by Jeremy Clare The Court of Appeals for the 1st District of Texas at Houston affirmed two summary judgment orders regarding the enforceability of a rule 11 agreement and the right to prepay under the agreement. Background In General Metal Fabricating Corporation GMF v. Stergiou, No. 01-11-00460-CV (Tex. App.—Houston [1st Dist.] May 24, 2012), Arnold Curry, General Metal Fabricating Corporation, and GMF Leasing, Inc. (“GMF”) and John Stergiou and Main Marine Repair and Industrial Cleaning Company (“Stergiou”) were in a dispute over ownership of shares of GMF stock for more than a decade. After several rounds of litigation, the parties agreed to interlocutory appeal of two summary judgment orders. The first order concluded that a rule 11 agreement agreed upon by the parties was an enforceable settlement agreement. The second order concluded that the rule 11 agreement did not confer any right to prepay the future payments owed according to the agreement. GMF and Stergiou reached a settlement during the second trial of the dispute and executed a rule 11 agreement. According to the agreement, Curry (GMF’s representative) would pay Stergiou $300,000 in return for the stock. Under the agreement’s terms, payment would be in the form of a promissory note with a $20,000 down payment and installment payments of $4,000 of principal and interest every month thereafter. GMF eventually tendered one cashier’s check for $20,000 and another for $280,000 to Stergiou. Stergiou rejected the payments. The parties then disputed the effect and terms of the rule 11 agreement. They agreed to resolve their dispute by summary judgment. The trial court determined that the rule 11 agreement was enforceable but did not permit prepayment. The parties then agreed to interlocutory appeal on two issues: (1) whether the rule 11 agreement is an enforceable agreement and (2) whether GMF had the right to prepay its debt under the agreement. Court of Appeals Stergiou challenged the trial court’s determination that the rule 11 agreement was enforceable. It contended that (1) the parties never achieved anything more than an agreement to agree, (2) that compliance with the agreement could not be ordered because its terms are too indefinite, and (3) that the agreement did not satisfy the statute of frauds. Addressing Stergiou’s first contention, the Court interpreted the agreement according to contract law. Stergiou argued that the agreement does not provide enough information regarding the documents necessary to execute the agreement (i.e. the promissory note, deed of trust, security agreement, and financing statement) and is not a valid contract. The Court concluded that the agreement did include all essential terms because rule 11 settlement agreements that contain terms of payment and release of claims contain all material terms as a matter of law. The particular terms of the additional documents were not required. Furthermore, the parties’ behavior on the record indicated that they believed the agreement was binding. Therefore, the agreement was not an unenforceable agreement to agree. Similarly, in response to Stergiou’s second contention, the Court concluded that the terms of the agreement are not so indefinite as to preclude its enforcement. Stergiou contended that the agreement cannot be enforced until the additional documents were executed. The Court disagreed. The agreement set forth the amounts to be paid for the stock and how and when the payments were to be made. Stergiou also argued that the agreement did not satisfy the statute of frauds because the real property offered as security in the agreement was not sufficiently described. The Court first questioned whether the statute of frauds was applicable to the agreement but ultimately concluded that even if the statute of frauds did apply, the agreement satisfied it. The Court noted that the statute of frauds does not require a complete description of the land in a single document. Rather, the complete description may be obtained from documents prepared throughout the transaction. The Court concluded that the various deeds of trust and draft security agreements contained sufficient descriptions of the real property. Thus, the Court determined that the rule 11 agreement was enforceable. GMF contended that the trial court erred in the second summary judgment order determining that they had no right to prepay the full $300,000. GMF argued that the particular language used in the agreement to allow for payment of the $20,000 down “on or before” a certain date allowed for prepayment of the entire $300,000. The Court disagreed. Because the language in the agreement was not ambiguous, the Court construed it according to the plain meaning of the express wording used. A plain, literal reading of the agreement compelled the Court to conclude that there was no right of prepayment of the continuing monthly payments. Therefore, the Court affirmed the trial court’s two summary judgment orders. Jeremy Clare is a law clerk at Karl Bayer, Dispute Resolution Expert. Jeremy received his J.D. from the University of Texas School of Law in 2012 and received a B.A. from the University of South Carolina where he studied political science.

