Arbitration Conversation #90:
Arbitrator Richard D. Faulkner


Hello and welcome to the arbitration conversation. So in this arbitration conversation it’s going to be in honor of the olympics which are going on right now in Tokyo and we are thinking about how arbitration intersects with the olympics and it does in many ways and for that we have a true expert in the field we have richard falkner now richard faulkner not only is he an expert in adr mediation and arbitration he’s been an arbitrator with the aaa for a very long time um began in 1979 and um and then started arbitrating 1981 so he has done his fair share i if you keep count i’m sure it’s quite a few and um but not only that you’ve been a real leader in education around arbitration as well and um and have been involved in some very very high profile arbitrations at and involved in amicus briefs in very important arbitration cases including rent-a-center so richard um first of all thank you so much for taking time with us oh delighted to i love teaching and i love to see other people are interested in arbitration uh you know one of the things i’ve tried to do over the decades has been to bring other people into arbitration because it’s important that we have a newer generation of people coming in and especially you know a lot of you ladies when i started in the 70s female arbitrators were effectively unknown and then as i became more active in the international arena i found more and more inter you know women in international arbitration not so many in sports arbitration issues yet and then uh i know i work with cpr no i’m on their panel of distinguished neutrals not the aaa panel uh they took exception to some things i had to say about them on capitol hill and so i i’m a semi-retired judge and so i tend not to bite my tongue and you know i note that cpr has done huge outreach for uh obtaining diversity on its panels the same with the icc and the london court of international arbitration and this is important because we need more people interested in adr and more people with diverse backgrounds 100 well 100 i mean one of the main impetus and reasons for our kind of reviving was precisely that reason we want more voices fresh voices um diverse viewpoints so well said absolutely and as we think about the olympics right and we think about the international arena um you were involved in four arbitrations all four arbitrations involving lance armstrong so maybe you want to share with us a little bit about that because you know we were chatting before we started and in fact you know people think of just the maybe one arbitration and the doping questions but in fact it goes much deeper than this um so if you could share with us a bit about the progeny and what happened in these four arbitrations that you were part of sure the first of the arbitrations was a an ad hoc non-administered arbitration solely creating the arbitral tribunal in the party’s agreement with a very unusual provision for continuing jurisdiction they specifically negated the entire concept of a tribunal becoming fungus officio and it was not apparent as to why they chose to do that in the agreements but they did and so in the first case we obviously were presented with mr armstrong’s claims that sca had not properly and timely paid him uh under the before winning the sixth tour de france and they defended on a basis of uh that he had ostensibly been doping well it was a very contentious set of hearings super good lawyers on both sides jeff tillotson did a magnificent job for sca and uh russ hermann and lisa blue were great on the armstrong side and the panel eventually reached a decision finding that in fact the money was due and that is what our first award ordered well then there were some uh problems uh that resulted in a second demand for arbitration by mr armstrong and that matter uh was expeditiously set i’ve never believed in allowing cases to hang around they’re not fine wine they’re more like old mackerel they do not improve with age and so as the case uh approach a hearing date it got resolved other problems arose mr armstrong filed a third demand for arbitration and those issues as a hearing date approach were also resolved then time went by but remember there was no provision for the panel to terminate its activities that is so odd that’s very odd so too but apparently they had concerns over the actual enforcement and collection of the award which was a substantial amount of money i mean we’re talking 10 million dollars and so then sca learned through a variety of sources including apparently one of the other sports arbitration problem areas which was the doping scandals in baseball and the same department of agriculture investigator involved in the barry bonds case and others somehow became involved in uh looking at lance armstrong very peculiar why a department of agriculture investigator would be involved in these things but what yeah what’s the connection i never quite fully understood how that was done but it led to a federal grand jury probe in los angeles and that probe was of course very different than arbitration why well having once been a prosecutor and a trial judge it’s amazing how people have more precise memories when there is a penalty of perjury for lying and of course you know with a federal grand jury or with interviews with federal investigators lying to them is in fact its own crime and so people started talking and witnesses that had given us a totally different version of events in the first