SAVE THE DATE to attend…

THE TEXAS ASSOCIATION OF MEDIATORS 2008 CONFERENCE

Conference by the Sea:  Reflect, Renew and Rejoice

                                                                                 Dinner on the Historic Elissa &

Many other fun, relaxing and informative events and speakers

                                                                                                Are being planned, don’t miss it!

At the Galvez Hotel on the Seawall

in beautiful Galveston, Texas

FRIDAY FEBRUARY 29

AND MARCH 1, 2008

FOR MORE INFO WWW.TXMEDIATOR.ORG

INFO and TIPS for ADR Professionals sent by Clara Gomez

Links to Resources on
Conflict Resolution

Association for Conflict Resolution
Current Publication and Updates

Baker Institute for Public Policy
 

Frank Evans Center for Conflict Resolution
South Texas College of Law

Institute for the Study of Transformative Mediation

Labor and Employment Relations Association (LERA)

LERA Houston Chapter

Nova Southeastern University
Certificate and Degree Programs in Conflict Resolution
 

Texas Association for Mediators

Texas Mediation Credentialing Association

United Nations Association - Houston Chapter

World Affairs Council - Houston Chapter

Recent ADR cases/articles, etc. from the net include…

• Religion and International Arbitration!
• Scope of ADR clause could sweep in tort claims
• Are all party-appointed arbitrators neutral?
• Requisite web disclosures my defeat unconscionability claims?
• Exclusion of evidence does not result in vacation of award.
• More on Class Arbitration prohibitions.
• Was there judicial intrusion into confidential mediation proceedings?
• Is there bias if the arbitrator knows that one party has not deposited fees?
• Failure to disclose pass business dealings may result in vacation of award.
• Are mediation documents discoverable in a separate proceeding?
• Can an arbitrator, in effect, by the award modify the contract when the arbitration clause precludes same?
• International arbitration in China!
• And other articles…
• ADR Opportunities
• More….

(Religion and International ADR!  Drafting of the arbitration agreement upheld!)

 Zeiler v. Deitsch, No. 06-1893, 06-5617 (2^nd  Circuit, August 23, 2007)
Order vacating arbitral awards made by a panel of Jewish rabbis where a panel member resigned, is reversed as: 1) the arbitration panel was entitled to continue after one member's resignation; 2) the accounting awards were properly confirmed; and 3) the enforcement order was properly entered.

http://caselaw.lp.findlaw.com/data2/circs/2nd/061893p.pdf

(Scope of ADR Clause important!  From NAF)

Third Circuit Holds Broad Arbitration Agreement Applicable to Intentional Tort Claim
Steigerwalt v. Terminix Int'l Co., No. 06-4751, 2007 WL 1780054 (3d Cir. June 21, 2007)
6/21/2007

(Another drafting problem?  No arbitral rules cited in the opinion. And the contract did not preclude non-neutral arbitrators in party-appointed situations!  From NAF)

Eighth Circuit: Party-Appointed Arbitrators Need Not Be Neutral
Winfrey v. Simmons Food, Inc., No. 06-3353, 2007 WL 2050833 (8th Cir. July 19, 2007)
7/19/2007    

In upholding a unanimous arbitration award in favor of a group of poultry growers, the Eighth Circuit Court of Appeals explained that party-appointed arbitrators need not be neutral. However, as the Court noted, "evident partiality" may be a basis for vacating an arbitration award if the alleged bias of a party-appointed arbitrator had a prejudicial impact on the award.

In Winfrey v. Simmons Food, Inc., No. 06-3353, 2007 WL 2050833 (8th Cir. July 19, 2007), a group of poultry growers (the Growers) sued Simmons Food (Simmons) for damages under the Packers and Stockyards Act. The district court ordered the parties to submit the dispute to arbitration in accordance with an arbitration clause in their contract....

  http://caselaw.lp.findlaw.com/data2/circs/8th/063353p.pdf

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 (Disclosure of fees, rules, etc. on website defeat this “unconscionability” claim.  From NAF)

Court Finds No Hidden Costs in Franchise Contract and Enforces Arbitration Agreement

A federal district court in Texas found no "hidden costs" that would render a franchise agreement arbitration clause substantively unconscionable where the arbitration administrator displayed the arbitration fees on its website.

