Shakeel Mustafa v. Felix Rippy

ACCEPTED

03-15-00422-CV

7320560

THIRD COURT OF APPEALS

AUSTIN, TEXAS

10/9/2015 5:18:13 PM

JEFFREY D. KYLE

CLERK

No. 03-15-00422-CV

SHAKEEL MUSTAFA, § IN THE

FILED THIRD

IN

3rd COURT OF APPEALS

Appellant § AUSTIN, TEXAS

§ 10/9/2015 5:18:13 PM

v. § COURT OF APPEALS

JEFFREY D. KYLE

§ Clerk

FELIX RIPPY, §

Appellee § AUSTIN, TEXAS

APPELLANT’S MOTION FOR EN BANC RECONSIDERATION

AND IN THE ALTERNATIVE PETITION FOR WRIT OF MANDAMUS

Shakeel Mustafa, Appellant, asks the Court to grant this motion to reconsider

the case en banc.

Introduction

1. Appellant is Shakeel Mustafa. Appellee is Felix Rippy. A panel of the

court issued the judgment and opinion in this case on September 24, 2015. A copy

of the opinion is attached to the appendix filed herewith (Appendix, p. 85). The

panel that rendered judgment in this case consisted of Chief Justice Rose, Justice

Pemberton and Justice Field. The panel that rendered judgment denied Appellant’s

last timely filed motion for rehearing on September 24, 2015.

Argument & Authorities

2. The Court has the authority to grant this motion and submit the case to the

full court, sitting en banc.1 The primary issue in the appeal was whether a party can

1

Tex. R. App. P. 49.7; see Tex. R. App. P. 41.2.

Page 1

appeal the denial of a motion to compel arbitration when there are competing

motions to compel arbitration with different procedural rules. Specifically,

Appellant requested that arbitration be compelled pursuant to the American

Arbitration Association Consumer Rules, and Appellee’s motion to compel

arbitration did not. The panel resolved the issue by holding it did not have

jurisdiction to consider the denial of his motion to compel arbitration. Appellant is

not asking this court to compel mediation (though he asked the trial court to compel

mediation); rather, the issue here is whether the denial of Appellant’s motion to

compel arbitration can be appealed.

3. The panel’s resolution of that issue is contrary to another opinion issued by

the Fifth Court of Appeals in Morford et. Al. v. Esposito Securities, LLC, No. 05-14-

01223-CV (Tex. App. – Dallas September 18, 2015). A copy of that opinion is

attached herewith. (Appendix, p. 87). To resolve the conflict between the opinion

in this case and the one in Morford, Appellant asks the Court to reconsider the case

en banc.2 The conflict between the cases is that the Fifth Court of Appeals held that

the denial of one motion of competing motions to compel arbitration does in fact

provide the appellate court with jurisdiction to consider the appeal. To the extent

necessary, Appellant requests that his appeal be alternatively treated as a petition for

writ of mandamus.

2

See Tex. R. App. P. 41.2(c), 49.7

Page 2

4. The issue in this case presents such an extraordinary circumstance that

resolution of the issue by the Court en banc is necessary. 3 The importance of the

protections provided by the American Arbitration Association Consumer Rules is of

significant concern to Appellant and necessary for the fair and equitable resolution

of the instant dispute. The arbitration agreement specifically provides that “AAA

Rules” will be followed, but the arbitration is taking place outside of the AAA and

without the application of the AAA Rules. (Appendix p. 13, 24). Appellant requests

that this Court withdraw its opinion and allow this issue to be fully briefed because

this Court does have jurisdiction to consider the denial of his motion to compel

arbitration.

IN THE ALTERNATIVE, PETITION FOR WRIT OF MANDAMUS

Mandamus – Jurisdictional Issue.

5. Because the trial court denied Mustafa’s motion to compel arbitration

pursuant to the AAA Rules, this Court has jurisdiction.4 Where two competing

motions to compel arbitration exist, the denial of one grants appellate jurisdiction.5

3

Id.

4

Texas Civil Practice and Remedies Code, Sections 51.016 permitting appeals from a district court of any

order that would be governed by the Federal Arbitration Act, 9 U.S.C. § 16 (§ 16(a)(1)(B) permitting

immediate interlocutory appeal of any order “denying a petition under section 4 of this title to order

arbitration to proceed”) and Texas Civil Practice & Remedies Code § 171.098(a)(1) (“Any party may appeal

a judgment or decree entered under this subchapter or an order:…(1) denying an application to compel

arbitration made under Section 171.021”).

5

See McReynolds v. Elston, 222 S.W.3d 731 (Tex. App. Houston [14th Dist.] 2007) (finding jurisdiction

because “although the trial court's order allowed the AAA Arbitration to continue, it denied McReynolds's

potential contractual right to arbitration under the Settlement Agreement”)

Page 3

In the alternative, should this Court determine that it does not have jurisdiction, this

Court should instead treat this matter as a petition for a writ of mandamus and review

the issues under the mandamus standard of review. 6 This Court has jurisdiction to

issue a writ of mandamus. 7

Mandamus – Introduction

6. Relator, Shakeel Mustafa, submits this petition for writ of mandamus

complaining of the order of the Honorable Judge Gary Harger, acting arbitrator of

this matter appointed by the Honorable John McMaster, Williamson County Court

at Law Number Four, Texas. For clarity, relator is referred to as Relator/Mustafa,

Respondent 1, the Honorable Judge Gary Harger, is referred to by name,

Respondent 2, the Honorable Judge John McMaster, is referred to by name, and the

real party in interest is referred to as Felix Rippy, Rippy and Taylor, P.C.

Mandamus – Statement of the Case

7. Relator, Shakeel Mustafa, submits this petition for writ of mandamus

complaining of the order of the Honorable Judge Gary Harger, acting arbitrator of

this matter appointed by the Honorable John McMaster, Williamson County Court

at Law Number Four, Texas.

6

See CMH Homes v. Perez, 340 S.W.3d 444, 452 (Tex. 2011) (impermissible interlocutory appeal from

order appointing an arbitrator would be considered as a petition for writ of mandamus, where seller invoked

the court of appeals’ appellate jurisdiction by specifically requesting that its appeal be treated as a

mandamus petition); Lucchese, Inc. v. Rodriguez, 388 S.W.3d 354, 360-61 (Tex. App.– El Paso 2012, no

pet.).

7

Tex. Gov’t Code §22.221(a), (b), and (c); see Tex. Const. art. V, §6(a).

Page 4

8. Rippy filed a collection lawsuit against Mustafa, a former client of Rippy.

Rippy’s original petition requested Mustafa be jailed for 180 days, fined up to $500,

and confined in the county jail until Mustafa paid the alleged debt. Each party

submitted motions to compel arbitration, with the difference being that Mustafa

requested the AAA Consumer Arbitration Rules be applied. Rippy subsequently

amended his petition to allege defamation. Mustafa filed a counterclaim and third-

party claim against the law firm Rippy & Taylor, P.C. alleging unreasonable

collection efforts and violations of the Texas Deceptive Trade Practices Act.

9. The Honorable John McMaster granted Rippy’s motion to compel

arbitration and denied Mustafa’s request. Mustafa’s subsequent motion to stay the

case pending arbitration was granted, and the Honorable Gary Harger was appointed

arbitrator with authority to decide all questions of law and fact. The Honorable Gary

Harger ruled that Mustafa could not issue additional discovery requests beyond the

initial request for production.

10. The Respondent Honorable Judge Harger’s actions, which form the basis

for this petition, include the refusal to allow discovery beyond the initial request for

production, refusing to allow amended pleadings and additional parties, refusal to

implement the AAA Consumer Arbitration Rules, and to recuse himself due to the

fact that he served as mediator in the underlying litigation where Rippy represented

Mustafa in a post-divorce action and based on his ongoing relationship with Mr.

Page 5

Rippy where he has been retained as mediator. The Respondent Honorable Judge

John McMaster’s actions, which form the basis for this petition, include denying

Relator’s motion to compel arbitration pursuant to Rules of the American Arbitration

Association.

Mandamus – Issues Presented

Issue 1: The arbitrator abused his discretion by not allowing Mustafa to

conduct additional discovery regarding his claims, refusing to allow amended

pleadings and additional parties, by not implementing the AAA Consumer

Arbitration Rules and by not recusing himself due to his involvement in the

underlying case as mediator, and by not recusing himself due to the fact that he

served as mediator in the underlying case and his ongoing business relationship with

Mr. Rippy.

Issue 2: The trial court abused his discretion by not implementing the AAA

Consumer Arbitration Rules and by appointed an arbitrator who served as mediator

in the underlying case where Relator disclosed confidential information.

Mandamus – Argument and Authorities

11. Mandamus relief is appropriate to remedy a trial court’s abuse of

discretion where a party has no adequate remedy at law. 8 A court should consider

8

See Walker v. Packer, 827 S.W.2d 833, 839 (Tex. 1992)

Page 6

whether the benefits of mandamus review outweigh the detriments.9 Here, the

arbitration agreement clearly provides, “Client consents . . . to all disagreements’

[sic] being arbitrated pursuant to AAA arbitration rules.” Thus, it was an abuse of

discretion to compel arbitration without requiring the AAA as the forum, to require

the AAA arbitrator appointment rules to apply, and to appoint the Honorable Judge

Harger, who served as mediator in the underlying case where Appellant disclosed

confidential information. (Appendix, p. 13, lines 1-3, 22-23). Alternatively,

assuming this Court determines it was appropriate for the trial court to defer to the

arbitrator on the issue of what rules to follow, it was an abuse of discretion for the

arbitrator to not apply the AAA rules (Appendix, p. 24), to not allow any amendment

of pleadings or additional discovery (Appendix, p. 26), and to not recuse himself.

12. Mandamus is an extraordinary writ that should be issued only when the

trial court has clearly abused its discretion and there is no adequate remedy by

appeal. 10 In this case, Mustafa has no adequate remedy and will suffer significant

harm because the AAA Rules are not being followed. Mustafa is being denied the

right to conduct discovery related to his claims, has no ability to seek a ruling related

to the adequacy of Rippy’s response to his request for production, and no ability to

seek appointment of an arbitrator that was not directly involved in the underlying

9

In re BP Prods. N. Am., Inc., 244 S.W.3d 840, 845 (Tex. 2008) (orig. proceeding).

10

In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135-36 (Tex. 2004); Walker v. Packer, 827 S.W.2d

833, 839-40 (Tex. 1992)

Page 7

litigation that forms the basis of this suit.

13. An appellate court has jurisdiction to issue "a writ of mandamus and all

other writs necessary to enforce the jurisdiction of the court," as well as "all writs of

mandamus, agreeable to the principles of law regulating those writs, against a . . .

judge of a district or county court in the court of appeals district. . . ." 11 Further,

this court has jurisdiction related to an attempt of apparent restraint of liberty by

virtue of an order because the live petition in this cause is requesting that Relator be

jailed for the failure to pay a debt.12

14. Appellant has no adequate remedy by appeal should this Court refuse to

hear their appeal on an interlocutory basis. In determining whether a party has shown

that he has no adequate remedy by appeal, the analysis is dependent upon the

circumstances and is guided by principles rather than simple rules. 13 A party does

not have an adequate remedy of appeal “when the appellate court would not be able

to cure the trial court’s discovery error.” 14 There is no adequate remedy at law here

because, by compelling arbitration without applying AAA Rules, the trial court has

denied Appellant the benefit of the agreement to arbitrate before the AAA, and as a

result he is not allowed to utilize the AAA rules regarding conflict of interest,

recusal, amendment of pleadings, or adding parties. Here, the denial of the ability

11

TEX. GOV'T CODE ANN. § 22.221(a), (b)(1) (Vernon 2004).

12

TEX. GOV'T CODE ANN. § 22.221(d) (Vernon 2004).

13

In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 136 (Tex. 2004).

14

Walker, 827 S.W.2d at 843.

Page 8

to add the actual party to the contract (the professional corporation), results in a

manifest injustice. “A party who is erroneously denied the right to arbitration has

no adequate remedy at law because the fundamental purpose of arbitration—to

provide a rapid, less expensive alternative to traditional litigation—would be

defeated.”15

15. If this Court does not reverse the trial court’s decision to compel

arbitration without applying the AAA Rules or the arbitrator’s decision regarding

same, Appellant will suffer irreparable harm by subject to an arbitration where there

is no central mechanism to file pleadings. In the instant case, Appellant is required

to email documents but there is no central clerk that ensures some mechanism for

receipt and organization of filings. Texas law “does not require [the Court] to turn

a blind eye to blatant injustice. . . . Appeal . . . is no remedy at all for the irreversible

waste of judicial and public resources that would be required . . . if mandamus does

not issue.” 16 Further, Appellant is being the denied the right to conduct discovery,

add the actual party to the arbitration agreement (the professional corporation), and

otherwise defend himself properly against claims that opposition claims exceed the

15

See Prudential, 148 S.W.3d at 138; see also In re Global Const. Co., L.L.C., 166 S.W.3d 795, 799 (Tex.

App.–Houston [14th Dist.] 2005, no pet.); See Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 272-73 (Tex.

1992) (orig. proceeding) (“Absent mandamus relief, [Relator] would be deprived of the benefits of the

arbitration clause it contracted for, and the purpose of providing a rapid, inexpensive alternative to

traditional litigation would be defeated.”); In re Golden Peanut Co., 298 S.W.3d 629 (Tex. 2009) (orig.

proceeding) (citing In re L & L Kempwood Assocs., L.P., 9 S.W.3d 125, 128 (Tex. 1999), “[a] party denied

the right to arbitrate pursuant to an agreement subject to the FAA does not have an adequate remedy by

appeal and is entitled to mandamus relief to correct a clear abuse of discretion”).

16

In re Masonite Corp., 997 S.W.2d 194, 198 (Tex. 1999) (orig. proceeding).

Page 9

jurisdictional limits of the court. (Appendix, page 33).

Conclusion

16. Appellant respectfully requests that this Court recognize it has jurisdiction

to consider this dispute and if necessary treat this appeal as a petition for writ of

mandamus. There is a dispute between this opinion and an opinion issued six days

earlier regarding the same issue of competing motions to compel arbitration.

Prayer

17. For these reasons, Appellant asks the Court to grant this motion to

reconsider the case en banc, and in the alternative request this petition for writ of

mandamus be granted to require the application of the AAA Rules (including

disqualification of an arbitrator), allow discovery to be conducted, and allow parties

to the underlying contract at issue to be added as parties to the arbitration.

Respectfully submitted,

/s/ Chris Osborn .

Christopher Osborn

State Bar No. 24037221

Osborn Law Firm, P.C.

