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Arbitration good?

The Supreme Court of Texas has made enforcing arbitration clauses super-easy. But what happens if the arbitration produces an outcome that may give the conservative Court pause — a $125 million award in favor of the claimant, for instance?

A case that the Court decided last week poses that lurking question. And regrettably their honors answered the question in the way you've probably come to expect. See here.

Question about an impression

Does the fact that an arbitrator has begged the lawyers who represent a party in arbitration for business but has gotten none make the arbitrator "evidently partial" to that party? The one whose lawyers have so far stiffed him on his requests for work? Such that a court must vacate the arbitration panel's award in favor of that party?

The Supreme Court of Texas said yes last week. In Tenaska Energy, Inc. v. Ponderosa Pine Energy, LLC, No. 12-0789 (Tex. May 23, 2014), the 9-0 Court applied an easy-peasy test for unhappy losers to satisfy. They need show only that a non-disclosure "might have conveyed an impression [of the arbitrator's] partiality toward [the lawyers for the winning party] to a reasonable person." Id. at 13.

Did you get that? Might have conveyed an impression of partiality to a reasonable person. Not "would have conveyed" it. Only might have. Possibly could have. Perhaps maybe did. We have our suspicions. I don't like the look of that. We're going to need you to go ahead and come in on Saturday, um-kay.

What about waiver?

The airy-fairiness of that "might have conveyed" rule may or may not bother you. But what do you think about how the Court dealt with a waiver question?

The court of appeals had held that the losing party — Tenaska Energy — had waived any complaint because the business-hungry arbitrator had disclosed the fact that the lawyers for the winning party — Ponderosa Energy — had tapped him three times before to serve as an arbitrator and that he'd solicited business from their law firm. The court cited the fact that Tenaska also agreed, in writing, that it "knowingly waived any and all conflicts of interest and/or potential conflicts of interest relating to the designation of the members of the Panel in this Arbitration." Id. at 17.

The Court batted the waiver point away by noting that the same writing also represented that the arbitrators had "fully disclosed all conflicts of interest and potential conflicts of interest with respect to the designation of the members of the Panel in this Arbitration". Id. "Because the waiver clause was conditioned on a full disclosure that did not occur, Tenaska has not waived its partiality challenge." Id. at 18.

The Court didn't explain in what way the waiver "was conditioned on a full disclosure". The document didn't use any language that implied that the waiver depended on the accuracy of the "fully disclosed" statement. So it's okay for Tenaska to have fibbed that it "knowingly waived any and all conflicts of interest"?

The Court also put a lot of stress on the fact that the non-disclosing arbitrator solicited work from Ponderosa's lawyers not for himself but on behalf of an Indian firm that he partly owned and helped set up in the U.S. He disclosed that he'd hustled business for the Indian outfit from the law firm but hadn't gotten any.

But, in view of the fact that Ponderosa's lawyer chose him as an arbitrator — in the same way that Tenaska's lawyers chose another of the three arbitrators, and those two selected a chair person  – should Tenaska have some kind of obligation to ask questions to find out why Ponderosa thought so highly of him?

Why did they do it?

A Court that routinely rules unanimously in favor of defendants probably doesn't realize just what an echo chamber it has become. The members may beguile themselves with the thought that they would have ruled exactly the same way if the defendant had won the arbitration – thus saving claimant Ponderosa from having to take a $1.25 million award and getting a fresh shot at the $150+ million that it sought.

Blawgletter does wonder what to make of the fact the Court mentioned that the Ponderosa lawyers converted their fee arrangement from hourly to contingent. Id. at 4-5. What does that signify, if not discomfort with a claimant and its lawyers receiving a big award?

Bottom line

What results from all this? Texas courts go out of their way to compel arbitration, including by non-signatories of agreements that include arbitration clauses, but also go out of their way to vacate awards on grounds that other courts would reject.

We also wonder why the Court didn't mention the Fifth Circuit's en banc opinion on the very same issue. Positive Software Solutions, Inc. v. New Century Mortg. Corp., 476 F.3d 278 (5th Cir.2007) (en banc) (rejecting "mere appearance" of bias test). The Court would have had a very hard time explaining why the arbitrator who disclosed the fact that he'd tried to get business but had so far failed needed also to disclose more particulars about his unsuccessful efforts under the Fifth Circuit test. Maybe that's why.

