Carl D. Woodard and Timothy D. Woodard v. Rotorcraft Services Group, Inc. ( 2015 )

ACCEPTED
02-15-00131-CV
SECOND COURT OF APPEALS
FORT WORTH, TEXAS
5/11/2015 3:22:00 PM
DEBRA SPISAK
CLERK
No. 02-15-00131-CV
FILED IN
IN THE 2nd COURT
SECOND COURT OF APPEALS DISTRICT OF APPEALS
FORT WORTH, TEXAS
OF TEXAS AT FORT WORTH 05/11/2015 3:22:00 PM
DEBRA SPISAK
Clerk
CARL D. WOODARD AND TIMOTHY D. WOODARD
Defendants/Appellants
v.
ROTORCRAFT SERVICES GROUP, INC.
Plaintiff/Appellee
On Appeal from the 352nd District Court of Tarrant County, Texas
Cause No. 352-274417-14, Hon. Bonnie Sudderth and Mark Pittman, Presiding
APPELLANTS' RESPONSE TO MOTION TO DISMISS
TO THE HONORABLE COURT:
Appellants, Carl D. Woodard and Timothy D. Woodard (the Woodards)
hereby respond to the Motion to Dismiss Appeal (Motion to Dismiss) filed by
Appellee, Rotorcraft Services Group, Inc. (Rotorcraft), showing it should be
DENIED, as follows:
A. THE APPEAL IS NOT UNTIMELY.
Addressing Rotorcraft's two points in reverse order for simplicity, its
argument that this appeal was brought too late is unfounded. Despite its prolixity,
APPELLANTS' RESPONSE TO MOTION TO DISMISS Page 1
178657
what Rotorcraft's argument entirely hinges upon is that "Defendants' Motion to
Vacate, Modify, Correct, or Reform the Judgment, or Alternatively for a New
Trial" (Motion for New Trial) (Ex. C to the Motion to Dismiss) was not really
what it says it was.' Rotorcraft conveniently fails to give not a hint of what the
Motion for New Trial should have looked like, or contained, to actually be a valid
motion for new trial.
The Woodards have found no case which held that "new grounds" have to
be urged in a motion for new trial from earlier arguments before the trial court in
order for the motion to constitute a motion for new trial, as far as appellate
deadlines are concerned. Rotorcraft does not cite any either. Rotorcraft instead
cites to Barry v. Barry, 193 S.W.3d 72 (Tex. App.—Houston [1st Dist.] 2006, no
pet.). Interestingly, Barry actually holds that a document filed as an "answer"
actually was an "answer," as opposed to a motion for new trial which would have
defeated jurisdiction. Barry is actually on point, however, in holding:
A motion for new trial must, by its very nature, seek to set aside an
existing judgment and request relitigation of the issues.
Id. at 74 (emphasis added; citation omitted). Accord, Hull v. S. Coast Catamarans,
L.P., 365 S.W.3d 35, 40 ("In a motion for new trial, a party asks the trial court to
The Woodards take great umbrage with the suggestion that they were "trying to get a new
judge." Obviously they had no control over the change of judgeship—they timely filed their
Motion for New Trial without any consideration of who would end up being on the bench.
Rotorcraft almost seems to argue that the Woodards were somehow precluded from exercising
their right to bring the Motion for New Trial because of a change they had no control over.
APPELLANTS' RESPONSE TO MOTION TO DISMISS Page 2
178657
correct trial error by granting a new trial.") (emphasis added; citations omitted).2
Although it is really too plain to require any argument that the Woodards
were requesting correction of trial error and setting aside an existing judgment, the
Woodards note the following excerpt from the Motion for New Trial:
Even in the absence of a conclusive judicial admission, the
evidentiary effect of the Demand, conjoined with Rotorcraft's action
pursuant to that agreed "method" or "process," shows that there is no
more than a scintilla of evidence to support any finding of lack of an
agreement to use a prior-panel arbitrator....
These cases show that, collectively, (a) the pleading of the
agreement, and (b) the action pursuant to the agreement are
conclusive that there was an agreement to use the "method" of
selection of the arbitrator—one from the prior panel. At a minimum,
there is no more than a scintilla of evidence to the contrary. The
Judgment must therefore be vacated, modified, corrected, or reformed
to vacate the Award; alternatively, a new trial must be had.
Motion for New Trial (Ex. C) at 4, 6. Therefore, Rotorcraft's contention that the
Woodards' Motion for New Trial was really not such a motion is specious at best
and should be denied.
Rotorcraft clouds the matter further by inferring that the Woodards could not
seek a reconsideration of the Judgment (Ex. B) because it was untimely under the
Federal Arbitration Act (FAA). But this assertion is itself predicated on the
Motion for New Trial being something other than what it actually was. Of course
2Concerning the subject of footnote 1 supra, it might be noted that in Hull, two different judges
were involved in the contested rulings, and the court held: "More than one judge, however, may
exercise authority over a single case." 365 S.W.3d at 41 (citations omitted).
APPELLANTS' RESPONSE TO MOTION TO DISMISS Page 3
178657
the Woodards could not institute some new proceeding seeking to vacate the
Award of the arbitrator. However, they were certainly entitled to treat the
Judgment confirming the Award as a judgment like any other, and therefore subject
to the same post-judgment remedies as any other.3 As Rotorcraft itself has
otherwise repeatedly pointed out, "a judgment confirming (or modifying or
correcting) an arbitration award is a final judgment like any other." Hamm v.
Millennium Income Fund, L.L.C., 178 S.W.3d 256, 263 (Tex. App.—Houston [1st
Dist.] 2005, pet. denied) (citing statutes). This applies to appellate deadlines. See id.
Cf. also Americo Life, Inc. v. Myer, 440 S.W.3d 18 (Tex. 2014), pet. for cert. filed
(litigation, including several appeals, continued for ten years past the arbitration
award). So Rotorcraft's position is completely invalid.
Rotorcraft appears to take the position, nonetheless, that a "motion for new
trial" is really in a different category, by citing to two federal cases, Lafarge Conseils
Et Etudes, S.A. v. Kaiser Cement & Gypsum Corp., 791 F.2d 1334, 1339 (9th Cir.
1986), and Halliburton Energy Servs. v. NL Indus., 618 F. Supp. 2d 614, 627 (S.D.
Tex. 2009). The nuances of federal court procedure are not the same as Texas State
Court procedure, so it is not at all clear that such authorities are applicable here. Be
that as it may, the procedures involved in those two cases did not involve "motions
for new trial" even under federal procedure.
3Leaving aside for the moment the question of whether the otherwise-available right of an
appeal from a judgment is precluded by agreement in this case, to be addressed infra.
APPELLANTS' RESPONSE TO MOTION TO DISMISS Page 4
178657
Rotorcraft opines Lafarge "address[es] situation similar to motion for new trial
under Federal Rule of Civil Procedure 60(b) and concluding that final arbitration
award could not be collaterally attacked." Motion to Dismiss at 14 (emphasis
added). In fact, however, motions for new trial (or to alter or amend the judgment)
are governed by Rule 59, and have a 28-day limitation. Rule 60(b) is a separate
"relief from a judgment" provision with completely different time periods and
different grounds for relief. It is, in essence, a "collateral" proceeding from that in
which the judgment was entered (more comparable to our "bill of review" under
Texas procedure). And in Halliburton, a Rule 59 motion for new trial was also not
involved. There is simply no basis for any holding that a party to an arbitration
award is precluded from filing a motion for new trial under the FAA since a
judgment confirming an arbitration award is a final judgment like any other.
Respectfully, Rotorcraft's Motion to Dismiss should be denied as it relates to
timeliness of the appeal, because, contrary to Rotorcraft's two arguments, (a) the
Motion for New Trial really was one, and (b) the Motion for New Trial was not a
"collateral attack" on the Judgment.
B. THE SPA PROVISION DOES NOT PRECLUDE THIS APPEAL.
As shown in Ex. D to the Motion to Dismiss, the Stock Purchase Agreement
(SPA) § 14.15 provides that an arbitration subject to the SPA "shall be non-
appealable." SPA at 56. At first glance, this provision might be read to preclude
APPELLANTS' RESPONSE TO MOTION TO DISMISS Page 5
178657
this appeal. However, both case law and common sense place restraints on the
applicability or enforceability of that provision under the facts of this case.
Initially, for the SPA provision to even apply here, there must have been an
arbitration conducted as directed by the SPA. If the arbitration was not conducted
pursuant to its provisions, then the SPA § 14.15's rules as to arbitration (including
that it would be "non-appealable") would not be applicable to it. Although this
issue should more properly be relegated to briefing on the merits, a prime
contention of the Woodards in this appeal is that the SPA § 14.15's requirements
as to the constitution of the arbitral body were not followed in this case. SPA
§14.15 clearly provides: "Such arbitration shall be conducted by a panel of three
arbitrators...." Id. at 56 (emphasis added). As Rotorcraft would have to concur,
this is not what happened. Consequently, this arbitration was not conducted in
accordance with the SPA, so the improperly-constituted singe arbiter's Award is
simply not subject to the SPA § 14.15's preclusion of an appeal.
Interestingly, Rotorcraft itself argued vociferously during the AAA arbitral
selection process that such a three-person panel was mandatory, and that if the
arbitral body was not so constituted, Rotorcraft would proceed in court to have the
award vacated, and would win such a contest. See Ex. 1 and Ex. 2 to this
Response (Woodards' Trial Ex's 10 and 12, respectively). The Woodards argued
that a subsequent agreement had been reached to modify that SPA provision to use
APPELLANTS' RESPONSE TO MOTION TO DISMISS Page 6
178657
a sole arbitrator from the prior panel that had presided over an earlier arbitration
between these parties. See Motion Ex's A and C. This was substantiated by
Rotorcraft's own admission in its original Demand in the instant arbitration. Ex. 3
to this Response (Woodards' Trial Ex. 5), page 3, 119. However, once this worked
out to result in an arbitrator Rotorcraft did not like, Rotorcraft then decided to
contest that modified agreement and insisted on the three-person panel under the
SPA as the only agreement, on pain of vacatur. See Ex's 1 and 2 supra.
Despite the parties' positions, however, the American Arbitration
Association (AAA) in a rogue decision ultimately constituted the arbitral body as
consisting of a single arbitrator who was not on the prior panel, which is not what
anybody claimed was the agreement. See Ex. 4 hereto (Woodards' Trial Ex. 15).
The Woodards' made a standing objection that this was not in accordance with the
parties' subsequent agreement, Ex. 5 hereto (Woodards' Trial Ex. 16), Rotorcraft
having already given its standing objection to there not being a three-member
panel (Ex. 1 at 2).
Following these events set in motion by the AAA, the Texas Supreme Court
very recently ruled that when an arbitration body is not composed pursuant to the
parties' agreement as to how the arbiter is to be constituted, then any award is void
as without jurisdiction. Americo Life, Inc. v. Myer, 440 S.W.3d 18 (Tex. 2014), pet.
for cert. filed. The Woodards, therefore, cannot be precluded from challenging the
APPELLANTS' RESPONSE TO MOTION TO DISMISS Page 7
178657
Award on appeal as being void and of no effect, particularly on the very ground that
the arbiter was not constituted as the parties agreed, under the SPA or otherwise.
This is more properly a question that should be determined on the merits than in
motion practice, but at a minimum this is a prima facie basis for finding jurisdiction
over this appeal, subject to any further consideration on the point by the Court upon
full briefing.
