Optimize Your Arbitration! Understanding the Role of … material.pdfthat arbitration proceedings will be quick, efficient, ... of contributing to the maintenance of high standards

Copyright 2015 American Arbitration Association

Optimize Your Arbitration! Understanding the Role of the Proactive Arbitrator

November 4, 2014 – 2:00 p.m. to 3:30 p.m. ET

PROGRAM SUMMARY

Speaker: David W. Waddell, Esq. Upon completion of this webinar, not only will attendees walk away with an understanding of the authority and the ethical mandate for an arbitrator to be proactive, but attendees will be provided with specific practical provisions designed to promote efficient arbitrations, increasing the likelihood that arbitration proceedings will be quick, efficient, and economical.

AGENDA 2:00 p.m. Welcome and Introduction of Speakers (5 minutes) 2:05 p.m. Techniques for Being Proactive (75 minutes)

• Techniques to assure the Parties obtain a “return on investment” in the arbitration process and you as an arbitrator;

• Review of the ethical mandates that authorize, and require an arbitrator to be proactive in formulating scheduling orders and ruling on procedural matters;

• Specific wording for proactive orders will be provided and practicalities will be discussed;

• Preliminary hearing techniques to ensure a fair, efficient, and economical resolution of the dispute; and

• Delay avoidance techniques.

3:20 p.m. Conclusion and Questions (10 minutes) 3:30 p.m. Evaluation (5 minutes) 3:35 p.m. Adjourn

DAVID W. WADDELL Principal – Legal and Business Counsel

440 Louisiana Street, Suite 900, Houston, Texas 77002 832-‐‑279-‐‑5103 direct 713-‐‑485-‐‑6427 main 832-‐‑202-‐‑0877 efax [email protected]

Professional Career David W Waddell Legal and Business Counsel – Principal July 2013-‐‑ Present

n Transactional counsel to Houston mid-‐‑stream oil and gas company in $40 million recapitalization involving the sale of membership interests to private equity firm.

n Trial counsel to national bank for commercial loan deficiency involving environmental contamination issues. Jury verdict obtained June 2014.

n Contract General Counsel to Non-‐‑Profit with assets of 70 million+.

n Arbitrator -‐‑ American Arbitration Association – Member of Construction Panel, and Large Complex Case Panel. Two cases active.

Seyfarth Shaw LLP – Partner November 2001-‐‑July 2013

n Chair of the Houston Office Litigation Section-‐‑ coordinating nationwide litigation strategy for various clients. More than 100 trial days as lead counsel for clients across the country since 2009.

o Multi-‐‑jurisdictional and international matters including representation of a Kuwaiti company simultaneously in Texas state and federal courts, and an ICDR arbitration (while monitoring active Kuwaiti litigation) which ultimately resulted in a two-‐‑week international arbitration in the Permanent Court of Arbitration, Peace Palace, The Hague, NL on which a favorable liability award was obtained; simultaneous representation in Texas state court and Delaware bankruptcy court on behalf of a national bank in its capacity as special servicer for a CMBS resort property located on an island in the Caribbean; and concurrent representations for a national bank prosecuting matters against an internet scammer in Nevada, Texas, Alabama, and North Carolina, while defending more than 50 similar arbitration and state court matters from the same scammer in multiple states across the U.S.

o Complex class and systemic exposure matters including consumer financial services (including bankruptcy issues) for national bank; product liability: food for international grocery retailer, contact lenses for international manufacturer and distributer, and EIFS (synthetic stucco) for national homebuilder.

o Construction representation in state court, and before arbitrators on behalf of industrial, commercial and residential matters, prosecuting and defending claims involving owners, contractors, subcontractors, architects, bid awards, bond and lien claims, delay claims, design defects, erection disputes, payment and performance issues, site conditions, warranty issues, and wrongful termination.

o Real estate matters – examples include two separate trials for publicly traded companies involving leases and pre-‐‑development commitments. The former was a six-‐‑week complex jury

trial in Houston with $30 million in controversy, and the latter, a week-‐‑long bench trial in Montgomery County, Texas, with over $10 million in controversy.

o Intellectual Property representation–summary judgment for client in a copyright infringement case brought in federal court in the Eastern District of Texas, including the first award of fees ($500,000.00) to a copyright infringement defendant in the Eastern District of Texas.

o Environmental matters including illegal dump cleanup in conjunction with State of Texas settlement; defense of television manufacturer against lawsuit by private landfill company (three weeks of trial ending in mistrial); representation of homebuilder in strategic determination of handling of known and unknown mold issues in homes throughout Texas.

§ Ethics/Conflicts Partner, Hiring Partner, Chair of Houston Office Lawyer Development Committee (responsible for associate evaluation, coaching, salary and bonus recommendations), Diversity Committee, Six Sigma Yellow Belt with applications to management methodologies; Leadership Certification – Northwestern University.

§ Supervisory Partner of the 2011 International Pro Bono Team of the Year http://supreme.courts.state.tx.us/ebriefs/10/10048902.pdf ; Participant and donor for various Houston and national charities, including the Houston Symphony, Rodeo, MS Houston to Austin annual biking fundraiser.

Hoover Bax & Slovacek – Associate/Partner July 1989-‐‑November 2001 § Trial Attorney – with majority of representative matters in bankruptcy, real estate, and construction.

§ Board Certified by the Texas Board of Legal Specialization in Business Bankruptcy 1993-‐‑1998.

§ Reported ERISA case -‐‑ Schnabel v. Philadelphia American Life Ins. Co., 795 F. Supp. 816 -‐‑ Dist. Court, SD Texas 1992; http://scholar.google.com/scholar?scidkt=3041279867632275697&as_sdt=2&hl=en

Shannon, Ustick, Tyler and Beller, Houston, Associate October 1988-‐‑July 1989

Plunkett, Gibson & Allen, San Antonio, Associate November 1986-‐‑October 1988

Academic Education § St. Mary’s University Law School, San Antonio, Texas -‐‑JD 1986 § Trinity University, San Antonio, Texas -‐‑BA Psychology, emphasis in Finance 1982

Appointments § Panelist -‐‑ American Arbitration Association 2002 – Present

§ Member/Chair -‐‑Supreme Court of Texas Grievance Oversight Committee 1997-‐‑2002 § Member 4H Grievance Committee 1995-‐‑1997

Non-‐‑Profits § ABC of Greater Texas, Board Member, Chair Legal Issues, PAC, et al 1989-March-2014

§ Citizens Against Lawsuit Abuse, grass-‐‑roots tort-‐‑reform, General Counsel 1992-‐‑2004

Passions, Outdoor Activities, and References available.

1 | adr.orgTHE CODE OF ETHICS FOR ARBITRATORS IN COMMERCIAL DISPUTES

The Code of Ethics for Arbitrators in Commercial DisputesEffective March 1, 2004

The Code of Ethics for Arbitrators in Commercial Disputes was originally prepared in 1977 by a joint committee consisting of a special committee of the American Arbitration Association® and a special committee of the American Bar Association. The Code was revised in 2003 by an ABA Task Force and special committee of the AAA®.

Preamble

The use of arbitration to resolve a wide variety of disputes has grown extensively and forms a significant part of the system of justice on which our society relies for a fair determination of legal rights. Persons who act as arbitrators therefore undertake serious responsibilities to the public, as well as to the parties. Those responsibilities include important ethical obligations.

Few cases of unethical behavior by commercial arbitrators have arisen. Nevertheless, this Code sets forth generally accepted standards of ethical conduct for the guidance of arbitrators and parties in commercial disputes, in the hope of contributing to the maintenance of high standards and continued confidence in the process of arbitration.

This Code provides ethical guidelines for many types of arbitration but does not apply to labor arbitration, which is generally conducted under the Code of Professional Responsibility for Arbitrators of Labor-Management Disputes.

There are many different types of commercial arbitration. Some proceedings are conducted under arbitration rules established by various organizations and trade associations, while others are conducted without such rules. Although most proceedings are arbitrated pursuant to voluntary agreement of the parties, certain types of disputes are submitted to arbitration by reason of particular laws. This Code is intended to apply to all such proceedings in which disputes orclaims are submitted for decision to one or more arbitrators appointed in a manner provided by an agreement of the parties, by applicable arbitration rules, or by law. In all such cases, the persons who have the power to decide should observe fundamental standards of ethical conduct. In this Code, all such persons are called “arbitrators,” although in some types of proceeding they might be called “umpires,” “referees,” “neutrals,” or have some other title.

Arbitrators, like judges, have the power to decide cases. However, unlike full-time judges, arbitrators are usually engaged in other occupations before, during, and after the time that they serve as arbitrators. Often, arbitrators are purposely chosen from the same trade or industry as the parties in order to bring special knowledge to the task of deciding. This Code recognizes these fundamental differences between arbitrators and judges.

In those instances where this Code has been approved and recommended by organizations that provide, coordinate, or administer services of arbitrators, it provides ethical standards for the members of their respective panels of arbitrators. However, this Code does not form a part of the arbitration rules of any such organization unless its rules so provide.


Note on Neutrality

In some types of commercial arbitration, the parties or the administering institution provide for three or more arbitrators. In some such proceedings, it is the practice for each party, acting alone, to appoint one arbitrator (a “party-appointed arbitrator”) and for one additional arbitrator to be designated by the party-appointed arbitrators, or by the parties, or by an independent institution or individual. The sponsors of this Code believe that it is preferable for all arbitrators including any party-appointed arbitrators to be neutral, that is, independent and impartial, and to comply with the same ethical standards. This expectation generally is essential in arbitrations where the parties, the nature of the dispute, or the enforcement of any resulting award may have international aspects. However, parties in certain domestic arbitrations in the United States may prefer that party-appointed arbitrators be non-neutral and governed by special ethical considerations. These special ethical considerations appear in Canon X of this Code.

This Code establishes a presumption of neutrality for all arbitrators, including party-appointed arbitrators, which applies unless the parties’ agreement, the arbitration rules agreed to by the parties or applicable laws provide otherwise. This Code requires all party-appointed arbitrators, whether neutral or not, to make pre-appointment disclosures of any facts which might affect their neutrality, independence, or impartiality. This Code also requires all party-appointed arbitrators to ascertain and disclose as soon as practicable whether the parties intended for them to serve as neutral or not. If any doubt or uncertainty exists, the party-appointed arbitrators should serve as neutrals unless and until such doubt or uncertainty is resolved in accordance with Canon IX. This Code expects all arbitrators, including those serving under Canon X, to preserve the integrity and fairness of the process.

