Opposition Brief — Houston Lighting & Power Co. v. Morris

No. 91-1230 | OFFIGE GF THE CLERK

IN THE

Supreme Court of the Gnited States

OCTOBER TERM, 1991

Houston LIGHTING AND POWER COMPANY,

Petitioner,

Vv.

THE HONORABLE JOSEPH B. MORRIS, JUDGE

(CiTy OF SAN ANTONIO AND CENTRAL POWER

AND LIGHT COMPANY, REAL PARTIES IN INTEREST)

Respondents.

CITY OF SAN ANTONIO’S

BRIEF IN OPPOSITION TO

HOUSTON LIGHTING AND POWER COMPANY’S

PETITION FOR WRIT OF CERTIORARI TO

THE SUPREME COURT OF TEXAS

CHARLES J. FITZPATRICK*

JON C. Woop

MERRITT M. CLEMENTS

MATTHEWS & BRANSCOMB

800 One Alamo Center

106 S. St. Mary’s Street

San Antonio, Texas 78205

(512) 226-4211

Attorneys for City of San Antonio

February 28, 1992 *Counsel of Record

PRESS OF BYRON S. ADAMS, WASHINGTON, D.C. (202) 347-8203

QUESTIONS PRESENTED FOR REVIEW

1. Does the United States Supreme Court have ju-

risdiction of a petition for writ of certiorari to chal-

lenge certain orders entered by a Texas state court

which are not final and not appealable, and which

were entered more than nine months prior to the

filing of the petition?

2. Is there any denial of due process where a Texas

state court compels arbitration of a dispute in precise

accordance with the arbitration agreement of the par-

ties, and with a majority of the panel controlled by

neutral arbitrators?

ii

LIST OF PARTIES

Houston Lighting & Power Company

Petitioner,

City of San Antonio, Texas, acting by and through

City Public Service Board of San Antonio

Central Power and Light Company

City of Austin, Texas

Honorable Joseph B. Morris, Judge of the

101st Judicial District Court of

Dallas County, Texas

Respondents.

ill

TABLE OF CONTENTS

QUESTIONS PRESENTED FOR REVIEW

LIST OF PARTIES

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Ne iilis iil ane Via dasubdsdinéewicdiccanessssasecesseuescsis

I. This Court Lacks Jurisdiction of the

Taal Ay ets Na oS

A. HL&P’S Petition is Untimely .................

B. HL&P’S Petition Seeks Review of an Or-

der That is Not a Final Judgment ........

II. Where a State Court Enforces an Arbitration

Agreement Precisely in Accordance with its

Terms, There is no Denial of Due Process .

CONCLUSION

SPH SHH HHT EH EEE SHEE EEEEEEEEEEEEEEEEE SHEESH EEE SEH EEEEEES

13

16

TABLE OF AUTHORITIES

Cases:

A. G. Edwards-& Sons, Inc. v. Clark, 558 So.2d

Ic

American Export Lines v. Alvez, 446 U.S. 274

(1980), overruled on other grounds by Miles »v.

Apex Marine Corp., 111 S. Ct. 317 (1990) ....

Bethke v. Polyco, Inc., 730 S.W.2d 431 (Tex. App.—

DI SND occ cacicusasundetasarvasbusckesions

Catlin v. United States, 324 U.S. 229 (1945) ........

Citizens Nat’l Bank v. Callaway, 597 S.W.2d 465

(Tex. Civ. App.—Beaumont 1980, writ ref’d) .

Commodity Futures Trading Comm’n v. Schor, 478

SENG: SE ST ciccilandncpnanbsnncsckadeceuacindeneconions

Commonwealth Coatings Corp. v. Continental Cas-

ualty Co., 393 U.S. 145 (1968) (Black, J., plu-

PU INN oka cect sainbacesacsacsicamarsinenercuscnes

Elmore v. Chicago & I.M. Ry., 782 F.2d 94 (7th

RANE. eas spina srscieretetindescatecainahepeniuta eae tiebinais

FDIC v. Air Florida Sys., Inc., 822 F.2d 833 (9th

Cir. 1987), cert. denied, 485 U.S. 987 (1988) .

Florasynth, Inc. v. Pickholz, 750 F.2d 171 (2d Cir.

