On January 11th, the Supreme Court of Texas agreed to hear CMH Homes, Inc. et al. v. Perez, No. 10-0688. In the case, a dispute between a creditor and a purchaser of a mobile home arose. After both parties agreed their dispute was subject to arbitration under the Federal Arbitration Act, a trial court signed an order compelling arbitration and appointing an arbitrator over CMH Homes’ objections that such an appointment was premature. CMH Homes filed an interlocutory appeal to the arbitration order in the San Antonio Appeals Court pursuant to Section 51.016 of the Texas Civil Practice and Remedies Code. Section 51.016 is a recent addition to the Code and only became effective on September 1, 2009. It states: Sec. 51.016. APPEAL ARISING UNDER FEDERAL ARBITRATION ACT. In a matter subject to the Federal Arbitration Act (9 U.S.C. Section 1 et seq.), a person may take an appeal or writ of error to the court of appeals from the judgment or interlocutory order of a district court, county court at law, or county court under the same circumstances that an appeal from a federal district court’s order or decision would be permitted by 9 U.S.C. Section 16. On July 28, 2010, the San Antonio Appeals Court dismissed CMH Homes’ interlocutory appeal for lack of jurisdiction (No. 04-10-00259-CV) and CMH Homes filed a petition for review with the Supreme Court of Texas. According to the Texas Supreme Court Journal, the questions presented by the parties are: ISSUES PRESENTED by CMH Homes, Inc., et al. 1. When federal courts permit interlocutory appeal of an issue, do Texas courts of appeals have the same jurisdiction under the new statute allowing interlocutory appeals “under the same circumstances that an appeal . . . would be permitted by 9 U.S.C. Section 16” of the Federal Arbitration Act? 2. When a party alternatively requests mandamus relief, and all procedural rules governing petitions for mandamus have been met, can a Texas court of appeals refuse to grant relief unless a second parallel proceeding is filed? ISSUES PRESENTED by Adam Perez Issue One A court of appeals does not have appellate jurisdiction under TEX. CIV. PRAC. & REM. CODE §51.016, which allows interlocutory appeal of arbitration orders to the extent permitted by 9 U.S.C. §16, because orders like the one at issue – appointing an arbitrator to resolve in impasse under §5 of the FAA – are not identified as one of the types of appeals permitted under the federal statute, and are therefore not immediately appealable unless combined with some other order from which an immediate appeal is permitted, such as a order of dismissal or orders denying arbitration. Issue Two CMH’s argument that a court of appeals should, for convenience, treat an appellate brief as though it were a mandamus petition, even though no instrument is filed to invoke the court of appeals’ original jurisdiction, was already rejected in Am. Std. v. Brownsville I.S.D. (In re D. Wilson Constr. Co.), 196 S.W.3d 774 (Tex. 2006). Oral argument will be heard at 9 am on February 3, 2011. Disputing will be keeping an eye on this and other notable ADR cases currently up for review by the Supreme Court of Texas. Technorati Tags: ADR, law, arbitration, Texas Supreme Court

Mark your calendars! The ABA Section of Dispute Resolution presents The Future of Mandatory Arbitration: A Conversation About Dodd-Frank and the Arbitration Fairness Act. The live teleconference will be held on Tuesday, February 8, 2011 from 12:00 – 1:15 pm EST. According to the brochure, Last year Congress passed Dodd-Frank, a bill that ushered in sweeping reform in the financial services industry. This bill directs the SEC to decide whether or not to eliminate mandatory arbitration. For several years, Congress has considered the Arbitration Fairness Act which could eliminate mandatory arbitration in all consumer disputes. The landscape is unclear and debate is heated. Join us while experts in this area discuss the future of mandatory arbitration in the securities industry and beyond. Joan Stearns Johnsen, Visiting Assistant Clinical Professor at Albany Law School will moderate. Speakers include: Kenneth Crowley, Executive Director of UBS Financial Services Inc., Weehawken, NJ. Theodore G. Eppenstein of Eppenstein and Eppenstein, PLLC, New York, NY. Stephen J. Ware, Professor of Law at the University of Kansas School of Law. The course brochure is available here. You may register until Friday, February 4, 2011 via mail, fax or online. Technorati Tags: ADR, law, arbitration

The Beaumont Court of Appeals has held in a memorandum opinion that a trial court properly compelled a party to arbitrate its claims against non-signatory third parties and properly entered judgment disposing of all claims where no evidence was offered against the third parties during arbitration. In Sabine Syngas, Ltd. v. Port of Port Arthur Navigation Dist., No. 09-09-00331-CV, (Tex. App. – Beaumont, January 13, 2011), the Port of Port Arthur Navigation District of Jefferson County, Texas (“Port”) entered into an agreement to develop and operate a gas and electric generation facility with Sabine Power in its capacity as a general partner of Sabine Syngas (collectively “Sabine”). The agreement contained an arbitration clause which provided, “[a]ny claim, dispute or other matter in question arising out of or related to the Agreement or otherwise arising from the design and construction of the Project shall be subject to arbitration.” In January 2006, the Port claimed the agreement was terminated