Photo credit: Sarin Kunthong/Shutterstock.com

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Photo of Barry Barnett Barry Barnett

Clients and colleagues call Barry Barnett an “incredibly gifted lawyer” (Chambers and Partners) who is “magic in the courtroom” (Who’s Who Legal), “the top antitrust lawyer in Texas” (Chambers and Partners), and “a person of unquestioned integrity” (David J. Beck, founder of Beck…

Clients and colleagues call Barry Barnett an “incredibly gifted lawyer” (Chambers and Partners) who is “magic in the courtroom” (Who’s Who Legal), “the top antitrust lawyer in Texas” (Chambers and Partners), and “a person of unquestioned integrity” (David J. Beck, founder of Beck Redden).

Barnett is a Fellow in the American College of Trial Lawyers, and Lawdragon has named him one of the top 500 lawyers in the United States three years in a row. Best Lawyers in America has honored him as “Lawyer of the Year” for Bet-the-Company Litigation (2019 and 2017) and Patent Litigation (2020) in Houston. Based in Texas and New York, Barnett has tried complex business disputes across the United States.

TRIAL COUNSEL
Barnett’s background, training, and experience make him indispensable to his clients. The small-town son of a Texas roughneck and grandson of a Texas sharecropper, Barnett “developed an unusual common sense about people, their motivations, and their dilemmas,” according to former client Michael Lewis.

Barnett has been historically recognized for his effectiveness and judgment. His peers chose him, for example, to the American College of Trial Lawyers and American Law Institute. His decades of trial and appellate work representing both plaintiffs and defendants have made him a master strategist and nimble tactician in complex disputes.

Barnett focuses on enforcement of antitrust laws, the “Magna Carta of free enterprise,” in Supreme Court Justice Thurgood Marshall’s memorable phrase. “Barry is one of the nation’s outstanding antitrust lawyers,” according to Joseph Goldberg, a member of the Private Antitrust Enforcement Hall of Fame. Named among Texas’s top ten antitrust lawyers of 2023, Business Today calls Barnett a “trailblazer” among the “distinguished legal minds” who “dedicate their skill and expertise to the maintenance of healthy competition in various sectors” of the Lone Star State’s booming economy. Barnett is also adept in energy and intellectual property matters and has battled for clients against a Who’s Who list of corporate behemoths, including Abbott Labs, Alcoa, Apple, AT&T, BlackBerry, Broadcom, Comcast, Dow, JPMorgan Chase, Samsung, and Visa.

Barnett commands a courtroom with calm and credibility and “is the perfect lawyer for bet the company litigation,” said Scott Regan, General Counsel of former client Whiting Petroleum. His performance before the Supreme Court in Comcast Corp. v. Behrend prompted the Court to withdraw the question on which it had granted review. The judge in a trial involving mobile phone technology called Barnett “one of the best” and that his opening statement the finest he had ever seen. Another trial judge told Barnett minutes after a jury returned a favorable verdict against the county’s biggest employer that he was one of the two best trial lawyers he’d ever come across—adding that the other one was dead.

COMPLETE PACKAGE
A versatile trial lawyer, Barnett knows how to handle a case all the way from strategic pre-suit planning to affirmance on appeal. He’s tried cases to verdict and then briefed and argued them when they went before appellate courts, including the Second, Third, Fifth, and Tenth Circuits, the Supreme Court of Louisiana, and (in the case of Comcast Corp. v. Behrend) the Supreme Court of the United States.

Barnett is a sought-after public speaker, often serving on panels and talking about topics like the trials of antitrust class actions and techniques for streamlining complex litigation. He also comments on trends in commercial litigation and the implications of major rulings for outlets such as NPR, Reuters, Law360, Corporate Counsel, and The Dallas Morning News. He’s even appeared in a Frontline program about underfunding of state pensions, authored chapters on “Fee Arrangements” and “Techniques for Expediting and Streamlining Litigation” (the latter with Steve Susman) in the ABA’s definitive treatise on Business and Commercial Litigation in Federal Courts, 5th, and commented on How Antitrust Enforcers Might Think Like Plaintiffs’ Lawyers.