Note on Construction

Various aspects of the conduct of arbitrators, including some matters covered by this Code, may also be governed by agreements of the parties, arbitration rules to which the parties have agreed, applicable law, or other applicable ethics rules, all of which should be consulted by the arbitrators. This Code does not take the place of or supersede such laws, agreements, or arbitration rules to which the parties have agreed and should be read in conjunction with other rules of ethics. It does not establish new or additional grounds for judicial review of arbitration awards.

All provisions of this Code should therefore be read as subject to contrary provisions of applicable law and arbitration rules. They should also be read as subject to contrary agreements of the parties. Nevertheless, this Code imposes no obligation on any arbitrator to act in a manner inconsistent with the arbitrator’s fundamental duty to preserve the integrity and fairness of the arbitral process.

Canons I through VIII of this Code apply to all arbitrators. Canon IX applies to all party-appointed arbitrators, except that certain party-appointed arbitrators are exempted by Canon X from compliance with certain provisions of Canons I-IX related to impartiality and independence, as specified in Canon X.


CANON I: An arbitrator should uphold the integrity and fairness of the arbitration process.

A. An arbitrator has a responsibility not only to the parties but also to the process of arbitration itself, and must observe high standards of conduct so that the integrity and fairness of the process will be preserved. Accordingly, an arbitrator should recognize a responsibility to the public, to the parties whose rights will be decided, and to all other participants in the proceeding. This responsibility may include pro bono service as an arbitrator where appropriate.

B. One should accept appointment as an arbitrator only if fully satisfied:

(1) that he or she can serve impartially;

(2) that he or she can serve independently from the parties, potential witnesses, and the other arbitrators;

(3) that he or she is competent to serve; and

(4) that he or she can be available to commence the arbitration in accordance with the requirements of the proceeding and thereafter to devote the time and attention to its completion that the parties are reasonably entitled to expect.

C. After accepting appointment and while serving as an arbitrator, a person should avoid entering into any business, professional, or personal relationship, or acquiring any financial or personal interest, which is likely to affect impartiality or which might reasonably create the appearance of partiality. For a reasonable period of time after the decision of a case, persons who have served as arbitrators should avoid entering into any such relationship, or acquiring any such interest, in circumstances which might reasonably create the appearance that they had been influenced in the arbitration by the anticipation or expectation of the relationship or interest. Existence of any of the matters or circumstances described in this paragraph C does not render it unethical for one to serve as an arbitrator where the parties have consented to the arbitrator’s appointment or continued services following full disclosure of the relevant facts in accordance with Canon II.

D. Arbitrators should conduct themselves in a way that is fair to all parties and should not be swayed by outside pressure, public clamor, and fear of criticism or self-interest. They should avoid conduct and statements that give the appearance of partiality toward or against any party.

E. When an arbitrator’s authority is derived from the agreement of the parties, an arbitrator should neither exceed that authority nor do less than is required to exercise that authority completely. Where the agreement of the parties sets forth procedures to be followed in conducting the arbitration or refers to rules to be followed, it is the obligation of the arbitrator to comply with such procedures or rules. An arbitrator has no ethical obligation to comply with any agreement, procedures or rules that are unlawful or that, in the arbitrator’s judgment, would be inconsistent with this Code.

F. An arbitrator should conduct the arbitration process so as to advance the fair and efficient resolution of the matters submitted for decision. An arbitrator should make all reasonable efforts to prevent delaying tactics, harassment of parties or other participants, or other abuse or disruption of the arbitration process.

G. The ethical obligations of an arbitrator begin upon acceptance of the appointment and continue throughout all stages of the proceeding. In addition, as set forth in this Code, certain ethical obligations begin as soon as a person is requested to serve as an arbitrator and certain ethical obligations continue after the decision in the proceeding has been given to the parties.

H. Once an arbitrator has accepted an appointment, the arbitrator should not withdraw or abandon the appointment unless compelled to do so by unanticipated circumstances that would render it impossible or impracticable to continue. When an arbitrator is to be compensated for his or her services, the arbitrator may withdraw if the parties fail or refuse to provide for payment of the compensation as agreed.

I. An arbitrator who withdraws prior to the completion of the arbitration, whether upon the arbitrator’s initiative or upon the request of one or more of the parties, should take reasonable steps to protect the interests of the parties in the arbitration, including return of evidentiary materials and protection of confidentiality.


Comment to Canon I

A prospective arbitrator is not necessarily partial or prejudiced by having acquired knowledge of the parties, the applicable law or the customs and practices of the business involved. Arbitrators may also have special experience or expertise in the areas of business, commerce, or technology which are involved in the arbitration. Arbitrators do not contravene this Canon if, by virtue of such experience or expertise, they have views on certain general issues likely to arise in the arbitration, but an arbitrator may not have prejudged any of the specific factual or legal determinations to be addressed during the arbitration.

During an arbitration, the arbitrator may engage in discourse with the parties or their counsel, draw out arguments or contentions, comment on the law or evidence, make interim rulings, and otherwise control or direct the arbitration. These activities are integral parts of an arbitration. Paragraph D of Canon I is not intended to preclude or limit either full discussion of the issues during the course of the arbitration or the arbitrator’s management of the proceeding.

CANON II: An arbitrator should disclose any interest or relationship likely to affect impartiality or which might create an appearance of partiality.

A. Persons who are requested to serve as arbitrators should, before accepting, disclose:

(1) any known direct or indirect financial or personal interest in the outcome of the arbitration;

(2) any known existing or past financial, business, professional or personal relationships which might reasonably affect impartiality or lack of independence in the eyes of any of the parties. For example, prospective arbitrators should disclose any such relationships which they personally have with any party or its lawyer, with any co-arbitrator, or with any individual whom they have been told will be a witness. They should also disclose any such relationships involving their families or household members or their current employers, partners, or professional or business associates that can be ascertained by reasonable efforts;

(3) the nature and extent of any prior knowledge they may have of the dispute; and

(4) any other matters, relationships, or interests which they are obligated to disclose by the agreement of the parties, the rules or practices of an institution, or applicable law regulating arbitrator disclosure.

B. Persons who are requested to accept appointment as arbitrators should make a reasonable effort to inform themselves of any interests or relationships described in paragraph A.

C. The obligation to disclose interests or relationships described in paragraph A is a continuing duty which requires a person who accepts appointment as an arbitrator to disclose, as soon as practicable, at any stage of the arbitration, any such interests or relationships which may arise, or which are recalled or discovered.

D. Any doubt as to whether or not disclosure is to be made should be resolved in favor of disclosure.

E. Disclosure should be made to all parties unless other procedures for disclosure are provided in the agreement of the parties, applicable rules or practices of an institution, or by law. Where more than one arbitrator has been appointed, each should inform the others of all matters disclosed.

F. When parties, with knowledge of a person’s interests and relationships, nevertheless desire that person to serve as an arbitrator, that person may properly serve.


G. If an arbitrator is requested by all parties to withdraw, the arbitrator must do so. If an arbitrator is requested to withdraw by less than all of the parties because of alleged partiality, the arbitrator should withdraw unless either of the following circumstances exists:

(1) An agreement of the parties, or arbitration rules agreed to by the parties, or applicable law establishes procedures for determining challenges to arbitrators, in which case those procedures should be followed; or

(2) In the absence of applicable procedures, if the arbitrator, after carefully considering the matter, determines that the reason for the challenge is not substantial, and that he or she can nevertheless act and decide the case impartially and fairly.

H. If compliance by a prospective arbitrator with any provision of this Code would require disclosure of confidential or privileged information, the prospective arbitrator should either:

(1) Secure the consent to the disclosure from the person who furnished the information or the holder of the privilege; or

(2) Withdraw.

CANON III: An arbitrator should avoid impropriety or the appearance of impropriety in communicating with parties.

A. If an agreement of the parties or applicable arbitration rules establishes the manner or content of communications between the arbitrator and the parties, the arbitrator should follow those procedures notwithstanding any contrary provision of paragraphs B and C.

B. An arbitrator or prospective arbitrator should not discuss a proceeding with any party in the absence of any other party, except in any of the following circumstances:

(1) When the appointment of a prospective arbitrator is being considered, the prospective arbitrator:

(a) may ask about the identities of the parties, counsel, or witnesses and the general nature of the case; and

(b) may respond to inquiries from a party or its counsel designed to determine his or her suitability and availability for the appointment. In any such dialogue, the prospective arbitrator may receive information from a party or its counsel disclosing the general nature of the dispute but should not permit them to discuss the merits of the case.

(2) In an arbitration in which the two party-appointed arbitrators are expected to appoint the third arbitrator, each party-appointed arbitrator may consult with the party who appointed the arbitrator concerning the choice of the third arbitrator;

(3) In an arbitration involving party-appointed arbitrators, each party-appointed arbitrator may consult with the party who appointed the arbitrator concerning arrangements for any compensation to be paid to the party-appointed arbitrator. Submission of routine written requests for payment of compensation and expenses in accordance with such arrangements and written communications pertaining solely to such requests need not be sent to the other party;

(4) In an arbitration involving party-appointed arbitrators, each party-appointed arbitrator may consult with the party who appointed the arbitrator concerning the status of the arbitrator (i.e., neutral or non-neutral), as contemplated by paragraph C of Canon IX;

(5) Discussions may be had with a party concerning such logistical matters as setting the time and place of hearings or making other arrangements for the conduct of the proceedings. However, the arbitrator should promptly inform each other party of the discussion and should not make any final determination concerning the matter discussed before giving each absent party an opportunity to express the party’s views; or

(6) If a party fails to be present at a hearing after having been given due notice, or if all parties expressly consent, the arbitrator may discuss the case with any party who is present.

C. Unless otherwise provided in this Canon, in applicable arbitration rules or in an agreement of the parties, whenever an arbitrator communicates in writing with one party, the arbitrator should at the same time send a copy of the communication to every other party, and whenever the arbitrator receives any written communication concerning the case from one party which has not already been sent to every other party, the arbitrator should send or cause it to be sent to the other parties.


CANON IV: An arbitrator should conduct the proceedings fairly and diligently.

A. An arbitrator should conduct the proceedings in an even-handed manner. The arbitrator should be patient and courteous to the parties, their representatives, and the witnesses and should encourage similar conduct by all participants.

