imageBetter results

Lawyers who like to handle disputes on a basis that shares risk with their clients often prefer the speed and lower cost of arbitration. The process has its drawbacks; some people worry about fuzzy standards and the lack of review for legal errors. And some general counsel even swear that it costs just as much and takes every bit as long as a lawsuit.

To which I say: hire somebody who will work on a contingent-fee or hybrid basis. You’ll get better, more efficient results faster.

But sometimes courts render rulings that seem to put arbitration into a second-class legal stratum, a minor league of law, a dustbin of dispute resolution. The Eighth Circuit did such a thing just this week.

Zarecors’ losses

The case arose from an $800,000 investment by Herschel and Mona Zarecor and their son in mutual funds that Morgan Keegan served as lead underwriter for. They filed an arbitration case against Morgan Keegan for fraud under Arkansas and New Jersey blue sky laws and the federal Securities Exchange Act of 1934. They won more than $500,000 in damages, but the district court vacated the award, holding that Financial Industry Regulatory Authority rules did not require Morgan Keegan to arbitrate the dispute.

The Zarecors tried again a week later in federal court. This time, the district court dismissed their case — which alleged the same claims — on the ground that thy sued too late.

Appellate ruling

The court of appeals upheld that ruling as to the Zarecors’ claims under Arkansas and federal law. The panel reasoned thus:

We conclude that pursuit of arbitration did not toll the federal statute of limitations. Although the Supreme Court has applied tolling under a different federal statute when a plaintiff initially brought suit in a state court where venue was improper, Burnett v. N.Y. Cent. R.R. Co., 380 U.S. 424, 428-32 (1965), arbitration is different. A plaintiff who pursues arbitration is not required to await the outcome to bring an action in court, and there is an accepted procedure for pursuing arbitration and a lawsuit simultaneously. As the Fifth Circuit observed in an analogous situation, a plaintiff may file suit within the statute of limitations and then seek a stay of the action pending arbitration: “Such a course would have guaranteed that the lawsuit was brought within the limitations period without waiving any right to arbitration which may have existed.” Fonseca v. USG Ins. Servs., 467 F. App’x 260, 261 (5th Cir. 2012). The First Circuit similarly explained that there is a means to give procedural priority to arbitration without foreclosing a plaintiff’s right to bring a timely action in court—“the bringing of suit within the limitations period, followed by a stay of such proceedings pending the results of arbitration.” United States ex. rel. Wrecking Corp. of Am. v. Edward R. Marden Corp., 406 F.2d 525, 526 (1st Cir. 1969) (per curiam). We believe that this reasoning is sound and should be applied in the context of the federal securities statutes. The district court thus properly dismissed the Zarecors’ federal claim as time-barred.

Zarecor v. Morgan Keegan & Co., Inc., No. 13-3315, slip op. at 9 (8th Cir. Sept. 1, 2015).

Disrespecting arbitration?

Did you catch that? Although filing a lawsuit in the wrong place will toll the running of the limitations period until you file the lawsuit in the right court or bring it in arbitration, filing an arbitration does not have the same effect. You get tolling from the improper lawsuit but not from the improper arbitration. To cover yourself, you must “pursu[e] arbitration and a lawsuit simultaneously.”

That does not make sense. Court’s should treat a good-faith effort to assert a claim in any tribunal that the law recognizes the same for tolling purposes. You don’t have to file a protective arbitration while you try to move ahead in court, and you shouldn’t have to file a protective lawsuit as you prosecute claims in arbitration either.

New Jersey agrees with me

The same panel that disregarded, for purposes of the federal and Arkansas, the tolling rule that I would apply proceeded to adopt my rule for purposes of the Garden a State claim. The decision in Galligan v. Westfield Centre Service, Inc., 412 A.2d 122 (N.J. 1980), the panel believed, made all the difference. Their honors explained:

The district court acknowledged Galligan but thought equitable tolling was unavailable here, because the Zarecors failed to file suit at all, choosing instead to pursue arbitration. That is a reasonable distinction that would be persuasive in some jurisdictions, but our best evidence of New Jersey law is that a diligent pursuit of a claim in arbitration also tolls the statute of limitations. In Schwartz v. Travelers of New Jersey Insurance Co., 2009 WL 1405861 (N.J. Super. Ct. App. Div. May 21, 2009), a New Jersey appellate court, considering an insured’s claim against an insurer for uninsured motorist benefits, agreed with a trial judge that a “demand for arbitration—even if inconsistent with the type of arbitration required by the policy—was sufficient to toll the statute of limitations.” Id. at *2. The court in Schwartz ultimately held that the action was untimely, because the plaintiff waited nearly six years after the defendant refused to arbitrate before suing, id. at *3, but it is significant that both the trial court and the intermediate appellate court concluded that a demand for arbitration tolled the statute of limitations. Given the breadth of Galligan and the broad reading given to that decision by other New Jersey courts, our best prediction of New Jersey law is that the Zarecors’ timely and diligent pursuit of their claim in arbitration was sufficient to toll the statute of limitations. That a federal court later concluded that the arbitration panel lacked jurisdiction does not preclude equitable tolling under the reasoning of Galligan.

Zarecor, slip op. at 12.

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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.

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.

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.

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.”

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.

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.”

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.