panel voted to award sanctions in the amount of $10 million

against Armstrong and Tailwind.78 The majority noted four issues for its consideration: (1) did
the panel have jurisdiction or authority to decide and resolve the disputes between the parties?;
(2) which parties were properly subject to the panels jurisdiction?; (3) what jurisdiction does the
panel have to award sanctions?; and (4) if sanctions are appropriate, what sanctions should be
awarded?79
36.

Initially, the majority held that the issue of its jurisdiction would be determined

based on the Compromise Settlement Agreement and Defendants prior pursuit of claims against
SCA after the 2006 arbitration.80 The majority noted its prior partial final award on jurisdiction,
and held that the partial award was further supplemented by the jurisdictional findings and
conclusions of this Final Award on the merits.81
37.

The majority then addressed the proper parties to the arbitration.82 It held that the

arbitration provision in the Compromise Settlement Agreement granted the panel the exclusive
authority to interpret and define its own jurisdiction, and that Armstrong and Tailwind are
further estopped by the language they agreed to from legitimately claiming otherwise as they

76
77
78
79
80
81
82

Exhibit I at 8; Exhibits J, Q, R; see also Exhibit K at 2 (noting objection to the Tribunals jurisdiction).
Exhibit K.
Id.
Id. at 2, 5.
Id. at 6.
Id. at 7.
Id. at 7-8.

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

17

affirmatively waived the jurisdictional challenge they now attempt.83 The majority stated that its
jurisdiction under the language of the Compromise Settlement was further buttressed by
Claimants own subsequent actions, referring to the requests for relief by Armstrong and
Tailwind after the conclusion of the 2006 arbitration.84 While the majority recognized that
arbitration Tribunals have no roving commission to determine or vindicate public policy, and
did not purport to assert it did, the majority found that arbitration Tribunals must have the
authority to regulate, control and, if necessary, sanction parties for conduct in connection with
the proceedings before them.85
38.

The majority, however, confirmed that it had no jurisdiction over William

Stapleton, as he acted in a disclosed capacity as merely a corporate officer of Tailwind or as


Armstrongs agent.86 Stapleton did not agree to any jurisdiction of the panel, and accordingly,
the majority refused to consider SCAs request for sanctions against Stapleton.87 It found that the
documents in evidence showed that Tailwind, Armstrong, SCA Promotions, Inc., and SCA
Insurance Specialists, Inc., were parties to the Contingent Prize Contract and the Compromise
Settlement Agreement and agreed directly, or by authorized agent, to arbitrate any disputes
between any or all of them before this Tribunal, as defined in these agreements.88
39.

Next, the majority rejected the application of the functus officio doctrine and held

its jurisdiction was not extinguished under that doctrine.89 The majority opined that [t]he claims
at issue now are but the newest set of disputes between these parties and ones substantially

83
84
85
86
87
88
89

Id. at 8.
Id.
Id.
Id.
Id. at 9.
Id.
Id.

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

18

similar to claims previously asserted by Claimants against SCA.90 It noted that the facts of this
case are unusual, but it held that the Compromise Settlement Agreements language
encompassed the claims:
The language of the [Compromise Settlement Agreement] was drafted to
empower the Tribunal to address future disputes, which the parties perceived as
virtually inevitable. The acrimonious history of these parties mandated the
creation of a private mechanism for resolution of any additional disputes that
would arise after issuance of the original Award. The parties agreements
anticipated that disputes were likely to arise in the future and provided for the
continuing jurisdiction of this Tribunal to arbitrate them. They did indeed arise,
and without contemporaneous objection, the parties submitted all of those
disputes to this Tribunal for decision.91
40.

The majority then relied on Lehigh Valley Railroad Company v. Germany, 8

R.I.A.A. 84 (1930) to support its jurisdictional analysis, determining that because of the postarbitration requests for relief made by Armstrong and Tailwind, all parties agreed that the
Compromise Settlement Agreement was to be interpreted as creating and maintaining the
jurisdiction and authority of this Tribunal to determine any disputes between the parties relating
to the CSA whenever those disputes might arise.92 The majority then noted parallels between
the panel in the Lehigh case and the instant arbitration, including that: (1) both arbitrations
involved awards procured by parties with a win by any means view of arbitration and involved
perjury and fraud on the tribunal that remained unknown and unknowable for many years; (2)
both tribunals were specifically created to address future disputes that the parties expected
would have to be determined after the agreement of an armistice; and (3) the settlements
between the parties in both cases were merely a temporary cease fire.93

90

Id.
Id. at 9-10.
92
Id. at 10.
93
Id. at 11. While the settlement in Lehigh was a treaty, the majority concluded that it was the same as any
other contract. Id. at 11-12 (citing BP Group v. Republic of Argentina, 134 S.Ct. 1198 (2014)).
91

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

19

41.

The majority buttressed its decision by noting that arbitrators, rather than courts,

determine if the preconditions to arbitration have been complied with, including claims of
waiver, delay, or other like defenses to arbitrability.94 It held that the arbitration provision in the
Compromise Settlement Agreement affirmatively waived any such challenges to the arbitrators
jurisdiction.95
42.

The majority determined that Armstrong and Tailwinds attacks on the panels

jurisdiction were essentially claims of waiver, laches, and estoppel, which were clearly within
the panels jurisdiction.96 It additionally held that the actions of Claimants in bringing prior
post-Consent award disputes to this Tribunal requesting relief almost identical to that now sought
by SCA are strong proof that Claimants are precluded from contesting the jurisdiction and
authority of this Tribunal in this proceeding.97 Accordingly, the majority concluded that
Claimants are precluded and estopped from contesting the Tribunals jurisdiction now. If
Claimants ever had any valid argument concerning the jurisdiction and authority of this Tribunal
to award sanctions, they also waived that dubious challenge by themselves seeking the award of
sanctions from this Tribunal against SCA.98
43.

After determining its jurisdiction, the majority then turned to the sanctions

request. The majority held that because the conduct at issue occurred during the 2006 arbitration,
in the presence of the panel and directly related to the issues submitted for the panels decision,
the panel had the inherent power to provide a remedy.99 The majority agreed that there is no
inherent duty of good faith and fair dealing in Texas; however, the majority recognized an

94
95
96
97
98
99

Id. at 12.
Id.
Id.
Id. at 12-13.
Id.
Id. at 14.

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

20

implied covenant that parties must not frustrate or impede any other parties performance of a
contract.100 It held that Armstrong and Tailwind improperly prevented SCA from performing its
duties under the parties contracts and agreements to arbitrate, and intentionally breached their
obligations to arbitrate their disputes with SCA, by breaching an obligation of parties in
arbitration to be truthful, to not commit perjury and to not intentionally submit fraudulent
evidence in arbitration of their disputes.101
44.

Additionally, though the panel never made a determination on the merits in the

prior arbitration, the majority opined that Armstrong and Tailwind impeded the panels
performance by presenting false evidence.102 The majority held that the arbitration agreement
imposed duties on the parties and the arbitrators, and the breach of the obligation to arbitrate can
lead to damages.103
45.

Next, the majority held that the evidence established that Armstrong and Tailwind

admitted the sanctionable conduct in substantial part, and it assessed sanctions in the amount of
$10,000,000.104 The majority rejected Tailwinds assertion that it was dissolved and not in
existence, and therefore, there was no jurisdiction to sanction the dissolved entity.105 Rather, it
held that was an issue of enforcement of the final award.106 Thus, Tailwind was subjected to the
sanctions as well.
46.

In his concurrence and dissent, Arbitrator Senator Lyon agreed that the panel had

no jurisdiction over Stapleton, but disagreed that the panel had authority to issue a sanctions

100

Id.
Id. at 15-16 (citing Owens v. Withee, 3 Tex. 161 (1848); Brown v. Eubank, 443 S.W.2d 386 (Tex. Civ.
App.Dallas 1969, no writ); Standard Fire Ins. Co. v. Fraiman, 588 S.W.2d 681 (Tex. App.Houston [14th Dist.]
1979, writ refd n.r.e.)).
102
Id. at 16.
103
Id.
104
Id. at 17-18.
105
Id. at 18.
106
Id.
101

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

21

award against Armstrong and Tailwind.107 Specifically, the Compromise Settlement Agreement
and Final Award were agreed to by the parties and resolved their disputes, and should be
binding.108
47.

Senator Lyon would hold that the agreement to arbitrate any disputes between

the parties contains no language that would allow the arbitrators to sanction Armstrong after their
negotiated settlement agreement waived all rights to challenge the award and expressly
disclaimed any reliance on any prior statements or conduct by the parties.109 With respect to the
post-arbitration proceedings initiated by Tailwind and Armstrong, Senator Lyon opined that
Tailwind and Armstrong merely sought enforcement of the Compromise Settlement Agreement
itself and to enforce the ongoing confidentiality order.110 The majoritys decision that the postarbitration conduct somehow opened the proceedings to be re-litigated eight years or to infinity
after a Final Settlement Agreement was made and effectuated . . . is unprecedented and far
fetched and (as the majority freely admits) not based on any Texas law.111 Senator Lyon
rejected the application of the Lehigh case as irrelevant and not based on Texas law.112
48.

Senator Lyon would have held that SCAs motion to reconvene the arbitration

was not the appropriate vehicle to challenge the Compromise Settlement Agreement and Final
Arbitration Award.113 Rather, SCA had 90 days under Texas Civil Practice and Remedies Code
section 171.088 to challenge the award, and failed to do so, waiting over seven years instead.114
He concluded that the majoritys sanction was SCAs belated attempt to vacate the prior award
and escape its own voluntarily entered settlement agreement:
107
108
109
110
111
112
113
114

Id. at 22-23.
Id.
Id. at 23.
Id.
Id.
Id.
Id.
Id. at 23-24.

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

22

The amount of the sanction is almost exactly that which SCA paid to settle with
Claimants and what SCA paid in attorneys fees and costs. To say that this is a
sanction when it mirrors almost exactly what SCA paid is incorrect. In substance,
the majoritys sanction is an unwarranted, unlawful reversal of a settlement
agreement that was made and effectuated nine years ago. There is an old saying
that if it looks like a duck, walks like a duck and quacks like a duck, its a duck.
This is a duck and it is no more or less than SCA trying to overturn an agreement
SCA voluntarily entered into in February 2006 to get its money back because
Armstrong lied about performance enhancing drugs in the 2005-2006
proceedings.115
49.

In closing, Senator Lyon opined that (1) the panel had no jurisdiction over

Stapleton, (2) the panel had no jurisdiction over Tailwind as a result of the dissolution, and (3)
the panel exceeded its authority by awarding sanctions.116 Furthermore, the panels decision
violates Texas public policy by (1) frustrating the policy of our law favoring voluntary disputes;
(2) rendering irrelevant disclaimers of reliance; and (3) substituting international precedent for
governing law.117
50.

This motion to vacate ensued. SCA has not moved to confirm the award in this

proceeding, as required by Texas Civil Practice and Remedies Code section 171.096, but has
filed suit in a separate action. See TEX. CIV. PRAC. & REM. CODE 171.096(d) (Consistent with
Section 171.024, if a proceeding is pending in a court relating to arbitration of an issue subject to
arbitration under an agreement before the filing of the initial application, a party must file the
initial application and any subsequent application relating to the arbitration in that court.).
IV. ARGUMENT AND AUTHORITIES ON MOTION
TO VACATE ARBITRATION AWARD
A.

Grounds for Vacating an Arbitration Award


51.