Also, under 9 U.S.C. § 10(a)(4) of the Federal Arbitration Act (FAA), a court
may vacate an arbitration award "where the arbitrators exceeded their powers."
Under Americo, arbitrators exceed their powers if they do not have any powers, as in
when the panel (or single arbitrator) is not selected in accordance with the parties'
agreed method of selection. As set forth above, there is really no question in this case
but that the "method of selection" was not followed, whether (a) three as under the
SPA, or (b) one from the prior panel as alleged by the Woodards. So in addition to
this Award not being one covered by the SPA, further or alternatively, the Woodards
have a statutory right under the FAA to have the Award vacated because the
arbitrator exceeded its powers (having none, since there was no jurisdiction), and the
right to judicial review on that FAA § 10(a)(4) question cannot be waived by
agreement. See:
As a preliminary matter, we must address whether we may even
entertain this appeal because both parties expressly waived their rights
of appeal in their stock purchase agreement. The arbitration provisions
in the parties' agreement included a provision for arbitration finality:
APPELLANTS' RESPONSE TO MOTION TO DISMISS Page 8
178657
"An award or determination of the arbitration tribunal shall be final
and conclusive upon the parties, judgment thereon may be entered by
any court of competent jurisdiction and no appeal thereof shall be
made by the parties." A trial court's judgment is appealable
notwithstanding such a provision when there is fraud, misconduct, or
gross mistake. Grissom v. Greener & Sumner Constr., Inc., 676
S.W.2d 709, 711 (Tex. App.--El Paso 1984, writ ref d n.r.e.). Further
a waiver of appeal in the arbitration agreement does not preclude
judicial review of matters concerning Texas Civil Practice and
Remedies Code sections 171.088 and 171.091. See id. (recognizing
matters concerning articles 237 and 238 of the Revised Civil Statutes,
the precursors to sections 171.088 and 171.091 of the Civil Practice
and Remedies Code, may be subjected to judicial review despite a
waiver of appeal in the arbitration agreement).
Barsness v. Scott, 126 S.W.3d 232, 237-238 (Tex. App.—San Antonio 2003, pet.
denied) (emphasis added). See also Circle Zebra Fabricators, Ltd. v. Americas
Welding Corp., 2011 WL 1844443, 2011 Tex. App. LEXIS 1945 at *15-17 (Tex.
App.—Corpus Christi March 17, 2011, orig. proceeding, no pet.).4
Rotorcraft seeks to distinguish Barsness on the basis that it acknowledged a
right to challenge an arbitral award on common law grounds, now precluded after
Hall St. Associates, L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008). This is
disingenuous. Barsness clearly also holds that an appeal may not be precluded
based on statutory grounds for challenging the award. See supra, 126 S.W.3d at
238. And Circle Zebra, which cites to Barsness, comes after Hall St., and holds:
[T]he "no appeal" language does not affect Circle Zebra's ability to
4
Unfortunately Appellants' counsels' law firm subscribes to LEXIS rather than WestLaw. The
alternative WestLaw case citation is provided. The portion of the opinion referenced is in the
"Conclusion" section at the close of the opinion.
APPELLANTS' RESPONSE TO MOTION TO DISMISS Page 9
178657
vacate or modify an arbitration award on grounds listed in the Texas
Arbitration Act or the Federal Arbitration Act.
Circle Zebra, 2011 WL 1844443, 2011 Tex. App. LEXIS 1945 at *16 (emphasis
added; citations omitted). As also noted in Circle Zebra:
See In re Gulf Exploration, LLC, 289 S.W.3d at 842 ("If a trial court
compels arbitration when the parties have not agreed to it, that error
can unquestionably be reviewed by final appeal.").
Id. This is directly analogous to the circumstance present here—the Woodards
urge that they did not agree to arbitrate before a sole arbitrator who did not serve
on the prior panel in the earlier arbitration between these parties. Whether they are
correct or not on that point goes to the merits of the appeal, not the right to appeal.
A recent federal court case reached a similar conclusion under the FAA:
Is a non-appealability clause in an arbitration agreement that eliminates
all federal court review of arbitration awards, including review under §
10 of the FAA, enforceable? We conclude that it is not.
In re Wal-Mart Wage & Hour Employment Practices Litig. v. Class Counsel & Party
to Arbitration, 737 F.3d 1262, 1264 (9th Cir. 2013). The Wal-Mart court reasoned,
inter alia, as follows:
Just as the text of the FAA compels the conclusion that the grounds
for vacatur of an arbitration award may not be supplemented, it also
compels the conclusion that these grounds are not waivable, or subject
to elimination by contract....
Permitting parties to contractually eliminate all judicial review of
arbitration awards would not only run counter to the text of the FAA,
but would also frustrate Congress's attempt to ensure a minimum
level of due process for parties to an arbitration. ... If parties could
APPELLANTS' RESPONSE TO MOTION TO DISMISS Page 10
178657
contract around this section of the FAA, the balance Congress
intended would be disrupted, and parties would be left without any
safeguards against arbitral abuse.
Id. at 1267, 1268. Consequently, the Woodards have a right to pursue this appeal
on at least one issue—the constitution of the arbiter.
Rotorcraft relies on MACTEC, Inc. v. Gorelick, 427 F.3d 821 (10th Cir.
2005), for the proposition that even if there may be no waiver of some judicial
review (i.e., by the District Court), there may nonetheless be a waiver of a right to
review by the Court of Appeals. However, this is inconsistent with the Texas cases
cited supra. Further, Rotorcraft is operating under a false premise in that regard.
MACTEC stated that the agreement there provided for District Court review, but
that this District Court review would be final. That is not what the SPA provides.
It provides: "Such arbitration ... shall be non-appealable." Motion Ex. D at page
56 (emphasis added). This language comes squarely within the ambit of the Wal-
Mart case as precluding any judicial review, which is a void provision. Rotorcraft
cannot "rehabilitate" the provision to allow from some court review, just not by the
Court of Appeals. It stands or falls as stated. So, while the Woodards believe the
rationale of Wal-Mart is sounder than that of MACTEC5, MACTEC also would not
uphold this waiver-of-review provision in the SPA, which tracks Wal-Mart's
5 See also Hoeft v. MVL Group, Inc., 343 F.3d 57, 66 (2d Cir. 2003) ("Unlike arbitration,
however, judicial review is not a creature of contract, and the authority of a federal court to
review an arbitration award - or any other matter - does not derive from a private agreement.')
(citation omitted).
APPELLANTS' RESPONSE TO MOTION TO DISMISS Page 11
178657
provision rather than MACTEC's.
The Court need go no further to deny the Motion to Dismiss. A clear ground
of jurisdiction to entertain the appeal is shown. However, the Woodards do further
note that they believe they have grounds to argue that the Award "exceeded the
arbitrator's powers" under the FAA in another aspect as well, even if the arbiter
were to be found to be "properly constituted" arguendo (which is certainly denied).
Specifically, the same SPA that requires arbitration also requires on the same page
in § 14.14 that "[t]his Agreement shall be governed and construed as to its validity,
interpretation and effect by the laws of the State of Texas...." Motion to Dismiss
Ex. D, page 56. The Texas Supreme Court in Nafta Traders, Inc. v. Quinn, 339
S.W.3d 84 (Tex. 2011), in discussing Hall St., stated:
[A]s the Supreme Court noted, "the FAA lets parties tailor some, even
many features of arbitration by contract, including the way arbitrators
are chosen..., along with ... choice of substantive law."
Nafta, 339 S.W.3d at 93, citing Hall St., 552 U.S. at 586. Thus, if the arbitrator
simply disregarded plainly provided, explicit, and controlling Texas law and
entered his own view of how he thought the case should turn out, then under Nafta
he "exceeds his powers" because "an arbitrator's powers are determined by
agreement of the parties." 339 S.W.3d at 95.
Again, this should be a matter which is resolved on the merits rather than via
APPELLANTS' RESPONSE TO MOTION TO DISMISS Page 12
178657
a Motion to Dismiss.6 Nonetheless, as "exceeds his powers" is a statutory ground
on which judicial review is permitted regardless of a "non-appealable" clause,
Barsness v. Scott, 126 S.W.3d at 237-238; Circle Zebra, 2011 WL 1844443, 2011
Tex. App. LEXIS 1945 at *15-17; Wal-Mart, 737 F.3d at 1264, prima facie
jurisdiction is demonstrated on this ground as well.
WHEREFORE, the Woodards as Appellants pray that the Motion to Dismiss
Appeal will in all things be DENTED, and that this appeal be permitted to proceed on
the merits, as (a) the appeal is not untimely due to the valid Motion for New Trial,
and (b) the non-appealable clause is either not applicable, cannot preclude review of
whether the arbitrator was even agreed upon, or is unenforceable as applied to
statutory grounds for review of the arbitration award.
6 Since Rotorcraft has elected to attach the Woodards' arguments below to its Motion, for
argument showing this total disregard of Texas law on key points, see Motion to Dismiss Ex. A
at 20-24 and Ex. C at 14-24.
APPELLANTS' RESPONSE TO MOTION TO DISMISS Page 13
178657
Respectfully submitted,
/s/Thomas F. Harkins, Jr.
Bruce L. James
State Bar No. 10538000
bjames@whitakerchalk.com
Thomas F. Harkins, Jr.
State Bar No. 09000990
tharkins@whitakerchalk.com.
WHITAKER CHALK SWINDLE
& SCHWARTZ PLLC
301 Commerce St., Ste. 3500
Fort Worth, Texas 76102-4135
Phone: (817) 878-0500
Fax: (817) 878-0501
ATTORNEYS FOR
DEFENDANTS/APPELLANTS
CARL D. WOODARD AND
TIMOTHY D. WOODARD
APPELLANTS' RESPONSE TO MOTION TO DISMISS Page 14
178657
CERTIFICATE OF SERVICE
I certify that a true and correct copy of the foregoing Response is being
served upon the following on this the 11th day of May, 2015:
Marshall M. Searcy, Esq. By Email
marshall.searcy@kellyhart.com
Derek Montgomery, Esq.
derek.montgomery@kellyhart.corn
KELLY, HART & HALLMAN LLP
201 Main Street, Suite 2500
Fort Worth, Texas 76102
Phone: (817) 332-2500
Fax: (817) 878-9280
ATTORNEYS FOR PLAINTIFF,
ROTORCRAFT SERVICES GROUP, INC.
/s/Thomas F. Harkins, Jr.
Thomas F. Harkins, Jr.
178657
APPELLANTS' RESPONSE TO MOTION TO DISMISS Page 15
178657
EXHIBIT 1
352-274417-14
KELLY HART
MARSHALL IA. SEARCY, JR. TELEPHIYNE: (817) 878-3512
marshalisearcy@bilyhartcaat FAX: (817) 878-9280
August 30, 2013
VIA ENTAIL: BartonAaadnorr
Mr. Andrew Barton
American Arbitration Association
18756 Stone Oak Parkway, Ste. 200
San Antonio, TX 78258
Re: Case No. 71459-00304-13; Rotorcraft Services Group, Inc. v. Timothy D.
Woodard and Carl D. Woodard
Dear Mr. Barton:
Claimant Rotorcraft Services Group, Inc. ("Rotorcraft") is in receipt of your August 30,
2013 email in which you state that "the AAA has determined that Justice Raul A. Gonzales
should be contacted to determine his willingness and availability to serve prior to any other
method considered."