1019 Cecelia St.

Taylor, TX 76574

512-275-6593

512-309-5317

chris@osbornpc.com

Attorney for Appellant

Page 10

CERTIFICATE OF COMPLIANCE

In accordance with the Texas Rules of Appellate Procedure 9.4, the

undersigned attorney of record certifies that this brief contains 14-point typeface for

the body of the document, 12-point typeface for footnotes in the brief, and contains

2,405 words as indicated by the word count software, excluding those words

identified as exempt from the word count under the rule and was prepared on

Microsoft Word.

/s/ Chris Osborn .

Christopher Osborn

CERTIFICATE OF SERVICE

I certify that a copy of Appellant’s Brief was served on Appellee, Felix Rippy, via

electronic mail before 5:00 p.m. this 9th day of October, 2015.

/s/ Chris Osborn .

Christopher Osborn

Page 11

CERTIFICATE OF CONFERENCE

I certify that I contacted Appellee, Felix Rippy, via electronic mail on October 2,

2015, and he is opposed to this motion.

/s/ Chris Osborn .

Christopher Osborn

Page 12

Cause No. 15-0708-CC4

FELIX RIPPY, § IN THE COUNTY COURT

Plaintiff §

§

v. § AT LAW NUMBER 4

§

SHAKEEL MUSTAFA, §

Defendant § WILLIAMSON COUNTY, TEXAS

DEFENDANT’S OBJECTION TO PLAINTIFF’S ASSSIGNMENT, AND

DEFENDANT’S MOTION TO COMPEL MEDIATION THEN ARBITRATION PURSUANT TO AAA

CONSUMER ARBITRATION RULES AND IN THE ALTERNATIVE MOTION TO DISMISS

1. Shakeel Mustafa, Defendant, asks the Court to refer the dispute between Rippy &

Taylor, P.C. and Shakeel Mustafa, Individually, to alternative dispute resolution (ADR) under

the authority of Texas Civil Practice & Remedies Code and pursuant to the Federal

Arbitration Act. Defendant alternatively requests that Plaintiff’s petition be dismissed for

failure to cure defects noted in Defendant’s Special Exceptions and due to the defective

purported assignment.

INTRODUCTION

2. Plaintiff, Felix Rippy, Individually, filed suit against Shakeel Mustafa. The attorney-

client agreement attached to Plaintiff’s Original Petition is between Rippy and Taylor, P.C.

and Mr. Mustafa. After Defendant filed special exceptions objecting to the case filed on behalf

of Felix Rippy, Individually, and after this Court’s order allowing Plaintiff to re-plead on June

12, 2015, the style of this case remains filed on behalf of Felix Rippy, Individually. Plaintiff

failed to cure the defects, instead alleging that all claims have been assigned to him,

individually.

Defendant’s Motion to Compel Mediation and Arbitration Pursuant to AAA Consumer Arbitration Rules

Page 1

APPENDIX PAGE 001

OBJECTION TO PURPORTED ASSIGNMENT

3. Defendant objects to Plaintiff’s purported assignment of the underlying contract

from the professional corporation to himself, individually. The underlying contract, which

is attached hereto and incorporated herein as Exhibit “1” provides in paragraph five that “[a]

referral to an attorney outside the firm may require a separate contract with that attorney

and will not be done without Client’s consent.” (emphasis added). Thus, the purported

assignment here is improper because the agreement specifies that if it is to be sent “outside

the firm [Rippy & Taylor, P.C.],” it requires “the Client’s consent.”

4. Assignments should be permitted or prohibited based on the likely effect on society,

and in particular, on the legal system. Employing a public policy analysis, the majority of

courts in this country have concluded that at least some claims arising out of the attorney-

client relationship are not assignable. Vinson & Elkins v. Moran, 946 SW 2d 381 (Tex.App.

Houston [14th Dist.] 1997) (analyzing malpractice claims).

PLAINTIFF’S REQUEST FOR CONTEMPT FINDINGS SHOULD BE DISMISSED

5. Plaintiff mistakenly claims that the final decree of divorce between Mr. Mustafa and

his ex-wife constitutes a secured judgment in the amount of $17,500 against Mr. Mustafa,

individually. However, due process requires this issue to be adjudicated before it should be

treated as a violation of any court order. The phrase relied on by Plaintiff is found in the

underlying divorce decree requiring each litigant pay their own attorney’s fees, but this does

not equal language that supports a finding of contempt. The Texas Supreme Court analyzed

this issue in Ex parte Chambers, 898 S.W.2d 257, 259 (Tex.1995): “A court order is

insufficient to support a judgment of contempt only if its interpretation requires inferences

or conclusions about which reasonable persons might differ.” MacCallum, 807 S.W.2d at 730.

Defendant’s Motion to Compel Mediation and Arbitration Pursuant to AAA Consumer Arbitration Rules

Page 2

APPENDIX PAGE 002

The existence of reasonable alternative constructions of a court order will prevent

enforcement of the order. See, e.g., Ex parte Crawford, 684 S.W.2d 124 (Tex.App.Houston

[14th Dist.] 1984, orig. proceeding) (holding an obligor in contempt who knew with certainty

he was to pay one of two amounts of child support but ignored the order altogether). Here,

there was no order to pay a specific amount. In fact, Defendant will testify that no invoice

was ever received by him and that this suit is in retaliation for filing a grievance with the

State Bar of Texas.

PLAINTIFF’S CLAIMS SHOULD BE DISMISSED FOR FAILURE TO CURE DEFECT OF PARTIES

6. Plaintiff has not cured the defects noted in Plaintiff’s special exceptions and there

remains a defect in the parties. Plaintiff’s claim should be dismissed in its entirety without

prejudice.

MOTION TO COMPEL MEDIATION THEN ARBITRATION WITH AAA CONSUMER

ARBITRATION RULES

7. In the event the Court does not dismiss this suit, Defendant requests that the Court

order that Plaintiff follow the terms of the agreement requiring mediation. Defendant

requests that the Court order mediation pursuant to the agreement that provides “THE

PARTIES AGREE TO MEDIATE ALL SUCH DISPUTES PRIOR TO ARBITRATION.” (emphasis

in original). Defendant requests the Court order mediation pursuant to Texas Civil

Practice & Remedies Code section 154.023.

8. If mediation does not resolve the dispute, Plaintiff asks this Court to order binding

arbitration between Rippy and Taylor, P.C. and Defendant, following the AAA Consumer

Arbitration Rules, pursuant to the Federal Arbitration Act (9 U.S.C. sec 1 et seq.) and/or

pursuant to Texas Civil Practice & Remedies Code section 154.027.

Defendant’s Motion to Compel Mediation and Arbitration Pursuant to AAA Consumer Arbitration Rules

Page 3

APPENDIX PAGE 003

9. This case is appropriate for referral to ADR because there is a binding arbitration

agreement between Defendant and Rippy and Taylor, P.C.

ADDITIONAL SPECIAL EXCEPTIONS

10. Defendant specially excepts to Plaintiff’s claim that “Felix Rippy … has individual

claims against Shakeel Mustafa, as well” in that there is not specificity as to the basis of these

purported claims that Plaintiff contends exist in addition to the contractual claims of Rippy

and Taylor, P.C. If there are indeed other facts or causes of action that will be asserted, the

question of whether those claims are arbitrable will require a separate inquiry because there

is no arbitration agreement between Felix Rippy, Individually, and Defendant.

CONCLUSION

For these reasons, Defendant asks the Court to dismiss this suit or render judgment

that plaintiff take nothing, assess costs and fees against plaintiff, and award all other relief to

which defendant is entitled. Defendant asks the Court to strike the defective portions of

Plaintiff’s pleading. Alternatively, Defendant asks this Court to compel mediation followed

by binding arbitration, if necessary, between Rippy and Taylor, P.C. and Defendant, following

the AAA Consumer Arbitration Rules.

RESPECTFULLY SUBMITTED,

OSBORN LAW FIRM, P.C.

By: /s Chris Osborn .

Christopher D. Osborn

State Bar No. 24037221

1019 Cecelia Street

Taylor, Texas 76574

512-275-6593

512-309-5317 fax

chris@osbornpc.com

ATTORNEY FOR PLAINTIFF

Defendant’s Motion to Compel Mediation and Arbitration Pursuant to AAA Consumer Arbitration Rules

Page 4

APPENDIX PAGE 004

CERTIFICATE OF SERVICE

I certify that a true and correct copy of the above and foregoing document has been served

on each attorney of record or party in accordance with the Texas Rule of Civil Procedure 21a

on this 19th day of June 2015.

/s/Chris Osborn .

Christopher D. Osborn

Felix Rippy ❒ hand-delivery

3000 Joe DiMaggio, Ste. 3

Round Rock, TX 78665 x❒ telecopy

512-310-9500

512-310-2580 fax ❒ first class mail

❒ certified mail, return receipt requested

Defendant’s Motion to Compel Mediation and Arbitration Pursuant to AAA Consumer Arbitration Rules

Page 5

APPENDIX PAGE 005

ATTORNEY/CLIENT ENGAGEMENT AGREEMENT

(Hourly Basis)

2. Client, in consideration of services to be re nd e red by Attorn_>;Y to Client, retains Attorney to

represent him/her as attorney in connection with �v� s bP,,f-c (-e.. r M ( , J4v-v1'c , .., I/·()�� ( - R: /

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It is understood and a gre ed by the parties that Attorney's re prese n tation ends upon the ent y a final order �4'-1 �

. )Dd-w.-,'4

disposing of the Client's case and does 11ot i n clud e the filing of any post -t ri al motions 01· appe

i;J 7�0 - soo + 2ro """- 11tY-rea.o

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3. If, in the future, Client desi1·es Attorney to represent Clienr in any other matter, that will be the

subject of additional discussions nnd an nclditionnl engagement ngreement. Attorney's fee will include only

services in connection with the matter listed in Paragraph 2 above.

Client and Attorney agr·ee:

4. A ttorn ey will devote his professio118I abilities to the matter, stri v e to keep Client informed of

significant developments in t his case and be reasonably available to answer inquiries. Client agrees to fully

coope rate with Attorney, including but not limited to k eepi n g Attorney advised of all developments relate d

to this m a tter, informing Attorney prnrnptly of any c ha n g e in Client's a dd res s or telephone number, and

promptly responding to Artorney·s inquir ies . Where applicable, ne ith er Attorney nor Client will settl e the

case without the othe r's written a p p roval .

5. Client empowers Attorney to take all ste ps in said matter d eemed by A ttorney to be advisable. Client

understands and agrees t ha t Attorney wi 11, to the extent Attorney believes it to be reasonable, c oo pe rate with

any opposing attorney concerning set t i n gs for trial or hearing, sched uling d epositions or meet ings , and

w het h er to request or a gree to continuances or d elay s . The undersigned attorney may deem it advisable to

refer Client's case to an other attorney with in the firm of Rippy & Taylor, PC, or to an a ttorn ey outside the

firm. A referral to an attorney outside t he firm may require a separate contract with that attorney and will

not be done without Client's co11se11t.

6. C lient agrees t o compensate Attorney for his services at th te of$ SOO per hour for the

time which is devoted to Client's case wit h a m i n i mum fee of$ 3sc:io ci.e"A which sha 11 be considered

earned at the t i me Attorney commences work 011 Cl ie nt ' s case. here applicable, this minimum fee is

inten ded to c o m pen s a t e Attorney for the preparation and fi ling of initial pl ead in gs , for all o ca tin g the time

and resources of Attorney and the staff of the law firm to Client's case, for the n ature and complexity of

Client ' s case and the experience of the Attorney hand Ii rig the matter and to compensate Attorney for the

potentiality that, by accepting this employment, Attorney may also be precluded from accepting other

employment. From t i me to time it may be n e c essary for other memb ers of the law firm to assist in the

Client ' s matter, and Client agrees to c ompens at e Attorney for these services at the fol l o wi ng rates:

Page I of 3

APPENDIX PAGE 006

Partner attorney: $300/hr

Legal assistant $ 75/hr

Client agrees to pay to Attorney all costs and disbursements incurred in said matter. For th e

following expenses, and no others, Attorney will charge a per case flat fee of $25.00: (I) long distance

telephone ch arges; (2) in-office photocopy ex p e nses; (3) fir s t class postage (not certified or priority maiI);

and (4) facsimile c harg es All other expenses will be bi ll ed to Clie nt in the actual amount inc urre d

. .

7. Cl ien t will pay A tto rney the sum

Agre ement .

of

A ttorney will not take any action

t Jeo�.e.

</ as a retainer at the time of execution of this

til th retainer is received. The reta iner will be deposited

in Attorney's trust ac cou nt , anci Atto rney will clrnw ag ain st those funds to satisfy Attorney's monthly

statements, copies of which will be sent to Client for C lient s information. Upon d ep l e t ion of the retainer,

'

the C lient agrees to d e posit an addi ti o nal retainer 111 an amoun t at le ast equal to the original re ta iner into

Attorney's trust ac co unt . I fan additional retainer fee is required Client agrees to pay the amount required

,

within ten ( 10) days of Attorney s request.

' Any funds remain i n g in the trust accou nt at the end of the

representation will be rerurned to Client at the time of the next billing period following termination of

representation. This retainer fee is not necessarily t he total cost for the services of the Attorney. The

total cost of legal services may exceed the r·etainer fee amount.

8. C l i ent has the righ t to cancel this Agreement a11cl termi na te Attorney's representation at any time by

written notice to Attorney. Clie11t understands that Attorney has the right to cancel this Agreement and

withdraw from representi ng CI ien t if any of Attorney's invoices are not paid by CIient with in 30 days of the

date that Attorney sends them to CI ien t ; if Client fai Is to d eposit additional i-etainer fu nd s as r eq u i re d by

P aragra ph 7; if the Client d etermin es not to follow the Attorney s advice; fai Is to communicate with the

'

Attorn ey ; or if Attorney concludes for any other re<Json that Attorney is unable to rep1·esent Client. Attorney

w i ll provide wr i tten notice in the event that Attorney decides to withdraw from representation.

9. In the event any legal action is taken to enforc e this Agreement, Client consents to jurisdiction of

the s ta te of Texas and venue in Williamson County, Texas, and to all disagreements' being arbitrated

pursuant to A.A.A arbitration ruies, CLIENT AND ATTORNEY AGREE THAT ALL DISPUTES

ARJSING OUT OF ATTORNEY'S REPRESENTATION OF CLIENT OR FEES CHARGED TO

CLIENT SHALL BE ARBITRATED IN A BINDING ARIHTRATION BEFORE AN ARBITRATOR

IN WIL LIA MSON COUNTY, TEXAS. UNLESS AN ARBITRATOR IS AGREED UPON BY THE

PARTIES, THE ARBITRATOR SHALL BE APPOIN TED BY THE .JUDGE OF A COURT OF

RECORD SITTING IN WILLIAMSON COUNTY, TEXAS. PRIOR TO ARBITRATION, CLIENT

AGREES TO SUBMIT ANY COMPLAINTS REGARDING ATTORNEY'S REPRESENTATION OR

DISPUTES REGARDING ATTORNEY'S FEES TO ATTORNEY IN WRITING. THE PARTIES

AGREE TO MEDIATE ALL SUCH DISPUTES PRIOR TO ARBITRATION.