The Texas Arbitration Act (TAA) and the Texas common law govern this

Courts review of final arbitration awards. CVN Grp., Inc. v. Delgado, 95 S.W.3d 234, 245 (Tex.
115
116
117

Id. at 24.
Id. at 24.
Id. at 25.

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

23

2002). Texas Civil Practice and Remedies Code section 171.088 provides the statutory grounds
for vacating an award under the TAA. TEX. CIV. PRAC. & REM. CODE ANN. 171.088(a)-(b).118
52.

Defendants request that the Court vacate the final arbitration award under section

181.088(a)(3)(A), which allows for vacatur where the arbitrators exceeded their powers. Id.
171.088(a)(3)(A). Arbitrators exceed their powers, and a final arbitration award can be vacated,
if the arbitrators conduct an arbitration and render an award in the absence of a valid arbitration
agreement covering the claims, even if the existence of an arbitration agreement was adversely
determined in a prior proceeding to compel or stay the arbitration. In re Gulf Exploration, LLC,
289 S.W.3d 836, 842 (Tex. 2009) (citing Perry Homes v. Cull, 258 S.W.3d 580, 586 & n. 9 (Tex.
2008)); Chambers v. O'Quinn, 242 S.W.3d 30, 32 (Tex. 2007); Gulf Oil Corp. v. Guidry, 160
Tex. 139, 143 (1959); compare TEX. CIV. PRAC. & REM. CODE 171.008(a)(3)(A), with id.

118

That section provides:


(a)
On application of a party, the court shall vacate an award if:
(1)
the award was obtained by corruption, fraud, or other undue means;
(2)
the rights of a party were prejudiced by:
(A)
evident partiality by an arbitrator appointed as a neutral arbitrator;
(B)
corruption in an arbitrator; or
(C)
misconduct or willful misbehavior of an arbitrator;
(3)
the arbitrators:
(A)
exceeded their powers;
(B)
refused to postpone the hearing after a showing of sufficient cause for
the postponement;
(C)
refused to hear evidence material to the controversy; or
(D)
conducted the hearing, contrary to Section 171.043, 171.044, 171.045,
171.046, or 171.047, in a manner that substantially prejudiced the
rights of a party; or
(4)
there was no agreement to arbitrate, the issue was not adversely determined in a
proceeding under Subchapter B, and the party did not participate in the
arbitration hearing without raising the objection.
(b)
A party must make an application under this section not later than the 90th day after the date of
delivery of a copy of the award to the applicant. A party must make an application under
Subsection (a)(1) not later than the 90th day after the date the grounds for the application are
known or should have been known. . . .

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

24

171.088(a)(4).119 The arbitration panels award of sanctions should be vacatedthe arbitrators


exceeded their authority by issuing sanctions that were not authorized by the parties agreements
to arbitrate. Furthermore, the arbitrators exceeded their authority because in proceedings under
the TAA, only a court can vacate a prior arbitration awardbut the panel essentially did just
that. Moreover, the arbitrators exceeded their authority under the doctrine of functus officio,
pursuant to which their authority expired years before SCA sought to reconvene the arbitration.
53.

In addition to the statutory grounds, a trial court can vacate an arbitration award

on public policy grounds in an extraordinary case in which the award clearly violates carefully
articulated, fundamental policy. CVN Group, Inc., 95 S.W.3d at 245. Defendants ask the Court
to vacate the arbitration award because it violates Texas public policy. Specifically, by
reconvening an arbitration years after its final resolution through a binding settlement agreement
and agreed final arbitration award, and awarding sanctions, the award violates the following
well-established Texas public policies:

The public policy in favor of settlement of disputes;

The public policy in favor of finality of arbitration awards, including enforcing


confirmed arbitration awards, and the use of vacatur by a court of law as the sole
method of setting aside a final arbitration award;

The public policy in favor of allowing corporations to dissolve and wind up their
affairs.

119

In fact, SCA expressly argued to the Dallas Court of Appeals that post-arbitration review would be allowed
under these provisions of the TAA. See Exhibit X at p. 10-18.

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

25

B.

The Arbitrators Exceeded Their Powers


1.

Standards of Review and Governing Law

54.

Arbitrators exceed their power when they decide matters not properly before

them. Townes Telecommcns, Inc. v. Travis, Wolff & Co., L.L.P., 291 S.W.3d 490, 493-94 (Tex.
App.Dallas 2009, pet. denied). Arbitrators authority derives from the arbitration agreement.
Id. When an arbitration panel departs from the agreement and, in effect, dispenses its own idea
of justice, the award is unenforceable. Id.
55.

Texas law strongly favors arbitration. See Cantella & Co. v. Goodwin, 924

S.W.2d 943, 944 (Tex. 1996) (per curiam); Phillips v. ACS Mun. Brokers, Inc., 888 S.W.2d 872,
875 (Tex. App.Dallas 1994, no writ). However, [a] party cannot be required to arbitrate
unless it has agreed to do so. Kilroy v. Kilroy, 137 S.W.3d 780, 785 (Tex. App.Houston [1st
Dist.] 2004, no pet.) (internal quotations omitted); see Roe v. Ladymon, 318 S.W.3d 502, 512
(Tex. App.Dallas 2010, no pet.) ([A]rbitration, being a matter of contract, is a way to resolve
those disputesbut only those disputesthat the parties have agreed to submit to arbitration.
(quoting First Options of Chicago v. Kaplan, 514 U.S. 938, 943, 115 S.Ct. 1920 (1995))).
56.

To determine whether the arbitrators exceeded their authority, the Court must

determine whether an agreement to arbitrate exists between the parties, and whether the claims
asserted fall within the agreements scope. See Gables Cent. Const., Inc. v. Atrium Cos., Inc., No.
05-07-00438-CV, 2009 WL 824732, at *2 (Tex. App.Dallas Mar. 31, 2009, pet. abated);
Dennis v. Coll. Station Hosp., L.P., 169 S.W.3d 282, 285 (Tex. App.Waco 2005, pet. denied);
Phillips, 888 S.W.2d at 875; L&L Kempwood Assocs., L.P. v. Omega Builders, Inc., 972 S.W.2d
819, 820-821, 825 (Tex. App.Corpus Christi 1998, orig. proceeding), mand. granted on other
grounds, In re L&L Kempwood Assocs., Inc., 9 S.W.3d 125 (Tex. 1999).

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

26

57.

Arbitration agreements are interpreted under traditional contract principles.

J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003). The courts primary concern
is to ascertain the parties true intentions as expressed in the instrument. Id. To do so, the court
must examine and consider the entire writing in an effort to harmonize and give effect to all its
provisions. Id. No single provision is giving controlling effect; instead, all provisions must be
considered with reference to the whole instrument. Id.
58.

Whether a claim falls within the scope of an arbitration clause is a question of

law. BDO Seidman, LLP v. J.A. Green Dev. Corp., 327 S.W.3d 852, 854 (Tex. App.Dallas
2010, no pet.). Doubts about the scope of an arbitration agreement are ordinarily resolved in
favor of coverage. In re D. Wilson Const. Co., 196 S.W.3d 774, 782 (Tex. 2006). However, the
policy favoring arbitration is not without limits; it cannot support stretching a contractual clause
beyond the parties intended scope or disregarding plain and unambiguous provisions in the
agreement. Burlington Resources Oil & Gas Co., L.P. v. San Juan Basin Royalty Trust, 249
S.W.3d 34, 44 (Tex. App.Houston [1st Dist.] 2007, pet. denied); McReynolds v. Elston, 222
S.W.3d 731, 740 (Tex. App.Houston [14th Dist.] 2007, no pet.).
59.

For arbitrations conducted in accordance with the TAA, courtsnot arbitrators

are the only forum that can be used to modify a prior final arbitration award when more than 20
days have passed since delivery of the award. Section 171.054 allows arbitrators to modify or
correct award on limited grounds only upon an application filed not later than the 20th day after
the date the award is delivered to the applicant. TEX. CIV. PRAC. & REM. CODE 171.054.
Thereafter, a party is limited to challenging the award through a motion to vacate, which must be
filed within 90 days after delivery of a copy of the award to the applicant. Id. 171.091
(authorizing application for court to modify award on limited grounds within 90 days). When an

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

27

arbitration panel modifies an award on grounds not provided by the statutes and outside the time
limits provided in the TAA, the modified award exceeds the arbitrators power and must be
vacated. Barsness v. Scott, 126 S.W.3d 232, 241 (Tex. App.San Antonio 2003, no pet.).
2.

Arbitrators Authority Does Not Arise from Any Inherent Powers or From
Silence in the Arbitration Agreement, But From the Express Terms of the
Arbitration Agreement

60.

In Stolt-Neilsen SA v. AnimalFeeds International Corp., the United States

Supreme Court confirmed that an arbitrators power can only arise from the contract providing
the obligation to arbitrate, and the parties intent to allow certain procedures and remedies cannot
be implied from silence but must derive from the parties reasonable expectations as expressed in
the contract. 559 U.S. 662, 684-87 (2010).
61.

In Stolt-Nielsen, the issue was whether the arbitrators had the authority to certify a

class action where both parties conceded that the contract providing for arbitration was silent on
the issue. Id. at 668-69, 676. The arbitrators determined that class arbitration could proceed. Id.
at 673-74. The Supreme Court noted that the arbitrators did not look to the governing lawin
that case, the Federal Arbitration Act (FAA), maritime, or New York lawto determine
whether any default rule allowed a class arbitration to proceed absent express consent. Id.
Instead, the arbitration panel proceeded as if it had the authority of a common-law court to
develop what it viewed as the best rule to be applied in such a situation, and it ruled based on its
perception that the consensus among arbitrators was that class arbitration should be
allowed. Id.
62.

The Supreme Court vacated the arbitrators decision. Id. at 677. The Court held

that the FAAs provisions show that the central or primary purpose of the FAA is to ensure that
private agreements to arbitrate are enforced according to their terms. Id. at 682 (internal

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

28

quotations omitted). Courts, and arbitrators, are bound to determine the parties intent as
expressed in the contract, must construe the contract in accordance with the expectations of the
parties, and are bound by the limitations within the contract:
Whether enforcing an agreement to arbitrate or construing an arbitration
clause, courts and arbitrators must give effect to the contractual rights and
expectations of the parties. In this endeavor, as with any other contract, the
parties intentions control. This is because an arbitrator derives his or her powers
from the parties agreement to forgo the legal process and submit their disputes to
private dispute resolution.
Underscoring the consensual nature of private dispute resolution, we have
held that parties are generally free to structure their arbitration agreements as
they see fit. For example, we have held that parties may agree to limit the issues
they choose to arbitrate, and may agree on rules under which any arbitration will
proceed. They may choose who will resolve specific disputes.
We think it is also clear from our precedents and the contractual nature of
arbitration that parties may specify with whom they choose to arbitrate their
disputes. It falls to courts and arbitrators to give effect to these contractual
limitations, and when doing so, courts and arbitrators must not lose sight of the
purpose of the exercise: to give effect to the intent of the parties.
Id. at 682-84 (citations omitted).
63.

Based on these bedrock principles, the Court held that it follows that a party may

not be compelled under the FAA to submit to class arbitration unless there is a contractual basis
for concluding that the party agreed to do so. Id. at 684. In other words, mere silence in an
arbitration agreement is not enough, and arbitratorsunlike courtsdo not have the ability to
employ procedures that are not expressly agreed to by the parties. Id. Instead of looking to the
contract and the governing law, the arbitrators in that case erroneously assumed that because the
contract did not bar class arbitration, the arbitrators had power to implement it if they saw fit. Id.
The Court found this proposition to be fundamentally at war with the foundational FAA
principle that arbitration is a matter of consent. Id.

