Landlord-Tenant Alternative Dispute Resolution

Reference Outline

Eric J. Millner
R. Jason Pierce
Bourland, Wall & Wenzel,
A Professional Corporation
Attorneys and Counselors
301 Commerce Street, Suite 1500
Fort Worth, Texas 76102

(817) 877-1088
(877) 429-9529 (toll-free)
(817) 877-1636 (facsimile)

Eric’s E-mail: emillner@bwwlaw.com

Jason’s E-mail: rjpierce@bwwlaw.com

Presented to

5th Annual Landlord-Tenant Law in Texas

November 3, 2010

Information set forth in this outline should not be considered legal advice, because every fact pattern is unique. The information set
forth herein is solely for purposes of discussion and to guide practitioners in their thinking regarding the issues addressed herein.

All written material contained within this outline is protected by copyright law and may not be reproduced without the express written
consent of Bourland, Wall & Wenzel.

©Bourland, Wall & Wenzel, P.C.

248408
 ADR

TABLE OF CONTENTS

I. INTRODUCTION/SOURCES OF ADR LAW ............................................................................... 3

II. MEDIATION ................................................................................................................................... 3
A. What is mediation? ............................................................................................................. 3
B. Confidentiality of the mediation procedure ........................................................................ 3
III. ARBITRATION .............................................................................................................................. 4
A. What is arbitration? ............................................................................................................. 4
B. What is the legal basis for arbitration? ............................................................................... 4
C. The Arbitration Agreement ................................................................................................. 5
D. The Arbitration Process .................................................................................................... 13
E. The Arbitration Award...................................................................................................... 15

APPENDIX A…………………………………………………………….................................................19

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 ADR

I. INTRODUCTION/SOURCES OF ADR LAW

Alternative Dispute Resolution is a blanket term used to describe a wide variety of forums beyond
the courthouse available to parties to seek to resolve their disputes. The term can refer to informal
and formal settlement conferences, moderated settlement conferences, mediation, trial by a special
judge, mini-trial, arbitration, and the burgeoning collaborative law process (used in family law
cases). Beyond informal settlement negotiations and settlement conferences, which are not
governed by specific rules, mediation and arbitration are by far the most common methods
employed by parties in seeking a resolution of disputes somewhere other than the courthouse.
Thus, this paper will focus primarily on those procedures.

Both Texas and federal law have strong public policy preferences in favor of alternative dispute
resolution. The reason is obvious – alternative dispute resolution procedures take the pressure off
of the courts, which are already overloaded, especially in the larger counties. Texas has specifically
provided for a number of alternative methods of dispute resolution in Title 7 of the Civil Practice
and Remedies Code, several provisions of which are discussed in greater detail later in this paper.
Congress has also authorized the arbitration process in the Federal Arbitration Act, which is found
in Title 9 of the U.S. Code.

II. MEDIATION
A. What is mediation?

Texas Civil Practice and Remedies Code Section 154.023(a) defines mediation as “a
forum in which an impartial person, the mediator, facilitates communication between
parties to promote reconciliation, settlement, or understanding among them.”

Mediation is an opportunity for parties to a dispute to attempt to reach a mutually

agreeable resolution of their dispute with the assistance of an intermediary who facilitates
the discussion. The mediator’s role is not to make a judgment or determination of the
relative merits of the parties’ positions. However, good mediators are able to assist the
parties in evaluating the relative strengths and weaknesses of their cases and exploring
effective and creative ways to resolve their disputes.

The mediation process is notable for its flexibility. There are no hard and fast rules for
the procedures that are involved in mediation. It can be conducted in a single session
over the course of a few hours or it can be conducted in stages broken out over the course
of a few days, weeks, or even months. The parties can spend time discussing the dispute
together in the same room or they can stay separated from each other, communicating
only through the mediator and/or their lawyers. The parties can mediate the entirety of
the dispute or they can mediate only specific issues in controversy.

B. Confidentiality of the mediation procedure

If there is one rule that does apply to mediation, though, it is that of

confidentiality. See TEX. CIV. PRAC. & REM. CODE § 154.073. The

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 communications made in the course of mediation are confidential and privileged
from discovery in a judicial or administrative proceeding. See id.

III. ARBITRATION

Arbitration is one of the most well developed areas of alternative dispute resolution law.

A. What is arbitration?

Arbitration is a procedure whereby parties can present their dispute to a neutral

third party who may render a specific award. See TEX. CIV. PRAC. & REM. CODE
§ 154.027. The arbitrator’s decision may be either non-binding or binding on the
parties. See id.

B. What is the legal basis for arbitration?

1. Texas Law.

There are at least three specific provisions for arbitration in Title 7 of the
Texas Civil Practice and Remedies Code, which are as follows:

a. Chapter 171 of the Texas Civil Practice & Remedies Code sets
forth the general arbitration provisions.

b. Chapter 172 of the Texas Civil Practice & Remedies Code sets
forth arbitration rules applicable to international commercial
disputes.

c. Chapter 173 of the Texas Civil Practice & Remedies Code sets
forth rules applicable to arbitration between members of non-profit
entities.

2. Federal Law.

The Federal Arbitration Act applies to all suits in either state or federal
court when the disputes concerns a contract evidencing a transaction
involving interstate commerce. Jack B. Anglin Co. v. Tipps, 842 S.W.2d
266, 268-70 (Tex. 1992). A contract evidences interstate commerce where
it affects interstate commerce. Am. Med. Techs., Inc. v. Miller, 149
S.W.3d 265, 269 (Tex. App.—Houston [14th Dist.] 2004, no pet.). The
question of whether a contract affects interstate commerce is one of fact.
TMI, Inc. v. Brooks, 225 S.W.3d 783, 790 n.6 (Tex. App.—Houston [14th
Dist.] 2007, pet. denied) (citing In re Educ. Mgmt. Corp., 14 S.W.3d 418,
422 (Tex. App.—Houston [14th Dist.] 2000, orig. proceeding)). Where it
applies, the Federal Arbitration Act preempts any inconsistent provisions

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 in the Texas Arbitration Act unless the parties specifically excluded its
application in the contract. Am. Med. Techs., Inc., 149 S.W.3d at 269.

C. The Arbitration Agreement

1. General Application of Arbitration Agreements.

A determination of whether a claim is subject to arbitration turns on two

questions: whether a valid and enforceable agreement to arbitrate exists
and, if so, whether the claims fall within the scope of the agreement. See
J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003); Dallas
Cardiology Assoc., P.A. v. Mallick, 978 S.W.2d 209, 212 (Tex. App.—
Texarkana 1998, pet. denied); see also IKON Office Solutions, Inc. v.
Eifert, 2 S.W.3d 688, 693 (Tex. App.—Houston [14th Dist.] 1999, no pet.).
The court has no discretion and must compel arbitration if the answer to
both of these questions is yes. Dallas Cardiology Assoc., P.A., 978
S.W.2d at 212. Whether an agreement exists is a fact question while the
scope of the agreement is a legal question. See IKON, 2 S.W.3d at 693-
94. Because arbitration is highly favored under Texas law, any doubts
must be resolved in favor of arbitration. See id. at 694.

