                                                                                  ACCEPTED
                                                                              13-15-00312-CV
                                                              THIRTEENTH COURT OF APPEALS
                                                                     CORPUS CHRISTI, TEXAS
                                                                         8/19/2015 6:10:46 PM
                                                                       CECILE FOY GSANGER
                                                                                       CLERK

                        NO. 13-15-00312-CV

               IN THE COURT OF APPEALS      FILED IN
                                     13th COURT OF APPEALS
    FOR THE THIRTEENTH JUDICIAL DISTRICT    OF TEXAS TEXAS
                                  CORPUS CHRISTI/EDINBURG,
                   AT CORPUS CHRISTI 8/19/2015 6:10:46 PM
                                                 CECILE FOY GSANGER
                                                       Clerk
                BRIAN O’GRADY, M.D. AND
         THE O’GRADY FAMILY PARTNERSHIP, LTD.
                       Appellants,

                                 v.

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH,
                         P.A.,
                        Appellee.


    Appealed from the 53rd District Court of Travis County, Texas



                      APPELLANTS’ BRIEF



                               RICHIE & GUERINGER, P.C.
                               SHELDON E. RICHIE
                               State Bar No. 16877000
                               EMILY J. SEIKEL
                               State Bar No. 24072331
                               100 Congress Avenue, Suite 1750
                               Austin, Texas 78701
                               512-236-9220 telephone
                               512-236-9230 facsimile
                               srichie@rg-austin.com Email
                               eseikel@rg-austin.com Email
                               ATTORNEYS FOR APPELLANTS

                ORAL ARGUMENT REQUESTED
                  IDENTITY OF PARTIES AND COUNSEL
      Pursuant to Texas Rule of Appellate Procedure 38.1(a), the following is a

complete list of all parties, and the names and addresses of all counsel, involved in

this case:

Appellants:

      Brian O’Grady, M.D.
      The O’Grady Family Partnership, Ltd.
      As owners of the claim of David Miller, Brett Schulick, and River Oaks
      Capital, Inc. per the June 28, 2013 Turnover Order of Judge Tim Sulak

Counsel for Appellants:
      Sheldon E. Richie
      State Bar No. 16877000
      Emily J. Seikel
      State Bar No. 24072331
      Richie & Gueringer, P.C.
      100 Congress Avenue, Suite 1750
      Austin, Texas 78701
      512-236-9220 Telephone
      512-236-9230 Facsimile
      srichie@rg-austin.com Email
      eseikel@rg-austin.com Email

Appellee:

      National Union Fire Insurance Company of Pittsburgh, P.A.




                                         2
Counsel for Appellee:

      Robert S. Harrell
      Jon C. Rice
      Andrea L. Fair
      Norton Rose Fulbright US LLP
      1301 McKinney, Suite 5100
      Houston, Texas 77010
      713-651-5151 Telephone
      713-651-5246 Facsimile
      robert.harrell@nortonrosefulbright.com Email
      jon.rice@nortonrosefulbright.com Email
      andrea.fair@nortonrosefulbright.com Email




                                       3
                                         TABLE OF CONTENTS

IDENTITY OF PARTIES AND COUNSEL .........................................................2
TABLE OF CONTENTS ........................................................................................4

INDEX OF AUTHORITIES ...................................................................................5

STATEMENT OF THE CASE ...............................................................................8

REQUEST FOR ORAL ARGUMENT................................................................10

ISSUE PRESENTED FOR RELIEF....................................................................11
Did the Arbitration Panel exceed the powers delegated to them at summary
judgment by making fact-findings on disputed issues, where the parties had
authorized the summary judgment proceeding as an initial stage of insurance
coverage arbitration for determinations as a matter of law based on the applicable
insurance policy and an underlying arbitration award, after which discovery
specific to the coverage dispute and arbitration on the merits on remaining claims
were to proceed, and did the trial court err in affirming the award and refusing to
vacate or modify it based on Appellants’ excess of powers argument?

PRELIMINARY STATEMENT ..........................................................................12

STATEMENT REGARDING THE RECORD...................................................18

STATEMENT OF FACTS ....................................................................................21

SUMMARY OF THE ARGUMENT ...................................................................27
ARGUMENT ..........................................................................................................28

PRAYER .................................................................................................................46
CERTIFICATE OF COMPLIANCE ..................................................................48

CERTIFICATE OF SERVICE ............................................................................49

APPENDIX .............................................................................................................50




                                                            4
                                      INDEX OF AUTHORITIES

Cases
Advanced Micro Devices, Inc. v. Intel Corp.,
 885 P.2d 994 (1994) .............................................................................................37
Ancor Holdings, LLC v. Peterson, Goldman & Villani, Inc.,
 294 S.W.3d 818 (Tex.App.—Dallas 2009, no pet.) .............................................29
Armstadt v. U.S. Brass Corp.,
  919 S.W.2d 644 (Tex. 1996) ................................................................................40
Barsness v. Scott,
 126 S.W.3d 232 (Tex.App.—San Antonio 2003, pet. denied) ............................29
Bonshire v. Thompson¸
 60 Cal. Rptr. 2d 716 (Cal. App. 1997) .................................................................36
Brockman v. Tyson,
  No. 01-03-01335-CV, 2005 WL 2850128 (Tex.App.—Houston [1st Dist.]
  Oct. 27, 2005) ................................................................................................ 17, 30
Busse v. Pacific Cattle Feedings Fund No. 1, Ltd.,
 896 S.W.2d 807 (Tex. App. 1995) .......................................................................40
Centex/Vestal v. Friendship West Baptist Church,
 314 S.W.3d 677 (Tex.App.—Dallas 2010, pet. denied) ................... 18, 19, 35, 36
Chem-Met Co. v. Metaland Intern., Inc.,
 No. Civ. A. 96-02548, 1998 WL 3572368, *4 (D.D.C. filed Mar. 25, 1998) .....38
City of Houston v. Clear Creek Basin Auth.,
  589 S.W.2d 671 n.5 (Tex. 1979) ..........................................................................28
Collins v. County of El Paso,
 954 S.W.2d 137 (Tex.App.—El Paso 1997, pet. denied) ....................................28
D.R. Horton-Texas, Ltd. v. Bernhard,
  423 S.W.3d 532 (Tex.App.—Houston [14th Dist.] 2014, pet. filed) ...................18
Duperier v. Texas State Bank,
 28 S.W.3d 740 (Tex. App. 2000) ........................................................................40
Leshin v. Oliva,
  --- S.W.3d ---, 2015 WL4554333 (Tex.App.—San Antonio,
  July 29, 2015, no pet. h.) ............................................................................... 17, 19




                                                           5
Luna v. North Star Dodge Sales, Inc.,
  667 S.W.2d 115 (Tex. 1984) ................................................................................43
Major League Baseball Players Ass’n v. Garvey,
 523 U.S. 504 (2001) .............................................................................................35
McKinney Drilling Co. v. Mach I Limited Partnership,
 32 MD App 205, 359 A.2d 100 (176) ..................................................................37
Myers v. Hall Columbus Lender LLC,
 437 S.W.3d 632 (Tex.App.—Dallas 2014) ..........................................................44
Nafta Traders, Inc. v. Quinn,
 339 S.W.3d 84 (Tex. 2011) ..................................................................................35
National Union Fire Ins. Co. of Pittsburgh, P.A. v. Puget Plastics Corp.,
 532 F.3d 398 (5th Cir. 2008) ......................................................................... 27, 41
Pope v. Rollins Protective Serv. Co.,
 703 F.2d 197 (5th Cir. 1983) ................................................................................41
St. Paul Surplus Lines Ins. Co., Inc. v. Dal-Worth Tank Co., Inc.,
  974 W.S.2d 51 (Tex. 1998) ........................................................................... 41, 43
Stolt-Nielson S.A. v. AnimalFeeds Int’l Corp.,
  559 U.S. 662, 130 S.Ct. 1758 (2010) ...................................................................35
Szuts v. Dean Witter Reynolds, Inc.,
  931 F.2d 830 (11th Cir.1991) ...............................................................................37
T&M Properties v. ZVFK Architects & Planners,
 661 P.2d 1040 (Wyo. 1983) .................................................................................38
Thomas J. Sibley, P.C. v. National Union Fire Ins. Co. of Pittsburgh, P.A.,
  921 F.Supp. 1526 (E.D. Tex. 1996) .....................................................................41
Town of Stratford v. International Federation of Professional and Technical
  Engineers,
  155 Conn. App. 246, 108 A.3d 280 (2015) ..........................................................36
W. Employers Ins. v. Jefferies & Co.,
 958 F.2d 258 (9th Cir. 1992) ................................................................................37
Zervos v. Freedman Properties Ltd.,
  223 N.J. Super. 599, 539 A.2d 336 (1987)...........................................................37




                                                         6
Statutes
TEX. BUS. & COM. CODE § 17.50 (B)(1) ............................................................42
TEX. CIV. PRAC. & REM. CODE § 171.088(a)(3)(A) .........................................34
TEX. CIV. PRAC. & REM. CODE § 171.091(a)(2) ..............................................34
TEX. CIV. PRAC. & REM. CODE § 41.001(11) ...................................................42
TEX. CIV. PRAC. & REM. CODE § 41.001(7) .....................................................43
Other Authorities
AAA Commercial Arbitration Rules and Procedures for Large, Complex
 Commercial Disputes ................................................................................... passim
Rules
Tex. Rev. Civ. St. Ann. Art. 581-33(A)(2) ..............................................................40




                                                      7
                           STATEMENT OF THE CASE
Nature of the underlying
proceeding:                  Appellants filed suit in the District Court of Travis
                             County in August 2013 against Appellee, an
                             insurance carrier, seeking coverage (in the shoes of
                             insureds, pursuant to a turnover order) for a prior
                             judicially-endorsed “FINRA” Arbitration Award.1
                             Appellants asserted causes of action for bad faith,
                             specific performance under the insurance policy, and
                             violations of the Texas Insurance Code and the Texas
                             Deceptive Trade Practices Act.2 The coverage
                             dispute was sent to arbitration. This appeal arises out
                             of the granting of an Order Confirming Arbitration
                             Award and Denying Motion to Vacate, and the entry
                             of a Final Judgment in favor of Appellee on May 15,
                             2015. 3

Course of the Proceedings: On November 8, 2013 the District Court of Travis
                           County entered an Unopposed Order to Transfer to
                           Arbitration. 4 The case proceeded in the American
                           Arbitration Association (AAA) under Case No. 01-
                           14-0000-1777. The parties and the panel of three
                           arbitrators – Susan Perin, John Boyce and Raul A.
                           Gonzalez (the “Arbitration Panel”) – held a
                           preliminary telephonic hearing on August 19, 2014
                           and agreed to conduct the arbitration proceeding in
                           two parts, beginning with an initial summary
                           judgment phase; the Arbitration Panel entered a
                           scheduling order governing the initial summary
                           judgment phase.5 Both sides moved for summary
                           judgment. A summary judgment hearing was
                           conducted before the arbitration panel on December
                           17, 2014.6 On February 6, 2015 the Arbitration

1
      CR:   3-99 (Plaintiffs’ Original Petition).
2
      CR:   3-99 (Plaintiffs’ Original Petition).
3
      CR:   321 – 322 (Order Confirming Award); 323 – 324 (Notice of Appeal).
4
      CR:   102-103 (Unopposed Order to Transfer to Arbitration).
5
      CR:   310 (Case Management Order #1).
6
      CR:   310 (Case Management Order #1); 251 – 253 (Final Summary Award).


                                          8
                             Panel signed a “Final Summary Award” finding no
                             insurance coverage and granting summary judgment
                             in whole to Appellee. 7

Trial Court’s Disposition
of Case:                     Order Confirming Arbitration Award and Denying
                             Motion to Vacate and Final Judgment, entered May
                             15, 2015. 8




7
      CR:   251 – 253 (Final Summary Award).
8
      CR:   321 – 322 (Order Confirming Award).


                                          9
                     REQUEST FOR ORAL ARGUMENT
       Appellants request the opportunity to present oral argument in this

proceeding. Oral argument will assist with clarification of the legal arguments in

this appeal, including the applicability of and distinctions of legal precedent cited

to herein. Oral argument will also be helpful in the decisional process of the Court

to the extent that arguments are unclear to the Court or are disputed between the

parties.   This appeal presents a novel question in this jurisdiction and oral

argument will involve discussion of precedent in other jurisdictions, as well as

public policy and due process considerations.




                                         10
                      ISSUE PRESENTED FOR RELIEF
Did the Arbitration Panel exceed the powers delegated to them at summary

judgment by making fact-findings on disputed issues, where the parties had

authorized the summary judgment proceeding as an initial stage of insurance

coverage arbitration for determinations as a matter of law based on the applicable

insurance policy and an underlying arbitration award, after which discovery

specific to the coverage dispute and arbitration on the merits on remaining claims

were to proceed, and did the trial court err in affirming the award and refusing to

vacate or modify it based on Appellants’ excess of powers argument?




                                        11
                         PRELIMINARY STATEMENT
      Appellants Brian O’Grady, M.D. (“Dr. O’Grady”) and his family partnership

The O’Grady Family Limited Partnership, Ltd. (“OGFP”) (collectively

“Appellants” or “O’Grady”) lost millions in three investment schemes promoted

by two individuals, Brett Schulick and David Miller, in 2004 and 2007. At all

pertinent times Mr. Schulick and Mr. Miller were registered representatives of

Woodbury Financial Services, Inc. (“Woodbury”).             At all pertinent times

Woodbury also had a professional negligence policy in place which was designed

to cover the “Wrongful Acts” of negligent Woodbury representatives in the

rendering of professional services to clients, such as Dr. O’Grady. 9

      O’Grady filed suit in 2008 and claims against Miller, Schulick, River Oaks

Capital Management, Inc. (“River Oaks”), and Woodbury were transferred to an

arbitration proceeding before the Financial Industry Regulatory Authority

(FINRA). Several days of trial testimony and evidence was presented to the

FINRA panel, and in October 2012 they issued the “FINRA Award” in favor of

O’Grady. 10 The FINRA Award found that Miller, Schulick and River Oaks were

jointly and severally liable for gross negligence and for violations of the Texas

Deceptive Trade Practices Act and the Texas Securities Act. 11


9
      CR:    12 – 95 (Woodbury Insurance Policy).
10
      CR:    145 – 157 (FINRA Award).
11
      CR:    145 – 157, at 152 (FINRA Award).


                                           12
      The 98th Judicial District Court of Travis County, Texas approved of the

FINRA Award and entered a Final Judgment for $3,279,351.49 plus interest

against Miller, Schulick and River Oaks on February 28, 2013.12 On June 28, 2013

Appellants obtained a Turnover Order from Judge Tim Sulak, whereby Appellants

were deemed the owners of potential insurance-related causes of action,

specifically including against Woodbury’s Insurer National Union.13

      Appellants’ coverage dispute with Appellee National Union subsequently

arose after unsuccessful demands for payment for the Judgment by O’Grady.

Appellants filed the underlying lawsuit asserting bad faith, specific performance

under the policy, and violations of the Texas Insurance Code and the Texas

Deceptive Trade Practices Act.14 The coverage dispute was submitted to a three-

arbitrator panel under the AAA (the “Arbitration Panel”). 15

      At the outset of the AAA arbitration proceedings the parties agreed to

bifurcate the proceedings and to proceed with an initial summary judgment phase

to determine certain claims as a matter of law.        The parties agreed that no

discovery specific to the coverage dispute would be conducted while the

preliminary summary judgment stage was pending, in the interest of efficiency and

in order to streamline future discovery to remaining coverage issues. As such, the
12
      CR: 96 – 97 (Final Judgment).
13
      CR: 98 – 99 (Turnover Order).
14
      CR: 3-99 (Plaintiffs’ Original Petition).
15
      CR: 102 – 103 (Unopposed Order to Transfer to Arbitration); 310 (AAA Case
      Management Order #1).


                                         13
parties agreed that the Arbitration Panel was to make summary judgment findings

based on (a) the face of the FINRA Award and (b) the face of the Woodbury

Insurance Policy, with a limited ability to look “behind” those documents to the

record from the underlying FINRA proceeding solely for explanation of the

FINRA Award. The parties did not agree to the Arbitration Panel’s use of the

underlying FINRA record to make their own factual findings not apparent from the

face of the FINRA Award, nor to decide on the credibility of disputed facts; nor

did they agree to forego the opportunity to conduct discovery on non-established or

disputed issues of fact that would inform the coverage dispute issues.         The

Arbitration Panel, however, as more fully described herein, conducted itself in

excess of their powers at the summary judgment stage of the proceeding, looked

behind the FINRA Award (which was an unreasoned opinion and contained no

findings of fact), made improper findings of fact, and summarily disposed of the

dispute in the Insurer’s favor.16

      The underlying coverage dispute involved three investment products

promoted by Miller and Schulick, and the Final Summary Award issued by the

Arbitration Panel summarily denied coverage for them all. 17 While Appellants




16
      CR:    251 - 253 (Final Summary Award).
17
      CR:    251 - 253 (Final Summary Award).


                                          14
believe that there were numerous problems with the Final Summary Award,18

Appellants asked the lower court to vacate or modify the Final Summary Award

only for its summary judgment denial of coverage for one of the investment

schemes – the “Asset Protection Plan” or “APP”. 19 Now Appellants further limit

their argument and bring this Appeal on only one of three bases for vacatur that

were urged to the lower court – “excess of powers.” As such, a synopsis of the

basic characteristics of, and known background on, the Asset Protection Plan is

informative to this Brief and to why the Arbitration Panel exceeded the powers

delegated to them by the parties at the agreed-upon summary judgment stage of the

AAA arbitration proceedings.

      After the agreement to bifurcate the arbitration proceeding, the parties each

filed competing summary judgment motions to argue that certain claims or

defenses could be summarily dealt with based upon the FINRA Award and the

Insurance Policy at issue. The briefing of each side referred to parts of testimony

and evidence that had been presented to the FINRA panel, and did so to provide

background and also to demonstrate that disputed facts exist.                 As such, the

Arbitration Panel heard prior testimony that the Asset Protection Plan was

presented to Dr. O’Grady in 2004 as a Woodbury-endorsed investment scheme that


18
      Including improper fact-finding regarding all the investment vehicles, as well as taking
      such an insurer-friendly position as to violate public policy and gross mistake of law.
19
      CR: 115 – 280 (Motion to Vacate or Modify Arbitration Award).


                                             15
would serve to protect the assets of Dr. O’Grady’s medical practice from creditors.

It heard that, under the Asset Protection Plan, Dr. O’Grady was sold creditor-

protected Woodbury and Hartford products (Woodbury is a subsidiary of The

Hartford), which he purchased using funds from a bank loan that was collateralized

by the accounts receivables of his medical practice. They heard that the APP

exclusively involved Woodbury/Hartford life insurance and annuities – products to

which Miller and Schulick had access only by reason of their status as Woodbury

representatives. They heard that the River Oaks office from which the APP was

marketed to Dr. O’Grady displayed a Woodbury sign and license showing agency

with Woodbury; that Miller and Schulick’s direct supervisor at Woodbury was

aware of the Asset Protection Plan; that Woodbury approved of the products it sold

to Dr. O’Grady under the APP and Woodbury/Hartford were paid over $1 million

in premiums for those products. They saw documentation on which Woodbury

had listed Dr. O’Grady as a “client” who had generated significant production for

Woodbury/Hartford. They learned that Miller and Schulick’s sole commissions

made under the APP were paid by Woodbury. They also learned that, despite

assurances that the APP was a low-risk plan designed to insulate the assets of Dr.

O’Grady’s medical practice from creditors, the funds were put into high-risk,

aggressive vehicles. Documentation demonstrated that Woodbury had notice that

its products were being purchased with borrowed funds, based on the financial



                                        16
statements submitted with the applications to purchase its products, and that

Woodbury was aware the products Dr. O’Grady purchased were high-risk,

aggressive vehicles. Woodbury profited from the sale of those products.

      Appellants raise these preliminary points regarding Woodbury and the APP

not in order to say that the Arbitration Panel should have ruled otherwise as to

coverage of the APP, but instead to demonstrate the Arbitration Panel made

findings in excess of the powers delegated to it in the bifurcated proceeding,

although they were aware of the existence of disputed facts.           This was in

contravention of the well-established procedural rules of summary judgment.

For example, there had been no prior adjudication on the question of Woodbury’s

“approval” of and “distribution” of the APP (for purposes of “Professional

Services” coverage under the Policy), no such fact finding could be gleaned from

the FINRA Award, and such issues were under heavy dispute. The FINRA Award

contains no finding on those questions or other coverage-specific issues.20

      By making findings of fact the Arbitration Panel exceeded the authority

given to it by agreement of the parties, which was to make findings as a matter of

law in the preliminary summary judgment stage.            The Arbitration Panel’s

overreach has denied Appellants due process and has caused Appellants to lose

their right (assured under the AAA Rules themselves) to put on evidence specific


20
      CR:    145 – 157 (FINRA Award).


                                         17
to the coverage dispute issues and to an arbitration proceeding on the merits of the

coverage dispute.

                  STATEMENT REGARDING THE RECORD
      Contrary to Appellee’s contention in the trial court, the lack of a transcript of

the underlying arbitration proceeding is not fatal to the instant case.

      First, no transcript exists, not due to any failure of the Appellants, but due to

the Arbitration Panel’s premature summary disposal of the arbitration, after a

preliminary summary judgment hearing that did not even involve evidentiary

rulings. No hearing on the merits ever took place, at which the parties’ viable

claims were tried, through live testimony and/or the submission of evidence.

There was no “hearing on the merits” where all “proofs, allegations, arguments and

authorities of the parties” were aired. Brockman v. Tyson, No. 01-03-01335-CV,

2005 WL 2850128 (Tex.App.—Houston [1st Dist.] Oct. 27, 2005).                  Thus a

“complete record” by the traditional sense is not in existence, nor could it be.

      Moreover, no such record is required in order to vacate or modify an

arbitration award on the basis of excess of powers. Leshin v. Oliva, --- S.W.3d ---,

2015 WL4554333 (Tex.App.—San Antonio, July 29, 2015, no pet. h.). While

some Texas appellate courts have held that there can be no appellate review of an

arbitrator’s decision without a complete record of the evidence presented at

arbitration, such cases have dealt primarily with gross mistake of law, or other



                                          18
bases for vacatur. “Excess of powers” as a basis for vacatur, on the other hand, is

different than mistake of law, as the appropriate inquiry in determining if

arbitrators acted in excess of their powers is not whether the arbitrators decided an

issue correctly, but whether the arbitrator had the authority to decide the issue at

all. D.R. Horton-Texas, Ltd. v. Bernhard, 423 S.W.3d 532, 534 (Tex.App.—

Houston [14th Dist.] 2014, pet. filed). The authority of arbitrators is derived from

the arbitration agreement and is limited to a decision of matters submitted either

expressly or by necessary implication. Centex/Vestal v. Friendship West Baptist

Church, 314 S.W.3d 677, 684 (Tex.App.—Dallas 2010, pet. denied). Such a

determination can frequently be made from, for example, the face of the arbitration

agreement, pleadings, and other documents and it is thus intuitive that a full record

is not necessarily required. Id. at 685 (noting the application of the general rule

that a record must be used to establish the basis for vacating an award does not

foreclose on a consideration of whether the arbitrator exceeded his authority, the

court decided on an excess of powers argument and did so without access to a

complete record of arbitration proceeding).

      Just this summer, on July 29, 2015 the San Antonio Court of Appeals

reversed a trial court’s affirmation of an arbitration award after concluding that the

arbitrator had exceeded his powers – and did so without access to a complete

record and with express affirmation that it could be done without a complete



                                         19
record. Leshin v. Oliva, --- S.W.3d ---, 2015 WL4554333 (Tex.App.—San

Antonio, July 29, 2015, no pet. h.).        The appellate record consisted of the

arbitration award, the pleadings on the request to vacate the award, and a copy of

trust agreement that contained the arbitration agreement. “[B]ecause the scope of

the arbitrator’s powers is ultimately derived from these documents” the lack of an

arbitration transcript did not preclude consideration of whether the arbitrator

exceeded his powers. Id. at *4. The court reversed the confirmation of the award.

Id. at *1.

       In the instant case, the question of whether the Arbitration Panel acted in

excess of the powers delegated to them for the summary judgment proceedings

does not “turn on the evidence offered and considered by the arbitrator . . . .”

Centex/Vestal, at 687. Rather, in order to determine “whether the arbitrator[s] had

authority to decide the claims” they decided in the Final Summary Award, what is

required is: (1) a legal practitioner’s understanding of the procedural rules and

purposes for summary judgments, whereby determinations are to be made based on

the law and undisputed facts; and (2) certain documents that the parties had agreed

were to inform the summary judgment - the Final Summary Award,21 reviewed in

light of the face of the FINRA Award 22 and the Woodbury Insurance Policy



21
       CR:   251 – 253 (Final Summary Award).
22
       CR:   145 – 147 (FINRA Award).


                                          20
containing the arbitration clause invoking the AAA Commercial Arbitration

Rules,23 each of which are in the appellate record and are cited to herein.

      As the Appellants will demonstrate herein, the FINRA Award contains no

findings of fact, yet the Final Summary Award contained a “reasoning” and fact-

finding that shows the Arbitration Panel acted in excess of their powers and

overreached the issues submitted to them at the summary judgment stage of the

proceeding, 24 and did so prior to any discovery or testimony specific to the

coverage dispute.

                            STATEMENT OF FACTS
      Pursuant to the Unopposed Order to Transfer to Arbitration, 25 the

determination of coverage of the FINRA Award under insurance policy No. 665-

25-96 (the “Policy”) was sent to arbitration. 26 After the Arbitration Panel was

established – comprised of Susan Perin, John Boyce and Raul A. Gonzalez – a

preliminary telephonic hearing was held, in conformity with the applicable AAA

Commercial Arbitration Rules and Procedures for Large, Complex Commercial

Disputes (the “AAA Commercial Arbitration Rules”).27           Each member of the



23
      CR: 12 – 95, at 30 par. 19 (Woodbury Insurance Policy).
24
      CR: 251 – 253 (Final Summary Award).
25
      CR: 102 – 103 (Order to Arbitration).
26
      CR: 12 – 95 (Woodbury Insurance Policy).
27
      CR: 310 (Case Management Order #1); 12 – 95, arbitration provision at 30 par. 19
      (Woodbury Insurance Policy) and App. Tab J – AAA Commercial Rules and Procedures
      for Large, Complex Commercial Disputes.


                                         21
Arbitration Panel, counsel for the parties, and the AAA case manager Andrew

Barton participated in that call on August 19, 2014.28

      During the initial conference regarding the arbitration, the parties agreed to

bifurcate the arbitration into an initial summary judgment portion prior to any

discovery specific to the coverage dispute, to be followed by a second ‘trial’

portion with attendant discovery specific to the coverage dispute. The parties

briefed competing summary judgment motions and both agreed that there was no

need, at the summary judgment stage of the proceedings, to look past the face of

(a) the FINRA Award and (b) the Insurance Policy. The parties agreed to a

“limited” use of testimony and documentation from the underlying FINRA

proceeding in order to provide background and explanation; not, however, for the

Arbitration Panel to make fact-findings on disputed issues.

      A summary judgment hearing was held on December 17, 2014, in keeping

with the parties’ agreement that the proceedings be bifurcated in an effort to

narrow the issues. The summary judgment hearing lasted one day and did not

involve live testimony, cross-examination or evidentiary disputes. Counsel for

both sides reiterated at the summary judgment hearing their agreement that the

Arbitration Panel need not look behind the face of (a) the Insurance Policy and (b)

the FINRA Award in order to make certain coverage determinations as a matter of


28
      CR:    310 (Case Management Order #1).


                                         22
law. The coverage dispute arbitrators executed their “Final Summary Award” on

February 6, 2015 and issued it shortly thereafter on February 11, 2015. The Final

Summary Award found no coverage and summarily disposed of the dispute. 29

THE FACE OF THE WOODBURY INSURANCE POLICY

      The Policy at the center of this dispute covers the “Insured Agents” of

Woodbury and is a professional liability insurance policy. It provides for the

payment of damages and defense costs resulting from a claim for a “Wrongful

Act” (which means any actual or alleged negligent act, error, or omission) of an

Insured Agent (it was never disputed that Miller and Schulick were Insured

Agents), if the Wrongful Act occurs solely in the performance or failure to perform

“Professional Services.” The Policy contains several definitions of Professional

Services. Endorsement #7 and Endorsement #8 provide the pertinent definitions in

this case:

      Endorsement #7 [(k)(3)]: Professional Services shall mean those
      services rendered or required to be rendered in the Insured Agent’s
      profession as:
            a licensed registered representative who services, sells or
            attempts to sell securities or other investment products
            including, but not limited to structured settlements approved by
            and distributed through . . . [Woodbury].
      Endorsement #8 [(k)(7)]: Professional Services shall mean those
      services rendered or required to be rendered in the Insured Agent’s
      profession as:


29
      CR:    251 – 253 (Final Summary Award).


                                          23
             a financial planner, financial consultant, or investment advisor,
             acting on behalf of a customer or client and providing
             consultation, advice, administration and services, whether or
             not a separate fee is charged, but only with respect to:

                     1. Investment products which are currently APPROVED
                        for sale by [Woodbury]. APPROVED for purposes of
                        Endorsement #8 means “any investment product
                        currently offered by [Woodbury] as available for sale
                        through [Woodbury].

The Policy also contains certain exclusions, including:

      “The Dishonesty Exclusion” at Section 3(a) of the Policy provides that the
      Policy does not cover damages or defense costs in connection with claims:
             arising out of, based upon or attributable to any actual or
             alleged criminal, dishonest, malicious, knowingly wrongful or
             fraudulent act committed by or at the direction of the Insured.
      “The Art Exclusion” at Endorsement #12(x)(1) provides that the
      Policy does not cover claims based on the purchase or sale (or failure
      to purchase or sell) art. 30

      “The Promissory Note Exclusion” at Endorsement #12(aa)(1)
      provides that the Policy does not cover claims based on the purchase
      or sale (or failure to purchase or sell) promissory notes. Promissory
      notes are defined as:

             An investment whereby the maker agrees to pay to the payee a
             specific sum of money either on demand or at a fixed or
             determinable future date.31


30
      Appellants do not address the Art Exclusion herein because no party argued, nor was
      there any basis for, its potential applicability to the APP. It was discussed as to another
      investment product not at issue in this appeal. Appellants do point it out though, as it is
      contained in the Final Summary Award which – Appellants believe – reflects another
      improper fact finding in excess of powers.
31
      Appellants do not address the Promissory Note Exclusion herein because no party
      argued, nor was there any basis for, its potential applicability to the APP. It was
      discussed as to other investment products not at issue in this appeal. It was discussed as
      to another investment product not at issue in this appeal. Appellants do point it out


                                              24
THE FACE OF THE 2012 FINRA AWARD
      The FINRA Award provided for:

         • Compensatory damages of $2,868,868.00
         • Pre-award interest at 5% per annum from and including September
           25, 2008
         • Post-award interest at 5% per annum from and including the date of
           the FINRA Award
         • $300,000.00 in punitive damages pursuant to the Texas Deceptive
           Trade Practices Act and gross negligence
         • $819,314.50 in attorneys’ fees pursuant to the Texas Securities Act
           and DTPA 32

      The FINRA Award was not a reasoned opinion and contained list of fact-

findings. The FINRA Award did state in its Case Summary that Miller and

Schulick had been “acting as agents of Woodbury and River Oaks.”33 It also stated

that it did not adjudicate any claims against Woodbury because Woodbury had

settled prior to the conclusion of the FINRA proceeding. 34 The FINRA Award

stated that the fraud claims had been withdrawn. 35

      The FINRA Award was judicially approved and entered as a final judgment

in Travis County for $2,118,921.30 (the compensatory damages less applicable

settlement credits), pre-judgment interest of $41,115.69 from September 25, 2008,




      though, as it is contained in the Final Summary Award which – Appellants believe –
      reflects another improper fact finding in excess of powers.
32
      CR: 145 – 157, at 150 (FINRA Award).
33
      CR: 145 – 157, at 150 (FINRA Award).
34
      CR: 145 – 157, at 151 (FINRA Award).
35
      CR: 145 – 157, at 151 (FINRA Award).