There are advantages and disadv anta ges to arbitration as c ompar ed to a judicial resolution of

disputes: 1) the cost and time of an arbitration is frequently less than that associated with a lawsuit; 2) the

level of discovery may be reduced: 3) the ru l e s of evidence may be relaxed; 4) the level of privacy in the

arbitration process is greater than that found in courts; 5) significant ri gh ts are waived in an arbitration,

i ncludi n g the right to a jury trial and the right to a judicial appeal because arbitration decisions can be

challenged only on limited grc1u11cls. Arbitrators may allocate costs or fees in an arbitration as well as

a wa rding monetary relief to a party.

Page 2 of 3

APPENDIX PAGE 007

10. Cli ent and Attorney agree that this Agreement is the entire agreement between them regarding the

matters set forth herein and supercedes any prior oral or written discussions 01· agreements between them.

This Agreeme n t can only be amended by a subseciuent written document signed by both Client and Attorney.

FAVORABLE OUTCOME NOT GUARANTEED

11. Each case is different. Client understands that Attorney has made no representation concerning the

successful termination of the claim or claims relating to L11e matter in controversy or the favorable outcome

of any legal ac t ion that is or may be filed.

DATED:

Rippy & Taylor, PC

5YA !Z f EL­

cuENT

Page 3 of 3

APPENDIX PAGE 008

1

1 REPORTER'S RECORD

2 CAUSE NO. 15-0708-CC4

3 FELIX RIPPY ) IN THE COUNTY COURT

4 VS. ) AT LAW NO. 4

5 SHAKEEL MUSTAFA ) WILLIAMSON COUNTY, TEXAS

6

7

8 HEARING ON MOTION FOR REFERRAL

9

10

11

12 On the 19th day of June, 2015, the

13 following proceedings came on to be heard in the

14 above-entitled and numbered cause before the Honorable

15 John B. McMaster, Judge presiding, held in Georgetown,

16 Williamson County, Texas:

17 Proceedings reported by Computerized Machine

18 Shorthand Method.

19

20

21

22 Thomas M. McMinn

Official Court Reporter

23 County Court at Law No. 4

Georgetown, Texas 78626

24 (512)943-1682

25

APPENDIX PAGE 009

2

1 A P P E A R A N C E S

2 LAW OFFICE OF FELIX O'NEIL RIPPY

By: Mr. Felix Rippy

3 SBOT No. 16937400

3000 Joe DiMaggio Blvd., Suite 3

4 Round Rock, Texas 78665

Tel 512-310-9500

5 Attorney for Plaintiff

6

7 THE LAW OFFICE OF CHRISTOPHER D. OSBORN

By: Mr. Chris Osborn

8 SBOT No. 24037221

1019 Cecelia Street

9 Taylor, Texas 76574

Tel 512-275-6593

10 Attorney for Defendant

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

APPENDIX PAGE 010

3

1 P R O C E E D I N G S

2 * * *

3 THE COURT: Could I have an announcement,

4 please, gentlemen? That would be 15-0708, be Rippy versus

5 Mustafa.

6 MR. RIPPY: Judge, Felix Rippy, and I

7 represent myself and the firm of Rippy & Taylor. You may

8 recall, the Court adjourned the motion to refer the case to

9 arbitration, and the re-pleading of the original lawsuit

10 there is what I have just handed the Court.

11 Now, the first part that I have underlined is

12 just the re-pleading saying, okay, I'm the majority

13 shareholder and so I have the authority to proceed on behalf

14 of the firm. The second part there on page one was already

15 in the prior filing. So made it pretty clear that any

16 dispute about the parties or who should be present is really

17 a matter for the arbitration. What we are here for is to

18 refer the case to arbitration. And because this the second

19 time I have had to appear, here's our proposed order

20 referring the case to arbitration, which you will notice has

21 a blank for the arbitrator.

22 And I'll remind the Court we normally use

23 either Gary Hargar or Jim Wallace in situations like this.

24 And there's really no defense to it. So I added the second

25 paragraph there for my attorney's fees for now having had

APPENDIX PAGE 011

4

1 made two trips up here to try to get compliance of a clearly

2 enforceable contractual obligation to arbitrate. Normally

3 it's $450 per trip to Court, for the Court's edification,

4 and I can testify to that, of course.

5 The bottom line is, the Court adjourned the

6 hearing. There's really no excuse for not proceeding to

7 arbitration. We do so all the time. And we need to have

8 the other side ordered to do so and pay half the

9 arbitrator's fee in accordance with the order we presented

10 to the Court.

11 THE COURT: Mr. Osborn, what is your

12 position?

13 MR. OSBORN: Yes, Your Honor. Here's our

14 motion we filed late last night. We faxed it over to Mr.

15 Rippy.

16 When we were here last time, Your Honor, the

17 Court considered the special exceptions that we filed.

18 There's some issues that we are going to need to get into,

19 Your Honor, in terms of the original petition right now is

20 seeking to throw Mr. Mustafa in jail until he pays the

21 purported attorney's fees. And the reason he's saying that

22 he can do that, and we all know we don't have debtor's

23 prison, the reason he is saying he can do that is because he

24 is violating a court order. And he's making reference to

25 the final decree of divorce, the section in the decree that

APPENDIX PAGE 012

5

1 says each party shall bear their own attorney's fees.

2 And the objection that we filed, we kind of

3 go into the Texas Supreme Court's analysis on specificity

4 with regard to an underlying order before it could be found

5 to be contemptible.

6 We have also, Your Honor, objected to the

7 purported assignment. When we were here last time, the main

8 issue that we discussed with the Court was the fact that the

9 attorney-client agreement is between Mr. Mustafa

10 individually and the professional corporation of Rippy &

11 Taylor, PC. We did some research, and it's kind of a unique

12 issue where you have a professional corporation assigning

13 its claims, it's prejudgment claims to the individual.

14 Normally, the professional corporation exists to shield the

15 individual.

16 So what makes this a little more complicated

17 is not just the purported assignment, and there's this case

18 styled Vinson & Elkins versus Moran, which was out of the

19 14th Court of Appeals in Houston, and they were looking at,

20 you know, a specific type of assignment of the agreement

21 pertaining to malpractice claims. They found that public

22 policy analysis, that those types of claims shouldn't be

23 assignable.

24 But the other thing, you know, we still renew

25 all of our original special exceptions as to all of these

APPENDIX PAGE 013

6

1 claims that he should be confined in jail, put on community

2 supervision for ten years, and all of that, because

3 Mr. Rippy also makes reference that he has other claims

4 independent of those that have already been pled. So if

5 there are in fact claims between them individually that

6 don't arise out of the attorney-client agreement, those

7 would not be subject to arbitration. So I think he needs to

8 re-plead what those claims are.

9 And if there's a -- because another thing

10 that makes this a little complicated, Your Honor, is Rippy &

11 Taylor, PC agreed to accept services performed by

12 Mr. Mustafa related to what's known as search engine

13 optimization. So the attorney-client agreement gives him a

14 $3,500 credit for that. Some of the disputes arise out of

15 that relationship. So it's questionable and it's for the

16 Court to decide if that arises out of the contract.

17 But, notwithstanding all that, of course our

18 motion does ask for dismissal for failure to cure the defect

19 in the parties, but we have also, Your Honor, filed our own

20 motion to refer this case to alternative dispute resolution

21 pursuant to the paragraph in the attorney-client agreement

22 which provides that mediation shall be a first step before

23 any arbitration is ordered.

24 So we are asking the Court to order this case

25 to mediation, and then if it doesn't settle at that point,

APPENDIX PAGE 014

7

1 then and only then is it ripe for arbitration.

2 Your Honor, my client will testify, depending

3 on how much the Court wants to get into this, but the most

4 linear approach in all honesty, Your Honor, is to grant our

5 motion requesting the alternative dispute resolution with an

6 order compelling us to go to mediation pursuant to the

7 agreement and then to go to arbitration if the case doesn't

8 settle. We can prepare an order abating this case pending

9 outcome of arbitration. But that arbitration needs to be

10 between Mr. Mustafa and Rippy & Taylor, PC because that's

11 the only contractual relationship before the Court where

12 there's an arbitration provision.

13 MR. RIPPY: Judge, I guess our response to

14 that is that none of that has anything do with whether the

15 arbitration provision is enforceable. Here's a little

16 warmed-over brief from the class I teach on that exact

17 subject. I will provide counsel with it, too.

18 But the bottom line is, the arbitrator will

19 govern the procedures relating to discovery. Once we have

20 done adequate discovery, we certainly don't oppose

21 mediation. I'm pretty sure Jim Wallace as a mediator will

22 order us to mediation although not with he himself. So all

23 of that can happen. But the first thing that needs to

24 happen is the Court needs to refer the case to arbitration.

25 And you kind of get the idea why we added the

APPENDIX PAGE 015

8

1 attorney's fees paragraph to this order referring to

2 arbitration. I have never seen so much wiggling to try to

3 get out of one's contractual obligation to arbitrate that is

4 clearly stated. So any complaints about who the parties are

5 or what the causes of action are, or specially excepting to

6 the petition, need to be presented to the arbitrator. And

7 once we have had a little time for discovery, certainly we

8 are not going to oppose mediation.

9 I will say this. In this brief I just handed

10 the Court, there's a reference to a very interesting case,

11 Dr. Brown versus Fullenweider, where the big Fullenweider

12 family law firm out of Houston sued somebody named Dr. Brown

13 on the grounds that the divorce decree said you shall pay

14 your own lawyers and enforced it on the basis of that

15 obligation imposed, not just on the parties to the divorce,

16 but the court's order in a divorce. Went all the way to the

17 Texas Supreme Court, remanded. Ultimate result, Dr. Brown

18 owed the Fullenweider firm a bunch of money. So that's an

19 interesting aside.

20 And as I pointed out to the Court, it has

21 nothing to do with referring the case to arbitration, but I

22 thought I would respond to that. If you're ordered to pay

23 your lawyer, even your own lawyer by a sitting Texas judge

24 in a divorce decree, you expose yourself to contempt.

25 Now, frankly, arbitration provision in some

APPENDIX PAGE 016

9

1 regards helps the other side because I don't think that, for

2 example, Jim Wallace is going to order anyone to be on

3 probation for contempt, but he could. And if that's his

4 recommendation and we come back to Court, I guess we will be

5 asking for that. None of that has anything to do with

6 referring the case to arbitration to begin with because

7 there hasn't been any orders like that.

8 THE COURT: Let me explain very briefly,

9 gentlemen, in regards to what the Court sees its role today.

10 I determine today whether or not to refer

11 this case to arbitration, but now mediation. I would like

12 to know, does your contract, which I do not have in front of

13 me, have a stair step mediation provision leading up to

14 arbitration? Does the contract provide for it?

15 MR. RIPPY: It certainly does provide for

16 mediation. I think you probably do have in front of you

17 because I think it's attached to the back of that petition.

18 MR. OSBORN: It's attached to the original

19 petition. We attached it to our motion, Your Honor, and we

20 highlighted the section, the arbitration provision. It's on

21 the last page.

22 THE COURT: All right.

23 MR. RIPPY: No question it requires mediation

24 at some point. The question is sort of who orders it.

25 THE COURT: Well, here's the Court's thought

APPENDIX PAGE 017

10

1 on that. You're going to alternative dispute resolution

2 today, gentlemen. That's what is going to happen because

3 your contract provides for it. I believe the pleadings are

4 in line now for me to order it, so that's where you're

5 headed.

6 Now, question for me is does the contract

7 require a stair step mediation, then arbitration. And I

8 want to know exactly what the contract says.

9 MR. OSBORN: It's that last sentence of the

10 highlighted provisions there, Your Honor, in terms of it's

11 mediation prior to arbitration.

12 MR. RIPPY: And, judge, I think that's right.

13 I just think it's not mediation prior to referral to

14 arbitration because, obviously, you're allowed to conduct

15 some discovery before mediation. Otherwise, mediation is

16 less likely to be successful.

17 THE COURT: What the Court's goal, and I

18 think the goal of the law is, is that you resolve your

19 issue. I believe that the best way for you to resolve your

20 issue is by an attempted mediation. If mediation fails,

21 then arbitration. I believe that that certainly follows

22 along the spirit of the agreement and of the contract, and I

23 think specifically that's what the contract provides for.

24 Mr. Rippy, am I incorrect in my interpretation?

25 MR. RIPPY: Well, no question the Court is

APPENDIX PAGE 018

11

1 correct, mediation is required, absolutely. So the only

2 question is before or after the Court refers the case to an

3 arbitrator so we can find out do we depose each other before

4 the mediation, what information do we exchange. So what the

5 contract says is mediation prior to arbitration. Not prior

6 to referral to arbitration.

7 THE COURT: The only thing that I'm -- and

8 that's a good argument that you're making. Because do you

9 view that you go to the arbitrator, the arbitrator gets you

10 both together, lays out a discovery control plan, you each

11 exchange your documents so you can be fully aware of what is

12 going on, then you go to the mediator, you can go through

13 the mediation process, and then if mediation fails, you go

14 and the arbitrator makes the final determination?

15 MR. RIPPY: Exactly right. That's how it

16 always works. And it doesn't say that in the order

17 referring the case to arbitration, but we certainly don't

18 oppose -- we aren't opposed to and don't oppose the Court

19 interlineating the order to say, okay, as soon as we get a

20 discovery control plan and the arbitrator thinks enough

21 discovery has taken place, we are going to mediate with, you

22 know, Josh Murray or somebody, that's fine. That's an

23 interlineation, it's okay by us.

24 But what we don't want to do is keep having

25 to come back to Court like this just to get the referral to

APPENDIX PAGE 019

12

1 arbitration when it's so clearly contractually enforceable.

2 THE COURT: The Court is of the opinion, as I

3 stated earlier, I'm compelling alternative dispute

4 resolution. So now it's the framework.

5 Now, the framework being arbitration first so

6 that you enter into a discovery control plan. You do your

7 discovery and then you do the mediation and then you go back

8 to arbitration if the mediation fails. Do either one of you

9 have a difficulty with that construct?