2. Existence of a Valid and Enforceable Agreement

a. Enforceability is Governed by General Contract Principles

An arbitration agreement is a contract and, as such, is interpreted

and enforced under traditional contract principles. See J.M.
Davidson, Inc., 128 S.W.3d at 227-28. To establish an enforceable
contract, one must show: (1) an offer, (2) an acceptance, (3) mutual
assent, (4) execution and delivery of the contract with the intent
that it be mutual and binding, and (5) mutuality of obligation
supporting the contract. See Texas Gas Util. Co. v. Barrett, 460
S.W.2d 409, 412 (Tex. 1970); Buxani v. Nessbaum, 940 S.W.2d
350, 352 (Tex. App.—San Antonio, 1997, no writ).

No particular form is required for an arbitration agreement so long

as there is a clear expression of intent demonstrated. See
Wachovia Securities, LLC v. Emery, 186 S.W.3d 107, 113 (Tex.
App.—Houston [1st Dist.] 2005, no pet.).

Arbitration agreements can be either stand-alone agreements or can

be part of an underlying contract. See In re AdvancePCS Health,
L.P., 172 S.W.3d 603, 607 (Tex. 2005). When the arbitration is
part of an underlying contract, the mutual promises in that contract
can support the arbitration agreement. Id.; In re FirstMerit Bank,

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 N.A., 52 S.W.3d 749, 757 (Tex. 2001). Where the arbitration
agreement is a stand-alone contract, binding, mutual promises are
required to support the agreement. AdvancePCS Health, L.P., 172
S.W.3d at 607.; J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223,
228 (Tex. 2003); In re Halliburton Co., 80 S.W.3d 566, 569 (Tex.
2002). The agreement may be illusory and unenforceable where
one party can unilaterally avoid the agreement to arbitrate. In re
Champion Technologies, Inc., 222 S.W.3d 127, 130 (Tex. App—
Eastland 2006, pet. denied).

b. Who is bound by the agreement?

Since the obligation to arbitrate a dispute is contractual in nature, it

goes without saying that, in general, only the signatories to the
arbitration agreement are bound thereby. In re James E. Bashaw
& Co., 305 S.W.3d 44, 54 (Tex. App.—Houston [1st Dist.] July 23,
2009, no pet.). The Texas Supreme Court has, however,
acknowledged six theories for binding non-signatories to an
arbitration agreement: (1) incorporation by reference; (2)
assumption; (3) agency; (4) alter ego; (5) equitable estoppel; and
(6) third-party beneficiary. See In Re Kellogg Brown & Root, Inc.,
166 S.W.3d 732, 739 (Tex. 2005). Despite this acknowledgment,
even in such situations, courts have significantly limited the
application of arbitrations to non-signatories, particularly with
respect to agency and estoppel.

The Texas Supreme Court has made it clear that “[a]rbitration

clauses do not automatically cover all corporate agents or
affiliates.” In re Kaplan Higher Educ. Corp., 235 S.W.3d 206, 210
(Tex. 2007); also In re Merrill Lynch Trust Co. FSB, 235 S.W.3d
185, 191 (Tex. 2007). Further, the Fifth Circuit has held that an
agency relationship—without more—is an insufficient basis to
compel arbitration with a non-signatory. See Palmer Ventures,
LLC v. Deutsche Bank AG, 254 Fed. Appx. 426, 433 (5th Cir.
2007)(holding Deutsche Bank, as agent for signatory, could not
compel arbitration).

Courts have limited estoppel in the context of enforcing an

arbitration provision to cases of “direct benefits estoppel.” See St.
Clair v. Brook Franchise Corp., No. 2-06-216-CV, 2007 WL
1095554, at *4 (Tex. App.—Fort Worth April 12, 2007, no
pet.)(citing InterGen N.V. v. Grina, 344 F.3d 134, 145-46); In re
Kellogg, 166 S.W.3d at 739. There are two circumstances under
which the courts have applied direct benefits estoppel. The first is
where a litigant sues based on a contract containing an arbitration
provision. See In re First Merit Bank, 52 S.W.3d 749, 755 (Tex.

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 2001). The second is where a non-signatory deliberately seeks or
obtains substantial benefits from the contract itself during the
performance of the contract. See In re Weekley Homes, L.P., 180
S.W.3d 127, 132-33 (Tex. 2005).

As respects the first circumstance, the Texas Supreme Court has

stated, “[w]hile the boundaries of direct-benefits estoppel are not
always clear, non-parties generally must arbitrate claims if liability
arises from a contract with an arbitration provision, but not if
liability arises from general obligations imposed by law.” In re
Vesta Ins. Group, Inc., 192 S.W.3d 759, 761 (Tex. 2006). It is not
enough to assert that claims relate to an agreement with an
arbitration provision. Rather, the claimant must be seeking,
through its claims, to derive a direct benefit from the contract. See
In re Kellogg, 166 S.W.3d at 740. To determine whether a party
seeks through the claim to derive a direct benefit from the contract,
the court must look to whether liability arises solely from the
contract or whether liability must be determined by a reference to
the contract. See In re Weekley Homes, 180 S.W.3d at 132. Where
claims are based upon an independent duty under Texas law and
not derivatively based on the contract, direct benefits equitable
estoppel does not apply.

In some instances, a claimant’s claims may be based on an

independent duty under Texas tort law, but the claimant may also
have actively sought direct benefits under the contract. See id.
Such was the case in Weekley Homes. In Weekley Homes, the non-
signatory in question was an adult child of a purchaser of a home
from Weekley Homes. See id. The non-signatory had been
actively involved in the construction process, including directing
construction of many features, making repeated demands for
extensive repairs, making requests for financial reimbursement of
expenses, conducting settlement negotiations with the builder, and
the like. See id. Based on this extensive involvement in the
construction, which was governed by a contract including an
arbitration clause, the non-signatory was estopped from taking the
position that her claims that Weekley’s negligent repairs caused
her to develop asthma were not subject to the arbitration provision
in the contract. See id.

3. Scope of the Agreement

The scope of the arbitration agreement controls what is to be arbitrated.

