MEDIATION & ARBITRATION - WHEN, HOW TO FIND A GOOD ONE, TIPS

MEDIATION & ARBITRATION WHEN, HOW TO FIND A GOOD ONE, TIPS W. GERALD (JERRY) HOOVER Attorney / Mediator / Arbitrator 1700 West Loop South, Suite 1250...
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MEDIATION & ARBITRATION WHEN, HOW TO FIND A GOOD ONE, TIPS

W. GERALD (JERRY) HOOVER Attorney / Mediator / Arbitrator 1700 West Loop South, Suite 1250-B Houston, Texas 77027-3006 e-mail:

State Bar of Texas COLLECTIONS PRACTICE 2003 May 15-16, 2003 - Houston May 29-30, 2003 - Dallas CHAPTER 19

W. JERRY HOOVER Law Offices of W. Jerry Hoover Attorney/Mediator/Arbitrator Gulf Interstate Engineering Tower 20+ Years in Legal Profession 1700 West Loop South, Suite 1250-B 9+ Years in Mediation/Arbitration Houston, Texas 77027-3006 Number of Cases Mediated: 700+ 713/622-0650 – Phone Number of Cases Served as Arbitrator: 60+ 713/622-0676 – Fax Martindale -Hubbell Rating: AV [email protected] Fellow - Texas Bar Foundation SERVICES :

Mediation, Arbitration, Special Master, Insurance Umpire, Neutral Case Evaluation, Moderated Settlement Conferences, Corporate Alternative Dispute Resolution (AADR@) Systems Design, Negotiation PRACTICE AREAS: Civil Litigation/General, Commercial Law/Business, Banking, Contracts, Construction, Real Estate, Insurance, Employment and Environmental ADR E XPERIENCE: Experienced Mediator and Arbitrator in all types of complex civil cases. Mediated and/or arbitrated over 750 cases, including commercial litigation, business law, construction and real estate, environmental, personal injury, DTPA, medical/legal malpractice, labor/employment law, insurance coverage, probate and family law cases. Also conducted several Apre-litigation@ mediations and arbitrations for insurance providers. Approved Mediator and Arbitrator panelist for the American Arbitration Association as well as for the National Association of Securities Dealers. Arbitrated several large, multi-party and complex commercial and construction industry cases for the American Arbitration Association. Approved mediator panelist for the U.S. District Court, Southern District of Texas. Recently, appointed Master in Chancery in Harris County District Court to oversee the settlement procedures in a complex toxic tort case involving over 800 plaintiffs and multiple defendants in a pipeline explosion case in Texas. EDUCATION: South Texas College of Law - J.D., 1981 Louisiana State University-Graduate Banking Degree, 1978 University of Florida - M.B.A., 1973 University of Florida - B.S.B.A. (with Honors), 1972 Member - College of the State Bar of Texas ADR TRAINING: A.A. White Dispute Resolution Institute at the University of Houston 40 hours Basic Mediation Training - 1993 24 hours Advanced Family Law Mediation Training - 1995 American Arbitration Association (AAA) Basic Arbitration Training, Houston - 1995 Construction Arbitration Training Workshop, Houston - 1996 Advanced Commercial Arbitration Training - Orlando, FL - 1998 Advanced Construction Arbitrator II Training - Houston - 2001 National Association of Security Dealers (NASD) Arbitration Training, Houston - 1996 Mediation Training, Houston - 1997 Chairperson Training, Houston - 1999 U.S. Postal Service REDRESS Program - 1999 ADR A FFILIATIONS: Board of Advisors and teaching faculty for the A.A. White Dispute Resolution Institute at the University of Houston; American Bar Association, Dispute Resolution Section, State Bar of Texas, ADR Section; Houston Bar Association, ADR Section; Association for Conflict Resolution (ACR) formerly SPiDR; Charter Member of Institute for Responsible Dispute Resolution at South Texa s College of Law. SELECTED PUBLICATIONS: AKeeping Disputes Out of Court and Raising Employee Morale: Strategic Use of Peer Review Panels, Mediation and Arbitration@ presented at the 15th Annual Texas Conference Personnel Law Update (November 9, 1998) in Houston. AIs There a New Approach to Conflict Resolution? Discover How Alternative Dispute Resolution Can Be Effectively Used In Your Organization@ presenting at the Council On Education Management (April 10, 2001) in Houston.