Rotorcraft expressly objects to contacting Justice Gonzales because the AAA has no
authority to do so—the parties' written agreement expressly provides for the selection of a three-
member panel pursuant to the commercial arbitration rules.
Rotorcraft specifically objects to any arbitration procedure contrary to that set forth in the
arbitration provision of the 2007 Stock Purchase Agreement ("SPA").
Rotorcraft specifically objects to any and all further proceedings in this case if one or
more arbitrators are selected in a manner or method contrary to the parties' written agreement, as
set forth in the SPA.
In Americo Life, Inc. v. Myer, Case No. 12-0739, the Texas Supreme Court recently
granted a petition for review seeking affirmation of a Texas district court's order vacating an
arbitrators' award where the AAA appointed an arbitrator contrary to the method approved and
agreed to by the-parties. There, the parties' arbitration agreement entitled each party to appoint
one arbitrator that is a "knowledgeable, independent businessperson or professional." Americo
appointed an arbitrator, but Myer objected on the ground that the arbitrator did not satisfy the
AAA's "impartiality" requirement because the arbitrator bad served on two earlier arbitration
panels that resolved disputes under the contract The AAA determined that a party-appointed
arbitrator must be impartial, and therefore disqualified the arbitrator appointed by Americo. The
AAA subsequently appointed a replacement arbitrator and assembled a three-member panel,
which entered a $35 million award against Americo. On Americo's motion, the Texas trial court
vacated the award because it was "void and ha[d] no binding effect" since it "was not issued by a
properly appointed and authorized arbitration panel."
1 5293 3 7 1
FORT WORTH OFFICE I 201 Main Street, Suite 2500 I Fort Worth, IX 76102 I Telephone: (817) 332-2500 I Fax: (817) 878-9280
AUSTIN OFFICE 1 301 Congress, Suite 2000 I Austin, TX 78701 Telephone: (512) 495-6400 I Fax (512) 4
EXHIBIT
Kelly Hart & Hallman,, a Limited Liability PPrtzterihip www_kellyhartcont 10
Werdard.
352-274417-14
The same principles at issue in Americo Life are at play in this case. That is, if the above-
referenced case proceeds after the AAA selects an arbitrator in a manner not agreed to by the
parties—and expressly objected to by Rotorcraft—any ultimate award is subject to being vacated
by the trial court. The applicable law, the AAA rules, and public policy all prohibit the AAA
from selecting an arbitrator in a manner contrary to the parties' written agreement
Rotorcraft therefore objects to the course of action announced in your August 30, 2013
email. To the extent that the AAA denies Rotorcraft's objection, Rotorcraft hereby specifically
requests a running objection to any and all future proceedings in the above-referenced case.
Sincerely,
Marshall M. Searcy, Jr.
cc: Bruce L. James Via Email: bjames@whitakerchalk.cam
Thomas F. Harkins, Jr. and tharkins@whitakerchalk.com
WHITAKER, CHALK, SWINDLE & SCHWARTZ PLLC
301 Commerce Street, Suite 3500
Fort Worth, Texas 76102
Michael E. McCue Via Email• mmccue®meadowscolliencom
Meadows, Collier, Reed, Cousins, Crouch &
Ungerman, LLP
901 Main Street, Suite 3700
Dallas, Texas 75202
Derek Montgomery (firm)
1529337 1 2
EXHIBIT 2
352-274417-14
KELLY HART
MARSHALL M. SEARCY, ht. TELEPHONE (817)878-3512
marshaltsearcy@kellyhart.com FAX: (817)878-9280
September 11, 2013
YL4 EMAIL: BartonAQadr.oix
Mr. Andrew Barton
American Arbitration Association
18756 Stone Oak Parkway, Ste. 200
San Antonio, TX 78258
Re: Case No. 71-459-00304-13; Rotorcre Services Group, Inc. v. Timothy D.
Woodard and Carl D. Woodard
Dear Mr. Barton:
Claimant Rotorcraft Services Group, Inc. ("Rotorcraft") is in receipt of your September
5, 2013 emaiLs and Justice Raul A. Gonzales' executed Notice of Appointment and
memorandum to you of the same date. By this letter, Rotorcraft hereby objects to the
appointment of Justice Gonzales for the reasons specifically noted herein and those previously
expressed in my August 22 and August 30, 2013 letters.
Rotorcraft expressly objected to contacting Justice Gonzales in the first place because the
AAA bad no authority to do so—the parties' written agreement expressly provides for the
selection of a three-member panel pursuant to the commercial arbitration rules. Rotorcraft
specifically objects to any arbitration procedure contrary to that set forth in the arbitration
provision of the 2007 Stock Purchase Agreement ("SPA"). And Rotorcraft specifically objects
to any and all further proceedings in this case if one or more arbitrators are selected in a manner
or method contrary to the parties' written agreement, as set forth in the SPA.
Rotorcraft respectfully requests that the AAA's national review committee review the
appointment of Justice Gonzales and reverse that decision. The correct course of action is to
appoint a. three-member panel, giving the parties an opportunity to strike and object to any
arbitrators for whom they have an objection to serving as an arbitrator. in this proceeding. In
addition to being the correct course of action, it also has the benefit of being the prudent course.
Appointing an arbitrator who served as a partially dissenting member in a prior arbitration
between the parties is inherently unfair, against public policy, against AAA rules, and contrary to
the parties' agreement
1. The SPA contains the only written arbitration agreement signed by all parties, and
requires appointment of a three-member panel pursuant to the Regular
Commercial Arbitration Rules.
The AAA must appoint an arbitrator in accordance with the parties' agreement See
AAA Commercial Arbitration Rule L-2(10. The parties all agree the AAA should look to the
15335073
FORT WORTH OFFICE 1 201 Main Street, Suite 2500 I Fort Worth, TX 76102 I Telephone: (817) 332-2500 I Farfill.11.11.111111.1111
AUSTIN OFFICE 301 Congress, Suite 2000 Austin, TX 78701 Telephone: (512) 495-6400 I Fax: (512) 4 EXHIBIT
e Ily Hart & Hallman, a Limited Liability Partnership I ww.kellyhart.com f 9-
1 \AICIerfaVel
• 352-274417-14
parties' agreement to determine the proper method for selecting arbitrators. See August 22, 2013
letter from Michael M. McCue to Andrew Barton, p. 1 ("[t]he [AAA] is to appoint an arbitrator
in accordance with the parties' agreement"). Therefore, the only question is what the parties
agreed to.
Here, the only written agreement signed by all parties requires appointment of a three-
member panel through the normal AAA procedures. Section 14.15 of the SPA provides:
[A]rbitration shall be conducted by a panel of three arbitrators selected pursuant
to the commercial arbitration rules of the American Arbitration Association at a
time and place mutually agreeable to the parties and the arbitrators within the
State of Texas.
CLAIMANT ROTORCRAFT SERVICES GROUP INC.'S AMENDED DEMAND FOR ARBITRATION (the
"DEMAND"), Ex. A, § 14.15 at WAH 04328. And section 15(a) of the SPA required that any
amendment to that agreement be in writing and signed by all parties.' See DEMAND, Ex. A,
§ 14.6 at WAH 04327. Respondents Timothy D. Woodard and Carl Woodard (collectively, the
"Woodards") do not contest the validity of the SPA. The Woodards do not argue that the terms
stated therein were the terms originally agreed to by the parties. Instead, they merely argue that
the parties reached a subsequent agreement that modified the prior terms. That is false.
a. The letter and email correspondence between the parties do not evince an
agreement for the selection of arbitrators.
The Woodards' August 15, 2013 letter suggests the "parties previously agreed to arbitrate
. . . before Marshall Doke, and if he was not available or refused to serve as arbitrator, that the
claims would be arbitrated before Raul A. Gonwiles, Jr." The Woodards' August 22, 2013 letter
makes a similar suggestion. Those suggestions are demonstrably false.
The AAA need only look at the exhibits offered in support of those suggestions to
understand that each of the documents allegedly evincing an agreement are nothing more than
proposals. They each reflect an ongoing negotiation that was never finalized:
• Attachment A to Mr. McCue's August 22, 2013 letter is an April 16, 2013 email
string where the last communication—one coming from the Woodards' counsel—
reveals that the Woodards were still conferring on what they themselves would agree
to, and were questioning as to whether Rotorcraft would object to Justice Gonzales.
• Attachment B to Mr. McCue's August 22, 2013 letter is an April 19, 2013 email from
Rotorcraft's counsel inquiring whether the Woodards "would agree to (1) utilizing
one arbitrator (Marshall Doke), who was (2) already familiar with the matter. . . .
When you are able, would you let me know on this."
The Woodards' August 22, 2013 letter argues that an unsigned agreement may be enforceable because Rule 11
allegedly does not apply. Rotorcraft does not rely on Rule Il for the enforceability of the parties' agreement to
arbitrate. Rotorcraft relies on the written terms of a contract the parties agreed to, which unquestionably require that
any amendment be made in writing. The Woodards agreed to, and relied upon, the same language when the parties
previously submitted claims to arbitration. Irrespective of Rule 11, the parties contractually agreed that any
modification regarding the arbitration provision must be in writing and signed by the parties. Because no such
signed writing exists here (the Woodards certainly cannot cite any evidence thereof), theSPA is the sole agreement
concerning arbitration.
1533507 1 2
352-274417-14
• Attachment C to Mr. McCue's August 22, 2013 letter is an April 22, 2013 email from
the Woodards' counsel in which he inquires whether an alternative arbitrator
selection process is agreeable to Rotorcraft. Specifically, the Woodards ask whether
Rotorcraft would agree to appoint Marshall Doke if available, or Justice Gonzales if
Mr. Doke is not available or refuses to serve.
• Attachment D to Mr. McCue's August 22, 2013 letter is an April 26, 2013 letter from
Rotorcraft's counsel proposing, amongst other terms, that the parties agree to appoint
Marshall Doke or, if Mr. Doke is unavailable or refuses to serve, to appoint Justice
Gonzales. The letter included signature blocks for the Woodards' counsel to agree to
the terms thereof. As evidenced by the blank nature of those signature blocks on
Attachment D, the Woodards never agreed to those terms. Instead, they rejected the
offer when they subsequently proposed alternative terms.
• Attachment E to Mr. McCue's August 22, 2013 letter is a May 1, 2013 letter from the
Woodards' counsel which rejected the proposed terms from Rotorcraft's April 26,
2013 letter and proposed alternate forms. The letter included signature blocks for
both Rotorcraft and Respondent Tim Woodard's counsel. As evidenced by the blank
nature of those signature blocks on Attachment E, Rotorcraft never agreed to those
terms.
• Attachment F to Mr. McCue's August 22, 2013 letter is a May 10, 2013 letter from
Rotorcraft's counsel to Mr. Doke indicating that the parties "have agreed, as a cost-
saving measure, to entrust resolution to a single arbitrator outside the Ainerican
Arbitration Association, specifically, you." The letter makes no mention of any other
potential arbitrator. Quite clearly, this letter does not evince an agreement to appoint
Justice Gonzales. If Attachment F was a written agreement concerning the method
for appointment of an arbitrator, it was only an agreement to use Mr. Doke and no
one else. And when Mr. Doke elected not to serve as a sole arbitrator in this
proceeding, the parties' only remaining agreement concerning arbitration would have
been that found in the SPA.
