The United States District Court for the Southern District of Texas, Houston Division held that an arbitration agreement naming the National Arbitration Forum (NAF) as the arbitrator was unenforceable because NAF (now unavailable) was an integral part of the arbitration provision. In Ranzy v. Extra Cash of Texas, No. H-09-3334, 2010 U.S. Dist. LEXIS 22551 (S.D. Tex. March 11, 2010), the arbitration clause at issue stated, AGREEMENT TO ARBITRATE ALL DISPUTES: You and we agree that any and all claims, disputes, or controversies between you and us and/or the lender, any claim by either of us against the other and/or the lender (or the employees, officers, directors, agents or assigns of the other or the lender) and any claim arising from or relating to your Credit Services and Loan Application, any LOC [Letter of Credit] issued by the CSO [Credit Services Organization] on your behalf, the loan documents that govern your obligations for any loan that you obtain or have previously obtained or later obtain, this CSO Agreement, this Agreement to Arbitrate All Disputes, collection of any loan or loans, collection of any LOC that the CSO issued on your behalf, or alleging fraud or misrepresentation, whether under the common law or pursuant to federal, state or local statute, regulation, or ordinance, including all disputes as to the matters, subject to arbitration, or otherwise, shall be resolved by binding individual (and not class) arbitration by and under the Code of Procedure of the National Arbitration Forum (“NAF”) in effect at the time the claim is filed. This agreement to arbitrate all disputes shall apply no matter by whom or against whom the claim is filed. Rules and forms of the NAF may be obtained and all claims shall be filed at any NAF office, or on the World Wide Web at www.arb-forum.com, by telephone at 800-474-2371, or at “National Arbitration Forum, P.O. Box 50191, Minneapolis, Minnesota 55405-0191.” Your arbitration fees may be waived by the NAF in the event you cannot afford to pay them. The cost of a participatory hearing, if one is held at your or our request, will be paid for solely by us if the amount of the claim is $ 15,000 or less. Unless otherwise ordered by the arbitrator, you and we agree to equally share the costs of a participatory hearing if the claims is for more than $15,000 and less than $ 75,000. Any participatory hearing will take place at a location near your residence. This arbitration agreement is made pursuant to a transaction involving interstate commerce. It shall be governed by the Federal Arbitration Act, 9 U.S.C. Sections 1-16. Judgment upon the award may be entered by any party in any court having jurisdiction. The first issue decided by the court was whether section 5 of the Federal Arbitration Act (FAA) authorizes the court to name a substitute arbitrator. The court stated, Although the FAA was designed “to overrule the judiciary’s long-standing refusal to enforce agreements to arbitrate,” it “does not require parties to arbitrate when they have not agreed to do so.” Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468, 478, 109 S. Ct. 1248, 103 L. Ed. 2d 488 (1989) (citations omitted). The FAA “simply requires courts to enforce private negotiated agreements to arbitrate, like other contracts, in accordance to their terms.” Id. The FAA does, however, provide for the court to appoint an arbitrator under certain circumstances. Section 5 of the FAA provides: If in the agreement provision be made for a method of naming or appointing an arbitrator or arbitrators or an umpire, such method shall be followed; but if no method be provided therein, or if a method be provided and any party thereto shall fail to avail himself of such method, or if for any other reason there shall be a lapse in the naming of an arbitrator or arbitrators or umpire, or infilling a vacancy, then upon the application of either party to the controversy the court shall designate and appoint an arbitrator or arbitrators or umpire, as the case may require, who shall act under the said agreement with the same force and effect as if he or they had been specifically named therein; and unless otherwise provided in the agreement the arbitration shall be by a single arbitrator. In determining whether NAF was an integral part of the arbitration agreement, the court concluded: In the present case, the court need not determine whether § 5 is applicable when a chosen arbitrator becomes unavailable because the NAF was clearly an integral part of the arbitration provision. “Arbitration agreements are subject to the same rules of construction used to interpret contracts.” Harvey v. Joyce, 199 F.3d 790, 794 (5th Cir. 2000). However, any ambiguities must be resolved in favor of arbitration. Id. To determine whether a named arbitrator is an integral part of the arbitration agreement, the court must look to the “essence” of the arbitration agreement. Grant, 678 S.E.2d at 439 (citations omitted). In this case, the plain language of the arbitration provision in both the Note and the Arbitration Agreement explicitly states that all disputes “shall be resolved . . . by and under the Code of Procedure of the [NAF].” Dkt. 15, Exs. 1, 2. Additionally, “all claims shall be filed at any NAF office,” or on the NAF web site. Id. This is mandatory, not permissive language and evinces a specific intent of the parties to arbitrate before the NAF. See Reddam, 457 F.3d at 1059-61 (outlining criteria for courts to use in determining whether the selection of a specific arbitrator is integral to the arbitration clause and noting, that at a minimum, the arbitrator must be expressly named); Carideo v. Dell, No. C06-1772JLR, 2009 U.S. Dist. LEXIS 104600, 2009 WL 3485933, *4 (W.D. Wash. Oct. 26, 2009) (arbitration provision that provided that disputes “shall be resolved exclusively and finally by binding arbitration administered by the NAF” was sufficient to find the NAF […]