BERRA PONTr Seys GMALUNi NcnaigaR we tet) arariti Re ReNr Asan

Geldermann, Inc. v. Commodity Futures Trading

Comm’n, 836 F.2d 310 (7th Cir. 1987), cert.

Gente, 455 U.S. SiG (IGG) ......c0cceecensecceseseesss

Gulfstream Aerospace Corp. v. Mayacamas Gane,

DO ic So, RAMI IIE ep icanencdsabvrduicnanoisepeaspan ies

In re New Mexico Natural Gas Antitrust Litigation,

620 F.2d 794, 795-7 (10th Cir. 1980) .............

In re Virginia Electric & Power Co., 539 F.2d 357,

IE WE Ws ROU i cgeecoraerettcd td scaliceecsmeeceuecs

International Produce, Inc. v. A/S Rosshavet, 638

F.2d 548 (2d Cir.), cert. denied, 451 U.S. 1017

G6 IARRRR iatp ete ee terra aU aL Anon 1 mea

10,

1]

14

Table of Authorities Continued

Page

Jolley v. Paine Webber Jackson & Curtis, Inc., 864

F.2d 402 (5th Cir. 1989) ..............ccccssseresseeenes 10,11

McMullen v. Yates, 697 S.W.2d 500 (Tex. App.—

San Antonio 1985, no Wit) ..........:cceseeeeeeeeeeees 7,12

Merit Ins. Co. v. Leatherby Ins. Co., 714 F.2d 673

(7th Cir.), cert. denied, 464 U.S. 1009

(VOGB) ccccaviensicessnvsccennsesesvcovactonovenranessannesonacexesies 14,16

Morelite Constr. Corp. v. New York City Dist. Coun-

cil Carpenters, 748 F.2d 79 (2d Cir. 1984) ..... 14,15

Moseley, Hallgarten, Estabrook & Weeden, Inc. »v.

Ellis, 849 F.2d 264 (7th Cir. 1988) .............+ 15,16

Nash v. Florida Indus. Comm’n, 389 U.S. 235

(TDCT) cncivicresnsiseccsscseversunensssssnsnateneussnsovasnexsnnns sans 7

North East Indep. School Dist. v. Aldridge, 400

S.W.2d 893 (Tex. 1966) ...........ccccsecccrresscseersees 12

Pitta v. Hotel Ass’n of New York City, Inc., 806

F.2d 419 (2d Cir. 1986) ............cccccscscrrressseeeess 14

Shearson Lehman Hutton, Inc. v. McKay, 763 S.W.

934 (Tex. App.—San Antonio 1989, no writ) . 7,8

Southland Corp. v. Keating, 465 U.S. 1 (1984) ..... 11

Stroh Container Co. v. Delphi Indus., Inc., 783 F.2d

743 (8th Cir.), cert. denied, 476 U.S. 1141

(RGBG) .vvcrcevcescsssssvnsesonassinsncescnnssncsenssetnsesensnevionnes 16

Turboff v. Merrill Lynch, Pierce, Fenner & Smith,

Inc., 867 F.2d 1518 (5th Cir. 1989) ............0 11

Statutes:

Federal Arbitration Act

U.S.C. O11 GE BOG, ccvecsccvisncscsvissnsencovsnrasscencaves 11,12,13

© UE, GG svstivcecsncccecticccsetirrsnevsitrecniastnes 5

OC -UF-G.G, GD cvcsscssanessorscssssccviesiannncsonnsonsemscnenceen 10,15

© UBC. 6G wccniccscestestchesieteenenn 11

vl

Table of Authorities Continued

Page

ak sas: A SI aseckuraciisalantenan evacaiaen a 7

Se Wars Te ED» Saciiceiccns'cansanenboancehcuailasausacesna-cuncasuns 7

Judicial Improvements and Access to Justice Act,

Pub. L. No. 100-702, 102 Stat. 4642 ............. 11

Texas General Arbitration Act, Tex. Rev. Civ. Stat.

Ann.

Ge deckelcssvanasenstosteusineecchdcaeusiiea crete 13

PTS FPtE saavclaveranicsdcaccencuuseiiaaeae ee 4

WE: | AEE Hadas iabictrssasdexdedemntipintcasnit ces iZ.13

Treatises:

16 Charles A. Wright et al., Federal Practice and

Procedure §$ 4009 (1977) .....cccccccescssescsccsscccsseses 9,10

IN THE

Supreme Court of the United States

OCTOBER TERM, 1991

No. 91-1230

Houston LIGHTING AND POWER COMPANY,

Petitioner,

us

THE HONORABLE JOSEPH B. MorRIs, JUDGE

(City of San Antonio and Central Power

And Light Company, Real Parties in Interest)

Respondents.

