Texas Business Court Decision – November 2, 2026
No. 26-BC01B-0068 Dealer Nation Automotive, LLC, et al. v. City Ventures, LLC, et al. (First Div., Judge Whitehill) 2026 Tex. Bus. 78 26-bc01b-0068-dealer-nation-automotive-v-city-ventures-2026-tex-bus-78.pdf
Arbitration Awards.
Background. Dealer nation and DNA Autos (together, Dealer Nation) petitioned to confirm an arbitration award against the defendant Dealerships. The Dealerships answered and applied to vacate the award under 9 U.S.C. Sec. 10(a)(4). The parties agreed to remove the case to the Business Court. The arbitrator’s award included roughly $7.8 million in damages, fees, interest, and expenses, conditional fees for any unsuccessful judicial review, as well as “Paragraph F,” which ordered two of the defendants – Buick GMC SDNC and Sub of El Cajon (the Stores) – to pay for the ongoing defense of DNA Autos, Thomas Hervey, and Ron Bowie II in Lozano v. Sub of El Cajon, LLC, a pending California wage-and hour class action. It also required the Stores to fully fund any settlement or final, non-appealable judgment in that case. The Dealership defendants sought vacatur of the entire award or, at a minimum, of the bulk-sale damages, the prospective Lozano relief, the $950,000 fee award, and the conditional judicial-review fees. The court grants the motion to vacate only as to the prospective Lozano relief.
Issues:
- Whether an arbitration award imposes a fiduciary-like duty of good faith on one party when it gives that party complete control over the opposing party’s assets and obligations in ongoing third-party litigation.
- Whether such an award is non-confirmable under the 9 U.S.C. Sec. 10(a)(4) because it is not “mutual, final, and definite.”
- Whether the court should remand the vacated portion to the arbitrator or refuse to do so.
Discussion.
Finality and definiteness. A court may vacate an arbitration award only in narrow circumstances, including when the arbitrator so imperfectly executed his or her powers that a mutual, final, and definite award was not made for purposes of 9 U.S.C. Sec. 10(a)(4). An award must resolve all submitted issues and determine each fully so that no further litigation is required to finalize the parties’ obligations. An award lacking a specific sum is not indefinite if the remaining calculation is merely ministerial. Lummus Glob. Amazonas S.A. v. Aguaytia Energy del Peru S.R. Ltda., 256 F. Supp.2d 594) (S.D. Tex. 2002). But an award that supplies a formula likely to generate further disputes must be vacated.
Fiduciary-like duty. The court agrees with the Dealership defendants that Paragraph F of the award leaves open future disputes, at least as to consent and control. The Defendant Stores bear the full cost of the Lozano defense and any settlement or judgment, while DNA Autos alone controls its own defense and settlement decisions. That gives DNA Autos sole control over how it spends the Stores’ money. The court concludes that this arrangement imposes on DNA Autos a fiduciary-like duty to act fairly toward the Stores because they must trust and rely on DNA Autos. See Tex. Bank & Tr. Co. v. Moore, 595 S.W.2s 502 (Tex. 1980), which held that an informal fiduciary duty arises in such situations. The court reasons, looking at a number of Texas decisions, that the law imposes fiduciary-like duties when control is separated from ownership. Because Paragraph F creates such a duty, future disputes may arise over how DNA Autos exercises its control.
Indemnity. The court would reach the same conclusion if it construed Paragraph F as an indemnity which shifts the burden of third-party liability. In such situations, courts ask whether an indemnitee’s settlement was reasonable before shifting its costs. Paragraph F is silent on reasonableness and could be read either to displace or preserve that limit. Resolving that ambiguity would require the court to construe the award, which it cannot do. See Flender Corp. v. Techna-Quip Co., 953 F.2d 273 (7th Cir. 1992). The court therefore vacates Paragraph F as non-final or non-definite.
Remedy. A court may, in its discretion, direct a rehearing by the arbitrator when an award is vacated and the arbitration agreement’s time limit has not expired. 9 U.S.C. Se. 10(b). The AAA Rule R-47 thirty-day time limit incorporated in the Management Agreements did not bar remand. The court nonetheless declines to remand. The problem was not a failure to decide a required issue but an attempt to adjudicate an inherently speculative future issue. Absent a final resolution of Lozano, the arbitrator, on remand, could not determine the reasonableness or lawfulness of future defense costs and settlements controlled by DNA Autos without the same degree of risk. The vacatur is without prejudice to later arbitration of the Lozano issues, for example when that litigation concludes.
Remedy. The Motion to Vacate was otherwise denied, and Dealer Nation’s Petition to Confirm is granted on all grounds except the perspective Lozano relief. The parties are directed to confer on Dealer Nation’s request for fees incurred in this proceeding and to submit a final judgment (or competing proposals).