B. The arbitrator should afford to all parties the right to be heard and due notice of the time and place of any hearing. The arbitrator should allow each party a fair opportunity to present its evidence and arguments.

C. The arbitrator should not deny any party the opportunity to be represented by counsel or by any other person chosen by the party.

D. If a party fails to appear after due notice, the arbitrator should proceed with the arbitration when authorized to do so, but only after receiving assurance that appropriate notice has been given to the absent party.

E. When the arbitrator determines that more information than has been presented by the parties is required to decide the case, it is not improper for the arbitrator to ask questions, call witnesses, and request documents or other evidence, including expert testimony.

F. Although it is not improper for an arbitrator to suggest to the parties that they discuss the possibility of settlement or the use of mediation, or other dispute resolution processes, an arbitrator should not exert pressure on any party to settle or to utilize other dispute resolution processes. An arbitrator should not be present or otherwise participate in settlement discussions or act as a mediator unless requested to do so by all parties.

G. Co-arbitrators should afford each other full opportunity to participate in all aspects of the proceedings.

Comment to Paragraph G Paragraph G of Canon IV is not intended to preclude one arbitrator from acting in limited circumstances (e.g., ruling on discovery issues) where authorized by the agreement of the parties, applicable rules or law, nor does it preclude a majority of the arbitrators from proceeding with any aspect of the arbitration if an arbitrator is unable or unwilling to participate and such action is authorized by the agreement of the parties or applicable rules or law. It also does not preclude ex parte requests for interim relief.

CANON V: An arbitrator should make decisions in a just, independent and deliberate manner.

A. The arbitrator should, after careful deliberation, decide all issues submitted for determination. An arbitrator should decide no other issues.

B. An arbitrator should decide all matters justly, exercising independent judgment, and should not permit outside pressure to affect the decision.

C. An arbitrator should not delegate the duty to decide to any other person.

D. In the event that all parties agree upon a settlement of issues in dispute and request the arbitrator to embody that agreement in an award, the arbitrator may do so, but is not required to do so unless satisfied with the propriety of the terms of settlement. Whenever an arbitrator embodies a settlement by the parties in an award, the arbitrator should state in the award that it is based on an agreement of the parties.


CANON VI: An arbitrator should be faithful to the relationship of trust and confidentiality inherent in that office.

A. An arbitrator is in a relationship of trust to the parties and should not, at any time, use confidential information acquired during the arbitration proceeding to gain personal advantage or advantage for others, or to affect adversely the interest of another.

B. The arbitrator should keep confidential all matters relating to the arbitration proceedings and decision. An arbitrator may obtain help from an associate, a research assistant or other persons in connection with reaching his or her decision if the arbitrator informs the parties of the use of such assistance and such persons agree to be bound by the provisions of this Canon.

C. It is not proper at any time for an arbitrator to inform anyone of any decision in advance of the time it is given to all parties. In a proceeding in which there is more than one arbitrator, it is not proper at any time for an arbitrator to inform anyone about the substance of the deliberations of the arbitrators. After an arbitration award has been made, it is not proper for an arbitrator to assist in proceedings to enforce or challenge the award.

D. Unless the parties so request, an arbitrator should not appoint himself or herself to a separate office related to the subject matter of the dispute, such as receiver or trustee, nor should a panel of arbitrators appoint one of their number to such an office.

CANON VII: An arbitrator should adhere to standards of integrity and fairness when making arrangements for compensation and reimbursement of expenses.

A. Arbitrators who are to be compensated for their services or reimbursed for their expenses shall adhere to standards of integrity and fairness in making arrangements for such payments.

B. Certain practices relating to payments are generally recognized as tending to preserve the integrity and fairness of the arbitration process. These practices include:

(1) Before the arbitrator finally accepts appointment, the basis of payment, including any cancellation fee, compensation in the event of withdrawal and compensation for study and preparation time, and all other charges, should be established. Except for arrangements for the compensation of party-appointed arbitrators, all parties should be informed in writing of the terms established;

(2) In proceedings conducted under the rules or administration of an institution that is available to assist in making arrangements for payments, communication related to compensation should be made through the institution. In proceedings where no institution has been engaged by the parties to administer the arbitration, any communication with arbitrators (other than party appointed arbitrators) concerning payments should be in the presence of all parties; and

(3) Arbitrators should not, absent extraordinary circumstances, request increases in the basis of their compensation during the course of a proceeding.

CANON VIII: An arbitrator may engage in advertising or promotion of arbitral services which is truthful and accurate.

A. Advertising or promotion of an individual’s willingness or availability to serve as an arbitrator must be accurate and unlikely to mislead. Any statements about the quality of the arbitrator’s work or the success of the arbitrator’s practice must be truthful.

B. Advertising and promotion must not imply any willingness to accept an appointment otherwise than in accordance with this Code.


Comment to Canon VIII

This Canon does not preclude an arbitrator from printing, publishing, or disseminating advertisements conforming to these standards in any electronic or print medium, from making personal presentations to prospective users of arbitral services conforming to such standards or from responding to inquiries concerning the arbitrator’s availability, qualifications, experience, or fee arrangements.

CANON IX: Arbitrators appointed by one party have a duty to determine and disclose their status and to comply with this code, except as exempted by Canon X.

A. In some types of arbitration in which there are three arbitrators, it is customary for each party, acting alone, to appoint one arbitrator. The third arbitrator is then appointed by agreement either of the parties or of the two arbitrators, or failing such agreement, by an independent institution or individual. In tripartite arbitrations to which this Code applies, all three arbitrators are presumed to be neutral and are expected to observe the same standards as the third arbitrator.

B. Notwithstanding this presumption, there are certain types of tripartite arbitration in which it is expected by all parties that the two arbitrators appointed by the parties may be predisposed toward the party appointing them. Those arbitrators, referred to in this Code as “Canon X arbitrators,” are not to be held to the standards of neutrality and independence applicable to other arbitrators. Canon X describes the special ethical obligations of party-appointed arbitrators who are not expected to meet the standard of neutrality.

C. A party-appointed arbitrator has an obligation to ascertain, as early as possible but not later than the first meeting of the arbitrators and parties, whether the parties have agreed that the party-appointed arbitrators will serve as neutrals or whether they shall be subject to Canon X, and to provide a timely report of their conclusions to the parties and other arbitrators:

(1) Party-appointed arbitrators should review the agreement of the parties, the applicable rules and any applicable law bearing upon arbitrator neutrality. In reviewing the agreement of the parties, party-appointed arbitrators should consult any relevant express terms of the written or oral arbitration agreement. It may also be appropriate for them to inquire into agreements that have not been expressly set forth, but which may be implied from an established course of dealings of the parties or well-recognized custom and usage in their trade or profession;

(2) Where party-appointed arbitrators conclude that the parties intended for the party-appointed arbitrators not to serve as neutrals, they should so inform the parties and the other arbitrators. The arbitrators may then act as provided in Canon X unless or until a different determination of their status is made by the parties, any administering institution or the arbitral panel; and

(3) Until party-appointed arbitrators conclude that the party-appointed arbitrators were not intended by the parties to serve as neutrals, or if the party-appointed arbitrators are unable to form a reasonable belief of their status from the foregoing sources and no decision in this regard has yet been made by the parties, any administering institution, or the arbitral panel, they should observe all of the obligations of neutral arbitrators set forth in this Code.

D. Party-appointed arbitrators not governed by Canon X shall observe all of the obligations of Canons I through VIII unless otherwise required by agreement of the parties, any applicable rules, or applicable law.


CANON X: Exemptions for arbitrators appointed by one party who are not subject to rules of neutrality.

Canon X arbitrators are expected to observe all of the ethical obligations prescribed by this Code except those from which they are specifically excused by Canon X.

A. Obligations Under Canon I

Canon X arbitrators should observe all of the obligations of Canon I subject only to the following provisions:

(1) Canon X arbitrators may be predisposed toward the party who appointed them but in all other respects are obligated to act in good faith and with integrity and fairness. For example, Canon X arbitrators should not engage in delaying tactics or harassment of any party or witness and should not knowingly make untrue or misleading statements to the other arbitrators; and

(2) The provisions of subparagraphs B(1), B(2), and paragraphs C and D of Canon I, insofar as they relate to partiality, relationships, and interests are not applicable to Canon X arbitrators.

B. Obligations Under Canon II

(1) Canon X arbitrators should disclose to all parties, and to the other arbitrators, all interests and relationships which Canon II requires be disclosed. Disclosure as required by Canon II is for the benefit not only of the party who appointed the arbitrator, but also for the benefit of the other parties and arbitrators so that they may know of any partiality which may exist or appear to exist; and

(2) Canon X arbitrators are not obliged to withdraw under paragraph G of Canon II if requested to do so only by the party who did not appoint them.

C. Obligations Under Canon III

Canon X arbitrators should observe all of the obligations of Canon III subject only to the following provisions:

(1) Like neutral party-appointed arbitrators, Canon X arbitrators may consult with the party who appointed them to the extent permitted in paragraph B of Canon III;

(2) Canon X arbitrators shall, at the earliest practicable time, disclose to the other arbitrators and to the parties whether or not they intend to communicate with their appointing parties. If they have disclosed the intention to engage in such communications, they may thereafter communicate with their appointing parties concerning any other aspect of the case, except as provided in paragraph (3);

(3) If such communication occurred prior to the time they were appointed as arbitrators, or prior to the first hearing or other meeting of the parties with the arbitrators, the Canon X arbitrator should, at or before the first hearing or meeting of the arbitrators with the parties, disclose the fact that such communication has taken place. In complying with the provisions of this subparagraph, it is sufficient that there be disclosure of the fact that such communication has occurred without disclosing the content of the communication. A single timely disclosure of the Canon X arbitrator’s intention to participate in such communications in the future is sufficient;

(4) Canon X arbitrators may not at any time during the arbitration:

(a) disclose any deliberations by the arbitrators on any matter or issue submitted to them for decision;

(b) communicate with the parties that appointed them concerning any matter or issue taken under consideration by the panel after the record is closed or such matter or issue has been submitted for decision; or

(c) disclose any final decision or interim decision in advance of the time that it is disclosed to all parties.