arbitration suddenly seemed to have different knowledge and as that progressed sca brought the fourth arbitration and we have one of these savings uh electricity savings mechanisms in our office so it takes all right we don’t need any more heat in dallas in the summertime so the fourth arbitration was brought by sca and they obtained information from a variety of sources to indicate that armstrong had in fact been involved in doping and then as the arbitration progressed he went on oprah and uh in his oprah interview he effectively did a mia culpa uh for those who are not catholic it’s a basically you know i’ve sinned i’m confessing and that then was used in the arbitration as part of the evidence against him uh needless to say his lawyers and the fourth arbitration contested our jurisdiction and asserted that we had no continuing jurisdiction despite the fact that they brought three arbitrations to the same tribunal previously and that was somewhat unpersuasive could imagine and uh it was okay for him to bring our arbitration demands but not for his opponent uh rather a curious position but nevertheless the one taken and so you know we uh eventually disposed of that with an appropriate ruling saying no we’re still empowered to hear this case um and the case uh progressed we actually heard testimony again and the fourth decision was a two-to-one decision uh the parties had each appointed party arbitrators so i was the true neutral in the matter and the sca arbitrator joined with me to find that there had been in fact a serious misleading of the tribunal and that we had been presented with uh shall we say extraordinarily inaccurate testimony and that uh many of the witnesses that had been presented to us either did not in fact have actual knowledge or had misled the tribunal and we required the return of all of the monies that uh had been obtained through the first arbitration uh some would say that’s an issue of sanctions we were a little more elegant and some would say creative in the way we wrote our award uh texas does not have a duty of good faith and fair dealing however we all do have contractual duties that prevent frustration and so that if you read the award closely is the basis for our decision and ordering the reimbursement and it had an interesting aspect because after we issued our award and there was a vigorous dissent by senator lyon

the we thought the matter had pretty much been resolved and that the money would be returned so unbeknownst to us there was a motion to confirm and the award was put into the case uh and became part of the evidence in the court proceeding well out of the blue we started members of the tribunal started getting telephone calls from the news media and one very enterprising reporter with the wall street journal called me and she had covered another case i had been involved in and i got this call saying hey judge faulconer i’d love to talk to you i think she’s calling about the other case and she wants to talk to me about armstrong and said i can’t discuss that it’s confidential and she said no your award is in the wall street journal what and you know we had not been informed that the uh confirmation uh hearing was proceeding or that the award was no longer confidential and so that was the first knowledge we had that uh the parties were con you know fighting this issue eventually it was resolved but it points out that we were dealing with some of the cutting edge issues in arbitration the continuing authority of a tribunal dealing with doping and scientific evidence mike some of the evidence that was presented to us was actually in german well we had witnesses that appeared in the armstrong arbitration from all across the world via video links and so long you know uh pre-covet 19 we were using the rather dysfunctional equivalence of zoom of that time period to be able to hear witnesses and we also had the concern that the first hearing uh you know the news media was vitally interested in it so we had to take steps to restrict access to the building uh to protect mr armstrong’s medical records uh for reasons that i think are already in the public record but we took very strong steps to ensure the security of the evidence uh and the confidentiality of the transcripts eventually someone surfaced would purport to be the transcripts of our hearings uh and you know the internet is the internet nothing ever dies or goes away whether it’s accurate or inaccurate and so uh we had to do a lot of things that have since come up in conjunction with covet and we also have had to have had to address some of the issues in sports such as what about bias in by investigators or bias by potentially involved parties and that leads me to the recent uh swiss supreme court case in sung yang versus uh the agency mandela anta ama and uh it’s another wada case uh world anti-doping association case and that also was an issue in the armstrong uh case because in our fourth award by that time usada the u.s anti-doping association had begun prosecuting mr armstrong the federal judge in the case in austin was not very complimentary towards usada and if you read our award very carefully you will see we excluded any reliance on usada or its investigations uh i can’t speak for the other arbitrators but at least in my mind when you know people associated with an investigating entity uh state in advance the conclusion they are going to reach uh having been a trial judge i have a serious problem with that and uh you know we specifically disavowed