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

29

64.

The Court did recognize that [i]n certain contexts, it is appropriate to presume

that parties that enter into an arbitration agreement implicitly authorize the arbitrator to adopt
such procedures as are necessary to give effect to the parties agreement. Id. at 684-85. But it
went on to hold that the mere existence of an arbitration agreement does not authorize
procedures that would change[] the nature of arbitration to such a degree that it cannot be
presumed the parties consented to it by simply agreeing to submit their disputes to an arbitrator.
Id.
65.

Applying these premises to class arbitration, the Court held that class arbitration,

in the absence of a specific agreement providing for it, would be antithetical to the general
expectations of parties to an arbitration agreement due to the nature of arbitration:
In bilateral arbitration, parties forgo the procedural rigor and appellate review of
the courts in order to realize the benefits of private dispute resolution: lower costs,
greater efficiency and speed, and the ability to choose expert adjudicators to
resolve specialized disputes. But the relative benefits of class-action arbitration
are much less assured, giving reason to doubt the parties mutual consent to
resolve disputes through class-wide arbitration.
Consider just some of the fundamental changes brought about by the shift
from bilateral arbitration to class-action arbitration. An arbitrator chosen
according to an agreed-upon procedure no longer resolves a single dispute
between the parties to a single agreement, but instead resolves many disputes
between hundreds or perhaps even thousands of parties. Under the Class Rules,
the presumption of privacy and confidentiality that applies in many bilateral
arbitrations shall not apply in class arbitrations, thus potentially frustrating the
parties assumptions when they agreed to arbitrate. The arbitrators award no
longer purports to bind just the parties to a single arbitration agreement, but
adjudicates the rights of absent parties as well. And the commercial stakes of
class-action arbitration are comparable to those of class-action litigation, even
though the scope of judicial review is much more limited. We think that the
differences between bilateral and class-action arbitration are too great for
arbitrators to presume, consistent with their limited powers under the FAA, that
the parties mere silence on the issue of class-action arbitration constitutes
consent to resolve their disputes in class proceedings.
Id. at 685-87 (citations omitted).

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

30

66.

Responding to the dissent, the Court dismissed that the question involved merely

what procedural mode was available to present the claims. Id. at 687. If the question were that
simple, there would be no need to consider the parties intent with respect to class arbitration.
Id. Instead, the Court held that [c]ontrary to the dissent, but consistent with our precedents
emphasizing the consensual basis of arbitration, we see the question as being whether the parties
agreed to authorize class arbitration. Here, where the parties stipulated that there was no
agreement on this question, it follows that the parties cannot be compelled to submit their
dispute to class arbitration. Id.
67.

Along these lines, courts have rejected an arbitrators inherent authority to

sanction parties and instead looked only to the arbitration agreement to determine the arbitrators
power to sanction. See InterChem Asia 2000 Pte. Ltd. v. Oceana Petrochemicals AG, 373 F.
Supp. 2d 340, 359 (S.D.N.Y. 2005) (finding arbitrator exceeded his authority by issuing
monetary sanctions where agreement did not provide arbitrator with that authority or incorporate
rules of arbitration that authorized any such action, and rejecting inherent authority); Seagate
Tech., LLC v. W. Digital Corp., 854 N.W.2d 750, 761 (Minn. 2014) (no inherent authority);
Certain Underwriters at Lloyd's, London v. Argonaut Ins. Co., 264 F. Supp. 2d 926, 94445
(N.D. Cal. 2003) (requiring express grant of authority before imposing punitive sanctions); MCR
of Am., Inc. v. Greene, 811 A.2d 331, 34344 (Md. Ct. Spec. App. 2002). Cf. Chase Bank USA v.
Hale, 19 Misc. 3d 975, 980 (N.Y. Sup. Ct. 2008) (upholding sanction by arbitrator where NAF
arbitration rules authorized award and were incorporated into arbitration agreement by
reference).

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

31

3.

The Parties Did Not Agree to Allow the Arbitration to be Reopened Years
After the Final Award to Address Conduct that Occurred in the Initial
Arbitration

68.

SCA has repeatedly contended that the Contingent Prize Contract and the

Settlement Agreement are silent as to the Panels ability to award sanctions.120 In the arbitration
proceeding, SCA attempted to distinguish Stolt-Nielsen on the basis that awarding sanctions does
not fundamentally change the entire arbitration process or the scope of the arbitration. SCA is
wrongSCAs request for sanctions does fundamentally alter the entire arbitration process and
the scope of arbitration as applied to this case. It also fundamentally changes the Settlement
Agreement from full and final to partial and temporary, thus rendering numerous provisions
meaningless.121 Therefore, to the extent SCA is correct that the contract is silent, Stolt-Nielsen
required the panel to refrain from granting sanctions. But SCAs argument ignores express
provisions in the Settlement Agreement indicating that the parties intended to resolve the entire
disputenot to leave it open indefinitely to allow SCA to later undo the settlement by recasting
its claims as a request for sanctions. In fact, Robert Hamman conceded that, as the decisionmaker for SCA, he intended the settlement to resolve the dispute.122
69.

Texas law has always favored the resolution of controversies through

compromise and settlement rather than through litigation[,] and it has always been the policy of
the law to uphold and enforce such contracts if they are fairly made and are not in contravention
of some law or public policy. Cadle Co. v. Castle, 913 S.W.2d 627, 638 (Tex. App.Dallas
1995, writ denied) (internal quotation omitted). Moreover, the Final Arbitration Award rendered
in accordance with the Compromise Settlement Agreement was the equivalent of a final

120

Exhibit V at 39-40.
Compare Exhibit K at 11 (finding that the parties intended a temporary cease fire), with Exhibit B at 2
(agreeing that the parties would not challenge, appeal or attempt to set aside the award.).
122
Exhibit J at 81-83, 113.
121

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

32

judgment in a civil suitit ended the dispute and left nothing for the parties to litigate. See
Crossmark, Inc., 124 S.W.3d at 429 (noting that [a]n arbitration award has the same effect as a
final judgment from a court of last resort); see also CVN Group, Inc., 95 S.W.3d at 238 (same).
An agreed judgment has neither less nor greater force or effect than it would have had [if] it
[had] been rendered after litigation, except to the extent that the consent excuses error and
operates to end all controversy between the parties. Gulf Ins. Co. v. Burns Motors, Inc., 22
S.W.3d 417, 422 (Tex. 2000).
70.

Parties to an arbitration agreement indisputably expect a quick and speedy

resolution, with limited appellate review. Stolt-Nielsen S.A., 559 U.S. at 685. As with the FAA,
the Texas Legislature has codified this expectation in the TAA, which provides the exclusive
procedural mechanism for challenging an arbitration award. See Parts IV.B.8, IV.C.3. The intent
to end the controversy could not be more clear where, as here, the parties expressly gave up the
only method they could ever use to challenge the Final Arbitration Award by agreeing never to
challenge, appeal, or attempt to set the award aside.123
71.

Moreover, parties to a freely-negotiated settlement agreement resulting in a final

arbitration award expect that consent to the settlement will excuse any errors in the proceeding
and operate to end all controversy between the parties. Gulf Ins. Co., 22 S.W.3d at 422. As with
any judgment, parties are entitled to expect that their agreed judgment will not be subject to a
later collateral attack; and in any event, established law entitles parties to expect that such
collateral attacks will not be based on actions intrinsic to the original proceeding. Browning v.
Prostok, 165 S.W.3d 336, 346, 347-49 (Tex. 2005). Inferring an agreement to allow an
arbitration panel to award sanctions more than nine years after a final arbitration award, based on
a freely-negotiated settlement agreement, fundamentally alters the scope of an anticipated
123

See Exhibit B.

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

33

arbitration and thwarts the parties reasonable expectations arising in the general context of
arbitration and settlement.
72.

The panels award of sanctions ignores the main point in Stolt-Nielsenan

arbitration panel does not have inherent authority to fashion procedures or remedies like a court
does, and any power must be derived from the language of the parties agreement.124 Here,
neither the Compromise Settlement Agreement nor the Contingent Prize Contract authorize
sanctions or delineate remedies that would include sanctions for conduct occurring in the prior
arbitration.125 Further, none of the cases SCA will likely cite involved a request for sanctions
where the requesting partylike SCAsettled the case, waived its right to ever challenge the
settlement and resulting consent award, and disclaimed reliance on any representations or
conduct preceding the agreement, which in this case is the very conduct upon which SCA relied
in its motion for sanctions. Compare Seagate Tech., LLC, 854 N.W.2d at 761-65, with Exhibit B.
73.

Although the Compromise Settlement Agreements arbitration clause may seem

broad, even broad arbitration provisions have their limits. In re Great W. Drilling, Ltd., 211
S.W.3d 828, 840-41 (Tex. App.Eastland 2006, orig. proceeding) (citing Pennzoil Explor. &
Prod. Co. v. Ramco Energy Ltd., 139 F.3d 1061, 1067 n.8 (5th Cir. 1998)), mandamus granted
on other grounds, In re Gulf Explor., LLC, 289 S.W.3d 836 (Tex. 2009). The Texas Supreme
Court has instructed courts to apply traditional contract principles to arbitration agreements in an
effort to ascertain the parties true intentions as the instrument expresses them. See J.M.

124

Even ReliaStar, cited in the arbitration by SCA for the proposition that the panel had inherent authority to
sanction, was based on the courts interpretation of the contract containing the arbitration agreement. ReliaStar Life
Ins. Co. of N.Y. v. EMC Natl Life Ins. Co., 564 F.3d 81, 86 (2d Circ. 2009) (Consistent with this principle, we here
clarify that a broad arbitration clause, such as the one in this case, see Coinsurance Agreements 10.1, confers
inherent authority on arbitrators to sanction a party that participates in the arbitration in bad faith and that such a
sanction may include an award of attorney's or arbitrator's fees.).
125
Exhibits B, G.

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

34

Davidson, Inc., 128 S.W.3d at 227. To follow this instruction, the court must consider the entire
document and give effect to all of its provisions, not just the arbitration clause. See id.
74.

The Compromise Settlement Agreement provides for arbitration of disputes

among the parties arising under or in connection with the Agreement or the Contingent Prize
Contract.126 As Senator Lyon eloquently explained in his initial dissent from exercising
jurisdiction, SCAs motion to reconvene the arbitration did not arise under or in connection
with the Agreement or the Contingent Prize Contract:
Courts have interpreted arbitration clauses that provide for arbitration of any and
all disputes arising under or in connection with a contract, such as the arbitration
provision at issue in this case, as narrower in scope than an arbitration clause
providing for arbitration of any and all disputes between the parties. See Tittle
v. Enron Corp., 463 F.3d 410, 422 (5th Cir. 2006); Autonation USA Corp. v.
Leroy, 105 S.W.3d 190, 197 (Tex. App.Houston [14th Dist.] 2003, orig.
proceeding); In re Conseco Fin. Serv. Corp., 19 S.W.3d 562, 570 (Tex. App.
Waco 2000, orig. proceeding).
If the facts alleged in support of the claim have a significant relationship
to or are factually intertwined with the contract that is subject to the arbitration
agreement, the claim is within the scope of the agreement and is arbitrable.
Dennis v. College Station Hosp., L.P., 169 S.W.3d 282, 285 (Tex. App.Waco
2005, pet. denied). If the facts alleged stand alone and are completely independent
of the contract, the claim is not subject to arbitration. Pennzoil Co. v. Arnold Oil
Co., 30 S.W.3d 494, 498 (Tex. App.San Antonio 2000, orig. proceeding). To
determine whether a claim falls within the scope of an arbitration agreement, the
Panel must look at the terms of the agreement and the factual allegations in the
petition, rather than the legal causes of action. See In re Rubiola, 334 S.W.3d at
223; Prudential Sec., Inc. v. Marshall, 909 S.W.2d 896, 900 (Tex. 1995).
The relief requested by SCA in its Motion to Reconvene Arbitration and
Request for Sanctions and Forfeiture Against Claimants is not predicated on a
claim for breach of the CSA or a claim for fraudulent inducement in connection
with the CSA. Instead, it asserts that fraudulent testimony in the 2006 litigation
resulted in an improper award, and so the funds paid to Claimants pursuant to that
award should be returned to SCA. In addition, SCA requests sanctions for the
fraudulent conduct as compensation for certain tort-based damages.
Since SCAs legal claims are based solely on fraud alleged to have
occurred during the 2006 arbitration proceedings, the dispute could be maintained
126

Exhibit B.