(5) Unless otherwise agreed by the arbitrators and the parties, a Canon X arbitrator may not communicate orally with the neutral arbitrator concerning any matter or issue arising or expected to arise in the arbitration in the absence of the other Canon X arbitrator. If a Canon X arbitrator communicates in writing with the neutral arbitrator, he or she shall simultaneously provide a copy of the written communication to the other Canon X arbitrator;

(6) When Canon X arbitrators communicate orally with the parties that appointed them concerning any matter on which communication is permitted under this Code, they are not obligated to disclose the contents of such oral communications to any other party or arbitrator; and

(7) When Canon X arbitrators communicate in writing with the party who appointed them concerning any matter on which communication is permitted under this Code, they are not required to send copies of any such written communication to any other party or arbitrator.

D. Obligations Under Canon IV

Canon X arbitrators should observe all of the obligations of Canon IV.

E. Obligations Under Canon V

Canon X arbitrators should observe all of the obligations of Canon V, except that they may be predisposed toward deciding in favor of the party who appointed them.

F. Obligations Under Canon VI

Canon X arbitrators should observe all of the obligations of Canon VI.

G. Obligations Under Canon VII

Canon X arbitrators should observe all of the obligations of Canon VII.

H. Obligations Under Canon VIII

Canon X arbitrators should observe all of the obligations of Canon VIII.

I. Obligations Under Canon IX

The provisions of paragraph D of Canon IX are inapplicable to Canon X arbitrators, except insofar as the obligations are also set forth in this Canon.

American Arbitration Association

Preliminary Hearing Scheduling Order # 1 Case # XX REPORT OF PRELIMINARY HEARING AND SCHEDULING ORDER

Pursuant to the Commercial Arbitration Rules of the American Arbitration Association (AAA), and Procedures for Large, Complex Commercial Disputes, a preliminary hearing was held telephonically on YY 2014 at 10:00am CST, before Arbitrator David.W.Waddell. Appearing at the hearing was ABC for the Claimant, XYZ for Respondent and Cross-Claimant (collectively the “Parties”), and Director of ADR Services for AAA. By Agreement of the Parties and Order of the Arbitrator, the following is now in effect: WITH all matters, consistent with the Parties intent in agreeing to arbitration with the AAA, and consistent with the communication and cooperation exhibited at the Preliminary hearing by all in attendance, the Parties and Arbitrator will make every effort to maximize efficiency and economy while providing each party a fair opportunity to present its case (hereinafter referred to as the “Goal”). E-mail will be treated as if hand-delivered, and will be used for service. No additional parties will be joined. 1. Next Scheduled Preliminary Hearing: On 2014 at 10:00am CST, a preliminary hearing

will be held telephonically before the Arbitrator to discuss pending issues not otherwise raised in this Order including but not limited to: the form of award, attorney fees, specific location of the hearing, the court reporter and cost associated, and bifurcation, to the extent not previously determined.

2. Amended Claims: On or before May 16, 2014, all Parties shall amend/specify claims

and/or counter claims. Responses, if any, shall be filed on or before May 20, 2014. 3. Disclosure of Witnesses:

a) On or before September 9, 2014 Claimant and Respondent shall serve and file a disclosure of fact witnesses, each reasonably expects to call. A non-deposed disclosed witness can be deposed before the hearing. b) On or before July 3, 2014 Claimant and Respondent shall serve and file a disclosure of expert witnesses, each reasonably expect to call at the September 30, 2014 hearing.

c) The disclosure of witnesses shall include the full name of each witness, a short summary of anticipated testimony, copies of any experts reports (or a notation of a date certain when such report will be provided, or a date certain when such expert is available for a deposition), and written C.V. of experts. If required information is not available, the disclosures shall so state. Each Party shall be responsible for updating its disclosures as such information becomes available, up to and including the date of the hearing.

Supplemental expert reports, which deal specifically and exclusively with modifications to opinions, facts, or basis in fact which arise because of continuing discovery, shall be produced within thirty days of the receipt of the new information by counsel for the party retaining the expert.

It is contemplated that this matter maybe bifurcated. Experts for a hearing subsequent to the hearing scheduled to begin on September 30, 2014 do not fall within the deadline above. d) The parties shall make arrangements to schedule the attendance of witnesses so that this case can proceed with all due expedition, and without any unnecessary delay.

e) The party presenting evidence, no later than 5:30p.m. the day before, shall give notice to the other party of the names of the witness(es) who will be called to testify the next day, and the order in which the witnesses will be called.

4 Exhibits:

a) On or before September 9, 2014, the parties shall designate (or exchange copies when appropriate), all exhibits to be offered, and shall include all existing demonstrative schedules, summaries, diagrams, and charts to be used at the hearing.

Each proposed exhibit shall be pre-marked for identification, and all will be designated with the same identification character and sequential number(ing) used during deposition(s), to the extent this method is consistent with the Goal.

b) The parties shall agree upon and submit a jointly prepared consolidated set of exhibits. Digital or electronic copies on a flash or thumb drive compatible with a MAC is acceptable for the Arbitrator’s copy.

5. Briefing and Stipulated Facts: On or before September 23, 2014, the parties may file briefing, with responsive briefing, if any, to be filed on or before September 29, 2014. On or before September 29, 2014, the parties may file a stipulation of uncontested facts.

6. Hearings: Hearings in this matter will commence before the Arbitrator in LMN County, Texas, beginning on September 30, 2014 at 9:00a.m. The parties estimate that this case will require ten (10) days of hearing time, inclusive of arguments. Each Party will be permitted sixty minutes of interim argument that can be used in no greater than ten (10) minute increments upon the completion of a witnesses’ testimony and prior to the beginning of the next witness’ testimony. Opening arguments are encouraged, and each Party will be allotted up to twenty minutes for opening argument. Closing arguments, if any, and their length will be determined after the hearing begins.

7. Communications with Arbitrator: Any and all documents pertaining to finances and deposits, or conflicts shall be filed with or transmitted to the AAA Case Manager for transmitting, if appropriate, to the Arbitrator. E-mail communications directly with the Arbitrator shall be permitted with the prior consent of opposing counsel, which consent shall be requested for each topic (not each e-mail) to be breached with the Arbitrator. If counsel cannot agree, then the communication shall be sent to the AAA Case Manager for determination of the appropriateness of transmitting the e-mail to the Arbitrator. ALL E-MAIL COMMUNICATIONS WITH THE ARBITRATOR SHALL BE CC’D TO OPPOSING COUNSEL AND THE AAA CASE MANAGER.

There shall be no oral communication between the parties and the Arbitrator, except at hearings.

8. Discovery:

August 29, 2014 will be the discovery deadline. Remember the Goal, especially with discovery where simpler, less expensive, and expeditious is the mantra. The Parties are encouraged to produce documents without a document request, and before the deadlines set forth below. Initial document requests shall be served no later than April 14, 2014. Responses to document requests shall be served no later than May 12, 2014. Fact Witness depositions will be limited to a total of 25 hours per Party. Time is allocated to the party asking questions, whether on direct or cross-examination. The number of depositions to be taken is unlimited as long as the 25-hour time limitation has not been exceeded. No objections will be made during the depositions other than to assert a privilege or terminate the deposition due to improper harassment. All deposition exhibits will be numbered sequentially X-1, X-2 etc., regardless of the identity of the deponent or the Party introducing the exhibit; the same numbers will be used at the hearing . The Parties should consider the use of the same court reporting service to negotiate a reduction in costs. Protective and/or Confidentiality Agreements or the lack thereof will not be a basis for delay or extended deadlines. Should the Parties be unable to agree on such an Agreement (to the extent the Parties believe one is necessary), each party shall simultaneous (on the same day) forward its version of an Agreement to the Arbitrator without comment and the Arbitrator will choose one within 48 hours. The Party making the document request will bear the reasonable costs of document production. Significant costs to be borne by the requesting Party will not be incurred without notice to, and approval of opposing counsel. In requesting documents, it is strongly encouraged that the requesting Party, communicate a narrative of what is the intended goal of the request, and what the requesting Party believes are the best search terms to be used to locate the documents. The party from whom the documents are requested may know additional search terms that would accomplish the intended goal. Given this, the producing Party will use the most appropriate search terms, in addition to the search terms requested by the requesting Party (unless the Parties agree otherwise – the Parties are strongly encouraged to work through these issues telephonically (letters are time consuming and expensive)). Relevant documents not produced may result in a negative inference against the producing party. The Parties discussed the production of ESI in native format. The Parties will confer whether such native production is necessary, and if so, how best to produce such, keeping in mind the Goal. Should the Parties be unable to agree, the following will be followed for ESI production although the Parties may agree to tweak the offered process:

The Parties will produce ESI in the native format kept by the producing party, or in a common interchange format, such as Outlook/PST, Concordance or Summation, so the receiving party can search it. If any special software is required to conduct a search in

native format and is regularly used by the producing party, it must be made available to the receiving party.

The Parties will produce a Bates numbered file listing of the file names and directory

structure of what is on any CDs or DVDs exchanged. Either Party may use an e-mail or an attachment to an e-mail that came from one of these previously produced disks by

printing the entire e-mail (and the attachment if they are using a file that came with an e-mail) and marking it at the deposition or hearing, and either Party may use the application data (which was not an attachment to the e-mail – so it’s stand-alone on a CD or DVD) as

long as the footer on these pages or a cover sheet indicates (1) the CD or DVD from whence it came, (2) the directory or subdirectory location of the file on the CD or DVD

and (3) the name of the file itself, including the file extension. The production of a privilege document(s) is not a waiver of the privilege of other documents. Privileged documents produced can be snapped back without the need to show inadvertent production. Communications between counsel and experts are not discoverable.

9. Other: The substantive laws of the State of Texas shall be used in this matter.

If not otherwise provided for in this Order, or the AAA Commercial Rules, or the Procedures for Large Complex Commercial Disputes, preliminarily the procedural laws of the State of Texas shall govern as long as not in conflict with the Goal.

Testimony of witnesses on direct maybe provided by declaration, with cross-examination in person. Declarations should be provided to opposing Party and Arbitrator no later than the day before the witness is to be called. Should the testimony of a witness be presented other than by a witness in attendance, notice to opposing counsel shall be given no later than September 22, 2014.

10. Deadlines: Deadlines stated herein are set and have been agreed by the Parties. The Arbitrator will consider the Goal, and agreement of the Parties if flexibility is requested.