Nothing in the Woodards' allegedly supporting documents reveal an agreement to appoint
Justice Gonzales. They reflect a negotiation process for the appointment of alternative
arbitrators that was never final zed. The only written, signed agreement regarding arbitration
between the parties is that found in section 14.15 of the SPA. The Woodards do not refute the
validity of the SPA or section 14.15 thereof. As the only binding agreement between the parties,
the AAA must follow the arbitrator-appointment procedures set forth in section 14.15 of the
SPA.
b. Rotorcraft's live demand makes clear that Rotorcraft did not agree to appoint
Justice Gonzales.
In its live arbitration demand, Rotorcraft submits its claim "for arbitration pursuant to the
parties' agreement in the SPA." See DEMAND, If 9. The live pleading makes no mention of an
agreement to appoint Justice Gonzales. To the contrary, the live pleading "specifically objects to
any arbitration procedure contrary to that set forth in the arbitration provision of the SPA . . .
[and] specifically objects to proceeding with arbitration if any of the procedures set forth in the
SPA are not strictly adhered to." Id at ¶ 12. Thus, Rotorcraft's live pleading indicates that
1533507_1 3
352-274417-14
(1) the arbitrator-appointment process should be that detailed in the SPA, and (2) Rotorcraft
objects to the appointment of Justice Gonzales—it certainly does not agree to it.
While Rotorcraft amended its original demand, the amendment has no effect on the
review panel's determination of whether an agreement to appoint Justice Gonzales exists. The
original demand did not state that the parties agreed to appoint Justice Gonzales.2 Instead, it
reflected a desire for a successive appointment process whereby Marshall Doke, or alternatively
Tom Collins, or alternatively Justice Raul Gonzales be appointed to arbitrate. But that was part
of a desire in negotiation—one which never came to fruition. As the Woodards themselves
acknowledge, the language in the original demand did not reflect an agreement between the
parties. See Mr. McCue's August 22, 2103 letter to Andrew Barton, p. 2. Instead, the Woodards
simply argue the original demand evinces an agreement "to utilize a sole arbitrator." See Mr.
McCue's August 22, 2103 letter to Andrew Barton, p. 2.
Rotorcraft is still willing to arbitrate before a sole arbitrator, if that arbitrator is appointed
pursuant to the AAA's normal commercial arbitration rules (as required in the SPA). But there
is no agreement to do so. Without an agreement to the contrary, the AAA is left with no choice
but to follow the parties' agreement in the SPA and subsequently appoint a three-member panel
pursuant to the AAA's normal commercial arbitration rules.
2. If no agreement concerning appointment of arbitrators exists, the Procedures for
Large, Complex Commercial Disputes require appointment of arbitrators pursuant
to the Regular Commercial Arbitration Rules.
If, for some reason, the AAA determines section 14.15 of the SPA is not the governing
agreement concerning appointment of arbitrators, then the AAA must appoint arbitrators
pursuant to Rules L-2(b) and R-11. Rule L-2(b) provides that if the parties have not reached
agreement on the method for appointing arbitrators, "the AAA shall appoint arbitrators from the
Large, Complex Commercial Case Panel in the manner provided in the Regular Commercial
Arbitration Rules." PROCEDURES FOR LARGE, COMPLEX COMMERCIAL DISPUTES, Rule L-2(b)
(emphasis added). And the Regular Commercial Arbitration Rules provide that the arbitrator
shall be appointed by the AAA sending, simultaneously to each party, an identical list of 10
(unless the AAA believes another number is appropriate) names of persons chosen from the
National Roster. See REGULAR COMMERCIAL ARBITRATION RULES, Rule R-11(a).
These rules mandate appointment of arbitrators by providing a list of 10 or more potential
arbitrators from the Large, Complex Commercial Case Panel. There is simply no discretion to
select and appoint a specific arbitrator. And there is certainly no discretion to select and appoint
a specific arbitrator that one party expressly objects to.
3. The AAA has no authority to appoint a specific arbitrator.
Rotorcraft respectfully submits that the AAA cannot appoint Justice Gonzales, or anyone
else, absent instruction to do so from all the parties. The Code of Ethics for Arbitrators in
2 And even if the original demand did indicate an agreement to appoint Justice Gonzales (it did not), statements
"contained in superseded pleadings are not conclusive and indisputable judicial admissions." Sosa v. Central Power
& Light, 909 S.W2d 893, 895 (Tex. 1995); see also Tyra v. Bob Carroll Constr. Co., 618 S.W.2d 853, 856 (Tex.
Civ. App.—El Paso 1981), 411'4 639 S.W2d 690 (Tex. 1982) (holding that when a party files an amended pleading,
statements made in earlier pleadings are no longer binding on the pleading party, who is free to subsequently dispute
the alleged facts contained in the earlier pleading).
1533507 1 4
352-274417-14
• Commercial Disputes provides that "arbitrators should, after careful deliberation, decide all
issues submitted for determination. An arbitrator should decide no other issues." CODE OF
ETHICS FOR ARBITRATORS IN COMMERCIAL DISPUTES, Canon V(A) (emphasis added). And lain
arbitrator should not delegate the duty to decide to any other person." Id at Canon V(C). The
parties have not "submitted for determination" the issue of whether an agreement concerning the
appointment of arbitrators exists and, if so, the terms of such agreement. It would therefore be
unethical for the AAA to make any such determination. See id at Canon V(A).
4. If the AAA does appoint a specific arbitrator, it is likely that any subsequent award
will be vacated.
Because Rotorcraft has not agreed to the appointment of Justice Gonzales and strongly
objects to any and all future proceedings if his appointment is affirmed by the national review
committee, Rotorcraft will pursue a motion to vacate should the proceeding result in an
arbitration award in favor of the Woodards. And based on the current rules, as well as Texas
Supreme Court's recent decision to grant petition for review in an analogous case, any motion to
vacate an award in favor of the Woodards is likely to be granted.
In Americo Life, Inc. v. Myer, Case No. 12-0739, the Texas Supreme Court recently
granted a petition for review seeking affirmation of a Texas district court's order vacating an
arbitrators' award where the AAA appointed an arbitrator contrary to the method approved and
agreed to by the parties. There, the parties' arbitration agreement entitled each party to appoint
one arbitrator that is a "knowledgeable, independent businessperson or professional." Americo
appointed an arbitrator, but Myer objected on the ground that the arbitrator did not satisfy the
AAA's "impartiality" requirement because the arbitrator had served on two earlier arbitration
panels that resolved disputes under the contract3 The AAA determined that a party-appointed
arbitrator must be impartial, and therefore disqualified the arbitrator appointed by Americo. The
AAA subsequently appointed a replacement arbitrator and assembled a three-member panel,
which entered a $35 million award against Americo. On Americo's motion, the Texas trial court
vacated the award because it was "void and ha[d] no binding effect" since it "was not issued by a
properly appointed and authorized arbitration panel."
The same principles at issue in Americo Life are at play in this case. That is, if this
arbitration is conducted by Justice Gonzales, any ultimate award is subject to being vacated by
the trial court. The applicable law, the AAA rules, and public policy all prohibit the AAA from
selecting an arbitrator in a manner contrary to the parties' written agreement
5. Justice Raul Gonzales—a Dissenting Member to the Prior Arbitration Award—is
Disqualified Under AAA Rule R-17.
Rotorcraft objects to Justice Raul Gonzales serving as an arbitrator in this proceeding
because the parties have not agreed to the appointment of a non-neutral arbitrator and Justice
Gonzales is subject to disqualification for one or more of the reasons set forth in AAA Rule R-17
and other applicable law.
• 3 This same argument should extend to disqualify Justice Gonzales, who served on a prior arbitration panel for a
dispute between the same parties. That arbitration proceeding resulted in an award favoring Rotorcraft. However,
Justice Gonzales did not fully join the other two arbitrators in the majority opinion. Justice Gonzales concurred in
the result but dissented in part. Because he was not in full agreement with the prior panel, the argument espoused in
Americo Life is particularly instructive here.
1533507_1 5
352-274417-14
On April 27, 2011, an arbitration panel incl ding Justice Raul Gonzales, Marshall Doke,
and Tom Collins entered an Award of Arbitrators (the "Prior Award") in Case No. 71-132-Y-
00024-11. Rotorcraft was the Claimant and the Woodards were Respondents in that
proceeding.4 The Prior Award entered relief in Rotorcraft's favor (and against the Woodards) on
claims for a declaratory judgment, breach of contract, breach of warranty, fraud, fraudulent
inducement, and conspiracy. Justice Gonzales entered a concurring and dissenting opinion in the
Prior Award—concurring on the breach of contract and breach of warranty claims, but dissenting
on the fraud, fraudulent inducement and conspiracy claims.
Justice Gonzales' service in rendering the Prior Award, and his dissenting opinion,
disqualify him under AAA Rule R-17. That rule requires that any arbitrator be "impartial and
independent" and "shall be subject to disqualification for (i) partiality or lack of independence,
(ii) inability or refusal to perform his or her duties with diligence and in good faith, and (iii) any
grounds for disqualification provided by applicable law." AAA Commercial Arbitration Rule R-
17(a). Where an arbitrator served as a neutral arbitrator in a prior panel and entered a dissenting
opinion in that prior proceeding, the AAA Rules authorize disqualifying him under the "partiality
or lack of independence" standard. See, e.g., Myer v. Americo Life, Inc., 371 S.W.3d 537, 545
(Tex. App. Dallas 2012, pet. granted).
Here, Justice Gonzales should be disqnal 'fled because the Woodards defensively plead in
a manner requesting that the arbitrator sit in judgment of the Prior Award and, potentially, amend
or clarify it. A neutral, impartial and independent arbitrator would be left to examine only the
face of the Prior Award and would be bound by the majority's opinion—confirmed by the Texas
state district court and, therefore, a final judgment. Justice Gonzales, however, is uniquely
situated to go beyond the face of the Prior Award and the actual record.5 Unlike any neutral
arbitrator, Justice Gonzales would have an opportunity to expound upon and potentially
adopt—his dissenting opinion as a majority here. The Woodards presumably desire Justice
Gonzales for that very reason. Their Answering Statements undoubtedly call the arbitrator to sit
in judgment of the Prior Award. For example, the Woodards argue Rotorcraft is prohibited from
recovering some or all of its claimed indemnifiable losses pursuant to the doctrine of "arbitration
and award of April 27, 2011." See RESPONDENT CARL WOODARD'S ANSWERING STATMENET TO
CLAIMANT'S DEMAND FOR ARBITRATION, p. 3, ¶ 4(g). The Woodards' Answering Statements
also pleads "that the SPA is ambiguous as to what an indemnity claim is." Id at p. 3, I 4(f).
They do so despite the Prior Award's clear findings, conclusions and declarations on
Indemnifiable Losses6—all of which the Woodards agreed to subsequently confirm, without
objection, through the Texas state district court. The Woodards further contend Rotorcraft's
claims are barred by the doctrines of res judicata, collateral estoppel and judicial estoppel. See
ri
id at p. 3, 4(c), (h), (i). Each of these plead affirmative defenses request the arbitrator to sit in
judgment of the Prior Award—a final judgment. Appointing a dissenting member to the Prior
Award as an arbitrator in this proceeding runs afoul of all notions of fundamental fairness.