Arbitration agreements are interpreted under traditional contract
principles. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex.
2003). Like other contracts, arbitration agreements are to be enforced

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according to their terms and the intentions of the parties. In re Kaplan
Higher Educ. Corp., 235 S.W.3d 206, 210 (Tex. 2007).

When the FAA applies, federal law determines whether a dispute is

arbitrable and federal common law is used to interpret the scope of the
arbitration clause. Prudential Secs., Inc. v. Marshall, 909 S.W.2d 896,
899 (Tex. 1995); Svc. Corp. Int’l v. Lopez, 162 S.W.3d 801, 810 (Tex.
App.—Corpus Christi 2005, orig. proceeding). Because of the strong
policy presumption in favor of arbitrability, the terms of a valid and
enforceable arbitration agreement are interpreted broadly. In re NEXT
Financial Group, Inc., 271 S.W.3d 263, 267 (Tex. 2008); In re Choice
Homes, Inc., 174 S.W.3d 408, 413 (Tex. App.—Houston [14th Dist.] 2005,
no pet.). For the same policy reasons, exceptions to an arbitration
agreement are to be construed narrowly. NEXT Financial Group, 271
S.W.3d at 267. Any doubts as to the scope of an arbitration agreement are
to be resolved in favor of finding coverage. In re Bank One, N.A., 216
S.W.3d 825, 826 (Tex. 2007); In re D. Wilson Constr. Co., 196 S.W.3d
774, 782-83 (Tex. 2006). The presumption in favor of arbitrability and
broad reading are especially followed when broad language is used in the
arbitration agreement, such as language that requires arbitration of “any
dispute arising between the parties”, any controversy or claim arising out
of or relating to the contract thereof”, or “any controversy concerning the
interpretation, performance or application of the contract.” McReynolds v.
Elston, 222 S.W.3d 731, 740 (Tex. App.—Houston [14th Dist.] 2007, no
pet.). The presumption cannot, however, be used to stretch a contractual
clause beyond the scope intended by the parties or to modify the plain and
unambiguous language of the arbitration agreement. Id.

In determining the scope of the arbitration agreement, the focus is on the

factual allegations of the claimant, not the legal causes of action. See
IKON Office Solutions, Inc. v. Eifert, 2 S.W.3d 688, 694 (Tex. App.—
Houston [14th Dist.] 1999, no pet.) (citing Prudential Securities, Inc. v.
Marshall, 909 S.W.2d 896, 900 (Tex. 1995)).

Courts generally view arbitration clauses embracing all disputes or

controversies “relating to” the underlying agreement as “extremely broad”
and “capable of expansive reach.” Kirby Highland Lakes Surgery Center,
L.L.P. v. Kirby, 183 S.W.3d 891, 898 (Tex. App.—Austin 2005, orig.
proceeding) (citing Pennzoil Exploration & Prod. Co. v. Ramco Energy,
Ltd., 139 F.3d 1061, 1067-68 (5th Cir. 1998)). In contrast to the use of the
phrase “arising out of”, which is more narrowly construed, the term
“related to” “extends to ‘all disputes between the parties having a
significant relationship to the contract regardless of the label attached to
the dispute’ or that ‘touch’ matters covered by the contract containing the
arbitration provision.” Id.; see also Svc. Corp. Int’l v. Lopez, 162 S.W.3d
801, 810 (Tex. App.—Corpus Christi 2005, orig. proceeding) (“Generally,

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 if the facts alleged ‘touch matters,’ have a ‘significant relationship’ to, are
‘inextricably enmeshed’ with, or are ‘factually intertwined’ with the
contract that is subject to the arbitration agreement, the claim will be
arbitrable.”) (citing Jack B. Anglin Co., Inc. v. Tipps, 842 S.W.2d 266, 271
(Tex. 1992); In re Nestle USA-Bev. Div., Inc., 82 S.W.3d 767, 776 (Tex.
App.—Corpus Christi 2002, orig. proceeding); Hou-Scape, Inc. v. Lloyd,
945 S.W.2d 202, 205-06 (Tex.App.-Houston [1st Dist.] 1997, orig.
proceeding)); Dennis v. College Station Hosp., L.P., 169 S.W.3d 282, 285
(Tex. App.—Waco 2005, pet. denied) (standing for the same proposition).
While this does not mean that a broadly worded arbitration clause is
unlimited in scope, there is a split between the intermediate courts of
appeals in Texas as to what the outer bounds would be. See generally
Kirby Highland Lakes Surgery Center, L.L.P. v. Kirby, 183 S.W.3d 891,
899 n.7 (Tex. App.—Austin 2005, orig. proceeding) (recognizing and
discussing the split of opinion between the various courts of appeals).
Some courts have held that where the facts alleged stand alone, completely
independent of the contract, and the claim could be maintained without
reference to the contract, the claim is not subject to arbitration. See Svc.
Corp. Int’l v. Lopez, 162 S.W.3d 801, 810 (Tex. App.—Corpus Christi
2005, orig. proceeding) (citing Fridl v. Cook, 908 S.W.2d 507, 511 (Tex.
App.— El Paso 1995, writ dism’d w.o.j.); In re Dillard’s Dept. Stores,
Inc., 181 S.W.3d 370, 377 (Tex. App. – El Paso 2005, orig. proceeding);
Assoc. Glass, Ltd. v. Eye Ten Oaks Investments, Ltd., 147 S.W.3d 507, 513
(Tex. App.—San Antonio 2004, orig. proceeding). Other courts have
argued that this approach is too narrow and inconsistent with the federal
common law governing the scope of an arbitration agreement without
providing any specific guidance as to the outer boundaries of the reach of
an arbitration clause. See Kirby Highland Lakes Surgery Center, L.L.P.,
183 S.W.3d at 899 n.7 (citing Dennis, 169 S.W.3d at 285).

4. Avoidance of the Arbitration Clause?

Upon establishing the existence of an arbitration agreement, the burden of

establishing grounds for the revocation of said agreement is on the party
seeking to avoid arbitration. Henry v. Gonzalez, 18 S.W.3d 684, 689
(Tex. App.—San Antonio 2000, pet. denied) (citing Dallas Cardiology,
978 S.W.2d at 212). There are a number of bases that have been argued in
avoidance of an arbitration clause in the past to varying degrees of
success. The more common potential defenses are as follows:

a. Fraud, Unconscionability, and Duress

A party may revoke an arbitration agreement only on a ground that

exists at law or in equity for the revocation of a contract. TEX.
CIV. PRAC. & REM. CODE § 121.001(b). In order to avoid
arbitration altogether, the defenses of unconscionability, duress,

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 and fraud must specifically relate to the arbitration clause itself.
Forest Oil Corp. v. McAllen, 268 S.W.3d 51, 56 (Tex. 2008); In re
First Merit Bank, 52 S.W.3d 749, 756 (Tex. 2001). Where those
defenses are asserted as to the contract as a whole, on the other
hand, they are subject to the arbitration clause. Forest Oil, 268
S.W.3d at 56; First Merit Bank, 52 S.W.3d at 756.