11. This order shall continue in effect unless and until amended by subsequent order of the

Arbitrator. Agreed: ABC counsel for Claimant ___________________ XYZ counsel for Respondent ____________________ ORDERED ________________________ Dated: ______________

David.W.Waddell, Arbitrator

American Arbitration Association

Preliminary Hearing Scheduling Order # 1 Case # XX REPORT OF PRELIMINARY HEARING AND SCHEDULING ORDER

Pursuant to the Commercial Arbitration Rules of the American Arbitration Association (AAA), and Procedures for Large, Complex Commercial Disputes, a preliminary hearing was held telephonically on YY 2014 at 10:00am CST, before Arbitrator David.W.Waddell. Appearing at the hearing was ABC for the Claimant, XYZ for Respondent and Cross-Claimant (collectively the “Parties”), and Director of ADR Services for AAA. By Agreement of the Parties and Order of the Arbitrator, the following is now in effect: WITH all matters, consistent with the Parties intent in agreeing to arbitration with the AAA, and consistent with the communication and cooperation exhibited at the Preliminary hearing by all in attendance, the Parties and Arbitrator will make every effort to maximize efficiency and economy while providing each party a fair opportunity to present its case (hereinafter referred to as the “Goal”). E-mail will be treated as if hand-delivered, and will be used for service. No additional parties will be joined. 1. Next Scheduled Preliminary Hearing: On 2014 at 10:00am CST, a preliminary hearing

will be held telephonically before the Arbitrator to discuss pending issues not otherwise raised in this Order including but not limited to: the form of award, attorney fees, specific location of the hearing, the court reporter and cost associated, and bifurcation, to the extent not previously determined.

2. Amended Claims: On or before May 16, 2014, all Parties shall amend/specify claims

and/or counter claims. Responses, if any, shall be filed on or before May 20, 2014. 3. Disclosure of Witnesses:

a) On or before September 9, 2014 Claimant and Respondent shall serve and file a disclosure of fact witnesses, each reasonably expects to call. A non-deposed disclosed witness can be deposed before the hearing. b) On or before July 3, 2014 Claimant and Respondent shall serve and file a disclosure of expert witnesses, each reasonably expect to call at the September 30, 2014 hearing.

c) The disclosure of witnesses shall include the full name of each witness, a short summary of anticipated testimony, copies of any experts reports (or a notation of a date certain when such report will be provided, or a date certain when such expert is available for a deposition), and written C.V. of experts. If required information is not available, the disclosures shall so state. Each Party shall be responsible for updating its disclosures as such information becomes available, up to and including the date of the hearing.

Supplemental expert reports, which deal specifically and exclusively with modifications to opinions, facts, or basis in fact which arise because of continuing discovery, shall be produced within thirty days of the receipt of the new information by counsel for the party retaining the expert.

It is contemplated that this matter maybe bifurcated. Experts for a hearing subsequent to the hearing scheduled to begin on September 30, 2014 do not fall within the deadline above. d) The parties shall make arrangements to schedule the attendance of witnesses so that this case can proceed with all due expedition, and without any unnecessary delay.

e) The party presenting evidence, no later than 5:30p.m. the day before, shall give notice to the other party of the names of the witness(es) who will be called to testify the next day, and the order in which the witnesses will be called.

4 Exhibits:

a) On or before September 9, 2014, the parties shall designate (or exchange copies when appropriate), all exhibits to be offered, and shall include all existing demonstrative schedules, summaries, diagrams, and charts to be used at the hearing.

Each proposed exhibit shall be pre-marked for identification, and all will be designated with the same identification character and sequential number(ing) used during deposition(s), to the extent this method is consistent with the Goal.

b) The parties shall agree upon and submit a jointly prepared consolidated set of exhibits. Digital or electronic copies on a flash or thumb drive compatible with a MAC is acceptable for the Arbitrator’s copy.

5. Briefing and Stipulated Facts: On or before September 23, 2014, the parties may file briefing, with responsive briefing, if any, to be filed on or before September 29, 2014. On or before September 29, 2014, the parties may file a stipulation of uncontested facts.

6. Hearings: Hearings in this matter will commence before the Arbitrator in LMN County, Texas, beginning on September 30, 2014 at 9:00a.m. The parties estimate that this case will require ten (10) days of hearing time, inclusive of arguments. Each Party will be permitted sixty minutes of interim argument that can be used in no greater than ten (10) minute increments upon the completion of a witnesses’ testimony and prior to the beginning of the next witness’ testimony. Opening arguments are encouraged, and each Party will be allotted up to twenty minutes for opening argument. Closing arguments, if any, and their length will be determined after the hearing begins.

7. Communications with Arbitrator: Any and all documents pertaining to finances and deposits, or conflicts shall be filed with or transmitted to the AAA Case Manager for transmitting, if appropriate, to the Arbitrator. E-mail communications directly with the Arbitrator shall be permitted with the prior consent of opposing counsel, which consent shall be requested for each topic (not each e-mail) to be breached with the Arbitrator. If counsel cannot agree, then the communication shall be sent to the AAA Case Manager for determination of the appropriateness of transmitting the e-mail to the Arbitrator. ALL E-MAIL COMMUNICATIONS WITH THE ARBITRATOR SHALL BE CC’D TO OPPOSING COUNSEL AND THE AAA CASE MANAGER.

There shall be no oral communication between the parties and the Arbitrator, except at hearings.

8. Discovery:

August 29, 2014 will be the discovery deadline. Remember the Goal, especially with discovery where simpler, less expensive, and expeditious is the mantra. The Parties are encouraged to produce documents without a document request, and before the deadlines set forth below. Initial document requests shall be served no later than April 14, 2014. Responses to document requests shall be served no later than May 12, 2014. Fact Witness depositions will be limited to a total of 25 hours per Party. Time is allocated to the party asking questions, whether on direct or cross-examination. The number of depositions to be taken is unlimited as long as the 25-hour time limitation has not been exceeded. No objections will be made during the depositions other than to assert a privilege or terminate the deposition due to improper harassment. All deposition exhibits will be numbered sequentially X-1, X-2 etc., regardless of the identity of the deponent or the Party introducing the exhibit; the same numbers will be used at the hearing . The Parties should consider the use of the same court reporting service to negotiate a reduction in costs. Protective and/or Confidentiality Agreements or the lack thereof will not be a basis for delay or extended deadlines. Should the Parties be unable to agree on such an Agreement (to the extent the Parties believe one is necessary), each party shall simultaneous (on the same day) forward its version of an Agreement to the Arbitrator without comment and the Arbitrator will choose one within 48 hours. The Party making the document request will bear the reasonable costs of document production. Significant costs to be borne by the requesting Party will not be incurred without notice to, and approval of opposing counsel. In requesting documents, it is strongly encouraged that the requesting Party, communicate a narrative of what is the intended goal of the request, and what the requesting Party believes are the best search terms to be used to locate the documents. The party from whom the documents are requested may know additional search terms that would accomplish the intended goal. Given this, the producing Party will use the most appropriate search terms, in addition to the search terms requested by the requesting Party (unless the Parties agree otherwise – the Parties are strongly encouraged to work through these issues telephonically (letters are time consuming and expensive)). Relevant documents not produced may result in a negative inference against the producing party. The Parties discussed the production of ESI in native format. The Parties will confer whether such native production is necessary, and if so, how best to produce such, keeping in mind the Goal. Should the Parties be unable to agree, the following will be followed for ESI production although the Parties may agree to tweak the offered process:

The Parties will produce ESI in the native format kept by the producing party, or in a common interchange format, such as Outlook/PST, Concordance or Summation, so the receiving party can search it. If any special software is required to conduct a search in

native format and is regularly used by the producing party, it must be made available to the receiving party.

The Parties will produce a Bates numbered file listing of the file names and directory

structure of what is on any CDs or DVDs exchanged. Either Party may use an e-mail or an attachment to an e-mail that came from one of these previously produced disks by

printing the entire e-mail (and the attachment if they are using a file that came with an e-mail) and marking it at the deposition or hearing, and either Party may use the application data (which was not an attachment to the e-mail – so it’s stand-alone on a CD or DVD) as

long as the footer on these pages or a cover sheet indicates (1) the CD or DVD from whence it came, (2) the directory or subdirectory location of the file on the CD or DVD

and (3) the name of the file itself, including the file extension. The production of a privilege document(s) is not a waiver of the privilege of other documents. Privileged documents produced can be snapped back without the need to show inadvertent production. Communications between counsel and experts are not discoverable.

9. Other: The substantive laws of the State of Texas shall be used in this matter.

If not otherwise provided for in this Order, or the AAA Commercial Rules, or the Procedures for Large Complex Commercial Disputes, preliminarily the procedural laws of the State of Texas shall govern as long as not in conflict with the Goal.

Testimony of witnesses on direct maybe provided by declaration, with cross-examination in person. Declarations should be provided to opposing Party and Arbitrator no later than the day before the witness is to be called. Should the testimony of a witness be presented other than by a witness in attendance, notice to opposing counsel shall be given no later than September 22, 2014.

10. Deadlines: Deadlines stated herein are set and have been agreed by the Parties. The Arbitrator will consider the Goal, and agreement of the Parties if flexibility is requested.

11. This order shall continue in effect unless and until amended by subsequent order of the

Arbitrator. Agreed: ABC counsel for Claimant ___________________ XYZ counsel for Respondent ____________________ ORDERED ________________________ Dated: ______________

David.W.Waddell, Arbitrator

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American Arbitration AssociationTHE TOP 10 WAYS TO MAKE ARBITRATION FASTER AND MORE COST EFFECTIVE

Forty experienced arbitrators from across the United States were asked what ten things they would tell CEOs and CFOs in order to maximize the benefits of commercial arbitration. The arbitrators represent a broad range of legal and business experience throughout the spectrum of commercial and governmental law. Experience as an arbitrator ranged from two years to forty years.

Arbitrators responding to the survey possessed wide experience in both business and law:

• Partners in large and small law firms

• General Counsel

• Executive Vice Presidents

• Corporate Secretaries in large and small companies,

including family owned enterprises

• Law Professors

• Transaction Attorneys

• Litigation Attorneys

• Former Judges

• Legal Aid Attorneys

• Public Defenders

• US Attorneys

• State Attorneys

• International Law and Business

• State and Federal Agencies

• State Government Elected and Appointed Officials

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But for arbitration to fulfill these expectations, companies and their counsel must evaluate their practices and take steps to en-sure that arbitration does not become the functional equivalent of a trip to court. These “top ten tips,” gleaned from the expe-riences of seasoned AAA® arbitrators, are a good starting point for the true stakeholders – the parties – to understand how to use the arbitration process to further their objectives.