                                          25
attorneys’ fees of $819,314.50, $300,000 in punitive damages, for a total of

$3,279,351.49.36

THE FACE OF THE FINAL SUMMARY AWARD
      In the section titled “Reasoning” of the Final Summary Award, the

arbitrators found that each of the three investment products were not in the scope

of “Professional Services” as defined by the Policy in Endorsement 7 and 8

because “Woodbury neither approved nor distributed them.” 37 They also went

on to find that three exclusions of the Policy defeated a finding of coverage: the so-

called “Dishonesty Exclusion,” “Art Exclusion,” and “Promissory Note

Exclusion.”38

      The Arbitration Panel stated its finding that “there is no genuine issue of

material fact regarding the lack of coverage under the Policy for Claimants’ Award

. . . .” 39 However, as Appellants will demonstrate herein, there were genuine issues

of material fact, and fact-finding itself is clear from a simple review of the Final

Summary Award in comparison to the FINRA Award and the Insurance Policy.



36
      CR: 98 – 99 (Turnover Order).
37
      CR: 251 – 253, at 252 (Final Summary Award).
38
      Again Appellants do not address the Art or Promissory Note Exclusions herein because
      no party argued, nor was there any basis for, their potential applicability to the APP.
      Appellants believe that their inclusion in the Final Summary Award reflects additional
      improper fact finding in excess of powers, as the Arbitration Panel was well aware of a
      dispute between the parties as to whether certain other investment vehicles were for the
      purchase of art, or were promissory notes.
39
      CR: 251 – 253, at 252 (Final Summary Award).


                                             26
                      SUMMARY OF THE ARGUMENT
      The Final Summary Award issued by the Arbitration Panel was in excess of

the parties’ agreed delegation of a limited decision-making function at the

bifurcated summary judgment stage. Rather than make findings “as a matter of

law” based on the FINRA Award and the Policy that were submitted to them, the

Arbitration Panel made improper fact findings that had not been submitted to them.

They did so in violation of the parties’ agreement to conduct summary judgment as

well as the clear tenets of summary judgment procedure against improper findings

of fact. Such fact findings could not have been made based on the FINRA Award,

had not been adjudicated elsewhere, and were clearly under dispute.

      Specifically for this appeal, the Arbitration Panel acted beyond their granted

authority granted to them by finding that Woodbury “neither approved of

distributed” the APP, and when it found that the conduct of Woodbury’s

representatives’ was “dishonest, malicious, or knowingly wrongful”. 40

      The Final Summary Award also reflects violations of the AAA Commercial

Arbitration Rules themselves, which ensure that parties may fairly and fully air

their claims through evidence and testimony. The Arbitration Panel acted beyond

the issues submitted to it and in the process unfairly deprived Appellants of their




40
      CR:   251 – 253, at 252 (Final Summary Award).


                                          27
due process in this coverage dispute. Appellants seek an evidentiary hearing on

the merits of its claims for coverage on the APP.

      The lower court erred by affirming the Final Summary Award.

                                  ARGUMENT
ISSUE:             Did the Arbitration Panel exceed the powers delegated to them
at summary judgment by making fact-findings on disputed issues, where the
parties had authorized the summary judgment proceeding as an initial stage of
insurance coverage arbitration for determinations as a matter of law based on the
applicable insurance policy and an underlying arbitration award, after which
discovery specific to the coverage dispute and arbitration on the merits on
remaining claims were to proceed, and did the trial court err in affirming the award
and refusing to vacate or modify it based on Appellants’ excess of powers
argument?

ANSWER:            Yes.

      In insurance coverage cases it is common that the “underlying case often

does not resolve all factual issues relevant to coverage because the question of

coverage can be irrelevant to the question of insured’s liability.” National Union

Fire Ins. Co. of Pittsburgh, P.A. v. Puget Plastics Corp., 532 F.3d 398, 404 (5th

Cir. 2008). As such, and out of concerns of efficiency and narrowing the issues

for future discovery specific to the coverage, the parties agreed to an initial

proceeding to assess the viable coverage claims and defenses and to do so by the

procedural device of summary judgment. The Arbitration Panel was authorized at

the summary judgment stage only to assess coverage or a lack thereof from the

eight corners of the Award and the Policy, and to look behind to the FINRA record



                                         28
only for limited, explanatory purposes. 41 The Arbitration Panel acted beyond their

delegated task to make findings as a matter of law at summary judgment, based on

the face of the FINRA Award and the Policy. Instead they improperly made fact-

findings on questions unique to the coverage dispute, and summarily disposed of

the arbitration.

      Summary judgment is a familiar procedural device with clear, well-

established tenets and purposes. Its purpose includes the goal of prompt disposal

of unmeritorious claims or untenable defenses, but with built-in rules to assure that

litigants are not deprived of their right to try their case. City of Houston v. Clear

Creek Basin Auth., 589 S.W.2d 671, 678 n.5 (Tex. 1979); Collins v. County of El

Paso, 954 S.W.2d 137, 145 (Tex.App.—El Paso 1997, pet. denied). Despite the

parties’ agreement to bifurcate into summary judgment for the sake of efficiency,

and despite their agreement to hold off on coverage-specific discovery until after

the summary judgment stage, the Arbitration Panel made several improper fact-

findings at summary judgment, including that the Asset Protection Plan was “not [a

Woodbury] product[] because Woodbury neither approved nor distributed” it and

that hence, Woodbury’s agents Miller and Schulick “did not perform ‘professional

services’ as defined by the Policy . . . .” 42      However, this certainly could be



41
      CR:    145 – 157 (FINRA Award).
42
      CR:    251 – 253, at 252 (Final Summary Award) [emphasis added.]


                                           29
gleaned from the face of the FINRA Award. Woodbury settled during the FINRA

proceeding and there was no FINRA finding as to Woodbury.

      The Arbitration Panel also improperly made a fact-finding of “dishonest,

malicious, [or] knowingly wrongful acts,” by Woodbury’s representatives, despite

the fact that the FINRA Award contains no such factual finding.43 As discussed

more fully herein there is also no legal finding in the FINRA Award for which

either dishonesty, maliciousness or knowing wrongfulness is a required element.

      “Arbitrators exceed their powers when they decide matters not properly

before them.” Ancor Holdings, LLC v. Peterson, Goldman & Villani, Inc., 294

S.W.3d 818, 829 (Tex.App.—Dallas 2009, no pet.); see also Barsness v. Scott, 126

S.W.3d 232, 241 (Tex.App.—San Antonio 2003, pet. denied) (finding the

arbitration panel exceeded its authority in issuing its award). The Arbitration Panel

acted in excess of the powers delegated by to them by the parties’ agreement to

bifurcate the proceeding.       They did so by making findings of fact in

contravention of the well-established procedural rules of summary judgment,

in contravention of the safeguards of the AAA Rules, and in contravention of

the parties’ agreement. As a result, the parties did not obtain an opportunity to

conduct discovery specific to the coverage dispute, and did not get to air all

“proofs, allegations, arguments and authorities of the parties in a hearing on the


43
      CR:    251 – 253, at 252 (Final Summary Award); 145 – 147 (FINRA Award).


                                          30
merits.”   Brockman v. Tyson, No. 01-03-01335-CV, 2005 WL 2850128

(Tex.App.—Houston [1st Dist.] Oct. 27, 2005).

Standard of Review

      A trial court’s decision to confirm or vacate an arbitration award is reviewed

de novo. Centex/Vestal v. Friendship West Baptist Church, 314 S.W.3d 677, 684

(Tex.App.—Dallas 2010, pet. denied).         This stems from strong public policy

favoring arbitration of disputes, and because it has the effect of a judgment of a

court of last resort, it is given deference. CVN Grp. v. Delgado, 95 S.W.3d 234,

238 (Tex.2002). In fact, absent specific common law or statutory grounds for

vacating, modifying, or correcting an award, a reviewing court must confirm an

arbitration award. CVN Grp., 95 S.W.3d at 238. Statutory grounds for vacating,

modifying, or correcting an award can be found in the Federal Arbitration Act as

well as the Texas General Arbitration Act. 9 U.S.C. § 10(a); TEX. CIV. PRAC. &

REM. CODE § 171.088(a)(3). Pursuant to these statutes, a trial court may vacate

an arbitration award for any one of several enumerated reasons, including the

contention that the arbitrator exceeded his powers. 9 U.S.C. § 10(a); TEX. CIV.

PRAC. & REM. CODE § 171.087. The lower court’s confirmation of the Final

Summary Award may be vacated if there is a determination that the Arbitration

Panel exceeded its powers. See Leshin v. Oliva, --- S.W.3d ---, 2015 WL4554333,

*3 (Tex.App.—San Antonio, July 29, 2015, no pet. h.).



                                        31
The AAA Commercial Arbitration Rules Govern
      The arbitration provision within the Woodbury Insurance Policy provides

that disputes shall be submitted to the AAA and conducted in accordance with the

“then-prevailing commercial arbitration rules.” 44 AAA Commercial Arbitration

Rule R-1(a) provides that the parties “shall be deemed to have made these rules a

part of their arbitration agreement whenever they have provided for arbitration by

the AAA under its Commercial Arbitration Rules . . . .” 45          Thus, the AAA

Commercial Arbitration Rules attached hereto in the Appendix at Tab J govern and

inform an analysis of the Arbitration Panel’s conduct of the arbitration.

      By its own Rules, the AAA acknowledges that its authority to administer an

arbitration is through a “delegation of duties” and is obtained through parties’

agreement and/or initiation of an arbitration under the Rules. 46 Rule R-21 provides

for a preliminary hearing, at which the parties and arbitrators are to “discuss and

establish a procedure for the conduct of the arbitration that is appropriate to

achieve a fair, efficient, and economical resolution of the dispute.” Rules P-1 and

P-2 address the issues to be considered at the preliminary hearing and provide that

the proceeding is to be organized “in a manner that will maximize efficiency and




44
      CR: 12 – 95, at 30 par. 19 (Woodbury Insurance Policy).
45
      App. Tab J, AAA Commercial Rules and Procedures for Large, Complex Commercial
      Disputes.
46
      App. Tab J, p. 11, Rule R-2 “AAA and Delegation of Duties.”


                                         32
economy, and will provide each party a fair opportunity to present its case.” 47 The

preliminary hearing, pursuant to the AAA Commercial Arbitration Rules, provides

an opportunity to decide, among other things 48:

     • what procedural law applies (P-2(a)(v)(b));
     • “whether there are any threshold or dispositive issues that can efficiently be
       decided without considering the entire case,” (P-2(a)(vi)), including without
       limitation:
          o Bifurcation of the proceeding (P-2(a)(vi)(d));
          o “whether the parties will exchange documents, including
              electronically stored documents, on which they intend to rely in the
              arbitration, and/or make written requests for production of documents
              within defined parameters” (P-2(a)(vii));
          o “whether the parties intend to present evidence from expert witnesses,
              and if so, whether to establish a schedule for the parties to identify
              their experts and exchange expert reports” (P-2(a)(xi));
          o “whether, according to a schedule set by the arbitrator, the parties
              will:
                  “identify all witnesses, the subject matter of their anticipated
                     testimonies, exchange written witness statements, and
                     determine whether written witness statements will replace
                     direct testimony at the hearing” (P-2(a)(xii)(a))

       Rule P-2(b) provides that “arbitrator shall issue a written order

memorializing decisions made and agreements reached during or following the

preliminary hearing.”49 Case Management Order #1 memorialized the August 19,

2014 preliminary telephonic hearing where the parties agreed to bifurcate the

proceeding and begin with summary judgment briefing and a summary judgment



47
       App. Tab J, p. 32, Rule P-1(a).
48
       App. Tab J, p. 32, Rule P-2(a).
49
       App. Tab J, p. 32, Rule P-2(b).


                                          33
hearing.50 Tellingly, the Order discusses only the summary judgment motions, and

nothing else regarding the way the remaining case will be put on. That is, the

parties did not get into the exchange of documents (under P-2(a)(vii)), expert

witnesses or reports (P-2(a)(xi)); identification of witnesses, anticipated subject

matter, or the use of direct testimony or witness statements (under P-2(a)(xii)(a)).

They did not do so because it was never contemplated by the parties that, by

bifurcating the proceedings as allowed under Rule P-2(a)(vi)(d), that the initial

summary judgment proceeding would serve as a replacement for a hearing on the

merits.

      The Rules also set forth certain procedural and fairness standards for AAA

arbitration proceedings.    AAA Commercial Rule R-32 on the “Conduct of

Proceedings” provides for the presentation of evidence by both sides and for the

opportunity for witnesses to be cross-examined as well as to take questions directly

from the arbitrator.51 The same rule provides that parties are to be “treated with

equality and that each party has the right to be heard and is given a fair opportunity

to present its case.” 52 The proceedings are to “afford a full opportunity for all

parties to present any evidence that the arbitrator deems material and relevant to




50
      CR: 310 (Case Management Order #1).
51
      App. Tab J, p. 22, Rule R-32(a).
52
      App. Tab J, p. 22, Rule R-32(a).


                                         34
the resolution of the dispute and, when involving witnesses, provide an opportunity

for cross-examination.” 53

Excess of Powers as a Basis for Vacating or Modifying an Award
      Texas and Federal statutory law clearly provide for the vacatur or

modification of an arbitration award for excess of powers. The Texas Arbitration

Act lists specific grounds for vacating, modifying, or correcting an arbitration

award and provides that, on application of a party to vacate an arbitration award,

the court shall vacate an award if the arbitrators “exceeded their powers.” TEX.

CIV. PRAC. & REM. CODE § 171.088(a)(3)(A). A court also shall modify or

correct an award if the arbitrators “have made an award with respect to a matter not

submitted to them,” and the award may be corrected without affecting the merits of

the decision with respect to the issues that were submitted. TEX. CIV. PRAC. &

REM. CODE § 171.091(a)(2). Section 10 of the FAA likewise provides for vacatur

of an award “where the arbitrators exceeded their powers, or so imperfectly

executed them that a mutual, final, and definite award upon the subject matter

submitted was not made.” 9 U.S.C.A. § 10(a)(4).

      Arbitration is a creature of agreement.     In an arbitration conducted by

agreement of the parties, “it is well established that [a]n arbitrator derives his

power from the parties’ agreement to submit to arbitration.” Nafta Traders, Inc. v.


53
      App. Tab J, p. 22, Rule R-32(c).


                                         35
Quinn, 339 S.W.3d 84, 90 (Tex. 2011) (quotation omitted); Stolt-Nielson S.A. v.

AnimalFeeds Int’l Corp., 559 U.S. 662, 130 S.Ct. 1758, 1773-1774 (2010). When

enforcing an agreement to arbitrate, “courts and arbitrators must give effect to the

contractual rights and expectations of the parties. In this endeavor, as with any

other contract, the parties’ intentions control. This is because an arbitrator derives

his or her powers from the parties’ agreement to forgo the legal process and submit

their disputes to private dispute resolution.” Stolt-Nielson S.A. v. AnimalFeeds Int’l

Corp., 559 U.S. 662, 130 S.Ct. 1758, 1773-1774 (2010) (emphasis added). An

arbitrator exceeds his powers when he decides matters not properly before him by

departing from the arbitration agreement, “and, in effect, dispenses with his own

idea of justice that the award may be unenforceable.” Centex/Vestal v. Friendship

Baptist Church, 314 S.W.3d 677, 684 (Tex.App.—Dallas 2010) (citing Major

League Baseball Players Ass’n v. Garvey, 523 U.S. 504, 509 (2001)). It is clear

that the appropriate inquiry in determining if arbitrators acted in excess of their

powers is not whether the arbitrators decided an issue correctly, but whether the

arbitrator had the authority to decide the issue at all. D.R. Horton-Texas, Ltd. v.

Bernhard, 423 S.W.3d 532, 534 (Tex.App.—Houston [14th Dist.] 2014, pet. filed).

      Excess of powers as a basis for vacatur does not turn only on the scope of an

arbitration agreement – the authority of arbitrators is also derived from the

matters submitted to them for determination when they were appointed.



                                         36
Centex/Vestal v. Friendship West Baptist Church, 314 S.W.3d 677 (Tex.App.—

Dallas 2010); Town of Stratford v. International Federation of Professional and

Technical Engineers, 155 Conn. App. 246, 108 A.3d 280 (2015) (the parties

themselves, by terms of their submission, define the powers of the arbitrators).

Indeed, Appellants’ issue with the Final Summary Award is not that its findings

fall outside the scope of the arbitration provision found in the Policy – ultimately

the Arbitration Panel was empowered to make an award that would fully settle the

dispute both as to law and fact. Rather, the Arbitration Panel went beyond their

task because it ignored the parties’ agreement to bifurcate into an initial summary

judgment proceeding and treated a hearing on the motions as if it was a full

arbitration proceeding in which they could make fact-findings – without telling the

parties and without the parties’ consent.

      Procedural unfairness or incorrect implementation of procedures in the

course of arbitration proceedings may be a basis for excess of powers vacatur.

Courts across the country have scrutinized and endorsed procedural missteps, or

conducting the arbitration contrary to the parties’ agreement, as evidence of

arbitrators’ excess of powers sufficient to vacate an arbitration award. See, e.g:

Bonshire v. Thompson¸ 60 Cal. Rptr. 2d 716, 721 (Cal. App. 1997) (reversing

confirmation of award where the arbitrator exceed his powers by violating the

parties’ agreement to prohibit the introduction of extrinsic evidence and limit the



                                            37
arbitrator; arbitrator’s remedy was unauthorized because it was arrived at through

an unsubmitted issue that the arbitrator was prohibited from reviewing); citing

Advanced Micro Devices, Inc. v. Intel Corp., 885 P.2d 994 (1994) (where the

California Supreme Court recognized that the parties may specifically agree to

compel the arbitrator to follow legal rules). The Eleventh Circuit vacated an award

in excess of powers because it was handed down by only two arbitrators when the

arbitration agreement in question unambiguously required arbitration before “at

least three arbitrators.” Szuts v. Dean Witter Reynolds, Inc., 931 F.2d 830, 830 - 32

(11th Cir.1991). The Ninth Circuit has also vacated an arbitration award that failed

to provide ‘findings of fact and conclusions of law’ as was required under the

arbitration agreement. W. Employers Ins. v. Jefferies & Co., 958 F.2d 258, 260

(9th Cir. 1992).

      Unfairness in the proceedings can also be a basis for excess of powers and

vacatur. McKinney Drilling Co. v. Mach I Limited Partnership, 32 MD App 205,

359 A.2d 100 (176) (arbitrator could have exceeded his powers in permitting

officer of nonparty to attend all sessions and testify even though witnesses were to

be sequestered). For example, arbitrators’ procedural delay in completing the

proceedings and entering an award has been found to support a claim they

exceeded their powers. Zervos v. Freedman Properties Ltd., 223 N.J. Super. 599,

539 A.2d 336 (1987) (arbitrators, without the explicit consent of parties, delayed



                                         38
the closing of hearings by almost two months after the submission of final briefs,

and also delayed in entry of the award, and were found to be in excess of their

authorized powers). Evidence of an arbitrator’s failure to notify a party of the

pendency of an arbitration hearing has also been held to demonstrate procedural

conduct in excess of powers sufficient to vacate an award. T&M Properties v.

ZVFK Architects & Planners, 661 P.2d 1040 (Wyo. 1983) (arbitrator sent only one

of several relevant contracts and did not send the correct contract to a party who

failed to appear and against whom award was entered).

      By dismissing this case in toto on summary judgment before the parties had

the opportunity to conduct coverage-specific discovery nor to have any evidentiary

hearing, the arbitrators denied Appellants “rights to present their case in full and to

test [Appellee’s] case through cross-examination.” See Chem-Met Co. v. Metaland

Intern., Inc., No. Civ. A. 96-02548, 1998 WL 3572368, *4 (D.D.C. filed Mar. 25,

1998) (vacating arbitration award pursuant to the FAA because the arbitrators

exceeded their powers by deciding the case on summary judgment and without an

evidentiary hearing). The court in Chem-Met went on that “Even recognizing the

need for flexibility in arbitration, it is a bedrock principle that each party must be

given a full opportunity to present its case at a hearing on the evidence. The

AAA’s Rules make it clear that deviation from that principle is only legitimate

upon the joint, written agreement of the parties.” Id. at *4.



                                          39
The Arbitration Panel Went Beyond their Authority in Finding Woodbury Did
Not Approve or Distribute the Asset Protection Plan
      The Arbitration Panel was not permitted to assess at summary judgment

whether Woodbury approved or distributed the Asset Protection Plan, and based

thereon to determine that the APP was “not [a Woodbury] product[] it and that

hence, Woodbury’s agents Miller and Schulick “did not perform ‘professional

services’ as defined by the Policy . . . .” 54 The FINRA Award stated nothing about

Woodbury’s approval or distribution, nor anything about Woodbury at all, as

Woodbury settled during the FINRA proceeding and there was no FINRA finding

as to Woodbury.

The Arbitration Panel Went Beyond their Authority in Finding that the conduct
of Woodbury’s representatives was “dishonest, malicious or knowingly
wrongful”
      The Arbitration Panel was not permitted to bar the APP from coverage under

the Dishonesty Exclusion based on a fact-finding that Woodbury’s representatives

Miller and Schulick were “dishonest, malicious or knowingly wrongful.” The

FINRA Award made no finding of dishonesty or of fraud. The FINRA Award

acknowledges on its face that the fraud allegations were in fact withdrawn before

conclusion of the proceedings. The FINRA Award is based on violations of the

Texas Securities Act, DTPA and gross negligence, none of which contain an

element of intent, malice, knowing wrongfulness or dishonesty. Nonetheless the

54
      CR:   251 – 253, at 252 (Final Summary Award) [emphasis added.]


                                          40
Arbitration Panel made a fact finding that Miller and Schulick had engaged in

“dishonest, malicious, [or] knowingly wrongful acts.”55

         Section 33 of the Texas Securities Act provides a civil cause of action

against any person who offers or sells, or offers or buys, a security by means of a

material misrepresentation or omission. A violation under Section 33 has only two

elements: (1) a misrepresentation or omission, (2) that is material. Tex. Rev. Civ.

St. Ann. Art. 581-33(A)(2); Duperier v. Texas State Bank, 28 S.W.3d 740 (Tex.

App. 2000).        The plaintiff need not prove scienter. See Busse v. Pacific Cattle

Feedings Fund No. 1, Ltd., 896 S.W.2d 807, 815 (Tex. App. 1995); Duperier, 28

S.W.3d 740.        Likewise, there is no scienter element under the DTPA.        The

elements of a successful Deceptive Trade Practices Act claim is: (1) the plaintiff is

a consumer, (2) the defendant can be sued under the DTPA, (3) the defendant

committed one or more wrongful acts under the DTPA, (4) the defendant’s acts

was a producing cause of plaintiff’s damages. Armstadt v. U.S. Brass Corp., 919

S.W.2d 644, 649 (Tex. 1996). A DTPA violation does not prove intentional

dishonesty and an insured can be held liable for DTPA without any showing of

dishonesty, fraud or malicious intent. Even a knowing violation is not necessarily

intentional: “Knowing violations of the DTPA are not intentional torts.” National

Union Fire Ins. Co. of Pittsburgh, P.A. v. Puget Plastics Corp., 532 F.3d 398 (5th


55
     CR: 251 – 251, at 252 (Final Summary Award).


                                              41
Cir. 2008), citing Pope v. Rollins Protective Serv. Co., 703 F.2d 197, 201 (5th Cir.

1983) (noting one of the primary reasons for the DTPA’s enactment was “to

provide consumers with a remedy for deceptive trade practices without the burdens

of proof and numerous defenses encountered in a common law fraud or breach of

warranty action”); Thomas J. Sibley, P.C. v. National Union Fire Ins. Co. of

Pittsburgh, P.A., 921 F.Supp. 1526 (E.D. Tex. 1996) (noting that it is possible to

violate deceptive trade practices law without showing any dishonesty or fraud). In

St. Paul, the Texas Supreme Court found that there was evidence of negligence and

violations of the DTPA, but no evidence of the actual awareness that the actions

were false, deceptive or unfair, or that the insurer was “more than consciously

indifferent” to the rights and welfare of the person affected. St. Paul Surplus Lines

Ins. Co., Inc. v. Dal-Worth Tank Co., Inc., 974 W.S.2d 51, 54 (Tex. 1998). “All

that we can definitively conclude” from a finding of a knowing violation of the

DTPA is that the actions were deliberately taken. Puget Plastics Corp., 532 F.3d

at 402. There is simply no inherent element of intent to harm, awareness of the

wrongfulness or maliciousness in DTPA violations.

      Lastly, conduct that is dishonest, malicious or knowingly wrongful cannot

be deduced from the FINRA Award’s award of punitive damages. The FINRA

panel awarded punitive damages based on gross negligence and for DTPA




                                         42
violations, neither of which require contain elements that would trigger the

Dishonesty Exclusion. 56

      First, as already stated, “Knowing violations of the DTPA are not intentional

torts.” Puget, 532 F.3d 398. Punitive damages awarded under the DTPA are

higher when the conduct is deemed intentional. TEX. BUS. & COM. CODE § 17.50

(B)(1) (punitives for intentional violation can be as high as 3x the economic

damages and the mental anguish damages). The punitive damages awarded by the

FINRA panel were very low in comparison to the overall compensatory damages

($300,000 as compared to almost $3 million). 57      If the conduct was deemed

intentional, the punitives would have been higher.    Here the award was at 10%,

not close to the 300% that would have been allowed if intentional.

      Secondly, gross negligence, for punitive damages purposes, is defined in the

Texas Civil Practice and Remedies Code as:

       an act or omission, which when viewed objectively from the
      standpoint of defendant(s) at the time of its occurrence involves an
      extreme degree of risk, considering the probability and magnitude of
      the potential harm to others; and (2) of which the defendants have
      actual subjective, awareness of the risk involved, but nevertheless
      proceed with conscious indifference to the rights, safety or welfare of
      others.
      TEX. CIV. PRAC. & REM. CODE § 41.001(11).



56
      CR:   145 – 157 (FINRA Award).
57
      CR:   145 – 157 (FINRA Award).


                                        43
The standard is thus actual awareness of the risk, rather than knowing

wrongfulness. This is distinct from “malice,” which the FINRA panel did not find,

and which does include “a specific intent” “to cause substantial injury or harm.”

TEX. CIV. PRAC. & REM. CODE § 41.001(7). The Texas Supreme Court has noted

that the terms “gross negligence,” “knowingly” “willful” and “intentional” are not

to be equated, and that those “terms lie on a continuum with gross negligence

being the lowest mental state and intentional being the highest.” St. Paul Surplus

Lines, 974 S.W.2d at 54 (quoting Luna v. North Star Dodge Sales, Inc., 667

S.W.2d 115, 118 (Tex. 1984).

          The Policy covers negligent Wrongful Acts (i.e., professional negligence),

and that is what the FINRA Award, on its face, found. 58 In the current coverage

dispute the Claimants had the right to obtain discovery on such questions such as

intent or dishonesty and any dispositive finding that the so-called Dishonesty

Exclusion bars coverage was wholly premature at summary judgment stage of the

coverage dispute. The Arbitration Panel’s improper fact-finding at a summary

judgment hearing was in clearly excess their delegated authority to determine

summary judgment motions, and prior to discovery.




58
     CR: 12 - 95 (Woodury Insurance Policy); 145 – 157 (FINRA Award).


                                              44
Conclusion

         The Final Summary Award itself states on its face that the case concerns the

“enforcement” of an underlying FINRA Award against the Policy. 59 The FINRA

Award was self-explanatory and should have been viewed in a light most favorable

to the prevailing parties – Dr. O’Grady and OFP. Instead, the coverage arbitrators

did not pay due deference to the FINRA Award, and went beyond the scope of

their authority to make factual findings not contained in the FINRA Award, and

upon which no discovery had yet taken place, at a summary judgment hearing.

They did this with the awareness of the existence of a significant amount of dispute

over certain matters. In this coverage dispute, the Arbitration Panel was to

determine coverage of the FINRA Award they were tasked to “enforce.” They

were to determine if there was coverage for its findings, i.e., violations of the

DTPA, the Texas Securities Act, and gross negligence (NOT fraud, the claims of

which were withdrawn and not adjudicated, and NOT malice). See, e.g., Myers v.

Hall Columbus Lender LLC, 437 S.W.3d 632, 637 (Tex.App.—Dallas 2014)

(noting the “well-settled law of insurance that a liability insurer’s . . . duty to

indemnify is triggered (or not) by the outcome of the case against the

insured”). The coverage arbitrators’ denial of coverage in its entirety, and refusal

to permit those portions of the dispute that were still subject to disputed fact issues


59
     CR: 251 - 253 (Final Summary Award).


                                            45
to survive summary judgment, was in excess of their powers.          The outcome

wrongfully denied Appellants of discovery, evidentiary hearings and due process

generally, and unfairly launched Appellants from a position of favorable

presumption (as the insured and as the prevailing party at FINRA) and into their

current unfavorable position of challenging an arbitration award.

      The Arbitration Panel was procedurally restricted by agreement or the

parties and they overstepped procedural bounds by making their own assessments

on disputed factual matters that had not yet been arrived at, fully aired and or

submitted to a hearing on the merits. Even with such a procedural restriction,

Appellants could theoretically result in a total summary disposition at the initial

phase, under certain circumstances. However in the instant case and under the

instant circumstances, this Arbitration Panel, bound to review the FINRA Award

and the Policy, could not make a summary disposition at the junction that they did,

and it was beyond the scope of their delegated authority to do so.

                                     PRAYER
      WHEREFORE, PREMISES CONSIDERED, Appellants pray that this Court

find that the Arbitration Panel acted in excess of its powers when it found that

there was no coverage under the Policy for the Asset Protection Plan and to vacate

or modify that portion of the Final Summary Award, and remand to arbitration so

that coverage of the Asset Protection Plan under the Policy may be assessed after a



                                         46
full evidentiary hearing on the merits. Appellants further prays for such other

relief, whether at law or in equity to which this Court deems they are justly

entitled.

                                    Respectfully submitted,

                                    RICHIE & GUERINGER, P.C.


                                    BY: /s/ Sheldon E. Richie
                                       SHELDON E. RICHIE
                                       State Bar of Texas No. 16877000
                                       Email: srichie@rg-austin.com
                                       EMILY J. SEIKEL
                                       State Bar of Texas No. 24072331
                                       Email: eseikel@rg-austin.com
                                       100 Congress Avenue, Suite 1750
                                       Austin, Texas 78701
                                       512-236-9220 telephone
                                       512-236-9230 facsimile

                                        ATTORNEYS FOR APPELLANTS




                                      47
                   CERTIFICATE OF COMPLIANCE
       Pursuant to Texas Rules of Appellate Procedure 9.4, the undersigned
certifies Appellant’s Brief complies with 9.4.

     1.    Exclusive of the exempted portions in Texas Rules of Appellate
           Procedure 9.4(i)(1), Appellants’ Brief contains 8,504 words.
     2.    Appellant’s Brief has been prepared in proportionally spaced typeface
           using Microsoft Word Version 2007 in Times New Roman 14 point.
     3.    The undersigned has provided an electronic version of Appellants’
           Brief.
     4.    The undersigned understands a material misrepresentation in
           completing this certificate, or circumvention of Texas Rules of
           Appellate Procedure 9.4, may result in the Court’s striking
           Appellants’ Brief.