Mediation & Arbitration – When, How To Find A Good One, Tips

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TABLE OF CONTENTS I.

INTRODUCTION....................................................................................................................................... 1

II.

MEDIATION - WHEN ................................................................................................................................ 1

III. MEDIATION – HOW TO FIND A GOOD ONE........................................................................................... 1 IV. MEDIATION – TIPS................................................................................................................................... 2 V. ARBITRATION – WHEN ........................................................................................................................... 2 VI. ARBITRATION-TIPS................................................................................................................................. 2 VII. CONCLUSION........................................................................................................................................... 3 APPENDICES: Appendix A.................................................................................................................................................5 Appendix B.................................................................................................................................................6 Appendix C.................................................................................................................................................8 Appendix D.................................................................................................................................................9 Appendix E ............................................................................................................................................... 11

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III. MEDIATION – HOW TO FIND A GOOD ONE As you know, there is a plethora of neutral party mediators practicing in the Texas marketplace. You take the required forty (40) hour mediation course and you are a “qualified” mediator. In Texas, you do not even have to be an attorney to be a mediator. Unfortunately, there is no current Texas Board Certification for an ADR specialist. The ADR Section of the Texas State Bar is currently masterminding the credentialing requirements for Texas mediators. These efforts should afford the purchasers of mediation services to have a reliable credentialing source with which to measure the experience, qualifications, and success rate of a mediation. As one of the more active ADR states, Texas offers an abundance of qualified and experienced mediators. Generally, it is beneficial to the parties to find a mediator experienced in the area(s) of the dispute, however, it is not a prerequisite. Obviously, the skills of a family law mediator are generally very different from those of a construction law mediator for example. An effective mediator must have the following personal traits:

MEDIATION & ARBITRATION WHEN, HOW TO FIND A GOOD ONE, TIPS I.

INTRODUCTION Mediation and Arbitration are the two most popular forms of Alternative Dispute Resolution (ADR) in Texas. Simply put, Mediation is a non-binding informal settlement conference conducted with the assistance of a neutral party. Arbitration on the other hand, is a binding dispute resolution alternative pursuant to a written contract between the parties. Generally the arbitration clause in a contract sets forth the forum for the arbitration, the rules to be followed in the arbitration, the number of arbitrators to hear the case and language to the effect that Judgment upon any Award rendered in the arbitration proceeding may be entered by any Federal or State Court having jurisdiction thereof. Appendix “A” sets forth several examples of ADR clauses that may be used as contract language in various types of contracts. For purposes of this paper, I will address Mediation and Arbitration separately. II. MEDIATION - WHEN In this author’s opinion, there are two key times (windows of opportunity) to use mediation. First, mediation should be conducted prior to either side pulling the trigger on filing a lawsuit or Demand for Arbitration. Before the lines of demarcation in litigation are drawn, counsel for the parties should arrange to mediate the disputes. An important prerequisite to “pre-suit” mediation is to be sure and gather up senior decision makers on both sides that have the authority to negotiate and the authority to settle the case. Depending on the type of litigation, legal fees, costs, expert fees and other unforeseen costs can sky rocket and make the case even tougher to settle due to the out-of-pocket costs to all parties. At least no one will say “why didn’t we mediate this case earlier?” when you end up settling on the courthouse steps and thousands of dollars of legal fees and costs have either been paid and/or accrued. The second best time to mediate a case is after reasonable and sufficient discovery has been taken and both the attorneys and the clients are in a better position to evaluate the case for settlement purposes. Generally by this time, both parties should be well briefed on their respective risks of going to trial or arbitration. Again, it is paramount to have authoritative decision makers present and personally participating in the mediation process. Participation via phone on the day of mediation by a senior decision maker may be acceptable in certain circumstances, but telephonic participation should only be conducted with the prior approval of opposing counsel.