The top 10 ways to make arbitration faster and more cost effective

David L. Evans, EsquireMurphy & KingBoston

India Johnson, President and CEOAmerican Arbitration Association®

New York

By:

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Pay Attention to Your Arbitration ClauseThoughtlessly inserting a boilerplate arbitration clause into your contract can turn a manageable dispute into a more time consuming, expensive and disruptive case.Companies and their transactional lawyers carefully evaluate the business terms in their contracts, but they often reflexively insert a boilerplate arbitration clause from other contracts or a form book. This oversight jeopardizes the inherent benefits of arbitration and could result in a more expensive, disruptive and inefficient proceeding. It is vital to give up-front consideration to the details of the procedures most suitable to any likely disputes under a contract and not simply hope for the best once hostilities have arisen. While an entire article could be written on clause drafting (a checklist of issues is included in the side bar), some key issues to address are:

•Casedeadlines •Discoverylimits •Arbitratorselectionandqualifications •Confidentiality

Courts have fixed rules of procedure regulating most aspects of a case. Arbitration is a creature of contract, enabling the parties to tailor the process to fit their needs and bypass litigation procedures. If you do not take advantage of this critical distinction, you may well be relegated to a more cumbersome and costly proceeding. As an arbitration administrator, the AAA has broad experience in these clause components, but you must include AAA in the clause to access its expertise.

Select Attorneys Experienced in ArbitrationWhile arbitration should be economical and efficient, less experienced attorneys often unnecessarily apply time-consuming litigation processes. While arbitration and litigation are both adversarial proceedings, there are important differences between the two and understanding those differences is critical to the cost- effective presentation of a case. Lawyers unfamiliar with the arbitration process tend to treat arbitration as though itwereacourtproceeding,resultinginrequests(orevenstipulations)forextensivediscovery, evidentiary skirmishes and unnecessary motion practice. Critically, since arbitration should not be burdened with full blown litigation discovery, you should hire a lawyer unafraid to try a case without having deposed every conceivable witness or unearthed every document. And, it is totally appropriate to ask prospective counsel how many arbitrations they have actually tried to conclusion! Make sure counsel understands your business objectives and is prepared to take the straightest path towards the fulfillment of those objectives.

Arbitration is a creature of contract, enabling the parties to tailor the process to fit their needs and bypass litigation procedures.

Checklist for Arbitration Clauses:

•Numberandqualifications of arbitrators•Hearinglocale•Time(caseduration)limits•Discovery(includinge-discovery)limits•Attorney’sfeesandarbitrationcosts(divideequallyorprevailingparty)•PhasedADRregime(meetandconfer, mediation, med/arb hybrid)•Confidentiality(documents, testimony, award)•Dispositivemotions (summary judgment)•Formofaward(reasonedorstandard)•Interimorinjunctiverelief•Governinglawandrules

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Request and Enforce BudgetsYour arbitration decisions should be based on traditional cost-benefit or ROI analyses. Howmanyimportantbusinessprojectsarelaunchedwithoutabudget?Arbitrationshouldbetreatednodifferently.Companiesshouldrequiretheirlawyerstoprepareand regularly update a budget for the various phases of the case (i.e. claim/answer, discovery, witness preparation, experts, hearings, motions, and briefs), justify the line items and track billings against the budget. Alternative fee arrangements such as blended hourly rates, contingent fees or fixed fees should also be considered. Overall, and absent special circumstances (e.g. customer relations or precedential concerns), yourarbitrationdecisionsshouldbebasedontraditionalcost-benefitorROIanalysesfamiliar to most businesses.

Choose the “Right” Arbitrator

Researching an arbitrator with the right expertise, temperament and background is an often overlooked yet essential step. Every arbitration award is rendered by a human being, or panel of them, each with his or her own backgrounds and experiences. Yet, it is surprising how little attention parties devote to the arbitrator selection process, and specifically to identifying an arbitrator with the substantive expertise, temperament and training to be receptive to the evidence. The first opportunity to narrow the field begins with the arbitration clause itself. Ask yourself: if there is a dispute under the contract,whatwillbethelikelyclaim(s)?DoIwantalawyertodecidetheclaims,oranaccountant,oranengineer?Oncethedemandisfiled,andthecaseadministratorhasdisseminatedalistofarbitratorcandidates(subjecttoanyrequirementsspecifiedinthearbitrationclause),businessesshouldreviewthearbitrators’biographies,searchtheinternet and any public data bases, and, if appropriate, solicit feedback from those with experience with the arbitrator. In short, conduct due diligence as you would with any important business decision.

An entire seminar could be dedicated to arbitrator selection, but three additional points areworthnoting.First,theAAA’sEnhancedNeutralSelectionProcessenablesthepartiestointerviewpotentialarbitratorsorposemutuallyagreeablewrittenquestionsto ascertain whether the arbitrator has the proper experience and disposition. The processhelpswinnowthefieldtothosearbitratorswiththeabilitytoexertrequisitemanagementskillsandhandleanyuniqueissuesinthecase.Second,partiesshouldvetcarefullyanyclausewhichrequiresathreepersonpanelandavoidwheneverpossiblea tripartite panel comprised of two party-appointed arbitrators. The running costs of a panel case can be substantial and scheduling becomes more problematic. Third, if there are a flurry of claims under your standard form contract, analyze what is wrong and fix it. An arbitrator cannot be expected to provide relief from a bad agreement.

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Every arbitration award is rendered by a human being, or panel of them, each with his or her own backgrounds and experiences.

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Limit Discovery to What is Essential for the Arbitrator

Establish a strict discovery schedule focused on the exchange of necessary information. Discovery costs are often the largest part of any litigation budget. But this should not be the case in arbitration, especially if the arbitration clause specifies that discovery will be limited to reasonable procedures consistent with the contours ofthedispute.Eveniftheclauseissilent,itisintheparties’mutualinterests(andis the duty of the arbitrator) to develop a discovery schedule that is restricted to the exchange of information necessary (not merely desired) for the arbitrator to understandandfairlydecidethecase.Writtendiscoveryrequests(interrogatoriesorrequestsforadmissions)arerarelyappropriate.Depositionsofwitnesseswhowilltestify at the hearings should be avoided, or at least confined to the key decision maker(s). Document exchange is commonplace, but that practice must be given special attention in this age of electronically stored information (ESI). E-discovery has spawned its own cottage industry of consultants and experts, and budgets can easily be exhausted in endless fields of back-up tapes, metadata, .pst files, and TIFF images. Unless the parties can work out an ESI treaty on their own, the issue should be presented to the arbitrator at the preliminary hearing. Even before a case is actually filed, it is prudent to investigate the burden of producing ESI because it could influence the decision on whether to file in the first instance.

Participate in the Preliminary HearingGauge the arbitrator, hear the other side’s position and have a say in develop-ing the schedule. The preliminary conference is the first occasion for the parties to present their positions to the arbitrator and discuss a case schedule. This need not be a lawyers-only gathering. Clients have the right to be present at the preliminary hearing (most are conducted by conference call), and by participating you have the abilitytogaugethearbitrator,heartheotherside’sunfilteredpositionandreacttothe schedule being developed. The product of the conference is a case manage-ment or scheduling order which codifies the arrangements from initial discovery through issuance of the award. Be sure to review its terms. Thereafter, monitor any requestsforcontinuancesorextensionsofthedeadlines,asyouwouldwithanybusiness project.

Limit Motion Practice

Potential motions must be scrutinized, as they are time-consuming and may not have any practical significance. Companies and their counsel should con-sider whether any potential motion truly “advances the ball.” Motions designed to restrict evidence at the hearings (so-called motions in limine) may be inappropriate because the formal rules of evidence do not apply in arbitration, and the arbitrator should rightfully consider evidence designed to further his or her understanding of the case. Similarly, arbitrators may be reluctant to grant dispositive (summary judg-ment) motions absent a stipulation by the parties because one of the few grounds for vacating an award under the Federal Arbitration Act is a refusal to hear mate-rial evidence. Consider suggesting to the arbitrator that any party wishing to file a motion first seek permission so the arbitrator can assess its potential effect on the case. At a minimum, have your attorneys explain the rationale for any motion, and evaluate its possible efficacy in comparison to the risks and costs.

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Monitor any requests for continuances or extensions of the deadlines, as you would with any business project

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Remain Open to Settlement

Keep an open mind and set aside emotions during the case as opportunities for settlement develop. Few lawsuits proceed as scripted, and arbitration is no different. Businesses need to be alert to case developments, and evaluate whether any new in-formation affects the value of the case. Leave your emotions aside. Consider direct talks withtheadverseparty’smanagementortheuseofamediator,andreassesstheoptionsthroughout the proceeding. Indeed, many cases settle during or after the hearings. As arbitration administrator, the AAA usually attempts to include a voluntary mediation step during your arbitration and, when adopted, many cases are settled or partially settled prior to hearing. Even settling some of the disputes in a case can make the hearings lessexpensiveandquicker.

Trust the Expertise of the Arbitrator

Arbitrators have specialized knowledge in your field and are more receptive to the facts of your case than to generalized pleas for fairness and equity. Attorneys who regularly represent clients in arbitration recognize the differences between a jury case and arbitration before someone knowledgeable about the industry or subject matter. Arbitrators want to understand how your case fits into a framework which they already have experienced. Present your claims in the clearest possible manner, with an eye towards demonstrating how the particular facts of your situation warrant relief. Focus onthekeyissuesindispute.Generalizedpleasforfairnessorequityarelesslikelytoresonate with the arbitrator.

Present the Case Efficiently and Professionally

You play a critical role in completing the arbitration as efficiently and persuasively as possible. By the time the first witness is sworn, procedures should be in place to ensure that the hearings flow smoothly. Time limits should be considered. Exhibits books containing stipulated exhibits should be pre-marked, with copies available for all participants, including witnesses. Slides or demonstrative exhibits can be effective pre-sentation tools, particularly for opening statements or complicated technical or damages matters.Thepartiesshouldhavediscussedanywitnesssequencingissues,consideredthe use of video or web testimony and affidavits, and presented any witness disputes to the arbitrator for disposition. Do have a party representative at the hearings. Do not groan,scofforchortleduringanopponent’scaseorslumpinyourchairafteranunfavor-able ruling or testimony. When testifying, direct your comments to the arbitrator and avoid unnecessary sparring with counsel during cross-examination.