any reliance or use of the usada report and i can confirm we made zero use of it uh specifically because of the issues as to whether or not it was independent and impartial and so those issues again have arisen in the sun yang case and there it became even more interesting because you had an arbitrator who made comments on social media well how many of us are going to you know withstand great scrutiny of social media and what does that do in the sports world uh the arbitrator in the yang case apparently made some very hostile anti-chinese comments pertaining to animals because the arbitrator was an animal rights activist but how many arbitrators really expect everything in their social media feeds to be examined and the swiss supreme court very carefully began analyzing the duty of curiosity and so nowadays parties are obviously tempted to obtain as much information as possible before naming an arbitrator or arbitrators but they also would love to have you know a few arrows in the quiver in case the award should become unfortunate from their standpoint and at what point will there be a trotting out of those issues that may or may not have been discoverable before and sports arbitration is raising issues relating not only to social media but think about this aspect of it what happens when an arbitral process is unfair and the sports world had seen another version of that in the ezekiel edwards case involving the nfl and the nfl players association and judge mazzant who is here in texas in the eastern district wrote a very careful and thoughtful analysis of his articulation of the really seriously unfair nfl arbitral process for player discipline and in that case the federal court conclusions and findings of fact were that edwards and the players association were misled about the existence of evidence the arbitrator who was supposed to determine whether or not the executive director of the nfl’s decision was correct was appointed by the executive director of the nfl how do you do that i know there’s a similar situation with deflate date that was similar where it was yes it was entirely very skewed and very questionable well you know what go ahead judge mazzant was pretty scathing in his comments and he granted the injunction or a temporary restraining order barring enforcement of the suspension and the more one reads of those decisions there goes my lights again uh yeah here we go thank you building you know sooner management for taking away our power so judge mazzant was very thoughtful in his analysis and it raises an issue of should entities like the nfl players association really be using arbitration or should they have greater input and take the appointment of the arbitrators away from the you know management side none of us would tolerate a biased arbitrator knowingly and yet we have seen in sports arbitrations the swiss case the ezekiel edwards case both of which call into serious question the independence and impartiality of the arbitral tribunal and so we’re seeing in sports arbitration a number of hot button issues that are contemporary and problematic and what gets to be even more fun since uh the sun yang case involved chinese is what happens if an arbitrator social media account may make uh statements or raise questions about for example the notorious espionage of the chinese government and all of the cyber warnings that the american and australian governments and uk governments have given about that is you know reading such uh such posts from the federal bureau of investigation i got another one this morning because as you and i discussed i do have some activity in the cyber field uh you know and those warn about chinese hacking attempts amongst other things if an arbitrator likes a post by the fbi on social media of any time is that now a basis or even a duty to inquire or investigate right right folks don’t think that in the social media context these are all contemporary issues uh do arbitrators even use social media i eliminated almost all of mine years ago except for linkedin we all do something there and uh you know this has become an issue for trial judges too i’m married to a district judge and i know that for a fact trial judges have had uh issues relating to potential sanction by judicial commissions and questions by council about a judge’s uh friend arrangements uh on facebook with opposing counsel yeah yeah that was all really interesting and important and even um you know as we think about students have to be really careful with their social media i know that’s something i often have to talk to students about um is really being careful with what they’re doing on social media can be dangerous sometimes you know back to one other um a question that we were talking about that i do think is really important and there’s been a lot of conversations about it and it came up in the armstrong case is really often um i think there’s a misperception there’s a misbelief um that arbitration is always going to be private always going to be confidential which is false because i think that’s a perfect example when it’s made public record because because the award was entered then as a judgment under the federal arbitration act it now becomes public record um and moreover in terms of confidentiality it’s not really confidential it’s only confidential to the extent to the extent that the parties agree in their contract to confidentiality um so maybe speaking to that because it must have been a bit of a shock um when the armstrong opinion