1.

Good personal skills (must enjoy working with people).

2.

Patience (must have the patience of Job).

3.

Ability to be a quick study on the legal issues (the litigators will brief you on the law).

4.

Diplomacy (“shuttle” diplomacy).

5.

Creative (must have ability to call “audibles” if the mediation bogs down).

6.

Committed to the process (must understand that mediation is a process).

7.

Hard Worker (both during mediation and post, if necessary).

8.

Diligence-If the case settles at mediation, reduce the Settlement Agreement to writing (see Appendix “B”).

Bottom line -choose your mediators carefully. If you do not know them, ask for references. Ask how many cases they have mediated and what types. Ask what their settlement success rate is. Ask another litigator whose recommendations you value to give you some names of mediators they have used successfully and they would recommend. Call the 1

Mediation & Arbitration – When, How To Find A Good One, Tips

mediator and personally interview him/her in advance. Be sure and ask for any disclosures of conflicts of interest regarding the parties or the attorneys of record. The choice of a mediator should be taken seriously and is one of the key boxes to check when planning and arranging for a successful mediation.

Although an arbitration is less formal than litigation, the procedures are similar. The parties make arguments and present evidence at a hearing, although rules of evidence typically are more relaxed. In addition, there may be a pre-hearing discovery process, but usually it is not as extensive as the discovery process in litigation. Finally, like judicial decisions, arbitrators often issue written decisions and may award a variety of remedies. The arbitrator’s decision is final and binding, although a lawsuit may be necessary to enforce the award in a court of competent jurisdiction.

IV. MEDIATION – TIPS Following are some basic tips toward culminating a dispute into a successful settlement. 1.

Select a qualified and experienced mediator.

2.

Mediate early (pre-suit is ok).

3.

Be sure decision makers with authority to negotiate and authority to settle the case attend the mediation with their counsel.

4.

Come prepared to the mediation. Have the legal points briefed and your damage model built. (Bring extra copies for the mediator).

5.

Give the process ample time. Do not schedule a case that is going to take a full day to evaluate for a one-half day mediation session.

6.

Keep an open mind for options and solutions to a settlement - sometimes there is more than one way to solve a dispute. From a practical standpoint, the parties should approach a dispute as a problem to be solved, not as a contest to be won.

7.

Send a mediation memorandum to the mediator in advance of the mediation. (see Attorney’s Confidential Information Sheet- Appendix “C”).

8.

Be prepared to discuss with your client the litigation budget going forward if the case does not settle.

9.

Be familiar with the specific Court Rules For Mediations (see Appendix “D”).

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VI. ARBITRATION-TIPS Virtually every business entity and/or individual who has sought justice in the courtroom complains that the cost of commercial litigation is too high and, for that reason, companies of all sizes are increasingly resorting to binding arbitration in an effort to reduce those costs. The decision to use arbitration as an alternative to litigation should not be taken lightly, and the legal pros and cons should be discussed with your Client. Arbitration is not a panacea which can solve all problems cheaply. However, once you decide to utilize arbitration, a number of factors can influence its cost relative to litigation. While each situation is different, frequently there are two primary reasons that commercial litigation carries such a high price tag – court-related delays and uncertainty. One such uncertainty involves jury members who are very often not at all familiar with the issues being disputed and may not have the training to decide disputes over complex business transactions and economic damages. Arbitration allows the parties to the dispute to take control of the dispute resolution process – thus potentially avoiding many of the delays and uncertainties experienced in litigation and reducing costs. You should not think that arbitration is always inexpensive – it is not. If large and complex cases with multiple issues are involved, arbitration cases can take several years and involve teams of attorneys and experts. However, the costs involved will usually be less than litigating the same case through the courts. Parties should understand, however, that in selecting arbitration they might give up some of the protections that the court system offers. Obviously, the first thing they give up is a trial by jury. How can the parties maximize their control and cost savings? The first step is for the parties to agree up front to arbitrate disputes rather than to litigate them. It is almost always easier to agree to an arbitration process before there is any dispute than

V.