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

35

without reference to the CSA or the CPS. Therefore, the dispute is not arising
under or in connection with the CSA or CPC, and so does not fall within the
scope of the arbitration provision at issue in this case.127
75.

And viewed as a whole, the Compromise Settlement Agreement expresses a clear

intent to end any controversy between the signatories and limit future claims to those involving
performance of the Agreement itself. This intent is expressed in the following provisions:

127
128

Consideration consisting of SCAs lone remaining obligation under Contingent


Prize Contract #31122reimbursement of the bonus amount Tailwind owed to
Armstrong after the 2004 Tour de France.

Terms requiring payment of the balance within one year unconditionally and
without any withholding or offset, regardless of the circumstances or any claim
made by Respondents, including any claims by Respondents that Claimants have
breached this Agreement in any way.

An Arbitration Award, signed by all three Arbitrators, ordering Respondents to


pay to Claimants the sum of $7,500,000.00 shall be entered on or before February
9, 2006.

Express language stating that [n]o party may challenge, appeal or attempt to set
aside the Arbitration Award.

The provision that the SETTLEMENT AGREEMENT is fully and forever


binding on THE PARTIES, and their heirs, executors, administrators, successors,
and assigns[.]

An express disclaimer of reliance: No promise or representation of any kind has


been made to any Party or to anyone acting for a Party, except as is expressly
stated in this SETTLEMENT AGREEMENT, and THE PARTIES execute this
SETTLEMENT AGREEMENT without reliance on any representation of any
kind or character not expressly stated in this SETTLEMENT AGREEMENT
. . . .

A strict merger clause: THE PARTIES each acknowledge that this instrument
constitutes the entre agreement between them with respect to the matters being
compromised and settled in this SETTLEMENT AGREEMENT, and that this
SETTLEMENT AGREEMENT supersedes any and all prior agreements and
understandings relating to the subject matter hereof.128

Exhibit E.
Exhibit B.

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

36

76.

Accordingly, the only dispute[s] or controvers[ies] that could possibly aris[e]

under or in connection with [the Compromise Settlement Agreement] or Contingent Prize


Contract #31122 were any breaches of express conditions of the Settlement Agreement, which
consisted of payment obligations, representations and warranties contained exclusively within
the Settlement Agreement, and confidentiality requirements. See In re Great W. Drilling, Ltd.,
211 S.W.3d at 840 (examining broad arbitration clause and holding that agreement defining
scope of parties duties under contract could not be reasonably interpreted as requiring
arbitration of claims clearly beyond those definitions and limitations).
77.

Contingent Prize Contract #31122 imposes no greater obligation to arbitrate. That

agreement provides in part: [Tailwind] agrees that any dispute arising under this contract shall
be resolved by binding arbitration pursuant to the Texas General Arbitration Act.129 Because the
Compromise Settlement Agreement supersedes Contingent Prize Contract #31122, no claim
against Armstrong or Tailwind can arise under or even in connection with Contingent Prize
Contract #31122. The Compromise Settlement Agreements plain effect was to cut off all claims
existing on February 8, 2006 and limit future claims to those relating to performance of the
Agreement. As such, neither of the arbitration clauses provided the arbitrators with the power to
issue sanctions.
78.

The parties likewise did not incorporate any rules from an arbitration organization

that would have allowed for the issuance of sanctions. The fact that some arbitration rules
authorize sanctions during a proceeding does not help SCA, as all the major arbitration
organizations rules supply no authority for reopening or revisiting a prior arbitration for that
purpose after an arbitration award is final. Instead, as the rules uniformly provide, an arbitrator
may not reopen an arbitration hearing after making an award. See American Arbitration
129

Exhibit G.

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

37

Association (AAA), Commercial Arbitration Rules 36, 46 (2009); see AAA, International
Arbitration Article 24 (2010); see JAMS, Comprehensive Arbitration Rules & Procedures
(CARP) Rule 22(i) (2010)). Once transmitted or served, an award is final and may only be
modifiedin a short, prescribed time periodto correct computational, typographical, or other
similar errors. AAA, Commercial Arbitration Rule 46; AAA, International Arbitration Article
30; JAMS, CARP Rule 24(j) & (k). Accordingly, an arbitrator may not redetermine the merits of
any claim resolved by an arbitration after the award is final. See, e.g., AAA, Commercial
Arbitration Rule 46. And that is exactly what SCA is now asking the Panel to do.
79.

In short, this Court should look no further than the Compromise Settlement

Agreement to determine the arbitrators jurisdiction. To the extent the Agreement is silent on the
ability to award sanctions, Stolt-Nielsen and the parties general expectations arising in the
context of arbitration preclude any authority to render sanctions at this late stage. But even more
importantly, the Settlement Agreements provisions indicate an intent contrary to SCAs
proposed implied powers purportedly arising from the Agreements silencethe provisions
indicate that the parties intended this settlement to be final, binding on the parties, forever waive
any rights to challenge the agreement or the resulting award, and expressly disclaimed any
reliance on representations or conduct that occurred in the arbitration. The Settlement Agreement
did not provide the Panel with authority to issue sanctions.
4.

The Majority Did Not Have Jurisdiction to Determine Its Own


Jurisdiction, and Could Not Create Jurisdiction Through an Estoppel,
Laches, or Waiver Theory.

80.

The arbitration panel majority held that it could only have jurisdiction of parties

and issues affirmatively delegated to the panel, but held that the arbitration provision granted the

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

38

tribunal the exclusive authority to interpret and define its own jurisdiction.130 It further held that
Armstrong and Tailwind were estopped by the language they agreed to from legitimately
claiming otherwise as they affirmatively waived the jurisdictional challenge they now
attempt.131 Furthermore, the majority determined that Armstrong and Tailwinds attacks on the
panels jurisdiction were essentially claims of waiver, laches, and estoppel, which were clearly
within the panels jurisdiction.132
81.

To support these propositions, the majority cited the following language in the

arbitration agreement:
The Arbitration Panel consisting of Richard Faulkner, Richard Chernick and Ted
Lyon shall have exclusive jurisdiction over the parties hereto with respect to any
dispute or controversy among them arising under or in connection with, this
SETTLEMENT AGREEMENT or Contingent Prize Contract #31122 and, by
execution and delivery of this SETTLEMENT AGREEMENT, each of the parties
hereby submits to the jurisdiction of that Panel and waives any objection to such
jurisdiction on the grounds of venue or forum non conveniens, the absence of
in personam or subject matter jurisdiction and any similar grounds, consents
to service of process by mail or any other manner permitted by law, and
irrevocably agrees to be bound by any order or award issued or tendered thereby
in connection with this SETTLEMENT AGREEMENT.133
82.

The majority quoted Moses H. Cone Memorial Hospital v. Mercury Construction

Corp. for the proposition that parties normally expect arbitrators to decide . . . claims of waiver,
delay, or a like defense to arbitrability.134 The panel further held that parties expect arbitrators
to resolve disputes relating to time limits, notice, laches, estoppel, and other conditions
precedent to an obligation to arbitrate, citing Howsam v. Dean Witter Reynolds.135 It then held
that the arbitration provisions chosen by the parties affirmatively waived any challenges to the
130
131
132
133
134
135

Exhibit K at 8.
Id.
Id.
Id. at 8 (emphasis added).
Id. at 12 (citing 460 U.S. 1, 25 (1983)).
Exhibit K at 12 (citing Howsam v. Dean Witter Reynolds, 537 U.S. 79, 85 (2002)).

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

39

jurisdiction of the Tribunal, and it exercised its perceived authority as the exclusive forum to
make that determination.
83.

Notably, the quote relied upon by the panel does not exist anywhere in Moses H.

Cone. Rather, the Supreme Court held that [t]he Arbitration Act establishes that, as a matter of
federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of
arbitration, whether the problem at hand is the construction of the contract language itself or an
allegation of waiver, delay, or a like defense to arbitrability.136 While doubts about the scope of
an arbitration agreement must be resolved in favor of arbitration, the Texas Supreme Court has
held that trial courts are the forum where gateway issues regarding the existence and scope of an
arbitration clause must be decided.137
84.

In addition, Texas courts have routinely considered clauses containing a waiver of

the right to challenge an arbitration award, and that is an issue expressly reserved to the courts.
Home Buyers Warranty Corp. v. Ward, No. 05-97-00807-CV, 1999 WL993740, at *1 (Tex.
App.Dallas 1999, no pet.) (not designated for publication); see Matter of Marriage of Long,
946 S.W.2d 97, 99 n.1 (Tex. App.Texarkana 1997, no writ) (holding right to waive appeal
from arbitration award is firmly established in Texas law); Aguilar v. Abraham, 588 S.W.2d 599,
601 (Tex. Civ. App.El Paso 1979, writ refd n.r.e.) (holding appellee was entitled to dismiss
appeal of arbitration award based on contractual waiver of right).
85.

These are the challenges Armstrong and Tailwind raisedchallenges to the scope

of the arbitration clause and SCAs waiver of the right to challenge an arbitration awardwhich
were not delegated to the panel but must be decided by this Court. First, the panels decision
ignores the prefatory language that limits the jurisdiction of the arbitrators to any dispute or
136
137

Moses H. Cone Mem'l Hosp., 460 U.S. at 24-25.


In re Morgan Stanley & Co., Inc., 293 S.W.3d 182, 185, 187 (Tex. 2009).

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

40

controversy among them arising under or in connection with this SETTLEMENT


AGREEMENT or Contingent Prize Contract #31122, as well as the Settlement Agreements
affirmative waiver of the right to challenge, appeal, or attack the final award.138 When read as a
whole, it is clear that the parties intended that the arbitration panels jurisdiction to only extend
to future disputes about the obligations created under the Compromise Settlement Agreement,
including payment terms and confidentiality obligations. For those types of disputes, the parties
agreed to the panels exclusive jurisdiction.139 The waiver of the right to challenge the
arbitrators jurisdiction was necessarily limited by the agreements prefatory language and the
express finality afforded the arbitration award. Certainly, the parties did not agree that the
arbitration panel had indefinite authority to undo the Settlement Agreement at a later date. This
language in the agreement certainly cannot operate to waive or estop challenges, properly
considered by a court and not an arbitrator, based on the exclusion of certain claims from the
scope of the arbitration agreement.
5.

Armstrongs and Tailwinds Prior Motions for Sanctions Do Not Constitute


An Implied Agreement to Arbitrate Sanctions Claims

86.