CITY OF SAN ANTONIO’S

BRIEF IN OPPOSITION TO

HOUSTON LIGHTING AND POWER COMPANY’S

PETITION FOR WRIT OF CERTIORARI TO

THE SUPREME COURT OF TEXAS

——__——_———

On January 27, 1992, Petitioner Houston Lighting

& Power Company (‘“HL&P”’) filed a Petition for Writ

of Certiorari challenging orders entered by a state

district court in Texas on August 22, 1990, and April

22, 1991. The first order granted Respondent’s Mo-

tion to Stay Litigation and Compel Arbitration; the

second order denied Petitioner’s Motion and Supple-

mental Motion for Appropriate Relief in Aid of Fair

Arbitration, which rehashed the same arguments made

by Petitioner in opposing Respondent’s original mo-

tion, Because the orders were entered more than

ninety (90) days prior to HL&P’s Petition, the Petition

———————

is untimely; because the orders are not final, they are

not subject to review; and because Petitioner’s due

process claim is groundless, the Petition for Writ of

Certiorari must be denied.

STATEMENT OF THE CASE

While Petitioner’s Statement of the Case is replete

with factual misstatements and omissions, Respondent

will address only those which are germane to this

proceeding. Petitioner’s key misstatement, illustrative

of the false premise of its entire Petition, is that the

state district court has required Petitioner to submit

to arbitration of claims against it by a majority vote

of a panel, ‘“‘when the panel majority has been ap-

pointed by the plaintiffs [Petitioner’s Questions Pre-

sented for Review, No. 1].’’ The truth is that in

accordance with the order of the Texas state court

complained of (Petitioner’s App. la), the claims

against Petitioner will be decided by a panel of five

arbitrators, of which the only one not neutral will be

the one appointed by Petitioner itself. The state

court’s order provided (Petitioner’s App. 2a) that ‘‘this

case should be stayed pending arbitration by arbitra-

tors appointed pursuant to Section 23.2 of the Par-

ticipation Agreement’’ which specifies (Petitioner’s

App. 2la) that each of the four project participants

may appoint one arbitrator, and if necessary to make

the total number of arbitrators an odd number, the

arbitrators so appointed shall elect one additional ar-

bitrator. To date, all four participants have appointed

arbitrators, who have deferred appointing the fifth

arbitrator pending the resolution of Petitioner’s myr-

iad efforts to delay the arbitration.

Contrary to the predicate of Petitioner’s entire ar-

gument, thére is no panel majority biased against

3

Petitioner. First of all, Petitioner concedes that, other

than the arb‘trator appointed by Petitioner, each of

the other three appointed arbitrators has taken a

sworn oath to perform as a neutral arbitrator and to

“faithfully, fairly and impartially hear and examine

the matters in controversy between the above-named

parties, in accordance with their Arbitration Agree-

ment and the AAA/ABA Code of Ethics for Arbitra-

tors in Commercial Disputes” (Petitioner’s App. 27a).

Nonetheless, Petitioner makes the groundless and in-

sulting assertion that despite that oath, appointees

who know they were chosen by a party to a dispute

cannot be considered neutrals.

Even ignoring for the moment Petitioner’s paranoid

and unsubstantiated misperception, and ignoring as

well Petitioner’s sufficient legal remedy to avoid any

adverse arbitration award shown to be the product

of evident partiality, there is still no basis for

Petitioner’s analysis: there are only two parties mak-

ing arbitration claims against the Petitioner, San An-

tonio and CPL. The remaining project participant,

City of Austin, has no arbitration claims pending,

though it was permitted by the court to appoint an

arbitrator, in accordance with the parties’ Arbitration

Clause. Significantly, Petitioner urged the trial court

to allow City of Austin to appoint an arbitrator to

assure the fairness of the panel and compliance with

the Arbitration Clause. Petitioner argued “‘ijf one

panel is to determine all disputes, then HL&P, Aus-

tin, CPL and San Antonio are entitled to appoint

arbitrators, and at least one clearly impartial arbi-

trator must then be selected” (Respondent’s App. 5a).