4 There were three additional Respondents in that case—Lisa M. Hall, Sandpiper Airport Inn, Inc., and Woodard
Aviation Holdings, Ltd.
5 There is no transcript of the prior arbitration hearing, so Justice Gonzales would have the unique knowledge of the
evidence received at the multi-day arbitration hearing,
6 These included stipulations entere by the Woodards themselves concerning their liability for Indemnifiable Losses
and the meaning of the term "Indemnifiable Losses." See, e.g., Prior Award, p. 11, at Conclusions of Law 13 and 14
(stipulating that "Indemnifiable Losses' under the SPA include losses, liabilities, claims, demands (including any
governmental penalty or punitive damages), lost profits damages, penalties, and settlements" and that "Mlle full
scope of the term 'Indemnifiable Loss' is set forth in the 'Definitions' preamble of the SPA.").
1533507 1 6
352-274417-14
For all of the foregoing reasons, Rotorcraft therefore objects to the appointment of Justice
Raul Gonzales and respectfully requests that the national review committee disqualify him from
serving in this proceeding. Rotorcraft respectfully requests that the AAA appoint a three-
member panel of arbitrators who shall be selected pursuant to the AAA's normal commercial
arbitration rules. To the extent that the AAA denies Rotorcraft's objection, Rotorcraft hereby
specifically requests a running objection to any and all future proceedings in the above-
referenced case.
Sincerely,
74 k—
frA141‘
-sf -
Marshall M. Searcy, Jr)
cc: Bruce L. James Via Email: bjames®whitakerchalk.com
Thomas F. Harkins, Jr. and tharkins®whitakerchalk.com
WHITAKER, CHALK, SWINDLE & SCHWARTZ PLLC
301 Commerce Street, Suite 3500
Fort Worth, Texas 76102
Michael E. McCue Via Email: mmccue®meadowscollier.com
Meadows, Collier, Reed, Cousins, Crouch &
Ungerman, LLP
901 Main Street, Suite 3700
Dallas, Texas 75202
Derek Montgomery (firm)
15335071 7
EXHIBIT 3
352-274417-14
KELLY HART
DEREK MONTGOMERY TELEPHONE: (817)878-3540
dereimontgarneryfticelOart.corn FAX: (817) 878-9280
May 28, 2013
VIA CMRRR 7013 0600 0001 7052 6024
American Arbitration Association
Case Filing Services
1101 Laurel Oak Road, Suite 100
Voorhees, NJ 08043
Re: Rotocraft Services Group, Inc. v. Timothy D. Woodard and Carl D. Woodard
To Whom It May Concern:
In preparing your files for a new proceeding to be filed pursuant to the Commercial Rules
of the AAA, please find the enclosed documents:
1. Demand for Arbitration for Tm:tothy D. Woodard;
2. Demand for Arbitration for Carl D. Woodard;
3. Demand for Arbitration; and
4. The pages of the May 10, 2007 Stock Purchase Agreement containing the
arbitration provision.
Thank you for your attention to this matter. Please contact me at your earliest
convenience if you need anything further
Sincerely,
Derek Montgomery
DLM/kdp
Enclosure
1491822 1
FORT WORTH OFFICE j 201 Main Street, Suite 2500 I Fort Worth, 'IX 76102 I Telephone: (817) 332-2500 I Fax: (
AUSTIN OFFICE 301 Congress, Suite 2000 J Austin, TX 78701 Telephone: (512) 495-6400 I Fax: (512) 495
Ke16, Hart & Hallman, a Limited Liability Partnership Iwww.kelOart.com
352-274417-14
•
American Arbitration Association
fer,olort.on Sena' tee Worldwide
COMMERCIAL ARBITRATION RULES
(ENTER THE NAME OF TAE APPLICABLE RULES)
Demand for Arbitration
MEDIATION: Ifyou would like the AAA to contact the other parties and attempt to arrange mediation, please check this box, tO
There is no additional administrative fee for this service.
Name of Respondent Name of Representative (if known)
Timothy D Woodard Bruce L. James
Address: Name of Finn (if applicable):
3925 Stoneshire Court Whitaker, Chalk, Swindle & Sawyer, LLP
Representative's Address
301 Commerce Street, Suite 3500
City • State Zip Code City State Zip Code
Fort Worth TX 76179 Fort Worth TX 76102
Phone No. Fax No. Phone No. Fax No.
817-878-0526 817-878-0501
Email Address: Email Address:
bjames(gwhitakerchalk.com
The named claimant, a party to an arbitration agreement dated May 10, 2007 , which provides for arbitration under the
Commercial Arbitration Rules of the American Arbitration Association, hereby demands arbitration.
THE NATURE OF THE DISPUTE
See attached Demand for Arbitration. Claimant would also note that the parties have agreed to arbitrate the matter before a single arbitrator in Fort
Worth, Texas.
Dollar Amount of Claim $4,000.000.00 Other Relief Sought ill Attorneys Fees kil Interest
_ 81 Arbitration Costa D Punitive/ Exemplary 0 Other
Amount Enclosed $ In accordance with Fee Schedule: 0Flexible Fee Schedule El Standard Fee Schedule
PLEASE DESCRIBE APPROPRIATE QUALIFICATIONS FOR ARBITRATORS) TO BE APPOINTED TO HEAR THIS DISPUTE:
The parties would prefer that Marshall Doke serve as arbitrator since he previously served on a panel which entered the declaratory judgment upon
which Claimant now seeks specific, quantified indemnifiable Losses.
Hearing locale Fort Worth, Texas (check one) SI Requested by Claimant D Locale provision included in the contract
Estimated time needed for hearings overall: Type of Business: Claimant Helicopter service and completion
hours or 2.00 days Respondent Former owner of business
Is this a dispute between a business and a consumer? [Yes No
Does this dispute arise out of an employment relationship? D Yes El No
If this dispute arises out of an employment relationship, what was/is the employee's annual wage range? Note: This question is required
by California law. OLess than $100,000 0 $100,000 - $250,000 0 Over $250,000 •
You are hereby notified that a copy of our arbitration agreement and this demand are being filed with the American Arbitration
Association with a request that it commence administration of the arbitration. The AAA will provide notice of your opportunity
to file an answering statement.
Si I, . • Is ay be sign , , a representative) Date: Name of Representative
. AP 41. Adirer d.:•■ Marshall Searcy and Derek Montgomery
Name of Claimant 411111
Rotorcraft Services Group, .
a 5/0//3
Name of Firm (if applicable)
Kelly Hart & Hallman LLP
Address (to be used in connection with this case): Representative's Address:
4001 N Main Street 201 Main Street, Suite 2500
City State Zip Code City State Zip Code
Fort Worth TX 75106 Fort Worth TX 76102
Phone No. Fax No. Phone No. Fax No.
(817) 332-2500 (817) 878-9740
Email Address: Email Address:
rnarshall.searcy@kellyhartcom derek.montgomery©kellyhart.com
To begin proceedings, please send a copy of this Demand and the Arbitration Agreement, along with the filing fee as provided for in
the Rules, to the AAA. Send the original Demand to the Respondent.
Please visit our website at www.adr.org if you would like to file this case online. AAA Case Piling Services can be reached at 877-495-4185
352-274417-14
American /Arbitration Association
Dispute Reseltelion Strokes Worldwide
COMMERCIAL ARBITRATION RULES
(ENTER THE NAME OF THE APPLICABLE RULES)
Demand for Arbitration
MEDIATION: If you would like the AAA to contact the other parties and attempt to arrange mediation, please check this box. b)
There is no additional administrative fee for this service.
Name of Respondent Name of Representative (if known)
Carl D Woodard Wheel E. McCue
Address: Name ofYmn (if applicable):
3925 Weshvay Terrace Meadows, Cotter, Reel, Cousins, Crouch & Ungerman, UP
Representative's Address
901 Main Street Suite 3700
City State Zip Code City State Zip Code -
Fort Worth TX 76179 Dallas TX 75202
Phone No. Fax No. Phone No. Fax No.
214-749-2460 _ 214-747-3732
Email Address: Email Address: .
rnmccue@meadowscolfier.00m
• The named claimant, a party to an arbitration agreement dated May 10,2007 , which provides for arbitration under the
Commercial Arbitration Rules of the American Arbitration Association, hereby demands arbitration.
THE NATURE OF THE DISPUTE
See attached Demand for Arbitration. Claimant would also note that the parties have agreed to arbitrate the matter before a single arbitrator In Fort
Worth, Texas.
Dollar Amount of Claim $4,000,000.00 Other Relief Sought lit Attorneys Fees iii Interest
SI Arbitration Costs 0 Punitive! Exemplary 0 Other
Amount Enclosed S In accordance with Fee Schedule: DFlexible Fee Schedule El Standard Fee Schedule
PLEASE DESCRIBE APPROPRIATE QUALIFICATIONS FOR ARI3ITRATOR.(S) TO BE APPOINTED TO HEAR THIS DISPUTE:
The parties would prefer that Marshall Doke serve as arbitrator since ha previously served on a panel-which entered the declaratory judgment upon
which Claimant now seeks specific, quantified Indemnifiabie Losses.
Hearing locale Fort Worth, Texas (check one) V Requested by Claimant 0 Locale provision included in the contract
Estimated time needed for hearings overall: Type of Business: Claimant Hera:peter service and completion
hours or zoo days Respondent Former owner of business
Is this a dispute between a business and a consumer? DYes 8 No
Does this dispute arise out of an employment relationship? °Yes V No
If this dispute arises out of an employment relationship, what was/is the employee's annual wage range? Note: This question is required
by California law. °Less than $100,000 0 $100,000 - $250,000 0 Over $250,000
You are hereby notified that a copy of our arbitration agreement and this demand are being filed with the American Arbitration
Association with a request that it commence administration of the arbitration. The AAA will provide notice of your opportunity
to file an answering statement
Si may v. - —, — •", tative) Date: Name of Representative
be signeldia.
■••--.
..........
--lasor S /ASA 3 Marshal Searcy and Derek Montgomery
Name of Claimant 4.04 -11111"ilk Name of Firm (if applicable)
Rotorcsaft Services Group, - Kelly Hart & Hallman LIP
Address (to be used in connection with this case): Representative's Address:
4001N Main Street 201 Main Street, Suite 2500
City State Zip Code City Slate Zip Code
Fort Worth TX 78108 Fort Worth IX 76102
Phone No. Fax No. Phone No. Fax No.
(817) 332-2500 (817) 878-9740
Email Address: Email Address:
marshatsearcy@kelyhart.com derek.montgamety kellyhart-corn
To begin proceedings, please send a copy of this Demand and the Arbitration Agreement, along with the filing fee as provided for in
the Rules, to the AAA. Send the original Demand to the Respondent.
Please visit our website at www.adrorg ifyou would Ifiro to file this case online. MA Case Filing Services can be reached at 877-4954185
352-274417-14
ARBITRATION PROCEEDING
ROTORCRAFT SERVICES GROUP, INC.,
Claimant,
v. ARBITRATION
PROCEEDING
CARL D. WOODARD & TIMOTHY D.
WOODARD,
Respondents.
CLAIMANT ROTORCRAF SERVICES GROUP INC.'S DEMAND FOR
ARBITRATION
Claimant Rotorcraft Services Group Inc. ("Rotorcraft") submits this Demand for
Arbitration against Respondents Carl D. Woodard and Timothy D. Woodard (collectively,
"Respondents").