10 MR. OSBORN: No, Your Honor. Just one point

11 of clarification in terms of what we are requesting.

12 We are requesting that the arbitration, and

13 we don't have a problem with the timeline the Court just

14 announced, but that the American Arbitration Association,

15 consumer arbitration rules be the rules that are applied.

16 That does have a profound impact on his out-of-pocket

17 expenses related to the arbitration itself. So we are

18 asking that the Court order arbitration pursuant to the AAA

19 consumer arbitration rules. I don't think there's any doubt

20 he's a consumer in this context, so those are the applicable

21 rules. Not the commercial rules but the consumer rules.

22 MR. RIPPY: Well, that's -- okay. Short

23 answer no, we don't have a problem with that timeline. But

24 that sort of halfway objection to the timeline shows exactly

25 the problem.

APPENDIX PAGE 020

13

1 THE COURT: I think I can shortcut this. I'm

2 going to let the arbitrator make that determination at this

3 point. I'm just ordering the referral. I'm not making

4 determinations. I'm even uncomfortable to some extent based

5 on rules concerning what I can do laying out the framework,

6 but I'm really doing that more as a guide to the arbitrator.

7 I'm going to let the arbitrator pick the mediator as opposed

8 to me doing that.

9 So I'm going to put Gary Hargar on as the

10 mediator. I do that because Judge Hargar has extensive

11 family law experience, and I believe that based on his

12 background he would be well suited having practiced family

13 law as well. So I think that he would be the arbitrator

14 that the Court would select for you.

15 MR. RIPPY: Yes, sir.

16 THE COURT: All other issues, other than just

17 the framework that I laid out, I'm going to defer to the

18 arbitrator who is Gary Hargar. Yes, counsel?

19 MR. OSBORN: The AAA consumer arbitration

20 rules have a system where they send each side five potential

21 arbitrators and that each side has an opportunity to strike.

22 THE COURT: Then I'm going to not employ

23 their rules.

24 MR. OSBORN: Okay.

25 THE COURT: I'm going to select Gary Hargar

APPENDIX PAGE 021

14

1 because what I want is a resolution to your issue. I

2 believe that he is the best man to accomplish that goal. So

3 I'm ordering Gary Hargar.

4 In regard to the attorney's fees, obviously

5 there were issues between the two of you, I do not believe

6 this was frivolous. I believe I'm going to treat this as a

7 misunderstanding and I'm not going to order either side

8 attorney's fees. But I am going to grant your relief,

9 counsel, and order Gary Hargar as the arbitrator.

10 MR. RIPPY: Yes, sir. Permission to withdraw

11 from the bench?

12 THE COURT: Absolutely.

13 MR. OSBORN: Thank you, Your Honor.

14 (Proceedings concluded)

15

16

17

18

19

20

21

22

23

24

25

APPENDIX PAGE 022

15

1 COURT REPORTER'S CERTIFICATE

2 THE STATE OF TEXAS )

3 COUNTY OF WILLIAMSON )

4 I, Thomas M. McMinn, Official Court Reporter

5 in and for the County Court at Law No. 4 of Williamson

6 County, State of Texas, do hereby certify that the foregoing

7 contains a true and correct transcription of all portions of

8 evidence and other proceedings requested by counsel or other

9 parties to be included in this volume of the Reporter's

10 Record in the above-styled and numbered cause, all of which

11 occurred in open court or in chambers and were reported by

12 me.

13 I further certify that this Reporter's Record

14 of the proceedings truly and correctly reflects the

15 exhibits, if any, offered into evidence.

16 WITNESS MY OFFICIAL HAND this the 4th day of August,

17 2015.

18 __________________________________

19 Thomas M. McMinn, CSR #1244

Expiration date: 12/31/16

20 Official Court Reporter

County Court at Law No. 4

21 405 MLK, Box 17

Georgetown, Texas 78626

22 (512)943-1682

23

24

25

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APPENDIX PAGE 026

AFFIDAVIT OF SHAKEEL MUSTAFA

CASE # l 5-0708-CC4

(1) My name is Shakeel Mustafa and I'm defendant in this Case. I am over the age of

18, have never been convicted of any crime nor diagnosed with any mental

disease or psychological disorder, and am otherwise competent to make this

affidavit.

(2) I believe Judge Gary Harger has not been selected according the AAA Arbitration

Rules as per the language of my Retainer Agreement with Felix Rippy

(3) I further understand that Mr. Chris Osborne has not agreed to change the terms

and interpretation of my Retainer Agreement with Felix Rippy.

(4) Mr. Felix Rippy also represented me in a Mediation of my family law case last

year with Judge Gary Harger who acted as a Mediator in my case.

(5) I spoke to Judge Gary Harger alone during the mediation session and shared a lot

of my personal and private information with him.

(6) I also believe that my ex-wife, Pakiza Asim, shared information with Judge Gary

Harger during the Mediation which were adversarial to me.

(7) I further understand that Mr. Felix Rippy routinely brings his family law cases to

Judge Gary Harger for mediation which financially benefits Judge Harger

(8) I believe this financial benefit from Mr. Felix Rippy may impact the impartiality

of Judge Gary Harger

(9) Affiant makes all of the above-and-foregoing statements under penalty of perjury

based on his personal information obtained after reasonable investigation, and his

resulting reasonable inferences, conclusions, and beliefs.

Signed and executed in Round Rock, Texas on this 9th day of September, 2015.

�h�

SHAKEEL MUSTAFA

1832 Bayland Street,

Round Rock, TX 78664

Affidavit ofShakeel Mustafa - Case # l 5-0708-CC4 1

APPENDIX PAGE 027

JURAT

Shak:eel Mustafa personally appeared before me on this 9th day of September,

2015, and, having duly taken his oath under penalty of perjury, did acknowledge and

verify the above-and-foregoing Affidavit in Cause No. 15-0708-CC4

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APPENDIX PAGE 028

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09/01/2015 15:35 5127151532 A+ FCU ROUND ROCK PAGE 01/02

AFFIDAVIT OF SHAKEEL MUSTAFA

CASE # 15-0708·CC4

(1) "My name is Shakeel Mustafa and I'm defendant in this Case. I am over the age

of 18, have never been convicted of any crone nor diagnosed with any mental

disease or psychological disorder , and am otherwise competent to make this

affidavit.

(2) Mr. Rippy has asserted claims beyon d a breach of contract claim, and I need

additional time to engage in discovery to investigate 1ruth as a defense and what

Mr. Rippy's damages include. I al�o have asserted violations of the Deceptive

Trade Practices Act, and I need to engage in discovery related to those claims.

(3) There is currently pending prosecution of Mr. Rippy related to my grievances

against Mr. Rippy, which was initially filed on April 25, 2015, with the State Bar

of Texas. Mr. Rippy was given the opportunity to reply to my grievances . After

review, and initial investigation the State Bar of Texas upgraded my grievance to

a full complaint. My Complaint was further investigated by the State Bar of Texas

through the assigned Administrative Attorney.

(4) On about August 21, 2015, I was informed by the State Bar of Texas that Ms.

Rebecca (Beth) Stevens (Assistant Disciplinary Couns el) will be handling the

prosecution of Mr. Rippy for the violation of multiple Rules of Professional

Conduct. I've been asked to testify and also provide a voluminous amount of

documentation for the case. The Office of Chief Disciplinary Counsel - State Bar

of Texas has directed me to fully. cooperate and provide them with all of the

relevant information.

(5) l\1t. Rippy filed this lawsuit one day after his response to my .initial bar complaint,

and I believe this lawsuit is retaliation for the complaint. I also believe that l\.fr.

Rippy' s discovery requests that include information irrelevant to both the breach

of contract claim and defamation claim will require substantial additional tirne

than initially anticipated. Further, I am requesting that this arbitration be

continued until after the State Bar has conducted the hearing between the se same

parties.

(6) I am not see.king this continuance for delay only, but so that justice can be done.

Affian.t makes all of the above-and-foregoing statements under penalty of perjury

based on his personal information obtained after reasonable in-vestigation, and his

resulting reasonable inferences, conclusions, and beliefs.�'

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Signed and executed in Round Rock, Texas on this � day of =� 2015.

�� SHAKEEL MUSTAFA

1832 Bayland Street,

Round Rock, TX 78664

JOHN P. CORONA

Notary Pubfic

STATE OF TEXAS

Affidavit ofShakeel Mustafa- Case# 15-0708-CC4 My Coll1!l. Exp: Dec. 19. 2015

APPENDIX PAGE 029

09/01/2015 15:35 5127161632 A+ FCU ROUND ROCK PAGE 02/02

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APPENDIX PAGE 030

AFFIDAVIT OF SHAKEEL MUSTAFA

CASE # 03-15-00422-CV

BEFORE ME the undersigned notary public appeared Shakeel Mustafa, who after being

sworn in made the following statement under oath and penalty of perjury:

(1) My name is Shakeel Mustafa and I am the defendant in this Case. I am over the

age of 18, have never been convicted of any crime nor diagnosed with any mental

disease or psychological disorder, and am otherwise competent to make this

affidavit. I make the statements made herein based on my personal knowledge.

(2) I am currently involved in an arbitration before Judge Gary Harger, who was

appointed by Judge McMaster of Williamson County Court at Law Number Four.

(3) On May 15, 2015, my former attorney Felix Rippy filed a lawsuit against me for

the attorney fee. At the time of filing of the lawsuit, he provided a figure of

$17 ,500. The arbitration agreement requires that the American Arbitration

Association ("AAA") Rules shall be followed, but Judge Harger has indicated that

we are not allowed to follow the AAA Rules.

(4) On September 04, 2015, my Attorney Chris Osborn sent me attachments via email

and one of the attachment was a "Billing Statement" that he received from Felix

Rippy

(5) This was the very fust time that I ever saw this "Billing Statement" and the items

included and the charges mentioned in this "Billing Statement"

(6) The date printed at the top of the "Billing Statement" was "August 26, 2015"

(7) The very first time I ever came to know the following on September 04, 2015:

(a) The "sub-total- all fee owed so far" was $41,210. This is the "Billing

Statement" coming from my former attorney, Felix Rippy, who filed the

ONLY document "Substitution of the Attorney Form" in my Case with the

Court prior to my final hearing held on Oct. 14, 2014

(b) I also came to know that the "legal additional fee for grievance defense-

compounding" was $8,000

(8) On September 10, 2015, I sent the attached Affidavit to Judge Gary Harger

through my attorney Chris Osborn

(9) Among other facts, I also stated the following in my attached Affidavit, "I further

understand that Mr. Felix Rippy routinely brings his family law cases to

Judge Gary Harger for mediation which financially benefits Judge Harger" and "I

believe this financial benefit from Mr. Felix Rippy may impact the impartiality of

Judge Gary Harger"

(10) I received a document titled as "ARBITRATION RULES through my Attorney

Chris Osborn that he received from Judge Gary Harger.

(11) I believe these "ARBITRATION RULES are different than AAA Arbitration

Rules. My Agreement with Rippy & Taylor P.C. stated the following:

" ...and to all disagreement being arbitrated pursuant AAA arbitration rules"

(12) Section 1 (e) of the "ARBITRATION RULES states the following:

"The arbitrator shall disclose to the parties any circumstance likely to affect

impartiality, including any bias or financial or personal interest in the result of the

Affidavit ofShakeel Mustafa - Case# 03-15-00422-CV 1

APPENDIX PAGE 031

arbitration and any past or present business or professional relationship with the

parties or their counsel

(13) I believe Judge Gary Harger has the obligation to disclose the information

specifically mentioned in the above paragraph. So far, neither I nor my attorney

has received any disclosure information related to the above paragraph from

Judge Gary Harger

(14) Affiant makes all of the above-and-foregoing statements under penalty of perjury

based on his personal information obtained after reasonable investigation, and his

resulting reasonable inferences, conclusions, and beliefs..

Signed and executed in Williamson County, Texas on this 7th day of October,

2015.

SHAKEEL MUSTAFA

1832 Bayland Street,

Round Rock, TX 78664

JURAT

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Sha.keel Mustafa personally appeared before me on this 5t'.fl day of October, 2015,

and, having duly taken his oath under penalty of perjury, did acknowledge and verify the

above-and-foregoing Affidavit in Case# 03-15-00422-CV

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Notary Public, Williamson County

State of Texas id�� CHRISTOPHER D. OSBORN

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Affidavit ofShakeel Mustafa - Case# 03-15-00422-CV 2

APPENDIX PAGE 032

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APPENDIX PAGE 033

Consumer Due Process PROTOCOL

Statement of Principles of the National Consumer Disputes Advisory Committee

Statement of Principles

Introduction: Genesis of the Advisory Committee

Scope of the Consumer Due Process

Glossary of Terms

Major Standards and Sources

Principle 1. Fundamentally-Fair Process

Principle 2. Access to Information Regarding ADR Program

Principle 3. Independent and Impartial Neutral; Independent Administration

Principle 4. Quality and Competence of Neutrals

Principle 5. Small Claims

Principle 6. Reasonable Cost

Principle 7. Reasonably Convenient Location

Principle 8. Reasonable Time Limits

Principle 9. Right to Representation

Principle 10. Mediation

Principle 11. Agreements to Arbitrate

Principle 12. Arbitration Hearings

Principle 13. Access to Information

Principle 14. Arbitral Remedies

Principle 15. Arbitration Awards

LIST OF SIGNATORIES

STATEMENT OF PRINCIPLES

PRINCIPLE 1. FUNDAMENTALLY-FAIR PROCESS

All parties are entitled to a fundamentally-fair ADR process. As embodiments of fundamental

fairness, these Principles should be observed in structuring ADR Programs.

PRINCIPLE 2. ACCESS TO INFORMATION REGARDING ADR PROGRAM

Providers of goods or services should undertake reasonable measures to provide Consumers

with full and accurate information regarding Consumer ADR Programs. At the time the

Consumer contracts for goods or services, such measures should include (1) clear and adequate

notice regarding the ADR provisions, including a statement indicating whether participation in

the ADR Program is mandatory or optional, and (2) reasonable means by which Consumers may

obtain additional information regarding the ADR Program. After a dispute arises, Consumers

should have access to all information necessary for effective participation in ADR.

APPENDIX PAGE 034

PRINCIPLE 3. INDEPENDENT AND IMPARTIAL NEUTRAL; INDEPENDENT

ADMINISTRATION

1. Independent and Impartial Neutral. All parties are entitled to a Neutral who is independent and impartial.

2. Independent Administration. If participation in mediation or arbitration is mandatory, the procedure should be administered

by an Independent ADR Institution. Administrative services should include the maintenance of a panel of prospective

Neutrals, facilitation of Neutral selection, collection and distribution of Neutral's fees and expenses, oversight and

implementation of ADR rules and procedures, and monitoring of Neutral qualifications, performance, and adherence to

pertinent rules, procedures and ethical standards.