Petitioner successfully insisted in the state court that

all participants were entitled to arbitrators and that

a panel composed of four party-appointed arbitrators

and a fifth neutral is what the parties intended in

their agreement (Respondent’s App. 5a). Petitioner

investigated the qualifications of City of Austin’s

sworn-to-be-neutral arbitrator, Mr. John Lawrence,

and reported to the trial judge ‘‘Austin’s designated

arbitrator is a disinterested and impartial arbitrator”’

(Respondent’s App. 5a). In accordance’ with

Petitioner’s urging, the state court permitted City of

Austin’s appointment of an arbitrator (Petitioner’s

App. 2a).

Now, as Petitioner has virtually exhausted its quiver

of procedural arrows to delay an arbitration requested

by Respondent in March 1988, its analysis has con-

veniently taken a 180-degree turn. Thus, Petitioner

now suggests (Petition p. 6) that the state court’s

permitting City of Austin to appoint an arbitrator

“exacerbated the problem,”’ relying upon the pen-

dency of a different claim in a different forum by

City of Austin against Petitioner to support the prop-

osition that City of Austin’s sworn neutral arbitrator

is actually aligned against Petitioner. This contention

is not credible, since that City of Austin claim against

Petitioner was already in litigation, both at the time

City of Austin appointed Mr. John Lawrence its ar-

bitrator, and at the time Petitioner urged the state

court that he was ‘disinterested and impartial’ and

that his appointment should be allowed (Respondent’s

App. 5a). HL&P’s attempt to rewrite history to con-

coct its “stacked deck” arbitration panel argument

must not be countenanced, and the entire hypothesis

of its Petition that the “panel majority has been ap-

pointed by the plaintiffs” is simply untrue—sufficient

reason without more for this Court to deny its Petition

for Writ of Certiorari.

Petitioner is likewise guilty of other misstatements,

which are of less import to the Court’s decision, but

which Respondent cannot leave unchallenged. At-

tempting to fabricate a bias argument, Petitioner pre-

sented an affidavit to the state court based on total

speculation as to the nature and amount of

Respondent’s claims, and speculation as to the utili-

zation Respondent would make of any funds received

through an arbitration award, and the potential fi-

nancial stake of arbitrators. Petitioner’s hypotheses

were opposed by affidavit (Respondent’s App. 1a),

were carefully considered by the state court, and were

properly rejected. Petitioner failed to substantiate,

either factually or by competent legal authority, its

argument that an arbitrator (or judge for that matter)

is automatically disqualified from participating in a

case simply by reason of his being a ratepayer of an

involved utility. Such a premise would typically dis-

qualify all judges in any jurisdiction from presiding

in any case involving any utility therein, and is simply

not the law. In re New Mexico Natural Gas Antitrust

Litigation, 620 F.2d 794, 795-7 (10th Cir. 1980); Jn

re Virginia Electric & Power Co., 589 F.2d 357, 366-

9 (4th Cir. 1976).

Petitioner criticizes the Texas district judge for not

taking what it calls “corrective steps’”’ (Petition p. 8),

suggesting various and sundry methods of composing

alternative arbitration panels. The simple answer to

that criticism is that the district judge ordered “‘ar-

bitration by arbitrators appointed pursuant to Section

93.2” of the parties’ agreement, thus binding

Petitioner to the arbitration agreement it bargained

for, rather than substituting some other terms newly

proposed by Petitioner.

Finally, in a factual statement which is of limited

relevance herein, but which is grossly inaccurate,

Petitioner states (Petition p. 4), with respect to a

lawsuit by City of Austin against Petitioner: ‘‘A jury

found that the cost of STP had not been increased

by any failure of HL&P to perform its duties as Proj-

ect Manager.”’ This is a rank misrepresentation by

Petitioner. In fact, the trial court in that case refused

City of Austin’s request to even submit to the jury

the quality of Petitioner’s performance of its duties

as Project Manager. It is that very refusal which is

the focal point of City of Austin’s pending appeal in

the Texas Court of Appeals at Dallas.

SUMMARY OF ARGUMENT

The United States Supreme Court lacks jurisdiction

of the Petition for Writ of Certiorari because it was

filed out of time, being filed more than nine months

after entry of one of the orders that it challenges,

and more than 17 months after entry of the other.