In Wasserman v. We The People Forms and Service Centers USA, Inc., No. 3:07-CV-0606-D, 2007 WL 2228617 (N.D. Tex. Aug. 3, 2007), Wasserman and We The People Forms ("We The People") entered into a franchise agreement that contained an arbitration clause. Wasserman filed suit against We The People for breach of contractual obligations under the franchise agreement.

In response, We The People moved to stay litigation pending arbitration. The Court granted the motion rejecting Wasserman's challenges to the validity of the arbitration agreement.

Wasserman contended that the "hidden costs" of arbitration rendered the clause substantively unconscionable. The Court disagreed, noting that the clause plainly disclosed that arbitration will be conducted under the American Arbitration Association (AAA) rules, each party will bear their own costs and expenses, and each party will pay one-half of administrative fees.

Additionally, a complete listing of the AAA's arbitration rules and specific costs are readily available on the AAA website. The Court did not find any substantive unconscionability in making both parties bear the costs equally, nor did it find any indication that the arbitration clause provided We The People with access to any additional remedies beyond those available to Wasserman.

Wasserman also argued that the clause was procedurally unconscionable because We The People denied Wasserman the 10-day cooling-off period granted under state and federal franchise law. The Court concluded that any violation of the 10-day cooling-off period would be insufficient to render the clause unenforceable. Under California law, a contract provision must be both substantively and procedurally unconscionable in order to be unenforceable.

(When does the arbitrator “rightfully step up to the plate” and exclude evidence?  From NAF)

Eleventh Circuit Upholds Arbitrator's Refusal to Hear Irrelevant Evidence
Rosensweig v. Morgan Stanley & Co., No. 05-15325, 2007 WL 2265515 (11th Cir. Aug. 9, 2007)
8/9/2007

Arbitrators enjoy wide latitude in conducting arbitration proceedings, and evidence that is irrelevant or cumulative may be rejected so long as it does not prejudice the rights of the parties, says the Eleventh Circuit Court of Appeals.

In Rosensweig v. Morgan Stanley & Co., No. 05-15325, 2007 WL 2265515 (11th Cir. Aug. 9, 2007), Rosensweig was employed by Morgan Stanley. As an experienced securities broker, Rosensweig brought client information with him, which was organized in a computer program called Broker's Ally....

(When are ex parte communications permitted—know the local rules even if not an attorney!?

(Is the court “required” to follow the arbitrability ruling of the arbitrators?)

Where trial court ruled that certain claims were subject to compelled arbitration, but arbitrators ruled they were not arbitrable, trial court correctly reconsidered its first ruling and ordered that those claims be heard in the trial court.
     Clark v. First Union Securities, Inc. - filed August 10, 2007, Second District, Div. Three
     Cite as 2007 SOS 5027
     Full text http://www.metnews.com/sos.cgi?0807%2FB189589A

(Judicial intrusion into the mediation process?)

JM Agency, Inc. v. NAS Financial Service, Inc., 2007 WL 2215393 (N.J.

Super.A.D., August 3, 2007).

“JM Agency sought recovery of commission for producing a client for NAS

Financial. The parties went to mediation but could not agree on the terms

of a written settlement, specifically an admission of liability by NAS.

NAS moved to enforce what it believed to be settlement terms and the trial

court granted the motion. JM Agency appealed. The appeals court

reversed, finding that JM Agency never intended to be bound to an

agreement without an admission of liability by NAS. Further, the court

stated that the trial judge erred in requiring JM Agency to adequately

explain why it required the stipulation of liability and why it found that

(When the check is not in the mail!  From NAF)

Third Circuit: No Bias Where Arbitrators May Have Learned a Party Intended to Not Pay Arbitration Fee
HSM Construction Services, Inc. v. MDC Systems, Inc., No. 06-2584, 2007 WL 2030278 (3rd Cir. July 16, 2007)
7/16/2007

In affirming confirmation of an arbitration award, the Third Circuit Court of Appeals held that a party is bound by an arbitration award when its actions clearly evince an objective intention to become a party to the arbitration. Additionally, the mere fact an arbitration panel may have learned a party intended not to pay the arbitration fee did not establish that the arbitrators had a financial stake in the arbitration's outcome.