by Holly Hayes One month ago, we started our health care conflict resolution series (see Part I, Part II, Part III, and Part IV) focusing on the Roger Fisher, William Ury Getting to YES principled negotiation method involving: 1. Separating the people from the problem. 2. Focusing on interests, not positions. 3. Generating a variety of possibilities before deciding what to do. 4. Insisting that the result be based on some objective standard. Our final post in this series focuses on “using objective criteria.” In almost any negotiation, no matter how many options are generated to “split the pie,” there is still going to be a conflict of interests. As seen in our previous posts, the physician wants to continue his vacation and the nurse on the unit wants him to sign his verbal orders per hospital policy, the radiology director wants to decrease patient complaints and the technician wants to be heard so he can be part of the solution, the physician wants to sell his practice for a high price and the hospital wants to purchase it for a low price, the ED manager wants housekeeping to help with the cleaning and housekeeping wants to work within its budgeted number of staff. In each situation, there are objective criteria that can be used to decrease the likelihood that the negotiation will become just a contest of wills and the ongoing relationship can be saved. Objective standards allow both parties to commit to reaching a solution based on principle, not pressure. In our examples, objective criteria could be hospital policy, regulatory standards, industry standards, standards used by local hospitals or physician groups or budgetary constraints. As the parties begin the process of identifying objective criteria, they can: 1. Jointly search for reasonable criteria. 2. Be open to the most appropriate standards and how they can be applied. 3. Never yield to pressure from the other party, but defer to objective standards. Pressure can take many forms: bribes, threats, manipulative appeals to trust or a simple refusal to back down. The principled response in each of these situations is the same: invite the other party to state their reasoning, suggest objective criteria that may apply and finally, refuse to budge except on the basis of objective criteria. This is the final post in our series on using the principled negotiation method in health care conflict. Look for future posts on Disputing on utilizing proven conflict resolution techniques specifically in health care. We invite your comments on this post and any suggestions for upcoming posts.   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.

by Michael McIlwrath The new international survey on arbitral practices has just been released. This iteration (the 4th), conducted by the School of International Arbitration of Queen Mary University and White & Case, captured responses from 710 in-house counsel, external counsel specialists, and arbitrators. It sought to answer these questions: to what extent are truly harmonized practices emerging in international arbitration? And if such practices are emerging, do they reflect the preferred practices of the international arbitration community? Some of the results provided with the Executive Summary of the survey are the following:   Selection of arbitrators ?? A significant majority of respondents (76%) prefer selection of the two co?arbitrators in a three-member tribunal by each party unilaterally. This shows that the arbitration community generally disapproves of the recent proposal calling for an end to unilateral party appointments. ?? There has been a long-standing debate about whether pre-appointment interviews with arbitrators are appropriate. The survey reveals that two-thirds of respondents have been involved in them,1 and only 12% find them inappropriate. The chief disagreement is not on whether such interviews are appropriate, but on the topics that may properly be discussed. ?? Almost three-quarters of respondents (74%) believe that party-appointed arbitrators should be allowed to exchange views with their appointing party regarding the selection of the chair.   Organising arbitral proceedings ?? The IBA Rules on the Taking of Evidence in International Arbitration (‘the IBA Rules’) are used in 60% of arbitrations: in 53% as guidelines and in 7% as binding rules. In addition, a significant majority of respondents (85%) confirm that they find the IBA Rules useful. ?? The most effective methods of expediting arbitral proceedings are (in order) ‘identification by the tribunal of the issues to be determined as soon as possible after constitution’, ‘appointment of a sole arbitrator’, and ‘limiting or excluding document production’.   Document production ?? Requests for document production are common in international arbitration: 62% of respondents said that more than half of their arbitrations involved such requests. ?? The survey confirms the widely held view that requests for document production are more frequent in the common law world: 74% of common lawyers, compared to only 21% of civil lawyers, said that 75-100% of their arbitrations involved such requests. ?? Notwithstanding the differing traditional approaches to document production in civil and common law systems, the survey reveals that 70% of respondents believe that Article 3 of the IBA Rules (‘relevant to the case and material to its outcome’) should be the applicable standard for document production in international arbitration.   