There is nothing per se unsoncsionable about arbitration

agreements. In re AdvancePCS Health, L.P., 172 S.W.3d 603, 608
(Tex. 2005). There are two types of unconscionability –
procedural unconscionability and substantive unconscionability.

Procedural unconscionability focuses on the circumstances

surrounding the bargaining process leading to the adoption of the
arbitration provision. See TMI, Inc., 225 S.W.3d at 792 (citing In
re Rangel, 45 S.W.3d 783, 786 (Tex. App.—Waco 2001, orig.
proceeding)). Generally, this will require a showing of fraudulent
inducement. See id. at 793 (“Absent fraud, a party to a contract
may not successfully claim he believed the provisions of a contract
were different from those plainly set out in the contract or he did
not understand the language.”).

Substantive unconscionability focuses on the fairness of the terms

of the arbitration provision itself. Id. at 792. The test of
substantive unconscionability is “whether, given the parties’
general commercial background and the commercial needs of the
particular trade or case, the clause involved is so one-sided that it
is unconscionable under the circumstances existing when the
parties made the contract.” First Merit Bank, 52 S.W.3d at 577;
TMI, Inc. v. Brooks, 225 S.W.3d 783, 792 (Tex. App.—Houston
[14th Dist.] 2007, pet. denied). For instance, substantive
unconscionability may be argued where, under the facts and
circumstances of the particular case, arbitration is so cost-
prohibitive as to effectively preclude a litigant from being able to
exercise his right to redress. First Merit Bank, 52 S.W.3d at 756;
TMI, Inc., 225 S.W.3d at 795-96. However, the party opposing
arbitration on this basis must present specific evidence of the
likelihood of incurring substantial costs. First Merit Bank, 52
S.W.3d at 756 (citing Green Tree Fin. Corp. v. Randolph, 531 U.S.
79, 90 (2000)); TMI, Inc., 225 S.W.3d at 795-96.

b. Waiver

Even where claims in litigation are subject to a valid and enforceable

arbitration agreement, arbitration may be avoidable where the party
seeking to invoke the arbitration clause has waived that right. A party
waives its right to invoke an arbitration clause or agreement when that

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substantially invokes the judicial process to the other party’s detriment.
In re Fleetwood Homes of Texas, L.P., 257 S.W.3d 692, 694 (Tex. 2008);
In re Bank One, N.A., 216 S.W.3d 825, 827 (Tex. 2007); EZ Pawn Corp.
v Mancias, 934 S.W.2d 87, 89 (Tex. 1996). However, there is a strong
presumption against waiver and it must be shown to be intentional. In re
Bank One, N.A., 216 S.W.3d at 827; EZ Pawn Corp., 934 S.W.2d at 89.
Waiver may be either express or implied. See Tex. Residential Mortg.,
L.P. v. Portman, 152 S.W.3d 861, 863(Tex. App.—Dallas 2005, no pet.);
Williams Indus., Inc. v Earth Dev. Sys. Corp., 16 S.W.3d 131, 135, (Tex.
App.—Houston [1st Dist.] 2003, no pet.).

The Texas Supreme Court has explained that “detriment” in this context
refers to “a party’s attempt to have it both ways by switching between
litigation and arbitration to its own advantage.” Perry Homes v. Cull,
258 S.W.3d 580, 596 (Tex. 2008). One intermediate Court of Appeals
has further stated that a party is prejudiced when his opponent uses the
judicial process to gain access to information that would not have been
available through arbitration or incurs significant costs and fees due to
the delay in invoking the arbitration process. Williams Indus., Inc. 110
S.W.3d at 135.

Waiver is a legal question to be decided by the court, not the arbitrator.

In re Fleetwood Homes of Texas, L.P., 257 S.W.3d at 694; Perry Homes,
258 S.W.3d at 589. It should be determined based on the totality of the
circumstances. In re Fleetwood Homes of Texas, L.P., 257 S.W.3d at
694. Factors to be considered by the court include: (1) whether the party
seeking to invoke arbitration was the plaintiff or defendant in the judicial
proceeding; (2) the length of delay in invoking the arbitration clause; (3)
when the party invoking the arbitration clause discovered its existence;
(4) whether and to what extent the pretrial activity in the judicial
proceeding was related to the merits, as opposed to questions of
arbitrability or jurisdiction; (5) the amount of time and expense incurred
in the litigation; (6) whether the party seeking arbitration sought or
opposed arbitration at any previous time in the litigation; (7) whether the
party seeking to invoke the arbitration clause has filed affirmative claims
or dispositive motions; (8) what discovery would be unavailable in
arbitration; (9) whether activity in court would be duplicated in
arbitration; and (10) when the case was to be tried. Perry Homes, 258
S.W.3d at 591. A different standard also applies in deciding whether
there has been a waiver when it is the plaintiff in the litigation who seeks
to invoke the arbitration clause, as opposed to the defendant. Id. at 592.
“As parties may begin arbitration without a court order, it is certainly
relevant that a plaintiff chose to file suit instead.” Id. However, it
should be noted that this difference does not apply when the plaintiff has
brought the suit merely to compel arbitration, as is permitted under
section 171.021 of the Texas Civil Practice & Remedies Code. Id.

Examples of circumstances in which courts have found that arbitration

has been waived include the following:

11
(1) Conducting full discovery and filing motions on the merits. In re
Citigroup Global Markets, Inc., 258 S.W.3d 623, 625 (Tex.
2008).
(2) Taking the case to trial. Cottman Transmission Sys., L.L.C. v.
FVLR Enterprises, L.L.C., 295 S.W.3d 372, 380 (Tex. App.—
Dallas 2009, pet. denied).
(3) Defendant amended answer to include counterclaims, served
discovery, received responses, and then, just after the other party
served its discovery, sought to compel arbitration. Okorafor v.
Uncle Sam & Assocs., Inc., 295 S.W.3d 27, 40 (Tex. App.—
Houston [1st Dist.] 2009, pet. denied).