Moreover, the Texas state court orders attacked by

Petitioner are not final and appealable orders, nor

was the procedural step of mandamus available to

Petitioner. Accordingly, neither order is a final judg-

ment or decree which is ripe for consideration by this

Court. Finally, the Texas state court enforced the

applicable arbitration clause in the agreement be-

tween the South Texas Project participants precisely

in accordance with its terms. Under the law and the

public policy of the United States, the state court was

not only correct but was required to do so, and ac-

cordingly the issue of a denial of due process is not

even raised herein.

ARGUMENT

I. This Court Lacks Jurisdiction of the Petition

A. HL&P’S Petition is Untimely

98 U.S.C. § 1257(a)' provides for certiorari review

under stipulated circumstances of “‘(f]inal judgments

or decrees rendered by the highest court of a State

in which a decision could be had.” 28 U.S.C. § 2101(c)

provides that a petition for certiorari must be filed

within ninety (90) days of the date of the judgment

complained of. The introductory paragraph of HL&P’s

Petition and its jurisdictional argument recognize that

the orders in issue were entered by the District Court

of Dallas County on August 22. 1990, and April 22,

1991. HL&P maintains that its efforts at seeking a

writ of mandamus tolled the deadline for filing of its

Petition. The orders in issue were not subject to man-

damus review by higher Texas courts, however, and

HL&P’s Petition is therefore untimely.

Nash v. Florida Indus. Comm’n, 389 U.S. 235, 237

n.1 (1967) teaches that identifying the highest state

court competent to consider a matter requires a re-

view of state law. Accordingly, this Court must ex-

amine Texas law to determine whether mandamus

review is available to attack orders compelling arbi-

tration.

1 HL&P incorrectly seeks to rely on “28 U.S.C. § 1257(3),”’ a

provision that was redesignated as § 1257(a) when Congress

eliminated appellate review of state court decisions some four

years ago.

Texas courts consistently hold that mandamus is

not available to subvert an order compelling arbitra-

tion. An example of such authority is McMullen v.

Yates, 697 S.W.2d 500, 502 (Tex. App.—San Antonio

1985, no writ), in which the court of appeals held that

the relator was not entitled to a writ of mandamus

requiring the trial court to vacate an order compelling

arbitration. In deciding that the relator had an ade-

quate remedy on appeal following entry of judgment,

the court observed that an order compelling arbitra-

tion is comparable to an order granting a plea in

abatement, a decision not subject to review in a man-

damus proceeding. The court reasoned that:

If we assume, while not deciding, that the

court incorrectly compelled arbitration, the

resulting delay is no more onerous than being

forced to try a case in an inappropriate

venue, or suffering an incorrect ruling on a

plea to the jurisdiction, a plea in abatement,

or any other interlocutory order that is not

subject to correction by mandamus.

Id. (emphasis added) (footnote omitted).

The San Antonio Court of Appeals affirmed and

explained the McMullen decision in Shearson Lehman

Hutton, Inc. v. McKay, 763 S.W. 934, 938-39 (Tex.

App.—San Antonio 1989, no writ), holding that while

appellate courts have mandamus jurisdiction to cor-

rect a decision denying a motion to compel arbitra-

tion, there is no jurisdiction to review a decision

compelling arbitration. Jd. at 939. The court explained

that the difference in the availability of mandamus

review was dictated by the public policies favoring

arbitration: “‘Once forced to trial, the benefits of ar-

9

bitration are forever lost: the speed and economy of

first going to arbitration are defeated. This benefit

cannot be regained on remand.” Jd. The court rea-

soned that mandamus was not appropriate when the

interlocutory decision is one compelling arbitration

“because relator has an appeal available once a final

judgment is entered and he loses no contract rights

or benefits by availing himself of arbitration.” Id.

As described in the Statement of the Case section

of this Response, HL&P’s Motion for Appropriate Re-

lief argued the same issues previously addressed to

the district court in HL&P’s responses to the Motion

of San Antonio and CPL to Compel Arbitration, and

the effect of the order overruling HL&P’s Motion was

‘dentical to that of the order granting the Motion of

San Antonio and CPL. As such, the latter order was

no more subject to mandamus review than the former,

and HL&P’s Petition is out of time as to both.