                                           /s/ Emily J. Seikel
                                           Sheldon E. Richie/Emily J. Seikel




                                      48
                        CERTIFICATE OF SERVICE
      I HEREBY CERTIFY that a true and correct copy of the above and
foregoing was served upon the following parties via electronic mail by the Court’s
CM-ECF system on this the 19th day of August 2015, as follows:

      Robert S. Harrell
      Jon C. Rice
      Andrea L. Fair
      Norton Rose Fulbright US LLP
      1301 McKinney, Suite 5100
      Houston, Texas 77010

      Counsel for Appellee
                                            /s/ Emily J. Seikel
                                            Sheldon E. Richie/Emily J. Seikel




                                       49
                        NO. 13-15-00312-CV

               IN THE COURT OF APPEALS
    FOR THE THIRTEENTH JUDICIAL DISTRICT OF TEXAS
                   AT CORPUS CHRISTI


                BRIAN O’GRADY, M.D. AND
         THE O’GRADY FAMILY PARTNERSHIP, LTD.
                       Appellants,

                                 v.

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH,
                         P.A.,
                        Appellee.


    Appealed from the 53rd District Court of Travis County, Texas



                      APPENDIX TO
             RECORD EXHIBITS ACCOMPANYING
                   APPELLANTS’ BRIEF
                                 NO. 13-15-00312-CV

                    IN THE COURT OF APPEALS
         FOR THE THIRTEENTH JUDICIAL DISTRICT OF TEXAS
                        AT CORPUS CHRISTI


                       BRIAN O’GRADY, M.D. AND
                THE O’GRADY FAMILY PARTNERSHIP, LTD.
                              Appellants,
                                            v.
 NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH,
                          P.A.,
                         Appellee.


         Appealed from the 53rd District Court of Travis County, Texas


                         TABLE OF CONTENTS
                  TO RECORD EXHIBITS ACCOMPANYING
                         APPELLANTS’ BRIEF

     The Appellants, Brian O’Grady, M.D. and The O’Grady Family Partnership, Ltd.,

submits the following exhibits in support of the Appellants’ Brief.

 TAB DESCRIPTION
 A       Order Confirming Award and Denying Motion to Vacate [C.R. 321-322]
 B       Final Summary Award [C.R. 251-253]
 C       FINRA Award [C.R. 145-148]
 D       Plaintiffs’ Original Petition [C.R. 3-99]
         a.    Woodbury Insurance Policy [C.R. 12-95]
         b.    Final Judgment Entering FINRA Award [C.R. 96-97]
         c.    Turnover Order [C.R. 98-99]
TAB DESCRIPTION
E   American Arbitration Association Case Management Order No. 1
    [C.R. 310-311]
F   TEX. CIV. PRAC. & REM. CODE § 171.088
G   TEX. CIV. PRAC. & REM. CODE § 171.091
H   9 U.S.C.A. § 10
I   TEX. CIV. PRAC. & REM. CODE § 41.001 - 41.003
J   AAA Commercial Arbitration Rules
K   Leshin v. Oliva, --- S.W.3d ---, 2015 WL4554333 (Tex.App.—San Antonio,
    July 29, 2015, no pet. h.)
                     APPENDIX

                       TAB A

ORDER CONFIRMING AWARD AND DENYING MOTION TO VACATE
                    (C.R. 321-322)
                                              DC              BK15140 PG626



                                                                                       Filed in The District Court
                                                                                        of Travis County, Texas

                                                                                             MAY 15 2015
                                         CAUSE NO. D-1-GN-13-002748
                                                                                       At                 LDDPM.
                                                                                       Velva L. Price, District Clerk
   BRIAN O'GRADY, M.D. and                                §         IN THE DISTRICT COURT OF
   THE O'GRADY FAMILY                                     §
   PARTNERSHIP, LTD., as owners of                        §
   the claim of David Miller, Brett                       §
   Schulick, and River Oal<s Capital, Inc.                §
   per the June 28, 2013 Turnover Order                   §
   of Judge Tim Sulal<                                    §
                      Plaintiffs,                         §         TRAVIS COUNTY, TEXAS
   v.                                                     §
                                                          §
   NATIONAL UNION FIRE INSURANCE                          §
   COMPANY OF PITTSBURGH, PA.,                            §
                                                          §
                                                          §
                            Defendant.                    §         53rd JUDICIAL DISTRICT


        ORDER CONFIRMING ARBITRATION AWARD AND DENYING MOTION TO
                       VACATE AND FINAL JUDGMENT

            Pending before the Court is Defendant National Union Fire Insurance Company of

   Pittsbm·gh, Pa.'s ("National Union") Motion to Confirm Arbitration Award ("Motion to

   Confirm") and the Motion to Vacate or Modify Arbitration Award ("Motion to Vacate") filed by

   Plaintiffs Brian O'Grady, M.D. and The O'Grady Family Partnership, Ltd. ("Plaintiffs"). In

   American Arbitration Association ("AAA") Case No. 01-14-0000-1777 panel members Hon.

   Raul A. Gonzalez, Susan G. Perin, and John I<. Boyce, Ill (the "Panel") found no genuine issue

   of material fact regarding the lack of coverage under Insurance Agents Professional Liability

   Insurance Policy No. 665-25-96 (the "Policy") for a FINRA arbitration award entered against

   David Millet·, Brett Schulick, and River Oaks Capital Management, Inc. ("Miller and Schulick").

   The Panel found that National Union and American International Group, Inc. ("AIG") are

   entitled to an award as a matter of law. The Panel held:

                •    that Miller and Schulick did not perform "professional services" as defined by the
                     Policy in Endorsements 7 and 8, and that the Policy therefore provides no
                     coverage.




lllllllllllllllllllllllllllllllllllllllllllllllllllllll
004033056


                                                                                                                        321
                                    DC                BK15140 PG627




           •   that the FINRA award's finding of "punitive damages pursuant to the Texas
               Deceptive Trade Practices Act ("DTPA"), and gross negligence" constitutes
               ·'dishonest. malicious, [orl knowingly wrongful" acts, and coverage under the
               Policy is excluded.

           •   that coverage fhr the Art Purchase Agreement and Team 02 is excluded under
               Endorsement 12 of the Policy.

           •   that AIG is neither an insurer under the Policy nor a party to the Polil:.:y.

       After considering the motions, the responses, replies, and argument of counsel. the Court

finds the Motion tu Cunlirm should be GRANTED and the Motion to Vacate should be

DENIED.

       IT IS THEREFORE ORDERED that the Final Summary Award clclted February 6, 2015.

issued in AAA Case No. 01-14-0000-1777 by the Panel is CONFIR\1ED.

       IT IS FURTHER ORDERED that the Motion to Vacate is DENIED.

       IT IS FURTHER ORDERED AND ADJUDGED that Plaintiffs Brian O'Grady, M.D.

and The O'Grady Family Partnership, Ltcl., as owners of the claim of David Miller, An~tt

Schulkk, and River Oaks Capital, Inc., TAKE NOTIIING on their claims against National

Union and AIG.

       All relief requested in this case and not expressly granted is denied.

       Signedthis_l_~of M~>t"'\                 ,2015.




on behalf of Plainti fTs                             on bchalf' of Dclendant




                                                    - 2-




                                                                                                   322
     APPENDIX

       TAB B

FINAL SUMMARY AWARD
      (C.R. 251-253)
                        AMERICAN ARBITRATION ASSOCIATION
                           Case No. 01-14-0000-1777



BRIAN O'GRADY, M.D. AND THE O'GRADY FAMILY PARTNERSHIP, LTD.

                       Claimants,

 V.

 NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, AND
 AMERICAN INTERNATIONAL GROUP, INC.
               Respondents




                                 FINAL SUMMARY AWARD

         WE, THE UNDERSIGNED ARBITRATORS, having been duly appointed pursuant to
•: 19 ·'Arbitration·· contained in the National Union professional liability insurance policy
effective August I, 2008 (''Policy"), the subject of this suit; having been sworn, and having heard
the allegations, arguments of the Parties, and having considered all furnished briefs, exhibits,
documents, and affidavits; and having reviewed the exhibits and documents presented at the
summary judgment hearing, the Panel enters its AWARD, as follows:


                                           Introduction

       I.      A summary judgment hearing was conducted on December 17, 2014, at the Four
               Seasons Hotel, Austin, Texas. Both sides moved for summary judgment.
               Sheldon E. (Don) Richie and Emily J. Seikel of Richie & Gueringer, P.C.
               appeared on behalf of Claimants, Brian O'Grady, M.D. and the O'Grady Family
               Partnership, Ltd. ("Claimant").      Robert S. Harrell, Jon Rice and Katie
               McNeanney of Norton Rose Fulbright appeared on behalf of Respondents,
               National Union Fire Insurance Company of Pittsburgh, PA. ("National Union")
               and American International Group ("AIG"). Additional briefs were filed after the
               hearing.

               This case concerns the enforcement of an underlying Financial Industries
               Regulatory Authority ("FINRA") arbitration award- turned-judgment ("Award")
               against the subject Policy.



                                           EXHIBIT D
                                     TO MOTION TO VACATE
                                 OR MODIFY ARBITRATION AWARD
AWARD OF ARBITRATORS                                                                    PAGE   I OF3
                                                                                                       251
                                              Award

       The Panel finds that there is no genuine issue of material fact regarding the lack of
coverage under the Policy for Claimants' Award, and those Respondents are entitled to an award
as a matter of law. ACCORDINGLY, Respondents' motion for summary judgment be and is
hereby GRANTED.


                                             Reasoning

       I.      The three Products/Transactions, the Asset Protection Plan, the Art Purchase
               Agreement, and Team 02, subjects of this arbitration, were not Woodbury
               Financial Services, Inc.'s ("Woodbury") products because Woodbury neither
               approved nor distributed them. Hence, Woodbury's agents, Miller and Schulick,
               ("Agents") did not perform "professional services" as defined by the Policy in
               Endorsements 7 and 8, and the Policy does not cover the Award;

       2.      The FINRA Award's finding #4 of "punitive damages pursuant to the Texas
               Deceptive Trade Practices Act ("DTPA"), and gross negligence" constitutes
               ''dishonest, malicious, [or] knowingly wrongful" acts, and coverage under the
               Policy is excluded under its Endorsement 3(a): and

       3.      Coverage for the Agents' Art Purchase Agreement and Team 02 is excluded
               under Endorsement 12 of the Policy.

       4.      AIG is neither an insurer under the Policy nor a party to the Policy, nor is there
               any arbitrable contract between AIG and Claimants.




                                       Fees and Expenses

       The administrative fees and expenses of the American Arbitration Association totaling
$8200.00 and the compensation and expenses ofthe arbitrators totaling $67,094.73 shall be
borne by borne by the party incurring same.

         This AWARD is in full settlement of all claims and counterclaims submitted in this
arbitration. All claims for relief not expressly granted herein, including all claims set forth by
the Parties in their pleadings, in their pre- and post-summary judgment hearing briefs, or orally at
the hearing. are hereby DENIED.




AWARD OF ARBITRATORS                                                                     PAGE2 OF 3
                                                                                                       252
253
  APPENDIX

    TAB C

FINRA AWARD
 (C.R. 145-147)
10/04/2012 14:02 FAX                                            NASD                                                                        141001/013


                  /j
             ~v
  "-         D1'spute Resolution
     Midwest Processing Center
     55 West Monroe Street
     Suite 2600
     Chicago, IL 60603
     E-m ail:midwestprocessingc en ter@finra.org
     Phone: 312-899-4440
     Fax: 312-236-9239


                           Number of Pages including the Cover Sheet:

                                                             Date: I010412012


   Case Number: 10-04965

   Case Name:          Brian O'Grady and The O'Grady Family Partnership, Ltd. vs. Woodbury Financial Services,
                       Inc., David Miler, et al.

                       Andrew Leib•)\vitz Phone:            214-915-9841 Fax: 214-752-8250
   To:
                       Sheldon E. Ri :hie       Phone:      512-236-9220 Fax: 512-236-9230

   From:               Elizabeth l\-lul<oon
                       Case Adrninist .·ator

    Message:




    Thi, facsimile transmission i~ in1•:nded only fo1· the adcll'cs~cc(s) shown above. It may cont;~in info-;:n\~tion rh;1 is pl'ivilegcd.
    crmfidNitial, o1· otllerwlsc pn1ter.ted from disclosure. Any review, dissemination or use nrthis tran~mission or its t;OTitcnt:; l>y
    persom other than a<ldresst•!! iss rictl~· prohibited. If you have rN·el-vcd this   transmfs.~lon   in error,   ph~llse   no tit~· us
    immedlHkly hy telephone at ri.H! ::bovc number.

                                                              EXHIBIT A
                                                        TO MOTION TO VACATE
                                                    OR MODIFY ARBITRATION AWARD

OCT-04-2012 02:39PM              From:                                           ID:RICHIE & GUERINGER                             Page:001      R=96%

                                                                                                                                                         145
 10/04/2012 14:03 FAX                                                   NASD                                                                   [4] 002/013




Fl      r              Finandallndustry Re ~ulatcry Authority




       October 4, 2012

       Sheldon E. Richie, Esq.
       Richie & Gueringer, P.C.
       100 Congress Ave.
       1750
       Austin, TX 78701

       Subject:         FINRA DlspL te Resolution Arbitration Number 10-04965
                        Brian O'Grac y and The O'Grady Family Partnership, Ltd. vs. Woodbury Financial
                        Services, Inc., David Miller, et al.

       Dear Mr. Richie:

       Enclosed please find the· decision reached by the arbitrators in the above-referenced matter.

                                                  Responsibility to Pay Monetary Award

       FINRA rules provide that all monetary awards shall be paid within 30 days of receipt unless a
       motion to vacate has be :m filed with a court of competent jurisdiction. An award shall bear
       interest from the date of the award:

           $       If not paid within 30 days of receipt;
           "       If the award is the subject of a motion to vacate which is denied; or
           ~       As specified by I he panel in the award.

       Interest shall be assess·~d at the legal rate, if any, then prevailing in the state where the award
       was rendered, or at a rate set by the arbitrators.

                                Expediled Suspension Proceedings for                          Non~Payment         of Awards

       Article VI, Section 3 of :he FINRA By-Laws and FINRA Rule 9554 permit FINRA to suspend or
       cancel the registration of any firm or associated person that fails to comply with a FlNRA
       arbitration award.

       Firms are required to n )tify FINRA in writing within 30 days of receipt of an award that they or
       their associated persor shave paid or otherwise complied with the award, or to identify a valid
       basis for non-payment. We also request that prevailing claimants notify us in writing when their
       awards have not been )aid within 30 days of receipt of the award.

       Written notification concerning award compliance or lack thereof should be directed to:



       lnve~tor   protection. Market irtewity.                  Disp.1te Re~olu\ion             55 'Nest M:mroc   Slr~"i·   ! 312 899 "440
                                                                Mirlwe>l Rr•gronal Off:c"~      Suil•c 1.600                r '312 236 0:119
                                                                                                Chcago, ''-                 www.firro.org
                                                                                                6060:!-5104




OCT-04-2012 02:39PM               From:                                                      ID:RICHIE & GUERINGER                     Pa9e:002    R=96%
                                                                                                                                                             146
 10/04/2012 14:03 FAX                                NASD                                                    ~   003/013




                                                David Carey
                                         FINRA Dispute Resolution
                               One Liberty Plaza, 165 Broadway, 52nd Floor
                                            New York, NY 10006
                    212~858-4233 (tel) 1301-527-4706 (fax) 1david.carey@finra.org (email)



                                       Right to File Motion to Vacate Award

       FINRA rules provide tha:, unless the applicable law directs otherwise, all awards rendered are
       final and are not subject to review or appeal. Accordingly, FINRA has no authority to vacate this
       award. Any party wishir g to challenge the award must make a motion to vacate the award in a
       federal or state court of lppropriate jurisdiction pursuant to the Federal Arbitration Act, 9 U.S. C. §
       10, or applicable state s :atute. There are limited grounds for vacating an arbitration award, and a
       party must bring a motic n to vacate within the time period specified by the applicable statute. If
       you are not represented by counsel and wish to challenge the award, we urge you to seek legal
       advice regarding any rights or remedies available to you.

                                                     Forum Fees

       You will receive under separate cover an invoice that reflects the fees assessed and any
       outstanding balance or ·efund due. Fees are due and payable to FINRA Dispute Resolution
       upon receipt of the invc ice and should be sent to the address specified on the invoice. Any
       applicable refunds will E lso be sent under separate cover approximately 45 days after the case
       closes. All questions regarding payment of fees and refunds should be directed to FINRA
       Finance at (240) 386-5!l10.

                                                Arbitrator Evaluation

       FINRA encourages parties to complete Arbitrator Evaluation Forms at the conclusion of every
       case. We will utilize ycur comments in our ongoing efforts to evaluate and improve the services
       our forum provides. Y<'U can complete the Arbitrator Evaluation Form on our website at
       www. finra. orgfarbevalu: ltion .

                               .E arty Submissions to Arbitrators After a Case Closes
       FINRA rules provide t 1at parties may not submit documents to arbitrators in cases that have
       been closed except under the following limited circumstances: 1) as ordered by a court; 2)
       at the request of any 1•arty within 10 days of service of an award, for typographical or
       computational errors, or mistakes in the description of any person or property referred to in
       the award; or 3) if all parties agree and submit documents within 10 days of service of an
       award. Any documents, if submitted, must be sent through FINRA.




OCT-04-2012 02:39PM        From:                                  ID:RICHIE & GUERINGER             Po;~ge:003    R=96%
                                                                                                                           147
 10/04/2012 14:03 FAX                           NASD                                              @004/013




                                       Questions Concerning Award

       Should you have any qu ~stions, please contact me at the phone number or email address
       provided below. Parties should not directly contact arbitrators under any circumstances.




        lizabet~
                                 t/
                 .. Muldoor;,~·tsq.
       Case Adn'iinistratotrr
       Phone: 312·899- 4 o
       Fax:     301-527- 8
       Elizabeth.Muldoon@tin ·a.org


       EAW:aas:LC09A
       idr: 08/29/2012


       RECIPIENTS:
             Andrew Lei bow tz, Esq., River Oaks Capital Managemen1, Inc.
             The Berry Firm PLLC, 1412 Main Street, Suite 2300, Dallas, TX 75202

              Andrew Lei bow tz, Esq., Brett Stephen Schulick
              The Berry F!rm PLLC, 1412 Main Street. Suite 2300, Dallas, TX 75202

              Andrew Leibowitz, Esq., David Charles Miller
              The Berry Firm PLLC, 1412 Main Street, Suite 2300, Dallas, TX 75202

               Sheldon E. Ric!1ie, Esq., The O'Grady Family Partnership, Ltd.
               Richie & Guerir1ger, P.C., 100 Congress Ave., 1750, Austin. TX 78701

               Sheldon E. Ric1ie, Esq .. Brian O'Grady, M.D.
               Richie & Gueringer, P.C., 100 Congress Ave., 1750, Austin, TX 78701




OCT-04-2012 02:40PM      From:                              ID:RICHIE & GUERINGER          PCl9e:004   R=96%

                                                                                                               148
          APPENDIX

           TAB D

PLAINTIFFS’ ORIGINAL PETITION
          (C.R. 3-99)
                                                                                      Filed
                                                                                      13 August 9 P3:27
                                                                                      Amalia Rodriguez-Mendoza
                                                                                      District Clerk
                                                                                      Travis District
                                                                                      D-1-GN-13-002748
                        CAUSE N O . - - - - - - - - - - -
BRIAN O'GRADY, M.D. and                           §            IN THE DISTRICT COURT OF
THE O'GRADY FAMILY                                §
PARTNERSHIP, LTD., as owners of                   §
the claim of David Miller, Brett                  §
Schulick, and River Oaks Capital,                 §
Inc. per the June 28, 2013 Turnover               §
Order of Judge Tim Sulak                          §                TRAVIS COUNTY, TEXAS
                    Plaintiffs,                   §
                                                  §
v.                                                §
                                                  §
NATIONAL UNION FIRE INSURANCE                     §
COMPANY OF PITTSBURGH, PA.                        §
             Defendant.                           §             _ _ _ JUDICIAL DISTRICT


                                    ORIGINAL PETITION


       Plaintiffs, BRIAN O'GRADY, M.D. and THE O'GRADY FAMILY PARTNERSHIP,

LTD., as owners of claims of David Miller, Brett Schulick, and River Oaks Capital Management,

Inc. (collectively "Plaintiffs") file this Original Petition against NATIONAL UNION FIRE

INSURANCE COMPANY OF PITTSBURGH, PA ("Defendant" or "National Union").

                                       INTRODUCTION

       1.      Plaintiffs seek a judicial declaration that the Judgment awarded them against

Defendant's Insureds is covered by the Policy which is the subject of this lawsuit.

       2.      Plaintiffs seek damages against Defendant for bad faith, breach of contract,

breach of the common law duty of good faith and fair dealing, violations of the Texas Insurance

Code, and unfair and deceptive trade practices.

                                    DISCOVERY LEVEL 3

       3.      Discovery in this matter will be conducted pursuant to Rule 190.4 (Level 3) of the

Texas Rules of Civil Procedure.



ORIGINAL PETITION

                                                                                                      3
                                                 PARTIES

          4.          Plaintiff Brian O'Grady, M.D. ("O'Grady") is an individual.

          5.          Plaintiff The O'Grady Family Partnership, Ltd. ("OFP")        IS   a duly-registered

Texas Limited Partnership authorized to do business in the State ofTexas.

           6.         Defendant National    Union Fire Insurance Company of Pittsburgh, Pa.

("Defendant" or "National Union") is a foreign for profit corporation conducting business in the

State of Texas and may be served through its registered agent, Corporation Service Company at

211 East 7th Street, Suite 620, Austin Texas 78701-3218, or wherever else National Union may

be found.

                                      JURISDICTION AND VENUE

           7.         This Court has jurisdiction over Defendant pursuant to section 37.003 of the

Texas Civil Practice & Remedies Code.

           8.         Pursuant to Section 15.002(1) of the Texas Civil Practice and Remedies Code,

jurisdiction and venue are appropriate in the District Court of Travis County, Texas because all

or a substantial part of the events and/or omissions on which this lawsuit is based occurred in

Travis County. More specifically, the final judgment ofthe underlying action for which National

Union is liable for was entered in Travis County, Texas. Additionally, the turnover order by

which Plaintiffs recovered the rights of Defendant's Insureds and Plaintiffs was entered in Travis

County, Texas.

           9.         The amount in controversy is over $1,000,000.00 and is within the jurisdictional

limits of this court.

                                         BACKGROUND FACTS

           10.        National Union issued a policy, Policy Number 00-665-25-96 (the "Policy"),

insuring Woodbury Financial Services, Inc. ("Woodbury"), River Oaks Capital Management,
                                                                                     2
ORIGINAL PETITION
41 05.006\0riginal Petition

                                                                                                             4
Inc. ("ROC Management"), David Miller ("Miller"), and Brett Schulick ("Schulick"),

collectively "Insureds." A true and correct copy of the Policy is attached hereto as Exhibit A.

           11.        On September 25, 2008, during the coverage period, Plaintiffs sued the Insureds

for various wrongful acts covered under the Policy. The Insureds timely notified National Union

of their claim and Plaintiffs' law suit (hereinafter the "Underlying Action"). National Union

tendered a defense for ROC Management, Miller and Schulick in the Underlying Action.

           12.        With the sole exception of Woodbury, who agreed to a settlement with Plaintiffs,

Plaintiffs prevailed against the remaining Insureds (ROC Management, Miller, and Schulick) at

the arbitration of the Underlying Action.

           13.        A final judgment awarding Plaintiffs the principal amount of $3,279,351.49, plus

interest, was entered in the 98th Judicial District Court of Travis County, Texas against

Defendant's Insureds- ROC Management, Miller, and Schulick, on February 28, 2013. A true

and correct copy of the Judgment is attached hereto as Exhibit B.

           14.        Despite the Judgment against its Insureds, National Union has refused and

continues to refuse to pay Plaintiffs the amounts of the Judgment covered by the Policy claiming

lack of coverage.

           15.        Defendant's Insureds, ROC Management, Miller, and Schulick have failed to

satisfy the Judgment awarded to Plaintiffs, forcing Plaintiffs to obtain a Turnover Order granting

ownership in the Insureds' rights under the Policy to Plaintiffs. A true and correct copy of

Plaintiffs' Turnover Order is attached hereto as Exhibit C.

                                       DECLARATORY JUDGMENT

           16.        Plaintiffs incorporate paragraphs 1 through 15 as if fully set forth verbatim herein.




                                                                                                          3
ORIGINAL PETITION
4105. 006\0riginal Petition

                                                                                                              5
            17.        The Texas Declaratory Judgment Act ("TDJA") expressly authorizes this Court to

declare the rights and other legal relations of any interested party seeking such declaration. TEX.

Crv. PRAC. & REM. CODE § 37.003(a). Thus, Plaintiffs request that this Court declare coverage

under the Policy giving rise to this proceeding. That is, Plaintiffs seek a judicial declaration from

the Court ruling that Plaintiffs' monetary judgment against ROC Management, Miller, and

Schulick is enforceable against Defendant because Plaintiffs' damages award qualifies as a

covered claim under the Policy.

            18.        Plaintiffs also request the Court to award costs and reasonable and necessary

attorneys' fees as "are equitable and just."

                                          BREACH OF CONTRACT

            19.        Plaintiffs incorporate paragraphs 1 through 18 as if fully set forth verbatim herein.

           20.         In the Underlying Action, Plaintiffs prevailed on their claims against Defendant's

Insureds, ROC Management, Miller, and Schulick. Said claims were covered under the Policy

issued by Defendant. In breach of its contractual obligations to its Insureds and now Plaintiffs

National Union has refused to tender amounts in satisfaction of the judgment awarded to

Plaintiffs. As a result of such breach, Defendant's Insureds and Plaintiffs have been damaged in

an amount in excess of $3,279,351.49, plus interest.

           21.         As a result of Defendant's breach of contract, Plaintiffs, as owners of the claims

held by Defendant's Insureds are entitled to recover damages and reasonable and necessary

attorneys fees incurred in this lawsuit.

                                                  BAD FAITH

           22.         Plaintiffs incorporate paragraphs 1 through 21 as if fully set forth verbatim herein.




                                                                                                           4
ORIGINAL PETITION
4 I 05.006\0riginai Petition

                                                                                                               6
           23.        ROC Management, Miller, and Schulick and now Plaintiffs, qualify as Insureds

under the Policy issued by National Union, which gives rise to a duty of good faith and fair

dealing.

           24.        Defendant owes its Insureds ROC Management, Miller, Schulick, and now

Plaintiffs, the duty to deal fairly and in good faith in processing and paying their claims,

including the judgment awarded to Plaintiffs against Defendant's Insureds.

           25.        Defendant breached its duty to its Insureds ROC Management, Miller, Schulick

and now Plaintiffs, by wrongfully denying payment of a valid, covered claim when Defendant

knew its liability under the Policy was reasonably clear.

           26.        Defendant's Insureds and Plaintiffs suffered mJury proximately caused by

Defendant's breach.

           27.        As owners of the claims and rights of Defendant's Insureds, ROC Management,

Miller, and Schulick under the Policy, Plaintiffs are entitled to recover damages against

Defendant for Defendant's bad faith. Plaintiffs are also entitled to costs and attorney's fees for

the pursuit of this action pursuant to the Texas Civil Practice & Remedies Code § 38.001 and

Article 21.55 ofthe Texas Insurance Code.

           28.        Defendant is liable for punitive damages because Defendant's breach of the duty

of good faith and fair dealing was accomplished by intentional, fraudulent, or grossly negligent

conduct.

                              VIOLATION OF THE TEXAS INSURANCE CODE

           29.        Plaintiffs incorporate paragraphs 1 through 28 as if fully set forth verbatim herein.

           30.        The actions of Defendant as described above constitute violations of the Texas

Insurance Code.


                                                                                                          5
ORIGINAL PETITION
41 05.006\0riginal Petition

                                                                                                              7
          31.        Defendant violated Section 541.060 of the Texas Insurance Code by refusing and

failing to tender payment to Plaintiffs in satisfaction of the Judgment, which is a claim covered

by the Policy.

          32.        As owners of the claims and rights retained by ROC Management, Miller, and

Schulick against Defendant, Plaintiffs are entitled to any and all damages owed by Defendant to

ROC Management, Miller, and Schulick. Further, Plaintiffs are entitled to an award of up to

three times the amount of their actual damages because of Defendant's knowing violations of the

Texas Insurance Code.

          33.        Pursuant to Chapter 541 of the Texas Insurance Code, Plaintiffs are entitled to a

statutory penalty of 18% per annum plus reasonable and necessary attorney's fees.

                             UNFAIR AND DECEPTIVE TRADE PRACTICES

          34.        Plaintiffs incorporate paragraphs 1 through 33 as if fully set forth verbatim herein.

          35.        As Defendant's Insureds and Plaintiffs, ROC Management, Miller, Schulick and

now Plaintiffs, qualify as consumers under the DTPA. The actions of Defendant as described

above constitute violations ofthe Texas Deceptive Trade Practices Act ("DTPA").

          36.        Defendant's wrongful acts were a producing cause of damages to ROC

Management, Miller, Schulick and Plaintiffs.

          37.        To that end and as owners of the claims and rights retained by ROC Management,

Miller, and Schulick against Defendant, Plaintiffs are entitled to any and all damages owed by

Defendant to ROC Management, Miller, and Schulick.

                                           SPECIFIC PERFORMANCE

          38.        Plaintiffs incorporate paragraphs 1 through 3 7 as if fully set forth verbatim herein.

          39.        Plaintiffs are entitled to specific performance of the terms, conditions, and

provisions of the insurance policy issued by Defendant. Accordingly, Defendant should be
                                                                                                          6
ORIGINAL PETITION
4105.006\0riginal Petition

                                                                                                              8
ordered by the Court to specifically perform its obligations under the policy and pay Plaintiffs

the entire Judgment award obtained by them in the Underlying Action, plus any related interest,

fees, and costs.

                                         EXEMPLARY DAMAGES

           40.        Plaintiffs incorporate paragraphs 1 through 39 as if fully set forth verbatim herein.

           41.        Plaintiffs are entitled to damages resulting from injuries caused by Defendant's

wrongful conduct. Defendant's wrongful conduct includes acts amounting to gross negligence,

malice, or actual fraud, which entitles Plaintiffs to exemplary damages under Texas Civil

Practice & Remedies Code §41.003(a).

                                     COSTS AND ATTORNEYS' FEES

           42.        Plaintiffs incorporate paragraphs 1 through 41 as if fully set forth verbatim herein.

           43.        As a result of Defendant's wrongful conduct, Plaintiffs had to engage the services

of the law firm of Richie & Gueringer, P.C., licensed attorneys, to represent them in this action,

and have agreed to pay said attorneys a reasonable fee for their services. Plaintiffs request these

attorneys' fees and costs incurred in connection herewith pursuant to all applicable laws,

including but not limited to, Chapter 37.009 of the Texas Civil Practice and Remedies Code,

Chapter 38.001 of the Texas Civil Practice and Remedies Code, Article 21.55 of the Texas

Insurance Code, Chapter 541 of the Texas Insurance Code as well as the Texas Deceptive Trade

Practices Act.

                                        CONDITIONS PRECEDENT

           44.        All conditions precedent to Plaintiffs' claims for relief have been performed or

have occurred. National Union received timely notice and demand of the Insureds' coverage

claim. In fact, National Union had representative counsel appear on its behalf at the arbitration

of the Underlying Action.
                                                                                                          7
ORIGINAL PETITION
4105 .006\0riginal Petition

                                                                                                              9
                                    MOTION TO REFER TO ARBITRATION

          45.        Plaintiffs' claims are subject to an arbitration agreement.          Said arbitration

agreement is included in the insurance policy attached as Exhibit A. Upon hearing, Plaintiffs

would request that this case be abated and referred to arbitration.