Examples of circumstances in which courts have found that arbitration

has not been waived include the following:

(1) Defendant did not pursue its demand for arbitration for eight
months while the matter was litigated, discussed a trial setting,
allowed limited discovery, noticed one deposition (which never
occurred), served one set of written discovery, and filed no
dispositive motions. In re Fleetwood Homes, 257 S.W.3d 692,
694-95 (Tex. 2008).
(2) Defendant filed a motion for new trial to set aside a default
judgment obtained by the opposing party. In re Bank One, N.A.,
216 S.W.3d 825, 827 (Tex. 2007).
(3) Minimal participation in discovery conducted by other parties to
the litigation. In re Wells Fargo Bank, N.A., 300 S.W.3d 818,
830-31 (Tex. App.—San Antonio 2009, orig. proceeding).
(4) Conducting extensive discovery while waiting court decision on
motion to compel arbitration when discovery sought could be
used in the arbitration. In re ReadyOne Indus., Inc., 294 S.W.3d
764, 773-74 (Tex. App.—El Paso 2009, orig. proceeding).
(5) Filing an answer subject to a motion to compel arbitration. PER
Group, L.P. v. Dava Oncology, L.P., 294 S.W.3d 378, 388-89
(Tex. App.—Dallas 2009, orig. proceeding).
(6) Defendant filing a motion to dismiss and seeking the onsite
inspection and testing of property involved in dispute. In re
Hawthorne Townhomes, L.P., 282 S.W.3d 131, 141-42 (Tex.
App.—Dallas 2009, no pet.).
(7) Merely filing suit. In re D. Wilson Constr. Co., 196 S.W.3d at
783; In re Green Tree Servicing, LLC, 275 S.W.3d 592, 601
(Tex. App.—Texarkana 2008, orig. proceeding).
(8) Moving to dismiss a claim for lack of standing. In re Vesta Ins.
Group, Inc., 192 S.W.3d at 764.
(9) Opposing a trial setting and seeking to move the litigation to
federal court. In re Serv. Corp. Int'l, 85 S.W.3d at 174-75.
(10) Moving to strike an intervention and opposing discovery.
Prudential Sec. Inc. v. Marshall, 909 S.W.2d 896, 898-99
(Tex.1995).
(11) Propounding interrogatories and requests for production. In re
Bruce Terminix Co., 988 S.W.2d at 704.

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 (12) Agreeing to a trial resetting, requesting one round of discovery,
and noticing a single deposition that was not taken, where there
was no showing that the discovery addressed the merits of the
case as opposed to the arbitrability of the dispute. In re Vesta
Ins. Group, Inc., 192 S.W.3d at 763.

5. Potential Exception for Temporary Injunctive Relief

The Northern District of Texas has held that a court may grant a
preliminary injunction in order to preserve the status quo during the
process of arbitration on the same claims. Ruscitto v. Merrill Lynch,
Pierce, Finner & Smith, Inc., 777 F. Supp. 1349, 1353 (N.D. Tex. 1991),
th
aff’d 948 F. 2d 1286 (5 Cir. 1991). Thus, even in cases clearly subject to
a valid and enforceable arbitration clause, temporary injunctive relief may
be available through the courts.

D. The Arbitration Process

The arbitration process itself can take many forms depending upon the agreement
of the parties, the particular rules chosen, and the facts and circumstances of the
case. The following are some common issues that can arise:

1. Initiating the Arbitration Process

Generally, there are two methods of initiating the arbitration process. The
first is to file a demand for arbitration with an arbitrator or arbitration
service provider such as the American Arbitration Association (“AAA”).
This is a good approach where the enforceability and applicability of the
arbitration clause is not likely to be at issue and where the arbitration
service provider is set out in the arbitration clause. The second is to file
an action with a court of competent jurisdiction to compel the opposing
party to arbitrate the dispute. This may be appropriate in circumstances
where the opposing party has already filed a judicial proceeding, the
validity or applicability of the arbitration clause is or is expected to be a
disputed issue, or the arbitrators or arbitration service provider has not
been set out in the arbitration clause.

2. Selection of Arbitrators

The parties may agree, either in the arbitration agreement or upon the
presentation of a demand for arbitration, on the arbitrators to be appointed.
See 9 U.S.C. § 5; TEX. CIV. PRAC. & REM. CODE §171.041(a). Where no
agreement has been or can be reached between the parties as to the
identity of the arbitrator, one or more parties may seek to have a court of
competent jurisdiction appoint the arbitrator or arbitration panel. See 9
U.S.C. § 5; TEX. CIV. PRAC. & REM. CODE § 171.041(b).

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3. Discovery in Arbitration

Parties in an arbitration proceeding are not entitled, as a matter of right, to

the pre-trial discovery procedures that are used in litigation. See In re
Citigroup Global Markets, Inc., 202 S.W.3d 477, 482 (Tex. App.—Dallas
2006, Miller Brewing Co. v. Fort Worth Distrib. Co., 781 F.2d 494, 497
(5th Cir. 1986)). However, the parties may permit for discovery under
their arbitration agreement. Some limited amount of discovery may also
be permitted under the rules selected by the parties to govern the
arbitration process, such as the rules of the AAA. According tot he Texas
Supreme Court, arbitrators possess “almost unbridled discretion”
concerning whether and to what extent discovery is permitted. Perry
Homes v. Cull, 258 S.W.3d 580, 599 (Tex. 2008). Given the policy and
purpose behind the arbitration process, many arbitrators are stingy in
allowing discovery.

When discovery is permitted by the arbitrator or arbitration panel, there

are procedural mechanisms to assist with conducting and compelling
discovery. Section 171.050 of the Texas Civil Practice & Remedies Code
permits arbitrators to authorize depositions to be used in the arbitration
proceeding, which are to be taken in the same manner as depositions for
use in the civil district courts. Section 171.051 also allows an arbitrator
to issue subpoenas to compel the attendance of witnesses and the
production of books, records, documents, or other evidence by persons not
a party to the arbitration proceeding.

The FAA also authorizes an arbitrator to issue a summons to compel non-

parties to attend the arbitration hearing to testify or produce documents. 9
U.S.C. § 7. A number of courts outside of the Fifth Circuit have taken a
narrow view of this power, holding that it is limited to compelling
attendance or production at the final hearing and does not authorize the
issuance of a summons to compel discovery or depositions prior to the
final hearing. See Life Receivables Trust v. Syndicate 102 at Lloyd’s of
London, 549 F.2d 210, 216-17 (2d Cir. 2008); Hay Group, Inc. v. E.B.S.
Acquisition Corp., 360 F.3d 404, 411 (3d Cir. 2004); see also COMSAT
Corp. v. Nat’l Sci. Found., 190 F.3d 269, 276 (4th Cir. 1999) (taking the
same position but carving out an exception in dicta for “unusual
circumstances” “upon a showing of special need or hardship”). While the
Fifth Circuit does not appear to have taken a position on this issue yet,
Chief Judge Fitzwater of the Northern District of Texas recently issued an
unpublished memorandum opinion adopting the rationale of the Second
and Third Circuits in holding that the FAA “does not authorize arbitrators
to compel production of documents from a non-party, unless they are
doing so in connection with the non-party's attendance at an arbitration

14
 hearing.” Empire Fin. Grp., Inc. v. Penson Fin. Svcs., Inc., No. 3:09-CV-
2155-D, 2010 WL 742579, at *3 (N.D. Tex. Mar. 3, 2010).