INTRODUCTION
1. Claimant Rotorcraft seeks recompense for the Indemnifiabie Losses incurred as a
result of Respondents' criminal, fraudulent, and deceptive conduct. Respondents Carl and
Timothy Woodard (the "Woodards") were the prior owners of Texas Aviation Services, Inc.
("TAS")' — a company that repaired and refurbished helicopters for private companies,
individuals, and the United States government. Rotorcraft bought the assets of TAS from the
Woodards through a 2007 Stock Purchase Agreement ("SPA") whereby the Woodards received
approximately $8,000,000 plus other forms of consideration. Unbeknownst to Rotorcraft at the
time it entered into the SPA, the Voodards had fraudulently invoiced the United States
government for hundreds of thousands of dollars of work that was never performed under a
contract to refurbish numerous Blackhawk helicopters. The Woodards had taken similar actions
with respect to contracts for the repair and refurbishment .of other helicopters owned by private
In September 2010, TAS was renamed as RSG Aviation, Inc. For purposes of clarity, Rotorcraft continues to refer
to that company as TAS.
CLAIMANT ROTORCRAFT SERVICES GROUP INC.'S DEMAND FOR ARBli RATION - PAGE I
DAL:786380.4
352-274417-14
companies and individuals. The Woodards concealed this fraudulent conduct from Rotorcraft.
In fact, the SPA through which the Woodards received approximately $8,000,000 included
several representations that they had not engaged in such conduct.
2. Sometime after the 2007 SPA, the U.S. Government began investigating the
Woodards and TAS concerning time billed for work allegedly done on the refurbishment of
Blackhawk helicopters. In July 2010, Lisa Hall (Tim Woodard's step-daughter And a former
Vice President of TAS) pled guilty to federal fraud charges and testified that the Woodards
instructed her to markup the number of hours billed for work on the Blackhawk helicopters and
for other civil aircraft billings.
3. Up and until Lisa Hall's testimony, the Woodards had continuously maintained
their innocence in the matters investigated by the U.S. Government. Armed with conclusive
proof otherwise, Rotorcraft filed suit on September 10, 2010, seeking a declaratory judgment that
it was entitled to its Indemnifiable Losses caused by the Woodards fraudulent and criminal
conduct, and asserting other causes of action. All parties agreed to arbitrate the issues before a
panel of three arbitrators selected pursuant to the AAA rules and procedures. The Arbitrators
entered an award on April 27, 2011, finding, inter alia, that Rotorcraft was entitled to its
Indemnifiable Losses at such time as they may be determined with reasonable certainty. The
Arbitrators found the Woodards jointly and severally liable for all such Indemnifiable Losses.
4. The Woodards elected not to make a motion to amend or vacate the Arbitrators'
Award. Instead of making such a motion, the Woodards executed an Agreed Motion to Confirm
the Arbitrators' Award to be entered by the 17th District Court for Tarrant County, Texas. The
l7th District Court subsequently granted that motion, and entered an Agreed Order Confirming
the Arbitrators' Award, which is now a final judgment (the "Final Judgment").
CLAIMANT ROTORCRAFT SERVICES GROUP INC.'S DEMAND FOR ARBITRATION - PAGE 2
352-274417-14
5. Final judgment in hand, Rotorcraft sent the Woodards indemnification demands
seeking specific payments for certain Indemnifiable Losses. At the Woodards' request,
Rotorcraft sent numerous, detailed documentation substantiating each of the Indemnifiable
Losses. In direct contravention of the Final Judgment and the Arbitrators' Award, the Woodards
have failed to pay Rotorcraft a single $.01 for its Indemnifiable Losses. The Woodards admit
that at least some of the demanded amounts are, in fact, Indemnifiable Losses. Nevertheless,
they refuse to pay Rotorcraft. Rotorcraft files this Demand seeking an order requiring that the
Woodards pay Rotorcraft $3,458,344.22 for the Indemnifiable Losses noticed to date.
PARTIES
6. Rotorcraft Services Group, Inc. is a Delaware corporation with its principal place
of business at 3901 North Main Street, Fort Worth, Texas 76106.
7. Carl Woodard is an individual who resides at 3925 Westway Terrace, Fort Worth,
Texas 76179.
8. Tim Woodard is an individual who resides at 3925 Stoneshire Court, Fort Worth,
Texas 76179.
THE PARTIES AGREE TO ARBITRATE THESE CLAIMS BEFORE A SOLE ARBITRATOR
9. The parties to this proceeding have agreed to submit this Demand to a single
arbitrator, notwithstanding the SPA's language otherwise requiring a panel of three arbitrators
parties' prior agreement to arbitrate claims before a panel of three arbitrators. Specifically, the
parties have agreed that Rotorcraft's Indemnifiable Loss claims shall be arbitrated before one of
the three arbitrators who conducted the prior arbitration between the parties—Marshall Doke,
Tom Collins, and Raul A. Gonzalez. The parties have agreed that their preference would be for
Marshall Doke to arbitrate the present claim. If Mr. Doke is unavailable, Rotorcraft requests that
CLAIMANT ROTORCRAFT SERVICES GROUP INC.'S DEMAND FOR ARBITRATION - PAGE 3
352-274417-14
Tom Collins arbitrate the present claim. If Mssrs. Doke and Collins are both unavailable, the
parties request that Raul A. Gonzalez arbitrate the present claim.
10. If Mssrs. Doke, Collins and Gonzalez are all unavailable to serve as the
Arbitrator, however, Rotorcraft submits this claim for arbitration before a sole arbitrator to be
selected pursuant to the commercial arbitration rules of the American Arbitration Association at
a time as soon as practicable in Fort Worth, Texas.
BACKGROUND FACTS
A. Rotorcraft Conducts Business at Meacham Airport.
11. Rotorcraft is a Fort Worth company that occupies more than 85,000 square feet of
hangar space at Fort Worth Meacham International Airport ("Meacham Airport"). Rotorcraft
provides completions, modifications, maintenance, painting, interiors, cabinetry, component
overhaul, and parts distribution on the AgustaWestland, Bell Helicopter 'TEXTRON and
Eurocopter product lines under its FAA Certified Repair Station. Rotorcraft is an approved
Customer Service Facility for helicopters manufactured by both AgustaWestland and . Bell
Helicopter.
B. Rotorcraft Purchases TAS From the Woodards for More than $8,000,000 in 2007.
12. In February 2007, Rotorcraft submitted a letter of intent to acquire TAS from the
Woodards.2 Rotorcraft subsequently conducted a due diligence review of TAS, the results of
which made abundantly clear that the findings and analysis expressed by the firm conducting the
due diligence review were based on information provided by the Woodards and Lisa Hall.3
Based on representations made by the Woodards themselves, Rotorcraft executed the SPA on
May 10, 2007 thereby purchasing the Woodards' stock in TAS for $8,000,000 plus other forms
of consideration.
2See ROTO 001312-21.
3See ROTO 001269-91.
CLAIMANT ROTORCRAVF SERVICES GROUP INC.'S DEMAND FOR ARBITRATION - PAGE 4
352-274417-14
C. The Woodards' Fraudulent and Criminal Conduct Comes to Light After Execution
of the SPA.
13. Before Rotorcraft acquired TAS, the Woodards engaged in a scheme to defraud
the United States Government and other non-governmental customers by inflating time sheets to
falsely invoice those , customers for labor that was never performed by TAS. When the
Woodards controlled TAS, TAS employees would submit time cards reflecting the number of
hours they worked on each helicopter. Lisa Hall then took those time cards and inputted them
into an Excel spreadsheet, which she would typically present to Tim Woodard. At Tim
Woodard's instruction and command, Lisa Hall would inflate the number of labor hours and
prepare an invoice to send to customers using those inflated hours. That fraudulent inflation
occurred in both government and commercial contracts.
14. The United States Government began investigating the fraudulent billing practices
employed by TAS at the time the Woodards were at the helm. Faced with an Information
revolving around TAS' deliberate and criminal decision to falsely invoice the United States
Government for labor never performed on subcontracts TAS secured for the wiring and rewiring
of Black Hawk Helicopters for the United States Army, Lisa Hall pled guilty and testified under
oath that she was acting pursuant to the Woodards' directions. Tim Woodard's wife offered
similar sworn testimony, testifying that "Lisa was given directions by the owners of the
company. They had the final decision on the amount of billing." That testimony came in July
2010.
15. Prior to that sworn testimony, the Woodards continually professed that the
allegations of fraudulent billings were untrue. In fact, the Woodards made several
representations to induce Rotorcraft to execute the SPA back in 2007. Specifically, the
Woodards represented that:
■ TAS operated in compliance with all laws;
CLAIMANT ROTORCRAFT SERVICES GROUP INC.'S DEMAND FOR ARBITRATION - PAGE 5
352-274417-14
■ TAS's financial statements fairly represented the true financial position of
TAS;
■ there were no developments, events, conditions, or circumstances that had or
could have a material adverse effect on TAS;
■ TAS had no undisclosed liabilities;
■ No documents contained untrue statements of a material fact; and
■ TAS and its Shareholders knew of no facts that would materially or adversely
affect or threatens the assets, business, prospects, financial condition or
results of TAS.
Those representations were false. Armed with Lisa Hall and Olga Woodard's testimony
conclusively establishing otherwise, Rotorcraft sought judicial intervention.
D. Rotoreraft Filed Suit and Resolved its Claims Through Arbitration
16. After Rotorcraft learned of the Woodards' detailed and extensive involvement in
that fraudulent activity, it filed suit in the 17th Judicial District Court of Tarrant County, Texas on
September 10, 2010, seeking a declaratory judgment that it was entitled to its Indemnifiable
Losses and asserting causes of action for fraud and breach of contract, among others. All parties
agreed to arbitrate that lawsuit pursuant to the SPA. In its Demand for Arbitration, Rotorcraft
sought a declaration from the Arbitration Panel determining that:
(a) the Woodards must indemnify Rotorcraft for all costs, expenses, attorneys'
fees, and any fine or penalty related to the ongoing government investigation into
TAS's illegal billing practices; (b) the Woodards must indemnify Rotorcraft for
all costs, expenses, attorneys' fees, and payments to any third-party, including,
but not limited to, other Black Hawk project subcontractors, related to TAS's
illegal billing practices; (c) the Woodards must indemnify Rotorcraft for all
attorneys' fees and expenses incurred in this connection with this lawsuit and its
effort to enforce the SPA; and (d) Rotorcraft is entitled to offset the entire
amounts due under the notes.
After hearing the evidence presented during arbitration and considering the parties' pre and post-
arbitration briefing, the Arbitration Panel entered an award on April 27, 2011 (the "Arbitrators'
Award"). A true and correct copy of the Arbitrators' Award is attached hereto as Exhibit C.
CLAIMANT ROTORCRAFT SERVICES GROUP INC.'S DEMAND FOR ARBITRATION PAGE 6
352-274417-14
K The Arbitrators' Award Declared Rotorcraft is Entitled to its Indemnifiable Losses.
17. The Arbitrators' Award ultimately concluded that the Woodards materially
breached the SPA, fraudulently induced Rotorcraft into executing the SPA, conspired with each
other to defraud Rotorcraft, and that Rotorcraft was entitled to a declaratory judgment regarding
its indemnity rights under the SPA.