and sued Sabine for breach. Also in 2006, the Port entered into a development agreement with the Goldman Sachs Group (“GSG”), Process Energy Solutions (“PES”) and James S. Falsetti for a gasification facility. Sabine filed a cross-claim against the Port for breach of the agreement and third party claims against GSG, PES and Falsetti for tortious interfere of the parties’ agreement. The Port, GSG, PES and Falsetti moved for arbitration based on the arbitration provision contained in the development agreement entered into between the Port and Sabine. Sabine argued the arbitration provision did not extend to its tortious interference claims. A trial court ordered all parties to arbitration and denied Sabine’s motion to sever its claims against GSG, PES and Falsetti. One day prior to arbitration, Sabine sought mandamus relief from the Beaumont Court of Appeals. The court denied Sabine’s request because “Sabine failed to establish that an appeal would not be an adequate remedy,” and the case went to arbitration. At arbitration, no evidence was offered with regard to Sabine’s third party claims. The arbitrator issued an award in favor of the Port, ordered Sabine to pay the Port contract damages and pay all arbitration costs and attorney’s fees. The arbitrator stated, “the award was ‘in full settlement of all claims submitted to this Arbitration’ and that ‘[a]ll claims not expressly granted herein are, hereby denied.’” The Port sought confirmation of the arbitration award and GSG, PES and Falsetti asked “the trial court to sign a take nothing judgment on Sabine’s third party claims.” Sabine opposed such a judgment by arguing that its third party claims were not arbitrated. The trial court rejected Sabine’s argument and confirmed the arbitration award. Sabine then appealed to the Ninth District of Texas Court of Appeals. Sabine argued that the trial court erred in compelling arbitration of its third party claims because they fell “outside the scope of its arbitration agreement with the Port.” The Court of Appeals stated although only signatories to an agreement are generally bound by the agreement, “'[a] person who has agreed to arbitrate disputes with one party may in some cases be required to arbitrate related disputes with others.’ Meyer v. WMCO-GP, LLC, 211 S.W.3d 302, 304 (Tex. 2006).” According to the Beaumont Court, Here, Sabine’s breach of contract claims against the Port are intertwined with its tortious interference claims against PES, Falsetti, and GSG and in fact have the same tap root—the Port’s proper termination of its agreement with Sabine. If the Port properly terminated its contract with Sabine, the Port’s subsequent execution of a development agreement with PES would not have been a breach of the Port’s contract and there could be no tortious interference with a terminated contract. Sabine’s tortious interference claims are dependent on the existence and terms of its Development Agreement with the Port. The Court of Appeals dismissed Sabine’s claims that GSG, PES and Falsetti were third party beneficiaries and as such had no right to compel arbitration, Appellees sought to compel arbitration in the trial court based on the theory of equitable estoppel, not as third party beneficiaries of the Development Agreement. Third party beneficiary theories, as well as equitable estoppel, are each independent bases non-signatory appellees can rely on to enforce the arbitration provision. See Arthur Andersen LLP v. Carlisle, 129 S. Ct. 1896, 1902, 173 L.Ed.2d 832 (2009). We conclude this third party beneficiary disclaimer does not negate appellees right to compel arbitration based on equitable estoppel. Sabine also argued the trial court erred when it confirmed the arbitrator’s award “because it disposed of Sabine’s tort claims without any arbitration finding or conclusion and without evidence to support the take nothing final judgment.” According to the court, We hold that Sabine had the burden to initiate arbitration as to its third party claims against PES, Falsetti and GSG. Since Sabine failed to initiate arbitration after the trial court ordered the arbitration to proceed, the trial court properly entered judgment disposing of all claims. Finally, the Court of Appeals dismissed Sabine’s argument “that the trial court erred in signing the final judgment because the arbitrator did not have jurisdiction to decide its third party claims when a three-person arbitration panel was required in arbitrations involving monetary claims in excess of $250,000 and there was only one arbitrator in this case.” According to the court, the number of arbitrators was a procedural contract issue the parties were free to waive and no evidence was offered regarding whether waiver had occurred. The Beaumont Court of Appeals held the trial court did not abuse its discretion when it compelled Sabine to arbitrate its claims against third parties GSG, PES and Falsetti. The Appeals Court also held “the trial court properly entered judgment disposing of all claims.” The Beaumont Court affirmed the judgment of the trial court. Technorati Tags: arbitration, ADR, law