ARBITRATION – WHEN Perhaps the most well known ADR procedure, arbitration is a formal, binding process in which a trained neutral imposes a binding decision on the parties. In 1925, Congress enacted the Federal Arbitration Act, which enforced arbitration clauses in interstate contracts, providing a firm foundation for the modern form of business arbitration as we know it today. Leaders of business and industry, seeking efficient, economical, and enforceable resolutions to their commercial, construction, and employment disputes, have embraced arbitration and it has grown in application and acceptance ever since. 2

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after. This does not mean that parties cannot agree to arbitrate after the fact, just that it is more difficult. Three components of the arbitration process play a major role in determining its success: 1.

selecting an arbitrator (or arbitrators) with the experience and expertise to understand the issues relevant to the dispute and the time to hear and decide your case,

2.

limiting the issues to be arbitrated, and

3.

establishing a reasonable timetable for reaching a decision.

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as planned), there should be some specific guidelines that will apply, barring agreement of the parties. For example, the parties may agree that an arbitrator must be selected within 60 days of notice that arbitration will be required, that the first meeting with the arbitrator will take place within 20 days, that the parties will file briefs on the issues and facts to the arbitrators within 20 days following the initial meeting, that answer briefs are required within 180 days of the initial hearing, and that the Arbitrator’s Award must be tendered within thirty (30) days of the closing of the hearings (fourteen (14) days if an Expedited Arbitration). In most instances, decisions of arbitrators cannot be appealed. Commercial litigation costs are high, not because of excessive attorney hourly rates, but because high-skilled professionals (as well as the parties themselves) are spending time that is required by the current legal system but is not directly related to resolving the disputes between the parties. For certain types of disputes, litigation, even with its high costs, may be the best solution. However, if arbitration is selected, it can be designed to maximize the benefit to the parties and reduce the costs by minimizing the two primary causes of high legal costs – delay and uncertainty.

By selecting an arbitrator with the expertise and experience in the areas being disputed much of the “fluff” and “puff” associated with litigation can be dispensed with and arbitrators can quickly get to the “meat” of the case. While judges must be lawyers in order to decide matters of law, arbitrators are often asked solely to resolve business issues. Therefore, while lawyers or retired judges may effectively serve as arbitrators, certified public accountants, retired executives or other individuals with relevant experience in the particular industry or specific types of transaction also should be considered. An arbitrator who already understands the transactions and relevant business practices will likely reduce the uncertainty associated with a jury or a judge with little or no experience or interest in the disputed area. Prior to retaining an arbitrator, it is critical to determine that the prospective arbitrator has the time available on his/her docket to deal with your case on the timetable set by the parties. Recognize that the arbitrator you select will require time to read and carefully study the materials submitted, hold hearings, ask questions of various party representatives, consider the evidence submitted, decide the case and render a decision. You should note that highly qualified arbitrators are not inexpensive and must be paid directly by the parties, generally in advance. Defining the issues to be decided by the arbitrator also reduces the time required, and thus, the cost. He or she can focus all attention on the issues which are of importance to the parties. While arbitration may involve some form of discovery, it is generally much more limited. In fact, the parties may decide themselves to contractually limit the scope and nature of discovery, or to eliminate some forms of discovery entirely. For example, depositions are typically limited in both number of depositions and the time per deposition. Establishing a reasonable timetable for the arbitration process is also a must. While arbitrators must be given some flexibility (things never go exactly

VII. CONCLUSION Promulgation of the Texas ADR Act, TEX. CIV. P RAC. & REM . C ODE ANN. Section 154.001, et seq. (Vernon Supp. 1994), appropriately triggered the ADR movement in Texas. Many District Court Judges in Texas will not commence a trial until the parties have either mediated the case or complied with an ADR Court Order. With a Court ordered mediation settlement success rate in excess of 85% in most Texas counties, court dockets have steadily eased since the passage of the Texas ADR Act. Increasingly litigators are more comfortable with the mediation process as, in many cases, it is a process that is in the best interest of their clients and to agree to mediate today is not interpreted as a sign of weakness. Arbitration on the other hand has grown in popularity, particularly in construction, commercial, and in employment cases, due to the exorbitant legal fees and costs generally prevalent in these types of disputes. In most cases, arbitrations are less costly and generally are final resolutions of the disputes since successful appeals of arbitrator’s awards are rare.

