NEW YORK, June 29 (Reuters) - A friendship between a
partner at Fish & Richardson and an arbitrator has prompted a
Texas appeals court to throw out a $22 million award the
arbitrator had granted to the attorney's client.
The court's June 28 decision, which also vacated $6 million
in attorney's fees to Fish & Richardson, held that the social
relationship between attorney Brett Johnson and JAMS arbitrator
Robert Faulkner, as well as their spouses, undermined the
fairness of the proceedings. The failure of the arbitrator to
disclose the relationship - which included country club dinners
and outings to Mavericks games - at the arbitration's onset
constituted "evident partiality," the court found.
The decision stems from a soured business partnership
between Johnson's client Jonathan Cooke and Robert Karlseng, an
attorney in Dallas. In 1999, the two men created a real estate
title company. Five years later, Johnson's client alleged that
Karlseng had transferred all the assets out of the company and
into a newly-formed law firm in violation of their original
business agreement. In 2006, the dispute went to arbitration
with Faulkner as the arbitrator. Faulkner eventually awarded
Johnson's client more than $22 million, including $6 million in
The appeals court noted in the June 28 decision that
shortly before the arbitration hearing over which Faulkner
presided, Fish & Richardson revised its fee arrangement with
Cooke to a contingency contract, a revision which resulted in
the $6 million award granted by Faulkner.
Johnson on Wednesday issued a statement through a
"I respectfully disagree with the opinion here," the
statement read. "The district court held a 2-day hearing and
found no impropriety."
Faulkner, a retired federal magistrate judge for the
Eastern District of Texas, was not immediately available for
Arbitration awards on rarely thrown out. Less than about 15
percent of challenges to awards result in a court vacating
them, according to The National Law Journal.
In vacating the $22 million award, the appeals court
observed that Johnson and his wife had invited Faulkner and his
wife to a private dinner at the Capital Grille in Dallas in
2003 and to a dinner paid for by Faulkner at a local country
club in 2006. In addition, the court found that Johnson and
Faulkner had arranged by email to attend a Mavericks basketball
game in 2006 and that Johnson, his wife and their baby attended
a function at private club in Dallas the same year.
Despite those events, Faulkner did not disclose the
relationship as required, the court found. In addition, it
found that they "acted as strangers" when the two men
introduced themselves to each other at the beginning of the
"In a case of this magnitude, in which Cooke requested over
$6 million in attorneys fees, and in which arbitrator Faulkner
and Johnson did not disclose the nature of their relationship,
the evidence of the relationship is particularly alarming."
Blake Beckham, a Dallas attorney who represented Karlseng in
fighting the award, said that Johnson was "buddies" with the
"This decision sends a message to big firms that are
courting arbitrators," he said.
(Reporting by Leigh Jones)