                                                      PRAYER

          WHEREFORE, based on the foregoing, Plaintiffs respectfully pray that Defendant be

summoned to appear and answer, and that upon the allegations hereof, Plaintiffs be granted the

following:

                a)           An abatement and referral to arbitration of this case;

                b)           Declaration that Defendant is liable to Plaintiffs for all amounts provided by

                             the Final Judgment of the Underlying Action;

                c)           Declaration and Judgment against Defendant for actual damages, exemplary

                             damages, and applicable statutory damages and/or specific performance;

                d)           Attorney's fees incurred by Plaintiffs;

                e)           Costs of suit;

                f)           Pre-judgment and post-judgment interest;

                g)           Such other and further relief, at law or in equity, to which Plaintiffs may be

                             justly entitled.




                                                                                                          8
ORIGINAL PETITION
4105.006\0riginal Petition

                                                                                                              10
                             Respectfully submitted,




                             BY: __-+~------~-----------------­
                                 SHE DON E. RICHIE
                                 State Bar No. 16877000
                                 WARREN C. WILLS
                                 State Bar No. 24037716
                                 JEANINE 0. NAVARRO
                                 State Bar No. 24052894
                                 100 Congress Avenue, Suite 1750
                                 Austin, Texas 78701
                                 512-236-9220 telephone
                                 512-236-9230 facsimile

                             ATTORNEYS FOR PLAINTIFF




                                                               9
ORIGINAL PETITION
4105.006\0riginal Petition

                                                                   11
 National Union Fire Insurance Company of Pittsburgh, Pa.
 175 Water Street
 New York. NY 10038
                                                                          A member company of
 212-770-7000                                                        American International Group, Inc.



                             NOTICE OF SUBJECT TO INFORMATION
                                                                            September 18, 2008
 SETH COLE
 ALLIANT INSURANCE SERVICES. INC.
 600 MONTGOMERY ST
 FL 9TH
 SAN FRANCISCO. CA 94111-2711
 RE: WOODBURY FINANCIAL SERVICES, INC.
     THROUGH THE FINANCIAL SALES
     PROFESSIONALS RISK PURCHASING GROUP
 Policy Number: 00-666- 25-96

 Dear SETH
 As you are aware, this account was bound subject to the receipt, review and acceptance of
 various additional information or documentation. Unfortunately, as of the present date, the
 following . information and/or documentation which is required to permanently bind the
 above- reference account, pursuant to our temporary and conditional binder, is still outstanding:


   Confirmation that the appropriate RPG is still in place
 • Completed. signed and dated application (no warranty questions).
 • Schedule of Insured Agents to be covered under the policy, due to the Insurer no
   later than forty-five (45) days from policy inception (due 911512008) and quarterly
   enrollment updates
 This information and/or documentation was to have been received, reviewed and given written
 underwriting approval by this office by August 8, 2008

 As a matter of courtesy, we enclose your client's policy. However, please note that by accepting
 the policy, you acknowledge that by issuing the policy, we do not waive our right to receive,
 review and approve the additional information or documentation noted above.
 Also, be advised that we have added exclusionary endorsement(s) to the policy pursuant to our
 rights set forth in our binder for the policy. Upon receipt and review of this outstanding
 information and/or documentation and written underwriting approval by this office, we may
 remove these exclusionary endorsements.

 If you have already sent the information requested above, please accept my sincerest apologies
 and call me at 212·458-2863

                                                        Very truly yours,



                                                        Marshall Rothstein
 En c.

                                                    EXHIBIT
360000925
                      BROKER
                  Archive Copy                         1\
                                                                                                          12
                          POLICYHOLDER NOTICE

Thank you for purchasing insurance from a member company of American
International Group, Inc. (AIG). The AIG member companies generally pay
compensation to brokers and independent agents, and may have paid
compensation in connection with your policy. You can review and obtain
information about the nature and range of compensation paid by AIG member
companies to brokers and independent agents in the United States by visiting
our website at www.aigproducercompensation.com or by calling AIG at
1-800-706-31 02.




91222 (7/06¥Vchive Copy



                                                                               13
                                                                5
                 AIG EXECUTIVE LIABILITY                            M
                 Insurance provided by the following member of American International Group, Inc.

               National Union Fire Insurance Company of Pittsburgh, Pa.
                                                                        A capital stock company


POLICY NUMBER: 00-665-25-96                   REPLACEMENT OF POLICY NUMBER: 00-664-90-85



          INSURANCE COMPANY SUPERVISORY & VICARIOUS LIABILITY AND
          INSURANCE AGENTS PROFESSIONAL LIABILITY INSURANCE POLICY

NOTICE: THIS IS A CLAIMS-MADE FORM. EXCEPT TO SUCH EXTENT AS MAY OTHERWISE BE
PROVIDED HEREIN, THE COVERAGE OF THIS POLICY IS LIMITED TO LIABILITY FOR ONLY
THOSE CLAIMS THAT ARE FIRST MADE AGAINST THE INSUREDS DURING THE POLICY PERIOD
AND REPORTED IN WRITING TO THE INSURER PURSUANT TO THE TERMS HEREIN. PLEASE
READ THE POLICY CAREFULLY AND DISCUSS THE COVERAGE HEREUNDER WITH YOUR
INSURANCE AGENT OR BROKER.

NOTICE: THE LIMIT OF LIABILITY AVAILABLE TO PAY DAMAGES SHALL BE REDUCED BY
AMOUNTS INCURRED FOR LEGAL DEFENSE. AMOUNTS INCURRED FOR LEGAL DEFENSE SHALL
BE APPLIED AGAINST THE DEDUCTIBLE.

                                       DECLARATIONS


Item 1.   NAMED INSURED:             WOODBURY FINANCIAL SERVICES, INC.
                                     THROUGH THE FINANCIAL SALES
                                     PROFESSIONALS RISK PURCHASING GROUP

          MAILING ADDRESS:          500 BIELENBERG DRIVE
                                    WOODBURY, MN 55125

Item 2.   POLICY PERIOD: From: AUGUST 1, 2008           To: DECEMBER 1, 2009
                         {12:01 A.M. standard time at the address stated in Item 1.)


Item 3.   LIMIT OF LIABILITY: $75,000,000             aggregate for Coverages A, B and C
                                                      combined (including Defense Costs).

          The limit of the Insurer's liability for all amounts payable hereunder in
          settlement or satisfaction of Claims covered under this policy shall be subject
          to one of the following Sub-Limits of Liability:

          a.    See End't #1 for Damages and Defense Costs arising from a Wrongful Act
                             or Interrelated Wrongful Acts resulting in a Claim(s) made
                             against:
                             (i)     one Insured Agent; or
                             (ii)    the Named Insured; or
                             (iii)   both one Insured Agent and the Named Insured.




68909 1 0/97 Ar   tiJ.    c                    1
                 C,   A~enc~R~ternational    Group, Inc. All rights reserved.


                                                                                                    14
          b.   $3,000,000     for Damages and Defense Costs arising from a Wrongful Act
                               or Interrelated Wrongful Acts resulting in a Claim(sl made
                               against:
                              (i)   more than one Insured Agent; or
                              (ii) both more then one Insured Agent and the Named
                                     Insured.

          c. NfA              for Damages and Defense Costs arising from a Class Action
                              Suit (certified or non-certified) alleging a Wrongful Act or
                              Interrelated Wrongful Acts resulting in a Claim(s) made
                              against:
                              (i)  the Named Insured; or
                              {ii) both the Named Insured and more than one Insured
                                    Agent.

          The Sub-Limits of Liability shall not increase the aggregate Limit of Liability.


Item 4.   DEDUCTIBLE:

          a.   Named Insured Non-Class Action Deductible:

               N/A            for Damages and Defense Costs arising from a Wrongful Act
                              or Interrelated Wrongful Acts.         The Named Insured
                              Deductible shall apply to all Insureds under this policy when
                              a Claim(s) is suited and made against:
                              (i)    the Named Insured; or
                              (ii)   both the Named Insured and one or more Insured
                                     Agents.

          b.   Named Insured Class Action Deductible (Shall only apply if Coverage C is
               elected):

               N/A            for Damages and Defense Costs arising from a Class Action
                              suit (certified or non-certified} alleging a Wrongful Act or
                              Interrelated Wrongful Acts.       The Named Insured Class
                              Action Deductible shall apply under this policy when a
                              Claim(s) is suited and made against:
                              (i}   the Named Insured; or
                              (ii) both the Named Insured and one or more Insured
                                     Agents.

          In the event a Class Action is not certified prior to final disposition of the suit,
          the deductible in Item 4a shall apply and the Insurer shall reimburse the Named
          Insured for all Damages and Defense Costs in excess of the deductible stated
          in 4a above, subject to the Limit of Liability stated In Item 3b on the
          Declarations page.




68909 1 0/97 Ar   t/;1.   c                  2
                c A~encllR~ternational     Group, Inc. All rights reserved.


                                                                                                 15
          c.   Insured Agent Deductible:

                See End't #2 for Damages and Defense Costs arising from a Wrongful Act
                              or Interrelated Wrongful Acts. The Insured Agent Deductible
                             shall apply severally to each Insured Agent when a Claim(s)
                              is:
                              (i)  suited and made against one or more Insured Agents
                                    and not against the Named Insured; or
                              (ii) not suited.

          In no event shall the total amount of Insured Agent Deductibles applied to the
          same Wrongful Act or Interrelated Wrongful Acts exceed in the aggregate the
          Named Insured Deductible amount stated above.


Item 5.   PREMIUM:                         (subject to upward adjustment)


Item 6.   COVERAGES:        Only those of the Coverages designated as "covered" by the
                            corresponding letter for the coverage (for example the letter
                            A(a) in the column under the heading "COVERED" next to
                            where they are listed below) are afforded coverage by this
                            policy. Absence of an entry means not covered.

                                   COVERED                              NOT COVERED

               COVERAGE   A(a):                                                X
               COVERAGE   A(b):                                                X
               COVERAGE   B:           X
               COVERAGE   C:                                                   X


ITEM 7.   NAME AND AODRESS OF Insurance Company !"Company"):
          (This policy is issued only by the insurance company indicated below.)

                 National Union Fire Insurance Company of Pittsburgh, Pa.
                                      175 Water Street
                                   New York, NY 10038




68909 10/97 Ar   ;p.    c                     3
                c .!.'{1fenc~Rihternational Group, Inc. All rights reserved.

                                                                                            16
IN WITNESS WHEREOF, the Insurer has caused this policy to be signed on the
Declarations by its President, a Secretary and its duly authorized representative.




                                                     ~ )l(.?ud-
            PRESIDENT                                               SECRETARY



                            t#2~
                            . AUTHORIZED REPRESENTATIVE




     COUNTERSIGNATURE                      DATE                 COUNTERSIGNED AT




ALLIANT INSURANCE SERVICES. INC.
600 MONTGOMERY ST
FL 9TH
SAN FRANCISCO, CA 94111-2711




360000925




68909 1 0/97 Ar   IJ.   c                    4
               C   AYffenc~R~ternational   Group, Inc. All rights reserved.


                                                                                     17
      nJI.I AIG           EXECUTIVE LIABILITY sM
      . . Insurance provided by the following member of American International Group, Inc.

                                                         '                               ®
                  National Union Fire Insurance Company of Pittsburgh, Pa.
                                                                       A capital stock company



                    INSURANCE COMPANY SUPERVISORY & VICARIOUS LIABILITY
                AND INSURANCE AGENTS PROFESSIONAL LIABILITY INSURANCE POLICY


   NOTICE: THIS IS A CLAIMS- MADE FORM. EXCEPT TO SUCH EXTENT AS MAY OTHERWISE BE
   PROVIDED HEREIN, THE COVERAGE OF THIS POLICY IS LIMITED TO LIABILITY FOR ONLY
   THOSE CLAIMS THAT ARE FIRST MADE AGAINST THE INSUREDS DURING THE POLICY PERIOD
   AND REPORTED IN WRITING TO THE INSURER PURSUANT TO THE TERMS HEREIN. PLEASE
   READ THE POLICY CAREFULLY AND DISCUSS THE COVERAGE HEREUNDER WITH YOUR
   INSURANCE AGENT OR BROKER.
   NOTICE: THE LIMIT OF LIABILITY AVAILABLE TO PAY DAMAGES SHAll BE REDUCED BY
   AMOUNTS INCURRED FOR LEGAL DEFENSE. AMOUNTS INCURRED FOR LEGAL DEFENSE SHAll
   BE APPLIED AGAINST THE DEDUCTIBLE.
   In consideration of the payment of the premium, and in reliance upon the statements in the
   Application attached and made a part of this policy, and subject to the terms and conditions of
   this policy, the insurance company designated in Item 6 of the Declarations, herein called the
   "Insurer", agrees as follows:
   1. INSURING AGREEMENTS
      COVERAGE A: INSURANCE COMPANY SUPERVISORY & VICARIOUS LIABILITY INSURANCE
      This policy shall pay the Damages and Defense Costs of the Named Insured arising from any
      Claim or Claims first made against the Named Insured, with or without any Claim or Claims
      made against an Insured Agent, during the Policy Period or any Discovery Period (if
      applicable) and reported to the Insurer pursuant to the terms of this policy for any actual or
      alleged:
          (a! Wrongful Act of the Named Insured arising out of, based upon or attributable to the
              General Supervision of an Insured Agent, or
          (b) Vicarious Liability of the Named Insured
      arising solely out of the Wrongful Act of an Insured Agent in the performance of or failure to
      perform Professional Services.
      Coverage A of this policy shall apply only if the underlying Wrongful Act of the Insured Agent
      is otherwise covered under the terms and conditions of this policy.
      The Insurer has the right but not the duty to defend the Named Insured for Claim(s) which
      would be covered under Coverage A. The Named Insured shall defend and contest any
      Claim(s) made hereunder. However, the Insurer shall reimburse, at the written request of the
      Named Insured, Defense Costs prior to the final disposition of any Claim (s), subject to Clause
      9, Defense Costs, Settlements, Judgments (Including Advancement of Defense Costs).
      COVERAGE B: INSURANCE AGENTS PROFESSIONAL LIABILITY INSURANCE
      (1) This policy shall pay the Damages and Defense Costs of the Named Insured ansmg from
          any Claim or Claims first made against any Insured Agent during the Policy Period or any
          Discovery Period (if applicable) and reported to the Insurer pursuant to the terms of this
          policy for a Wrongful Act of an Insured Agent or that of any other person for whom the
          Insured Agent is legally responsible, but only if such Wrongful Act occurs solely in the
          performance of or failure to perform Professional Services, and only if the Named Insured




68910 (10/971   BRO.Ifli:/Rive Copy


                                                                                                        18
          has assumed the defense of the Insured Agent pursuant to the following paragraph.
          The Named Insured has the right but not the duty to assume the defense of any Claim(s)
          made against an Insured Agent. In the event the Named Insured assumes the defense of
          an Insured Agent, the Insurer shall reimburse, at the written request of the Named
          Insured, Defense Costs prior to the final disposition of any Claim (s), subject to Clause 9,
          Defense Costs, Settlements, Judgments (Including Advancement of Defense Costs).
       (2) In the event the Named Insured does not assume the defense of any Claim(s} made
           against an Insured Agent pursuant to Coverage 8(1) or Coverage C below, this policy shall
           pay on behalf of the Insured Agent Damages and Defense Costs resulting from any Claim
           or Claims first made against the Insured Agent during the Policy Period or any Discovery
           Period (if applicable) and reported to the Insurer pursuant to the terms of this policy for
           any Wrongful Act of the Insured Agent, but only if such Wrongful Act occurs solely in the
           performance of or failure to perform Professional Services. The Insurer will defend any
           such Claim(s) against the Insured Agent, even if the allegations in any such Claim(s) are
           groundless, false or fraudulent, subject to Clause 9, Defense Costs, Settlements,
           Judgments (Including Advancement of Defense Costs), but only when the Insured Agent is
           not being defended by the Named Insured pursuant to Coverage 8(1) above.
      COVERAGE C: CLASS ACTION COVERAGE FOR NAMED INSURED AND INSURED AGENTS
      Coverage C may only be elected if the Named Insured has elected Coverage A(a) and/or A(b)
      of the policy. Upon election of Coverage C, as indicated in Item. 6 of the Declarations, this
      policy shall pay the Damages and Defense Costs arising from a Class Action suit (whether
      certified or non- certified) first made against the Named Insured with or without any Class
      Action suit or suits made against an Insured Agent during the Policy Period (if applicable) and
      reported to the Insurer pursuant to this policy for any actual or alleged Wrongful Act or
      Interrelated Wrongful Act arising solely out of the Wrongful Act of an Insured Agent in the
      performance of or failure to perform Professional Services.
      Coverage C of this policy shall apply only if the underlying Wrongful Act of the Insured Agent
      is otherwise covered under the terms and conditions of this policy.
      In the event the Named Insured does not elect Coverage C, this policy shall pay on behalf of
      the Insured Agent(s) Damages and Defense Costs resulting from any Class Action suit
      (certified or non- certified) first made against the Insured Agent during the Policy Period or
      any Discovery Period (if applicable) and reported to the Insurer pursuant to the terms of this
      policy for any Wrongful Act of the Insured Agent, but only if such Wrongful Act occurs solely
      in the performance of or failure to perform Professional Services. In all cases described
      herein the Insured Agent Deductible stated in Item 4c shall apply. The Named Insured retains
      the right but not the duty to assume the defense of any Class Action suit made against an
      Insured Agent. However, if the Named Insured does not assume the defense of any Class
      Action suit made against the Insured Agent this policy will respond as stated in Coverage
      8(2} above.
   2. DEFINITIONS
   (a} "Claim/Class Action" means:
      (1) any demand for monetary relief; or
      (2) a civil, criminal, administrative or arbitration proceeding for monetary relief which is
          commenced by:
          ([) service of a complaint or similar proceeding; or
          (ii) return of an indictment !in the case of a criminal proceeding); or
          (iii) receipt or filing of a notice of charges.
      A Claim or Class Action suit is "suited" when a lawsuit, civil, criminal, administrative or
      arbitration proceeding is formally commenced, pursuant to (i), (ii} or (iii) above or the
      requirements, laws, rules and regulations of the jurisdiction where the Claim or Class Action
      suit Is asserted.



68910 (10/97l   BROJ(IiJffive Copy                   2



                                                                                                         19
   (b) "Continuity Date" means:
       (1) with respect to the Named Insured, the effective date of the Named Insured's first
           Insurance Company Supervisory & Vicarious Liability and Insurance Agents Professional
           Liability Insurance policy issued by the Insurer or any member company of American
           International Group, Inc. and continuously renewed and maintained in effect thereafter
           with the Insurer or any member company of American International Group, Inc. to the
           inception date of this policy.
       (2) with respect to any Insured Agent, the earlier of:
          (i) the effective date of the Insured Agent's first Insurance Agents Professional Liability
              Insurance policy issued to the Insured Agent; or
          {ii) the effective date the Insured Agent first became scheduled under an Insurance
               Company Supervisory & Vicarious Liability and Insurance Agents Professional Liability
               Insurance policy,
          issued by the Insurer or any member company of the American International Group, Inc.
          and continuously renewed and maintained in effect thereafter with the Insurer or any
          member company of the American International Group, Inc. to the inception date of this
          policy.
   (c) "Damages" means all sums which an Insured is legally obligated to pay for any Claim(s) or
       Class Action suit to which this insurance applies. Damages shall not include any amount for
       which an Insured is not financially liable or which are without legal recourse to an Insured, or
       matters which may be deemed uninsurable under the law pursuant to which this policy shall
       be construed. Damages shall include any taxes, fines and penalties incurred by a third party,
       other than an Insured, and which are included in such third party's Claim against an Insured.
   (d) "Defense Costs" shall mean reasonable and necessary fees, costs and expenses resulting
       solely from the investigation, adjustment, defense or appeal of any Claim or Class Action suit
       to which this insurance applies. Defense Costs shall not include the cost of investigation and
       adjustment of any Claim(s) or Class Action suit by salaried employees of the Insurer or the
       Insured, but shall include the fees of any attorney hired to defend an Insured. Defense Costs
       are only those fees, costs and expenses incurred by the Named Insured with the Insurer's
       consent, or incurred by the Insurer or at the Insurer's direction when the Insurer Is defending
       an Insured.
   (e) "General Supervision" means the Named Insured's selection of an Insured Agent and its
       oversight and direction of the performance of an Insured Agent in the rendering of or failure
       to render Professional Services.
   (f) "lnsured(s)" means:
      (1) any Insured Agent(s); and/or
      {2) the Named Insured, but only as respects coverage under Insuring Agreement, Coverage A,
          Insurance Company Supervisory & Vicarious Liability Insurance.
   (g) "Insured Agent(s)" means:
      (1) any natural person who is a licensed life or accident and health insurance agent or
          general agent under contract with the Named Insured and is scheduled by the Insurer,
          which schedule is considered to be attached to and made part of this policy;
      (2) any corporation, partnership, or other business entity engaging in Professional Services
          which is either owned or controlled by a natural person in (1) above or ln which a natural
          person in (1) above is an employee and then only with respect to those operations of the
          corporation, partnership or other business entity directly related to .the Professional
          Services provided by the natural person in (1) above. Furthermore, this extension shall not
          afford coverage for any actual or alleged Wrongful Act of the corporation, partnership, or
          other business entity, but shall only apply to Claim(s) or Class Action suit arising out of




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            any actual or alleged Wrongful Act(s) of a natural person in (1) above;
         (3) any natural person who was or is a partner, officer, director or employee of (1) or (2)
             above solely while acting within the scope of his/her duties as such and provided such
             natural person is not at the time of the alleged Wrongful Act a party to an agent, general
             agent, insurance broker or registered representative contract with any corporation,
             partnership, or other business entity engaging in Professional Services.
         In all events, coverage as Is afforded under this policy with respect to an Insured Agent shall
         only apply to a Clalm(s) or a Class Action suit made against an Insured Agent after the
         Continuity Date of the Insured Agent pursuant to Definition 2(b)(2) above and for any
         Wrongful Act(s) committed or allegedly committed prior to the time such Insured Agent
         ceases to be an Insured Agent.
   (h) "Interrelated Wrongful Acts" means Wrongful Acts which are logically or causally connected
       by reason of any common fact, circumstance, situation, transaction, casualty, event or
       decision. For the purposes of this definition, "causally connected" Wrongful Acts shall include,
       but are not limited to, all Wrongful Acts arising out of, based upon, or attributable to: (1) a
       related method of sale, marketing or illustration of a particular product; (2) an incident which
       affects more than one investor or customer in one or more policies, obligations or securities
       issued, sponsored or distributed by an entity or its subsidiaries or affiliates; or (3) any single
       occurrence or event.
   {i)   "Named Insured" means the insurance company designated in Item 1 of the Declarations and
         any Subsidiary thereof.
   (j)   "Policy Period" means the period from the inception date of this policy shown in Item 2 of
         the Declarations to the earlier of the expiration date shown in Item 2 of the Declarations or
         the effective date of cancellation of this policy.
   (k) "Pr.ofessional Services" shall mean those services rendered or required to be rendered in the
       Insured Agent's profession as:
         (1) a licensed life or accident and health insurance agent or general agent who is placing
             business with the Named Insured;
         (2) a licensed life or accident and health insurance agent or general agent who is placing
             business with Insurance companies other than the Named Insured;
         (3) a licensed registered representative who services, sells, or attempts to sell securities
             approved by and distributed through the Named Insured's National Association of
             Securities Dealers ("NASD") licensed broker/dealer;
         (4) a licensed registered representative who services, sells, or attempts to sell mutual funds
             or variable products through any NASD licensed broker/dealer;
         (5) a notary public, but solely with respect to the performance of Professional Services
             described in paragraphs (1) through (4) above.
         (6) a general agent of the Named Insured, but solely while acting within the scope of his
             duties on behalf of the Named Insured, including but not limited to the recruitment,
             training and supervision of Insured Agents.
   (I)   "Subsidiary" means:
         (1) a corporation of which the insurance company designated in Item 1 of the Declarations
             owns, on the inception date of the Policy Period, more than 50% of the issued and
             outstanding voting stock either directly or indirectly through one or more of its
             Subsidiaries;
         (2) a corporation which becomes a Subsidiary during the Policy Period but only upon the
             condition that within 90 days of its becoming a Subsidiary, the insurance company
             designated in Item 1 of the Declarations shall have provided the Insurer with full
             particulars of the new Subsidiary and agreed to any additional premium and/or



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          amendment of the provisions of this policy required by the Insurer relating to such new
          Subsidiary.
      A corporation becomes a Subsidiary when the insurance company designated in Item 1 of
      the Declarations owns more than 50% of the issued and outstanding voting stock either
      directly or indirectly through one or more of its Subsidiaries. A corporation ceases to be a
      Subsidiary when the insurance company designated in Item 1 of the Declarations ceases to
      own more than 50% of the issued and outstanding voting stock either directly or indirectly
      through one or more of its Subsidiaries.
      In all events, coverage as is afforded under this policy with respect to a Claim made against
      a Subsidiary shall only apply for any Wrongful Act(s) committed or allegedly committed after
      the effective time that such Subsidiary became a Subsidiary and prior to the time that such
      Subsidiary ceases to be a Subsidiary.
   (m) "Vicarious Liability" means liability of the Named Insured arising out of, based upon or
       attributable to the Wrongful Act(s) of an Insured Agent. Vicarious Liability shall not include
       liability for any Wrongful Act(s) of the Named Insured.
   (n) "Wrongful Act" means any actual or alleged:
      (1) negligent act, error, or omission; or
      {2) false arrest, detention or imprisonment; or
      {3) the publication or utterance of a libel or slander or of other defamatory or disparaging
          material, or a publication or utterance in violation of an individual's right of privacy; or
      {4) wrongful entry or eviction or other invasion of the right of private occupancy.
   3. EXCLUSIONS
      This Insurer shall not be liable to make any payment for Damages and Defense Costs in
      connection with a Claim or Class Action suit made against:
      (a) (1) an Insured arising out of, based upon or attributable to any actual or alleged criminal,
              dishonest, malicious, knowingly wrongful· or fraudulent act committed by or at the
              direction of the Insured; or
          (2) an Insured arising out of, based upon or attributable to any actual or alleged violation
              of the Racketeer Influenced and Corrupt Organizations Act (as amended). 18 USC
              Sections 1961 et seq., or any rules or regulations promulgated thereunder;
          however, if such allegations are not subsequently proven by a final judgment or other
          adjudication adverse to the Insured and are not admitted to by the Insured, then the
          Insured shall be entitled to all reasonable Defense Costs which would have been
          collectible under this policy;
      (b) an Insured for physical injury, sickness or disease sustained by a person, including death
          resulting from any of these at any time, emotional distress, damage to or destruction of
          any property, including the loss of use thereof;
      {c) an Insured alleging, arising out of, based upon or attributable to the facts alleged, or to
          the same Wrongful Act or Interrelated Wrongful Acts alleged or contained, in any Claim or
          Class Action suit which has been reported, or in any circumstances of which notice has
          been given, under any policy of which this policy is a renewal or replacement or which it
          may succeed in time;
      (d) an Insured alleging, arising out of, based upon or attributable to any pending or prior
          litigation as of the Continuity Date, or alleging or derived from the same or substantially
          the same facts as alleged in such pending or prior litigation;
      (e) an Insured arising out of, based upon or attributable to any actual or alleged Wrongful Act
          or Interrelated Wrongful Acts occurring prior to the Continuity Date, if on or before such
          date any Insured knew or could have reasonably foreseen that such Wrongful Act or



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            Interrelated Wrongful Acts could be the basis of a Claim or Class Action suit;
      (f) an Insured arising out of, based upon or attributable to the Insured's activities as an
          actuary, lawyer, accountant, real estate agent, real estate broker, or third party claims
          administrator;
      (g) an Insured arising out of, based upon or attributable to the insolvency, receivership,
          bankruptcy, liquidation or inability to pay, of any entity in which the Insured has placed
          funds or obtained coverage or invested funds for a client, including, but not limited to,
          the Named Insured, or any bank, banking firm, insurance company, benefit plan,
          broker/dealer, trust or Investment vehicle;
      (h) an Insured arising out of, based upon or attributable to any commingling of funds or
          accounts;
      (i) the Named Insured alleging, arising out of, based upon or attributable to any one or more
          of the following:
            (1) any failure or refusal to pay, or delay in the payment of, benefits due or alleged to
                have been due under any insurance contract or from any pension plan, welfare plan or
                other benefit plan;
            (2) any lack of good faith or fair dealing in the handling of any claim or obligation arising
                out of or under any insurance contract or from any pension plan, welfare plan or other
                benefit plan;
      {j) an Insured arising out of, based upon or attributable to any pension plan, welfare plan or
          other benefit plan sponsored by any Insured or by any firm in which:
            (1) any Insured has a financial interest;
            {2) any Insured is a participant, named fiduciary, designated fiduciary, administrator or
                trustee as those terms are used in the Employee Retirement income Security Act of
                1974 as amended;
      (k) an Insured which is brought by or on behalf of any Insured under this policy;
      (I)   an Insured for taxes, fines or penalties, or the multiplied portion of multiplied damages
            imposed against an Insured unless such taxes. fines or penalties are incurred by a third
            party, other than an Insured, and which are included in such third party's Claim against an
            Insured; furthermore. only where permitted by law, this policy shall cover, subject to all
            the terms, conditions and exclusions contained herein, up to $5,000 punitive, exemplary or
            multiplied damages, as part of and not in addition to the Limits of Liability otherwise
            afforded by this policy;
      (m) an Insured arising out of, based upon or attributable to the Insured making or stating any
          promises or guarantees as to interest rates or market values;
      (n) an Insured alleging, arising out of, based upon or attributable to:
            (1) any business interference with client lists;
            (2) any fees, commissions, brokerage monies or other charges for any Professional
                Services; provided, however, this exclusion shall not apply to Claims made against an
                Insured Agent by a client of the Insured Agent;
            (3) any contract dispute between any Insureds, or between the Insureds and any other
                entities insurance companies or securities broker/dealers;
      (o) an Insured which is brought by any governmental authority or any self- regulatory or
          regulatory authority regardless of the capacity in which it is brought, or brought by the
          successors or assigns of any of the aforementioned; however, this exclusion shall not
          apply to a Claim brought by any of the aforementioned to enforce its rights as a direct
          client of the Insured in the ordinary course of business;




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       (p) an Insured ansmg out of, based upon or attributable to any Wrongful Act committed or
           alleged to be committed directly or indirectly in connection with the sale or
           recommendation of any instrument issued by any limited partnership, master limited
           partnership, real estate investment trust or any affiliated organization of any of the
           foregoing;
       (q) an Insured arising out of, based upon or attributable to any solicitation, placement or
           referral of property and/or casualty insurance;
       {r) an Insured alleging, arising out of, based upon, attributable to, or in any way involving,
           directly or indirectly:
           (1) the actual, alleged or threatened discharge, dispersal, release or escape of pollutants;
               or
          (2) any direction or request to test for, monitor, clean up, remove, contain, treat, detoxify
              or neutralize pollutants,
          including but not limited to     a Claim alleging damage to the Named Insured or its
          securities holders;
          Pollutants include, but is not limited to, any solid, liquid, gaseous or thermal irritant or
          contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste.
          Waste includes, but is not limited to, materials to be recycled, reconditioned or reclaimed;
       (s) an Insured arising out of, based upon or attributable to any obligation for which the
           Insured or any carrier as his insurer may be held liable under any workers compensation,
           unemployment compensation or disability benefits law or under any similar law;
       (t) an Insured arising out of, based upon or attributable to payment of employee benefits,
           wages, salaries or commissions;
       (u) an Insured for any publication or utterance of a libel or slander or other defamatory or
           disparaging material, or a publication or utterance in violation of an individual's right of
           privacy made by or at the direction of any Insured with the knowledge of the falsity
           thereof.
NOTE: The Wrongful Act of any Insured Agent under Coverage 8 of this policy shall not be imputed to anv
      other Insured Agent under Coverage 8 for the purpose of determining the applicabilitv of the
      exclusions within the policy.