Going further, the panel held that Armstrong and Tailwinds prior sanctions

motions constituted an implied agreement to provide the panel with authority to issue sanctions
and buttressed the argument that Armstrong and Tailwind were estopped and affirmatively
waived their challenges to jurisdiction.140 Examining the relief requested by Armstrong and
Tailwind after the conclusion of the 2006 arbitration, however, reveals that there was no implied
agreement to arbitrate any and all types of sanctions requested by the parties. In fact, the
Settlement Agreement shows the opposite.

138
139
140

Exhibit B.
Id.
Exhibit K at 8, 13.

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

41

87.

An implied contract can arise from the parties acts and conduct. Harrison v.

Williams Dental Group, P.C., 140 S.W.3d 912, 916 (Tex. App.Dallas 2004, no pet.). This type
of contract exists when the facts and circumstances surrounding the parties relationship imply a
mutual intention to contract. Id. Every contract requires a meeting of the minds, but the meeting
can be implied from and evidenced by the parties conduct and a course of dealing that indicates
the parties understanding of their contractual obligations. Id. The panels theory fails in this
case, however, because the requisite elements are not met.
88.

In Hamstein Cumberland Music Group v. Williams, appellant challenged the

denial of its motion to confirm an arbitration award based on the trial courts finding that the
arbitrator exceeded his authority. 532 F. Appx at 539. There, both parties moved for sanctions
during a pending arbitration based on the same conductfailure to comply with discovery
requests. Id. at 541. The arbitrator sanctioned Williams, but the district court held that the
arbitrator lacked authority to issue sanctions and refused to confirm that portion of the award. Id.
at 541-42.
89.

The Fifth Circuit disagreed, stating that Williams submitted the issue by moving

for sanctions for the exact same reason that Hamstein moved for sanctions in the first place
Williams claimed that Hamstein had failed to respond to discovery that he had requested of
Hamstein. Id. at 543. Citing Executone Information Systems, Inc. v. Davis, the Court held that
[t]he scope of an arbitrator's authority is a function of both the arbitration agreement and the
parties submissions, which include both formal, written submission agreements and merely
asking the arbitrator to decide an issue. Id. (citing 26 F.3d 1314, 1323 (5th Cir. 1994).
90.

In Executone, however, the Fifth Circuit made clear that [i]f the parties go

beyond their promise to arbitrate and actually submit an issue to the arbitrator, we look both to

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

42

the contract and to the scope of the submissions to the arbitrator to determine the arbitrators
authority. 26 F.3d at 1323 (emphasis added). The Court further stated that the parties may
agree to arbitration of disputes that they were not contractually compelled to submit to
arbitration, and held that the parties jointly submitted a broad issue for the arbitrators decision
in that case, which encompassed the claims at issue. Id.; see also Horton Automatics v. Indus.
Div. of Commcns Workers of Am., 506 F. Appx 253, 256-57 (5th Cir. 2013) (not designated for
publication) (reviewing precise scope of submission and determining that issue was not
submitted by agreement); John Morrell & Co. v. Local Union 304A of United Food &
Commercial Workers, AFL-CIO, 913 F.2d 544, 561 (8th Cir. 1990) (same).
91.

Here, it is clear that the arbitration clause expressly authorized Tailwinds and

Armstrongs earlier requests for sanctions based on SCAS failure to make payments under the
Compromise Settlement Agreement and for a breach of the arbitrators confidentiality order and
the confidentiality provisions in the Settlement Agreement. The Agreement provided for
arbitration before the panel of any dispute or controversyarising under or in connection with
this SETTLEMENT AGREEMENT or Contingent Prize Contract #31122.141 Tailwind and
Armstrong moved for sanctions based on conduct that occurred after the arbitration concluded,
but the requests were based on obligations that expressly arose both under the panels ongoing
order and the Compromise Settlement Agreement itself, which Tailwind and Armstrong were
indisputably entitled to enforce.142
92.

SCAs request for sanctions, by contrast, is not contemplated by any agreement.

The Compromise Settlement Agreement expressly states that [n]o party may challenge, appeal
or attempt to set aside the Arbitration Award, and that [n]o promise or representation of any

141
142

Exhibit B.
Exhibit I at 192-193; Exhibit J at 68-69, 96-99, 163-164, 167-169; Exhibits S, T; U, W, V.

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

43

kind has been made to any Party or to anyone acting for a Party, except as is expressly stated in
this SETTLEMENT AGREEMENT, and THE PARTIES execute this SETTLEMENT
AGREEMENT without reliance on any representation of any kind or character not expressly
stated in this SETTLEMENT AGREEMENT . . . .143 The Agreement likewise states that
[b]efore executing this SETTLEMENT AGREEMENT, THE PARTIES became fully informed
of the terms, contents, conditions, and effect of this AGREEMENT, and received independent
legal counsel and advice before agreeing to the terms of this AGREEMENT, and that the parties
entered the agreement freely, by THE PARTIES own choice and judgment, and without duress
or other influence . . . .144
93.

There is no evidence of any course of dealing with respect to requesting post-

arbitration sanctions capable of giving rise to an implied contract to submit all sanctions issues to
the arbitration panel for all time. The only act that could have completed the alleged
modification, SCAs June 2013 motion to reconvene, is too remote in time and too substantively
different from Armstrongs and SCAs post-settlement requests for relief to support an implied
modification. SCAs position would permit sanctions claims based upon the prior arbitration
hearing, ad infinitum, and is absurd. Analyzing the arbitration agreement in its entirety and the
precise scope of the submissions to the panel to determine its authority, it is clear that
Armstrongs and Tailwinds earlier requests were not an implicit submission to the panel
authorizing it to sanction themby essentially undoing the freely-negotiated settlementas
SCA requests. The Panel simply had no authority to sanction Tailwind and Armstrong for
conduct that occurred during the arbitration.

143
144

Exhibit B.
Id.

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

44

6.

Tailwind Is Not a Party to an Arbitration AgreementIt Is a Dissolved


Entity, and the Arbitrators Exceeded Their Authority by Entering Sanctions
Against It

94.

As the Texas Supreme Court has recognized, under the common law, dissolution

terminate[s] the legal existence of a corporation. Once dissolved, the corporation [can] neither
sue nor be sued, and all legal proceedings in which it was a party [are] abated. Hunter v. Fort
Worth Capital Corp., 620 S.W.2d 547, 549-50 (Tex. 1981). In response to the common-law rule,
the trust fund doctrine emerged whereby a creditor of the dissolved corporation could pursue
the traceable assets of the dissolved corporation on the theory that such assets were burdened
with a lien in the creditors favor. Pellow v. Cade, 990 S.W.2d 307, 313 (Tex. App.
Texarkana 1999, no pet.); see Hunter, 620 S.W.2d at 550. As early as 1879, the Legislature
enacted remedial statutes embodying the trust fund doctrine in an effort to supplant the commonlaw abatement rule. Hunter, 620 S.W.2d at 550. The effect of these statutes was to supplant the
equitable trust fund theory by declaring a statutory equivalent. In Texas, recognition of the trust
fund theory, as applied to dissolved corporations, did not exist apart from these statutes. Id.
95.

The Texas Legislature, however, imposed severe limits on the trust fund doctrine

in the predecessors to sections 11.351, 11.356, and 11.359 of the Texas Business Organizations
Code. TEX. BUS. ORGS. CODE 11.351; 11.356, 11.359. Through these provisions, the
Legislature likewise embodied the trust fund doctrine in its currently limited state. Hunter, 620
S.W.2d at 549. Specifically, section 11.359(a) provides: Except as provided by Subsection (b),
an existing claim by or against a terminated filing entity is extinguished unless an action or
proceeding is brought on the claim not later than the third anniversary of the date of termination
of the entity. TEX. BUS. ORGS. CODE 11.359. Notably, a dissolved corporation can only be
liable for a claim existing at the time of its dissolution. Id. 11.351.

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

45

96.

The current Texas statutory scheme applies to arbitration proceedings, and it

precludes any arbitration of SCAs claims against Tailwind. Section 11.359(a) applies its
prohibition against action[s] and proceeding[s] brought after three years following a
corporations dissolution. See id. The term proceeding is broadly defined, and it should include
an arbitration proceeding. See Reveille Tool & Supply, Inc. v. State, 756 S.W.2d 102, 103 (Tex.
App.Austin 1988, no writ) (discussing phrase action or proceeding in substantially similar
predecessor statute and finding that it included administrative proceedings). Even if it did not,
the statutes make no allowance for arbitration proceedings instituted after a corporation has been
dissolved for three years. See TEX. BUS. ORGS. CODE 11.351; 11.356, 11.359. Either way, as a
dissolved entity that can no longer be subjected to a legal proceeding, Tailwind is no longer a
party to any arbitration agreement with SCA and therefore cannot be forced to arbitrate under
Texas law.
97.

The result would be the same under Delaware law. In Delaware, the trust fund

doctrine has been largely discredited and abandoned[.] See CML V, LLC v. Bax, 6 A.3d 238,
253-54 (Del. Ch. 2010), affd, 28 A.3d 1037 (Del. 2011). The Delaware Legislature, like the
Texas Legislature, has emasculated the doctrine by declaring that a dissolved Delaware
corporation can only sue or be sued within three years after its dissolution date. DEL. CODE ANN.
tit. 8 278; see Frederic G. Krapf & Son, Inc. v. Gorson, 243 A.2d 713, 715 (Del. 1968); United
States v. McDonald & Eide, Inc., 670 F. Supp. 1226, 1231 (D. Del. 1987), affd, 865 F.2d 73 (3d
Cir. 1989). The existence of a liquidating trust does not extend the three-year period. See City
Investing Co. Liquidating Trust v. Contl Cas. Co., 624 A.2d 1191, 1197 (Del. 1993) (describing
and treating liquidating trust as separate entity from dissolved corporation to which Section 278
does not apply).

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

46

98.

By including Tailwind in its re-convened arbitration, and awarding sanctions

against it, the arbitration panel purports to enforce an arbitration agreement with Tailwind more
than three years after Tailwind has dissolved.145 Delaware law, however, does not allow a party
to enforce an obligation against a dissolved corporation more than three years after the
dissolution date. See Aluminum Co. of Am. v. Beazer E., Inc., 124 F.3d 551, 567 (3d Cir. 1997)
(citing Contl Cas. Co., 624 A.2d at 1195).
99.

Further, Delawares statutory language is more restrictive than Texas law when

dealing with dissolved corporations. Under Section 278 of the Delaware Code, a corporation
may only be continued for three years after dissolution for the prosecution or defending of suits.
DEL. CODE ANN. tit. 8 278. The statute makes no accommodation for arbitration proceedings.
See id. As such, under Delaware law, an arbitration panel could not exercise jurisdiction over
claims against a dissolved corporation. See id. Assuming that the statute made allowance for
arbitration proceedings, however, an arbitration panel would still lack jurisdiction over a
dissolved corporation if a proceeding were convened after three years following the
corporations dissolution. See id.
100.

The three-year period is not a limitations periodit is a survival period, the

expiration of which extinguishes the claim by or against the corporation. Pellow, 990 S.W.2d at
313. Consequently, after the claim is extinguished, a court has no power to adjudicate it. Id.
[W]hen a cause of action is outside a survival statutes ambit, the cause of action is
extinguished and no longer exists. Id. Any judgment thereon is a nullity. Id. If a dissolved
entity can no longer be sued in court, then it likewise cannot be forced to defend itself in an
arbitration proceeding.

145

Exhibit H.

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

47

101.