4. Arbitration Hearing

Under the Texas Arbitration Act, unless the agree to the contrary in the
arbitration agreement, they have a right to have a hearing conducted by the
arbitrators. See TEX. CIV. PRAC. & REM. CODE § 171.043. At the hearing,
each party has the right to be heard, to present evidence material to the
controversy, and to cross-examine any witnesses. TEX. CIV. PRAC. &
REM. CODE § 171.047. Absent an agreement to the contrary by the
parties, the Rules of Civil Procedure and the Rules of Evidence are not
applicable in an arbitration proceeding. Crossmark, Inc. v. Hazar, 124
S.W.3d 422, 432-33 n.10 (Tex. App.—Dallas 2004, pet. denied). It is up
to the arbitrator to decide the rules that govern arbitration. In re Wood,
140 S.W.3d 367, 369-70 (Tex. 2004).

Similarly, the Fifth Circuit has held that an “arbitrator is not bound to hear
all of the evidence tendered by the parties; however, he must give each of
the parties to the dispute an adequate opportunity to present its evidence
and arguments.” Forsythe Intern., S.A. v. Gibbs Oil Co. of Texas, 915
F.2d 1017, 1023 (5th Cir. 1990) (quoting Hoteles Condado Beach v. Union
de Tronquistas Local 901, 763 F.2d 34, 39 (1st Cir. 1985)).

E. The Arbitration Award

1. Form and Substance of the Arbitration Award

Under the Texas Arbitration Act, the arbitration award must be in writing
and signed by each arbitrator joining in the award. TEX. CIV. PRAC. &
REM. CODE § 171.053(a). It must be delivered to each party in person, by
registered or certified mail, or as otherwise agreed. TEX. CIV. PRAC. &
REM. CODE § 171.053(b). The Federal Arbitration Act does not
specifically contain these types of requirements, but as a practical matter
the arbitration award will need to be in writing to be enforced.

Substantively, the arbitrators may not exceed the authority granted to them
by the arbitration agreement in crafting their remedy. J.J. Gregory
Gourmet Svcs., Inc. v. Antone’s Import Co., 927 S.W.2d 31, 35 (Tex.
App.—Houston [1st Dist.] 1995, no writ) (citing Gulf Oil Corp. v. Guidry,
327 S.W.2d 406, 408 (Tex. 1959); City of Baytown v. C.L. Winter, Inc.,
886 S.W.2d 515, 518 (Tex. App.—Houston [1st Dist.] 1994, writ denied)).
However, where there is no language in the arbitration clearly restricting
the arbitrators’ authority, the courts will grant the arbitrators great latitude
in crafting the appropriate remedy. Id. (citing Lodge No. 12, Dist. 37,
Int’l Assoc. of Machinists v. Cameron Iron Works, Inc., 292 F.2d 112, 119

15
 (5th Cir. 1961). Arbitrators are not required to set forth any findings of
fact or to state the reasons for their award in the arbitration award. Gray v.
Noteboom, 159 S.W.3d 750, 754 (Tex. App.—Fort Worth 2005, pet.
denied).

2. Enforcement of the Arbitration Award

Unless grounds exist to vacate, modify, or correct an arbitration award, a

court is required to enter a judgment confirming the award. 9 U.S.C. § 9;
TEX. CIV. PRAC. & REM. CODE § 171.087. The Texas Arbitration Act does
not set forth a specific timeline in which the parties must seek a
confirmation. The Federal Arbitration Act, on the other hand, requires the
parties to seek confirmation within one year after the award is made. 9
U.S.C. § 9. The arbitration award may then be enforced in the same
manner as any other judgment of the court. See TEX. CIV. PRAC. & REM.
CODE § 171.092(a).

3. Modification and Correction of the Arbitration Award

Under the Texas Arbitration Act, the arbitrators may modify or correct an
award for the following reasons:

(1) To correct evident mistakes as to the amount of the award or the

description of the persons, things, or property referred to in the
awards. TEX. CIV. PRAC. & REM. CODE §§ 171.054(a)(1) and
171.091(a)(1).
(2) To correct an award made with respect to a matter that has not
been submitted to them, provided that the award may be corrected
without affecting the merits of the decision made with respect to
the issues that were before the arbitrators. TEX. CIV. PRAC. & REM.
CODE §§ 171.054(a)(1) and 171.091(a)(2).
(3) To correct an imperfection in the form of the award not affecting
its merits. TEX. CIV. PRAC. & REM. CODE §§ 171.054(a)(1) and
171.091(a)(3).
(4) To clarify the award. TEX. CIV. PRAC. & REM. CODE §
171.054(a)(2).

The modification or correction must be requested by either a party or a

court. TEX. CIV. PRAC. & REM. CODE § 171.054(b). A party to the
proceeding may request the modification or correction from the arbitrators
no later than the 20th day following the date the award is delivered to the
applicant. TEX. CIV. PRAC. & REM. CODE §171.054(c). A party may also
make an application to the court to modify or correct the award, provided
it is brought not later than the 90th day after the delivery of a copy of the
award to the applicant. TEX. CIV. PRAC. & REM. CODE §171.091(b).

16
 Section 11 of the Federal Arbitration Act permits the modification or
correction of an arbitration by a court, upon application of the parties for
the following:

(1) Where there was an evident material miscalculation of figures or

an evident material mistake in the description of any person, thing,
or property referred to in the award.
(2) Where the arbitrators have awarded upon a matter not submitted to
them, unless it is a matter not affecting the merits of the decision
upon the matter submitted.
(3) Where the award is imperfect in matter of form not affecting the
merits of the controversy.

4. Grounds for Appeal or Vacation of the Arbitration Award

There is no true basis for “appeal” of an arbitration award. Parties may,

however, under very narrow circumstances, seek to have an arbitration
award vacated.

Under the Texas Arbitration Act, a court is required to vacate an award

upon an application by a party and a showing of one of the following:

(1) The award was obtained by corruption, fraud, or other undue

means;
(2) the rights of a party were prejudiced by:
(A) evident partiality by an arbitrator appointed as a neutral
arbitrator;
(B) corruption in an arbitrator; or
(C) misconduct or willful misbehavior of an arbitrator;
(3) the arbitrators:
(A) exceeded their powers;
(B) refused to postpone the hearing after a showing of
sufficient cause for the postponement;
(C) refused to hear evidence material to the controversy; or
(D) conducted the hearing, contrary to Sections 171.043,
171.044, 171.045, 171.046, or 171.047, in a manner that
substantially prejudiced the rights of a party; or
(4) there was no agreement to arbitrate, the issue was not adversely
determined in a proceeding under Subchapter B, and the party did
not participate in the arbitration hearing without raising the
objection.