3. Standards for Neutrals. The Independent ADR Institution should make reasonable efforts to ensure that Neutrals

understand and conform to pertinent ADR rules, procedures and ethical standards.

4. Selection of Neutrals. The Consumer and Provider should have an equal voice in the selection of Neutrals in connection

with a specific dispute.

5. Disclosure and Disqualification. Beginning at the time of appointment, Neutrals should be required to disclose to the

Independent ADR Institution any circumstance likely to affect impartiality, including any bias or financial or personal

interest which might affect the result of the ADR proceeding, or any past or present relationship or experience with the

parties or their representatives, including past ADR experiences. The Independent ADR Institution should communicate

any such information to the parties and other Neutrals, if any. Upon objection of a party to continued service of the

Neutral, the Independent ADR Institution should determine whether the Neutral should be disqualified and should inform

the parties of its decision. The disclosure obligation of the Neutral and procedure for disqualification should continue

throughout the period of appointment.

PRINCIPLE 4. QUALITY AND COMPETENCE OF NEUTRALS

All parties are entitled to competent, qualified Neutrals. Independent ADR Institutions are

responsible for establishing and maintaining standards for Neutrals in ADR Programs they

administer.

PRINCIPLE 5. SMALL CLAIMS

Consumer ADR Agreements should make it clear that all parties retain the right to seek relief in

a small claims court for disputes or claims within the scope of its jurisdiction.

PRINCIPLE 6. REASONABLE COST

1. Reasonable Cost. Providers of goods and services should develop ADR programs which entail reasonable cost to

Consumers based on the circumstances of the dispute, including, among other things, the size and nature of the claim,

the nature of goods or services provided, and the ability of the Consumer to pay. In some cases, this may require the

Provider to subsidize the process.

2. Handling of Payment. In the interest of ensuring fair and independent Neutrals, the making of fee arrangements and the

payment of fees should be administered on a rational, equitable and consistent basis by the Independent ADR Institution.

PRINCIPLE 7. REASONABLY CONVENIENT LOCATION

In the case of face-to-face proceedings, the proceedings should be conducted at a location which

is reasonably convenient to both parties with due consideration of their ability to travel and

other pertinent circumstances. If the parties are unable to agree on a location, the determination

should be made by the Independent ADR Institution or by the Neutral.

APPENDIX PAGE 035

PRINCIPLE 8. REASONABLE TIME LIMITS

ADR proceedings should occur within a reasonable time, without undue delay. The rules

governing ADR should establish specific reasonable time periods for each step in the ADR

process and, where necessary, set forth default procedures in the event a party fails to

participate in the process after reasonable notice.

PRINCIPLE 9. RIGHT TO REPRESENTATION

All parties participating in processes in ADR Programs have the right, at their own expense, to

be represented by a spokesperson of their own choosing. The ADR rules and procedures should

so specify.

PRINCIPLE 10. MEDIATION

The use of mediation is strongly encouraged as an informal means of assisting parties in

resolving their own disputes.

PRINCIPLE 11. AGREEMENTS TO ARBITRATE

Consumers should be given:

a. clear and adequate notice of the arbitration provision and its consequences, including a statement of its

mandatory or optional character;

b. reasonable access to information regarding the arbitration process, including basic distinctions between

arbitration and court proceedings, related costs, and advice as to where they may obtain more complete

information regarding arbitration procedures and arbitrator rosters;

c. notice of the option to make use of applicable small claims court procedures as an alternative to binding

arbitration in appropriate cases; and,

d. a clear statement of the means by which the Consumer may exercise the option (if any) to submit disputes to

arbitration or to court process.

PRINCIPLE 12. ARBITRATION HEARINGS

1. Fundamentally-Fair Hearing. All parties are entitled to a fundamentally-fair arbitration hearing. This requires adequate

notice of hearings and an opportunity to be heard and to present relevant evidence to impartial decision-makers. In some

cases, such as some small claims, the requirement of fundamental fairness may be met by hearings conducted by

electronic or telephonic means or by a submission of documents. However, the Neutral should have discretionary

authority to require a face-to-face hearing upon the request of a party.

2. Confidentiality in Arbitration. Consistent with general expectations of privacy in arbitration hearings, the arbitrator should

make reasonable efforts to maintain the privacy of the hearing to the extent permitted by applicable law. The arbitrator

should also carefully consider claims of privilege and confidentiality when addressing evidentiary issues.

PRINCIPLE 13. ACCESS TO INFORMATION

No party should ever be denied the right to a fundamentally-fair process due to an inability to

obtain information material to a dispute. Consumer ADR agreements which provide for binding

arbitration should establish procedures for arbitrator-supervised exchange of information prior

to arbitration, bearing in mind the expedited nature of arbitration.

APPENDIX PAGE 036

PRINCIPLE 14. ARBITRAL REMEDIES

The arbitrator should be empowered to grant whatever relief would be available in court under

law or in equity.

PRINCIPLE 15. ARBITRATION AWARDS

1. Final and Binding Award; Limited Scope of Review. If provided in the agreement to arbitrate, the arbitrator's award should

be final and binding, but subject to review in accordance with applicable statutes governing arbitration awards.

2. Standards to Guide Arbitrator Decision-Making. In making the award, the arbitrator should apply any identified, pertinent

contract terms, statutes and legal precedents.

3. Explanation of Award. At the timely request of either party, the arbitrator should provide a brief written explanation of the

basis for the award. To facilitate such requests, the arbitrator should discuss the matter with the parties prior to the

arbitration hearing.

INTRODUCTION: GENESIS OF THE ADVISORY COMMITTEE

Recent years have seen a pronounced trend toward incorporation of out-of-court conflict

resolution processes in standardized agreements presented to consumers of goods and services.

Some of these processes (such as mediation and non-binding evaluation) involve third party

intervention in settlement negotiations; others involve adjudication (binding arbitration). Such

processes have the potential to be of significant value in making dispute resolution quicker, less

costly, and more satisfying. 1

Yet because consumer contracts often do not involve arm's length negotiation of terms, and

frequently consist of boilerplate language presented on a take-it-or-leave it basis by suppliers of

goods or services, there are legitimate concerns regarding the fairness of consumer conflict

resolution mechanisms required by suppliers. This is particularly true in the realm of binding

arbitration, where the courts are displaced by private adjudication systems. In such cases,

consumers are often unaware of their procedural rights and obligations until the realities of out-

of-court arbitration are revealed to them after disputes have arisen. 2 While the results may be

entirely satisfactory, they may also fall short of consumers' reasonable expectations of fairness 3

and have a significant impact on consumers' substantive rights and remedies. 4

The use of mediation and other forms of alternative dispute resolution (ADR) by various state

and federal courts has also raised concerns regarding quality, effectiveness and fairness. The

response has been a number of national, state and local initiatives to establish standards for the

guidance and information of courts. Until now, however, there has been no comparable national

effort in the private consumer sphere.

In the spring of 1997, the American Arbitration Association (AAA) announced the establishment

of a National Consumer Disputes Advisory Committee. The stated mission of the Advisory

Committee is:

To bring together a broad, diverse, representative national advisory committee to

advise the American Arbitration Association in the development of standards and

procedures for the equitable resolution of consumer disputes.

APPENDIX PAGE 037

In light of its stated mission, the Advisory Committee's recommendations are likely to have a

direct impact on the development of rules, procedures and policies for the resolution of consumer

disputes under the auspices of the AAA.

The Advisory Committee's recommendations may also have a significant impact in the broader

realm of consumer ADR. A Statement of Principles which is perceived as a broadly-based

consensus regarding minimum requirements for mediation and arbitration programs for

consumers of goods and services may influence the evolution of consumer rules generally and

the development of state and federal laws governing consumer arbitration agreements. The

standards may affect the drafting of statutes and influence judicial opinions addressing the

enforceability of arbitration agreements pursuant to existing state or federal law. 5

_______________________________

1. See, e.g., CPR Institute for Dispute Resolution, ADR Cost Savings & Benefit Studies

(Catherine Cronin-Harris, ed. 1994) (summarizing some of the research findings on the relative

advantages ADR may offer). See also, e.g., Madden v. Kaiser Foundation Hosp., 17 Cal. 3d 699,

711, 552 P.2d 1178, 1186 (1976) ("The speed and economy of arbitration, in contrast to the

expense and delay of a jury trial, could prove helpful to all parties....")

2. The arbitration agreement may be included in the "fine print" in a brochure of terms and

conditions inside a box of goods. See, e.g. , Hill v. Gateway 2000, Inc. , 105 F.3d 1147 (7th Cir.

1997) (Customers agreed to computer company's contract terms, including arbitration agreement,

by failing to return merchandise within 30 days). See Age of Compelled Arbitration, 1997, Wis.

L. Rev33, 40-53 (Offering a "cautionary tale" regarding employment arbitration agreement.)

3. See Mark E. Budnitz, Arbitration of Disputes Between Consumers and Financial Institutions:

A Serious Threat to Consumer Protection, 10 Ohio St. J. On Disp. Res. 267 (1995) (discussing

procedural limitations of arbitration in treating consumer disputes with banks and lenders);

Schwartz, supra note 2 (discussing issues relating to adhesion contracts involving employees and

consumers); Jean R. Sternlight, Rethinking the Constitutionality of the Supreme Court's

Preference for Binding Arbitration: A Fresh Assessment of Jury Trial, Separation of Powers,

and Due Process Concerns , 72 Tulane L. Rev. 1 (1997) (discussing due process concerns with

binding arbitration under employment and consumer contracts). See, e.g., Engalla V.

Permanente Med. Grp. , 938 P.2d 903 (Cal. 1997) (medical group may not compel arbitration

where it administers own arbitration program, fraudulently misrepresents speed of arbitrator

selection process, and the forces delays); Broemmer V. Abortion Serv. of Phoenix , 840 P.2d

1013 (Az. 1992) (refusing to enforce agreement in "adhesion contract" where drafter inserted

potentially self-serving term requiring sole arbitrator of medical malpractice claims to be

licensed medical doctor).

4. See Schwartz, supra note 2, at 60-61 (discussing perceptions regarding relative damages

awards in court and in arbitration), 64-66 (summarizing some statistics on arbitration awards).

See also William W. Park, When and Why Arbitration Matters, in The Commercial Way to

Justice 73, 75 (G.M. Beresfort Hartwell ed., 1997) (" Who interprets an...agreement will

frequently be more significant than what the applicable law says about the agreement....").

APPENDIX PAGE 038

5. See, e.g., Cole v. Burns International Security Services, 105 F.3d 1465 (D.C.Cir. 1997) (Citing

Due Process Protocol for Employment Disputes). The consensus-based approach of the broadly

constituted group reflects the "public interest" model espoused by Professor Speidel. See Richard

E. Speidel, Contract Theory and Securities Arbitration: Whither Consent? , 62 Brook. L. Rev.

1335 (1996).

SCOPE OF THE CONSUMER DUE PROCESS PROTOCOL

The Consumer Due Process Protocol (Protocol) was developed to address the wide range of

consumer transactions those involving the purchase or lease of goods or services for personal,

family or household use. These include, among other things, transactions involving: banking,

credit cards, home loans and other financial services; health care services; brokerage services;

home construction and improvements; insurance; communications; and the purchase and lease of

motor vehicles and other personal property.

Across this broad spectrum of consumer transactions, the Protocol applies to all possible

conflicts from small claims to complex disputes. In light of these realities, the Advisory

Committee sought to develop principles which would establish clear benchmarks for conflict

resolution processes involving consumers, while recognizing that a process appropriate in one

context may be inappropriate in another. Therefore, the Protocol embodies flexible standards

which permit consideration of specific circumstances.

In some cases, the AAA is developing or has developed special dispute resolution policies and

procedures governing particular transactional systems. A recent example is its current initiative

with respect to ADR in contracts for health care services. Where the general principles set forth

in this Protocol conflict with more specific standards developed under the auspices of the AAA

or some other independent organization with relatively broad participation by affected parties,

the latter should govern.

There are other transactions that share many of the features of consumer transactions, such as

those involving small businesses and individual employment contracts. While the Protocol was

not developed for specific application to such other transactions, there may be circumstances in

which the Protocol might be applied by analogy to ADR in those venues. The Principles

articulated here are likely to have an impact on minimum standards of due process for other

ADR systems involving persons of disparate bargaining power.

Each section of this document is devoted to treatment of a discrete topic concerning consumer

ADR. It begins with a basic Principle that embodies the fundamental reasonable expectation of

consumers as defined by the Advisory Committee. Each Principle is accompanied by Reporter's

Comments that explain the rationale of the Advisory Committee in the context of other emerging

standards. In addition, some Principles are supplemented by Practical Suggestions for putting the

Principles into practice.

The specific mention of mediation and binding arbitration reflects the current emphasis on these

processes in consumer conflict resolution. The Advisory Committee recognizes that a number of

APPENDIX PAGE 039

other approaches are being employed to resolve commercial and consumer disputes, and

encourages their use in accordance with the spirit of the Protocol.

The signatories to this Protocol were designated by their respective organizations, but the

Protocol reflects their personal views and should not be construed as representing the policy of

the designating organizations. Although the following Principles reflect a remarkable degree of

consensus, achieved during the course of several meetings of the entire Advisory Committee,

subcommittee deliberations, exchanges of numerous memoranda and of five drafts of the

Protocol, Advisory Committee members at times accepted compromise in the interest of arriving

at a common ground. As was the case with the task force which developed the Employment Due

Process Protocol, opinions regarding the appropriateness of binding pre-dispute arbitration

agreements in consumer contracts were never fully reconciled. Like that group, however, the

Advisory Committee was able to address standards for ADR processes within the given context.

GLOSSARY OF TERMS

Consumer

Consumer refers to an individual who purchases or leases goods or services, or contracts to

purchase or lease goods or services, intended primarily for personal, family or household use.

Provider

Provider refers to a seller or lessor of goods or services to Consumers for personal, family or

household use.

ADR Process

An ADR (Alternative Dispute Resolution) Process is a method for out-of-court resolution of

conflict through the intervention of third parties. Mediation and arbitration are two widely used

ADR processes.

Mediation

Mediation refers to a range of processes in which an impartial person helps parties to a dispute to

communicate and to make voluntary, informed choices in an effort to resolve their dispute. A

mediator, unlike an arbitrator, does not issue a decision regarding the merits of the dispute, but

instead facilitates a dialogue between the parties with the view of helping them arrive at a

mutually agreeable settlement.