   4. LJMIT OF LIABILITY- (INCLUDING DEFENSE COSTS)
       The aggregate Limit of Liability stated in Item 3 of the Declarations is the maximum limit of
       the Insurer's liability for all Damages and Defense Costs arising out of all Claims or Class
       Action suits covered under this policy. The aggregate Limit of Liability applies regardless of
       the number of Insureds, Claims or Class Action suits or Wrongful Acts.
       The limit of the Insurer's liability for all amounts payable hereunder in settlement or
       satisfaction of all Claim(s) or Class Action suit(s) (including Defense Costs) covered under
       this policy shall be subject to one of the following Sub- Limits of liability provided in
       paragraphs (A), (B) or (C) below. The applicable Sub- Limits of Liability shall apply to all
       Claims or Class Action suits alleging the same Wrongful Act or Interrelated Wrongful Acts
       and is dependent upon the number of Insureds against whom Claim(s) Is made.
       The Sub- Limits of Liability shall be reduced by Defense Costs as incurred and Damages shall
       be paid in the order that the Insurer, in its absolute discretion, deems appropriate. The
       Sub-limits of Liability shall not, under any circumstances, serve to increase the aggregate
       Limit of Liability stated in Item 3 of the Declarations. The Sub- Limits of Liability are subject
       to the aggregate Limit of Liability and accordingly, may not be available in whole or in part
       depending on the amount of reduction of the aggregate Limit of Liability. The Insurer shall
       not be obligated to defend any Claim(s) or reimburse any Insured after the applicable
       Sub- Limit of Liability or aggregate Limit of Liability stated in Item 3 of the Declarations has



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                                                                                                           24
      been exhausted, whichever occurs first.
      A. FOR DAMAGES AND DEFENSE COSTS ARISING FROM A WRONGFUL ACT OR
         INTERRELATED WRONGFUL ACTS RESULTING IN CLAIM(S) MADE AGAINST: (i) ONE
         INSURED AGENT; OR (ii) THE NAMED INSURED; OR (iii) BOTH ONE INSURED AGENT
         AND THE NAMED INSURED.
          The Sub-limit of Liability stated in Item 3a of the Declarations is the limit of the Insurer's
          liability for Damages and Defense Costs payable hereunder arising from a Wrongful Act or
          Interrelated Wrongful Acts regardless of the number of Claims or Class Action suits,
          Insureds or claimants involved. This Sub-limit of Liability shall apply to all Insureds under
          this policy when a Claim (s) or Class Action suit is made against:
                (i) one Insured Agent; or
                (ii) the Named Insured; or
                (iii) both one Insured Agent and the Named Insured.
          If additional Claims are subsequently made against the Insured Agent and/or the Named
          Insured which arise out of the same Wrongful Act or Interrelated Wrongful Acts as Claims
          already made and reported to the Insurer, all such Claims, whenever made, shall be
          considered first made within the Policy Period or any Discovery Period (if applicable) in
          which the earliest Claim arising out of such Wrongful Act or Interrelated Wrongful Acts
          was first made and reported to the Insurer. Such additional Claims, along with all other
          previously made Claims, shall be subject to a single Sub- Limit of Liability as stated in
          Item 3a of the Declarations.
          However, if additional Claims are subsequently made against the Insured Agent and/or the
          Named Insured, as well as against any other Insured Agents, which arise out of the same
          Wrongful Act or Interrelated Wrongful Acts as Claims already made and reported to the
          Insurer, all such Claims, whenever made, shall be considered first made within the Policy
          Period or any Discovery Period (if applicable) in which the earliest Claim arising out of
          such Wrongful Act or Interrelated Wrongful Acts was first made and reported to the
          Insurer. Such additional Claims, along with all other previously made Claims, shall
          thereafter be subject to a single Sub- Limit of Liability as stated in Item 3b of the
          Declarations (more fully described below).
      B. FOR DAMAGES AND DEFENSE COSTS ARISING FROM A WRONGFUL ACT OR
         INTERRELATED WRONGFUL ACTS RESULTING IN CLAIM{S) MADE AGAINST: {i) MORE
         THAN ONE INSURED AGENT; OR (ii} BOTH MORE THAN ONE INSURED AGENT AND THE
         NAMED INSURED.
          The Sub-limit of Liability stated in Item 3b of the Declarations is the limit of the Insurer's
          liability for Damages and Defense Costs payable hereunder arising from a Wrongful Act or
          Interrelated Wrongful Acts regardless of the number of Claims, Insureds or claimants
          involved. This Sub- Limit of Liability shalt apply to all Insureds under this policy when a
          Claim (s) is made against:
                (i) more than one Insured Agent; or
                (ii) both more than one Insured Agent and the Named Insured.

          If additional Claims are subsequently made against the Insureds which arise out of the
          same Wrongful Act or Interrelated Wrongful Acts as Claims already made and reported to
          the Insurer, all such Claims, whenever made, shall be considered first made within the
          Policy Period or any Discovery Period (if applicable) in which the earliest Claim arising out
          of such Wrongful Act or Interrelated Wrongful Acts was first made and reported to the
          Insurer. Such additional Claims, along with all other previously made Claims, shall be
          subject to a single Sub- Limit of Liability as stated in Item 3b of the Declarations.
          This Sub-limit of Liability shall apply and be in effect .throughout the settlement and/or
          satisfaction of all such Claims regardless of whether an Insured Agent is later dismissed
          from a Claim which would otherwise cause the Sub- Limit of Liability stated in Item 3a of
          the Declarations to be applicable.



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                                                                                                           25
        C. FOR DAMAGES AND DEFENSE COSTS ARISING FROM ALL CLASS ACTION SUITS
           (CERTIFIED OR NON- CERTIFIEDI ALLEGING A WRONGFUL ACT OR INTERRELATED
           WRONGFUL ACTS RESULTING IN CLAIM(S} MADE AGAINST: (i) THE NAMED INSURED;
           OR (ii) BOTH THE NAMED INSURED AND MORE THAN ONE INSURED AGENT.
           The Sub- Limit of Liability stated in Item 3c of the Declarations is the limit of the Insurer's
           liability for Damages and Defense Costs payable hereunder arising from a Class Action
           suit (certified or non- certified) alleging a Wrongful Act or Interrelated Wrongful Acts
           regardless of the number of Claims, Insureds or claimants involved. This Sub- Limit of
           Liability shall apply to all Insureds under this policy when a Class Action suit is made
           against:
                 (i) the Named Insured; or
                 (ii) both the Named Insured and more than one Insured Agent.
           This Sub- Limit of Liability shall apply and be in effect throughout the settlement and/or
           satisfaction of all such Claims regardless of whether an Insured Agent is later dismissed
           from a Claim which would otherwise cause the Sub- Limit of Liability stated in Item 3a of
           the Declarations to be applicable.
   5.   DEDUCTIBLE
        The Insurer shall only be liable for those amounts payable hereunder in settlement and/or
        satisfaction of Claim(s) or Class Action suit (including Defense Costs) which are in excess of
        the applicable Deductible stated in Item 4 of the Declarations.
        The Deductible stated in Item 4a of the Declarations, Named Insured Non- Class Action
        Deductible, shall apply to Damages and Defense Costs arising from a Wrongful Act or
        Interrelated Wrongful Acts. The Named Insured Deductible shall apply to all Insureds under
        this policy when a Claim(s) is suited and made against:
           (i) the Named Insured; or
           (ii) both the Named Insured and one or more Insured Agents.
        The Deductible stated in Item 4b of the Declarations, Named Insured Class Action Deductible,
        shall apply to Damages and Defense Costs arising from a class action suit (certified or
        non- certified) alleging a Wrongful Act or Interrelated Wrongful Acts. The Named Insured Class
        Action Deductible shall apply under this policy when a Class Action is made against:
           {i) the Named Insured; or
           (ii) both the Named Insured or one or more Insured Agents.

        In the event a class action is not certified prior to final disposition of the suit, the deductible
        in Item 4a on the Declarations page shall apply and the Insurer shall reimburse the Named
        Insured for all Damages and Defense Costs in excess of the deductible stated in 4a of the
        Declarations page subject to the Limit of Liability stated in Item 3b on the Declarations page.
        The Deductible stated in Item 4c of the Declarations, Insured Agent Deductible, shall apply to
        each Insured Agent for Damages and Defense Costs arising from a Wrongful Act or
        Interrelated Wrongful Acts. The Insured Agent Deductible shall apply severally to each Insured
        Agent when a Claim (s) is:
           (j)  suited and made against one or more Insured Agents and not against the Named
                Insured; or
           (ii) not suited.
        In no event shall the total amount of Insured Agent Deductibles applied to the same
        Wrongful Act or Interrelated Wrongful Acts exceed in the aggregate the Named Insured
        Deductible amount stated in Item 4a of the Declarations.
   6.   DISCOVERY PERIOD
        A. OPTIONAL POLICY DISCOVERY PERIOD




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          If the Insurer or the Named Insured shall cancel or refuse to renew this policy, the Named
          Insured shall have the right, upon payment of an additional premium of 75% of the total
          annual premium, to purchase a period of twelve (12) months following the effective date
          of such cancellation or non- renewal in which to give written notice to the Insurer of
          Claim(s) first made during the Optional Policy Discovery Period for Wrongful Acts
          occurring prior to the effective date of such cancellation or non- renewal and otherwise
          covered by this policy.
          The rights contained in this clause shall terminate, however, unless written notice of such
          election together with the additional premium due is received by the Insurer within sixty
          (60) days of the effective date of cancellation or non- renewal. This clause and the rights
          contained herein shall not apply to any cancellation resulting from non- payment of
          premium.
      B. TERMINATED AGENT DISCOVERY PERIOD
          Upon termination of his status as an Insured Agent during the Policy Period, the
          terminated Insured Agent shall have an automatic one (1) year Terminated Agent
          Discovery Period, effective as of his termination date, to report Claim{s) under this policy
          but only for Wrongful Acts which occurred prior to his/her termination date.
      C. RETIRED/DISABLED AGENT DISCOVERY PERIOD
          Upon retirement, death or disability of an Insured Agent during the Policy Period, the
          retired, deceased (or the estate of the deceased Insured Agent on his/her behalf; or the
          Named Insured on the deceased Insured Agent's behalf) or disabled Insured Agent shall
          have an unlimited Retired/Disabled Agent Discovery Period, effective as of his retirement,
          death or disability to report Claim(s) under this policy but only for Wrongful Acts which
          occurred prior to the date of his/her retirement, death or disability.
      The provisions of any Discovery Period shall be part of and not in addition to the applicable
      Sub- Limit of Liability and the aggregate Umit of Liability for the Policy Period.
   7. TERRITORY
      This policy applies to Wrongful Acts committed anywhere in the world provided that a Claim
      is made or a suit is brought against the Insured in the United States of America, its
      territories or possessions or Canada.
   8. NOTICE/CLAIM REPORTING PROVISIONS
      Notice hereunder shall be given in writing to the Insurer named on the Declarations at
      the address indicated in Item 6 of the Declarations. If mailed, the date of mailing shall
      constitute the date that such notice was given and proof of mailing shall be sufficient
      proof of notice.
      (a) The Named Insured or the Insureds shall, as a condition precedent to the obligations of
          the Insurer under this policy, give written notice to the Insurer of a Claim or Class Action
          suit made against an Insured as soon as possible and either:
          (1) anytime during the Policy Period or during any Discovery Period (if applicable); or
          (2) within 30 days after the end of the Policy Period or any Discovery Period (if
              applicable), as long as such Claim or Class Action suit is reported no later than 30
              days after the date such Claim or Class Action suit was first made against an Insured.
      (b) If written notice of a Claim or Class Action suit has been given to the Insurer pursuant to
          Clause 8(a) above, then any Claim which is subsequently made against the Insureds and
          reported to the Insurer alleging, arising out of, based upon or attributable to the facts
          alleged in the Claim for which such notice has been given, or alleging any Wrongful Act
          which is the same as or related to any Wrongful Act or Interrelated Wrongful Acts alleged
          in the Claim of which such notice has been given, shall be considered made at the time
          such notice was given.




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                                                                                                         27
        (c) If during the Policy Period or during any Discovery Period (if applicable) the Insureds shall
            become aware of any circumstances which may reasonably be expected to give rise to a
            Claim or Class Action suit being made against the Insureds and shall give written notice
            to the Insurer of the circumstances and the reasons for anticipating such Claim, with full
            particulars as to dates, persons and entities involved, then any Claim which is
            subsequently made against the Insureds and reported to the Insurer alleging, arising out
            of, based upon or attributable to such circumstances or alleging any Wrongful Act which
            is the same as or related to any Wrongful Act or Interrelated Wrongful Aots alleged or
            contained in such circumstances, shall be considered made at the time such notice of
            such circumstances was given.
   9.   DEFENSE COSTS, SETTLEMENTS, JUDGMENTS (INCLUDING ADVANCEMENT OF DEFENSE
        COSTS)
        The Insureds shall not admit or assume any liability, enter into any settlement
        agreement, stipulate to any judgment, or incur any Defense Costs without the prior
        written consent of the Insurer. Only those settlements, stipulated judgments and
        Defense Costs which have been consented to by the Insurer shall be recoverable as
        Damages and Defense Costs under the terms of this policy. The Insurer's consent shall
        not be unreasonably withheld, provided that the Insurer shall be entitled to effectively
        associate in the defense and the negotiation of any settlement of any Claim or Class
        Action suit.
        The Insurer may make any settlement of any Claim or Class Action suit it deems expedient
        with respect to any Insured subject to such Insured's written consent. If any Insured
        withholds consent to such settlement which is agreeable to the claimant, the Insurer's
        liability for all Damages and Defense Costs on account of such Claim or Class Action suits
        shall not exceed the amount for which the Insurer could have settled such Claim or Class
        Action suit plus Defense Costs incurred as of the date such settlement was proposed in
        writing by the Insurer.
        The Insurer shall have the right to effectively associate with the Insureds in the defense of
        any Claim, including but not limited to negotiating a settlement. The Insureds shall give the
        Insurer full cooperation and such information as it may reasonably require.
        Under Coverage A,8(1) and C of this policy, the Insurer has the right but not the duty to
        defend any Claim(s) or Class Action suits. The Named Insured shall defend and contest any
        Claim(s) made thereunder. Except as hereinafter stated, the Insurer shall reimburse, at the
        written request of the Named Insured, Defense Costs prior to the final disposition of any
        Claim(s) or Class Action suit. Such advance payments by the Insurer shall be repaid to the
        Insurer by the Insureds, severally according to their respective interests, in the event and to
        the extent that the Insureds shall not be entitled under the terms and conditions of this
        policy to payment of Defense Costs.
        Under Coverage B(2) of this policy, the Insurer shall have the right and duty to defend any
        suit, with counsel of its selection; against an Insured Agent for any alleged Wrongful Act
        even if such Claim(sl or Class Action suit(s) are groundless, false or fraudulent.
        The Insurer shall not be obligated to defend any Claim(s) or Class Action suits or reimburse
        any Insured after the applicable Sub· Limit of Liability or aggregate Limit of Liability stated in
        Item 3 of the Declarations has been exhausted, whichever occurs first.
   10. ALLOCATION OF UNINSURED ALLEGATIONS AGAINST THE NAMED INSURED
        With respect to (i) Defense Costs jointly incurred by, (ii) any joint settlement made by, andfor
        (iii) any adjudicated judgment of joint and several liability against the Named Insured and any
        Insured Agent(s), in connection with any Claim(s) or Class Action suit other than a covered
        Claim under Coverage A, the Named Insured and the Insured Agent(s) and the Insurer agree
        to use their best efforts to determine a fair and proper allocation of the amounts as between
        the Named Insured, the Insured Agent(s) and the Insurer, taking into account the relative legal
        and financial exposures of and the relative benefits obtained by the Insured Agent(s) and the
        Named Insured.


68910 (10t97J   BROAiiJIIive Copy                     11



                                                                                                             28
   11. ASSISTANCE AND COOPERATION OF THE INSURED
      The Insured shall cooperate with the Insurer and, upon the Insurer's request, assist in making
      settlements, in the conduct of suits or proceedings and in enforcing any right of contribution
      or indemnity against any person or organization who may be liable to the Insured. The
      Insured shall attend hearings, trials and depositions and shall assist in securing and giving
      evidence and obtaining the attendance of witnesses. The Insured shall not admit any liability,
      voluntarily make any payment, assume any obligation, or incur any expense without the prior
      written consent of the Insurer. Any such undertaking by the Insured without the written
      consent of the Insurer shall be made at the Insured's own cost.
   12. ACTION AGAINST INSURER
      No action shall lie against the Insurer unless, as a condition precedent thereto, there shall
      have been full compliance with all the terms of this policy, nor until the full amount of the
      Insured's obligation to pay shall have been finally determined either by judgment against the
      Insured after actual trial or by written agreement of the Insured, the claimant and the Insurer.
      Any person or organization or the legal representative thereof who has secured such
      judgment or written agreement shall thereafter be entitled to recover under this policy to the
      extent of the insurance afforded by this policy. No person or organization shall have any right
      under this policy to join the Insurer as a party to any action against the Insured to determine
      the Insured's liability nor shall the Insurer be lm pleaded by the Insured or his legal
      representative.
   13. SUBROGATION
      If any person or organization to or for whom the Insurer makes payment under this policy
      has rights to recover damages from another, those rights are transferred to the Insurer. That
      person or organization must do everything necessary to secure those rights of the Insurer
      and must do nothing to impair or prejudice such rights.
   14. OTHER INSURANCE AND INDEMNIFICATION
      Such insurance as is provided under this policy shall apply only as excess over any other
      valid and collectible insurance. This policy applies to the amount of Damages and Defense
      Costs which is more than the Jim its of insurance of the other insurance and the total of all
      deductibles and self- insured amounts under such other insurance. This policy shall not pay
      more than the applicable Sub- Limit of Liability or the aggregate Limit of Liability stated in
      Item 3 of the Declarations.
      If any Claim under this policy is also covered by one or more other policies issued by the
      Insurer, or by any other member company of the American International Group, Inc. to the
      persons or entities insured under this policy or to any person who controls, is controlled by,
      or is affiliated by common control with, said persons or entities, then with respect to any
      such Claim (s) or Class Action suits:
          (a) the Insurer shall not be liable under this policy for a greater proportion of the loss
              than the applicable Sub- Limit of Liability or aggregate Limit of Liability under this
              policy bears to the total limits of liability of all such policies, and
          (b) the maximum amount payable under all such policies shall not exceed the limit of
              liability of that policy referred to above which has the highest applicable limit of
              liability.
   15. CANCELLATION
      This policy may be canceled by the Named Insured by surrender of this policy to the Insurer
      or by giving written notice to the Insurer stating when thereafter such cancellation shall be
      effective. This policy may also be canceled by the Insurer mailing to the Named Insured by
      registered, certified or other first class mail, at the Named Insured's address shown in Item 1
      of the Declarations, written notice stating when, not less than sixty (60) days thereafter, the
      cancellation shall be effective. The mailing of such notice as aforesaid shall be sufficient
      proof of notice and this policy shall terminate at the date and hour specified in such notice.



68910 (10t97l   BROJfli:lllive Copy                12



                                                                                                         29
      If this policy shall be canceled by the Named Insured, the Insurer shall retain the customary
      short rate proportion of the premium herein.
      If this policy shall be canceled by the Insurer, the Insurer shall retain the pro rata proportion
      of the premium herein.
      Payment or tender of any unearned premium by the Insurer shall not be a condition
      precedent to the effectiveness of cancellation, but such payment shall be made as soon as
      practicable.
   16. ASSIGNMENT
      Assignment of Interest under this policy shall not bind the Insurer until its consent is
      endorsed hereon; however, subject otherwise to the terms hereof, this policy shall cover the
      estate, heirs, legal representatiye or assigns of the Insured in the event of the Insured's
      death, bankruptcy, Insolvency or being adjudged incompetent.
   17. BANKRUPTCY
      Bankruptcy or insolvency of the Insured or the Insured's estate shall not relieve the Insurer of
      any obligation hereunder.
   18. NOTICE TO AGENT AND CHANGES
      Notice to any agent or knowledge possessed by any agent or by any other person shall not
      effect a waiver or a change in any part of this policy or estop the Insurer from asserting any
      right under the terms of this policy; nor shall the terms of this policy be waived or changed,
      except by written endorsement issued to form a part of this policy and signed by an
      authorized representative of the Insurer.
   19. ARBITRATION
      All disputes or differences which may arise under or in connection with this policy, whether
      arising before or after termination of this policy, including any determination of the amount
      of damages, shall be submitted to the American Arbitration Association under and in
      accordance with its then prevailing commercial arbitration rules. The arbitrators shall be
      chosen in the manner and within the time frames provided by such rules. If permitted by
      such rules, the arbitrators shall be three disinterested individuals having knowledge of the
      insurance issues relevant to the matters in dispute.
   20. DUTIES OF NAMED INSURED
      The Named Insured shall be the sole agent of all Insureds hereunder for the purpose of
      effecting or accepting any amendments to or cancellation of this policy, for the payment of
      premium and the receipt of any return premiums that may become due under this policy, and
      the exercising or declining to exercise any right to an extended reporting period.
   21. REPRESENTATIONS
      By accepting this policy, the Insureds agree that:
          (a) The statements in the Declarations and Applications made part of this policy are
              accurate and complete;
          (b) Those statements are based on representations the Insured made to the Insurer; and
          (c) The Insurer has issued this policy in. reliance upon the Insured's representations.
   22. HEADINGS
      The descriptions in the headings of this policy are solely for convenience, and form no part
      of the terms and conditions of coverage.




                                                                AUTHORIZED REPRESENTATIVE



68910 !10/97J   BROKii:llfive Copy                 13



                                                                                                          30
                                     ENDORSEMENT#     1

This endorsement, effective 12:01    AM      August 1, 2008            forms a part of
policy number 00-665·25-96
issued to   ¥~~g~W!,Ylftf!'~~~l~bJlfR~{£f§· INC·
            PROFESSIONALS RISK PURCHASING GROUP
by      Nat1ona1 Union Fire Insurance Company of Pittsburgh, Pa.
                       AMEND DECLARATIONS PAGE - ITEM 3(a)


In consideration of the premium charged, it is hereby understood and agreed that Item
3(a). of the Declarations Page is deleted in its entirety and replaced by the following:

      The limit of the Insurer's liability for all amounts payable hereunder in settlement or
      satisfaction of Claims covered under this policy shall be subject to either of one of
      the following Sub-Limits of Liability:

       A 1.   $7.250.000     for Damages and Defense Costs arising from a Wrongful Act
                             or Interrelated Wrongful Acts resulting in a Claim{s) made
                             against:

                             (i)      one Insured Agent; or
                             (ii)     the Named Insured; or
                             (iii)    both one Insured Agent and the Named Insured.

       A2.    $2,000,000     for Damages and Defense Costs arising from a Wrongful Act
                             or Interrelated Wrongful Acts resulting in a Claim(s) made
                             against:

                             (i}     one Insured Agent; or
                             (ii)    the Named Insured; or
                             (iii)   both one Insured Agent and the Named Insured.

       A3.    $2,000,000     for Damages and Defense Costs arising from a Wrongful Act
                             or Interrelated Wrongful Acts resulting in a Claim(s) made
                             against:

                             (i)     one Insured Agent; or
                             (ii)    the Named Insured; or
                             (iii)   both one Insured Agent and the Named Insured.

       A4.    $3,000,000     for Damages and Defense Costs arising from a Wrongful Act
                             or Interrelated Wrongful Acts resulting in a Claim(s) made
                             against:

                             (i)     one Insured Agent; or
                             (ii)    the Named Insured; or
                             (iii)   both one Insured Agent and the Named Insured.




        BRdlfl;/live Copy END 1


                                                                                                31
                                    ENDORSEMENT#      1      (Continued)


This endorsement, effective 12:01    AM      August 1, 2008             forms a part of
policy number  00-665-25-96
issued to    WOODBURY FINANCIAL SERVICES, INC.
             THROUGH THE FINANCIAL SALES
             PROFESSIONALS RISK PURCHASING GROUP
by      National Union Fire Insurance Company of Pittsburgh, Pa.

       The applicable Sub-limit of Liability, either A 1 or A2 or A3 above, shall be
       dependent on the option which was elected by the Insured Agent named in the
       Claim. Such election being reflected on the schedule of Insured Agents maintained
       by Driver Alliant Insurance Services, Inc. and provided quarterly to the Insurer for
       review, which schedule is considered to be attached to and made part of this
       policy.

       In the event that a Claim(s) is made against more than one Insured Agent, the
       applicable Sub-limit of Liability is that shown on Item 3(b) of the Declarations Page.

It is further agreed that the Sub-Limits of Liability, as shown in A 1 or A2 or A3 above,
shall not increase the aggregate Limit of Liability of $75,000,000 as shown on Item 3 of
the Declarations Page, nor shall it increase the Sub-Limits of Liability as shown under Items
3(b) or 3(cl of the Declarations Page.




ALL OTHER TERMS,         CONDITIONS, AND       EXCLUSIONS       OF THE     POLICY   REMAIN
UNCHANGED.




                                                          AUT ORIZED REPR
              Arc~Wrne~lM?Ynternational     Group, Inc. All rights reserved.
        BROKER                  END1
                                                                                                32
                                    ENDORSEMENT#       2

This endorsement, effective 12:01 AM          August 1, 2008            forms a part of
policy number 00-665-25·96
issued to   ¥~~gz~~Y-/HfN?Ji~l~b~fR~1£f~· INC.
            PROFESSIONALS RISK PURCHASING GROUP
by      Nat1ona1 Union Fire Insurance Company of Pittsburgh, Pa.
                            AMEND INSURED AGENT DEDUCTIBLE


The policy is hereby amended as follows: Item 4(c) of Declarations Page, "Insured Agent
Deductible", is amended to read as follows:

c.     1. Insured Agent Deductible:

       I) $500       for Damages arising from a Wrongful Act or interrelated Wrongful
                     Acts in connection with the following:

                     1)      Proprietary Woodbury/Fortis/Hartford    Mutual Funds and
                             Annuities
                     2)      Woodbury/Fortis/Hartford Life Insurance Company Products
                     3)      All other mutual funds sold through Woodbury Financial
                             Services, Inc.

                     for Damages arising from a Wrongful Act or interrelated Wrongful
                     Acts in connection with the following:

                     1l      All other securities and products sold through W~>Odbury
                             Financial Services, Inc. not stated in paragraph I) above. (e.g.,
                             Series 7 - general securities).

       Ill) $2,500   for Damages arising from a Wrongful Act or Interrelated Wrongful
                      Acts in connection with any other covered "outside" business (life,
                      accident & health or disability insurance sold through any
                      Non-Woodbury insurer; mutual funds or variable products sold through
                      any broker/dealer other than Woodbury Financial Services, Inc.)

c)     2. Insured Agent Deductible: for Option A(3)

              A)     $2,500
                     for Damages and Defense Costs ansmg from a Wrongful Act or
                     Interrelated Wrongful Acts in connection with the following:

                     ( 1)    Proprietary Woodbury/Fortis/Hartford    Mutual Funds and
                             Annuities
                     (2)     Woodbury/Fortis/Hartfqrd Life Insurance products
                     (3)     All other mutual funds sold through Woodbury Financial
                             Services, Inc.




        BRdlfEhive Copy END 2

                                                                                                 33
                                  ENDORSEMENT#      2      (Continued)


This endorsement, effective 12:01 AM    August      1, 2008          forms a part of
policy number 00-665-25-96
issued to   WOODBURY FINANCIAL SERVICES, INC.
           THROUGH THE FINANCIAL SALES
           PROFESSIONALS RISK PURCHASING GROUP
by     National Union Fire Insurance Company of Pittsburgh, Pa.


             B)     $2,500
                    for Damages and Defense Costs ansmg from a Wrongful Act or
                    Interrelated Wrongful Acts in connection with the following:

                    1}     All other securities and products sold through Woodbury
                           Financial Services, inc. not stated in paragraph A above, (i.e.
                           Series 7 - general securities)

             C)     $2,500
                    for Damages and Defense Costs ansmg from a Wrongful Act or
                    Interrelated Wrongful Acts in connection with any other covered
                    "outside" business:

                    {life, accident and health or disability insurance sold through any
                    non-Woodbury insurer; mutual funds or variable products sold through
                    any broker/dealer other than Woodbury Financial Services, Inc.)

                    IN EITHER CASE:

                    The Insured Agent Deductible shall apply severally to each Insured
                    Agent when a Claim(s) is:

                    (i)    suited and made against one or more Insured Agents and NOT
                           against the Named Insured; or

                    Iii)   not suited.

      In' no event shall the total amount of the Insured Agent Deductibles applied to the
      same Wrongful Act or Interrelated Wrongful Acts exceed in the aggregate the
      Named Insured Deductible amount stated above. (If no Named Insured Deductible
      applies, in no event shall the total amount of the Insured Agent Deductibles applied
      to the same Wrongful Act or Interrelated Wrongful Acts exceed $25,000.)




       BRdlfE/Iive Copy END 2


                                                                                             34
                                    ENDORSEMENT#     2      (Continued)


This endorsement, effective 12:01 AM    August       1, 2008           forms a part of
policy number  00-665-25·96
issued to   WOODBURY FINANCIAL SERVICES, INC.
            THROUGH THE FINANCIAL SALES
            PROFESSIONALS RISK PURCHASING GROUP
by      National Union Fire Insurance Company of Pittsburgh, Pa.


It is further understood and agreed that Section 5. of the policy, Deductible, 5th paragraph
is deleted in its entirety and replaced with the following:

       The deductible stated in Item 4c of the Declarations, Insured Agent Deductible,
       shall apply to each Insured Agent for Damages arising from a Wrongful Act or
       Interrelated Wrongful Acts. The Insured Agent Deductible shall apply severally to
       each Insured Agent vvhen a Claim(s) is:

              {i)    suited and made against one or more Insured Agents and not against
                     the Named Insured; or

              {ii)   not suited.




ALL OTHER TERMS,         CONDITIONS, AND       EXCLUSIONS      OF THE     POLICY   REMAIN
UNCHANGED.




                                                          AUT ORIZED REPR      EN ATIVE

             Arc~WA1e~~RYnternational      Group, Inc. All rights reserved.
        BROKER                     END2
                                                                                               35
                                    ENDORSEMENT# 3

This endorsement, effective 12:01 AM    August 1, 2008                   forms a part of
policy number 00-665-25-96
issued to   WOODBURY FINANCIAL SERVICES. INC.
            THROUGH THE FINANCIAL SALES
            PROFESSIONALS RISK PURCHASING GROUP             .
by      Nat1ona1 Union Fire Insurance Companr of P1ttsburgh, Pa.
                                   AMEND DEFINITION (g)


It is hereby agreed that Definition (g), "Insured Agent", is deleted in its entirety and
replaced with the following:

(g)    "Insured Agent(s)" means:

      (1)    any natura! person who is a licensed registered representative under contract
             with the Named Insured (Woodbury Financial Services/ Inc.) and is scheduled
             by the Insurer, which schedule is considered to be attached to and made a
             part of this policy;

      (2)    any corporation, partnership or other business entity engaging in Professional
             Services which is either owned or controlled by a natural person in (1} above
             or in which a natural person in !1) above is an employee and then only with
             respect to those operations of the corporation, partnership or other business
             entity directly related to the Professional Services provided by the natural
             person in (1) above. Furthermore, this extension shall not afford coverage
             for any actual or alleged Wrongful Act of the corporation, partnership, or
             other business entity, but shall only apply to Claim(s) arising out of any
             actual or alleged Wrongful Act(s) of a natural person in ( 1) above;

      (3)    any natural person who was or is a partner/ officer, director, employee or
             licensed support staff of (1) or (2) above/ solely while acting within the
             scope of his/her duties as such and provided such natural person is not at
             the time of the alleged Wrongful Act a party to an agent, general agent,
             insurance broker or registered representative contract with any corporation,
             partnership, or other business entity for the purpose of providing Professional
             Services offered by the Insured in (1} or (2) above. Furthermore, coverage
             shall not apply to any licensed support staff of (1) or (2) above that is
             earning income on a commission basis.

