The Texas Fourteenth Court of Appeals affirmed the trial court’s denial of confirmation of an arbitral award. In AMOCO D.T. Co.v. Occidental Petroleum Corp., NO. 14-09-00651-CV, (Tex. App.–Houston [14th Dist.] May 17, 2011, Amoco D.T. Company (“Amoco”) and Shell Land & Energy Company (“Shell”) entered into a purchase-and-sale agreement with Occidental Petroleum Corporation (“Oxy”). Pursuant to the agreement, Oxy made a demand for arbitration to resolve a contract dispute, and the case was submitted to arbitration under the Federal Arbitration Act (“FAA”). The arbitration panel was comprised of Shannon Ratliff (selected by Oxy), Thomas McDade (selected by Shell), and George Chapman (selected by Ratliff and McDade). During the course of the pre-arbitration proceedings, McDade left his law firm, McDade & Fogler, and became “of counsel” with the firm of Beck, Redden, & Secrest, L.L.P. (“Beck Redden”). In a two-to-one decision, the arbitration panel ruled for Shell. Subsequently, Oxy discovered undisclosed information pertaining McDade’s and Beck Redden’s relationships with Shell. Shell filed suit in district court to confirm the arbitral award. On the other hand, Oxy moved to vacate the award based on the arbitrator’s evident partiality. The trial court determined the evidence established evident partiality and vacated the arbitration award. Shell now appeals. The court of appeals first cited the U.S. Supreme Court’s evident-partiality decision, Commonwealth Coatings Corp. v. Continental Casualty Co., 393 U.S. 145 (1968). In Commonwealth Coatings, the court said, a supposedly neutral arbitrator failed to disclose that one of the parties to the arbitration was a regular customer of his engineering-consulting services, including on the projects underlying the parties’ dispute. The court then cited Justice Black: It is true that arbitrators cannot sever all their ties with the business world, since they are not expected to get all their income from their work deciding cases, but we should, if anything, be even more scrupulous to safeguard the impartiality of arbitrators than judges, since the former have completely free rein to decide the law as well as the facts and are not subject to appellate review. We can perceive no way in which the effectiveness of the arbitration process will be hampered by the simple requirement that arbitrators disclose to the parties any dealings that might create an impression of possible bias. Next, the court mentioned Burlington N. R.R. Co. v. TUCO, Inc., 960 S.W.2d 629, 632 (Tex.1997) decided by Texas Supreme Court. Tuco dealt with an arbitration award for evident partiality under the Texas General Arbitration Act (“TAA”). In Tuco, the Texas Supreme Court clarified that standard for evident partiality should be the same under the FAA and the TAA. Thus, the court of appeals concluded that Tuco should be the standard under both, the FAA or TAA. Then, the court outlined the facts argued by Oxy in its motion for vacatur: (1) during the course of the arbitration, Beck Redden attorney David Gunn represented BP Products North America, Inc. (“BP Products”), a BP Amoco p.l.c. subsidiary, in mandamus proceedings in Texas;(2) during the course of the arbitration, a Beck Redden attorney began representing several BP Amoco p.l.c. subsidiaries;(3) Beck Redden represented Shell Oil Company from 1994 to 1999; and (4) after the arbitration panel issued its award, Shell designated McDade as an arbitrator in unrelated matter. Finally, the court concluded that: McDade’s failure to disclose Beck Redden’s BP Products representation might, to an objective observer, create a reasonable impression of his partiality. See TUCO, 960 S.W.2d at 636. We recognize that evident partiality is generally proved by an arbitrator’s nondisclosure of his own potential conflicts, whereas here, McDade’s evident partiality was proved by his nondisclosure of his firm’s potential conflicts. Nevertheless, the fact that a reasonable person could conclude the circumstances might have affected McDade’s impartiality triggered his duty to disclose. See id. at 639. Thus, the fact that McDade failed to disclose non-trivial information was sufficient to establish evident partiality. Id. at 636. [Hat tip to our blog contributor Jim Gaitis.] Technorati Tags: law, ADR, arbitration

Effective June 6, 2011, under FINRA rules, a moving party will have a five-day period to reply to a response to a motion. According to FINRA, “this five-day period gives parties an opportunity to brief fully the issues in dispute, and ensure that arbitrators deciding a motion have all the motion papers before issuing a final decision.” FINRA’s press release is here. Technorati Tags: law, ADR, arbitration