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APPENDIX A Sample ADR Clauses RE: CONSTRUCTION LAW Dispute Resolution. If a dispute or controversy arises out of the interpretation, performance or breach of this Agreement, the parties agree in good faith to submit any and all disputes to Mediation conducted by a third party neutral mediator. The fees and expenses of the mediator shall be borne equally by the parties. In the event the disputes are not settled at mediation, the parties hereto agree to submit any and all disputes to binding arbitration conducted pursuant to the guidelines of the Construction Industry Rules of Arbitration then in effect at the American Arbitration Association. The arbitration will be conducted in Houston, Texas, and Judgment upon any AWARD rendered in any such Arbitration proceeding may be entered by any Federal or State Court having jurisdiction thereof. Further, any AWARD may include the costs of arbitration, as well as the legal fees associated with the arbitration, as part of an AWARD to the prevailing party. RE: COMMERCIAL LAW Dispute Resolution. If a dispute or controversy arises out of the interpretation, performance or breach of this Agreement, the parties agree in good faith to submit any and all disputes to Mediation conducted by a third party neutral mediator. The fees and expenses of the mediator shall be borne equally by the parties. In the event the disputes are not settled at mediation, the parties hereto agree to submit any and all disputes to binding arbitration conducted pursuant to the guidelines of the Commercial Rules of Arbitration then in effect at the American Arbitration Association. The arbitration will be conducted in Houston, Texas, and Judgment upon any AWARD rendered in any such Arbitration proceeding may be entered by any Federal or State Court having jurisdiction thereof. Further, any AWARD may include the costs of arbitration, as well as the legal fees associated with the arbitration, as part of an AWARD to the prevailing party. RE: EMPLOYMENT LAW Dispute Resolution. If a dispute or controversy arises out of the interpretation, performance or breach of this Agreement, the parties agree in good faith to submit any and all disputes to Mediation conducted by a third party neutral mediator. The fees and expenses of the mediator shall be borne equally by the parties. In the event the disputes are not settled at mediation, the parties hereto agree to submit any and all disputes to binding arbitration conducted pursuant to the guidelines of the Employment Law Rules of Arbitration then in effect at the American Arbitration Association. The arbitration will be conducted in Houston, Texas, and Judgment upon any AWARD rendered in any such Arbitration proceeding may be entered by any Federal or State Court having jurisdiction thereof. Further, any AWARD may include the costs of arbitration, as well as the legal fees associated with the arbitration, as part of an AWARD to the prevailing party. RE: GENERIC MEDIATION The parties agree to negotiate in good faith in an effort to resolve any dispute related to or arising out of this contract. If the dispute cannot be resolved by negotiation, the parties will submit the dispute to mediation before resorting to arbitration or litigation and will equally share the costs of a mutually acceptable mediator. This paragraph survives termination of this contract. This paragraph does not preclude a party from seeking equitable relief from a court of competent jurisdiction.

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APPENDIX B Sample Settlement Agreement CAUSE NO. 2003-0001

LAST NATIONAL BANK, N.A. Plaintiff VS. HARD LUCK ENTERPRISES, INC. Defendant

§ § § § § § §

IN THE DISTRICT C O U R T OF _____________ COUNTY, ______ J U D I C I A L

TEXAS

DISTRICT

SETTLEMENT AGREEMENT 1.

The Parties hereto agree to settle the above-styled and numbered case, pursuant to T EX . CIV. P RAC.

& REM . CODE ANN. Section 154.071 (Vernon Supp. 1994). 2.

The consideration to be given for this settlement is as follows:

3.

