December 18, 2017

December 18, 2017:

Dallas Court of Appeals affirms dismissal of a motion to vacate an arbitration award because the movant failed properly to serve the motion within the statutory three-month limitations period.  Craig v. Southwest Securities, Inc., No. 05-16-01378-CV, 2017 WL 6503213 (Tex. App. -- Dallas, Dec. 18, 2017, no pet.) (unpublished).

Craig had investment accounts with Southwest Securities.  The accounts lost value.  Craig filed an arbitration proceeding against Southwest Securities with FINRA.  The arbitration panel denied all of Craig's claims.  Craig filed a motion to vacate the arbitration award in Dallas County district court and emailed a copy of the motion to Southwest Securities counsel, but did not request issuance of citation or service.  More than three months after the arbitration award, Craig filed a supplemental motion to vacate and -- for the first time -- asked the Dallas County clerk's office for issuance of citation and thereafter served the registered agent for Southwest Securities with process and citation.  Southwest Securities moved to dismiss the motion to vacate and for confirmation of the arbitration award on the ground that Craig had failed properly to serve the motion to vacate within three months of the arbitration award, as required by section 12 of the
Federal Arbitration Act, 9 U.S.C. § 12.  The district court agreed with Southwest Securities, dismissing the motion to vacate and entering a final judgment that confirmed the arbitration award.  Craig appealed.  The Dallas Court of Appeals affirmed.    

The analysis of the Dallas Court of Appeals was straightforward.  The parties agreed that the FAA governed.  Section 12 of the FAA required that notice of a motion to vacate "must be served . . . within three months after the award," thus creating a "substantive three-month limitations period."  2017 WL 6503213, at *2.  Texas law, however, provided that even when the substantive provisions of the FAA govern, the Texas Arbitration Act "governs procedural matters in proceedings arising out of an arbitration dispute."  Id. at *2-3.  In turn, the TAA required that an application to vacate an arbitration award must be served on the oposing party in the same manner as "required for process and service on a defendant in a civil action in a district court."  Tex. Civ. Prac. & Rem. Code Ann. § 171.094.  Craig's initial attempt at email service did not meet this requirement.  His later service of citation on the registered agent for Southwest was untimely because it was outside of the three-month limitations period established by the FAA.  Craig's failure properly to serve the motion to vacate within the three-month limitations period was fatal to his appeal.     

The broad lesson of Craig is simple:  Before deadlines happen, know what the deadlines are and precisely what they require.      


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