In HSM Construction Services, Inc. v. MDC Systems, Inc., No. 06-2584, 2007 WL 2030278 (3rd Cir. July 16, 2007), HSM hired MDC to prepare expert engineering reports. HSM failed to pay MDC, claiming MDC provided an unusable expert disclosure report. In response, MDC filed an arbitration claim. During arbitration, HSM Management argued it was not a party to the contract. The arbitration panel found HSM Construction and HSM Management jointly and severally liable for $86,969... 

(If the clause requires election of arbitration, the timeframe may be binding, too!)

Abel Homes at Naranja Villas v. Hernandez from the Third  District Court of Appeal of Florida (No. 3D07-728, filed July 18, 2007) “discusses when the right to  arbitrate is waived by failure to comply with the time limitations to  seek arbitration under a contract provision.”   

Applied Industrial Materials Corporation v. Ovalar Makine Ticaret Ve

 Sanayi, A.S., 2007 WL 1964955 (2nd Cir., July 9, 2007.)

 “Applied Industrial Materials Corporation (AIMCORP) and Ovalar Makine

 Ticaret Ve Sanayi (Ovalar) entered into a joint venture where AIMCORP

 supplied Ovalar with a petroleum product. Disputes rose over distribution

 of the profits, and arbitration by a 3-person panel was held. The

 arbitrators were required to disclose conflicts of interest. In 2003 the

 panel was informed of the sale of AIMCORP to a new parent company which

 had business dealings with a company belonging to one of the arbitrators.

 The panel subsequently found for AIMCORP in a 2-1 decision. Ovalar

 subsequently asked the conflicted arbitrator to recuse himself, but the

 request was refused. Ovalar then asked the district court to vacate the

 award, and the court granted to this motion based on the appearance of

 partiality or bias on the part of the arbitrator, leading to this appeal

 by AIMCORP. The 2d Circuit held that once an arbitrator is aware of a

 potential conflict, there is a duty to investigate further, and failure to

 do so is “evident partiality.” Had the arbitrator in question

 investigated, he would have discovered over $275,000 in dealings between

 his company and one of the parties, a significant conflict in the eyes of

 the court.”  The award is vacated.

http://caselaw.lp.findlaw.com/data2/circs/2nd/063297p.pdf

Three S Delaware, Incorporated v. Dataquick Information Systems,

 Incorporated, 2007 WL 2004454 (4th Cir., July 12, 2007).

 “Dataquick Information Systems, Inc. entered an agreement to lease their

 database to Three S Delaware, Inc. (3S) as a part of the 3S software.

 Dataquick received the greater of two amounts every month: a minimum

 payment or a per transaction cost. Three S claimed the transactions were

 never greater than the minimum monthly payment. Three S failed to pay and

 Dataquick terminated the agreement and sued for damages. Pursuant to the

 agreement, arbitration was compelled. During arbitration, Dataquick

 submitted testimony by the owner of 3S from a previous case in which 3S

 sued First Union National Bank. Three S was awarded $37 million in

 damages in that case. The testimony revealed the Dataquick database was

 used more than 3S reported to Dataquick and would have required 3S to pay

 Dataquick by the transaction instead of a monthly minimum. Three S did

 not participate in the arbitration. The arbitrator ruled for Dataquick

 and awarded damages including 10% of 3S’ recovery from First Union. The

 district court denied 3S’ motion to vacate the award and 3S appealed. The

 Fourth Circuit affirmed. The arbitration award could include a percentage

 of the First Union/3S damages since unjust enrichment was contemplated in

 the agreement, and 3S’ recovery was based on the use of Dataquick’s

 database. Thus, the arbitration award was drawn from the essence of the

 agreement.”

http://caselaw.lp.findlaw.com/data2/circs/4th/061227p.pdf

(Mediation documents (for another proceeding) “may” be discoverable!  What if the subsequent proceeding is an arbitration?  Should the judge be able to review the “documents?”)

Bradley v. Fontaine Trailer Co., Inc., 2007 WL 2028115 (D.Conn., July 10,

 2007).

 “Fontaine Trailer sought to compel disclosure of confidential mediation

 documents between Bradley and a third party relating to a fatal traffic

 accident involving all parties. Bradley agreed to provide copies of

 releases from the third party and settlement agreements, but refused to

 provide other mediation materials. The Connecticut District Court

 reviewed the materials in camera. The court held that, pursuant to

 Connecticut statutes, the court has to weigh the interest in justice

 that would result from disclosure of the mediation materials against the

 need for confidentiality of such mediation materials. The court’s in

 camera review confirmed Bradley’s statements that the mediation documents

 did not contain any information Fontaine. By reviewing the materials in

 camera, the District Court determined that the materials were not likely

 to lead to relevant evidence under Federal Rule of Civil Procedure 26 and

 their use could be prohibited under Rule 408 of the Federal Rules of

 Evidence.”