Except for the undertakings provided in this Settlement Agreement which shall survive hereafter,

___________________________ agrees to release, discharge, and forever hold ___________________________ harmless from any and all claims, demands or suits, known or unknown, fixed or contingent, liquidated or unliquidated, whether or not asserted in the above case, as of this date, arising from, or related to, the events and transactions which are the subject matter of this case. 4.

Each signatory hereto warrants and represents that a) he/she has the authority to bind the parties for

whom that signatory acts; and b) the claims, suits, rights and/or interests which are the subject matter are owned by the party asserting same, have not been assigned, transferred or sold, and are free of encumbrance. 5.

______________________________ shall deliver drafts of any further confirming documents to the

other parties by ___________________________, 2003. The parties agree to cooperate with each other in the drafting and execution of such additional documents as are reasonably requested or required to implement the terms and spirit of this Settlement Agreement. 6.

If one or more disputes arise with regard to the interpretation and/or performance of this Settlement

Agreement or any of its provisions, the parties agree to attempt to resolve same by phone conference with the Mediator who facilitated this settlement. If the parties cannot resolve their differences by phone conference, then each agrees to schedule with the Mediator, one-half day of mediation, within thirty (30) days, to resolve the disputes. If a party refuses, then that party may not recover attorneys’ fees or costs in any litigation brought to construe or 6

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enforce this Settlement Agreement. Otherwise, if unsuccessful, the prevailing party or parties shall be entitled to recover reasonable attorneys’ fees and expenses. 7.

THIS SETTLEMENT AGREEMENT IS IRREVOCABLE.

This agreement is made and

performable in ____________________________ County, Texas, and shall be construed in accordance with the laws of the State of Texas. 8.

Each signatory to this Settlement Agreement has entered into the same freely and without duress

after having consulted with professionals of his or her choice. Each party hereto has been advised by the Mediator that the Mediator is not the attorney for any party and that each party should have this Settlement Agreement reviewed by that party’s attorney prior to executing same. Signed this

day of

, 2003.

LAST NATIONAL BANK, N.A.

_____________________________ (Name) _____________________________ (Title) PLAINTIFF

By: _____________________________ John Doe Attorney at Law ATTORNEY FOR PLAINTIFF

HARD LUCK ENTERPRISES, INC.

_____________________________ (Name) _____________________________ (Title) DEFENDANT

By: _____________________________ Jane Smith Attorney at Law ATTORNEY FOR DEFENDANT

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APPENDIX C Sample Confidential Information Sheet ATTORNEY=S CONFIDENTIAL INFORMATION SHEET AND REQUEST FOR MEDIATION Court/Judge: Cause No.: Style: 1.

Your firm name, address, telephone and fax numbers:

2.

Name and designation (e.g. Plaintiff, Defendant, Intervenor, etc) of party you represent:

3.

Name of your party representative(s) (other than the attorney of record) to attend the mediation:

4.

If an insurance company is involved, please provide the following: a. Name of Company: b. Adjuster or other representative you will be bringing: c. Policy limits: d. Anything unusual or noteworthy:

5.

Summarize the nature of the case and the most contentious issues:

6.

State the specific relief in dollars being sought by any party seeking to affirmatively recover:

7.

Provide the history of settlement offers to date and the current status of settlement dialogue:

8.

What is the status of discovery? (circle one): (a) little or none; (b) some discovery but substantially incomplete; (c) substantially complete; or (d) complete

9.

Do you have sufficient information to form a realistic settlement position? If not, what else is needed?

10.

Do you know of any impediment to going forward with a good faith mediation at this time?

11.

Total number of people in your party who will be attending the mediation:

ON BEHALF OF , ONE OF THE PARTIES IN THE ABOVE CAUSE, THE UNDERSIGNED ATTORNEY OF RECORD REQUESTS THAT W. JERRY HOOVER (AMEDIATOR@), AGREE TO SERVE AS MEDIATOR IN THE ABOVE CASE. MY CLIENT(S) AND I HAVE READ AND AGREE TO BE BOUND BY THE ARULES OF MEDIATION@ ATTACHED HERETO AS WELL AS BY ALL PROCEDURAL RULES ESTABLISHED BY THE MEDIATOR. I HAVE ADVISED MY CLIENT(S) THAT THE MEDIATOR DOES NOT SERVE AS COUNSEL TO ANY PARTY AND THAT EACH PARTY MUST RELY EXCLUSIVELY ON THEIR OWN COUNSEL FOR ALL LEGAL ADVICE. DATED on the __________ day of _____________________, 200___. Respectfully submitted, Attorney of Record Print Name:

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APPENDIX D Sample Mediation Rules of Court RULES FOR MEDIATION 1.