TEX. CIV. PRAC. & REM. CODE § 171.088(a). A party must seek to have
the court vacate the award not later than the 90th day after the date of
delivery of a copy of the award to the applicant, except in the case of an
award obtained by corruption, fraud, or other undue means, which must be

17
brought within 90 days following the date the grounds for such an
application are known or should have been known. TEX. CIV. PRAC. &
REM. CODE § 171.088(b).

Similarly, section 10 of the Federal Arbitration Act permits a court to

vacate an arbitration award upon the application of a party and a showing
of one or more of the following:

(1) the award was procured by corruption, fraud, or undue means;

(2) there was evident partiality or corruption in the arbitrators, or
either of them;
(3) the arbitrators were guilty of misconduct in refusing to postpone
the hearing, upon sufficient cause shown, or in refusing to hear
evidence pertinent and material to the controversy; or of any other
misbehavior by which the rights of any party have been prejudiced;
or
(4) the arbitrators exceeded their powers, or so imperfectly executed
them that a mutual, final, and definite award upon the subject
matter submitted was not made.

9 U.S.C. § 10(a). The court may also, in its discretion, direct a rehearing
by the arbitrators under these same circumstances. 9 U.S.C. § 10(b). The
Supreme Court recently ruled that the grounds set out in the FAA for
vacating, modifying, or correcting an arbitration award are exclusive.
Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 583 (2008). As
such, the grounds for appeal cannot be varied by an agreement of the
parties. Id. Additionally, citing to the Supreme Court’s exclusivity ruling
in Hall Street Associates, the Fifth Circuit has held that even a “manifest
disregard of the law” by the arbitration panel in reaching its decision does
not form a proper basis for vacating the arbitration award. Citigroup
Global Mkts., Inc. v. Bacon, 562 F.3d 349, 355-58 (5th Cir. 2009); see
also Ramos-Santiago v. United Parcel Serv., 524 F.3d 120, 124 n.3 (1st
Cir. 2008) (“[M]anifest disregard of the law is not a valid ground for
vacating or modifying an arbitral award in cases brought under the
[FAA].”); but see Comedy Club Inc. v. Improv West Assocs., 533 F.3d
1277, 1290 (9th Cir. 2009) (holding that manifest disregard of the law is
an authorized grounds for vacating an arbitration award under section
10(a)(4) of the FAA, which permits vacating the award when the
arbitrators exceed their powers); Stolt-Nielsen SA v. AnimalFeeds Int’l
Corp., 548 F.3d 85, 93-95 (2d Cir. 2008) (same).

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 APPENDIX A

Arbitration Provision Examples

Example 1 – Specific Issue

Any dispute, claim, controversy, or other matter in question between the parties hereto relating to
the tenant’s pro rata share of operating expenses shall be settled by binding arbitration administered by
the American Arbitration Association pursuant to the then-existing applicable rules of the American
Arbitration Association. The locale of the arbitration proceeding shall be Fort Worth, Texas. A demand
for arbitration may be made by either party. The decision of the arbitrator shall be final and binding on
both parties and the award of the arbitrator shall be enforceable according to law.

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Example 2 – Specific Issue with Procedures spelled out in Contract

[From a total takings clause.] If Landlord and Tenant are unable to agree on the respective fair
market values of their interests in the Premises, then the matter shall be submitted to arbitration as
provided in Section 15.03. After the determination and distribution of the condemnation award as herein
provided, this Lease shall terminate.

15.03 Arbitration.

(a) This section shall only apply where express provision is made in this Lease for settlement
of a dispute or determination of a matter by arbitration.

(b) If either Party wishes to so settle an applicable dispute or determine an applicable matter
by arbitration, such matter shall be resolved by binding arbitration in accordance with the provisions of
this Section 15.03, and shall be self-administered in accordance with the American Arbitration
Association pursuant to its rules of commercial arbitration. Any claimed default based upon such dispute
shall be deemed suspended until the dispute is resolved, provided that the Party claimed to be in default is
proceeding diligently with the arbitration; provided, however, nothing contained in this Section 15.03
shall suspend the obligation of Tenant to pay Rent hereunder.

(c) Landlord and Tenant may agree on an arbitrator, and in such event, such arbitrator’s
decision shall be final and binding on Landlord and Tenant and shall be specifically enforceable in any
court having jurisdiction. If Landlord and Tenant are unable to agree on an arbitrator, Landlord and
Tenant shall each appoint an arbitrator, and such two arbitrators shall select, within fifteen (15) days after
the appointment of such second arbitrator, a third arbitrator. The decision of a majority of the three
arbitrators shall be final and binding on Landlord and Tenant and shall be specifically enforceable in any
court having jurisdiction.

(d) If (i) either Landlord or Tenant fails to appoint an arbitrator within ten (10) days after
receiving notice from the other Party that such other Party has appointed an arbitrator, or (ii) the first two
arbitrators fail to appoint a third arbitrator within the aforesaid fifteen (15) day period, or (iii) any Person
appointed as an arbitrator by or on behalf of either Landlord or Tenant shall die, fail to act, resign or
become disqualified and the Party by or on behalf of whom such arbitrator was appointed shall fail to
appoint a substitute arbitrator within ten (10) days after being requested to do so by the other Party, the
arbitrator in question will be appointed by the United States District Court for the Southern District of
Texas, Houston Division, or if it does not have jurisdiction, then the District Courts of Harris County
Texas subject to the rules of such courts regarding recusal of judges. Each Party shall bear and pay the
cost of the arbitrator appointed by (or for) it, and the cost of the third arbitrator shall be borne and paid
equally by Landlord and Tenant. If the presiding judge of the applicable court does not appoint the third
arbitrator within forty-five (45) days, then such arbitrator shall be appointed within fifteen (15) days
thereafter in accordance with the rules of the American Arbitration Association, but subject to the
requirements herein for the appointment of arbitrators.

(e) All arbitration proceedings shall be held in Houston, Harris County Texas. If a hearing is
scheduled, Landlord and Tenant shall be given reasonable advance notice of the time and place of any
arbitration hearing and both shall have the right to be present, heard and represented by counsel. The
arbitrators shall not have the right to add to or subtract from or otherwise change the terms and provisions
of this Lease, and their determination shall be consistent and in accordance with the terms and provisions
of this Lease and the Laws of the State of Texas.

