Hamm v. Millennium Income Fund, L.L.C – Case Brief Summary (Texas)

In Hamm v. Millennium Income Fund, L.L.C., 178 S.W.3d 256 (Tex. App.--Houston 1st Dist. 2005, pet. denied), the First Court of Appeals analogized asserting statutory grounds for vacating an arbitration award to the requirements for pleading affirmative defenses. Hamm, 178 S.W.3d at 268.

"The statutory grounds for vacating, modifying, or correcting an arbitration award under either statute are in the nature of affirmative defenses because the party asserting these grounds implicitly confesses the existence of an arbitration award, but nonetheless seeks to avoid its effect by asserting an independent reason that the award should not be enforced. Like Rule of Civil Procedure 94, which expressly requires pre-judgment pleading of affirmative defenses and "matters constituting an avoidance" in other contexts, the FAA and TAA also contemplate . . . a due order of pleading with respect to motions to confirm, to vacate, to modify, or to correct, requiring a party challenging an award to raise its challenge before final judgment. This requirement makes sense given that the statutory grounds for vacatur, modification, and correction are matters--like those governed, by analogy, by rule 94--of confession and avoidance." Id.

In Hamm, the party seeking to vacate the arbitration award failed to file anything prior to confirmation of the award except a motion for continuance. Id. at 259, 269.

The motion requested a continuance because the party "intended to prepare and present motions to vacate and/or modify the arbitration award." Id. at 259.

The motion did not offer any of the grounds on which the motion to vacate would be based. See Id. "The trial court had no discretion but to confirm the arbitration award if the Hamm parties did not file a motion to vacate or to modify (or otherwise challenge in any way) the award before the ruling on Millennium's motion to confirm." Id. at 272.

The court held that like an affirmative defense, a party waives any challenge to an arbitration award if the party moves to vacate and produces evidence in support of its motion only after the trial court has confirmed the award and rendered final judgment. Id. at 268.

The court explained that "if a judgment confirming an arbitration award is final like any other, then, as it is required to do with any other judgment, a party must raise (and prove, if evidence is necessary) its confession-and-avoidance defenses before judgment." Id.