Arbitration

Arbitration is a process in which parties submit disputes to a neutral third person or persons for a

decision on the merits. Each party has an opportunity to present evidence to the arbitrator(s) in

writing or through witnesses. Arbitration proceedings tend to be more informal than court

proceedings and adherence to judicial rules of evidence is not usually required. Arbitrators

decide cases by issuing written decisions or "awards." An award may or may not be binding on

the parties, depending on the agreement to arbitrate. A "binding" arbitration award may be

enforced as a court judgment under the terms of federal or state statutes, but judicial review of

arbitration awards is limited.

APPENDIX PAGE 040

Neutral

A Neutral is a mediator, arbitrator, or other independent, impartial third party selected to

intervene in a Consumer-Provider dispute.

ADR Agreement

An ADR Agreement is an agreement between a Provider and a Consumer to submit disputes to

mediation, arbitration, or other ADR Processes. As used in this Statement, the term includes

provisions (sometimes incorporated by reference) in standard contracts furnished by Providers

which signify the assent of the Consumer and Provider to such processes (although the assent

may only be the "generalized assent" typically given by Consumers to standard terms).

ADR Program

An ADR Program is any program or service established by or utilized by a Provider of goods

and services for out-of-court resolution of Consumer disputes. The term includes ADR rules and

procedures and implementation of administrative structures.

Independent ADR Institution

An Independent ADR Institution is an organization that provides independent and impartial

administration of ADR Programs for Consumers and Providers, including, but not limited to,

development and administration of ADR policies and procedures and the training and

appointment of Neutrals.

MAJOR STANDARDS AND SOURCES

The Reporter's Comments accompanying these Principles cite a number of existing standards

and sources relied upon by the Advisory Committee. The more frequently cited standards and

sources are set forth below by their full title as well as the abbreviated title that appears in the

Comments.

American Arbitration Association, Commercial Arbitration Rules, July 1, 1996 (AAA

Commercial Rules)

American Arbitration Association, Construction Industry Dispute Resolution Procedures, Oct.

15, 1997 (AAA Construction Procedures)

American Arbitration Association, Wireless Industry Arbitration Rules, July 15, 1997 (AAA

Wireless Rules)

American Arbitration Association & American Bar Association, Code of Ethics for Arbitrators

in Commercial Disputes (1977) (Code of Ethics for Arbitrators)

Center for Dispute Settlement, Institute of Judicial Admin., Standards for Court-Connected

Mediation Programs (Standards for Court-Connected Programs)

Council of Better Business Bureaus, Inc., Arbitration (Binding) (BBB Arbitration Rules)

APPENDIX PAGE 041

CPR-Georgetown Commission on Ethics and Standards in ADR Working Group on Provider

Organizations, Principles for ADR Provider Organizations (Draft of April 4, 1998) (Principles

for ADR Provider Organizations)

Federal Arbitration Act, 9 U.S.C. '' 1-16 (as amended and in effect July 1, 1992) (Federal

Arbitration Act)

Blue-Ribbon Advisory Panel on Kaiser Permanente Arbitration, The Kaiser Permanente

Arbitration System: A Review and Recommendations for Improvement 1 (1998) (Kaiser

Permanente Review and Recommendations)

Joint Committee (American Arbitration Association, American Bar Association and Society of

Professionals in Dispute Resolution) on Standards of Conduct, Standards of Conduct for

Mediators (1994) (Joint Standards for Mediators)

Society of Professionals in Dispute Resolution (SPIDR) Commission on Qualifications,

Ensuring Competence and Quality in Dispute Resolution Practice (Draft Report 1994)(SPIDR

Report on Qualifications)

Society of Professionals in Dispute Resolution (SPIDR) Law and Public Policy Committee,

Mandated Participation and Settlement Coercion: Dispute Resolution as It Relates to the Courts

(1991) (SPIDR Report on Court-Mandated ADR)

Society of Professionals in Dispute Resolution (SPIDR) Commission on Qualifications,

Principles Concerning Qualifications (1989) (SPIDR Principles)

Task Force on Alternative Dispute Resolution in Employment, A Due Process Protocol for

Mediation and Arbitration of Statutory Disputes Arising Out of the Employment Relationship

(1995) (Employment Due Process Protocol)

Uniform Arbitration Act , 7 U.A.A. 1 (1997) (Uniform Arbitration Act)

PRINCIPLE 1. FUNDAMENTALLY-FAIR PROCESS

All parties are entitled to a fundamentally-fair ADR process. As embodiments of fundamental

fairness, these Principles should be observed in structuring ADR Programs.

Reporter's Comments

Users of ADR are entitled to a process that is fundamentally fair. Emerging standards governing

consensual and court-connected ADR programs reflect pervasive concerns with fair process. See,

e.g., III Ian R. Macneil, Richard E. Speidel, & Thomas J. Stipanowich, Federal Arbitration Law:

Agreements, Awards & Remedies Under the Federal Arbitration Act '32.2.1 (1994) [hereinafter

Federal Arbitration Law ] (noting "universal agreement" that arbitrators must provide parties

with fundamentally-fair hearing). See also Kaiser Permanente Review and Recommendations 1

APPENDIX PAGE 042

("As the sponsor of a mandatory system of arbitration, Kaiser Permanente must assure a fair

system to their members, physicians and staff.")

Where conflict resolution processes are defined by a written contract, that writing is often

viewed by courts as the primary indicator of the "procedural fairness" for which the parties

bargained. As the Advisory Committee recognized, however, ADR agreements in most

Consumer contracts are "take-it-or-leave-it" contracts which are not products of negotiation by

Consumers. See David S. Schwartz, Enforcing Small Print to Protect Big Business: Employee

and Consumer Rights Claims in an Age of Compelled Arbitration , 1997 Wis. L. Rev. 33, 55-60

(discussing adhesion dimension of pre-dispute arbitration agreements in standardized contracts);

Kaiser Permanente Review and Recommendations 28 (noting that many members of a major

HMO have no realistic alternative for medical care). It is possible, therefore, that contracts to

which they have generally assented contain ADR Agreements which fall so far short of

Consumers' reasonable expectations that they would not have entered into the agreement had

they been aware of the provisions. Thus, although these Principles attempt to enhance the

likelihood that Consumers will have specific knowledge of ADR provisions at the time of

contracting, the Advisory Committee also believed it necessary to describe a baseline of

reasonable expectations for ADR in Consumer transactions. These Principles identify specific

minimum due process standards which embody the concept of fundamental fairness, including:

informed consent; impartial and unbiased Neutrals; independent administration of ADR;

qualified Neutrals; access to small claims court; reasonable costs (including, where appropriate,

subsidized Provider-mandated procedures); convenient hearing locations; reasonable time limits;

adequate representation; fair hearing procedures; access to sufficient information;

confidentiality; availability of court remedies; application of legal principle and precedent by

arbitrators; and the option to receive a statement of reasons for arbitration awards.

Where provisions in a standardized pre-dispute arbitration agreement fail to meet Consumers'

reasonable expectations, there is authority for the principle that courts may properly refuse to

enforce the arbitration agreement in whole or in part. See Restatement (Second) of Contracts '

211 (1981); Broemmer v. Abortion Services of Phoenix, Ltd ., 173 Ariz. 148, 840 P.2d 1013

(1992)(standardized arbitration agreement was unenforceable where its terms fell beyond

patient's reasonable expectations); Graham v. Scissor-Tail, Inc., 623 P.2d 165 (Cal.

1981)(arbitration clauses in adhesion contracts are unenforceable if they are contrary to the

reasonable expectations of parties or unconscionable). Cf. Cole v. Burns International Security

Services , 105 F.3d 1465 (D.C. Cir. 1997)(setting forth minimum due process standards for

judicial enforcement of arbitration agreement in the context of a statutory employment

discrimination claim where the employee was required to enter into the agreement as a condition

of employment). Procedural fairness in Consumer arbitration agreements may also be policed

under other principles. See, e.g., Stirlen v. Supercuts , 51 Cal. App. 4 th Supp. 1519, 60 Cal.

Rptr.2d 138 (1997)(finding remedial limits in "adhesive" employment agreement

unconscionable); Engalla v. Permanente Med. Grp., 938 P.2d 903 (Cal. 1997)(arbitration

agreement was unenforceable if there was substantial delay in arbitrator selection contrary to

consumer's reasonable, fraudulently induced, contractual expectations).

Because the Principles in this Protocol represent a fundamental standard of fairness, waiver of

any of these Principles in a pre-dispute agreement will naturally be subject to scrutiny as to

APPENDIX PAGE 043

conformity with the reasonable expectations of the parties and other judicial standards governing

the enforceability of such contracts. Assuming they have sufficient specific knowledge and

understanding of the rights they are waiving, however, Consumers may waive compliance with

these Principles after a dispute has arisen.

PRINCIPLE 2. ACCESS TO INFORMATION REGARDING ADR PROGRAM

Providers of goods or services should undertake reasonable measures to provide Consumers

with full and accurate information regarding Consumer ADR Programs. At the time the

Consumer contracts for goods or services, such measures should include (1) clear and adequate

notice regarding the ADR provisions, including a statement indicating whether participation in

the ADR Program is mandatory or optional, and (2) reasonable means by which Consumers may

obtain additional information regarding the ADR Program. After a dispute arises, Consumers

should have access to all information necessary for effective participation in ADR.

Reporter's Comments

See SPIDR Report on Qualifications at 9 ("Consumers are entitled to know what tasks the

neutral...may perform and what tasks they are expected to perform in the course of a particular

dispute resolution service.") Cf. SPIDR Principles at 6-7 ("It is the responsibility of...private

programs offering dispute resolution services to define clearly the services they provide...[and

provide information about the program and Neutrals to the parties.]"); Kaiser Permanente

Review and Recommendations 28 (provider of medical services has duty to provide users with

"enough information and facts to allow them to understand the actual operation of the arbitration

system"); Principles for ADR Provider Organizations 2 . At a minimum, Consumers should be

provided with (or have prompt access to) written information to explain the process. This should

include general information describing each ADR process used and its distinctive features,

including:

*the nature and purpose of the process, including the scope of ADR provisions;

*an indication of whether or not the Consumer has a choice regarding use of the

process;

*the role of parties and attorneys, if any;

*procedures for selection of Neutrals;

*rules of conduct for Neutrals, and complaint procedures;

*fees and expenses;

*information regarding ADR Program operation, including locations, times of

operation, and case processing procedures;

APPENDIX PAGE 044

*the availability of special services for non-English speakers, and persons with

disabilities; and,

*the availability of alternatives to ADR, including small claims court.

See, e.g., BBB Arbitration Rules (defining arbitration and the roles of various participants;

providing "checklist" for Consumers preparing for arbitration; setting forth procedural rules). Cf .

Standards for Court-Connected Programs ' 3.2.b. (listing information which courts sponsoring

mediation should provide to program users). See also SPIDR Principles at 6-7 (listing

information which private programs should offer to parties regarding the program and

participating Neutrals). Consumers should also be able to obtain a copy of pertinent rules and

procedures. In the case of binding arbitration provisions, there should also be a straightforward

explanation of the differences between arbitration and court process. See Principle 11

"Agreements to Arbitrate." Although the Provider of goods or services is charged with the

responsibility for making certain that Consumers have access to appropriate information

regarding ADR, the Independent ADR Institution has an important role in this area. The

Independent ADR Institution must be prepared to communicate to the parties all information

necessary for effective use of the ADR process(es), particularly after a dispute arises.

All materials should be prepared in plain straightforward language. As a rule, such information

should be in the same language as the principal contract for goods or services. See, e.g., N.Y.

Pers. Prop. Law ' 427 (McKinney 1997). See also Standards for Court-Connected Programs '

3.2.b., Commentary, at 3-4 (If a significant percentage of the population served is monolingual in

a particular language, the material should be available in that language.)

Practical Suggestions

An example of a creative approach to providing information about Consumer ADR is provided

by a major university medical center's Health Care Dispute Resolution Program. The medical

center provides prospective patients with a written explanation of mediation and arbitration

procedures for resolution of health care-related disputes one month before they visit the center to

complete the remaining paperwork. As the written materials explain, the program is voluntary;

patients are not required to opt for the procedures as a condition to receiving treatment. Patients

may contact the center for additional information regarding the processes.

For purposes of allowing Consumers access to information about dispute resolution programs,

the AAA makes available an 800 customer service telephone number. In addition, the AAA, like

some other Independent ADR Institutions, also has a World Wide Web site; it posts its rules and

an explanation of its mediation and arbitration procedures on the Web site.

A panel proposing reforms to a major HMO-sponsored arbitration system recommended the

creation of an "ombudsperson program to assist members in navigating the system of dispute

resolution." Kaiser Permanente Review and Recommendations 2.43.

PRINCIPLE 3. INDEPENDENT AND IMPARTIAL NEUTRAL; INDEPENDENT

ADMINISTRATION

APPENDIX PAGE 045

1. Independent and Impartial Neutral. All parties are entitled to a Neutral who is independent

and impartial.

2. Independent Administration. If participation in mediation or arbitration is mandatory, the

procedure should be administered by an Independent ADR Institution. Administrative services

should include the maintenance of a panel of prospective Neutrals, facilitation of Neutral

selection, collection and distribution of Neutral's fees and expenses, oversight and

implementation of ADR rules and procedures, and monitoring of Neutral qualifications,

performance, and adherence to pertinent rules, procedures and ethical standards.

3. Standards for Neutrals. The Independent ADR Institution should make reasonable efforts to

ensure that Neutrals understand and conform to pertinent ADR rules, procedures and ethical

standards.

4. Selection of Neutrals. The Consumer and Provider should have an equal voice in the selection

of Neutrals in connection with a specific dispute.

5. Disclosure and Disqualification. Beginning at the time of appointment, Neutrals should be

required to disclose to the Independent ADR Institution any circumstance likely to affect

impartiality, including any bias or financial or personal interest which might affect the result of

the ADR proceeding, or any past or present relationship or experience with the parties or their

representatives, including past ADR experiences. The Independent ADR Institution should

communicate any such information to the parties and other Neutrals, if any. Upon objection of a

party to continued service of the Neutral, the Independent ADR Institution should determine

whether the Neutral should be disqualified and should inform the parties of its decision. The

disclosure obligation of the Neutral and procedure for disqualification should continue

throughout the period of appointment.

