Perry Homes has once again been applied to describe what constitutes an arbitration waiver, except this time no waiver was found. As we have mentioned before in While We Were Out, a post from May, waiver is hard to come by in a Texas Supreme Court opinion. Perry Homes could have moved us into a parallel universe in which claiming waiver of arbitration is a winning argument. But those who criticized the opinion knew we would be making no such move, not because of the particulars involved but because of who the players were. As we wrote about before, Perry Homes was the party seeking waiver and was also a big supporter of many justices of the Court. Many critics of the opinion did not see Perry Homes as precedent for a shift in the court’s policy due to that fact. Well critics, you were probably right. In Fleetwood Homes, the Texas Supreme Court applied Perry Homes, but decided that waiting eight months to compel arbitration, during which time the parties engaged in some discovery and set a trial date (or in this case, postponed it), did not waive arbitration. “[A] party waives an arbitration clause by substantially invoking the judicial process to the other party’s detriment or prejudice.” This quote from Perry Homes sums up the standard that will now be applied by the court in these matters. Gulf in Fleetwood relied on Vesta Ins. Group’s precedent that a party would waive its right to arbitrate when it engaged in “full discovery,” filed motions going to the merits of the case, and sought arbitration “only on the eve of trial.” The court did not, however, agree with Gulf that Fleetwood fit that description. Moreover, the court focused on a party’s detriment as the dispositive issue in cases of arbitration waiver. Because no detriment was found to have befallen Gulf by Fleetwood’s pretrial activities, the court found no waiver. Fleetwood made it clear that unless a party truly waits to the very last minute before trial to compel arbitration, having already engaged in full discovery, no waiver will be found. The fact that Fleetwood had taken no depositions (although it noticed one after canceling it) may have had an impact on the court but the decision hinged on the detriment to Gulf. The court found that Gulf suffered no detriment by trading emails with Fleetwood regarding a trial date. The opinion also pointed out that those emails did not constitute an implied waiver, much less sufficed as evidence for an express waiver as Gulf claimed. Apart from the implications on arbitration waivers, this opinion seriously impacts fee-shifting clauses. The agreement between Fleetwood and Gulf contained a fee-shifting clause which allowed for a prevailing defendant’s attorney fees. Gulf attempted to throw out the arbitration agreement on unconscionability grounds based on this fee-shifting clause, but to no avail. The court found that even though Texas law only allows for prevailing plaintiff’s attorney fees, an arbitration clause that would allow for a prevailing defendant to get attorney’s fees would not make such agreement unconscionable; in fact, it would make it more fair. This statement leaves us to wonder whether we can expect more resistance against arbitration clauses from here on out… Posted by A.C. Vieira For more information, please check out these links: http://www.karlbayer.com/blog/?p=135 http://www.supreme.courts.state.tx.us/historical/2008/jun/060943.pdf http://www.scotxblog.com/orders/order-list-for-6-20-2008/#more-224

Tomorrow is November 4th. Many have voted early, and more have not yet voted. This post goes out to the undecided voters out there (although, I have no idea how you are still undecided), as well as the open-minded decided ones. This is the most important issue for me in the upcoming election, and the candidates have very different perspectives on it. First, let’s all agree how vital the internet is to modern culture. I don’t think I’m too far out on a limb when I say that the internet is one of the, if not the, most important technological and social development, ever. It is our printing press, if you will. Untold depths of information and cultural expression exist within the four corners of your browser window, and all you need is access. For $10 per month paid to a local internet service provider (“ISP”), anyone in the world can take free courses online from MIT. And what did we do before the catharsis of spewing our personalities to the world on myspace? Turn-by-turn directions?! Such content! Even more than all that, the internet is single-handedly defining an entire global generation, and its affects on the world have been and will hopefully continue to be as innumerable and limitless as the net itself. Net neutrality. In my experience, very few people actually know what it is, and fewer truly get how profoundly important it is. Perhaps the best way to explain it is by explaining what it isn’t. Right now, with net neutrality, Time Warner/AT&T/etc. charge different prices based on speed (i.e.: $10/mo. for dial-up, $60/mo. for high-speed). Without net neutrality, Time Warner/AT&T/etc. will be able to additionally charge different prices based on content. Right now, the government regulates ISPs such that they cannot do this sort of thing – their services must remain content-neutral (thus “net neutrality”). Abolishing this regulation would allow the free market to take over, and ISPs could immediately being charging for whatever they are able, including the content itself. This is one area of my life I do not trust to the market, just because of the potential consequences, pictured below. In my opinion, something like this could actually move cultural and technological advancement backwards. This system will destroy the limitlessness of the internet by handing over content to private companies, giving them the power to mete that content to end-users according to who can pay for it. Will a poor student in Arizona be able to take those free MIT courses online? Maybe, if he can afford the internet package that allows access to the site. At the core of the internet – the thing that makes it so revolutionary – is the at-my-fingertip accessibility of unfathomable amounts of content. We already have accessibility issues (generally, you still need to pay someone for access and find a computer), which people are working hard to overcome with projects like city-wide wifi and the One Laptop Per Child initiative. Do we really need content issues as well? I would advise anyone voting tomorrow to research where the candidates stand on this important issue, and consider it in deciding where to place your vote. More about the wonderful image above at boingboing. (It’s by echobucket of the somethingawful forums.) http://www.boingboing.net/2007/09/22/how-a-nonneutral-isp.html A much more fleshed-out version by one of my favorite speakers, Lawrence Lessig. (Heads up: it’s very pro-Obama.) http://lessig.org/blog/2008/08/me_on_mccain_on_technology.html