HARD GRADERS
Clients and other hard graders have praised Barnett for his courtroom skills and legal acumen.

A client in a $100 million oil and gas case, which Barnett’s team won at trial and held on appeal, said Barnett and his team “presented a rare combination of strong legal intellect, common sense about right and wrong, and credibility in the courtroom.” David McCombs at Haynes and Boone said Barnett “has a natural presence that goes over well with juries and judges.”

Even former adversaries give Barnett high marks. Lead opposing counsel in a decade-long antitrust slugfest said “Barry is a highly skilled advocate. He understands what really matters in telling a narrative and does so in a very compelling manner.”

CIVIC ENGAGEMENT
Barnett relishes opportunities to collaborate with all kinds of people. At the Center for American and International Law (CAIL), founded by a former prosecutor at Nuremberg in 1947 and headquartered in the Dallas area, he has served on the Executive Committee, co-chaired the committee that produced CAIL’s first-ever strategic plan, supported CAIL’s Institute for Law Enforcement Administration and other development efforts, and proposed formation of a new Institute for Social Justice Law. CAIL’s former President David Beck said “Barry is extremely bright” and is “very well prepared in every lawsuit or professional task he undertakes.”

Barnett is also a Trustee of the New-York Historical Society, a Sterling Fellow at Yale, a member of the Yale University Art Gallery’s Governing Board, a winner of the Class Award for his work on behalf of his college class, and a proud contributor to the Yellow Ribbon Program at Harvard Law. Barnett’s pro bono work includes leading the trial team representing people who are at greatest risk of severe illness and death as a result of being exposed to the novel coronavirus SARS-CoV-2 while being detained in the Dallas County jail—work for which he received the NGAN Legal Advocacy Fund RBG Award.

At Susman Godfrey, Barnett has served on the firm’s Executive Committee, Employment Committee, and ad hoc committees on partner compensation, succession of leadership, and revision of the firm’s partnership agreement. He also twice chaired the Practice Development Committee.

KEEPING PERSPECTIVE
Barnett understands that clients face many pressures. Managing the stress is important, especially in matters that take years to resolve. He encourages clients to call him whenever they have a question or concern and to keep the inevitable ups and downs in perspective. He wants them to know that he will do his level best to help them achieve their goals. He also strives to foster trust and to make working with him a pleasure.

Cyrus “Skip” Marter, the General Counsel of Bonanza Creek in Denver and a former Susman Godfrey partner and client, said Barnett is “excellent about communicating with clients in a full and honest manner” and can “negotiate for his clients from a position of strength, because he is not afraid to take a case through a full trial on the merits.” Stacey Doré, the President of Hunt Utility Services and a former client, said that Barnett is “an excellent trial lawyer and the person you want to hire for your bet-the-company cases. He is client focused, responsive, and uniquely savvy about trial and settlement strategy.” A New York colleague said, “Barry is a joy to work with as co-counsel. He tackles complex procedural and factual hurdles capably, efficiently, and without drama.”

PERSONAL
Barnett’s wide-ranging experience and calm, down-to-earth approach enable him to connect with clients, judges, jurors, witnesses, and even opposing counsel. He grew up in Nacogdoches, Texas. He co-captained his high school varsity football team as an All-East Texas middle linebacker while also serving as the Editor of Key Club’s Texas-Oklahoma District, won the Best Typist award, took the History Team to glory, and sang in the East Texas All Region Choir. As Dan Kelly of client Vistra Corp. put it, Barnett is “a great person to be around.”

Barnett is steady and loyal. He has practiced at Susman Godfrey his entire career. He and his wife Nancy live in Dallas and enjoy spending time in Houston and New York. Their daughter works for H-E-B in Houston, and their son is a Haynes and Boone transactions lawyer in Dallas.

As a member of Ivy League championship football teams in his junior and senior years at Yale and a parent of two Yalies, Barnett has no trouble choosing sides for “The Game” in November. And he knows how important fighting all the way to the end is. On his last play from scrimmage, in the waning minutes of The Game on Nov. 22, 1980, he recovered a Crimson fumble.

Yale won, 14-0.