Reporter's Comments

The concept of a fair, independent and impartial Neutral (or Neutral Panel) is enshrined in

leading standards governing arbitration and mediation. See Federal Arbitration Act ' 10(a)(2);

Uniform Arbitration Act ' 12(a)(2); AAA Commercial Rules 12, 13, 14, 19; BBB Arbitration

Rules 6, 8. The Joint Standards for Mediators describe mediator impartiality as "central" to the

mediation process and require mediators to conduct mediation in an impartial manner. Joint

Standards for Mediators, Art. II; Standards for Court-Connected Programs ' 8.1.a. Similar

policies animate standards requiring mediators to disclose conflicts of interest and to conduct the

mediation in a fair manner. Joint Standards for Mediators, Arts. III, VI; SPIDR Principles,

Principles 4.b., c., f.; 6.d., e., i.; Standards for Court-Connected Programs ' 8.1.b.

When Neutrals are appointed by a court or other organization, the appointing entity has an

important obligation to ensure their impartiality. This obligation entails a reasonable level of

oversight of Neutral performance. Comments to the Joint Standards for Mediators indicate that

"[w]hen mediators are appointed by a court or institution, the appointing agency shall make

reasonable efforts to ensure that mediators serve impartially." Joint Standards for Mediators,

Art. II. The Standards for Court-Connected Programs therefore require courts to "adopt a code

APPENDIX PAGE 046

of ethical standards for mediators [covering, among other things, impartiality and conflict of

interest], together with procedures to handle violations of the code." Standards for Court-

Connected Programs ' 8.1. For these and other reasons, the integrity and impartiality of the

administrative organization is also important; the growing use of arbitration and mediation in the

Consumer context has also raised issues regarding the administration of such processes. See, e.g.,

Engalla v. Permanente Med. Grp., 928 P.2d 903 (Cal. 1997). See generally Edward Dauer,

Engalla's Legacy to Arbitration , ADR Currents, Summer 1997, at 1; Principles for ADR

Provider Organizations (setting forth general principles of responsible practice for ADR

Provider Organizations, "entities which hold themselves out as offering, brokering or

administering dispute resolution services").

In addition to appointing Neutrals, administering institutions often perform many functions

which have a direct impact on the conduct of the dispute resolution process, including functions

sometimes performed by Neutrals. The consensus of the Advisory Committee was that the reality

and perception of impartiality and fairness was as essential in the case of Independent ADR

Institutions as it was in the case of individual Neutrals. Thus, the Advisory Committee concluded

that when an ADR Agreement mandates that parties resort to mediation or arbitration, the

administering Independent ADR Institution should be independent of either party and impartial .

See, e.g., Kaiser Permanente Review and Recommendations 31 (recommending, first and

foremost, the "creation of an independent, accountable administrator" for the Kaiser Permanente

arbitration system to counter "perception of bias" raised by "self-administration"). See also

Principles for ADR Provider Organizations (draft standards for organizations providing ADR

services). For this and other reasons, this Principle may be the single most significant

contribution of the Protocol. In the long term, moreover, the independence of administering

institutions may be the greatest challenge of Consumer ADR.

Broad disclosure of actual or potential conflicts of interest on the part of prospective Neutrals is

critical to the real and perceived fairness of ADR. Although consenting parties have considerable

freedom to choose Neutrals, including those with experience in a particular industry or

profession, the key to informed consent is broad disclosure by prospective Neutrals. Therefore, a

long line of authority under federal and state arbitration statutes establishes the principle that an

arbitrator's failure to disclose certain relationships or other facts which raise issues of partiality

may result in reversal of an arbitration award. See generally III Federal Arbitration Law Ch. 28

(discussing legal and ethical rules governing arbitrator impartiality). The principle of disclosure

is embodied in leading arbitration rules and ethical standards. See AAA Commercial Rule 19,

NASD Code ' 10312; BBB Arbitration Rules 6, 8.

The Joint Standards for Mediators mandate disclosure of "all actual and potential conflicts of

interest reasonably known to the mediator" including any "dealing or relationship that might

create an impression of possible bias." Joint Standards for Mediators, Art. III. Thereafter, the

mediator must await the parties' agreement to proceed with mediation. The same concerns

require mediators to identify and avoid conflicts during (and even after) mediation. Id. Cf.

Employment Due Process Protocol ' C.4. (mediators and arbitrators have a duty to disclose any

relationship which might reasonably constitute or be perceived as a conflict of interest); SPIDR

Principles , Principles 4.b., c., f.; 6.d.,e., i.; Standards for Court-Connected Programs ' 8.1.b.

APPENDIX PAGE 047

Although they did not establish it as a requirement under these Principles, most members of the

Advisory Committee endorsed the concept of a "list selection" process similar to that employed

by the AAA. See AAA Commercial Rule 14. Under this process, the Independent ADR Institution

provides each of the parties with lists of prospective Neutrals and invites the parties to identify

and rank acceptable individuals. Mutually acceptable Neutrals are thereby identified. The AAA

approach served as the model for other ADR standards. See, e.g., Employment Due Process

Protocol ' C.3.; Securities Industry Conference on Arbitration, List Selection Rule (Final Draft,

Sept. 18, 1997)(proposed by SICA as modification to Section 8 of the Uniform Code of

Arbitration ); Proposed Rule Change by National Association of Securities Dealers, File No. SR-

NASD097 (proposed by NASD as modification to Rules 10310 and 10311 of the NASD Code of

Arbitration Procedure). The concern was expressed that the list selection approach may create a

financial tie between Neutrals in the pool and Providers, who will be "repeat players" in the ADR

Program. Such considerations may mandate, among other things, a larger panel of Neutrals,

rotating assignments, or disclosure of past awards rendered by arbitrators.

In the interest of informed selection, the Advisory Committee recommends that parties be

provided with or have access to some information regarding recent ADR proceedings conducted

by prospective Neutrals. Cf. Employment Due Process Protocol ' B.3 (recommending that parties

be provided with names, addresses, and phone numbers of party representatives in a prospective

arbitrator's six most recent cases to aid in selection).

The dictates of fairness also extend to the conduct of ADR sessions. Thus, for example,

arbitrators generally are forbidden from communicating with parties outside of hearings. See III

Federal Arbitration Law ' 32.4. Similarly, standards for mediator conduct demand impartiality.

See, e.g., Standards for Court-Connected Programs ' 8.1.

Although the rules and procedures of an ADR Program and oversight by the Independent ADR

Institution are important in assuring the impartiality of Neutrals, it is also essential that Neutrals

be bound to perform in accordance with recognized ethical standards. In the case of arbitrators,

the leading ethical standard is the Code of Ethics for Arbitrators in Commercial Disputes

(current version). Similarly, ethical standards governing mediator eligibility also require

impartiality. See, e.g., Standards for Court-Connected Programs ' 8.1. It is the responsibility of

the Independent ADR Institution to develop or adopt ethical standards for Neutrals and to ensure

that Neutrals understand and conform to applicable standards.

Some arbitration procedures provide for a "tripartite" panel in which each party appoints its own

"party-arbitrator," and the two party-arbitrators select a third arbitrator to complete the panel. See

generally III Federal Arbitration Law ' 28.4; see also Alan Scott Rau, Integrity in Private

Judging, 38 S. Tex. L. Rev. 485, 505-08 (1997)(noting problems with party-arbitrator concept).

For a number of reasons, the Advisory Committee believed such practices should be avoided in

the Consumer sphere, and that all arbitrators should be neutral. Cf. Kaiser Permanente Review

and Recommendations 42 (expressing serious concerns regarding tripartite panel approach).

Practical Suggestions

APPENDIX PAGE 048

Independent ADR Institutions should develop procedures which are appropriate to each of the

ADR Programs they administer. A helpful model for program administrators is the User

Advisory Committee now being utilized by the AAA to establish procedures and policies for

ADR in the areas of employment, construction, health care, and other transactional settings. Cf.

Kaiser Permanente Review and Recommendations 32 (recommending "on-going, volunteer

Advisory Committee" comprised of representatives of various interest groups, including "an

appropriate consumer advocacy organization" to consult in development of arbitration program).

Such entities should provide a forum in which representatives of Consumers and Providers

cooperate in the development and implementation of policies and procedures governing an ADR

program, including selection of Neutrals.

For selection of Neutrals, the Independent ADR Institution might utilize a list procedure similar

to that used by the AAA. The list of prospective Neutrals should include pertinent biographical

information, including the names of parties and representatives involved in recent arbitration

proceedings handled by the prospective Neutral. Cf. Employment Due Process Protocol ' B.3

(recommending that parties be provided with names, addresses, and phone numbers of party

representatives in a prospective arbitrator's six most recent cases to aid in selection). Each party

should be afforded discretion to reject any candidate with or without cause. Failing agreement on

a Neutral or panel of Neutrals in this fashion, the Neutral should be appointed by the

Independent ADR Institution, subject to objection for good cause.

PRINCIPLE 4. QUALITY AND COMPETENCE OF NEUTRALS

All parties are entitled to competent, qualified Neutrals. Independent ADR Institutions are

responsible for establishing and maintaining standards for Neutrals in ADR Programs they

administer.

Reporter's Comments

Organizations providing ADR services for Consumer transactions should have a continuing

obligation to monitor the quality of the services they provide. This obligation requires that they

establish and maintain standards for Neutrals within the program which is appropriate to the

issues or disputes being addressed. The SPIDR Commission on Qualifications calls upon private

as well as public programs offering ADR services to set and monitor program performance. See

SPIDR Principles, Principle 6, at 3-4. Likewise, the Standards for Court-Connected Programs

call upon courts to "ensure that the mediation programs to which they refer cases are monitored

adequately...and evaluated [periodically]." Standards for Court-Connected Programs ' 6.0.

The most critical element in ADR quality control is the establishment and maintenance of

standards of competence for Neutrals within the program. "Competence" refers to "the

acquisition of skills, knowledge and...other attributes" deemed necessary to assist others in

resolving disputes in a particular setting. See SPIDR Report on Qualifications at 6. In 1989, the

SPIDR Commission on Qualifications published a list of general skills and areas of knowledge

that should be considered by groups establishing competency standards. See SPIDR Principles,

Principle 11, at 4-7.

APPENDIX PAGE 049

While ensuring the competence of Neutrals is always important, it is particularly "critical in

contexts where party choice over the process, program or neutral is limited" a reality of many

Consumer ADR programs. See SPIDR Report on Qualifications at 5; SPIDR Principles,

Principle 3 at 2 (extent to which Neutral qualifications are mandated should vary by degree of

choice parties have over dispute resolution process, ADR Program, and Neutral). The SPIDR

Commission on Qualifications requires private programs to, among other things, establish clear

criteria for the selection and evaluation of Neutrals and conduct periodic performance

evaluations. SPIDR Principles at 3. See also SPIDR Report on Qualifications at 6 (Neutrals,

professional associations, programs and Consumers should all have responsibility for addressing

and assessing Neutral performance); American Bar Ass'n Young Lawyers Div. & Special

Comm. On Alternative Means of Dispute Resolution, Resolving Disputes: An Alternative

Approach, A Handbook for Establishment of Dispute Settlement Centers 32 (1983) (noting

importance of post-mediation evaluation by administering agency).

The Advisory Committee concluded that it would be inappropriate (and, probably, impossible) to

set forth a set of universally applicable qualifications for Neutrals in Consumer disputes. The

Advisory Committee's conclusions parallel those of other groups establishing broad standards for

the conduct of ADR. See, e.g., SPIDR Report on Qualifications; SPIDR Principles at 1, 2. As the

SPIDR Commission on Qualifications determined, Neutral qualifications are best established by

joint efforts of concerned "stakeholders" in specific contexts. See, e.g., Kaiser Permanente

Review and Recommendations 35-36 (recommending involvement of advisory committee in

development of arbitrator qualifications).

It is important for Consumers to have a voice in establishing and maintaining standards of

competence and quality in ADR programs. The SPIDR Commission on Qualifications recently

observed that "consumers...share a responsibility with programs, [Neutrals]...and associations to

join in evaluating and reporting on the performance of [Neutrals]...and programs and

contributing to the development of policies and standards on qualifications." SPIDR Report on

Qualifications, ' G.2. at 9. See also SPIDR Principles, Principle 2 at 2 (private entities making

judgments about neutral qualifications should be guided by groups that include representatives of

consumers of services). Although Neutral expertise is traditionally a hallmark of arbitration,

technical or professional experience often carries with it the perception if not the reality of bias.

From the Consumer's perspective, therefore, an arbitrator who shares the professional or

commercial background of a Provider may not be the ideal judge. See, e.g. , Broemmer v.

Abortion Serv. of Phoenix , 840 P.2d 1013 (Ariz. 1992)(adhesion arbitration agreement provided

by abortion clinic which, among other things, required arbitrator to be a licensed

obstetrician/gynecologist, was unenforceable as beyond reasonable expectations of patient).

An Independent ADR Institution's responsibility for the qualifications of Neutrals in a particular

Consumer ADR program dictates the development of an appropriate training program. Ideally,

the training should include a mentoring program with experienced Neutrals as well as coverage

of applicable principles of Consumer law. See Mark E. Budnitz, Arbitration of Disputes Between

Consumers and Financial Institutions: A Serious Threat to Consumer Protection , 10 Ohio St. J.

on Disp. Res. 267, 315 (arbitrators need special legal expertise to address statutory issues

respecting consumer claims against financial institutions). Successful completion of such

APPENDIX PAGE 050

training should be reflected in the information on prospective Neutrals furnished to the parties

prior to selection. Cf. Employment Due Process Protocol ' C.2.

The Advisory Committee generally supports the concept of broad choice in selection of Neutrals,

and recognizes the right of Consumers and Providers to jointly select any Neutral in whom the

parties have requisite trust, even one who does not possess all of the qualifications recommended

by an ADR Program. Cf. Employment Due Process Protocol ' C.1.; Standards for Court-

Connected Programs ' 13.4 ("Parties should have the widest possible latitude in selecting

mediators, consistent with public policy."). This assumes, of course, that both parties have a true

choice in the matter, that they are duly informed about the background and qualifications of the

Neutrals proposed, and that all such Neutrals have made full disclosure of possible conflicts of

interest in accordance with Principle 3.

Practical Suggestions

Elements of effective quality control include the establishment of standards for Neutrals, the

development of a training program, and a program of ongoing performance evaluation and

feedback. Because the requirements of parties will vary with the circumstances, it will be

necessary to establish standards for Neutrals in an ADR Program with due regard for the specific

needs of users of the program. As noted in connection with Principle 3, a helpful model for

program administrators is the User Advisory Committee now being utilized by the AAA to

establish procedures and policies for ADR in the areas of employment, construction, health care,

and other transactional settings. Such entities could bring Consumer and Provider representatives

together to assist in the development and implementation of programs to train, qualify and

monitor the performance of Neutrals.

PRINCIPLE 5. SMALL CLAIMS

Consumer ADR Agreements should make it clear that all parties retain the right to seek relief in

a small claims court for disputes or claims within the scope of its jurisdiction.