SCA did not contest the proof that Tailwind dissolved on December 31, 2007,

more than three years before SCA filed this lawsuit and attempted to reconvene the prior
arbitration.146 Any claim that SCA may have had against Tailwind was therefore extinguished
upon the three-year anniversary of its dissolutionmore than two years before SCA instituted
this lawsuit or attempted to reconvene the prior arbitration. Because there is no longer an entity
capable of having agreed to arbitration under the Compromise Settlement Agreement or any
other arbitration clause, no enforceable arbitration agreement exists between Tailwind and SCA.
102.

Accordingly, the panel exceeded its authority by determining that a valid

arbitration agreement still exists between SCA and Tailwind, a dissolved entity that no longer
exists.
7.

The Arbitrators Exceeded Their Powers Because the Functus Officio


Doctrine Barred Them from Reconvening the Previous Arbitration

103.

Arbitrators exhaust their power when they make a final determination on the

matters submitted to them. They have no power after having made an award to alter it; the
authority conferred on them is then at an end. Bayne v. Morris, 68 U.S. (1 Wall.) 97, 99, 17 L.
Ed. 495 (1863). This common-law doctrine is known as functus officioa task performed. See
Brown v. Witco Corp., 340 F.3d 209, 218-19 (5th Cir. 2003); see also Green v. Ameritech Corp.,
200 F.3d 967, 976-77 (6th Cir. 2000) (defining term as [h]aving fulfilled the function,
discharged the office, or accomplished the purpose, and therefore of no further force or
authority (quoting BLACKS LAW DICTIONARY 673 (6th ed. 1990)); Denver City Energy
Assocs., L.P. v. Golden Spread Elec. Co-op., Inc., 340 S.W.3d 538, 544 n.6 (Tex. App.
Amarillo 2011, no pet.) (Under the common law, [a]rbitrators complete their function and lose
their authority to act after making a final determination on a matter.) (citation and internal
146

See generally Exhibits I, J.

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

48

quotations omitted).147 A major purpose of the doctrine is to protect the finality of an arbitrators
decision. See Anderman/Smith Operating Co. v. Tenn. Gas Pipeline Co., 918 F.2d 1215, 1220
n.4 (5th Cir. 1990).148
104.

Here, the arbitration panel unquestionably completed its task when it rendered the

Final Arbitration Award based on the Settlement Agreement.149 Thus, reconvening the
arbitration as SCA requested was improper under the functus officio doctrine and exceeded the
panels authority. See also TEX. CIV. PRAC. & REM. CODE 171.054 (setting out limited
circumstances under which arbitrators may modify or correct awards).150
105.

This conclusion is especially true with respect to sanctionsthe relief SCA has

obtained from the arbitrators.151 All of the conduct recognized as supporting the sanctions
occurred during the original arbitration proceedings.152 To be sure, the arbitrators were permitted
to police the arbitration process and fashion appropriate remedies to effectuate their authority
while the original arbitration was ongoing, Hamstein Cumberland Music Group v. Williams, 532
F. Appx 538, 539 (5th Cir. 2013), but that power came to an end when the arbitration
concluded. The functus officio doctrine precludes reopening an arbitration more than seven years
after rendition of the final award to mete out sanctions or for any purpose outside one of the
doctrines recognized exceptions, particularly when, as here, the arbitration concluded through a

147

Neither Texas courts nor the Fifth Circuit have addressed the functus officio doctrine in detail. See Brown v.
Witco Corp., 340 F.3d 209, 218 (5th Cir. 2003). However, other circuits have addressed the doctrine at length, and
the Fifth Circuit has found their view of the doctrine persuasive. Id.
148
The doctrine has some exceptions, none of which apply here. An arbitrator can (1) correct a mistake which
is apparent on the face of his award; (2) decide an issue which has been submitted but which has not been
completely adjudicated by the original award; or (3) clarify or construe an arbitration award that seems complete but
proves to be ambiguous in its scope and implementation. Brown, 340 F.3d at 219.
149
See Exhibits B & C.
150
Exhibit E at 4 (concluding that, consistent with functus officio doctrine, TAA Section 171.088 grants
courts, not arbitrators, authority to vacate arbitration awards).
151
Exhibit K.
152
Id. at 14.

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

49

settlement agreement disclaiming reliance on any representation of any kind or character not
expressly stated in the agreement.153
106.

The Fifth Circuits decision in Positive Software Solutions, Inc. v. New Century

Mortgage Corp.on which SCA heavily relied to support reopening the arbitrationdoes not
support the majoritys decision to assert jurisdiction. In that case, the parties settled their dispute
after an arbitrator issued an award and the case had wound its way through several court
proceedings. See 619 F.3d 458, 459-60 (5th Cir. 2010). In Positive Software, however, the Fifth
Circuit relied on specific American Arbitration Association (AAA) rules authorizing (a) the
reopening of an arbitration hearing at any time before the award is made and (b) extensions of
time based on good cause. See id. at 463 (citing American Arbitration Association, Commercial
Arbitration Rule 36, 38 (2009)). A prior opinion makes clear that the parties conducted the
arbitration through AAA. See Positive Software Solutions, Inc. v. New Century Mortg. Corp.,
476 F.3d 278, 279 (5th Cir. 2007).
107.

Positive Software is distinguishable because even the AAA ruleswhich do not

apply to this casespecifically limit the reopening of an arbitration to the time before the
award is made, an event that at this point occurred nine years ago. Indeed, the current rules of
procedure issued by major arbitration associations, both domestic and international, do not
recognize a never-ending right to review prior final decisions. Instead, as the rules uniformly
provide, an arbitrator may not reopen an arbitration hearing after it makes an award. See
American Arbitration Association (AAA), Commercial Arbitration Rules 36, 46 (2009); AAA,
International Arbitration Article 24 (2010); JAMS, Comprehensive Arbitration Rules &

153

Exhibit B 3.1(e).

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

50

Procedures (CARP) Rule 22(i) (2010).154 Once transmitted or served, an award is final and
may only be modifiedin a short, prescribed time periodto correct computational,
typographical, or other similar errors. See AAA, Commercial Arbitration Rule 46; AAA,
International Arbitration Article 30; JAMS, CARP Rule 24(j) & (k)).
108.

The Positive Software court did not hold that arbitrators have the power to reopen

proceedings years after the fact to consider sanctions requests based on conduct during
arbitration. Rather, the Fifth Circuit merely pointed out some potential options in response to
Positive Softwares complaint that it lacked any means to address the supposed wrongdoing.
Positive Software, 619 F.3d at 462-63. The functus officio doctrine never came into play because
Positive Software never sought sanctions from the arbitrators, but instead asked the district court
to order them based on its inherent authority after the case was administratively closed. See id. at
460-63.
109.

The majoritys reliance on Lehigh Valley Railroad Co. v. Germany,155 an

international arbitration from the 1930s, is likewise misplaced. Here, the majority found that the
Lehigh cases support arbitrator jurisdiction because of certain parallels between that tribunal
and this one . . . .156
110.

The Lehigh cases, however, provide no support for reconvening an arbitration and

issuing an award nearly a decade after its conclusion by settlement and final confirmation of the
award. First, any remedy for alleged fraud upon the tribunal lies in the courts, not in a reconvened arbitration. See TEX. CIV. PRAC. & REM. CODE 171.088(a) (providing for vacatur of
arbitration award obtained by corruption, fraud, or other undue means). The two-arbitrator
154

Defendants ask the Court to take judicial notice of these rules, which are readily available through the AAA
and JAMS websites, http://www.adr.org/aaa/faces/rules and http://www.jamsadr.com/rules-clauses/.
155
The Lehigh opinions are several hundred pages in length. Defendants will make copies available for the
Court at the hearing.
156
Exhibit D at 5; Exhibit K at 11.

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

51

majority cited no authorityand there is nonethat an arbitration panel may take matters into
its own hands years after the fact to remedy any alleged fraud.
111.

Second, the Compromise Settlement Agreement, while it contained an arbitration

clause, was hardly a temporary cease-fire between the parties. To the contrary, as set out
above, the Compromise Settlement Agreement fully and finally resolved any disputes then
existing and resulted in an agreed Final Arbitration Award.157 Although disputes regarding
performance or enforcement of the agreement might arise, the notion that the Compromise
Settlement Agreement was nothing more than a short-term solution to a larger problem is an
absurd, result-oriented justification for expanding the arbitration panels power in a manner the
parties plainly did not contemplate when they entered into the settlement and agreed Final
Arbitration Award.
112.

Moreover, the Lehigh decisions simply do not apply to expand arbitrator

jurisdiction in the manner the majority held. Those decisions were rendered by a commission
created for the purpose of resolving reparations claims against Germany due to acts of sabotage
against American citizens, as required by the Treaty of Berlin and an agreement between the
United States and Germany dated August 10, 1922. This agreement created the Mixed Claims
Commission, which consisted of one commissioner appointed by the United States, one
appointed by Germany, and an umpire.
113.

Lehigh was no ordinary arbitrationit was one between two governments by a

long-standing commission appointed to decide numerous cases between the two governments at
an extremely precarious point in our nations history. But most importantly, the procedural
history of the Lehigh cases ultimately shows that the rules and procedures applicable to the
Commission gave express authority to the Commission to reopen a case, without any time limit.
157

See Exhibits B & C.

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

52

Neither SCA nor the two-arbitrator majority has pointed to any provision bestowing similar
power on the panel that heard the original dispute in 2005 and 2006. The dissenting arbitrator
recognized as much, concluding that SCA . . . failed to identify a similar procedural rule
applicable to this case that provides for re-opening of this arbitration.158
114.

Even if the Court were to consider this complicated and outdated group of

decisions as precedent, it is clearly distinguishable, most notably because the arbitrators were not
induced to render any award based on anything other than the parties own Compromise
Settlement Agreement, which itself was reached at arms length, with competent counsel, and
with no party relying on anything any other party did or said. Litigation must end at some point.
And in this case it didwith a settlement and award that is and must be binding and cannot now
be disturbed.
115.

In conclusion, the arbitrators exceeded their authority under the doctrine of

functus officio, and the award must be vacated.


8.
116.

The Arbitrators Exceeded Their Authority By Modifying the Award


Years After it Became Final.

The TAA provides express provisions for obtaining a modification of an award by

the arbitrators, limits the type of modifications that the arbitration panel can make, and provides
deadline for seeking the modifications. Section 171.054 allows arbitrators to modify or correct
award on limited grounds only upon an application filed not later than the 20th day after the
date the award is delivered to the applicant. TEX. CIV. PRAC. & REM. CODE 171.054.
Thereafter, a party is limited to challenging the award through a motion to vacate, which must be
filed within 90 days after delivery of a copy of the award to the applicant. Id. 171.091
(authorizing application for court to modify award on limited grounds within 90 days). When an
158

Exhibit E at 4.

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

53

arbitration panel modifies an award on grounds not provided by the statute and outside the time
limits provided in the TAA, the modified award exceeds the arbitrators power and must be
vacated. Barsness, 126 S.W.3d at 241.
117.

SCAs request for relief in the form of sanctions was an end-run around these

provisions, and by indulging the request, the arbitration panel exceeded its authority. It is
undisputed that SCAs attempt to reconvene this arbitration occurred well after the time limits in
section 171.054 expired, and SCA did not even raise any grounds recognized by the statutes as
appropriate grounds for modification.159 And, as pointed out below and in Defendants pleas to
the jurisdiction, SCAs attempts to vacate the award came too late as well. See infra Part IV.C.3.
This Court should vacate the award because the arbitrators clearly exceeded their authority.
C.

The Award Must Be Vacated Because It Violates Texas Public Policy


118.