Definition of Mediation. Mediation is a process under which an impartial person, the mediator, facilitates communication between the parties to promote reconciliation, settlement or understanding among them. The Mediator may suggest ways of resolving the dispute, but may not impose his/her own judgment on the issues for that of the parties.

2.

Agreement of Parties. Whenever the parties have agreed to mediation they shall be deemed to have made these rules, as amended, and in effect as of the date of the submission of the dispute, a part of their agreement to mediate.

3.

Consent to Mediator. The parties consent to the appointment of the individual named as mediator in their case. The Mediator shall act as an advocate for resolution and shall use his best efforts to assist the parties in reaching a mutually acceptable settlement.

4.

Conditions Precedent to Serving as Mediator. The Mediator will only serve in cases in which the parties are represented by attorneys, unless the pro se litigant agrees to sign, in advance, an acknowledgment that the Mediator does not give legal advice or serve as counsel for any party to the mediation. The Mediator shall not serve as a mediator in any dispute in which he/she has any financial or personal interest in the result of the mediation. Prior to accepting the appointment, the Mediator shall disclose any circumstance likely to create a presumption of bias or prevent a prompt meeting with the parties. In the event that the parties disagree as to whether the Mediator shall serve, the Mediator shall not serve.

5.

Authority of Mediator. The mediator does not have the authority to decide any issue for the parties, but will attempt to facilitate the voluntary resolution of the dispute by the parties. The mediator is authorized to conduct joint and separate meetings with the parties and to offer suggestions to assist the parties achieve settlement. If necessary, the Mediator may also obtain expert advice concerning technical aspects of the dispute, provided that the parties agree and assume the expenses of obtaining such advice. Arrangements for obtaining such advice shall be made by the Mediator or the parties, as the Mediator shall determine.

6.

Mediator Cannot Impose Settlement. The parties understand that the Mediator will not and cannot impose a settlement in their case and agree that a settlement, if any, must be voluntarily agreed to by the parties. The Mediator, as an advocate for settlement, will use every effort to facilitate the negotiations. The Mediator does not warrant or represent that settlement will result from the mediation process.

7.

Authority of Representatives. PARTY REPRESENTATIVES MUST HAVE AUTHORITY TO SETTLE AND ALL PERSONS NECESSARY TO THE DECISION TO SETTLE SHALL BE PRESENT. The names and addresses of such persons shall be communicated in writing to all parties and to the Mediator.

8.

Time and Place of Mediation. The Mediator shall fix the time of each mediation session. The mediation shall be held at the office of the Mediator, or at any other convenient location agreeable to the Mediator and the parties as the Mediator shall determine.

9.

Identification of Matters in Dispute. Prior to the first scheduled mediation session, each party shall provide the Mediator and all attorneys of record with an Information Sheet and Request For Mediation on the form provided by the Mediator setting forth its position with regard to the issues that need to be resolved

10.

Privacy. Mediation sessions are private. The parties and their representatives may attend the mediation session. Other persons may attend only with the permission of the parties and with the consent of the Mediator. 9

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Confidentiality. Confidential information disclosed to a Mediator by the parties or by witnesses in the course of the mediation shall not be divulged by the Mediator. All records, reports, or other documents received by a mediator while serving in that capacity shall be confidential. The Mediator shall not be compelled to divulge such records or to testify in regard to the mediation in any adversary proceeding or judicial forum. Any party that violates this agreement shall pay all fees and expenses of the Mediator and other parties, including reasonable attorneys= fees incurred in opposing the efforts to compel testimony or records from the Mediator. The parties shall maintain the confidentiality of the mediation and shall not rely on, or introduce as evidence in any arbitral, judicial or other proceeding: a) views expressed or suggestions made by another party with respect to a possible settlement of the dispute; b) admissions made by another party in the course of the mediation proceedings; c) proposals made or views expressed by the Mediator; or d) the fact that another party had or had not indicated willingness to accept a proposal for settlement made by the Mediator.