suddenly was in the new york times um that strikes me as a really significant issue right because um there was and that becomes new so how does one deal with that i suppose um how does an arbitrator navigate those waters i guess as soon as you find out that it’s public record then of course you’re free to talk i mean could you even be i mean normally you have immunity you shouldn’t be called into court but i suppose it’s possible well first of all it begins before the award is even issued sometimes now you have to think as we did about what happens if this leaves and the prospect of an award being filed either as per a part of a motion to vacate or uh you know to be confirmed it is evident it’s always present and federal courts have a presumption of the openness of courts and court records and more than a few parties have been shocked to find that things they thought were secret and confidential are laid right on out in the arbitration awards in the federal court uh chief judge barbara lynn here has actually redacted portions of arbitral awards but only small portions and at least one of the parties was less than pleased to find that what it thought was secret and confidential was not but you raised something that students ought to also be aware of which is some parties use arbitrations confidentiality as a way to mislead other parties or potential parties and in a different context in computer hardware and software cases uh i routinely appeared as council against an entity that insisted it never lost and uh we beat them uh obtained a substantial award which they did not pay on time so i filed a motion to confirm of course that then motivated you know an overnight very very large check and a demand that we dismiss the case so having known that they always claim they never lost i filed a motion to dismiss on the basis of full payment attached an order reciting same and a copy of the check redacting their bank account numbers the judge signed it so you can go find it in pacer so much for their claims that they never lost and unfortunately you know confidentiality and secrecy has become a problem in other areas because remember we don’t have any rules of evidence in arbitration so all sorts of things come in and may become part of an arbitral record that are would never see the light of day in a court and quite often you will see arbitral tribunals even those of us who’ve been trial judges say i’ll take it for what it’s worth because as arbitrators we can get in trouble if we exclude evidence but we can’t you know we’ll never get in trouble for accepting evidence no matter how um uh potentially useless it may be and so the tendency is to let everything in well what happens if it leaks what happens if arbitration is being used to suppress either dangerous products or we all know sex harassment cases were routinely shoved into arbitration and that gets into a problem that exists in sports arbitrations and other places of the repeat player effect and professor colvin has done really good research on that and that’s a huge problem because it goes to the same issues that arose in the sun yang case of arbitrator selection you and i are repeat players in this field i once trained many of the international arbitrators in north america for the chartered institute of arbitrators so i know arbitrators all around the world you probably do too but if we’re opposed by a council or team of council who don’t have that knowledge we may or may not have an advantage in selecting the arbitrators that particularly comes up in specific areas where the asymmetries of information can in fact seriously influence the outcome and there’s another issue that comes up as well which is parties that mislead arbitrators just as what happened in the armstrong uh arbitration but this happens in the international arbitral arena as well those of us in the united states are in the united kingdom are used to reasonably honest courts and legal systems but what happens when you go to some of the legal systems in other parts of the world is it trustworthy not so much what happens if you if you have a party like certain governments that flat don’t follow any rules they will put in um questionable evidence there will be evidence that one of my professors of oxford quipped blew in with the blowing sands of the desert winds and we all know very well that the national uh intelligence agencies or organs of that government obtain the evidence is it accurate is it inaccurate was it created for purposes of the arbitration uh what happens with social media accounts by arbitrators that may be more uh put as private well you and i both work in the cyber field and so is it really private what happens if it’s hacked and what happens to the evidence in an arbitration if that gets hacked these are all really great yeah really good questions um and most definitely um yeah good stuff to continue the conversation i’m just really thankful that you took time with us and um really good questions and thank you for the insights about the armstrong case that was really really interesting stuff so richard thank you i really just want to thank you again oh thank you i enjoyed doing it i you know hope that we will have more people entering this field it’s fun it’s it’s it is exciting it is never boring and who knows you too could end up with a case that ends up in the in the new york times or the wall street journal or the times of london anyway

thank you very much

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