Defendants request that the Court vacate the arbitration award because it violates

the following Texas public policies: (1) The public policy in favor of settlement of disputes; (2)
The public policy in favor of finality of arbitration awards, including enforcing confirmed
arbitration awards, and the use of vacatur by a court of law as the sole method of setting aside a
final arbitration award; (3) The public policy in favor of allowing corporations to dissolve and
wind up their affairs.
1.

Standard of Review and Governing Law

119.

While the review of an arbitration award is normally exceedingly narrow, courts

should not confirm an award if that award is contrary to public policy. Symetra Nat. Life Ins.
Co. v. Rapid Settlements, Ltd., No. 14-07-00880-CV, 2009 WL 1057339, at *2 (Tex. App.
Houston [14th Dist.] Apr. 21, 2009, no pet.) (mem. op.) (citing Apache Bohai Corp., LDC v.
Texaco China BV, 480 F.3d 397, 401 (5th Cir. 2007); Myer v. Americo Life, Inc., 232 S.W.3d
159

Compare Exhibit A, with Exhibits B, C.

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

54

401, 408 (Tex. App.-Dallas 2007, no pet.)); see also CVN Group, Inc., 95 S.W.3d at 239-40
(explaining that for a public policy concern to support setting aside an arbitration award it
must be well defined and dominant and not cobbled from general considerations of
supposed public interests.).
120.

For example, where a Texas statute announces public policy, and in particular

precludes certain actions in court or otherwise, the statute provides an express public policy that
cannot be subverted through arbitration. In other words, a party cannot accomplish through
arbitration that which the [legislative] acts prevent it from otherwise doing. Id. at *3.
2.

The Award Violates the Public Policy in Favor of Voluntary Settlement

121.

The Texas Legislature has expressly determined that the public policy of Texas is

to encourage the settlement of legal disputes. See TEX. CIV. PRAC. & REM. CODE 154.002
(West 2011) (It is the policy of this state to encourage the peaceable resolution of disputes, ...
and the early settlement of pending litigation through voluntary settlement procedures.). The
Legislature has expressly tasked the courts with enforcing this public policy: It is the
responsibility of all trial and appellate courts and their court administrators to carry out the
policy under Section 154.002. TEX. CIV. PRAC. & REM. CODE 154.003. This is a well-defined
public policy in Texas that has been expressly committed to the courts for enforcement of the
policy.
122.

Here, the 2006 Final Award derived from a voluntary settlement agreement of the

parties, and it expressly included a waiver of the right to challenge the award and disclaimed
reliance on any representations not set forth in the contract.160 The panel, however, failed to
protect this public policy in favor of voluntary settlements by effectively reversing the parties

160

Exhibit B.

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

55

freely-negotiated settlement agreement. The award should be vacated on the grounds that it
subverts the public policy in favor of voluntary settlement of disputes. Symetra Nat. Life Ins. Co.,
2009 WL 1057339, at *3.
3.

The Award Violates the Public Policy in Favor of Finality of Arbitration


Awards

123.

An arbitration award is treated the same as the judgment of a court of last

resort. Ancor Holdings, LLC v. Peterson, Goldman & Villani, Inc., 294 S.W.3d 818, 826 (Tex.
App.-Dallas 2009, no pet.) (App. 155) (emphasis supplied). It is presumed valid and entitled to
great deference, and a court may not substitute [its] judgment merely because [it] would have
reached a different decision. Id. [A]ll reasonable presumptions are indulged to uphold the
arbitrator's decision, and none are indulged against it. Cambridge Legacy Group, Inc. v. Jain,
407 S.W.3d 443, 447 (Tex. App.-Dallas 2013, no pet.). Texas public policy strongly favors the
enforcement of arbitration awards, because [j]udicial review of an arbitration award adds
expense and delay and thereby diminishes the benefits of arbitration as an efficient, economical
system for resolving disputes. Ancor Holdings, 294 S.W.3d at 826 (citing CVN Group, Inc., 95
S.W.3d at 238).
124.

The arbitration award ignores that the Texas Legislature has adopted a statutory

framework serving as the exclusive procedural method for vacating or modifying an arbitration
award under the TAA. See Patten v. Johnson, 429 S.W.3d 767, 776-67 (Tex. App.Dallas
2014, pet. denied) (affirming grant of plea to jurisdiction in lawsuit asserted against arbitrator
based on exclusivity of statutory provisions for relief from arbitration awards); Yazdchi v. Am.
Arbitration Assn, No. 01-04-00149-CV, 2005 WL 375288, at *4 (Tex. App.Houston [1st
Dist.] 2005, no pet) (mem. op.) (Section 171.088 provides the exclusive remedy to contest an
arbitration award when the Texas Arbitration Act governs . . . .).

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

56

125.

The TAA provides for a due order of consideration and limits the time within

which a party may challenge an arbitration award. See TEX. CIV. PRAC. & REM. CODE
171.087.088; Hamm v. Millennium Income Fund, L.L.C., 178 S.W.3d 256, 262-69 (Tex.
App.Houston [1st Dist.] 2005, pet. denied); Diamond Offshore Co. v. Hall, No. 02-06-272CV, 2007 WL 1441011, at *2-5 (Tex. App.Fort Worth May 17, 2007, pet. denied) (mem. op.).
And whatever the tribunal, confirmation destroys any possibility that an arbitration may be
reconvened after the arbitration award has been confirmedconsistent with the policies
favoring the efficiency and finality of arbitration proceedings.
a.
126.

The Due Order of Consideration Requirement Precludes a Motion


to Vacate After Confirmation of the Award

The due order of consideration requirement provides that once an arbitration

award has been confirmed, a trial court has no power or jurisdiction to vacate it under the TAA.
Hamm, 178 S.W.3d at 262-69. Unless grounds are offered for vacating, modifying, or correcting
an award under Section 171.088 or 171.091, the court, on application of a party, shall confirm
the award. TEX. CIV. PRAC. & REM. CODE 171.087. Additionally, Section 171.088(c) provides:
If the application to vacate is denied and a motion to modify or correct the award is not
pending, the court shall confirm the award. Id. 171.088(c). Because confirmation is the
default, any motions to vacate, to modify, or to correct the award must be pending before the
court for its consideration, or must already have been ruled on, at the time that the court
considers the motion to confirm. Hamm, 178 S.W.3d at 262.
127.

The TAA provides that a party may move to vacate an award not later than the

90th day after the date the grounds for the application are known or should have been known.
TEX. CIV. PRAC. & REM. CODE 171.088(b). However, this maximum time limit does not
provide an exception to the due order of consideration requirement. Hamm, 178 S.W.3d at

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

57

264. As part of its analysis, the Hamm court held that [a]lthough both the FAA and TAA allow
a party who wishes to challenge an arbitration award a certain period to move to vacate, to
modify, or to correct an arbitration award, courts have held that that period of time represents a
maximum, not an absolute period upon which the challenging party may always rely. Id.
128.

The Diamond Offshore court rejected the defendants arguments that fraud

allowed them to pursue vacatur after confirmation but within the 90-day limitations period. See
No. 02-06-272-CV, 2007 WL 1441011, at *4-5 (Tex. App.Fort Worth May 17, 2007, pet.
denied) (mem. op.). The court cited Hamm and agreed with the due order of consideration
requirement. Id. at *4. Defendants argued that to dismiss their petition to vacate would allow
one who successfully defrauds an arbitration panel . . . to retain his ill-gotten booty because the
award was paid, and urged the court to consider section 171.088 as adopting a discovery
rule for bringing a motion to vacate an arbitration award obtained by fraudulent means. Id. The
court rejected this argument where the award had been confirmed before the motion to vacate
was filed:
While [defendants] are correct in citing Tijerina v. City of Tylers avowal
that, as judges, we are called upon to apply a statutory command even when it
produces a policy of which we disapprove, the discovery rule interpretation
urged by Appellants would render a result, not just a policy, that would be
ineffective, unjust, and unreasonable within the TAA context. See 846 S.W.2d
825, 828 (Tex. 1992). To allow a losing party to vacate an arbitration award
ninety days after alleged fraud at any time after the award was rendered, even
after it had been confirmed, would eliminate the finality of all arbitration awards
and eradicate the benefits of arbitration. See CVN Group, Inc. v. Delgado, 95
S.W.3d 234, 238 (Tex. 2002) (stating that subjecting arbitration awards to judicial
review adds expense and delay, thereby diminishing the benefits of arbitration as
an efficient, economical system for resolving disputes); see also Browning v.
Prostok, 165 S.W.3d 336, 345-46 (Tex. 2005) (expressing that it is the policy of
the law to give finality to judgments).
Id. at *4 n.6.
b.

The 298th District Courts Agreed Order Transferring the Registry


Funds Judicially Confirmed the Final Arbitration Award

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

58

129.

After the parties settlement of the 2006 arbitration, the 298th District Court

issued an agreed order effectively confirming the Final Arbitration Award and rendering a final
judgment on the Award.161 This is true even though Defendants did not formally move to
confirm. As a result, the arbitration award does not merely revisit the Compromise Settlement
Agreement and Final Arbitration Award as a mere contractual matter; the award interferes with
the district courts disposition of the case in conjunction with the Award.
130.

In Diamond Offshore Co., a central issue was whether the award was confirmed

before the defendants file a motion to vacate it. 2007 WL 1441011, at *2-5. The defendants
alleged that no confirmation had been ordered because plaintiff had never moved for
confirmation, but instead, the parties merely submitted an agreed, final take-nothing judgment.
Id. at *3. The court rejected this analysis, holding that by obtaining the trial courts approval of
the award through a judgment dismissing the claims, the award was confirmed. Id. at *3.
131.

In reaching its conclusion, the court first noted that the TAA does not expressly

define confirmation, but in essence, confirmation is the act of giving formal approval. Id.
(quoting BLACKS LAW DICTIONARY 318 (8th ed. 2004)). The court further stated that
confirmation is simply a method to enforce an arbitration award. Id. (citing Crossmark, 124
S.W.3d at 429 n.5). The court disagreed with the defendants argument that confirmation could
not occur without an express motion to confirm the award. Id. While an application to confirm
should be decided as other motions in civil cases, i.e., on notice and an evidentiary hearing if
necessary, the parties could choose to bypass that route. Id. The court held that there was no
need to hold an evidentiary hearing on whether the award should be confirmed when
[defendants] had already paid the award; and by paying the award, [defendants] essentially
waived the necessity of Appellee filing an application to confirm. See id. To constitute a
161

Exhibit P.

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

59

confirmation, there must only be some indication that the trial court gave formal approval of
the award. Id. This formal approval includes the use of any methods to enforce the
arbitration award. Id. Even if the order does not expressly confirm the arbitration award, if its
effect is to carry out the terms and enforce the award, it is sufficient. Id.
132.

Here, as in Diamond Offshore, the Final Arbitration Award was confirmed by the

district court without the need for a formal confirmation motion. As noted above, SCA deposited
funds into the 298th District Courts registry that were only to be released upon conclusion of the
arbitration.162 If Tailwind and Armstrong prevailed, they were entitled to the money, and vice
versa with respect to SCA.163 After the Settlement and rendition of the Final Arbitration Award,
the parties filed a joint motion to release the funds in the courts registry to Tailwind, signaling to
the 298th District Court that the arbitration had concluded with Tailwind as the victorious
party.164 The agreed order, therefore, asked the 298th District Court to approve and effectuate
the Final Arbitration Award by releasing the funds to Tailwind instead of SCA, including an
express finding by the 298th District Court that the release of the funds is appropriate.165 In
other words, the parties jointly asked the 298th District Court to enforce the Award, resulting
in an order confirming the Award and a final judgment. Diamond Offshore Co., 2007 WL
1441011, at *3.
133.