12.

No Stenographic Record. There shall be no stenographic record of the mediation process and no person shall tape or record any portion of the mediation session.

13.

No Service of Process at or near the site of the Mediation Session. No subpoenas, summons, complaints, citations, writs or other process may be served upon any person at or near the site of any mediation session, or upon any person entering, attending, or leaving the mediation session.

14.

Termination of Mediation. The mediation shall be terminated: a) by the execution of a settlement agreement by the parties; b) by declaration of the Mediator to the effect that further efforts at mediation are no longer worthwhile; or c) after the completion of one full mediation session, by a written declaration of a party or parties to the effect that the mediation proceedings are terminated.

15.

Exclusion of Liability. The Mediator is not a necessary or proper party in any judicial proceedings relating to the mediation. Neither Mediator nor any law firm employing Mediator shall be liable to any party for any act or omission in connection with any mediation conducted under these rules.

16.

Interpretation and Application of Rules. The Mediator shall interpret and apply these rules.

17.

Fees and Expenses. The Mediators daily fee shall be agreed upon prior to the mediation and shall be paid in advance of each mediation day. The expenses of witnesses for either side shall be paid by the party producing such witness. All other expenses of the mediation, including fees and expenses of the Mediator, shall be borne equally by the parties unless they agree otherwise.

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APPENDIX E Sample Award of Arbitrator

IN THE M ATTER OF THE ARBITRATION BETWEEN: LAST NATIONAL BANK, N.A.

§ § § § § § § § § § § § §

CLAIMANT VS. JANE SMITH, INC. AND I. O. BUCKS RESPONDENTS

AD HOC ARBITRATION BEFORE: W. JERRY HOOVER ARBITRATOR

FORUM: Houston, Texas

AWARD OF ARBITRATOR

I, THE UNDERSIGNED ARBITRATOR, having been designated in accordance with the arbitration agreement entered into between the above-named parties dated May 1, 2000, and the Rule 11 Agreement between counsel for the parties dated January 10, 2001, and having been duly sworn and having heard the proofs, testimony and allegations of the parties and after due consideration of all testimony, documentary evidence, argument of counsel and post-hearing briefing, hereby AWARD as follows: Respondents, JANE SMITH, INC. and I.O. BUCKS, shall jointly and severally pay to Claimant, LAST NATIONAL BANK, N.A., the net sum of ONE HUNDRED FORTY-THREE THOUSAND AND 00/100 DOLLARS ($143,000.00) calculated as follows: CLAIMANT’S CLAIMS

Amount

Breach of Contract

$100,000.00

Pre-Award Interest (From January 1, 2002 through December 31, 2002 at 10% per annum)

$10,000.00 $33,000.00

Attorneys Fees & Costs Net Amount Due Claimant

$143,000.00

The above sums are to be paid on or before thirty (30) days from the date of this AWARD.

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Chapter 19

AWARD OF ARBITRATOR PAGE 2

Respondent shall pay to Claimant post-AWARD interest on the above sums at the rate of 10% per annum, commencing 30 days from the date of this AWARD and continuing until the AWARD is paid in full. The compensation and expenses of the arbitrator totaling $5,000.00 shall be borne equally by the parties and deducted from deposits previously advanced to the Arbitrator by the parties. This AWARD is in full and final settlement of all claims and counterclaims submitted to this Arbitration. All claims or other relief not expressly granted herein are, hereby DENIED. This AWARD disposes of all claims, counterclaims and parties. This AWARD may be executed in any number of counterparts, each of which shall be deemed an original and all of which shall constitute together one and the same instrument.

SIGNED:

DATED:

W. Jerry Hoover, Arbitrator

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