      Coverage provided pursuant to this endorsement shall be subject to all of the terms,
      conditions and exclusions of the policy to which it attaches.




ALL OTHER TERMS/        CONDITIONS, AND         EXCLUSIONS       OF THE     POLICY   REMAIN
UNCHANGED.




                                                           AUT ORIZED REPR       EN ATIVE

             Arc~fr'r«efrc~I?Ynternational   Group, Inc. All rights reserved.
        BROKER                 END3
                                                                                               36
                                    ENDORSEMENT#      4

This endorsement, effective 12:01    AM      August 1, 2008             forms a part of
policy number  00·665·25·96
issued to    WOODBURY FINANCIAL SERVICES, INC.
             THROUGH THE FINANCIAL SALES
             PROF£SSI(JNALS. RISK PURCHASING GROUP
by       Nat1ona1 Un1on F1re Insurance Company of Pittsburgh, Pa.
                          AMEND DEFINITION (i) & DEFINTION (I)


This policy is hereby amended as follows: Definition (i), "Named Insured", is deleted in its
entirety and replaced by the following:

       (i)    "Named Insured" means the company            designated in       Item   1 of   the
              Declarations and any Subsidiary thereof.

It is further agreed that the policy is amended as follows:   Definition (1), "Subsidiary", is
deleted in its entirety and replaced by the following:
       (I)    "Subsidiary" means:
              (1)    a corporation of which the Named Insured designated in Item 1 of the
                     Declarations owns, on the inception date of the Policy Period, more
                     than 50% of the issued and outstanding voting stock either directly or
                     indirectly through one or more of its Subsidiaries;
              (2)    a corporation which becomes a Subsidiary during the Policy Period
                     but only upon the condition that within 90 days of its becoming a
                     Subsidiary, the Named Insured designated in Item 1 of the
                     Declarations shall have provided the Insurer with full particulars of the
                     new Subsidiary and agreed to any additional premium and/or
                     amendment of the provisions of this policy required by the Insurer
                     relating to such new Subsidiary.
              A corporation becomes a Subsidiary when the Named Insured designated in
              Item 1 of the Declarations owns more than 50% of the issued and
              outstanding voting stock either directly or indirectly through one or more of
              its Subsidiaries. A corporation ceases to be a Subsidiary when the Named
              Insured designated in Item 1 of the Declarations ceases to own more than
              50% of the issued and outstanding voting stock either directly or indirectly
              through one or more of its Subsidiaries.

              In all events, coverage as is afforded under this policy with respect to a
              Claim made against a Subsidiary shall only apply for any Wrongful Act(s)
              committed or allegedly committed after the effective time that such
              Subsidiary became a Subsidiary and prior to the time that such Subsidiary
              ceases to be a Subsidiary.


ALL OTHER TERMS,         CONDITIONS, AND       EXCLUSIONS      OF THE      POLICY      REMAIN
UNCHANGED.




                                                          AUT ORIZED REPR

              Arc(JW~e~~I?Ynternational Group,     Inc. All rights reserved.
         BROKER                 END4
                                                                                                   37
                                   ENDORSEMENT#       5

This endorsement, effective 12:01 AM    August       1. 2008           forms a part of
policy number 00·665·25·96
issued to   WOODBURY FINANCIAL SERVICES, INC.
            THROUGH THE FINANCIAL SALES
            PROFESSIONALS RISK PURCHASING GROUP
by      Nat1ona1 Union Fire Insurance Companr of Pittsburgh. Pa.
                                   AMEND EXCLUSION (j)


It is hereby agreed that Exclusion {j) is deleted in its entirety and replaced with the
following:

      (j)    an Insured arising out of, based upon or attributable to any pension plan,
             welfare plan or other benefit plan sponsored by any Insured or by any firm in
             which:

             (1)    any Insured has a financial interest;

             (2)    any Insured is a participant, named fiduciary, designated fiduciary,
                    administrator or trustee as those terms are used in the Employee
                    Retirement Income Security Act of 1974, as amended;

             Provided, however, Exclusion (j) (i) shall not be applicable in the event an
             Insured Agent is either (i) deemed to be a Fiduciary Advisor under the
             Pension Act of 2006 or any amendments thereto or (ii) is a fiduciary by
             recommending securities, as described in Section 3(21 }(A)(ii)of ERISA

             Specifically, "named fiduciary" is defined in Section 402(a) (2} as:

                    "a fiduciary who is named in the plan instrument, or who, pursuant to
                    a procedure specified in the plan, is identified as a fiduciary;

                           (i)     by a person who is an employer              or   employee
                                   organization with respect to the plan; or

                           (ii)    by such an employer and            such     an   employee
                                   organization acting jointly."

Coverage provided pursuant to this endorsement shall be subject to all of the terms,
conditions and exclusions of the policy to which it attaches.




ALL OTHER TERMS & CONDITIONS OF THE POLICY REMAIN UNCHANGED.




                                                            AUT ORIZED REPR     EN ATIVE
             Arc?f¥~efrc~RYnternational    Group, Inc. All rights reserved.
        BROKER                    END5
                                                                                               38
                                    ENDORSEMENT# 6

This endorsement, effective 12:01 AM    August        1, 2008            forms a part of
policy number  00-665-25-96
issued to   WOODBURY FINANCIAL SERVICES, INC.
             THROUGH THE FINANCIAL SALES
             PROFESSIPNALS RISK PURCHASING GROUP
by      Nat1ona1 Un1on Fire Insurance Company of Pittsburgh, Pa.
                                   AMEND DEFINITION (k}


It is hereby agreed that Definition (k), "Professional Services", is amended to include the
following:
       The sale and/or servicing (including any advice and consultation in connection with
       such) of employee benefit plans (other than multiple              employer welfare
       arrangements) including group or individual pension and/or profit sharing plans, life,
       accident & health and/or disability plans, provided however, that such plans must
       use either an insurance product, investment grade              bonds,    listed and
       over-the-counter stocks or mutual funds as a funding vehicle in order for coverage
       to be triggered under this endorsement.

The following exclusions shall apply with regard to this definition, and the policy shall not
afford coverage for:
1.     Any Claim arising out of activities of the Insured in regard to any employee benefit
       plan sponsored, as an employer, by the Insured or any firm or other entity which the
       Insured owns or controls, or in regard to any plan in which the Insured is a
       participant;
2.     Any Claim arising out of activities of the Insured as an accountant, lawyer, actuary,
       third-party administrator, or real estate agent or broker, whether or not licensed as
       such;
3.     Any Claim arising out of the Insured's activities or Professional Services as a named
       fiduciary as that term is defined in the Employee Retirement Income Security Act of
       1974 (and any amendments thereto) or to the extent that the Insured exercises any
       discretionary authority or control concerning the management or disposition of plan
       assets;
4.     Any Claim arising out of tax advice provided by the Insured, except as an incidental
       part of Professional Services rendered by the Insured;
5.     Any Claim arising from or contributed to by the placement of coverage with Multiple
       Employer Welfare Arrangements as defined in the Employee Retirement Income
       Security Act of 1974, as amended.

Coverage provided pursuant to this endorsement shall be subject to all of the terms,
conditions and exclusions of the policy to which it attaches.


ALL OTHER TERMS,         CONDITIONS, AND        EXCLUSIONS      OF THE     POLICY   REMAIN
UNCHANGED.




                                                           AUT ORIZED REPR      EN ATIVE
              Arc~W~eFrccaRYnternational    Group, Inc. All rights reserved.
        BROKER                  END6
                                                                                                39
                                     ENDORSEMENT#      7

This endorsement, effective 12:01     AM      August 1, 2008             forms a part of
policy number 00·665 ·25 ·96
issued to    ¥~~8ZW/,YJtP~~~i~b~fRX~ff~· INC.
             PROFESSI{JNALS RISK PURCHASING GROUP
by      Nat1onal Un1on Fire Insurance Companr of Pittsburgh, Pa.
                                  AMEND DEFINITION (k)(3)


It is hereby agreed that Definition (k){3), "Professional Services", is deleted in its entirety
and replaced with the following:

       (k)    "Professional Services" shall mean those services rendered or required to be
              rendered in the Insured Agent's profession as:

              (3)    a licensed registered representative who services, sells or attempts to
                     sell securities or other investment products including, but not limited
                     to structured settlements approved by and distributed through the
                     Named Insured's National Association of Securities Dealers ("NASD")
                     licensed broker/dealer {Woodbury Financial Services, Inc.);

Furthermore, the policy is hereby amended as follows: Exclusion (p) is deleted in its
entirety and replaced by the following:

This Insurer shall not be liable to make any payment for Damages and Defense Costs in
connection with a Claim made against:

       {p)    an Insured arising out of, based upon or attributable to any Wrongful Act
              committed or alleged to be committed directly or indirectly in connection
              with the sale or recommendation of any instrument issued by any limited
              partnership, master limited partnership, real estate investment trust or any
              affiliated organization of any of the foregoing not offered and sold through
              the Named Insured's NASD licensed broker/dealer {Woodbury Financial
              Services, Inc.);




ALL OTHER TERMS,         CONDITIONS, AND        EXCLUSIONS      OF THE     POLICY     REMAIN
UNCHANGED.




                                                           AUT ORIZED REPR
              Arc?fr~e~~I?Ynternational     Group, Inc. All rights reserved.
        BROKER                  END7
                                                                                                  40
                                         ENDORSEMENT#      8

This endorsement, effective 12:01 AM    August             1, 2008           forms a part of
policy number  00·665·25·96
issued to   WOODBURY FINANCIAL SERVICES, INC.
               THROUGH THE FINANCIAL SALES
               PROFESSIONALS RISK PURCHASING GROUP
by        Nat1onal Union Fire Insurance Company of Pittsburgh, Pa.
      AMEND DEFINITION (kl FINANCIAL PLANNER/FINANCIAL CONSULTANT EXTENSION


It is hereby understood and agreed that the policy is amended as follows:           Definition (k),
"Professional Services", is amended by addition of .the following:

(k)      "Professional Services" shall mean those services rendered            or required to be
         rendered in the Insured Agent's profession as:

         (7)    a financial planner, financial consultant, or investment advisor, acting on
                behalf of a customer or client and providing consultation, advice,
                administration and services, whether or not a separate fee is charged, but
                only with respect to:

                1.     investment products which are currently APPROVED for sale by the
                       Named Insured's NASD licensed broker/dealer.

                       For the purposes of coverage provided by virtue of this endorsement,
                       APPROVED shall mean:

                       (i)     any investment product currently offered by the Named
                               Insured's NASD licensed broker/dealer as available for sale
                               through the broker/dealer;

                2.     Mutual funds and/or variable annuities which are approved by and
                       offered for sale through any NASD licensed broker/dealer.

                Any Insured Agent         covered by virtue of this endorsement         must be in
                compliance with any       certification and/or licensing requirements   as respects
                to financial planner,    financial consultant or investment advisor     activities, in
                those jurisdictions in   which the Insured Agent is providing such      Professional
                Services.

                Any Insured Agent providing Professional Services with regards to an
                investment product pursuant to (k){7)1 {ii) of this endorsement, must keep
                written evidence of the approval from the Named Insured's broker/dealer for
                review by the Insurer.




          BRo'JtEhive Copy END 8


                                                                                                         41
                                    ENDORSEMENT#      8      (Continued)


This endorsement, effective 12:01 AM    August        1, 2008           forms a part of
policy number 00-665-25-96
issued to   WOODBURY FINANCIAL SERVICES. INC.
             THROUGH THE FINANCIAL SALES
             PROFESSIONALS RISK PURCHASING GROUP
by      National Union Fire Insurance Company of Pittsburgh, Pa.


Furthermore, it is agreed that the following is hereby added to the Clause 3., "Exclusions"
of this policy:

       This Insurer shall not be liable to make any payment for Damages and Defense
       Costs in connection with a Claim made against:

              v.     an Insured Agent arising out of tax advice provided by the Insured
                     Agent, except as an incidental part of professional services rendered
                     by the Insured Agent.


Nothing contained in this endorsement shall serve to alter or increase the Limit of Liability
as stated in Item 3 of the Declarations.




ALL OTHER TERMS,         CONDITIONS, AND       EXCLUSIONS       OF THE     POLICY   REMAIN
UNCHANGED.




                                                          AUT ORIZED REPR
           Arc?W~e~~I?Ynternational         Group, Inc. All rights reserved.
        BROKER            ENDS
                                                                                                42
                                    ENDORSEMENT# 9

This endorsement, effective 12:01 AM    August        1, 2008          forms a part of
policy number  00-665·25·96
issued to   WOODBURY FINANCIAL SERVICES, INC.
             THROUGH THE FINANCIAL SALES
             PROFESSIONALS RISK PURCHASING GROUP
by      Nat1onal Union Fire Insurance Company of Pittsburgh, Pa.
                           PROPERTY & CASUAL TV EXTENSION


In consideration of an additional premium charged of $1 00/agent, it is understood and
agreed that an Insured Agent(s) who is also a licensed property and/or casualty insurance
agent(s) or general agent(s} shall have coverage extended as provided by this
endorsement.

Solely with respect to such Insured Agents described above, the policy shall be amended
as follows:

I.     Clause 2. DEFINITIONS is amended by addition of the following:

       (k)    (2)(a) a licensed property and/or casualty insurance agent or general agent
              who is placing property or casualty insurance with insurance companies
              other than the Named Insured;

       (o)    "Retroactive Date" means the effective date of the Insured Agent's first
              Property/Casualty Insurance Agents Professional Liability policy or any
              insurance agents errors and omissions policy (providing similar coverage)
              issued to the Insured Agent by any insurance carrier and continuously
              thereafter renewed and/or maintained in effect, without interruption, to the
              inception date of this policy.

II.    Clause 3. EXCLUSIONS (q) is deleted in its entirety.

Ill.   In no event shall this policy or this endorsement be construed to provide coverage
       for a Named Insured for any Claim(s) alleging, arising out o( based upon or
       attributable to the Insured Agent's performance of or failure to perform Professional
       Services as a licensed property and/or casualty insurance agent or general agent or
       for any Claim(s) arising out of, based upon or attributable to any solicitation,
       placement or referral of property and/or casualty insurance.


ALL OTHER TERMS & CONDITIONS OF THE POLICY REMAIN UNCHANGED.




                                                          AUT ORIZED REPR
             Arc?WA1e~~f?Ynternational     Group, Inc. All rights reserved.
        BROKER                  END9
                                                                                               43
                                    ENDORSEMENT#     10

This endorsement, effective 12:01   AM     August 1, 2008             forms a part of
policy number 00-665-25·96
issued to   ¥~~gz~~Y&f'M~~~blfR~~rf~· INC.
            PROFESSIONALS RISK PURCHASING GROUP
by      Nat1ona1 Union Fire Insurance Company of Pittsburgh, Pa.
                                AMEND EXCLUSION (b)


This policy is hereby amended as follows: Exclusion (b) is deleted in its entirety and
replaced by the following:

      This Insurer shall not be liable to make any payment for Damages in connection
      with a Claim made against:

             (b)   an Insured for physical injury, sickness or disease sustained by a
                   person, including death resulting from any of these at any time, or
                   damage to or destruction of any property, including the loss of use
                   thereof;




ALL OTHER TERMS,       CONDITIONS, AND       EXCLUSIONS       OF THE     POLICY   REMAIN
UNCHANGED.




                                                          AUT ORIZED REPR

            Arc?Wrf1e~c!M?Ynternational   Group, Inc. All rights reserved.
        BROKER               END10
                                                                                           44
                                   ENDORSEMENT#      11

This endorsement, effective 12:01 AM    August 1, 2008                forms a part of
policy number 00-665-25-96
issued to   WOODBURY FINANCIAL SERVICES, INC.
            THROUGH THE FINANCIAL SALES
            PROFESSIONALS RISK PURCHASING GROUP
by      Nat1onal Union Fire Insurance Company of Pittsburgh, Pa.
                                 AMEND EXCLUSION (g)


In consideration of the premium charged, it is understood and agreed that Exclusion (g) is
deleted in its entirety and replaced by the following:

      an Insured arising out of, based upon or attributable to the insolvency, receivership,
      bankruptcy, liquidation or inability to pay, of any entity in which the Insured has
      placed funds or obtained coverage or invested funds for a client, including, but not
      limited to, any bank, banking firm, insurance company, benefit plan, broker/dealer,
      trust or investment vehicle.

Solely with respect to insurance coverage placed with the Named Insured this exclusion
shall not apply, provided that at the time the policy of insurance was placed, the Named
Insured had a Best's Rating of A- or higher.




ALL OTHER TERMS & CONDITIONS OF THE POLICY REMAIN UNCHANGED.




                                                          AUT ORIZED REPR

             .ArC~fr~efc~RYnternational   Group, Inc. All rights reserved.
        BROKER                 END11
                                                                                               45
                                  ENDORSEMENT#       12
This endorsement, effective 12:01 AM    August       1, 2008           forms a part of
policy number 00-665-25-96
issued to   WOODBURY FINANCIAL SERVICES. INC.
            THROUGH THE FINANCIAL SALES
            PROFESSI{JNALS RISK PURCHASING GROUP
by      Nat1onal Umon Fire Insurance Company of Pittsburgh, Pa.
                            AMEND CLAUSE 3., EXCLUSIONS


It is hereby understood and agreed that the policy's Clause 3., "Exclusions" is amended by
adding the following:

       This Insurer shall not be liable to make any payment for Damages and Defense
       Costs in connection with a Claim or Class Action suit made against:

             (w)    an Insured alleging, arising out of, based upon or attributable to an
                    Insured exercising discretionary authority or control with regard to
                    management or disposition of assets; however, this exclusion shall
                    not apply to any Insured's purchase or sale of no-load investment
                    company or variable annuities in which there is no initial or contingent
                    sales charge or commission;

             (x)    an Insured alleging, arising out of, based upon or attributable to the
                    purchase or sale of (or failure to purchase or sell) any of the
                    following, or any advice in connection therewith:

                    1)     any collectible, including but not limited to stamps, art, cards,
                           jewelry, antiques or other tangible personal property; or

                    2)     any equity security priced under $5.00 at the time that the
                           Wrongful Act triggering such Claim arose; however, this
                           exclusion shall not apply if the security is:

                           i)     registered, or approved for registration upon notice of
                                  issuance, on a national securities exchange; or

                           ii)    authorized, or approved for authorization upon notice of
                                  issuance, for quotation in the NASDAQ National Market
                                  System or the NASDAQ Small Cap Market; or

                           iii)   issued by an investment company registered under the
                                  Investment Company Act or 1940 (as amended); or

                    3)     any security in any market outside of the United States of
                           America and its territories and possessions or Canada; or




        BRdlfl?hive Copy END 12


                                                                                               46
                                 ENDORSEMENT#       12     (Continued)


This endorsement, effective 12:01 AM    August      1, 2008           forms a part of
policy number 00·665·25·96
issued to   WOODBURY FINANCIAL SERVICES. INC.
           THROUGH THE FINANCIAL SALES
           PROFESSIONALS RISK PURCHASING GROUP
by     National Union Fire Insurance Company of Pittsburgh. Pa.



                  4)     any commodities, futures contracts, forwards contracts or any
                         type of option or futures contract, or any similar investment or
                         investment product; however this exclusion shall not apply to
                         "Covered Call Options", which for the purposes of this section
                         shall be defined as: exchange-traded and/or NASDAQ traded
                         short call options on stock actually owned by the Insured's
                         client throughout the option's life.

            (y)   an Insured alleging, arising out of, based upon or attributable to, or in
                  any way involving, directly or indirectly, the formation, operation,
                  administration or management by an Insured, in whole or in part, of
                  any limited partnership or general partnership, including but not
                  limited to Claims arising out of an Insured acting as a general partner
                  or any limited partnership and/or managing general partner or any
                  general partnership;

            (z)   an Insured alleging, arising out of, based upon or attributable to, in
                  whole or in part, any investment banking activity by an Insured,
                  including but not limited to any disclosure requirements in connection
                  with the foregoing; however, this exclusion shall not apply to Claims
                  arising out of the sale by an Insured to a particular client or customer
                  of an open-ended investment company or variable annuity which
                  alleges that a client or customer was unsuitable for and vvrongfully
                  placed into such investment company or variable annuity.

                  For the purposes of this section, "investment banking activity" shall
                  mean the underwriting or syndicating of any security or partnership
                  interest in connection with any of the following: any actual, alleged or
                  threatened merger, acquisition, divestiture, tender offer, proxy
                  contest, leveraged buy-out, going private·transaction, reorganization
                  (voluntary or involuntary), capital restructuring, recapitalization,
                  spin-offs, primary or secondary offerings of securities (regardless of
                  whether the offering is a public offering or private placement),
                  dissolution or sale of all or substantially all of the assets or stock of a
                  business entity, or effort to raise or furnish capital or financing for any
                  enterprise or entity, or any activity by an Insured as a specialist or
                  market maker (including the failure to make a market) for any
                  securities, or any disclosure requirements in connection with any of




       BRd/tshive COPYEND 12

                                                                                                47
                                    ENDORSEMENT#       12       (Continued)


This endorsement, effective 12:01 AM    August 1, 2008                   forms a part of
policy number 00-665·25·96
issued to   WOODBURY FINANCIAL SERVICES. INC.
           THROUGH THE FINANCIAL SALES
           PROFESSIONALS RISK PURCHASING GROUP
by     National Union Fire Insurance Companr of Pittsburgh, Pa.

                    the foregoing. Investment banking activity also includes the rendering
                    of advice or recommendations or rendering of a written opinion in
                    connection with any of the foregoing, however it does not include
                    advice in connection with or sale of bank owned life insurance or
                    corporate owned life insurance products.

             (aa)   an Insured alleging, arising out of, based upon, or attributable to the
                    purchase or sale (or failure to purchase or sell) any of the following,
                    or any advice in connection therewith:

                    (1)     promissory notes, i.e. an investment whereby the maker
                            agrees to pay to the payee a specific sum of money either on
                            demand or at fixed or determinable future date;

                    (2)     viatica! products including     viatica! settlement   and viatica!
                            contracts; or

                    (3)     callable certificates of deposit.

                    (4)     leases (including but not limited to ETS Pay Phones).


Coverage provided pursuant to this endorsement shall be subject to all of the terms,
conditions and exclusions of the policy to which it attaches.




ALL OTHER TERMS,          CONDITIONS, AND       EXCLUSIONS       OF THE       POLICY   REMAIN
UNCHANGED.




                                                            AUT ORIZED REPR
            Arc~Wr«effc'ai?Ynternational Group,     Inc. All rights reserved.
       BROKER                  END12
                                                                                                 48
                                    ENDORSEMENT# 13

This endorsement, effective 12:01    AM      August 1, 2008            forms a part of
policy number 00-665-25-96
issued to   ¥~~BZM~Y&rfiN~~h~T_R~~ff~· INC.
            PROFESSI(JNALS RISK PURCHASING GROUP
by      Nat1onal Un1on Fire Insurance Company of Pittsburgh, Pa.
                                     MOLD EXCLUSION


In consideration for the premium charged it is hereby understood and agreed that the
following amendments to the policy shall apply:

The EXCLUSIONS section of the policy is amended by adding the following paragraph to
the end thereof:

This policy does not apply:

       to any claim for or alleging bodily injury, sickness, disease, or death of any person,
       or damage to or destruction of any property (including the loss of use thereof),
       personal and advertising injury, or any other damage, loss, cost or expense,
       including, but not limited to damages, losses, costs or expenses related to, arising
       from or associated with clean-up, remediation, containment, removal or abatement,
       caused directly or indirectly, in whole or in part, by:

              a.     Any Fungus(i), Molds(s), mildew or yeast, or

              b.     Any Spore(s) or toxins created or produced by or emanating from
                     such Fungus(i), Mold(s), mildew or yeast, or

              c.     Any substance, vapor, gas, or other emission or organic or inorganic
                     body or substance produced by or arising out of any Fungus(i) ,
                     Mold{s), mildew or yeast, or

              d.     Any material, product, building component, building or structure, or
                     any concentration of moisture, water or other liquid within such
                     material, product, building component, building or structure, that
                     contains, harbors, nurtures or acts as a medium for any Fungus(i),
                     Mold(s), mildew, yeast, or Spore(s) or toxins emanating therefrom,

      regardless of any other cause, event, material, product and/or building component
      that contributed concurrently or in any sequence to that bodily injury, property
      damage, personal and advertising injury, loss, cost or expense.




        BR~hiveCOPYEND13


                                                                                                49
                                  ENDORSEMENT#       13     (Continued)


This endorsement, effective 12:01 AM    August 1, 2008                forms a part of
policy number 00-665-25-96
Issued to   WOODBURY FINANCIAL SERVICES, INC.
           THROUGH THE FINANCIAL SALES
           PROFESSIONALS RISK PURCHASING GROUP
by     National Union Fire Insurance Company of Pittsburgh, Pa.


The DEFINITIONS section of the policy is amended by adding the following to the end
thereof:

      Fungus(i) includes, but is not limited to, any of the plants or organisms belonging to
      the major group Fungi, lacking chlorophyll, and including Molds, rusts, mildews,
      smuts, and mushrooms.

      Mold{s) includes, but is not limited to, any superficial growth produced on damp or
      decaying organic matter or on living organisms, and Fungi that produce Molds.

      Spore(s) means any dormant or reproductive body produced by or arising or
      emanating out of any Fungus(i}, Mold(s), mildew, plants, organisms or
      microorganisms.




ALL OTHER TERMS, CONDITIONS AND EXCLUSIONS REMAIN UNCHANGED.




            Arc~Wrf1e~~RYnternational     Group, Inc. All rights reserved.
       BROKER                 END13
                                                                                               50
                                    ENDORSEMENT#      14
This endorsement, effective 12:01 AM    August        1. 2008          forms a part of
policy number 00-665·25-96
issued to   WOODBURY FINANCIAL SERVICES, INC.
            THROUGH THE FINANCIAL SALES
            PROFESSIONALS RISK PURCHASING GROUP
by      Nat1onal Union Fire Insurance Company of Pittsburgh, Pa.
                        AMEND SECTION 6(A) DISCOVERY PERIOD


It is hereby agreed that the policy is amended as follows: Section 6, "Discovery Period", is
deleted in its entirety and replaced with the following:

6.     DISCOVERY PERIOD

       A(1 ). AUTOMATIC POLICY DISCOVERY PERIOD

              If the Insurer or the Named Insured shall cancel or refuse to renew this
              policy, the Named Insured shall have an automatic ninety (90) day period
              following the effective date of such cancellation or non-renewal in which to
              give written notice to the Insurer of Claim(s) first made during the Automatic
              Policy Discovery Period for Wrongful Acts occurring prior to the effective
              date of such cancellation or non-renewal and otherwise covered by this
              policy.

              However, in the event that the lnsured(s) is issued another professional
              liability policy upon the cancellation or nonrenewal of this policy, whether by
              this Insurer or any other insurance company, then the lnsured(s) shall not be
              entitled to this Automatic Policy Discovery Period.

      A(2). OPTIONAL POLICY DISCOVERY PERIOD
              If the Insurer or the Named Insured shall cancel or refuse to renew this
              policy, the Named Insured shall have the right, upon payment of an
              additional premium of 150% of the total annual premium, to purchase a
              period of twelve ( 12) months following the effective date of such
              cancellation or non-renewal in which to give written notice to the Insurer of
              Claim(s) first made during the Optional Policy Discovery Period for Wrongful
              Acts occurring prior to the effective date of such cancellation or non-renewal
              and otherwise covered by this policy.
              The rights contained-in this clause shall terminate, however, unless written
              notice of such election together with the additional premium due is received
              by the Insurer within sixty (60) days of the effective date of cancellation or
              non-renewal. This clause and the rights contained herein shall not apply to
              any cancellation resulting from non-payment of premium.
             The first ninety (90) days of the Optional Policy Discovery Period, if it
             becomes effective, shall run concurrently with the Automatic Policy
             Discovery Period.




        BRolf/Ehive Copy END 14


                                                                                                51
                                    ENDORSEMENT#      14     (Continued)


This endorsement, effective 12:01 AM    August        1, 2008           forms a part of
policy number 00-665-25-96
issued to   WOODBURY FINANCIAL SERVICES. INC.
             THROUGH THE FINANCIAL SALES
             PROFESSIONALS RISK PURCHASING GROUP
by      National Union Fire Insurance Company of Pittsburgh, Pa.


       B.     TERMINATED AGENT DISCOVERY PERIOD
              Upon termination of his status as an Insured Agent during the Policy Period,
              the terminated Insured Agent shall have an automatic one {1) year
              Terminated Agent Discovery Period, effective as of his termination date, to
              report Claim(s) under this policy but only for Wrongful Acts which occurred
              prior to his/her termination date.
              The rights contained in this clause shall terminate in the event that the
              terminated Insured Agent has replaced coverage or is insured under any
              other professional liability insurance policy.
              Furthermore, this clause and the rights contained herein shall not apply if the
              Named Insured has terminated its relationship with the terminated Insured
              Agent for disciplinary reasons.

       C.     RETIRED/DISABLED AGENT DISCOVERY PERIOD

              Upon retirement, death or disability of an Insured Agent during the Policy
              Period, the retired, deceased (or the estate of the deceased Insured Agent on
              his/her behalf; or the Named Insured on the deceased Insured Agent's
              behalf) or disabled Insured Agent shall have an unlimited Retired/Disabled
              Agent Discovery Period, effective as of his retirement, death or disability to
              report Claim{s) under this policy but only for Wrongful Acts which occurred
              prior to the date of his/her retirement, death or disability. Furthermore, the
              rights contained in this clause shall terminate in the event that the
              retired/disabled/deceased Insured Agent has replaced coverage or is insured
              under any other professional liability insurance policy.

The provisions of any Discovery Period shall be part of and not in addition to the applicable
Sub-Limit of Liability and the aggregate Limit of Liability for the Policy Period.

Coverage provided pursuant to this endorsement shall be subject to all of the terms,
conditions and exclusions of the policy to which it attaches.


ALL OTHER TERMS,         CONDITIONS, AND        EXCLUSIONS      OF THE     POLICY   REMAIN
UNCHANGED.




                                                                                                52
                                    ENDORSEMENT#      15

This endorsement, effective 12:01 AM    August        1, 2008          forms a part of
policy number  00-665-25-96
issued to   WOODBURY FINANCIAL SERVICES, INC.
             THROUGH THE FINANCIAL SALES
             PROFESSIONALS RISK PURCHASING GROUP
by      Nat1onal Union Fire Insurance Company of Pittsburgh, Pa.
     IMPROPER MUTUAL FUND AND VARIABLE ANNUITY PRACTICES ENDORSEMENT


In consideration of the premium charged, it is hereby understood and agreed that the
Insurer shall not make any payment for loss based solely upon allegations that any Insured
intentionally permitted, or aided or abetted others in using, was aware of others using, or
was a participant or connected in any way in the use of: 1) Late Trading; 2) Market
Timing; 3) Soft-dollar Activity; 4) Front Running; or 5) Revenue Sharing related to a mutual
fund or variable annuity.

Solely for the purpose of this endorsement, "Late Trading" means: 1) any transaction
involving mutual fund shares made after the determination of the mutual fund's Current
Net Asset Value (as defined in Rule 2a-4 of the Investment Company Act of 1940),
including but not limited to, the placement or confirmation of orders for, or the purchase or
redemption of mutual fund shares, but made at a price based on the fund's previously
determined Current Net Asset Value calculated that same day, in contravention of Rule
22c-1 of the Investment Company Act of 1940; or, 2) any transaction defined as late
trading by any state or federal statute or regulation, or any prospectus, policy, limitation,
agreement or procedure of the mutual fund.