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Example 3 – Broad arbitration agreement

DISPUTE RESOLUTION AGREEMENT

DISPUTE RESOLUTION AGREEMENT

ATTACHED AS EXHIBIT “B” TO AND MADE A PART OF THE
COMMERCIAL LEASE AGREEMENT OF LANDLORD AND TENANT

ARBITRATION

(a) If a dispute, controversy or claim arises between the parties, including without limitation any
dispute, controversy or claim that arises out of or relates to this Agreement or any other
agreement or instrument between or among any of the shareholders, officers and/or directors of
this corporation (collectively the “parties”), or the breach, termination or invalidity of the
Agreement or any such other agreement or instrument, AND including but not limited to a claim
based on or arising out of a claim for tortious interference or other tortious or statutory claims
arising before, during or after termination of the Agreement (all of the foregoing shall be
collectively referred to as “Dispute”), the parties agree to resolve the Dispute by binding
arbitration administered by the American Arbitration Association (“AAA”) in accordance with its
Commercial Arbitration Rules (the “Rules”), and judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof. Any arbitration hereunder
shall be conducted pursuant to the Rules, except to the extent modified in this Section.

(b) The parties expressly agree that any court with jurisdiction may order the consolidation of any
arbitrable dispute, controversy or claim under this Agreement with any related arbitrable dispute,
controversy or claim not arising under this Agreement, as the court may deem necessary in the
interests of justice or efficiency or on such other grounds as the court may deem appropriate.

(c) The site of the arbitration shall be in Fort Worth, Texas, and shall take place in the offices of the
American Arbitration Association or such other place as the parties may agree.

(d) The parties agree that the federal and state courts located in the State of Texas shall have
exclusive jurisdiction over an action brought to enforce the rights and obligations created in or
arising from this agreement to arbitrate, and each of the parties hereto irrevocably submits to the
jurisdiction of said courts. Notwithstanding the above, application may be made by a party to any
court of competent jurisdiction wherever situated for enforcement of any judgment and the entry
of whatever orders are necessary for such enforcement.

(e) Process in any action arising out of or relating to this Agreement may be served on any party to
the Agreement anywhere in the world by delivery in person or by registered or certified mail,
return receipt requested.

(f) Neither party nor the arbitrators may disclose the existence, content, or results of any arbitration
hereunder without the prior written consent of both parties.

(g) The parties agree that all questions concerning the arbitrator’s jurisdiction shall be decided by the
arbitrator.

21
(h) All fees and expenses of the arbitration (exclusive of filing fees for claims and counterclaims)
shall be borne by the parties equally. Each party shall bear the expense of its own counsel,
experts, witnesses, and presentation of proofs.

(i) This agreement to arbitrate is intended to be binding upon the signatories hereto, their principals,
successors, assigns, subsidiaries or affiliates.

(j) The arbitrator shall determine the rights and obligations of the parties according to applicable
federal laws and the substantive laws of the State of Texas (excluding conflicts of laws
principles).

(k) The arbitrator is directed to consider any defense that all or part of the claim is not timely by
reason of laches or statute of limitations as a preliminary issue and to render an award
determining the merits of such claim before considering the substantive merits of the arbitration
claim, unless the arbitrator determines that the merits of such claim of laches or statute of
limitations is so intertwined with the substantive merits of the arbitration claim as to make
impractical the determination of the claim of laches or limitations as a preliminary matter.

(l) The arbitrator shall hear and determine any preliminary issue of law asserted by a party to be
dispositive of any claim, in whole or part, in the manner of a court hearing a motion to dismiss for
failure to state a claim or for summary judgment, pursuant to such terms and procedures as the
arbitrator deems appropriate.

(m) It is the intent of the parties that, barring extraordinary circumstances, any arbitration shall be
concluded on or before six months of the date the statement of claim is received by the arbitrator.
Unless the parties otherwise agree, once commenced, hearings shall be held five days a week,
four weeks a month, with each hearing day to begin at 9:00 A.M. and to conclude at 5:00 P.M.
These time limits can be extended or altered by an agreement by the parties or by a determination
by the arbitrator that such extension or alteration is in the interests of justice. The arbitrator shall
use his or her best efforts to issue the final award or awards within a period of thirty days after
closure of the proceedings. Failure to do so shall not be a basis for challenging the award.

(n) The procedure to be followed in any arbitration hereunder shall be as prescribed herein and in
such directives that shall be issued by the arbitrator following consultation with the parties.
Unless otherwise agreed by the parties, the procedures shall provide for the submission of briefs
by the parties, the introduction of documents and the oral testimony of witnesses, cross-
examination of witnesses, oral arguments, the closure of the proceedings and such other matters
as the arbitrator may deem appropriate. Further, the arbitrator shall regulate all matters relating to
the conduct of the arbitration not otherwise provided for in this Agreement or in the Rules.

(o) In the event a party, having been given notice and opportunity, shall fail or shall refuse to appear
or participate in an arbitration hereunder or in any stage thereof, the proceedings shall
nevertheless be conducted to conclusion and final award. Any award rendered under such
circumstances shall be as valid and enforceable as if both parties had appeared and participated
fully at all stages.

(p) The parties agree that discovery shall be limited and shall be handled expeditiously. Discovery
procedures available in litigation before the courts shall not apply in an arbitration conducted
pursuant to this agreement. However, each party shall produce relevant and non-privileged
documents or copies thereof requested by the other parties within the time limits set and to the

22
 extent required by order of the arbitrator. All disputes regarding discovery shall be promptly
resolved by the arbitrator.

(q) It is the intent of the parties that the testimony of witnesses be subject to cross-examination. It is
agreed that the direct testimony of a witness may be submitted by sworn affidavit, provided that
such affiant be subject to cross-examination.

(r) Strict rules of evidence shall not apply in an arbitration conducted pursuant to this Agreement.
The parties may offer such evidence as they desire and the arbitrator shall accept such evidence as
the arbitrator deems relevant to the issues and accord it such weight as the arbitrator deems
appropriate.

(s) No witness or party may be required to waive any privilege recognized at law.

(t) The parties to this Agreement agree that neither party shall be entitled to any damages in the
nature of punitive, exemplary or statutory damages in excess of compensatory damages or any
form of damages in excess of compensatory damages, and the parties hereby waive all rights to
any damages in the nature of punitive, exemplary or statutory damages. Any arbitrator or
arbitrators deciding any disputes hereunder will not have the authority to award and are
specifically divested of any power to award any damages in the nature of punitive, exemplary or
statutory damages or any other damages in excess of compensatory damages or any form of
damages in excess of compensatory damages, and may not, in any event, make any ruling,
finding or award that does not conform to the terms and conditions of the Agreement.

23