I first wrote about this case here. An arbitrator failed to disclose his relationship with the attorney for one of the parties. The arbitrator, Robert Faulkner, a former US Magistrate, had long standing ties with the lawyer for one of the parties, Brett Johnson. The arbitration went well for Mr. Johnson of Fish and Richardson in Dallas. Arbitrator Faulkner awarded $22 million to Mr. Johnson’s client and $6 million in attorney fees.
The Fifth Court of Appeals in Dallas overturned the award last June, finding that Mr. Faulkner failed to disclose his prior relationship to Mr. Johnson and that Mr. Johnson deliberately concealed his prior relationship to the former Magistrate. The court noted that at the outset of the arbitration hearing, both Faulkner and Johnson pretended to be meeting each other for the first time.
Now, the losers in the arbitration have sued Fish and Richardson, Brett Johnson and the former opposing party for fraud. See Texas Lawyer report. The suit appears to be based on a Rule 11 agreement entered into by the parties early in the arbitration process. In the Rule 11 agreement, Brett Johnson’s client, Jonathan Cooke agreed to arbitrate his dispute and to take the dispute to a neutral arbitrator with JAMS. A Rule 11 agreement simply describes an agreement between opposing parties which is filed or capable of being filed withe the district clerk.
As I have stated before, the problem with arbitration is the web of connections between all lawyers and law firms. In the arbitration world, those connections are not apparent. If the matter remained in a court of law, where it belongs, there is much greater transparency. How many more connections are out there of which consumers and employees have no knowledge? Yet, those same consumers and employees are forced into arbitrations everyday. Arbitration is premised on the arbitrator and the parties disclosing all prior contacts. But, if they choose not to disclose, who will know otherwise?