The California Supreme Court has ruled that private attorney-client communications related to a mediation remain confidential communications protected by California’s Evidence Code even during a legal malpractice lawsuit between the parties. In Cassel v. Superior Ct., No. S178914, (Cal. Jan. 13, 2011) Michael Cassel sued attorneys who represented him during a mediation settlement for malpractice, breach of fiduciary duty, fraud and breach of contract. Cassel alleged that his attorneys induced him to settle for less than the case was worth and less than he said he was willing to accept. The attorneys moved to exclude all evidence of private attorney-client communications made in preparation for and during the mediation, including communications related to mediation strategies and any attempts to persuade Cassel to reach a settlement. A trial court granted the attorneys’ motion. An appellate court reversed the ruling of the trial court reasoning that California’s mediation confidentiality statutes were not intended to protect attorneys against malpractice claims, but instead intended to protect mediation participants. The appellate court stated, The mediation confidentiality statutes do not extend to communications between a mediation participant and his or her own attorneys outside the presence of other participants in the mediation. The appellate majority also ruled that a malpractice suit removed the attorney-client privilege and prevented attorneys from using the confidentiality statutes as a shield against their former clients. Cassel’s former attorneys then appealed to the California Supreme Court. The Supreme Court first turned to the plain language of Section 1119 of the California Evidence Code. The Court noted that in drafting the provision the legislature “broadly provided for the confidentiality of things spoken or written in connection with a mediation proceeding” in order to “encourage the candor necessary” for successful mediation settlements. The Court also relied on an earlier ruling that the plain language of Section 1119 extends protection to all communications “for the purpose of” or “pursuant to” a mediation, including private communications between a disputant and his or her counsel. The Court next clarified that while the term “participant” was not defined in the statute, there was no reason to define the term so narrowly as to include only parties to mediation and exclude their respective legal counsel as separate participants. The Supreme Court disagreed with the appellate court’s holding that a party to mediation and his or legal counsel constituted a single “participant.” According to the California Supreme Court, legal counsel must agree to waive confidentiality protections for communications made under Section 1122 of the California Evidence Code. The Supreme Court also stated, application of the mediation confidentiality statutes to legal malpractice actions does not implicate due process concerns so fundamental that they might warrant an exception on constitutional grounds. According to the court, We therefore conclude that the evidence the trial court ruled nondiscoverable and inadmissible by reason of the mediation confidentiality statutes was not, as a matter of law, excluded from coverage by those statutes on the mere ground that they were private attorney-client communications which occurred outside the presence or hearing of the mediator or any other mediation participant. Instead, such attorney-client communications, like any other communications, were confidential, and therefore were neither discoverable nor admissible — even for purposes of proving a claim of legal malpractice — insofar as they were “for the purpose of, in the course of, or pursuant to, a mediation . . . . The California Supreme Court held Cassel’s private communications with his attorneys related to the mediation were confidential communications protected by California’s Evidence Code and could not be discovered during a legal malpractice lawsuit between the parties. In his concurrence, Justice Chin wrote, The court holds today that private communications between an attorney and a client related to mediation remain confidential even in a lawsuit between the two. This holding will effectively shield an attorney’s actions during mediation, including advising the client, from a malpractice action even if those actions are incompetent or even deceptive. Attorneys participating in mediation will not be held accountable for any incompetent or fraudulent actions during that mediation unless the actions are so extreme as to engender a criminal prosecution against the attorney. (See maj. opn., ante, at p. 28, fn. 11.) This is a high price to pay to preserve total confidentiality in the mediation process. He went on to state the outcome was a matter for the California Legislature, not the courts, to address, Accordingly, I agree with the majority that we have to give effect to the literal statutory language. But I am not completely satisfied that the Legislature has fully considered whether attorneys should be shielded from accountability in this way. There may be better ways to balance the competing interests than simply providing that an attorney’s statements during mediation may never be disclosed. For example, it may be appropriate to provide that communications during mediation may be used in a malpractice action between an attorney and a client to the extent they are relevant to that action, but they may not be used by anyone for any other purpose. Such a provision might sufficiently protect other participants in the mediation and also make attorneys accountable for their actions. But this court cannot so hold in the guise of interpreting statutes that contain no such provision. As the majority notes, the Legislature remains free to reconsider this question. It may well wish to do so. Technorati Tags: ADR, law, mediation