Apple and Psystar have agreed to a private ADR session to attempt a resolution to the ongoing lawsuit filed by Apple. It appears they opted out of the court-provided ADR options for a private mediation service. Psystar is a Florida corporation that has received some level of attention over a recent website that sold custom-built computers with Apple’s OS X operating system installed. Such setups, PCs running Macintosh operating systems, are often dubbed “Mac Clones.” Apple places legal restrictions on its software with a license agreement stating that OS X should only be run on its proprietary hardware. Psystar argues that such restrictions are unenforceable and countersued. It does strike me as strange that anyone can walk into an Apple Store and purchase a copy of OS X, but then would be restricted from installing it on their PC. Indeed, that’s what Psystar was doing – telling its customers that if they purchased OS X, Psystar would install it on the PC for free. They argue their process was an end-around the license agreement. This is a great look at the advantages of ADR, and a classic case for its usefulness. Psystar is a small company that probably doesn’t want to engage in a drawn out litigation with a monster like Apple, and the last thing Apple wants is a court opinion holding its user license agreement unenforceable. By choosing private mediation, the parties may be able to reach a private settlement that would allow Psystar to cut its losses (or even take home some winnings), and let Apple resolve the issue without showing a chink in its armor. This should be interesting as it develops. The initial report: http://www.macobserver.com/article/2008/10/16.9.shtml Another article, which contains a link to the full ADR agreement: http://news.cnet.com/8301-13579_3-10068824-37.html?part=rss A few more articles on the suit: (July) http://news.cnet.com/8301-13860_3-9991572-56.html?tag=mncol;txt (May) http://news.cnet.com/8301-13579_3-9933896-37.html?tag=mncol;txt

[Ed: On the cusp of what looks to be yet another long weekend on Wall Street, this cautionary tale by Chandra.] After enacting policies to stem the economic crisis of 2000-2002, Argentina is locked in multiple arbitrations with foreign investors who were hurt by the government’s actions, which included freezing foreign assets and prices. Most of these disputes revolve around claims that Argentina’s government violated the terms of the US-Argentina Bilateral Investment Treaty, a trade agreement made in 1994. Argentina claims that under Article 11 of the treaty, it was released from the agreement when it had to enact emergency measures to “maintain public order.” Argentina also cites the “state of necessity” standard that is customary under international law. Many of these disputes were sent, with both parties’ consent, to The International Centre for Settlement of Investment Disputes, known as the ICSID, located in Washington, D.C. The ICSID is an institution with over 140 member states that helps independent tribunals facilitate arbitrations by providing institutional and procedural frameworks and facilities. It was created by the Executive Directors of the International Bank for Reconstruction and Development (the World Bank) under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States in 1966. The main goal of the Convention was to increase flows of private investment between countries by creating an impartial forum providing facilities for international investment disputes. Currently the ICSID is the leading arbitration institution for investor-State dispute settlement. In some disputes the ICSID tribunals found that Argentina’s actions were “necessary” to protect “essential security interests” and were therefore absolved under Article 11 of the treaty. For instance, Continental Casualty, a U.S. investor, sought $112 million (US) in damages; however they were only awarded $2.8 million because most of Argentina’s actions were found necessary. On the other hand, some tribunals found that Argentina was not in a “state of necessity” at the time of its actions under the stringent tests imposed by customary international law. For instance, in another case the tribunal awarded a US-based energy firm $133 million (US) in compensation. In total so far, Argentina owes over three-quarters of a billion US dollars to various plaintiffs for damages incurred during the crisis, and there are still more disputes to be decided. In these unprecedented financial times, it would be prudent for countries to remember that “emergency actions” still have legal ramifications after the crisis has been abated. The current global financial crisis has encouraged the United States government to take emergency actions such as the Federal Reserve Bank’s contentious bail-out of AIG. The terms of this deal state that the U.S. government owns 79.9% of equity interest in AIG, with the right to veto dividend payments to preferred shareholder in the deal. The seizure of Washington Mutual will lead to some shareholders’ and bond-holders’ accounts being wiped out. In England, Prime Minister Gordon Brown endorsed Lloyd’s TSB takeover of Halifax Bank of Scotland, despite anti-trust concerns. The ICSID will probably be seeing arbitrations in the future regarding these and other controversial moves that affect foreign investors. Only stringency tests and future tribunal interpretations will tell if the “state of necessity” argument will hold. Links: ICSID’s website: http://icsid.worldbank.org/ICSID/FrontServlet US-Argentina BIT: http://www.bilaterals.org/article.php3?id_article=435 Article on Continental Casualty’s Dispute: http://www.investmenttreatynews.org/cms/news/archive/2008/09/10/award-continental-casualty-company-v-the-argentine-republic-argentina-emerges-largely-victorious-in-dispute-related-to-country-s-financial-crisis.aspx Official Award given to Continental Casualty: http://www.investmenttreatynews.org/documents/p/24.aspx Information on various Argentina arbitrations from Investment Treaty News: http://www.iisd.org/pdf/2007/itn_oct15_2007.pdf Article on the seizure of Washington Mutual: http://www.nytimes.com/2008/09/26/business/26wamu.html?_r=1&hp&oref=slogin