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Few lawsuits proceed as scripted, and arbitration is no different.

As the stakeholders with the greatest economic interest, the parties have the most to gain from an efficient, fair and expeditious resolution of their dispute. Businesses, in consultation with in-house and outside counsel, must assume ownership of the arbitration process to leverage the unique benefits of arbitration over court. With a customized arbi-tration clause and careful monitoring of the proceeding, the parties are uniquely situated to rein in costs and produce speedy outcomes. Attention to these ten tips will put the parties on the path towards better outcomes.

www.adr.org

AAA114

10 WAYS TO MAKE ARBITRATION FASTER, BETTER, AND CHEAPER

CHANDRIKA SHORI Shori Legal Services PLLC

3355 Blackburn, #8107 Dallas, Texas 75204

JOHN DeGROOTE

John DeGroote Services, LLC 501 S 2nd Avenue, SuiteA700

Dallas, Texas 75226

LONNIE M. SCHOOLER Jackson Walker, L.L.P

1401 McKinney, Suite 1900 Houston, TX 77010

State Bar of Texas ALTERNATIVE DISPUTE RESOLUTION

January 23, 2015 Austin

CHAPTER 7

10 Ways To Make Arbitration Faster, Better, And Cheaper Chapter 7

TABLE OF CONTENTS

I. CONTROL THE PROCESS .............................................................................................................................. 1 A. The process is in your control. ................................................................................................................... 1

1. You get (at least) three opportunities to choose. ................................................................................ 1 2. You can be as specific as you'd like at every turn. ............................................................................. 1

B. You can use the arbitration clause to make the process faster, better and cheaper. ................................... 2 1. The arbitration clause: a checklist ..................................................................................................... 2 2. The arbitration clause: traps to avoid ................................................................................................ 3 3. Sample arbitration clauses .................................................................................................................. 3

II. ELIMINATE THE OUTLIER ........................................................................................................................... 3

III. PICK A BETTER ARBITRATOR ..................................................................................................................... 4 A. You can agree in advance what type of arbitrator you'll have. .................................................................. 4 B. There's more you can learn about your prospective arbitrator. .................................................................. 4

1. Knowledge: The horsepower to get what you want done, done. ........................................................ 4 2. Approach: the demeanor by which knowledge is applied .................................................................. 4 3. Efficiency: Just what the label implies .............................................................................................. 5 4. Manifest Integrity ............................................................................................................................... 5

IV. GET A SCHEDULING ORDER THAT WORKS ............................................................................................. 5 A. Arbitration isn't litigation. .......................................................................................................................... 5 B. Remember that the parties are resolving a narrowly identified dispute. .................................................... 5 C. You can manage the costs -- and impacts -- of discovery in arbitration, and you can tailor discovery to

what you need. ........................................................................................................................................... 5 D. You can limit the costs of e-discovery. ...................................................................................................... 6 E. Remember that the arbitrator you select has an impact. ............................................................................. 6

V. PRESENT EVIDENCE MORE EFFICIENTLY ............................................................................................... 6 A. Direct testimony may not be required. ....................................................................................................... 6 B. Arbitrators can read depositions, evidentiary summaries, and more. ......................................................... 6

VI. APPOINT THREE ARBITRATORS AS A CHECK ......................................................................................... 6

VII. RECOGNIZE THAT 3 > (3X1) ......................................................................................................................... 6

VIII. PICK BETTER FACILITIES ............................................................................................................................ 7

IX. KEEP THE CLIENT INVOLVED ..................................................................................................................... 7

X. BUILD IN AN APPELLATE PROCEDURE .................................................................................................... 7 A. Appeals within arbitration are not new. ..................................................................................................... 7 B. The parties need to give the appellate panel something to work with. ....................................................... 8

APPENDIX A ................................................................................................................................................................. 9 APPENDIX B ............................................................................................................................................................... 11

Full program can be purchased from the Texas Bar CLE at the following link:

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REVISED FEBRUARY 6, 2015 IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 13-11274

BNSF RAILWAY COMPANY, Plaintiff - Appellee v. ALSTOM TRANSPORTATION, INCORPORATED, Defendant - Appellant

Appeal from the United States District Court

for the Northern District of Texas Before KING, DENNIS, and CLEMENT, Circuit Judges. EDITH BROWN CLEMENT, Circuit Judge:

Appellant Alstom Transportation, Inc. (“Alstom”) appeals from the final judgment entered by the district court, in which the district court partially vacated an arbitration panel’s final award in Alstom’s favor. For the reasons explained below, we VACATE the district court’s order. We REMAND for further proceedings consistent with this opinion, with instructions to reinstate the Panel’s final award.

FACTS AND PROCEEDINGS Appellee BNSF Railway Co. (“BNSF”) hired Alstom to implement and

manage a new maintenance program for BNSF’s locomotives. As relevant here,

United States Court of Appeals Fifth Circuit

FILED February 5, 2015

Lyle W. Cayce Clerk

Case: 13-11274 Document: 00512929481 Page: 1 Date Filed: 02/06/2015

No. 13-11274 BNSF and Alstom’s relationship was governed by a Maintenance Agreement (“Agreement”), which contained an arbitration agreement. Alstom’s performance did not satisfy BNSF in the early years of the new program. As part of Alstom and BNSF’s negotiations to resolve the growing conflict, the parties amended the Agreement to give BNSF the right to terminate the parties’ contractual relationship “at any time, without cause.” Later, BNSF informed Alstom that it planned to remove a significant percentage of its locomotives from its active fleet. These plans triggered a provision in the Agreement, which required BNSF to confer with Alstom to make a reasonable economic adjustment in Alstom’s favor.1 But, before BNSF and Alstom met to discuss an adjustment, BNSF terminated the contract. After BNSF sought declaratory relief in the district court, Alstom asked the district court to compel arbitration. The district court ordered BNSF and Alstom to arbitrate their claims under the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1, et seq.

The Agreement specified that the arbitration panel (“Panel”) should resolve any dispute according to the Agreement’s express terms. The Agreement provided that it should “be governed by and construed in accordance with the laws of . . . Illinois.” If nothing in the Agreement answered the question presented to the Panel, the Agreement directed the Panel to refer to Illinois law to discern the controlling rule. The Agreement also provided that the Panel could award ordinary and direct damages, but not consequential or incidental damages, such as lost profits.

The Panel found that BNSF exercised its termination rights to avoid its contractual duty to confer with Alstom regarding a reasonable economic adjustment. Thus the Panel held that, under Illinois law, BNSF breached the

1 BNSF’s payments to Alstom were roughly correlated to the number of trains in service. Thus a decrease in the size of BNSF’s active fleet would result in a lower payment to Alstom.

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No. 13-11274 covenant of good faith and fair dealing when it terminated the Agreement. The Panel also held that BNSF breached the Agreement by failing to confer on a reasonable economic adjustment. The Panel then considered what remedy to give Alstom. The Panel refused to award certain remedies, such as lost profits, because the Agreement prohibited them. But the Panel interpreted the Agreement to allow out-of-pocket damages. Accordingly, the Panel awarded Alstom its out-of-pocket costs, minus penalties and liquidated damages.

Alstom moved to confirm the award in the district court. BNSF moved to vacate the award pursuant to 9 U.S.C. § 10(a)(4). The district court sided with BNSF, vacating the Panel’s holding that BNSF violated the Illinois covenant of good faith and fair dealing. In the alternative, the district court vacated the Panel’s remedy in part, holding that the Panel had given Alstom damages that were forbidden under the Agreement.

STANDARD OF REVIEW We review a district court’s order vacating an arbitration award de novo.

See Citigroup Global Mkts., Inc. v. Bacon, 562 F.3d 349, 350 (5th Cir. 2009). Our “review of the underlying award is exceedingly deferential.” Rain CII

Carbon, LLC v. ConocoPhillips Co., 674 F.3d 469, 472 (5th Cir. 2012) (internal quotation marks omitted). “[T]he sole question for us is whether the arbitrator (even arguably) interpreted the parties’ contract, not whether he got its meaning right or wrong.” Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064, 2068 (2013).

DISCUSSION Alstom argues that the district court erred by vacating the Panel’s decision and award and refusing to confirm the award in Alstom’s favor. For the reasons explained below, we agree with Alstom.

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No. 13-11274 I. A.

“Arbitration is a matter of contract.” Brook v. Peak Int’l, Ltd., 294 F.3d 668, 672 (5th Cir. 2002). Thus, “the power and authority of arbitrators in an arbitration proceeding is dependent on the provisions under which the arbitrators were appointed.” Id. (alteration and internal quotation marks omitted). This principle is enshrined in 9 U.S.C. § 10(a)(4), which provides a remedy in the federal courts “where the arbitrators exceeded their powers.” When an arbitration goes an opponent’s way on the basis of questionable contract interpretation, parties often seek refuge in § 10(a)(4). But the Supreme Court has made clear that district courts’ review of arbitrators’ awards under § 10(a)(4) is limited to the “sole question . . . [of] whether the arbitrator (even arguably) interpreted the parties’ contract.” Oxford Health, 133 S. Ct. at 2068. This is an objective test. Cf. Stolt-Nielsen S.A. v.

AnimalFeeds Int’l Corp., 559 U.S. 662, 676 (2010) (holding that, despite arbitrators’ “few references to [the parties’] intent,” evidence showed that they could not have been guided by parties’ intent). Thus a party challenging an arbitration award need not adduce hard-to-obtain evidence concerning the arbitrators’ true intent. At the same time, in evaluating the available evidence, the district courts “must resolve all doubts in favor of arbitration.” Brook, 294 F.3d at 672. Accordingly, the party challenging an arbitrators’ award under § 10(a)(4) must carry a “heavy burden.” Oxford Health, 133 S. Ct. at 2068. In determining whether the arbitrator exceeded her authority, district courts should consult the arbitrator’s award itself. The award will often suggest on its face that the arbitrator was arguably interpreting the contract. Several pieces of relevant evidence can be gleaned from the award’s text, including but not limited to: (1) whether the arbitrator identifies her task as interpreting the contract; (2) whether she cites and analyzes the text of the

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No. 13-11274 contract; and (3) whether her conclusions are framed in terms of the contract’s meaning. See id. at 2069.