HL&P sought to avoid the problem it recognized

as to the timeliness of its Petition by contending that

its efforts to seek mandamus relief tolled the deadline

for filing. The argument presupposes, however, the

availability of mandamus review which, as demon-

strated above, was patently nonexistent. Surely, ef-

forts to seek relief in tribunals where that relief is

legally unavailable does not excuse late filings with

this Court. The highest court that could render the

orders complained of was the district court which en-

tered them, and HL&P’s Petition is therefore tardy

by many months.

B. HL&P’S Petition Seeks Review of an Order That is

Not a Final Judgment

Of course, this Court may only entertain final judg-

ments or decrees on certiorari. As Professor Wright

10

states, ‘‘[t]he most elementary component of the final

judgment rule is that there must be a judgment.”’ 16

Charles A. Wright et al., Federal Practice and Pro-

cedure § 4009 (1977). Both the Federal Arbitration

Act, 9 U.S.C. §9 and the Texas General Arbitration

Act, art. 238-1 (Respondent’s App. 7a), contemplate

that following the arbitration panel’s decision, a judg-

ment will be entered. Accordingly, there is presently

no final judgment for this Court to review.

The Fifth Circuit Court of Appeals relied on iden-

tical reasoning in holding that an order staying pro-

ceedings pending arbitration is not final for purposes

of review under 28 U.S.C. § 1291.2 Jolley v. Paine

Webber Jackson & Curtis, Inc., 864 F.2d 402 (5th Cir.

1989). The court began by quoting the classic Supreme

Court holding that a decision is only final when it

“ends the litigation on the merits and leaves nothing

for the court to do but execute judgment.” 864 F.2d

at 405, quoting Catlin v. United States, 324 U.S. 229,

233 (1945). The Jolley court next cited Gulfstream

Aerospace Corp. v. Mayacamas Corp., 108 S. Ct. 1133

(1988) for the proposition that neither orders granting

nor orders denying a stay pending arbitration are

final, because neither ends the litigation on the mer-

its. ““While an order granting a stay postpones actual

litigation in the district court, it contemplates that

the district court will retain jurisdiction to confirm,

modify, or, in some cases, to renew the litigation

* The requirements for finality of § 1291 and § 1297 are es-

sentially coextensive as evidenced by the Supreme Court’s treat-

ment of authority from actions involving one statute as

controlling in cases involving the other. E.g., American Export

Lines v. Alvez, 446 U.S. 274 (1980), overrwed on other grounds

by Miles v. Apex Marine Corp., 111 S. Ct. 317 (1990).

11

despite the arbitration award.” 864 F.2d at 405. Be-

cause of the requirement for additional court action,

the Jolley court held that an order compelling arbi-

tration is not final.

Gulfstream and Jolley have been modified some-

what by the enactment of 9 U.S.C. § 16, part of the

Judicial Improvements and Access to Justice Act, Pub.

L. No. 100-702, 102 Stat. 4642, but only as the cases

relate to the review of orders denying arbitration.

The statute permits review of such orders but, con-

sistent with previous case law, prohibits appellate con-

sideration of orders which stay court proceedings

pending arbitration or compelling arbitration. The

statute is significant, first because it recognizes that

orders compelling arbitration are interlocutory (and

thus not dispositive of litigation) and second because

it indicates a Congressional policy against review of

orders compelling arbitration, Turboff - Merrill

Lynch, Prerce, Fenner & Smith, Inc., 867 F.2d 1518,

1520 (5th Cir. 1989), a policy that would be violated

were this Court to entertain HL&P’s Petition.

Section 16 of the Federal Arbitration Act may ap-

ply to Texas appellate courts. In A. G. Edwards &

Sons, Ine. v. Clark, 558 So.2d 358, 360-61 (Ala. 1990),

the Alabama Supreme Court held that the statute

(then designated § 15) delimited its power to consider

an order concerning arbitration. This position is con-

sistent with the holding of Southland Corp. v. Keat-

ing, 465 U.S. 1, 11-18 (1984), that the Federal

Arbitration Act creates a body of federal substantive

law regarding the enforcement of arbitration agree-

ments involving interstate commerce, regardless of

the forum in which enforcement is sought. The Fed-

12

eral Arbitration Act therefore provides an independ-

ent basis for the conclusion that the orders complained

of are not final.

