Houston’s First Appellate District has stated an arbitrator exceeded his authority when he determined that a non-signatory to an arbitration agreement was bound to arbitrate under the agreement.  In Elgohary v. Herrera, No. 01-11-00550-CV (Tex. App. 1st March 5, 2013), Victor S. Elgohary entered into a written employment agreement with Herrera Partners, L.P., a Texas Limited Partnership with Gilbert A. Herrera as the limited partner.  The employment agreement contained a clause that required any disputes between the parties to be decided through binding arbitration.  Elgohary was subsequently terminated for cause in May 2007 and Herrera Partners was formally dissolved one month later.

After unsuccessfully pursuing a claim for unemployment compensation, Elgohary sought to compel arbitration with both Herrera Partners and Gilbert Herrera despite that Gilbert Hererra was not a signatory to the agreement.  In response, Herrera Partners filed a counterclaim against Elgohary.  In addition, Herrera stated he could not be compelled to arbitrate because he was not a signatory to the parties’ arbitral agreement.  Herrera also argued throughout the arbitral proceeding that “whether he as a non-signatory should be compelled to arbitrate was a ‘gateway matter’ for the court to decide, not the arbitrator.”

The arbitrator found that a “successors and assigns” clause in the agreement “clearly and unmistakably” incorporated Herrera as the successor to Herrera Partners.  According to the arbitrator, this rendered Herrera a proper party to the arbitration.  The arbitrator then awarded Elgohary unpaid wages and business expenses.  When Elgohary sought to confirm the arbitral award, Herrera filed an objection with the trial court.  The lower court confirmed the arbitral award as it related to Herrera Partners and vacated the award against Herrera.  Elgohary then filed an appeal with Houston’s First District.

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