In summary, by granting the parties joint motion and issuing the order to release

SCAs deposited funds to Tailwind, the 298th District Court approved and enforced the Final
Arbitration Award. SCA consented to the agreed order distributing the funds from the 298th
District Courts registry andconsistent with the Settlements termstook no action to reopen

162
163
164
165

Exhibit L.
Id.
Exhibit P.
Exhibit P.

DEFENDANTS MOTION TO VACATE FINAL ARBITRATION AWARD

60

the case within the thirty-day period stated in the courts order abating and administratively
closing the case.166 By granting the parties joint motion and issuing the order to release SCAs
deposited funds to Tailwind, the 298th District Court approved and enforced the Final
Arbitration Award. This order therefore confirmed the award and operated as a final judgment.
The arbitrators award of sanctions violates the fundamental public policy in favor of finality of
judgments, and it allows an arbitration panel to essentially vacate a final judgment of a Texas
court. It must be vacated.
c.

134.

Even if a Discovery Rule Could Be Applied, SCA Knew or Should


Have Known of Its Claims More Than Ninety Days Before Filing Suit,
and It Cannot Now Attempt to Vacate the 2006 Final Arbitration
Award

As noted, the 298th District Courts enforcement of the Final Arbitration Award

constituted confirmation of and final judgment on the award. Thereafter, under the due order of
consideration requirement, no court has jurisdiction to vacate the award. Diamond Offshore Co.,
2007 WL 1441011, at *1. Yet, SCA asked this Court to step in and has asserted the very same
theories it alleged in arbitration, plus a few more. Again, by rendering an award of sanctions, the
arbitration panel has allowed SCA to vacate the prior arbitration award in an untimely manner
prohibited by the Texas statutes governing arbitration.
135.

The discovery rule provision in section 171.088(b) does not apply to allow a

late motion to vacate an award after it has been confirmed. Id. at *4 n.6. But even if that
provision could apply, SCA could not establish its requirements. Under 171.088(b), [a] party
must make an application under Subsection (a)(1) (alleging the award was obtained by
corruption, fraud, or other undue means) not later than the 90th day after the date the grounds
for the application are known or should have been known. TEX. CIV. PRAC. & REM. CODE

166

Exhibits M, P.

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171.088(b) (emphasis added). SCAs lawsuit was filed on February 7, 2013; therefore, if SCA
knew or should have known of the grounds for the application before November 9, 2013, it could
not rely on section 171.088(b)s discovery rule.
136.

In applying the discovery rule to fraudulent concealment, courts have held that the

plaintiffs cause of action accrues not when injury becomes certain, but when the claimant
should know of his injury. Murphy v. Campbell, 964 S.W.2d 265, 271 (Tex. 1997). A cause of
action can accrue well before the defendant admits or acknowledges the allegedly fraudulent
conduct underlying the claim. See, e.g., Fraga v. Drake, 276 S.W.3d 55, 65 (Tex. App.El Paso
2008, no pet.) (While Fraga did not know of the full extent of the problems with the home, he
certainly knew or should have known that he had suffered a legal injury.). As one court
explained in the related context of fraudulent concealment:
As with any form of equitable estoppel, a party asserting fraudulent concealment
must have relied reasonably on appellants lies or improper silence. Once
appellees knew or should have known of the deceit, reliance is no longer
reasonable, and the tolling effect ends. Once on notice of the deception, a party
must act diligently.
Sw. Grain Co. v. Garza, No. 13-04-00409-CV, 2007 WL 1087179, at *6 (Tex. App.Corpus
Christi Apr. 12, 2007, pet. denied) (mem. op.) (quotations omitted). And, courts have held that
the plaintiff was on notice of its potential claim, despite the defendants denial that he engaging
in the alleged conduct, where the plaintiff had previously filed suit years earlier alleging nearly
the same grounds. See Hansler v. Wendt, No. 13-99-00130-CV, 2000 WL 35721223, at *3-4
(Tex. App.Corpus Christi June 1, 2000, no pet.) (not designated for publication).
137.

SCA cannot reasonably dispute that knew or should have known of the grounds

for the application more than ninety days before it filed its motion to reconvene. TEX. CIV.
PRAC. & REM. CODE 171.088. In fact, nearly identical allegations were raised in the previous

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arbitration proceeding.167 Robert Hamman repeatedly testified that at no point during the prior
arbitration or the settlement negotiations did he ever believe Armstrong was not using PEDs, and
that opinion never changed.168 SCA nevertheless settled, expressly disclaiming reliance on any
representation not set out in the agreement. Yet now SCA obtained a do-over, claiming that it
could not have discovered the grounds for vacating the Final Arbitration Award.
138.

Even focusing on more recent events belies any claim that SCA could not have

asserted its claim in the district court sooner. For example, one high-profile Armstrong
teammate, Floyd Landis, confessed to doping and implicated Armstrong as early as May 2010,
and another implicated Armstrong in 2011.169 Certainly, once USADA announced its
investigation in June 2012 stating that numerous Armstrong teammates had come forward
against him, SCA had notice of the grounds it now asserts.
139.

SCA cannot use the Oprah interview as its discovery date. SCA argues that its

claims could not have been discovered until Armstrong confessed to Oprah in January 2013.
However, a plaintiff who suspects he may have a claim is not entitled to sit on his rights and wait
for the defendant to admit the conduct. Patrick v. Howard, 904 S.W.2d 941, 944 (Tex. App.
Austin 1995, no writ) (disagreeing with plaintiffs allegation that they were unaware of the facts
forming the basis of their claims until December 18, 1992, when [an informant] was convicted of
perjury in connection with another case.). Even so, SCAs own petition asserts that Armstrongs
refusal to contest USADAs allegations against him, on or about August 23, 2013, was an

167

Exhibit A; Exhibit J at 74, 82.


Exhibit J at 74, 88-90.
169
See Defendants Lance Armstrong and William Stapletons Plea to the Jurisdiction, on file; Defendant
Tailwind Sports Corps Joinder to Defendants Lance Armstrong and William Stapletons Plea to the Jurisdiction, on
file.
168

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admission of guilt.170 Furthermore, SCA concedes that its case against Armstrong developed
well before the Oprah interview.171 SCA cannot have it both ways.
140.

In sum, SCA used the reconvened arbitration proceeding as a vehicle for

collaterally attacking the Final Arbitration Award in a manner inconsistent with the exclusive
statutory scheme. By indulging that request, the panels award violates Texas public policy in
favor of final judgments.
141.

SCA attempted during the arbitration to impeach these arguments by pointing to

one sentence in Tailwind and Armstrongs motion For Default or, Alternatively, Motion to
Compel.172 There, Tailwind and Armstrong argued: Should Respondents be in default or fail to
cure their existing default pursuant to compulsion by the Panel, Claimants request that they be
entitled to file the arbitration Award, seek approval by the District Court of Dallas County, Texas
and pursue post-judgment remedies as are available under Texas law.173 SCA argued that,
through this language, Armstrong and Tailwind acknowledged that no implied confirmation had
occurred. But this argument is a mere red herring.
142.

For purposes of the due order of consideration, confirmation can be express or

implied, as held in Diamond Offshore. But for purposes of obtaining a writ of execution and
other post-judgment procedural remedies through the court system, a signed court judgment
confirming the award would have been necessary. TEX. CIV. PRAC. & REM. CODE ANN.
63.001(3) (requiring, for writ of garnishment, that plaintiff have a valid, subsisting judgment);
TEX. CIV. PRAC. & REM. CODE ANN. 31.002 (providing for turnover order for judgment
creditor seeking to obtain satisfaction on judgment); TEX. R. CIV. P. 621 (stating that [t]he

170
171
172
173

Original Petition at 7.
Id.
Exhibit S.
Id.; see Exhibit I at 194-195.

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judgments of the district, county, and justice courts shall be enforced by execution or other
appropriate process (emphasis added)); TEX. R. CIV. P. 622 (An execution is a process of the
court from which it is issued. The clerk of the district or county court or the justice of the peace,
as the case may be, shall tax the costs in every case in which a final judgment has been rendered
and shall issue execution to enforce such judgment and collect such costs.) (emphasis added);
see also Hamm, 178 S.W.3d at 267 (quoting Martin v. Hydraulic Fishing Supply, Inc., 832 P.2d
118, 123 (Wash. App. 1992) (Forrest, J., concurring) with approval for proposition that [a]n
arbitration award that is confirmed is entered as a judgment of the court and has the same
force and effect, in all respects as, and is subject to all the provisions of law relating to any other
civil judgment.).
143.

Accordingly, this requested procedure was a reasonable precaution to allow

Tailwind and Armstrong to enforce the Settlement Agreement and Final Arbitration Award
through the court system. But it had no effect on whether the Final Award was impliedly
confirmed, thus precluding the panel from revisiting the merits. SCAs remedy, if any, lies in the
courts, where it has brought a parallel action seeking the same relief.
144.

In short, clearly established public policy required SCA to challenge the 2006

Final Award, if at all, in a court of law, and not through an end run around the confirmed award.
4.

The Award Violates the Public Policy in Favor of Allowing Corporations to


Dissolve and Wind Up Their Affairs.

145.

Texas public policy mandates that corporations, as part of the winding-up process,

must be able to mark a date after which they can no longer be subject to a claim that could cause
them to incur defense fees and costs or result in a judgment. See TEX. BUS. ORGS. CODE
11.351, 11.359. The forum in which that claim is broughtin court or in arbitrationshould

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not affect Tailwinds statutory rights. See, e.g., In re Schmitz, 285 S.W.3d 451, 459 (Tex. 2009)
(granting mandamus to preserve corporations rights under Business Corporations Act).
146.

The panels sanctions award eviscerates the statutory scheme provided by the

Legislature to allow corporations to wind up and expressly precludes actions such as this from
proceeding. By awarding sanctions against Tailwind more than three years after its dissolution,
the panels sanctions award violated a clear public policy and must be vacated.
VII. CONCLUSION AND PRAYER
For these reasons, Defendants ask the Court to set this motion for an evidentiary hearing
and vacate the Final Arbitration Award dated February 4, 2015. Defendants request all other
appropriate relief to which they are entitled.
Respectfully submitted,
HOWRY BREEN & HERMAN, L.L.P.
/s/ Tim Herman
Timothy J. Herman
State Bar No. 09513700
therman@howrybreen.com
Sean E. Breen
State Bar No. 00783715
sbreen@howrybreen.com
1900 Pearl Street
Austin, Texas 78705-5408
(512) 474-7300
(512) 474-8557 Fax
D. Todd Smith
State Bar No. 00797451
todd@appealsplus.com
Brandy Wingate Voss
State Bar No. 24037046
brandy@appealsplus.com
Smith Law Group, LLLP
1250 Capital of Texas Highway South
Three Cielo Center, Suite 601
Austin, Texas 78746
(512) 439-3230
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(512) 439-3232 (fax)


Attorneys for Defendants/Movants
Lance Armstrong and Tailwind Sports Corp.
CERTIFICATE OF SERVICE
This document was served in compliance with the Texas Rules of Civil Procedure by
serving a copy to the following counsel of record on this 4th day of May 2015:
Jeffrey M. Tillotson
LYNN TILLOTSON PINKER & COX, L.L.P.
2100 Ross Avenue, Suite 2700
Dallas Texas 75201
/s/ Tim Herman
Timothy J. Herman

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