Mark your calendars! our blog contributor professor S.I. Strong, will be hosting the live Webcast AT&T Mobility v. Conception: What It Means for Class Actions and Arbitration on June 1, 2011 at 12:30 pm – 1:30 pm EDT. Here is the course description: Taught by Elyse D. Echtman, Jennifer L. Young and S.I. Strong, this session provides insights on Concepcion from both the plaintiffs’ and the defendants’ bar, as well as the views of one of the nation’s leading scholars on class arbitration. Attending this seminar will help you gain a practical and theoretical view of the Supreme Court’s latest decision on arbitration and suggest what you can do to prepare yourself and your clients for the future in this rapidly changing area of law. More information is here. To register, click here. Technorati Tags: law, ADR, arbitration  

By Brett Goodman Under the Texas ADR Act, by either the motion of the court or a party, a pending dispute may be referred to mediation except when that dispute is subject to the Federal Arbitration Act. In this referral, an “impartial third party” must be appointed to mediate. To qualify for an appointment as an impartial third party, a person must have completed a minimum of forty hours of training in dispute resolution techniques in a course conducted by an alternative dispute resolution system or other dispute resolution organization approved by the court making the appointment. See Tex. Civ. Prac. & Rem. Code Ann. § 154. The trial court has discretion in deciding that mediation is appropriate for the case and may consider several factors in the decision, including: the nature of the dispute, the complexity of the issues, the number of parties, the extent of past settlement discussions, the posture of the parties, whether there had been sufficient discovery to permit an accurate case evaluation, the status of the case on the docket, and whether a referral would be appropriate at that particular time. Walton v. Canon, Short & Gaston, 23 S.W.3d 143, 150 (Tex. App. 2000). The Decker decision laid out a number of the considerations that come along with the trial court’s discretion. Decker v. Lindsay, 824 SW2nd 247, 250 (Tex. App.-Houston [1st District] 1992, no writ) The court may compel parties to attend mediation, but that is the furthest extent of its authority in that it cannot force a resolution to materialize from this mediation. Only when a party objects to mediation with a reasonable basis for doing so can a court be stripped of its power to refer a dispute to mediation, so a court can compel mediation without issue if it finds a party will not have a reasonable basis for objection. Using the Decker framework along with the factors of use to a trial court in referring a dispute to mediation, courts on a case by case basis have made a fairly predictable determination of whether or not mediation is appropriate with a trend that the court’s discretion is broad. See In re Magallon, 09-07-438CV, 2007 WL 2962934 (Tex. App. Oct. 11, 2007) Although a trial court ordered mediation to be in good faith in In re Magallon, if a trial court does find mediation appropriate, both parties are compelled to attend. The court of appeals could not say that the trail court abused its discretion in finding the party who did not appear at mediation in contempt and neither party made an objection. Regardless of a dispute over the referral to mediation, the referral compels the parties to attend pursuant to the trial court’s discretion. After the issue of compelling parties to meet in mediation has been resolved, it is true that a trial court may only compel the parties to meet but not more. Decker, 824 S.W.2d at 250. Thus, the court did say the judge in Decker overstepped the authority of a trial court by requiring not just that the parties meet, but that they negotiate in good faith and attempt to reach a settlement. Doing more than just compelling the parties to meet would not comport with the Texas ADR Act. Also, a court may, in its discretion, decide that mediation would not be of benefit to the parties and thus not refer the case to mediation. Walton, 23 S.W. 3d at 150. Where a law firm brought suit against a former client for failure to pay legal dues, the client demanded mediation, claiming that it is required unless the trial court determines it inappropriate. Although the trial court did not make a determination of inappropriateness, there was a dispute over who would be the mediator. The court declared, “We may reasonably infer that the trial court found that referral for [mediation] would not have benefited the parties and would only have served as a delay.” In Texas, a trial court may refer a case to mediation at its discretion, but it is not forced to when it would find mediation would not be of benefit in the situation. Technorati Tags: law, ADR, arbitration Brett Goodman is a summer intern at Karl Bayer, Dispute Resolution Expert. Brett is a J.D. candidate at The University of Texas School of Law. He holds degrees in Finance, Mathematics, and Spanish from Southern Methodist University.