B. The question before us is whether the arbitrators “(even arguably) interpreted” the Agreement in reaching their award. Id. at 2068. The parties’ arguments implicate three provisions in the Agreement. Sections 13.2, 15.6, and 18.1, respectively, give BNSF the right to terminate the Agreement “without cause”; authorize the Panel to consider Illinois law when the Agreement does not contain an answer to a question in dispute; and provide that the Agreement should be generally governed by and construed according to Illinois law. The Panel’s discussion of the duty of good faith and fair dealing is framed as an interpretation of the meaning of the “without cause” provision. The Panel appears to have concluded that the “without cause” language in the Agreement was ambiguous. Even if they had not, they could have turned to Illinois law in the first instance to aid their interpretation of the “without cause” language under § 18.1. In either event, the arbitrators were “arguably interpreting” the agreement when they construed the term “without cause” by reference to Illinois law. See Oxford Health, 133 S. Ct. at 2068. BNSF fails to show that the Panel could not have been interpreting the Agreement when it concluded that Illinois law imposes a limitation on the right to terminate “without cause” based on the covenant of good faith and fair dealing. BNSF argues that the Panel should have interpreted the termination provision as giving it a right to terminate the Agreement for any reason whatsoever. BNSF also contends that the Panel “completely botched” the application of Illinois law when it applied the covenant of good faith and fair dealing. But error in interpreting a contract is not grounds for setting aside an arbitrator’s award.

5


No. 13-11274 As we have said too many times to want to repeat again, the question for decision by a federal court asked to set aside an arbitration award . . . is not whether the arbitrator or arbitrators erred in interpreting the contract; it is not whether they clearly erred in interpreting the contract; it is not whether they grossly erred in interpreting the contract; it is whether they interpreted the contract.

Hill v. Norfolk & W. Ry. Co., 814 F.2d 1192, 1194-95 (7th Cir. 1987). As such, BNSF’s arguments are misplaced. The sole question is whether the arbitrators even arguably interpreted the Agreement in reaching their award; it is not whether their interpretations of the Agreement or the governing law were correct. See Oxford Health, 133 S. Ct. at 2068. That we might interpret the Agreement differently than the Panel is entirely beside the point because it is not our interpretation that the parties bargained for. See id. (“Because the parties bargained for the arbitrator’s construction of their agreement, an arbitral decision even arguably construing or applying the contract must stand, regardless of a court’s view of its (de)merits.” (citation and internal quotation marks omitted)).

Accordingly, we reverse the district court. C.

The Panel’s award also suggests that the Panel was interpreting the Agreement when it calculated Alstom’s remedy. The Panel held that BNSF breached the Agreement in two ways, and that BNSF should pay damages to Alstom according to the terms of the Agreement’s remedial provision. The Panel made clear, either expressly or by implication,2 that it interpreted the Agreement to allow out-of-pocket costs as direct damages, and that Alstom’s remedy was for its out-of-pocket damages.

2 The Panel refused to give Alstom any “category of damages precluded by . . . [the] Agreement.” It follows that the Panel interpreted the Agreement to allow the damages it did award.

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No. 13-11274 Most of BNSF’s arguments about the damages the Panel awarded to

Alstom boil down to a complaint that the Panel misinterpreted the Agreement. BNSF argues that the Panel exceeded its powers by creating a remedy based on the “reasonable economic adjustment” clause. We recognize that the Panel phrases its award in those terms. But the Panel also tailored the “economic adjustment” remedy to fit the Agreement’s remedial provision. And BNSF fails to adduce any evidence that the Panel referred to sources besides the Agreement or relevant Illinois case law in determining the amount of Alstom’s award.

BNSF contends that the Panel awarded Alstom lost profits, which were prohibited under the Agreement. As evidence, BNSF cites the Panel’s statement that BNSF’s bad faith termination “denied [Alstom] the opportunity to earn additional revenues through the remainder of the contract period.” But the Panel clearly mentions Alstom’s revenue expectations only as a component of what Alstom had a reasonable right to expect according to the covenant of good faith and fair dealing.3 The Panel’s award also conveys that the Panel believed the Agreement allowed out-of-pocket damages, that Alstom “reasonably proved that they sustained legitimate out-of-pocket costs” exceeding the amount of the award, and that the award was for out-of-pocket damages pursuant to the Agreement’s remedial provision.4 Given what appears on the face of the Panel’s award, BNSF must show that the Agreement

3 BNSF omits the fact that Alstom estimated that it lost hundreds of millions of dollars in lost revenues, which is significantly more than the award the Panel gave Alstom. This suggests, at least, that the Panel’s award was based on some measure besides lost revenue.

4 BNSF argues that Alstom waived its argument regarding reliance damages because they “never requested reliance damages, nor did the arbitration panel consider or award them.” We disagree. The term “reliance damages” is generally understood to refer to out-of-pocket damages. See, e.g, Restatement (Second) of Contracts § 349 (1981) (“[T]he injured party has a right to damages based on his reliance interest, including expenditures made in preparation for performance or in performance. . .”). And the Panel repeatedly described its award to Alstom in terms of Alstom’s “out-of-pocket” costs or damages.

7


No. 13-11274 cannot even arguably be interpreted to allow out-of-pocket damages, or that the award itself cannot even arguably be construed as an out-of-pocket remedy. BNSF cites this court’s opinion in Amigo Broadcasting, LP v. Spanish

Broadcasting System, Inc., 521 F.3d 472 (5th Cir. 2008), to show that out-of-pocket damages are the same as lost profits damages. But, even if that case supported that proposition, it was based on Texas rather than Illinois law. See

id. at 479. BNSF fails to cite any Illinois case law—which is controlling when the Agreement does not define a given term—that holds that out-of-pocket damages are the same as lost profits. Thus BNSF fails to carry its burden to show that the Panel did not even arguably interpret the Agreement when it fashioned Alstom’s remedy.

While we have endeavored to construe BNSF’s arguments according to the proper standard—whether the Panel even arguably interpreted the Agreement—we may be giving BNSF’s arguments more solicitude than they deserve. The gist of most of its arguments is that the Panel erred, and this error proves that the Panel failed to interpret the Agreement. But “convincing a court of an arbitrator’s error—even his grave error—is not enough.” Oxford

Health, 133 S. Ct. at 2070. Because BNSF failed to carry its burden to show that the Panel was not

even arguably interpreting the Agreement, “[t]he [Panel]’s construction holds, however good, bad, or ugly.” Id. at 2071. We reverse the district court on its alternative holding that the Panel failed to even arguably interpret the Agreement when it awarded Alstom damages.

II. BNSF argues that, even if the Panel’s award would stand under the FAA, we should overturn it under the Texas Arbitration Act (“TAA”), Tex. Civ. Prac. & Rem. Code § 171.001, et seq., or the Illinois Arbitration Act (“IAA”), 710 Ill. Comp. Stat. 5/1, et seq. BNSF admits that the Agreement does not expressly

8


No. 13-11274 reference the TAA or IAA. “FAA rules apply absent clear and unambiguous contractual language to the contrary.” Action Indus., Inc. v. U.S. Fid. & Guar.

Co., 358 F.3d 337, 341 (5th Cir. 2004). “[T]his Court permits arbitration under non-FAA rules if a contract expressly references state arbitration law. . . .” Id. (emphasis added).

BNSF contends that Hall Street Associates v. Mattel, Inc., 552 U.S. 576 (2008), supersedes this part of Action.5 We disagree. In Hall, the Supreme Court noted that parties may obtain more searching review of arbitration decisions by stipulating in the arbitration agreement that state statutes or common law rules apply. See id. at 590. Action is consistent with Hall. Action

simply states that the FAA provides the default standard of review, and that parties must unambiguously express their agreement to non-FAA standards to obtain more searching review. See Action, 358 F.3d at 341. Because the Agreement does not refer to the TAA, IAA, or any other body of law offering a competing standard of review, we hold that the FAA’s standard of review controls. BNSF also maintains that the district court erred when it ordered the parties to arbitrate gateway questions of arbitrability. BNSF argues that it never agreed to submit these gateway questions to arbitration. The problem with this argument is, BNSF did not file a cross-appeal. “An appellee who does not take a cross-appeal may ‘urge in support of a decree any matter appearing before the record, although his argument may involve an attack upon the reasoning of the lower court.’” Jennings v. Stephens, 135 S. Ct. 793, 798 (2015) (quoting United States v. Am. Ry. Express Co., 265 U.S. 425, 435 (1924)). “But

5 We consider only whether Hall overrules Action in this limited respect. The Action Panel also held, for example, that this court allows arbitration under non-FAA rules if an agreement’s “arbitration clause specifies with certain exactitude how the FAA rules are to be modified.” Action, 358 F.3d at 341. We do not consider whether Hall overrules this latter rule or any other part of Action.

9


No. 13-11274 an appellee who does not cross-appeal may not ‘attack the decree with a view either to enlarging his own rights thereunder or of lessening the rights of his adversary.’” Id. (quoting Railway Express, 265 U.S. at 435); see also Weaver v.

Tex. Capital Bank N.A., 660 F.3d 900, 905 (5th Cir. 2011) (per curiam) (“Although an appellee may argue any ground available to support affirmance of a judgment, he may not argue for a ruling that would expand his legal rights.”). Here, the district court’s final judgment provided that “the arbitration panel’s award is PARTIALLY VACATED, in that the panel’s decision that the termination of the parties’ agreement by plaintiff BNSF Railway Company (‘BNSF’) breached Illinois’s duty of good faith and fair dealing and its assessment of a reasonable economic adjustment against BNSF is VACATED.” By now arguing that the arbitration at issue in this case should have never occurred because the parties did not agree to it, BNSF seeks full—not partial—vacatur of the arbitral award. Thus BNSF asks for an expansion of the judgment without filing a cross-appeal, which it may not do.

Accordingly, we may not consider BNSF’s arguments on this ground. III.

Alstom asks us to confirm the Panel’s final award, but it fails to cite any case law showing that we have the power to do so in the first instance. The FAA provides that parties should seek confirmation of an arbitration award in the court specified in the agreement, or if no court is specified, in the federal district court in the district where the award was made. See 9 U.S.C. § 9. Alstom does not argue that this court is named in its agreement. Thus we do not appear to have the power to confirm the Panel’s final award.

10


No. 13-11274 CONCLUSION

For the reasons explained, we VACATE the district court’s order. We REMAND for further proceedings consistent with this opinion, with instructions to reinstate the Panel’s final award.

11


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