Wholly apart from federal case law and the Federal

Arbitration Act, Texas doctrine prohibits appellate re-

view of orders compelling arbitration because such

orders are neither final nor subject to interlocutory

review. For example, in Citizens Nat’l Bank v. Cal-

laway, 597 S.W.2d 465, 466 (Tex. Civ. App.—Beau-

mont 1980, writ ref’d), the court squarely held that

an order compelling arbitration is not a final judg-

ment subject to appellate review. The court began by

noting that in order for a judgment to be final, it

‘“‘must dispose of all the issues and parties in a case.”’

Id., citing North East Indep. School Dist. v. Aldridge,

400 S.W.2d 893, 895 (Tex. 1966). Observing that an

order compelling arbitration of a dispute does not

finally dispose of the matter, the court dismissed the

appeal for lack of jurisdiction.

Similarly, in Bethke v. Polyco, Inc., 730 S.W.2d 431

(Tex. App.—Dallas 1987, no writ), the court of appeals

recognized that the trial court’s order compelling ar-

bitration represented simply ‘‘the first step in the

ultimate disposition of the dispute between the par-

ties.”’ Id. Because the order was therefore not final,

the court of appeals refused to exercise jurisdiction.

It is so clear that orders compelling arbitration are

not appealable in Texas that the issue is generally

conceded. For instance, in McMullen v. Yates, supra,

the parties acknowledged that the trial court’s order

was not a final judgment. 697 S.W.2d at 501.

Article 238-2 of the Texas General Arbitration Act

(Respondent’s App. 7a) also recognizes that appellate

na sdamanal atten talsiaaai

13

review of orders compelling arbitration is not avail-

able. Like its federal counterpart, the statute permits

appeals of orders refusing to compel arbitration. On

the other hand, Article 938-2 does not authorize

appeals of orders compelling arbitration. It is logical

to conclude then that the Texas Legislature agrees

with all of the courts of Texas that orders compelling

arbitration are not final judgments.

In conclusion, the Federal Arbitration Act, the

Texas General Arbitration Act and the Texas and

Federal case law all recognize that the orders at-

tacked by HL&P are not final judgments or decrees.

Obviously, this Court therefore has no jurisdiction to

address the issues raised by HL&P’s Petition at this

time.

II. Where a State Court Enforces an Arbitration Agree-

ment Precisely in Accordance with its Terms, There

is no Denial of Due Process

The court’s order compelling arbitration specified

that the arbitrators should be selected in accordance

with the terms of the Participation Agreement. The

order accorded with the mandates of Article 226 of

the Texas General Arbitration Act and §5 of the

Federal Arbitration Act to the effect that agreed-upon

methods of arbitrator selection ‘“‘shall be followed,”

and did not deny due process to HL&P.

Initially, it is clear that the court’s enforcement of

the negotiated procedure will produce a fair and bal-

anced panel, as once recognized by HL&P. At the

same time, the panel would not be rendered defective

even if a majority of the arbitrators were to be se-

lected by parties adverse to HL&P. HL&P’s argu-

ment to the contrary 1S based on cases involving

———— St”

14

tripartite arbitration and wholly disregards the pos-

sibility that a party-appointed arbitrator can operate

as a neutral. Indeed, one of the authorities relied upon

by HL&P recognizes that a party-appointed arbitrator

may act as a neutral. Code of Ethics for Arhitrators

in Commercial Disputes, Canon VII (Respondent’s

App. 8a).

Given that HL&P cannot sustain the argument that

party-appointed arbitrators are necessarily partisan,

it resorts to the position that the ‘appearance of

bias’’ requires reconfiguration of the panel, basing its

argument on what it terms the holding of Common-

wealth Coatings Corp. v. Continental Casualty Co.,

393 U.S. 145 (1968) (Black, J., plurality opinion). It

is true that in that case, Justice Black, writing for

a plurality of four justices, appeared to impose on

arbitrators the same lofty ethical standards applicable

to Article III judges. At the same time, four justices

do not constitute a majority of the Supreme Court.