Solely for the purpose of this endorsement, "Market Timing" means the making of
short-term purchases or sales of mutual fund shares or variable annuities, contrary to or in
violation of any mutual fund prospectus, variable annuity contract, policy, limitation,
agreement or procedure, or contrary to or in violation of any state or federal statute or
regulation, and the conduct associated therewith, including, but not be limited to:

       (1)    the waiver of redemption fees associated with Short-Term Trading contrary
              to the mutual fund's prospectus, variable annuity contract, policies,
              limitations, agreements or procedures;

       (2)    the failure to abide by written representations regarding the permissibility of
              Short-Term Trading, or written representations regarding the mutual fund's
              or variable annuity's efforts to monitor or prevent Short-Term Trading;

       (3)    the receipt of fees or other compensation from certain investors in exchange
              for providing such investors with Short-Term Trading privileges not available
              to other investors;

       (4)    the failure to monitor, detect, identify or remediate Short-Term Trading.




        BRdlfEhive Copy END 15

                                                                                                53
                                   ENDORSEMENT#       15     (Continued)


This endorsement, effective 12:01 AM    August       1, 2008           forms a part of
policy number 00·665-25·96
issued to   WOODBURY FINANCIAL SERVICES. INC.
            THROUGH THE FINANCIAL SALES
            PROFESSIONALS RISK PURCHASING GROUP
by      National Union Fire Insurance Company of Pittsburgh, Pa.


Solely for the purpose of this endorsement, "Short-Term Trading" means the redemption of
shares of a mutual fund, or sale of a variable annuity contract, in a time period less than
that provided in a mutual fund prospectus, or a variable annuity contract, or the policies,
limitations, agreements or procedures of a mutual fund or variable annuity, or at law,
including without limitation any so-called "in and out" trading ·of mutual fund shares or
variable annuity contracts or any other trade of mutual fund shares or variable annuity
contracts designed to take advantage of inefficiencies in the method the mutual fund uses
to price its shares or the variable annuity uses to price its contracts.

Solely for the purpose of this endorsement, "Soft Dollar Activities" means paying or
providing, or receiving or accepting, fees, commissions, bonuses, gratuities, services or
any other form of compensation in exchange for the preferential treatment of a particular
mutual fund, particular class of mutual fund share or particular variable annuity.

Solely for the purpose of this endorsement, "Front Running" means the trading by brokers
of mutual fund shares or variable annuities based on information received internally, before
clients of the broker have been given the information.

Solely for the purpose of this endorsement, "Revenue Sharing" means any undisclosed
compensation to the lnsured(s) by a sponsoring company for the purchase or sale of their
mutual fund or variable annuity




ALL OTHER TERMS, CONDITIONS AND EXCLUSIONS REMAIN UNCHANGED.




                                                           AUT ORIZED REPR

             Arc?W~efrc~RYnternational     Group, Inc. All rights reserved.
        BROKER                 END15
                                                                                               54
                                    ENDORSEMENT#       16

This endorsement, effective 12:01 AM    August         1. 2008          forms a part of
policy number 00·665-25·96
issued to   WOODBURY FINANCIAL SERVICES. INC.
             THROUGH THE FINANCIAL SALES
             PROFESSIONALS RISK PURCHASING GROUP
by       Nat1ona1 Union Fire Insurance Companr of Pittsburgh, Pa.
                        AIG NON· STACKING LIMITS ENDORSEMENT


In consideration of the premium charged, it is hereby understood and agreed that if any
Claim under this policy is also covered by one or more other policies issued by the Insurer,
or by any other member of_ American International Group, Inc. to the person or entity
named in Item 1 of the Declarations or to any person who controls, is controlled by or is
under common control with, said person or entity, then with respect to such Claim:

1)     the Insurer shall not be liable under this policy for a greater proportion of the Loss
       than the applicable limit of liability under this policy bears to the total applicable
       limits of liability of all such policies; and

2)     the maximum amount payable under all such policies shall not exceed the limit of
       liability of that policy referred to above which has the highest applicable limit of
       liability.

Nothing contained in this endorsement shall be construed to increase the limit of liability of
this policy.




ALL OTHER TERMS,         CONDITIONS      AND    EXCLUSIONS OF       THE    POLICY    REMAIN
UNCHANGED.




                                                            AUT ORIZED REPR
           Arc~Wrf1e~~RYnternational        Group, Inc. All rights reserved.
        BROKER             END16
                                                                                                 55
                                     ENDORSEMENT#       17

This endorsement, effective 12:01 AM           August 1, 2008              forms a part of
policy number  00-665-25·96
issued to      ¥~~SZ~~YfHfNf~~~~b~fR~~fH· INC.
               PROFESSIONALS RISK PURCHASING GROUP
by          Nat1ona1 Union Fire Insurance Company of           Pittsburgh, Pa .
                                                          .;

                               FEE ARRANGEMENT EXCLUSION


In consideration of the premium charged, it is hereby understood and agreed that the
Insurer shall not be liable to make any payment for loss and/or defense costs in connection
with any claim made against any Insured alleging, arising out of, based upon or attributable
to any allegations that any Insured intentionally or negligently permitted, or aided or
abetted others in using, was aware of others using, or was a participant or connected in
any way in the use of an illegal or improper agreement or other arrangement between an
insurance broker and an insurance carrier involving the payment of increased fees,
commissions or other compensation based on the volume or type of business referred to
the insurance carrier,
       .,
It is the intent of the parties that this policy shall exclude such loss regardless of the form,
style, or denomination of any such claim, regardless of whether the claim is criminal,
administrative or civil, and shall specifically apply but not be limited to claims alleging
conflict of interest, breach of contract, failure to supervise, negligent supervision or
negligence of any contract, controlling person liability, breach of fiduciary duty, personal
profiting, improper or unlawful fees or charges of any kind, criminal activity, market
manipulation, violation of any law related to the insurance industry, misrepresentation,
estoppel or repudiation of any commitment and any other theory of liability.




ALL OTHER TERMS, CONDITIONS AND EXCLUSIONS REMAIN UNCHANGED.




                                                               AUT ORIZED REPR    EN ATIVE
                Arc?Wrf1eff~I?Ynternational   Group, Inc. All rights reserved.
            BROKER               END17
                                                                                                   56
                                  ENDORSEMENT#      18

This endorsement, effective 12:01 AM    August      1, 2008          forms a part of
policy number 00·665-25-96
issued to   WOODBURY FINANCIAL SERVICES. INC.
           THROUGH THE FINANCIAL SALES
           PROFESSIONALS RISK PURCHASING GROUP
by     Nat1ona1 Union Fire Insurance Company of Pittsburgh,          Pa.
                               NEW YORK AMENDATORY


I.    GENERAL TERMS AND CONDITIONS

      In consideration of the premium charged, it is hereby understood and agreed that
      solely with respect to any Insureds that are domiciled or have a primary place of
      business in New York, the Policy is amended as follows:

      A.    Clause 9, ("Defense and Settlements"), first paragraph, is        deleted and
            replaced with the following:

            With respect to any Claim for which insurance is afforded by this policy
            under Insuring Agreement 1 above, the Company shall, as part of and
            subject to the Limits of Liability, pay on behalf of the Insured Defense Costs.
            The Company shall at all times have the right and duty to assume the
            defense of all Claims against any Insured.

            1•     The Company shall have the right to appoint counsel and to make
                   such investigation and defense of a Claim as it deems necessary.
                   The Insured or Insureds, as applicable, shall:

                   a.     have the right to consent to the Company's choice of defense
                          attorney, which consent shall not be unreasonably withheld;
                          and

                   b.     participate in and assist in the direction of the defense of any
                          Claim.

                   Subject to Paragraph II. below, the Company's obligation to defend
                   any Claim or pay any Damages or Defense Costs, shall be completely
                   fulfilled and extinguished if the applicable Limit of liability has been
                   exhausted by payment of Damages or Defense Costs.

            2.     If the Company concludes that any Limit of Liability applicable to a
                   Claim may become exhausted prior to the conclusion of a Claim, the
                   Company will notify the Insured or Insureds, in writing, to that effect.




       BRo'lflihive Copy END 18

                                                                                              57
                                 ENDORSEMENT#      18     (Continued)


This endorsement, effective 12:01 AM    August     1, 2008          forms a part of
policy number 00-665-25·96
issued to   WOODBURY FINANCIAL SERVICES, INC.
           THROUGH THE FINANCIAL SALES
           PROFESSIONALS RISK PURCHASING GROUP
by     National Union Fire Insurance Company of Pittsburgh, Pa.


                   When any Limit of Liability applicable to a Claim has actually been
                   exhausted prior to the conclusion of a Claim, the Company will notify
                   the Insured or Insureds, in 'Miting, as soon as practicable, that such
                   Limit of Liability has been exhausted and that the Company's duty to
                   defend such Claim has ended.

                   The Company will initiate, and cooperate in, the transfer of control to
                   the Insured or Insureds, of any Claims which were subject to that
                   Limit 6f Liability and which were reported to the Company prior to the
                   exhaustion of such Limit. The Insured or Insureds must cooperate in
                   the transfer of control of such Claims.

                   The Company agrees to take the necessary steps as the Company
                   deems appropriate to avoid a default in, or continue the defense of,
                   such Claims until such transfer has been completed, provided that
                   Insured or Insureds are cooperating in completing such transfer.

                  The Insured or Insureds shall reimburse the Company for expenses
                  the Company incurs in taking those steps the Company deems
                  appropriate to avoid a default in, or continuing the defense of, any
                  such Claims.

                  The Company will not take any action with respect to any Claim that
                  would have been subject to such Limit of Liability, had it not been
                  exhausted, if the Claim is reported to the Company after that
                  applicable Limit of Liability has been exhausted.

                  The exhaustion of any limit of Liability by payment of any Claim, and
                  the resulting end of the Company's duty to defend, will not be
                  affected by the Company's failure to comply with any of the terms
                  and conditions of this provision.

      B.    Item 3 of the Policy's Declarations ("total policy aggregate for Coverages A,
            B & C") is deleted.




       BRdNI;hive Copy END 18


                                                                                             58
                                  ENDORSEMENT#       18     (Continued)


This endorsement, effective 12:01 AM    August       1, 2008           forms a part of
policy number 00·665·25·96
issued to   WOODBURY FINANCIAL SERVICES, INC.
           THROUGH THE FINANCIAL SALES
           PROFESSIONALS RISK PURCHASING GROUP
by     National Union Fire Insurance Company of Pittsburgh, Pa.


      C.    Clause 4 of the Policy is deleted and replaced with the following:

            The per Claim Limit of Liability stated in Item 3 of the Declarations is the
            maximum limit of the Company's liability for Damages and Defense Costs
            incurred in a Claim which is covered under this policy excess of the
            applicable Retention indicated in Item 4 of the Declarations. The per Claim
            Limit of Liability applies regardless of the number of Insureds, Wrongful
            Acts, Interrelated Wrongful Acts or claimants implicated, named or
            referenced in a Claim. If an Insured/Broker Dealer/ Named Insured and/or two
            or more Insured Agents are implicated in a Claim, then a single per Claim
            Limit of Liability applies, whichever is the largest.

            The Insured Agent aggregate Limit of Liability stated in Item 3 of the
            Declarations is the maximum limit of the Company's liability for all Damages
            and Defense Costs arising out of all Claims against an Insured Agent covered
            under this policy. The aggregate Limit of Liability applies regardless of the
            number of Claims against or Wrongful Acts or Interrelated Wrongful Acts by
            an Insured Agent.

            The limit of the Company's liability for all amounts payable hereunder in
            settlement or satisfaction of all Claim(s) (including Defense Costs) covered
            under this policy shall be subject to the Limits of Liability stated in Item 3 of
            the Declarations. The Company shall not be obligated to defend any claim(s)
            or reimburse any Insured after the applicable Limit of Liability or aggregate
            Limit of Liability stated in Item 3 of the Declaration as applicable to such
            Insured has been exhausted; provided however that should the settlement,
            satisfaction or defense of Claims(s) exhaust the aggregate Insured Agent
            Limited of Liability, other Insureds shall remain covered up to the aggregate
            Limits of Liability afforded to such Insureds.

            If additional Claims are subsequently made against an Insured that arise out
            of the same Wrongful Act or Interrelated Wrongful Acts as Claims already
            made and reported to the Company, all such Claims, whenever made, shall
            be considered first made within the Policy Period in which the earliest Claim
            arising out of such Wrongful Act or Interrelated Wrongful Acts was first
            made and reported to the Company. Such additional Claims, along with all
            other previously made Claims, shall be subject to a single per Claim Limit of
            Liability as stated in Item 3 of the Declarations.




       BRo'JtEhive Copy END 18


                                                                                                59
                                   ENDORSEMENT#      18     !Continued)


This endorsement, effective 12:01 AM    August       1, 2008          forms a part of
policy number  00-665·25·96
issued to   WOODBURY FINANCIAL SERVICES. INC.
             THROUGH THE FINANCIAL SALES
             PROFESSIONALS RISK PURCHASING GROUP
by        National Union Fire Insurance Company of Pittsburgh, Pa.



     D.       Clause 8 ("Notice/Claim Reporting Provisions"), Subsection (a) is deleted and
              replaced with the following:

              The Insureds shall, as a condition precedent to the obligations of the
              Company under this policy, give written notice to the Company of a Claim
              made against an Insured as soon as practicab(e during the Policy Period, any
              subsequent renewal of the Policy, or an Extended Reporting Period, if
              applicable.

      E.      The Policy is amended to include the following provision:

               1)    In consideration of the coverage provided by this Policy, the Named
                     Insured hereby covenants that it will not:

                     i.     mandate that any Insured Agent or Insured Broker/Dealer
                            purchase or accept coverage under this Policy; or

                     ii.    impose any penalty upon any Insured Agent or Insured
                            Broker/Dealer that does not purchase or accept coverage under
                            this Policy,

                     provided, however, that the Named Insured may require such Insured
                     Agent or Insured Broker/Dealer to either purchase or accept coverage
                     under this Policy or otherwise obtain comparable coverage.

               2)    In consideration of the coverage provided by this Policy, the Named
                     Insured, each Insured Agent, and each Insured Broker/Dealer hereby
                     covenant that the Named Insured shall be the sole agent of each
                     Insured Agent and Insured Broker/Dealer for accepting any return
                     premium, notice· of cancellation or non-renewal of coverage or any
                     extended reporting period offer under this Policy with respect to any
                     Insured Agent or Insured Broker/Dealer. Upon receipt of a cancellation
                     or non-renewal notice or extended reporting period offer from the
                     Company, the Named Insured shall send timely notice of such
                     cancellation or non-renewal to the applicable Insured Agent or Insured
                     Broker/Dealer in accordance with the provisions provided herein.




          BRdlf'Ghive Copy END 18


                                                                                              60
                                 ENDORSEMENT#         18    (Continued l


This endorsement, effective 12:01 AM    August        1, 2008         forms a part of
policy number 00-665-25·96
issued to   WOODBURY FINANCIAL SERVICES. INC.
           THROUGH THE FINANCIAL SALES
           PROFESSIONALS RISK PURCHASING GROUP
by     National Union Fire Insurance Company of Pittsburgh, Pa.


            3).    It is understood and agreed that nothing stated in this endorsement
                   shall be deemed to affect in any way Definition (h) of this Policy, "
                   Interrelated Wrongful Acts" or the application of such definition
                   pursuant to any provision in the Policy or any endorsements thereto,
                   including but not limited to any applicable per Claim Limit of Liability,
                   RETENTION, or NOTICE/ClAIM REPORTING PROVISIONS.

      E.    The Policy is amended to include the following provision:

            NONRENEWAL/CONDITIONAL RENEWAL OF THE POLICY

            1.     If the Company elects not to renew this Policy, the Company shall
                   send notice as provided in paragraph F (3) below along with the
                   reason for nonrenewal.

            2.     If the Company conditions renewal of this Policy upon:
                   A.     change of limits of Liability;
                   B.     change in type of coverage;
                   C.     reduction of coverage;
                   D.     increased Retention;
                   E.     addition of exclusion; or
                   F.     increased premiums in excess of 1 0%, exclusive of any
                          premium increased due to and commensurate with insured
                          value added or increased exposure units; or as a result of
                          experience rating, loss rating, retrospective rating or audit; the
                          Company shall send notice as provided in paragraph F(3)
                          below.

            3.     Notice of nonrenewal and conditional renewal will be provided as
                   follows:
                   if the Company decides not to renew this Policy or to conditionally
                   renew this Policy as provided in Paragraphs F (1) and F (2) above, the
                   Company shall mail or deliver written notice to the Named Insureds at
                   least sixty (60), but not more than one hundred twenty (120) days
                   before the expiration date of the Policy.




       BRo'lfGhive Copy END 18


                                                                                               61
                                 ENDORSEMENT#       18        (Continued)


This endorsement, effective 12:01 AM    August 1, 2008                  forms a part of
policy number  00-665-25-96
issued to   WOODBURY FINANCIAL SERVICES, INC.
           THROUGH THE FINANCIAL SALES
           PROFESSIONALS RISK PURCHASING GROUP
by     National Union Fire Insurance Company of Pittsburgh. Pa.

            4.     Notice will be mailed or delivered to the Named Insured, at the
                   address in Item 6 of the Declarations, and to its authorized agent or
                   broker. If notice is mailed, proof of mailing will be sufficient proof of
                   notice.
            5.     The Company will not send the Named Insured notice of non-renewal
                   or conditional renewal if any of the Named Insured, its authorized
                   agent or broker, or another insurer of the Named Insured mails or
                   delivers notice to the Company that this Policy has been replaced or
                   is no longer desired.

      G.    The Policy is amended to include the following provision:

            CANCELLATION/NONRENEWAL/CONDITIONAL                  RENEWAL     OF    INSURED
            AGENT CERTIFICATE OF INSURANCE
            I.     Cancellation of Certificate of Insurance
                   1.     An Insured Agent has the right to cancel his or her Certificate
                          of Insurance and enrollment for coverage under the Policy at
                          any time by giving notice to the Company stating when
                          thereafter the cancellation shall be effective. If the Certificate
                          of Insurance is so cancelled, earned premium shall be
                          computed on a short rate basis
                   2.     If an Insured Agent's Certificate of Insurance and enrollment
                          for coverage under the Policy has been in effect for sixty (60)
                          days or less, the Certificate of Insurance and enrollment may
                          be cancelled by the Company, in the manner provided by in
                          General Condition E. 2. of this endorsement, by mailing or
                          delivering to the Insured Agent written notice stating the
                          reason for cancellation at the mailing address shown on the
                          Certificate of Insurance, and to the Insured Agent's authorized
                          agent or broker at least:
                          (i)    Twenty (20) days before the effective date of
                                 cancellation if the Certificate of Insurance is canceled
                                 for any reason not included in paragraph {ii} below.




       BRdJtEhive Copy END 18


                                                                                               62
                               ENDORSEMENT#      18     (Continued)


This endorsement, effective 12:01 AM    August 1, 2008             forms a part of
policy number 00-665-25-96
issued to   WOODBURY FINANCIAL SERVICES. INC.
           THROUGH THE FINANCIAL SALES
           PROFESSIONALS RISK PURCHASING GROUP
by     National Union Fire Insurance Company of Pittsburgh, Pa.


                        (ii)   Fifteen (15) days before the effective date of
                               cancellation if the Certificate of Insurance is canceled
                               for any of the following reasons:

                                A.    nonpayment of premium;

                                B.    conviction of a crime;
                               C.     discovery of fraud or material misrepresentation
                                      in the obtaining of the Certificate of Insurance or
                                      in the presentation of a Claim;
                               D.     after issuance of the Certificate of Insurance or
                                      after the last renewal date, discovery of an act
                                      or omission, or a violation of any policy
                                      condition, that substantially and materially
                                      increases the hazard insured against, and which
                                      occurred subsequent to inception of the current
                                      Policy Period;
                               E.    material change in the nature or extent of the
                                     risk, occurring after issuance or last annual
                                     renewal anniversary date of the Certificate of
                                     Insurance, which causes the risk of loss to be
                                     substantially and materially increased beyond
                                     that contemplated at the time the Certificate of
                                     Insurance was issued or last renewed;
                               F.    required pursuant to a determination of the New
                                     York State Superintendent of Insurance that
                                     continuation of the Company's present premium
                                     volume would jeopardize the Company's
                                     solvency or would be hazardous to the interest
                                     of the Company's policyholders, creditors or the
                                     public;
                               G.    a determination by such Superintendent that the
                                     continuation· of the Certificate of Insurance
                                     would violate, or would place the Company in
                                     violation of, any provision of the New York
                                     Insurance Code; or




       BRo'kEhive Copy END 18


                                                                                            63
                               ENDORSEMENT#       18     (Continued)


This endorsement, effective 12:01 AM    August    1, 2008           forms a part of
policy number 00-665-25-96
issued to   WOODBURY FINANCIAL SERVICES, INC.
           THROUGH THE FINANCIAL SALES
           PROFESSIONALS RISK PURCHASING GROUP
by     National Union Fire Insurance Companr of Pittsburgh, Pa.


                               H.     revocation or suspension of the Insured Agent's
                                      license to provide Professional Services.
                  3.    If an Insured Agent's Certificate of Insurance and enrollment
                        for coverage under the Policy has been in effect for more than
                        sixty (60) days, or if the Certificate of Insurance is a renewal
                        or continuation of a Certificate of Insurance issued by the
                        Company, the Certificate of Insurance and enrollment may be
                        cancelled by the Company, in the manner provided by General
                        Condition E. 2. of this endorsement, only for any of the
                        reasons listed in paragraph 1.2. (ii) above, provided that written
                        notice is mailed or delivered to the Insured Agent at the
                        address shown in the Certificate of Insurance, and to his or her
                        authorized agent or broker at least fifteen ( 1 5) days before the
                        effective date of cancellation stating the reason for
                        cancellation.
                  4.    Notice of cancellation will state the effective date of
                        cancellation. The Insured Agent's enrollment for coverage
                        under the Policy will end on this date. If notice is mailed, proof
                        of mailing will be sufficient proof of notice. The notice of
                        cancellation for nonpayment of premium will include the
                        amount of premium due.
                  5.    If an Insured Agent cancels his or her Certificate of Insurance
                        and enrollment for coverage under the Policy, earned premium
                        will be computed on a short rate basis. If the Company cancels
                        a Certificate(s) of Insurance, earned premium shall be
                        computed on a pro rata basis based upon the amount paid
                        towards the Policy premium by such Insured Agent. Premium
                        adjustment may be made either at the time cancellation is
                        effected or as soon as practicable after cancellation becomes
                        effective, but payment or tender of unearned premium is not a
                        condition of cancellation.
                  6.    If one of the reasons for cancellation set forth in Paragraph 1.2.
                        (ii) exists, the Company may cancel an Insured Agent's entire
                        Certificate of Insurance and enrollment for coverage under the
                        policy, even if the reason for cancellation pertains only to a
                        new coverage or endorsement initially effective subsequent to
                        the original issuance of a Certificate of Insurance.




       BRdlfE/Iive Copy END 18


                                                                                             64
                                ENDORSEMENT#       18      (Continued)


This endorsement, effective 12:01 AM    August    1, 2008           forms a part of
policy number 00-665-25-96
issued to   WOODBURY FINANCIAL SERVICES. INC.
           THROUGH THE FINANCIAL SALES
           PROFESSIONALS RISK PURCHASING GROUP
by     National Union Fire Insurance    Compa~    of Pittsburgh, Pa.


            II.   Nonrenewal of Certificate of Insurance

                  1.    If the Company elects not to renew an Insured Agent's
                        Certificate of Insurance and enrollment for coverage under the
                        policy, the Company shall send notice as provided in paragraph
                        G (11)(2)(i) below along with the reason for nonrenewal.

                  2.    Notice of nonrenewable and         conditional   renewal will   be
                        provided as follows:

                         (i)    If the Company decides not to renew an Insured
                                Agent's Certificate of Insurance and enrollment for
                                coverage under the Policy as provided in paragraph G
                                (11)(1) above, the Company shall mail or deliver, in the
                                manner provided in General Condition E.2. written
                                notice to the Named Insured at least seventy (70) but
                                not more than one hundred twenty (120) days before:

                                A.     the expiration date; or

                                B.     the anniversary date of the Insured        Agent's
                                       continuous Certificate of Insurance.

                        (ii)    Notice will be mailed or delivered to the Insured Agent
                                by the Company, in the manner provided by General
                                Condition E. 2. of this endorsement, at the address
                                shown in the Certificate of Insurance and his or her
                                authorized agent or broker. If notice is mailed, proof or
                                mailing will sufficient proof of notice.

                        (iii)   The Company will not send the Named Insured notice
                                of non-renewal of the Insured Agent's Certificate Of
                                Insurance if the Insured Agent or its authorized agent or
                                broker or another insurer of the Insured Agent mails or
                                delivers notice that his or her coverage has been
                                replaced or no longer desired.




       BRoiJtEhive Copy END 18


                                                                                             65
                                  ENDORSEMENT#       18     (Continued)


This endorsement, effective 12:01 AM    August      1, 2008             forms a part of
policy number  00·665-25-96
issued to   WOODBURY FINANCIAL SERVICES, INC.
           THROUGH THE FINANCIAL SALES
           PROFESSIONALS RISK PURCHASING GROUP
by     National Union Fire Insurance Company of Pittsburgh, Pa.

            Ill.   INCOMPLETE/LATE CONDITIONAL            RENEWAL       NOTICE OR      LATE
                   NONRENEWAL NOTICE

                   If any Insured does not receive timely or proper nonrenewal notice
                   under applicable New York law:

                   1.     and the Policy Period has not expired, then coverage will
                          remain in effect at the same terms and conditions of this
                          Policy Period at the lower or the notice is mail or delivered,
                          unless the Insured, during this sixty (60) day period, has
                          replaced coverage or elects to cancel.

                   2.     and the Policy Period has ended, then coverage will remain in
                          effect at the same terms and conditions of this Policy Period
                          for another Policy Period at the lower of the current rates or
                          the prior Policy Period's rates, unless the Insured, during the
                          Policy Period, has replaced the coverage or elects to cancel.

      H.    The Policy is amended to include the following provision:

            BANKRUPTCY

            Bankruptcy or insolvency of an Insured or of an Insured's estate will not
            relieve the Company of its obligations under this Policy.

            I.     The Policy's Exclusions are amended as follows:

                   Exclusion (o) is deleted in its entirety and replaced with the following:

                   to any Claim brought by any governmental authority or any
                   self-regulatory or regulatory authority (including, but not limited to,
                   the Securities Investor Protection Corporation or National Association
                   of Securities Dealers, Inc.), regardless of the capacity in which it is
                   brought, or brought by the successors or assigns of any of the
                   aforementioned;

                   In addition, the following Exclusion is added:

                   {v)    to any Claim that is certified as,         or which    is   seeking
                          certification as, a class action.




       BRc:INEhive Copy END 18


                                                                                                66
                                 ENDORSEMENT#       18     {Continued)


This endorsement, effective 12:01 AM    August      1, 2008           forms a part of
policy number 00·665·25·96
issued to   WOODBURY FINANCIAL SERVICES, INC.
           THROUGH THE FINANCIAL SALES
           PROFESSIONALS RISK PURCHASING GROUP
by     National Union Fire Insurance Company of Pittsburgh, Pa.

II.   INSURED AGENT

      In consideration of the premium charged, it is hereby understood and agreed
      that solely with respect to any Insured Agents that are domiciled or have
      a primary place of business in New York, the Policy is amended as follows:

      A.    Definition (g) of Insured Agent is amended by addition of the following:
            It is understood and agreed that a condition precedent to coverage for any
            Insured Agent is that the Named Insured issued such Insured Agent a
            Certificate of Insurance.

      B.    The Policy ls amended to include the following Definition:
            Certificate of Insurance means the document issued to an Insured Agent
            which evidences in accordance with applicable law his or her enrollment for
            coverage under the Policy, pursuant to all of its terms, provisions,
            exclusions, limitations and conditions.

      C.    The Policy is amended to include the following:

            EXTENDED REPORTING PERIODS

            I.     AUTOMATIC EXTENDED REPORTING PERIOD

                   1.     In the event of termination of an Insured Agent's Certificate of
                          Insurance because of cancellation or nonrenewal of the Policy
                          or of Certificate(s) of Insurance; or due to a decrease in limits,
                          reduction in coverage, new exclusion or any other change in
                          coverage less favorable to an Insured Agent than that
                          contained in the preceding Policy, a sixty {60) day Automatic
                          Extended Reporting Period will be granted to the Insured Agent
                          at no charge, solely with respect to such coverage restriction
                          or decrease in limits.

                          A.     Pursuant to this Extended Reporting Period, an Insured
                                 Agent shall automatically have an additional sixty {60)
                                 days, commencing on the date of termination and
                                 ending sixty (60) days· thereafter, during which to report
                                 Claims under this Policy solely with respect to the
                                 coverage so extended. Claims reported during the




       BRalfEhive Copy END 18


                                                                                               67
                               ENDORSEMENT#      18     !Continued}


This endorsement, effective 12:01 AM    August   1, 2008          forms a part of
policy number 00·665-25-96
issued to   WOODBURY FINANCIAL SERVICES, INC.
           THROUGH THE FINANCIAL SALES
           PROFESSIONALS RISK PURCHASING GROUP
by     National Union Fire Insurance Company of Pittsburgh, Pa.

                               Automatic Extended Reporting Period must have been
                               first made against the Insured Agent during the Policy
                               Period for a Wrongful Act occurring prior to the end of
                               the Policy Period.
                        B.     The Limits of Liability for such Automatic Extended
                               Reporting Period shall be the applicable amount
                               remaining on the Policy's aggregate Limit of Liability
                               with respect to such Insured Agent.
                        C.     Claims reported during the Automatic Extended
                               Reported Period must otherwise be covered pursuant to
                               the terms, provisions, exclusions and other conditions
                               contained in the Policy.
                   2.   Within thirty (30) days after termination of the Policy, the
                        Company, in the manner provided by General Condition E. 2.
                        of this endorsement, will notify each affected Insured Agent,
                        in writing, of the Automatic Extended Reporting Period
                        provided for by paragraph 1 (A) above.

            II..   ADDITIONAL EXTENDED REPORTING PERIOD

                   1.   Within thirty (30) days after termination of the Policy or
                        Certificate of Insurance, the Company will notify the Named
                        Insured of the availability of, the premium for, and the
                        importance of purchasing an Additional Extended Reporting
                        Period. It is understood and agreed that, in the manner
                        provided by General Condition E.2 of this endorsement, the
                        Named Insured will notify each affected Insured Agent
                        regarding same.

                   2.   The Additional Extended Reporting Period shall be for 1 year
                        commencing on the date of termination and ending 1 2 months
                        thereafter, inclusive of the sixty (60) day Automatic Reporting
                        Period specified in Section I above, during which to report any
                        Claims under the Policy. Claims reported during the Additional
                        Extended Reporting Period must have been first made against
                        the Insured Agent during the Policy Period or the Additional
                        Extended Reporting Period for a Wrongful Act occurring prior
                        to the end of the Policy Period.




       BR~/Iive COPYEND 18


                                                                                          68
                               ENDORSEMENT#      18        (Continued)


This endorsement, effective 12:01 AM    August   1, 2008            forms a part of
policy number 00-665-25·96
issued to   WOODBURY FINANCIAL SERVICES, INC.
           THROUGH THE FINANCIAL SALES
           PROFESSIONALS RISK PURCHASING GROUP
by     National Union Fire Insurance Company of Pittsburgh, Pa.