Gury Company v. Nippon Carbide Industries (USA) Inc., 2007 WL 1874245

 (Cal.App. 2 Dist., June 29, 2007).

 “Gury Company (“Gury”) bought reflective sheeting from Nippon Carbide

 Industries Inc. (“Nippon Carbide”) to produce reflective signs. The sales

 contract contained an arbitration clause, a warranty disclaimer, and a

 consequential damage exclusion. Gury claimed Nippon Carbide’s sheeting

 was defective and sought reimbursement. Nippon Carbide refused the

 reimbursement and the parties entered arbitration. The arbitrator ruled

 in Gury’s favor, found the warranty disclaimer and consequential damage

 exclusion were unconscionable and awarded consequential damages to Gury.

 Gury and Nippon Carbide filed petitions to confirm and vacate,

 respectively, in trial court. The trial court confirmed the decision.

 Nippon Carbide appealed, claiming the arbitrator exceeded his powers.

 While the arbitration clause did limit the arbitrator’s power to modify or

 alter the terms of the contract, the Appeals Court ruled that the Nippon

 Carbide waived the limitation because they did not raise the argument

 during the arbitration and were barred from arguing such on appeal.”

http://www.metnews.com/sos.cgi?0707%2FB194926

 Adam and Eve, LLC v. Yantai North Adre Juice Co. LTD, 2007 WL 1791647,

 (E.D.N.Y., June 20, 2007.)

 “Adam and Eve (AE) and Yantai, a Chinese corporation, negotiated a supply

 contract in New York where Yantai produced apple juice and AE sold the

 juice. The contract included an arbitration clause stating that the rules

 of an arbitration organization in the defendant’s country would be

 controlling, but no specific Chinese arbitration organization was

 specified. Yantai breached the contract, AE sued in New York and Yantai

 removed the case to federal court, moving to compel arbitration in China.

 AE argued that because the clause did not name an arbitration organization

 as required by Chinese arbitration law, the clause was invalid, and asked

 for arbitration in New York. The Court held that the New York Convention

 on the Recognition and Enforcement of Foreign Arbitral Awards applied.

 Therefore, the Court was required to compel arbitration in China and could

 not decide Chinese law for the parties when Chinese courts were available

 to do so.”

 (Again, Federal court jurisdiction rests on the amount of the original claim)

Choice Hotels International, Inc., v. Shiv Hospitality, LLC, 2007 WL

 1763536 (4th Cir., June 20, 2007).

 “Choice Hotels (Choice) and Shiv Hospitality (Shiv) entered into a

 franchise agreement in 1998. Shiv defaulted on the agreement and the

 relationship was terminated in June 2000. Choice filed suit in district

 court for $116,432.28 in damages. Shiv moved to dismiss, the motion was

 denied, and Shiv appealed, claiming the case was subject to the

 arbitration agreement in the franchise contract. While on appeal, the

 court decided a similar case and remanded this case in light of their

 decision requiring arbitration. The district court ordered arbitration

 and Choice Hotels was awarded $59,208.75. Nine months later, Choice moved

 to reopen the case in district court and confirm the award. Shiv opposed

 the confirmation and asked for $36,935 in attorney fees and costs. Shiv

 claimed the district court lacked subject matter jurisdiction because

 Choice’s award was less than $75,000 and that he was contractually

 entitled to attorney fees. The district court affirmed the award stating

 the amount in controversy was $96,143.75 consisting of Choice’s award and

 Shiv’s demand for attorney fees. The court also held Shiv’s arguments on

 the merits were time barred by the FAA because it did not challenge the

 award within three months of the award. On appeal, the Fourth Circuit

 held that Shiv’s claim was time barred and the court did have subject

 matter jurisdiction. The original claim filed in the district court was

 for over $75,000 and was stayed for arbitration, thus the amount of the

 arbitration award was irrelevant in determining jurisdiction.”

_____________________________________________________

Ombuds position posted at the University of California, Santa Barbara

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