Several cases in which the court has been cited to

the language in Black’s opinion have held that arbi-

trators are not subject to disqualification due to an

appearance of bias, and the Supreme Court has de-

clined at least two opportunities to correct the opin-

ions. See, e.g., Pitta v. Hotel Ass’n of New York City,

Inc., 806 F.2d 419, 423 (2d Cir. 1986); Florasynth,

Inc. v. Pickholz, 750 F.2d 171, 173-74 (2d Cir. 1984);

Morelite Constr. Corp. v. New York City Dist. Council

Carpenters, 748 F.2d 79, 83 (2d Cir. 1984); Merit Ins.

Co. v. Leatherby Ins. Co., 714 F.2d 673, 679 (7th Cir.),

cert. denied, 464 U.S. 1009 (1983); International Pro-

duce, Inc. v. A/S Rosshavet, 638 F.2d 548, 551-52 (2d

Cir.), cert. denied, 451 U.S. 1017 (1981). These cases

all hold that an individual is not disqualified from

serving as an arbitrator unless he demonstrates “‘ev-

ident partiality,” a standard described in §9 of the

Federal Arbitration Act. As described in Morelite,

“evident partiality” is a considerably lower standard

than that by which Article III judges are evaluated,

and an arbitrator is only disqualified ‘‘where a rea-

sonable person would have to conclude that an arbi-

trator was partial to one party to the arbitration.”

748 F.2d at 84 (emphasis added).

HL&P’s consent to the arrangement it now attacks

is a matter of dispositive significance. As this Court

recognized in Commodity Futures Trading Comm'n

» Schor, 478 U.S. 833, 848-9 (1986), the right to

Article III’s guarantee of an independent and impar-

tial adjudication is “subject to waiver, just as are

other personal constitutional rights that dictate the

procedures by which civil and criminal matters must

be tried.’’ Notably, assent to private arbitration op-

erates as just such a waiver. Geldermann, Inc. v.

Commodity Futures Trading Comm'n, 836 F.2d 310,

816-318 (7th Cir. 1987), cert. denied, 488 U.S. 816

(1988). FDIC v. Air Florida Sys., Inc., 822 F.2d 833,

842 n.Q (9th Cir. 1987), cert. denied, 485 U.S. 987

(1988), and Elmore v. Chicago & I.M. Fy., 782 F.2d

94, 96 (7th Cir. 1986), are consistent with Gelder-

mann, recognizing that private arbitration does not

implicate due process considerations.

The foregoing authorities indicate the importance

of judicial deference to the agreement of the parties.

As established by other cases, parties to an arbitra-

tion agreement will not be heard to attack the terms

of their own agreement. “Parties should be aware

that they get what they bargain for and that arbi-

tration is far different from adjudication.’ Moseley,

16

Hallgarten, Estabrook & Weeden, Inc. v. Ellis, 849

F.2d 264, 268 (7th Cir. 1988), citing Stroh Container

Co. v. Delphi Indus., Inc., 783 F.2d 743, 751 n.12

(8th Cir.), cert. denied, 476 U.S. 1141 (1986). Like-

wise, “(t]he parties to an arbitration choose their

method of dispute resolution, and can ask no more

impartiality than inheres in the method they have

chosen.” Merit Ins. Co., 714 F.2d at 679.

The foregoing cases describe important principles

which preclude this Court from intervening to rewrite

the parties’ agreement. Private arbitration does not

include due process protections, and the panel’s com-

position is in any event a fair one. Under the cir-

cumstances, there is no basis for this tribunal to

assume the task of configuring a panel which will be

more agreeable to HL&P than the one the parties

mutually agreed upon years ago.

CONCLUSION

The United States Supreme Court does not have

jurisdiction of a Petition for Writ of Certiorari to

challenge state court orders which are not final and

not appealable, and which were entered more than

nine months prior to the filing of the Petition. Fur-

thermore, there is no denial of due process where a

state court compels arbitration of a dispute in precise

accordance with the arbitration agreement of the par-

ties, and with a majority of the panel controlled by

neutral arbitrators. Consequently, the Petition for

Writ of Certiorari should be denied.

February 23,

1992

Respectfully submitted,

CHARLES J. FITZPATRICK”

Jon C. Woopd

MERRITT M. CLEMENTS

MATTHEWS & BRANSCOMB

A Professional Corporation

800 One Alamo Center

106 S. St. Mary’s Street

San Antonio, Texas 78205

TEL: (512) 226-4211

FAX: (512) 226-0521

Attorneys for Respondent,

City of San Antonio

*(Counsel of Record