Continue reading...It has been a long road for Mr. and Mrs. Cull. Here are the facts of the case: In 1996, the Culls bought a home from home builder Perry Homes and warranties from Home Owners Multiple Equity, Inc. and Warranty Underwriters Insurance Company. In 2000, the Culls sued the warranty companies over problems with their house foundation and construction. They claimed that their home had defects that caused its appraised value to plummet from more than $233,000 when they bought it in 1996 to $41,000 by 2001. Days before the case was scheduled for trial, however, the Culls moved to compel arbitration (pursuant to an arbitration clause in their warranty agreement). This was 14 months after the suit. The trial court reluctantly granted the motion to compel arbitration in December 2001. So, the case was submitted to arbitration. After a year in arbitration, on December 24, 2002, the arbitrator awarded the Culls $800,000, including restitution of the purchase price of their home ($242,759), mental anguish ($200,000), exemplary damages ($200,000), and attorney’s fees ($110,000). After the arbitrator found for the Culls, Perry Homes and the other defendants claimed that the couple had waived their right to arbitrate and resisted confirmation of the award. The district and appellate courts ruled against Perry Homes. Perry Homes appealed the judgment to the Texas Supreme Court. In 2008 the Texas Supreme Court ruled in favor of Perry Homes and vacated the arbitral award. Perry Homes, et al. v. Robert E. Cull and S. Jane Cull. (find our discussion of the case here) The case made the headlines (read more here and here) because rarely do arbitration awards get vacated and all Texas Supreme Court Justices had received campaign contributions from Perry Homes. So, the case was sent back to the court system. On March 1, 2010 a 236th district court jury (in Fort Worth, Texas) awarded the Culls more than $58 million in damages, including $44 million in punitive damages. Cull and Cull v. Perry Homes, et al. (read more here, here and here). So, the case was sent to court-ordered mediation. In mid-March, 2010 the mediation post-verdict failed and no settlement was reached between the Culls and the companies. (read more here) The next step is a hearing to enter the judgment. At the time of this writing, the case has not been appealed. Stay tuned to Disputing for more updates on this case. Technorati Tags: law, ADR, arbitration
Continue reading...Need CLE credits? The Houston Bar Association and the Frank Evans Center for Conflict Resolution at South Texas College of Law will host their Annual Conference on ADR on Friday, April 30, 2010. The all-day conference will take place at South Texas College of Law. The program looks very interesting. Peter S. Vogel, trial partner at Gardere Wynne Sewell LLP and contributor of this blog will present “eMediation and Special Masters in eDiscovery: A New Role for Mediation.” The brochure with more information is here. Technorati Tags: law, ADR, arbitration
Continue reading...By Holly Hayes The Lucian Leape Institute at the National Patient Safety Foundation released a report entitled “Unmet Needs:Teaching Physicians to Provide Safe Patient Care.” The report concludes that “[U.S.] medical schools are not doing an adequate job of facilitating student understanding of basic knowledge and the development of skills required for the provision of safe patient care.” The report’s 12 recommendations center on three main themes: Medical schools and teaching hospitals need to create learning cultures that emphasize patient safety, model professionalism, encourage transparency, and enhance collaborative behavior. They should have zero tolerance policies for egregious disrespectful or abusive behavior. Medical schools should teach patient safety as a basic science and ensure that students develop interpersonal and communication skills through experiences working in teams with nursing, pharmacy, and other professional students. Medical schools and teaching hospitals need to launch intensive faculty development programs to enable all faculty to acquire sufficient patient safety knowledge and to develop the interpersonal skills in teamwork and collaboration that permit them to function effectively as teachers and role models for students. A focus on teaching communication, teamwork, and conflict resolution skills in medical schools can be a major step toward more effective patient safety. We welcome your comments on this topic. Holly Hayes is a mediator at Karl Bayer, Dispute Resolution Expert where she focuses on mediation of health care disputes. Holly holds a B.A. from Southern Methodist University and a Masters in Health Administration from Duke University. She can be reached at: holly@karlbayer.com.
Continue reading...Disputing is published by Karl Bayer, a dispute resolution expert based in Austin, Texas. Articles published on Disputing aim to provide original insight and commentary around issues related to arbitration, mediation and the alternative dispute resolution industry.
To learn more about Karl and his team, or to schedule a mediation or arbitration with Karl’s live scheduling calendar, visit www.karlbayer.com.
Disputing is published by Karl Bayer, a dispute resolution expert based in Austin, Texas. Articles published on Disputing aim to provide original insight and commentary around issues related to arbitration, mediation and the alternative dispute resolution industry.
To learn more about Karl and his team, or to schedule a mediation or arbitration with Karl’s live scheduling calendar, visit www.karlbayer.com.