18. With respect to those indemnity rights, the Arbitration Panel concluded that
Rotorcraft "has, and will continue to incur, 'Indemnifiable Losses' as defined. in the SPA"4 but
that the Woodards had no obligation to pay any "indemnity amount until an amount of loss can
be determined and has been provided by [Rotorcraft] to the Woodards."5 The Arbitration Panel
aptly recognized that assessing the amounts of any Indemnifiable Losses at that time would be
premature because "Indemnifiable Losses are continuing and ongoing" and Rotorcraft could not
"yet specify, as required, the amount of Indemnifiable Losses."6 To that end, the Aribtrators'
Award simply
declare[d] that [Rotorcraft] is entitled, at such time as it can determine
Indemnifiable Losses with finality and reasonable certainty as defined in the SPA,
to the full relief accorded by Article 10 of the SPA. Time and Carl Woodard have
a continuing duty and liability, joint and several, to indemnify [Rotorcraft] for all
Indemnifiable Losses as hereafter determined in the future pursuant to the
procedures of Article 10.7
19. The parties subsequently filed an Agreed Motion to Confirm the Arbitrators'
Award and a corresponding Agreed Order Confirming Arbitrators' Award. Without objection
from the Woodards or a request for modification in any respect, the 17th Judicial District Court
of Tarrant County, Texas confirmed the Arbitrators' Award and entered the Agreed Order on
May 31, 2011. That Agreed Order is now the Final Judgment.
4 Ex. C., p. 7, Q 58.
5 Ex_ C., p. 12,116.
6 Ex. C., p. 12, 1 17.
7 Ex. C., p. 12,118; Ex_ C., p. 15, 1 1.
CLAIMANT ROTORCRAFT SERVICES GROUP INC.'S DEMAND FOR ARBITRATION - PAGE 7
352-274417-14
F. Rotoreraft Determined Some of its Indemnifiable Losses with Finality and
Reasonable Certainty and Provided Those Amounts to the Woodards.
20. Pursuant to both Article 10 of the SPA and the Arbitrators' Award, Rotorcraft
sent several indemnification demands to the Woodards. The demands made to date are as
follows:
Legr-eTrw
,ii,
Tim Woodard Employment
and Commission A y cement
Thus, Rotorcraft has presented demand payments of at least $3,458,344.22 in Indemnifiable
Losses to date. That amount already takes into account an offset to which the Woodards are
entitled!
G. The Woodards Refuse to Pay a Single $.01 for Rotorcraft's Indemnifiable Losses.
21. In contravention of the Arbitrators' Award and the Final Judgment, the Woodards
have failed to pay Rotorcraft for any of its noticed Indemnifi
' able Losses. The Woodards have
8 Rotorcraft acknowledges that the Woodards are entitled to an offset Pending resolution of claims, Rotorcraft
elected to refrain from making payments under a Promissory Note. The Arbitrators' Award did not rescind that
Promissory Note. Accordingly, Rotorcraft still owed the outstanding principal and interest.
CLAIMANT ROTORCRAFT SERVICES GROUP INC.'S DEMAND FOR ARBITRATION - PAGE 8
352-274417-14
failed to make a single payment; however, they have not objected to all of the indemnification
demands. Rather, the Woodards have only lodged partial (and unfounded) objections to certain
Indemnifiable Losses.
22. The Woodards ignore the Arbitrators' Award and Final Judgment's declaration of
Rotorcraft's entitlement to its Indemnifiable Losses relating to the Tim Woodard Employment
and Commission Agreement. In their August 25, 2011 letter, the Woodards argue that
"Rotorcraft has not established any actual damages in connection with the Tim Woodard
Employment and Commission Agreement . . . were caused by any actions of the Woodards." To
the contrary, the Arbitrators' Award found that Rotorcraft "would not have entered into the
Commission Agreement or the amendment thereto if Tim Woodard had disclosed to TAS the
fact and extent of the fraudulent billing scheme." Arbitrators' Award, Finding ¶ 68. Thus, the
losses attributable to the Tim Woodard Employment and Commission Agreement are related to
the Woodards' fraudulent conduct.
23. The Woodards also ignore the Arbitrators' Award and Final Judgment's
declaration of Rotorcraft's entitlement to its Indemnifiable Losses relating to the Attempted Sale
and Leaseback with WP Carey. On August 25, 2011, the Woodards remarkably argue that "[t]he
WP Carey Sale Leaseback was not discontinued as a result of any acts of the Woodards." It is
clear, however, that the Attempted Sale Leaseback with WP Carey failed solely because of the
Woodards' fraudulent conduct and subsequent unwillingness to incriminate themselves. The
Attempted Sale Leaseback with WP Carey failed to close because the parties were unable to
obtain audited financial statements of TAS. The parties employed BDO Seidman to audit TAS's
financial statements but, when BDO Seidman required that TAS's President and Vice-Chairman
for the .audited period sign a representation letter verifying that all reported financials were true
and correct, TAS's President and Vice-Chairman for the audited period (Tim Woodard) failed to
CLAIMANT ROTORCRAFT SERVICES GROUP INC.'S DEMAND FOR ARBITRATION - PAGE 9
352-274417-14
sign that letter. The Arbitrators' Award left no doubt as to why Tim Woodard failed to sign:
"Tim Woodard refused to sign the representation letter because it would incriminate him."
Arbitrators' Award, Finding ¶ 63. Tim Woodard's failure to sign that representation letter
resulted in BDO Seidman not issuing audited financial statements (See Arbitrators' Award,
Finding ¶ 64) and in the failure of the Attempted Sale Leaseback with WP Carey. The
Woodards' assertion that the failed Sale Leaseback was unrelated to their acts or caused directly
by them is blatantly false and is yet another example, of the Woodards' attempt to obfuscate the
law and rights of other parties.
24. The Woodards also ignore the Arbitrators' Award and Final Judgment's
declaration of Rotorcraft's entitlement to its Indemnifiable Losses relating to the DCIS
Investigation and Interconnect Lawsuit. In their October 11, 2011 letter, the Woodards lodged
unfounded objections to Rotorcraft's demand for payment of Indemnifiable Losses relating to the
DCIS Investigation and the Interconnect Lawsuit. The objections are without basis and even
contradict themselves. For example, the Woodards agree to indemnify Rotorcraft for legal fees
relating to the DCIS and Interconnect matters, but also claim that "[n]one of the alleged expenses
in connection with the DCIS Investigation and Interconnect Matters are Indemnifiable Losses
pursuant to the SPA" and are not "allowable Indemnifiable Losses pursuant to the Arbitration
Award." This not only makes no sense, but it is also contrary to the Arbitrators' Award.
Conclusion of Law number 17, for example, specifically identifies the attorney's fees, costs, and
other payments made in the DCIS Investigation and Interconnect Lawsuit as Indemnifiable
Losses. See Arbitrators' Award, Conclusion of Law ¶ 17.
25. The Woodards also ignore the Arbitrators' Award and Final Judgment's
declaration of Rotorcraft's entitlement to its Indemnifiable Losses relating to reputational and
goodwill damages. In their October 11, 2011 letter, the Woodards argue that "[n]one of the
CLAIMANT ROTORCRAFT SERVICES GROUP INC.'S DEMAND FOR ARBITRATION - PAGE 10
352-274417-14
alleged expenses in connection with the Reputational and Goodwill Damages are Indemnifiable
Losses pursuant to the SPA" and are not "allowable Indemnifiable Losses pursuant to the
Arbitration Award." Again, this argument ignores and contradicts the Arbitrators' Award, which
expressly found that "[t]he Woodards' fraudulent billing scheme has substantially damaged the
reputation and goodwill of TAS and [Rotorcraft], but such damage is not quantifiable at this
time." Arbitrators' Award, Finding ¶ 56.
26. The Woodards also ignore the Arbitrators' Award and Final Judgment's
declaration of Rotorcraft's entitlement to its Indemnifiable Losses relating to the Pratt Claims.
The Woodards' fraudulent billing scheme caused both Ron Pratt and Pylon Aviation to stop
sending work to TAS that they would have but for the Woodards' criminal conduct. Like all the
other Indemnifiable Losses that Rotorcraft has notified the Woodards of, the Woodards have
refused to pay any amount for these Indemnifiable Losses relating to Mr. Pratt and Pylon
Aviation's election to send work elsewhere solely because of the Woodards' past criminal
conduct. There is no question that these losses constitute Indemnifiable Losses, as the parties
have expressly stipulated that, under the SPA, Indemnifiable Losses include lost profits damages.
Arbitrators' Award, Conclusion of Law ¶ 14.
27. The Woodards also ignore the Arbitrators' Award and Final Judgment's
declaration of Rotorcraft's entitlement to its Indemnifiable Losses relating to costs and expenses
incurred in pursuit of indemnification. Had it not been for the Woodards' misrepresentations and
false warranties in the SPA, Rotorcraft would not have incurred any losses in pursuit of
indemnification. Arbitrators' Award, Conclusion of Law ¶ 11. Thus, pursuit-of-indemnification
losses fall squarely within those losses that the Woodards are bound to indemnify Rotorcraft
from under the terms of the Arbitrators' Award. More specifically, "Tim and Carl Woodard
have a continuing duty and liability, joint and several, to indemnify [Rotorcraft] for all
CLAIMANT ROTORCRAFT SERVICES GROUP INC.'S DEMAND FOR ARBITRATION - PAGE II
352-274417-14
Indemniflable Losses as hereafter determined in the future pursuant to the procedures of Article
10, which losses presently are continuing and ongoing." Arbitrators' Award, Conclusion of Law
1118 (emphasis added).
REQUEST FOR DECLARATORY RELIEF - INDEMNIFICATION AND OFFSET
28. Rotorcraft hereby incorporates the allegations contained in all preceding
paragraphs as if fully set forth herein.
29. Under the Final Judgment, the Arbitrators' Award and the SPA, the Woodards
must indemnify Rotorcraft from and against "all Indemnifiable Losses imposed upon, incurred
by or asserted against" Rotorcraft related to any misrepresentation, breach of any warranty by the
Woodards, and any document or other item furnished to Rotorcraft in connection with the SPA.
30. Pursnant to Texas Civil Practice & Remedies Code Chapter 37, Rotorcraft hereby
seeks a declaration that:
(a) Rotorcraft is entitled to its Indernnifiable Losses as soon as such
Indemnifiable Losses can be determined by Rotorcraft with finality and reasonable
certainty;
(b) the Woodards must pay Rotorcraft for any of its Indemnifiable Losses
within thirty (30) calendar days of receipt of any notification and demand for payment
thereof;
(c) the Woodards are jointly and severally liable to Rotorcraft in an amount of
$3,458,344.22 for all Indemnifiable Losses expressly noticed to date (including interest
through the date of this Demand);
(d) the Woodards are jointly and severally liable to Rotorcraft for all
attorneys' fees and expenses incurred in connection with this arbitration proceeding and
its effort to enforce the SPA, the Arbitrators' Award, and the Final Judgment; and
CLAIMANT ROTORCRAFT SERVICES GROUP INC.'S DEMAND FOR ARBITRATION - PAGE 12
352-274417-14
(e) any future disputes as to categories or amounts of Indemnifiable Losses
the Woodards are obligated to pay must be lodged after the Woodards have paid the
noticed amounts to Rotorcraft to be held in trust pending resolution of the dispute, and
must be pursued in binding arbitration with all costs and expenses to be borne by the
Woodards;
31. Rotorcraft has hired the undersigned law firm to prosecute its claim for
declaratory relief. An award of reasonable and necessary attorneys' fees to Rotorcraft would be
equitable and just and therefore is authorized by Texas Civil Practice & Remedies
Code § 37:009.