Reporter's Comments

Disputes arising out of Consumer transactions often involve relatively small amounts of money.

Such disputes may be well-suited to resolution by informal ADR processes and judicial small

claims procedures.

Within the judicial system, the least expensive and most efficient alternative for resolution of

claims for minor amounts of money often lies in small claims courts. These courts typically

provide a convenient, less formal and relatively expeditious judicial forum for handling such

disputes, and afford the benefit, where necessary, of the coercive powers of the judicial system.

The Advisory Committee concluded that access to small claims tribunals is an important right of

Consumers which should not be waived by a pre-dispute ADR Agreement.

APPENDIX PAGE 051

Practical Suggestions

Because, for cases involving small amounts of money, parties retain the option of an oral hearing

in small claims court, it may be reasonable for the ADR Agreement to provide for arbitration of

small claims without a face-to-face hearing. Such alternatives may include "desk arbitration,"

which involves the making of an arbitration award based on written submissions; proceedings

conducted by telephone or electronic data transmission; and other options. See Principle 12.

Mediation conducted by telephone conference call has also proven effective in resolving

Consumer disputes. At least one major auto manufacturer has successfully used this technique to

resolve warranty claims.

PRINCIPLE 6. REASONABLE COST

1. Reasonable Cost. Providers of goods and services should develop ADR programs which entail

reasonable cost to Consumers based on the circumstances of the dispute, including, among other

things, the size and nature of the claim, the nature of goods or services provided, and the ability

of the Consumer to pay. In some cases, this may require the Provider to subsidize the process.

2. Handling of Payment. In the interest of ensuring fair and independent Neutrals, the making of

fee arrangements and the payment of fees should be administered on a rational, equitable and

consistent basis by the Independent ADR Institution.

Reporter's Comments

A fundamental principle of our civil justice system is that a person should never be denied access

to a court due to an inability to pay court costs. The reality is that the public justice system is

heavily subsidized, and that users pay only a small fraction of the actual cost of trial and related

procedures. Moreover, indigent litigants may be afforded relief from even these small fees. This

principle has been extended in many cases to court-connected ADR programs, in which courts

defray all or part of the expenses of mediation or court-connected arbitration. See Standards for

Court-Connected Programs, '' 5.1.a, 13.0 ("[c]ourts should impose mandatory attendance only

when the cost of mediation is publicly funded"; "[c]ourts should make mediation available to

parties regardless of the parties' ability to pay"). According to data from the National Center for

State Courts' ADR database, approximately 60% of programs did not depend upon the parties to

pay mediator fees for contract and tort cases; no programs charged user fees for mediation of

small claims. See Standards for Court-Connected Programs ' 13.2., Commentary, at 13-4.

Similar policies have prompted various private ADR tribunals to institute mechanisms for

waiving filing fees and other administrative expenses in appropriate cases. See, e.g., NASD Code

' 10332 (permitting Director of Arbitration to waive fees or deposits for parties in securities

arbitration); Nazon v. Shearson Lehman Bros., Inc., 832 F. Supp. 1540, 1543 (S.D. Fla.

1993)(employee, although required to bear expenses of pursuing civil rights claim in arbitration,

might seek waiver of fees under NASD rules). One federal court of appeals recently concluded

that to be enforceable with respect to actions under statutes governing employment

discrimination, an arbitration agreement must not "require employees to pay either unreasonable

APPENDIX PAGE 052

costs or any arbitrators' fees or expenses as a condition of access to the arbitration forum." Cole

v. Burns Int'l Security Serv., 105 F.3d 1465, 1482-84 (D.C. Cir. 1997).

Due to the wide range of transactions and the equally broad spectrum of conflict in the Consumer

arena, it is inappropriate to mandate bright-line rules regarding ADR costs. In determining what

is reasonable, consideration should be given to the nature of the conflict (including the size of

monetary claims, if any), and the nature of goods or services provided. In some cases, it may be

possible to fulfill the principle of reasonable cost by the use of the Internet, the telephone, other

electronic media, or through written submissions. See, e.g., Michael F. Altschul & Elizabeth S.

Stong, AAA Develops New Arbitration Rules to Resolve Wireless Disputes , ADR Currents, Fall

1997, at 6. Abbreviated procedures may be particularly appropriate in the context of small

monetary claims, where there is always the alternative of a face-to-face hearing in small claims

court. See Principle 5.

In some cases, the need to ensure reasonable costs for the Consumer will require the Provider of

goods or services to subsidize the costs of ADR which is mandated by the agreement. Indeed,

many companies today deem it appropriate to pay most or all of the costs of ADR procedures for

claims and disputes involving individual employees. See Mei L. Bickner, et al, Developments in

Employment Arbitration, 52 Disp. Res. J. 8 (1997). The consensus of the Committee was that if

participation in mediation is mandated by the ADR agreement, the Provider should pay the costs

of the procedure, including mediator's fees and expenses. The Committee considered, and

ultimately rejected, the alternative of establishing specific requirements for Provider

subsidization of the cost of arbitration procedures, other than to conclude that the Provider of

goods and services should ensure the consumer a basic minimum arbitration procedure

appropriate to the circumstances.

In some cases, an arbitrator may find it appropriate to defray the cost of Consumer participation

in arbitration by an award of costs. Some lemon laws provide for such relief. See, e.g., Chrysler

Corp. v. Maiocco , 209 Conn. 579, 552 A.2d 1207 (1989)(applying Connecticut Lemon Law);

Walker v. General Motors Corp ., 160 Misc.2d 903, 611 N.Y.S.2d 741 (1994)(applying

provision of New York Lemon Law permitting "prevailing consumer" to receive award of

attorney's fees); General Motors Corp. v. Fischer , 140 Misc.2d 243, 530 N.Y.S.2d 484

(1988)(same). In some cases, it may be appropriate for an arbitrator in a Consumer case to render

an award of attorney's fees pursuant to statute or in other cases where a court might do so.

Without such an award, however, the Committee does not support the proposition that Providers

are required to subsidize Consumers' attorney's fees for ADR.

At the same time, there are legitimate concerns that having the Provider pay all or a substantial

portion of neutral's fees and expenses may undermine the latter's impartiality. For this reason, as

observed in the Employment Due Process Protocol, "[i]mpartiality is best assured by the parties

sharing the fees and expenses of the mediator and arbitrator." Employment Due Process Protocol

' 6. See also Stephen J. Ware, Arbitration and Unconscionability After Doctor's Associates, Inc.

v. Casarotto, 31 Wake Forest L. Rev. 1001, 1023 (1996). But see Alan Scott Rau, Integrity in

Private Judging, 38 S. Tex. L. Rev. 485, 528 (1997). Therefore, the Advisory Committee

concludes that Consumers should have the option to share up to half of the Neutral's fees and

expenses. In addition, unless the parties agree otherwise after a dispute arises, the handling of fee

APPENDIX PAGE 053

arrangements and the payment of fees should be conducted by the Independent ADR Institution.

The latter, "by negotiating the parties' share of costs and collecting such fees, might be able to

reduce the bias potential of disparate contributions by forwarding payment to the mediator and/or

arbitrator without disclosing the parties' share therein ." Employment Due Process Protocol ' 6.

Some ADR Programs serving Consumers are staffed wholly or partly by unpaid volunteers. See,

e.g., BBB Arbitration Rules at 2. The use of such programs, including community dispute

resolution centers, may be a satisfactory means of addressing cost concerns associated with

Consumer ADR, particularly in cases involving low stakes. However, concerns have been

expressed by some authorities regarding overdependence on volunteer Neutrals. See Standards

for Court-Connected Programs ' 13.1, Commentary, at 13-2 (warning of dangers of exclusive

reliance on volunteers in ADR programs). Care must be taken by those responsible for

overseeing such programs to make certain that lower cost does not come at the expense of

adequately qualified Neutrals.

Practical Suggestions

In the event that an ADR procedure is mandated by the Provider of goods and services and the

Consumer demonstrates an inability to pay all or part of the costs of the procedure, the Provider

should front such costs subject to allocation in the arbitration award or mediation settlement.

In some cases, it may be possible to fulfill the principle of reasonable cost by the use of the

Internet, the telephone, other electronic media, or through written submissions. See, e.g., Michael

F. Altschul & Elizabeth S. Stong, AAA Develops New Arbitration Rules to Resolve Wireless

Disputes , ADR Currents, Fall 1997, at 6.

PRINCIPLE 7. REASONABLY CONVENIENT LOCATION

In the case of face-to-face proceedings, the proceedings should be conducted at a location which

is reasonably convenient to both parties with due consideration of their ability to travel and

other pertinent circumstances. If the parties are unable to agree on a location, the determination

should be made by the Independent ADR Institution or by the Neutral.

Reporter's Comments

The Advisory Committee concludes that ADR proceedings should take place at a location that is

reasonably convenient to all parties.

Flexibility in choosing a hearing location is a theoretical advantage of consensual conflict

resolution, permitting minimal cost and inconvenience to all parties. On the other hand, location

terms may put one party at a great disadvantage, significantly increasing the cost and logistical

complexity of dispute resolution. This is particularly true with regard to binding arbitration,

which may involve the participation of multiple witnesses as well as the parties and their

representatives. See III Federal Arbitration Law ' 32.8.3.

APPENDIX PAGE 054

Typically, contractual agreements which provide that arbitration hearings will be conducted in a

particular place are honored by the courts. See, e.g., Management Recruiters Int'l, Inc. v. Bloor ,

129 F.3d 851 (6 th Cir. 1997)(under Federal Arbitration Act , forum expectations of parties in

arbitration agreement are enforceable, and may not be upset by state law); Bear Stearns & Co. v.

Bennett , 938 F.2d 31, 32 (2 nd Cir. 1991)(noting "prima facie validity" of forum-selection

clauses, including those in arbitration agreements); Snyder v. Smith , 736 F.2d 409, 419 (7th

Cir.), cert. denied, 469 U.S. 1037, 105 S. Ct. 513, 83 L. Ed.2d 403 (1984)(courts must give effect

to freely-negotiated arbitration clause in commercial agreement). See II Federal Arbitration Law

' 24.2.3.4 (discussing Federal Arbitration Act ). Cf. Carnival Cruise Lines, Inc. v. Shute , 449

U.S.585,111 S.Ct. 1522, 113 L. Ed. 2d 622 (1991)(judicial forum selection clause in terms on

cruise ship passenger ticket enforceable); M/S Bremen v. Zapata Off-Shore Co. , 407 U.S. 1, 92

S. Ct. 1907. 32 L.Ed.2d (1972)(judicial forum selection clause is prima facie valid and should be

enforced unless enforcement is shown by the resisting party to be unreasonable under the

circumstances).

The same is true of cases where the parties agree to a process for selecting location, such as that

provided by the AAA Rules. See, e.g., AAA Commercial Rule 11. There is authority for pre-award

challenges to location selection mechanisms. Aerojet-General Corp. v. AAA , 478 F.2d 248 (9th

Cir. 1973)(pre-award judicial review appropriate where choice of arbitration locale not made in

good faith and one or more parties are faced with severe irreparable injury). Again, however,

such action is likely to be deemed appropriate only in extreme cases. See Seguro de Servicio de

Salud v. McAuto Systems , 878 F.2d 5, 9 n.6 (1st Cir. 1989); S.J. Groves & Sons Co. v. AAA , 452

F. Supp. 121, 124 (D. Minn. 1978).

Some courts, however, have identified limits on locational designations in judicial forum

selection provisions. See Mark E. Budnitz, Arbitration of Disputes Between Consumers and

Financial Institutions: A Serious Threat to Consumer Protection , 10 Ohio St. J. on Disp. Res.

267, 292; David S. Schwartz, Enforcing Small Print to Protect Big Business: Employee and

Consumer Rights Claims in an Age of Compelled Arbitration , 1997 Wis. L. Rev. 36, 121 n.366.

Forum selection clauses may be overcome if it can be demonstrated that their incorporation in

the contract was the result of fraud, undue influence, or an extreme disparity in bargaining

power, or if the selected forum is so inconvenient that it would effectively deprive a party of a

day in court. See, e.g., Kubis & Persyk Assoc., Inc. v. Sun Microsystems, Inc ., 146 N.J. 176, 188-

97, 680 A.2d 618, 624-29 (1996)(reviewing cases and recognizing limits on enforceability of

forum selection clauses); Moses v. Business Card Expr., Inc ., 929 F.2d 1131, 1136-39 (6 th Cir.),

cert. denied, 502 U.S. 821, 112 S. Ct. 81, 116 L.Ed.2d 54 (1991)(in considering change of venue

motion, forum selection clause must be considered along with convenience of parties and

witnesses and overall fairness); Hoffman v. Minuteman Press Int'l, Inc., 747 F. Supp. 552 (W.D.

Mo. 1990)(denying venue change in accordance with forum selection agreement on basis of

extreme hardship and alleged fraud in the inducement); Cutter v. Scott & Fetzer Co ., 510 F.

Supp. 905, 908 (E.D. Wis. 1981)(refusing to enforce forum selection clause on basis of state Fair

Dealership Law, and observing that clause was not the subject of negotiation). See also

Restatement (Second) of Conflict of Laws ' 80 (1969)(agreement regarding place of action will be

given effect unless it is unfair or unreasonable); Benjamin Levin & Richard Morrison, Kubis and

the Changing Landscape of Forum Selection Clauses, 16 Franchise. L.J. 97 (1997)(discussing

trend to limit enforceability of forum selection clauses in franchise agreements by statute and

APPENDIX PAGE 055

case law); Donald B. Brenner, There is a Developing Trend Among Courts of Making Choice of

Forum Clauses in Franchise Agreements Presumptively Invalid , 102 Com. L.J. 94

(1997)(same).

In the course of finding a judicial forum selection provision in a form franchise agreement

presumptively invalid, the New Jersey Supreme Court recognized that the following factors may

be relevant to enforceability: (1) whether the provision is the product of arm's length negotiations

or is effectively imposed by a party with disproportionate bargaining power; and (2) whether the

provision provides an "indirect benefit to...[the stronger party by making] litigation more costly

and cumbersome for economically weaker...[parties] that often lack the sophistication and

resources to litigate effectively a long distance from home." Kubis , 146 N.J. at 193-94, 680 A.2d

at 626-27. See also Model Choice of Forum Act ' 3(4) Comment (1968)("A significant factor to

be considered in determining whether there was an abuse of economic power or other

unconscionable means' [sufficient to deny enforcement to a forum selection clause] is whether

the choice of forum agreement was contained in an adhesion, or take-it-or-leave-it' contract.").

Such considerations may also affect the enforceability of an agreement to arbitrate. See Patterson

v. ITT Consumer Financial Cor

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