The Supreme Court of Texas held that a court abused its discretion by permitting discovery instead of deciding a motion to compel arbitration. In re Houston Pipe Line Co., __S.W.3d __ (Texas 2009) (No. 08-0800) involves a gas purchase agreement between Houston Pipe Line Company, L.P. and O’Connor & Hewitt, Ltd. The agreement was based on the Houston Ship Channel Price Index (the “Index”) and contained the following arbitration clause: Except for matters within the jurisdiction of the Railroad Commission of Texas, any and all claims, demands, causes of action, disputes, controversies, and other matters in question arising out of or relating to this Agreement, any of its provisions, or the relationship between the Parties created by this Agreement . . . shall be resolved by binding arbitration pursuant to the Federal Arbitration Act. . . .If a Party refuses to . . . arbitrate, the other Party may seek to compel arbitration in either federal or state court. . . .The final hearing shall be conducted within 60 days of the selection of the third arbitrator. . . [and] shall not exceed 10 business days. A few years later, O’Connor sued Houston Pipe Line claiming manipulation of the Index, which, according to O’Connor, caused the company to receive lower payments for the gas purchased under the contract. Houston Pipe Line moved to compel arbitration. O’Connor challenged the motion arguing that “it would be impossible to identify all potential defendants and to complete damages calculations within the sixty days allotted for discovery as set out in the arbitration provision.” Instead of ruling on the motion, the trial court ordered discovery to determine: (1) if additional defendants could invoke the arbitration clause, (2) whether the claims fell within the scope of the arbitration clause, and (3) if the discovered time limits on the agreement where jurisdictional. Houston Pipe Line appealed and the Court of Appeals refused to issue writ. The Texas Supreme Court now decides whether the trial court abused its discretion by permitting discovery on damage calculations and other potential defendants, instead of ruling on the motion to compel arbitration. Citing Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006), the court stated that “[w]hen a party disputes the scope of the arbitration provision or raises a defense to the provision, the trial court, not the arbitrator must decide the issues.” Pre-arbitration discovery is authorized under the Texas Arbitration Act, the court noted, when a court lacks sufficient information on the scope of the arbitration provision, and therefore, cannot make a decision on the motion to compel arbitration. However, the court concluded that this is not the case because determinations of liability must be answered by the arbitrator. The court pointed out that a party cannot avoid arbitration by merely alleging that there may be other potential defendants. Accordingly, the court directed the trial court to vacate the discovery order and rule on the motion to compel arbitration. Technorati Tags: arbitration, ADR, law
Continue reading...To follow up on our post of last week and as reported by the ADR Prof Blog and Professor Ross Runkel’s Law Memo Arbitration Blog, the National Arbitration Forum (“NAF”) announced that is settling its lawsuit with Minnesota’s Attorney General and agrees to step aside from the credit card and consumer debt arbitration business. Lory Swanson released this statement today: National Arbitration Forum Barred From Credit Card And Consumer Arbitrations Under Agreement With Attorney General Swanson: Swanson Also Wants Congress to Ban “Fine Print” Forced Arbitration Clauses. On a related note, the U.S. Congress hearing blogged here is scheduled for Wednesday, July 22. AG Lori Swanson and Michael Kelly, National Arbitration Forum COO are invited to testify at the hearing. Related Posts: Big Arbitration Firm Pulls Our of Credit Card Business, Business Week, July 19, 2009 An AG’s Quick Victory: Arbitration Forum Exits Credit Dispute Business, ABA Journal, July 20, 2009 In Settlement, Arbitration Company Agree to Largely Step Aside, Wall Street Journal, July 20, 2009.
Continue reading...As announced by this press release, the U.S. Subcommittee on Domestic Policy will hold a hearing related to arbitration on July 22, 2009. The hearing is entitled “Arbitration or ‘Arbitrary’: The Misuse of Arbitration to Collect Consumer Debts.” Experts invited to testify include: Michael Kelly, Chief Operating Officer, National Arbitration Forum Richard W. Naimark, Senior Vice-President, International Centre for Dispute Resolution, a division of the American Arbitration Association F. Paul Bland, Staff Attorney, Public Justice Professor Christopher R. Drahozal, John M. Rounds Professor of Law, University of Kansas The Honorable Lori Swanson, Attorney General, State of Minnesota. Stay tuned to Disputing for updates on this controversial topic! Technorati Tags: arbitration, ADR, law, consumer arbitration
Continue reading...[Update: Lee Keller King currently works at this firm.] The July 2009 Edition of Texas Bar Journal titled “The Electronic Lawyer,” features the following letter to the editor written by Texas attorney Lee Keller King. Mr. King writes in response to a Texas Bar Journal article published in May 2009 (blogged here). We welcome your commentary about this post! I am one of those critics who believe that the trend in mandatory arbitration has gone too far (“The Future of Arbitration,” May, p. 352). Regarding the comment that “an advocate for less arbitration … is likely to omit that the consumer fails to even appear in the majority” of credit card arbitrations is correct, as far as it goes, but does not give the reason for the high rate of defaults. Most credit card arbitration agreements that I have reviewed (and fought on behalf of my clients) have included onerous choice of venue provisions. Is it any wonder that a consumer in Texas, who took out his credit card in Texas and used it in Texas, will be hard pressed to appear for arbitration in New Jersey? Or in New York? I think not, and I doubt if any such consumer would —in the real world — knowingly consent to such a venue provision. However, in the world of consumer arbitration, she is presumed to have consented because she is presumed to have read all the fine print in the consumer credit application she signed to get the credit card. I am not saying that arbitration does not have its place, but is it fair to impose binding arbitration on consumers who are not educated regarding the court system, much less the arbitration system? I would say that it is not, and many agree with me. I would, however, support a form of arbitration that our sister state of Arizona has found useful. In Arizona, all civil cases (except family law cases) with an amount in controversy under a certain amount ($65,000, I believe) are sent to an arbitration conducted by an attorney picked at random from the attorneys practicing in that county. If a party is dissatisfied with the result of the arbitration, that party may appeal for a trial de novo in the Superior (district) Court. Should the party that appeals the arbitration not be successful in obtaining a 23 percent more favorable result at trial, then it is liable to the nonappealing party for attorney’s fees of the defendant against the appeal, reasonable expert witnesses necessitated by the appeal, and for costs. This is something I think would also work in Texas and would allow for fair resolution of many disputes, while nonetheless reducing the case load on the courts. Lee Keller King Technorati tags: arbitration, ADR, law, Arbitration Fairness Act of 2009
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.