REQUEST FOR RELIEF
Claimant Rotorcraft Services Group Inc. requests that the Arbitrator, upon a hearing on
the merits, enter an order as follows:
1. Declaring that
(a) Rotorcraft is entitled to its Indemnifiable Losses as soon as such
Indemnifiable Losses can be determined by Rotorcraft with finality
and reasonable certainty;
(b) the Woodards must pay Rotorcraft for any of its Indemnifiable
Losses within thirty (30) calendar days of receipt of any
notification and demand for payment thereof;
(c) the Woodards are jointly and severally liable to Rotorcraft in an
amount of $3,458,344.22 for all Indemnifiable Losses expressly
noticed to date (including interest through the date of this
Demand);
(d) the Woodards are jointly and severally liable to Rotorcraft for all
attorneys' fees and expenses incurred in connection with this
arbitration proceeding and its effort to enforce the SPA, the
Arbitrators' Award, and the Final Judgment; and
(e) any future disputes as to categories or amounts of Indemnifiable
Losses the Woodards are obligated to pay must be lodged after the
Woo dards have paid the noticed amounts to Rotorcraft to be held
in trust pending resolution of the dispute, and must be pursued in
CLAIMANT ROTORCRAFT SERVICES GROUP INC.'S DEMAND FOR ARBITRATION - PAGE 13
352-274417-14
binding arbitration with all costs and expenses to be borne by the
Woodards;
2. Awarding Rotorcraft $3,458,344.22 for all Indernnifiable Losses expressly
noticed to date (including interest through the date of the Demand);
3. Awarding Rotorcraft additional prejudgment interest from the date of the Demand
through the date of the Award signed by the Arbitrator;
•4. Awarding Rotorcraft postjudgment interest at the maximum rate allowable by
law; and
5. Awarding Rotorcraft all other relief to which it may prove itself justly entitled,
whether at law or in equity.
CLAIMANT ROTORCRAFT SERVICES GROUP INC.'S DEMAND FOR ARBITRATION - PAGE 14
352-274417-14
Dated: May 28th, 2013.
Respectfully submitted,
Marshall M. Searcy, J
State Bar No. 17955500
Derek Montgomery
State Bar No. 22042264
KELLY, HART & HALLMAN LLP
201 Main Street, Suite 2500
Fort Worth, Texas 76102
Telephone: 817-332-2500
Facsimile: 817-878-9280
ATTORNEYS FOR CLAIMANT
ROTORCRAFT SERVICES GROUP,
INC.
CER1IFICATE OF SERVICE
This is to certify that a true and correct copy of the foregoing document has been sent to
the following counsel of record on the 28th day of May, 2013.
Bruce James, Esq. Michael E. McCue, Esq.
Tom Harkins, Esq. Meadows, Collier, Reed, Cousins, Crouch &
Whitaker, Chalk, Swindle & Sawyer, LLP Ungerman, L L P.
301 Commerce Street, Suite 3500 901 Main Street, Suite 3700
Fort Worth, Texas 76102 Dallas, Texas 75202
CLAIMANT ROTORCRAFT SERVICES GROUP INC.'S DEMAND FOR ARBITRATION - PAGE 15
352-274417-14
14.11. Counterparts. This Agreement may be executed in any number of counterparts,
and each such counterpart shall be deemed to be an original instrument; but all such counterparts
together R1m11 constitute one and the same instrument
' 14.12. Severability. Any provision of this Agreement that is prohibited or unenforceahle
in any'jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Agreement or such
provision, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
14.13. Waiver of Jury Trial. Each party to this Agreement hereby irrevocably and
unconditionally waives to the fullest extend such party may legally and effectively do so, trial by
jury in any suit, action, or proceeding arising under this Agreement.
14.14. Governing Law. This Agreement shall be governed and construed as to its
validity, interpretation and effect by the laws of the State of Texas notwithstanding the choice of
law rules of Texas or any other jurisdiction. in addition, in the case of any dispute under or in
connection with this Agreement, each of the parties hereby consents to the exclusive jurisdiction
and venue of the courts of the State of Texas or the Federal District Court for such state,
provided that such Federal court has subject matter jurisdiction over such dispute, and each of
the parties hereby waives any claim such party may have at any time as to forum non conveniens
with respect to such venue. Notwithstanding anything to the contrary set forth in the preceding
sentence, Acquiror shall have the right to institute any legal action against any of the
Shareholders arising out of or relating to this Agreement in any appropriate court and in any
jurisdiction where any of the Shareholders is subject to personal jurisdiction and where venue is
proper.
14.15. Arbitration. Except as set Ruth in Section 3.4, the parties hereto agree that
binding arbitration shall be the sole means of resolving any claim or dispute under this
Agreement or under any other agreement or document to be delivered at the Closing hereunder,
except only where (a) a party seeks solely equitable relief and where delay could reasonably be
expected to cause inseparable harm, or (b) an award or other relief has been granted in arbitration
or by any court of competent jurisdiction and enforcement of such award, judgment, remedy or
other order cannot otherwise reasonably be accomplished with any certainty of avoiding
substantial harm to the party in whose favor such was granted, or (c) a party hereto wants to join
or implead another party hereto in a legal proceeding involving a third Person, in any of which
cases such party has the option to pursue such action for appropriate relief in any court of
competent jurisdiction. Such arbitration shall be conducted by a panel of three arbitrators
selected pursuant to the commercial
' arbitration rules of the American Arbitration Association at
a time and place mateally agreeable to the parties and the arbitrators within the State of Texas;
shall be non-appealable; shall be determined by the arbitrators in accordance with the rules of the
American Arbitration Association; and the normal rules of evidence contained in the Federal
Rules of Civil Procedure shall apply to such proceeding. The arbitrators shall be required to
render a written opinion upon which their award is based upon the reasonable request of any
party to such proceeding. The award of the arbitrators may be filed in any court as a judgment,
including any state or federal court within the State of Texas. The costs of such arbitration shall
be shared equally between the Shareholders and Acquiror and each shall pay its own counsel
Ranger - TAS Stack Purchase Agreement -56-
DAL:657389.13
ROTO 000060
352-274417-14
fees unless the arbitrators shall otherwise specifically determine as part of their. award. If either
party fails to honor or pay any arbitration award_ within thirty (30) days, the other shalt be
entitled to interest from such date as part of a court's enforcement of such award.
L
Ranger - TAS Stock Purchase Agrement -57-
DAL:07389.13
ROTO 000061
EXHIBIT 4
352-274417-14
McCue, Michael E.
Andrew Barton
Wednesday, September 25, 2013 4:48 PM
To McCue, Michael E.; 'Tom Harkins'; 'Bruce L lames'; Marshall Searcy; Kathryn Moore;
Nickie Caesar; 'Derek Montgomery'
Subject: ARC 71 132 304 13 Arbitrator Challenge Gonzalez Remove 092413
Dear Counsel:
The issue raised by Claimant regarding the objection to the continued service of Arbitrator Gonzalez and responses received were
considered by the MA's Administrative Review Council (Council) on September 24, 2013. After careful consideration of the parties'
contentions, the Coundl has determined that the arbitrator shall be removed in this case. This decision will be made a part of our
administrative file.
The AAA's rule on disqualification provides that an arbitrator shall be subject to disqualification for partiality or lack of
independence, inability or refusal to perform his or her duties with diligence and in good faith, and any grounds for disqualification
provided by applicable law. The Council has carefully reviewed and considered the parties' submissions in this matter, and based
upon the Council's Review Standards available at www.adr.orearc that the parties were previously referred to, the Council has
determined that the arbitrator shall be removed in this case.
Further, the council decided that this matter should be heard by a single arbitrator. Accordingly, I will issue a list of arbitrators for
the parties consideration from which one will be selected. If you would like to provide input as to the qualifications of the neutral, I
will incorporate your suggestions in to my search and attempt to create a list based on those preferences. I can also add to the list, a
number of former judges for your consideration. Please let me know at your earliest convenience, but not later than Friday
(-4ernoon.
ank you for your attention,
Andrew
Andrew Barton
Vice President
American Arbitration Association
18756 Stone Oak Parkway
Suite 200
San Antonio, TX 78258
www.adr.orq
T:210 998 5750
F:
The information in this transmittal (mcluding attachments, if any) is privileged and/or confidential and is intended only for the recipient(s) listed above. Any
review, use, disclosure, distal:union or copying of this tranurdttal is prohibited except by or on behalf of the intended recipient If you have received this transmittal
in error, please notify me immediately by reply email and destroy all copies of the transmittal. Thank you.
1
EXHIBIT 5
352-274417-14
IN ME A °WS COLLIE R
MMUS IT 1.11
kanorag camel. two, an atoubt a unGramoa,t..t.t
REGIBTEM LOAMIDLIABRAYBUCCIaRmileiticLUDDIG notmONALCORKatAlarels
901 MAIN STREET SUITE 3700
DALLAS, TEXAS 75202
(214) 744-3700
MICHAEL M. MCCUE, P.C. wwweltdowscpllicr.com FAX (214) 747-3732
Partner WATS (500) 451-0093
DIRECT DIAL (214)749.2460
minecue@roesdOwICOUier.com
September 27., 2013
By email: l3artonA@adr.org
Mr. Andrew Barton
American Arbitration Association
18756 Stone Oak Parkway, Ste. 200
San Antonio, TX 78258
Re: Case No. 70 132 304 13
Rotorcraft Services Crrozo Inc. v.. Carl D. Woodard & Timothy D. Woodard
Dear Mr. Barton
This is in response to your request dated September 25, 2013, for input as to the
qualifications of a neutral.
As you know, the parties had a lengthy arbitration which resulted in an Award dated
April 27, 2011. Respondents Carl Woodard and Tim Woodard assert that Claimant Rotorcraft's
claims almost exclusively seek alleged damages incurred, if at all, prior to the previous
arbitration. Respondents assert these claims were either expressly denied by the previous
Award, or are now barred based upon res judicata, statute of limitations, and other defenses
which have been asserted by Respondents. Consequently, Respondents request that the list of
arbitrators to be considered be composed entirely of former trial or appellate judges, or at least
experienced litigators, who are knowledgeable abOut Texas law of damages, statute of
limitations, res judicak4 estoppel, and election of remedies.
Respondents also submit that it is much more important that the ultimate arbitrator have
theabove qualifications than be from the DFW area.
For purposes Of the record, Respondents object to AAA's rejection of Justice Raul
Gon7alez as the sole arbitrator pursuant to the parties' agreement, and their participation in the
selection of a replacement arbitrator and the subsequent arbitration is not a waiver of that
objection.
352-274417-14
• September 27, 2013
Page 2
Thank you.
Very truly yours,
Michael E. McCue
MEADOWS COLL= REED COUSINS CROUCH
UticsemANLLP
Attorney for Carl Woodard
Bruce ames
Tom Harkins
WIETA103R CHALK SWINDLE & SCHWARTZ PLLC
Attorneys for Tim Woodard
MEW= •
4360932.W539.1001
cc: Torn Harkins, Esq. /by email
Marshall Searcy; P..sq; /by email
Derek tofoirtgomexy, Esq. lby email
•