Pleadings and hearings ?? Not only does sequential exchange of substantive written submissions occur much more regularly (82%) than simultaneous exchange (18%), there is also a strong preference for this type of exchange (79%). ?? The survey reveals that only a small minority (15%) of merits hearings are held outside the seat of arbitration. ?? The most common duration of a final merits hearing is 3-5 days (53%), followed by 6-10 days (23%), 1-2 days (19%) and 10+ days (5%). ?? Civil lawyers have traditionally claimed that their hearings are shorter than those of common lawyers – the survey confirms this to be true. 31% of civil lawyers said the average duration of their merits hearings was 1-2 days, compared to only 9% of common lawyers. ?? Time limits are imposed for oral submissions and/or examination of witnesses in two-thirds of arbitration hearings. Most respondents prefer some form of time limits (57%), while only 6% prefer no time limits at all (34% said it depends on the case).   The arbitral award and costs ?? How long should a tribunal take to render an award? For sole arbitrators, two-thirds of respondents believe that the award should be rendered within 3 months after the close of proceedings. For three-member tribunals, 78% of respondents believe that the award should be rendered either within 3 months (37%) or in 3 to 6 months (41%). ?? A common criticism of arbitration is that tribunals unnecessarily ‘split the baby’. Overall, respondents believe this has happened in 17% of their arbitrations, while those actually making the rulings – the arbitrators – said this occurs in only 5% of their arbitrations. ?? Tribunals allocate costs according to the result in 80% of arbitrations, and leave parties to bear their own costs and half the arbitration costs in 20% of arbitrations. However, only 5% prefer this latter approach, which shows there is a desire for tribunals to allocate costs according to the result even more frequently than they are currently doing. ?? An overwhelming majority of respondents (96%) believe that improper conduct by a party or its counsel during the proceedings should be taken into account by the tribunal when allocating costs. This sends a strong message to arbitrators that they are expected to penalise improper conduct when allocating costs. MICHAEL MCILWRATH is Senior Counsel, Litigation, for the GE Oil & Gas Division in Florence, Italy. His experience in international arbitration includes representing the company in disputes under the rules of various international and regional arbitration institutions and under ad hoc procedures around the world, and in coordinating the activities of outside counsel in domestic court and arbitral proceedings. He has published numerous articles in the fields of international arbitration, mediation, and negotiation, and is co-author, with John Savage, of International Arbitration and Mediation: A Practical Guide (Kluwer Law International). Michael is a member of the European Advisory Committee of CPR, and acted as an industry representative to the European Commission (Justice) in the creation of a European ADR Code of Conduct. He was Chair of the International Mediation Institute (IMI), in 2009. In addition, he was the co-vice chair with mediator Judith Meyer (and chair, Singapore ambassador at large Tommy Koh) of the IMI Independent Standards Committee. He is also a member of the board of directors of the National Center for Science Education, in Oakland, California.

  Professor S.I. Strong (University of Missouri School of Law) has published “Does Class Arbitration ‘Change the Nature’ of Arbitration? Stolt-Nielsen, AT&T and a Return to First Principles,” 17 Harvard Negotiation Law Review 201 (2012). The abstract is: In Stolt-Nielsen S.A. v. AnimalFeeds International Corp., the United States Supreme Court stated that class arbitration “changes the nature of arbitration,” an idea that was also reflected in the Supreme Court’s subsequent decision in AT&T Mobility LLC v. Concepcion. Certainly class proceedings do not resemble the traditional view of arbitration as a swift, simple, and pragmatic bilateral procedure with few witnesses, documents, or formalities, but do these types of large-scale disputes violate the fundamental nature of the arbitral procedure? This article answers that question by considering the jurisprudential nature of arbitration and determining whether and to what extent class arbitration fails to meet the standards necessary for a process to qualify as “arbitration.” During the course of the discussion, the article analyzes the ways in which class arbitration differs from other forms of multiparty arbitration and investigates whether a form of “quasi-arbitration” is in the process of developing as a means of responding to the demands of class proceedings. The full article may be downloaded here. Other scholarly papers by Professor S.I. Strong are here.