                        A.     Claims reported during the Additional Extended
                               Reported Period must otherwise be covered pursuant to
                               the terms, provisions, exclusions and other conditions
                               contained in the Policy.

                        B.     The premium for the Additional Extended Reporting
                               Period shall be computed in accordance with the rates
                               in effect when the Policy was last issued or renewed.
                               The premium for the Additional Extended Reporting
                               Period shall be based upon the rates for such coverage
                               in effect on the date this Policy was issued or last
                               renewed and shall be for 1) years at 150% of such
                               premium.

                  3.    An Insured Agent shall have the greater of sixty (60) days
                        from the effective date of termination of this Policy or thirty
                        (30) days from the date of mailing or delivery of the advice of
                        the availability to purchase an Additional Extended Reporting
                        Period, to submit written acceptance of the Additional
                        Extended Reporting Period. The premium for such Additional
                        Extended Reporting Period must be paid promptly when due.
                        The premium shall be fully earned at the inception of this
                        endorsement.

                  4.    Upon termination of this Policy:

                        A.     any return premium due the Insured Agent shall be
                               credited toward the premium for an Additional Extended
                               Reporting Period if the Insured Agent elects such
                               coverage.

                        B.     where premium is due to the Company for coverage
                               under this Policy or any preceding policy, any monies
                               received by 'the Company from the Insured Agent as
                               payment for an Additional Extended Reporting Period
                               coverage shall first be applied to such premium owing
                               for this Policy or any preceding policy.




       BRo'/u?hive Copy END 18


                                                                                          69
                               ENDORSEMENT#       18     (Continued)


This endorsement, effective 12:01 AM .  August   1, 2008           forms a part of
policy number 00·665·25·96
issued to   WOODBURY FINANCIAL SERVICES, INC.
           THROUGH THE FINANCIAL SALES
           PROFESSIONALS RISK PURCHASING GROUP
by     National Union Fire Insurance Companr of Pittsburgh, Pa.


                  5.    As a condition precedent to the right to purchase an Additional
                        Extended Reporting Period, the total premium for this Policy
                        must have been paid. The right to purchase an Additional
                        Extended Reporting Period shall end unless the Company
                        receives written notice and full payment of the premium for
                        such period within sixty {60) days after the end of the Policy
                        Period or thirty (30) days from the date of mailing or delivery
                        of the advice of the availability to purchase an Additional
                        Extended Reporting Period.

                  6.    If an Additional Extended Reporting Period is purchased, the
                        entire premium shall be deemed earned at its commencement
                        without any obligation by the Company to return any portion
                        thereof.

                  7.    Limits of Liability for such additional extended reporting period
                        shall be the applicable amount remaining on the Policy's
                        aggregate Limit of Liability with respect to such Insured Agent.




ALL OTHER TERMS, CONDITIONS AND EXCLUSIONS OF THE POLICY SHALL REMAIN
UNCHANGED.




                                                       AUT ORIZED REPR

            Arc?W~e~~I?Ynternational   Group, Inc. All rights reserved.
       BROKER               END18
                                                                                            70
71
                                      ENDORSEMENT#     19     (Continued)


This endorsement, effective 12:01 AM    August         1, 2008           forms a part of
policy number 00-665-25-96
issued to   WOODBURY FINANCIAL SERVICES, INC.
               THROUGH THE FINANCIAL SALES
               PROFESSIONALS RISK PURCHASING GROUP
by        National Union Fire Insurance Company of Pittsburgh, Pa.


The Aggregate Limit of CIP Insurance set forth In Item 7 of the Declarations and each and
every Sublimit of Insurance described in Item 8 of the Declarations shall be part of, and not
in addition to, the Aggregate Limit of Liability set forth in Item 3 of the Declarations of the
policy.

                                              II.

Clause 1. INSURING AGREEMENTS is amended by adding the following to the end thereof:

     D. Personal Identity Liability

        This policy shall pay on behalf of the Insured, those amounts in excess of any
        applicable Deductible, the Insured is legally obligated to pay as Damages resulting
        from a Claim arising from a Personal Identity Event first discovered by an Insured
        during the Policy Period and reported to the Insurer within the Notice Period.

     E. Administrative Action

        This policy shall pay the Insured for all reasonable Administrative Expenses, in
        excess of any applicable Deductible and Coinsurance, resulting from an
        Administrative Action arising from a Personal Identity Event first discovered by an
        Insured during the Policy Period and reported to the Insurer within the Notice Period.

     F. Identity Event Services

        This policy shall pay the Named Insured for all reasonable Notification Costs, Crisis
        Expenses and Post Event Services, in excess of any applicable Deductible and
        Coinsurance, resulting from a Personal Identity Event first discovered by an Insured
        during the Policy Period and reported to the Insurer within the Notice Period.




          BRd/tEhive Copy END 19


                                                                                                  72
                                     ENDORSEMENT#       19     (Continued)


This endorsement, effective 12:01 AM    August         1. 2008           forms a part of
policy number 00-665-25·96
issued to   WOODBURY FINANCIAL SERVICES. INC.
             THROUGH THE FINANCIAL SALES
             PROFESSIONALS RISK PURCHASING GROUP
by       National Union Fire Insurance Company of Pittsburgh. Pa.


                                              Ill.

Solely with respect to the coverage provided by this endorsement, Clause 2. DEFINITIONS
is amended by adding the following to the end thereof:

CIP(a)   "Administrative Action" means and is limited to:
          1.  an investigation of the Insured after written notice is sent to the Insured by,
         2.   negotiation of a consent order against the Insured with, or
         3.   formal adversarial administrative proceeding against the Insured instituted
              by, a United States or Canadian federal, state, provincial or territorial
              regulatory agency, arising solely out of a Personal Identity Event first
              discovered by an Insured during the Policy Period and reported to the Insurer
              within the Notice Period.

CIP(b)   "Administrative Expenses" means reasonable attorneys' fees and expenses for
         legal services incurred by the Insured with the Insurer's prior written consent, in
         the defense and investigation of an Administrative Action, provided that these
         services are not performed _by employees of the Named Insured.                   All
         Administrative Expenses incurred with respect to appeals and proceedings, or a
         series of continuous or interrelated appeals and proceedings arising out of an
         Administrative Action shall be considered as part of the original Administrative
         Action. Administrative Expenses shall not include ongoing monitoring or the costs
         of implementing any changes required or consented to for regulatory compliance.

CIP(c)   "Class Action Claim" means any Claim arising out of a Personal Identity Event:
         1.    brought on behalf of a class or putative class of plaintiffs (whether or not
               certified as such); or
         2.    otherwise brought on a representative basis.

CIP(d)   "Crisis Expenses" means the reasonable and necessary charges and fees incurred
         by a Named Insured within six (6) months following discovery of a Personal
         Identity Event covered under this policy, for the services of a public relations firm,
         crisis management firm, or law firm hired or appointed by the Insurer, or by the
         Named Insured with the Insurer's prior written consent, retained solely for the
         purpose of restoring the confidence of the Named Insured's customers and
         investors.




         BRdJrGhive Copy END 19


                                                                                                  73
                                    ENDORSEMENT#       19     !Continued)


This endorsement, effective 12:01 AM          August 1. 2008            forms a part of
policy number 00·665-25-96
issued to    WOODBURY FINANCIAL SERVICES, INC.
             THROUGH THE FINANCIAL SALES
             PROFESSIONALS RISK PURCHASING GROUP
by       National Union Fire Insurance Company of Pittsburgh, Pa.


CIP(e)   "Information Holder" means a third party that the Insured has provided Personal
         Identification to and with whom an Insured has entered into a contract that
         requires such party to protect such Personal Identification.

CIP(f)   "Notification Costs" means and is limited to the reasonable and necessary costs
         incurred by a Named Insured with the Insurer's prior written consent, within one
         {1) year following discovery of a Personal Identity Event covered under this policy,
         for:
         1.    newspaper or other printed media, radio and television advertisements, or
               correspondence intended to inform or educate the general public, that cite a
               Personal Identity Event and advise any individual whose Personal
               Identification is the subject of such Personal Identity Event of any available
               remedy; and
         2.    correspondence or any other communication directed to' any individual
               whose Personal Identification is the subject of a Personal Identity Event for
               purposes of notifying them of the Personal Identity Event and any available
               remedy.

CIP(g)   "Notice Period means the sixty {60) day period of time the Insured shall have to
         notify the Insurer that a Personal Identity Event has occurred. The Notice Period
         shall commence immediately upon first discovery of the Personal Identity Event by
         an Insured.

CIP(h)   "Personal Identification" means any information from which an individual may be
         uniquely and reliably identified, including without limitation, an individual's name,
         address, telephone number, social security number, account relationships, account
         numbers, account balances, account histories and passwords.

CIP{i)   "Personal Identity Event" means any event involving a Named Insured that has or
         could reasonably result in the fraudulent use of Personal Identification, that is or
         was in the care, custody or control of an Insured or Information Holder. All
         Claims, Administrative Actions, Damages, Defense Costs, Administrative
         Expenses, Notification Costs, Crisis Expenses and Post Event Services resulting
         from the same, continuous, related or repeated event or which arise from the
         same, related or common nexus of facts will be deemed to arise out of one
         Personal Identity Event.




         BRoftEIIive Copy END 19


                                                                                                 74
                                       ENDORSEMENT#      19     (Continued)


This endorsement, effective 12:01 AM    August           1, 2008           forms a part of
policy number  00·665·25·96
issued to   WOODBURY FINANCIAL SERVICES. INC.
               THROUGH THE FINANCIAL SALES
               PROFESSIONALS RISK PURCHASING GROUP
by         National Union Fire Insurance CompanY of Pittsburgh, Pa.


CIP(j)     "Pollutants" means, but is not limited to, any solid, liquid, gaseous, biological,
           radiological or thermal irritant or contaminant, including smoke, vapor, dust, fibers,
           mold, spores, fungi, germs, soot, fumes, asbestos, acids, alkalis, chemicals and
           Waste. "Waste" includes, but is not limited to, materials to be recycled,
           reconditioned or reclaimed and nuclear materials.

CIP(k)     "Post Event Services" means reasonable fees and expenses incurred by a Named
           Insured with the Insurer's prior written consent, for any service specifically
           approved by the Insurer in writing, including without limitation, identity theft
           education and assistance and credit file monitoring. Such Post Event Services
           must be provided by or on behalf of a Named Insured within one (1) year following
           discovery of a Personal Identity Event covered under this policy to any individual
           whose Personal Identification is the subject of that Personal Identity Event for the
           primary purpose of mitigating the effects of such Personal Identity Event.

CIP(I)     "Privacy. Policy" means any policy in any form regarding the collection,
           dissemination, storage, or treatment of information regarding customers, visitors
           to an Internet site, or other persons.

CIP{m) "Suit" means a civil proceeding seeking monetary relief that is commenced by the
       service of a summons and a complaint or similar pleading.         "Suit" shall also
       include a binding arbitration proceeding in which monetary relief is alleged and to
       which the Insured must submit or does submit with the Insurer's prior written
       consent.

                                                IV.

Solely with respect to the coverage provided by this endorsement, Clause 2. DEFINITIONS
is amended by deleting Definitions (a), (c) and (d) in their entirety and replacing them with
the following:

     (a)    "Claim" means a written demand for payment of money, including a Suit.
     (c)    "Damages" means any amount that the Insured shall be legally required to pay
            because of civil judgments or arbitration awards rendered against the Insured, or
            for settlements negotiated by the Insurer or the Insured in accordance with
            Clause 9 of the policy. "Damages," however, shall not include civil or criminal
            fines or penalties imposed by law, punitive, exemplary or liquidated damages, the
            multiplied portion of multiple damages, taxes, any amount for which an Insured is




           BR~/Iive COPYEND 19


                                                                                                    75
                                      ENDORSEMENT#      19     (Continued)


This endorsement, effective 12:01 AM    August          1. 2008          forms a part of
policy number 00-665-25·96
issued to   WOODBURY FINANCIAL SERVICES. INC.
              THROUGH THE FINANCIAL SALES
              PROFESSIONALS RISK PURCHASING GROUP
by         National Union Fire Insurance Company of Pittsburgh, Pa.


            not financially liable or which is without legal recourse to an Insured or matters
            which may be deemed uninsurable under the law pursuant to which this policy is
            construed.

     (d)    "Defense Costs" means reasonable and necessary fees, costs and expenses
            (including premiums for any appeal bond, attachment bond or similar bond, but
            without any obligation to apply for or furnish any such bond or to appeal),
            charged by an attorney and incurred by the Insurer or by the Insured with the
            Insurer's written consent, and resulting solely from the investigation, adjustment,
            defense and appeal of any Claim against the Insured. Defense Costs shall not
            include compensation or expenses of any Insured.

                                               v.
Clause 3. EXCLUSIONS of the policy shall not apply to the coverage provided by this
endorsement, however, the following exclusions shall apply:

This policy shall not apply to:

A. Prior Knowledge
   any Personal Identity Event that any of the Named Insured's directors, officers,
   trustees, governors, management committee members, members of the management
   board or partners {or the equivalent positions) knew or reasonably could have foreseen
   prior to the occurrence of that Personal Identity Event;

B. Bodily Injury
   any Damages, Defense Costs, Administrative Expenses, Notification Costs, Crisis
   Expenses, and Post Event Services arising out of or resulting, directly or indirectly, from
   physical injury, sickness, disease, disability, shock or mental anguish sustained by any
   person, including without limitation, required care, loss of services or death at any time
   resulting therefrom;

C. War and Other Events
   any Damages, Defense Costs, Administrative Expenses, Notification Costs, Crisis
   Expenses, and Post Event Services arising out of or resulting, directly or indirectly, from
   any of the following:
   1. fire, smoke, explosion, lightning, wind, water, flood, earthquake, volcanic eruption,
      tidal wave, landslide, hail, an act of God or any other physical event, however
      caused;




           BRo'Nf;Jiive Copy END 19


                                                                                                  76
                                      ENDORSEMENT# 19          !Continued)


This endorsement, effective 12:01 AM    August          1. 2008           forms a part of
policy number  00·665·25-96
issued to   WOODBURY FINANCIAL SERVICES, INC.
              THROUGH THE FINANCIAL SALES
              PROFESSIONALS RISK,PURCHASING GROUP
by        National Union Fire Insurance Company of Pittsburgh, Pa.


     2. strikes or similar labor action, war, invasion, act of foreign enemy, hostilities or
        warlike operations (whether declared or not), civil war, mutiny, civil commotion
        assuming the proportions of or amounting to a popular rising, military rising,
        insurrection, rebellion, revolution, military or usurped power, or any action taken to
        hinder or defend again.st these actions; or
     3. electrical or mechanical failures, including any electrical power interruption, surge,
        brownout or blackout; a failure of telephone lines, data transmission lines, satellites
        or other infrastructure comprising or supporting the Internet, unless such lines or
        infrastructure were under the Insured's operational control;

D. Pollution
   any Damages, Defense Costs, Administrative Expenses, Notification Costs, Crisis
   Expenses, and Post Event Services arising out of or resulting, directly or indirectly, from
   the presence of or the actual, alleged or threatened discharge, dispersal, release or
   escape of Pollutants {including nuclear materials), or any direction or request to. test
   for, monitor, clean up, remove, contain, treat, detoxify or neutralize Pollutants, or in
   any way respond to or assess the effects of Pollutants;

E. Late Reporting
   any Personal Identity Event that was not properly reported to the Insurer during the
   Notice Period;

F. Non-Monetary Relief
   any Claim seeking non-monetary relief, including without limitation, injunctive relief,
   declaratory relief, or other equitable remedies;

G. Routine Regulatory or Compliance Activities
   any expenses incurred as a result of regularly scheduled, recurring or routine regulatory
   examinations, inquiries or compliance activities;

H. Contractual Liability
   any liability or obligation of any Insured under any contract or agreement; however, this
   exclusion shall not apply to liability the Insured would have in the absence of such
   contract or agreement;

I.   Criminal Matters
     any Damages, Defense Costs, Administrative Expenses, Notification Costs, Crisis
     Expenses, and Post Event Services arising out of or resulting, directly or indirectly, from
     any criminal investigations or proceedings;




          BRdlfEhive Copy END 19


                                                                                                   77
                                     ENDORSEMENT#         19   (Continued)


This endorsement, effective 12:01 AM    August            1, 2008         forms a part of
policy number 00-665-25-96
issued to   WOODBURY FINANCIAL SERVICES, INC.
              THROUGH THE FINANCIAL SALES
              PROFESSIONALS RISK PURCHASING GROUP
by       National Union Fire Insurance Company of Pittsburgh, Pa.


J. Personal Conduct
   any Damages, Defense Costs, Administrative Expenses, Notification Costs, Crisis
   Expenses, and Post Event Services arising out of or resulting, directly or indirectly, from
   any dishonest, fraudulent, criminal or malicious act, error or omission, or any intentional
   or knowing violation of the law or the Privacy Policy of the Named Insured, or gaining
   of any profit or advantage to which the Insured is not legally entitled, if committed by
   any of the Named Insured's:
   1. directors, officers, trustees, governors, management committee members, members
       of the management board or partners (or the equivalent positions), whether acting
       alone or in collusion with other persons; or
   2. employees or Insured Agents (other than officers) of the Named Insured if any of
       the Named Insured's elected or appointed officers possessed, at any time,
       knowledge of any dishonest, fraudulent, malicious, or criminal or malicious act,
       error or omission, or any intentional or knowing violation of the law or the Privacy
       Policy of the Named Insured, or gaining of any profit or advantage to which the
       Insured is not legally entitled, committed by such employee or Insured Agent that
       caused a Personal Identity Event; provided, however, the Insurer will defend Suits
       alleging any of the foregoing conduct, until there is a judgment against, final
       adjudication against, adverse finding of fact against, adverse admission by, or plea
       of nolo contendere or no contest by, the Insured as to such conduct, at which time
       the Insured shall reimburse the Insurer for Defense Costs;

K. Securities Claims
   any Claim alleging, arising out of or resulting, directly or indirectly, from any purchase,
   sale, or offer or solicitation of an offer to purchase or sell securities, or any violation of
   any securities law, including the Securities Act  of  1933, as amended, or the Securities
   Exchange Act of 1934, as amended, or any regulation promulgated under the foregoing
   statutes, or any federal, state or local laws similar to the foregoing statutes (including
   "Blue Sky" laws), whether such law is statutory, regulatory or common law;

L. Security
     any Personal Identity Event resulting from failure of the Insured:
     1. to use, maintain and update at a minimum every ninety (90) days, when necessary,
        antivirus software, firewall software on all broadband or high-speed connections to
        the Internet and software security patches; or
     2. to comply with all data security standards issued by credit card issuers or financial
        institutions with whom the Insured transacts business, if the Insured processes,
        stores or handles credit card information;




         BRoffEJiive Copy END 19


                                                                                                    78
                                      ENDORSEMENT#      19     (Continued)


This endorsement, effective 12:01 AM    August          1. 2008           forms a part of
policy number 00-665-25-96
issued to   WOODBURY FINANCIAL SERVICES, INC.
              THROUGH THE FINANCIAL SALES
              PROFESSIONALS RISK PURCHASING GROUP
by        National Union Fire Insurance Company of Pittsburgh, Pa.


M. Retroactive Date
     any Personal Identity Event that first occurred prior to 8/1/2008;

N. Intellectual Property
     any Damages, Defense Costs, Administrative Expenses, Notification Costs, Crisis
     Expenses, and Post Event Services arising out of or resulting, directly or indirectly, from
     the infringement of copyright, patent, trademark, trade secret or other intellectual
     property rights;

0. Discrimination
   any Damages, Defense Costs, Administrative Expenses, Notification Costs, Crisis
   Expenses, and Post Event Services Expenses alleging, arising out of or resulting,
   directly or indirectly, from any discrimination against any person or entity on any basis,
   including but not limited to: race, creed, color, religion, ethnic background, national
   origin, age, handicap, disability, sex, sexual orientation or pregnancy; or

P. Insured versus Insured
   any Claim against an Insured that is brought, directly or indirectly, by or on behalf of:
   1 . any Insured;
   2. any entity that is owned, managed or operated, directly or indirectly, in whole or in
       part, by an Insured; or
   3. any parent company, subsidiary, director, officer, partner, trustee, successor or
       assignee of an Insured, or anyone affiliated with an Insured or such business entity
       through common majority ownership or control;
   provided/ however, this exclusion shall not apply to any Claim brought by or on behalf
   of an Insured whose Personal Identification is the subject of an otherwise covered
   Personal Identity Event. Notwithstanding the foregoing, there shall be no coverage for
   any counterclaims against such Insured.

     Provided further, however, this policy shall apply to Defense Costs incurred in
     connection with any cross claim for contribution or indemRity that is part of an
     otherwise covered Claim and is brought by one Insured against another Insured.




         BR~hiveCopYEND19


                                                                                                   79
                                     ENDORSEMENT#       19    (Continued)


This endorsement, effective 12:01 AM    August         1. 2008           forms a part of
policy number 00-665-25-96
issued to   WOODBURY FINANCIAL SERVICES, INC.
              THROUGH THE FINANCIAL SALES
              PROFESSIONALS RISK PURCHASING GROUP
by        National Union Fire Insurance Company of Pittsburgh, Pa.



                                              VI.

Solely with respect to the coverage provided by this endorsement, Clause 4. LIMITS OF
LIABILITY - (INCLUDING DEFENSE COSTS) is amended by adding the following to the end
thereof:

     The Aggregate Limit of CIP Insurance indicated in Item 7. of the Declarations of this
     policy will be the most the Insurer shall pay for all coverages provided under the
     CORPORATE IDENTITY PROTECTION AMENDATORY endorsement combined,
     regardless of the number of Personal Identity Events, persons, entities, Claims or
     Administrative Actions covered by this policy, or claimants, Claims or Administrative
     Actions made and regardless of the total of all Damages, Defense Costs,
     Administrative Expenses, Notification Costs, Crisis Expenses, and Post Event Services
     resulting from all Personal Identity Events first discovered by an Insured during the
     Policy Period and reported to the Insurer within the Notice Period.

     All Claims, Administrative Actions, Damages, Defense Costs, Administrative Expenses,
     Notification Costs, Crisis Expenses, and Post Event Services resulting from the same,
     continuous, related or repeated Personal Identity Event shall be subject to the terms,
     conditions, exclusions and Aggregate Limit of CIP Insurance of this policy and the
     CORPORATE IDENTITY PROTECTION AMENDATORY endorsement issued by the
     Insurer to the Named Insured first named in item 1 of the Declarations of this policy in
     effect at the time the first such Personal Identity Event is first discovered by an
     Insured.

     The most the Insurer shall pay for the total of all:
     1. Administrative Expenses is the Administrative Expenses Sublimit of Insurance
        indicated in the Item 8 of the Declarations;
     2. Notification Costs is the Notification Costs Sublimit of Insurance indicated in Item 8
        of the Declarations;
     3. Crisis Expenses is the Crisis Expenses Sublimit of Insurance indicated in Item 8 of
        the Declarations; and
     4. Post Event Services is the Post Event Services Sublimit of Insurance indicated in
        Item 8 of the Declarations;
     regardless of the number of Personal Identity Events first discovered by an Insured
     during the Policy Period and reported to the Insurer within the Notice Period. The
     applicable Sublimits of Insurance shall be part of, and not in addition to, the Aggregate




         BRo'JtEhive Copy END 19


                                                                                                 80
                                    ENDORSEMENT#       19    (Continued)


This endorsement, effective 12:01 AM    August        1, 2008           forms a part of
policy number 00-665-25-96
issued to   WOODBURY FINANCIAL SERVICES, INC.
              THROUGH THE FINANCIAL SALES
              PROFESSIONALS RISK PURCHASING GROUP
by       National Union Fire Insurance Company of Pittsburgh, Pa.


     Limit of CIP Insurance, and shall be excess of any applicable Deductible, resulting from
     all Personal Identity Events first discovered by an Insured during the Policy Period and
     reported to the Insurer within the Notice Period.

     Solely with respect to Insuring Agreement 1 .D, PERSONAL IDENTITY LIABILITY, the
     Insurer shall also pay all interest on that amount of any judgment for a covered
     Personal Identity Event that is within the applicable limit of Insurance:
     1. which accrues after entry of judgment; and
     2. before the Insurer has paid, offered to pay, or deposited in court that part of the
        judgment within the applicable Limit of Insurance.
     Any such payment shall be part of, and not in addition to, the Aggregate Limit of CIP
     Insurance.

     In all events, the Aggregate limit of CIP Insurance and each and every Limit of
     Insurance described above shall be part of, and not in addition to, the Aggregate Limit
     of Liability set forth in Item 3 of the Declarations of the policy.

                                             VII.

Solely with respect to the coverage provided by this endorsement, Clause 5. DEDUCTIBLE
is amended by adding the following to the end thereof:

     The Insured shall be responsible for the Deductible set forth in the in Item 8 of the
     Declarations. The Deductible applies to each Personal Identity Event. In the event that
     a Personal Identity Event triggers more than one Deductible amount, then as to that
     Personal Identity Event, the highest of such Deductible amounts shall be deemed the
     Deductible applicable to all Damages, Defense Costs, Administrative Expenses,
     Notification Costs, Crisis Expenses and Post Event Services arising from such Personal
     Identity Event. The Deductible shall be applied to Notification Costs, Crisis Expenses,
     Post Event Services, Administrative Expenses, Damages and Defense Costs in that
     order.

     Solely with respect to Insuring Agreement 1.D., for each Personal Identity Event that
     results in a Class Action Claim, the Insurer shall only pay amounts the Insured becomes
     legally required to pay as Damages and Defense Costs that exceed the applicable
     Deductible amount for such Class Action Claims indicated in Item 8 of the
     Declarations.




         BRdNEhive Copy END 19

                                                                                                81
                                      ENDORSEMENT#      19     (Continued)


This endorsement, effective 12:01 AM    August          1, 2008           forms a part of
policy number 00-665-25-96
issued to   WOODBURY FINANCIAL SERVICES, INC.
              THROUGH THE FINANCIAL SALES
              PROFESSIONALS RISK PURCHASING GROUP
by        National Union Fire Insurance Company of Pittsburgh, Pa.


     The amount equal to the applicable Deductible shall be borne by the Insured and remain
     uninsured.

     COINSURANCE

     If a Coinsurance percentage is shown in Item 8 of the Declarations, the Insurer shall
     only pay Administrative Expenses, Notification Costs, Crisis Expenses and Post Event
     Services in excess of any applicable Deductible minus the Coinsurance.

     The Coinsurance shall be applied to Administrative Expenses, Notification Costs, Crisis
     Expenses and Post Event Services arising out of each Personal Identity Event and shall
     be applied subsequent to the applicable Deductible for each Personal Identity Event.

     The amount equal to the Coinsurance shall be borne by the Insured and remain
     uninsured.

                                              XIII.

Solely with respect to the coverage provided by this endorsement, Clause 7. TERRITORY is
deleted in its entirety and replaced with the following:

     TERRITORY

     Subject to its terms, conditions and exclusions, this policy applies to a Personal Identity
     Event occurring anywhere in the world, but the Insurer shall only pay for Damages,
     Defense Costs, Administrative Expenses, Notification Costs, Crisis Expenses, Post
     Event Services incurred in the United States of America, its territories and possessions,
     or Canada.

                                               IX.

Solely with respect to the coverage provided by this endorsement,                   Clause   8.
NOTICE/CLAIM REPORTING PROVISIONS is deleted in its entirety.




         BRo'/(E/live Copy END 19


                                                                                                   82
                                     ENDORSEMENT#       19     (Continued)


This endorsement, effective 12:01 AM    August          1, 2008           forms a part of
policy numbe.r 00-665-25-96
issued to   WOODBURY FINANCIAL SERVICES. INC.
             THROUGH THE FINANCIAL SALES
             PROFESSIONALS RISK PURCHASING GROUP
by       National Union Fire Insurance Company of Pittsburgh, Pa.


                                               X.
Solely with respect to the coverage provided by this endorsement, Clause 9. DEFENSE
COSTS, SETTLEMENTS, JUDGMENTS (INCLUDING ADVANCEMENT OF DEFENSE COSTS)
is deleted in its entirety and replaced with the following:

     DEFENSE
     Solely with respect to coverage afforded under Insuring Agreement 1.D, PERSONAL
     IDENTITY LIABILITY:
     A. Insurer's Duty To Defend Insureds: The Insurer has the right and the duty to
           defend a Suit brought against any Insured arising from an otherwise covered
           Personal Identity Event, even if the Suit is groundless or fraudulent.
     B.    Insurer's Right to Settle Claims: The Insurer has the right, but not the duty, to
           settle any Claim, with the written consent of the Insured, if the Insurer believes
           that it is proper.
     C; Defense Costs: The lnsurer.shall pay for Defense Costs any Insured incurs with
           the Insurer's prior written consent in the defense of a Suit for covered Personal
           Identity Events occurring during the Policy Period. The Insurer has the right, but
           not the duty, to investigate any Claim against any Insured. In the event the
           Insurer investigates any Claim and the Insured incurs Defense Costs with the
           Insurer's prior written consent as a result of such investigation, the Insurer shall
           pay such Defense Costs.
     D. Insureds' Right To Settle: The Insured may settle any Claim or Suit to which this
           insurance applies provided that the Insured does so (i) on behalf of all Insureds,
           and (ii) for an amount not exceeding the applicable Deductible (inclusive of
           Defense Costs).
     E.    When the Insurer's Duty to Defense Ends: The Insurer's duty to defend ends
           upon the exhaustion of the Aggregate Limit of Liability set forth in Item 3 of the
           Declarations, Aggregate Limit of CIP Insurance set forth in Item 7 of the
           Declarations or applicable Sublimit of Insurance set forth in Item 8 of the
           Declarations by payment of Damages and/or Defense Costs. The Insurer's duty
           to defend also ends if any Insured fails or refuses to consent to any settlement
           the Insurer recommends and the claimant will accept. The Insured must then
           defend the Claim at the Insured's own expense. As a consequence of such
           failure or refusal, the Insurer's liability shall not exceed the amount for which the
           Claim could have been settled if such recommendation was consented to, plus
           Defense Costs incurred by the Insurer, or incurred by the Insured with the
           Insurer's written consent, prior to the date of such refusal.




         BRoffGRive Copy END 19


                                                                                                   83
                                     ENDORSEMENT#       19     (Continued}


This endorsement, effective 12:01 AM    August         1, 2008           forms a part of
policy number 00-665-25-96
issued to   WOODBURY FINANCIAL SERVICES. INC.
              THROUGH THE FINANCIAL SALES
              PROFESSIONALS RISK PURCHASING GROUP
by        National Union Fire Insurance Company of Pittsburgh, Pa.


                                              XI.

Solely with respect to the coverage provided by this endorsement, Clause 12. ACTION
AGAINST INSURER is deleted in its entirety and replaced with the following:

     ACTION AGAINST INSURER

     1. With respect to Insuring Agreement 1.D., no person or organization has a right
        under this policy:
        a) to join the Insurer as a party or otherwise bring the Insurer into a Suit asking for
             Damages from an Insured; or
        b) to sue the Insurer on this policy unless all of its terms have been fully complied
             with.
        A person or organization may sue the Insurer to recover on an agreed settlement or
        on a final judgment against an Insured obtained after an actual trial, but the Insurer
        will not be liable for Damages that are not payable under the terms of this policy or
        that are in excess of the applicable Limit of Insurance. An agreed settlement
        means a settlement and release of liability signed by the Insurer, the Insured and
        the claimant or the claimant's legal representative.

     2. Except as provided in Clause 19. ARBITRATION of this policy, with respect to
        Insuring Agreements 1.E. and 1.F., no legal action may be brought or made against
        the Insurer under this policy unless:
        a) there has been full compliance with all of the terms of this policy; and
        b) with respect to Insuring Agreement 1. F., the action is brought within two {2)
           years after the date on which a Personal Identity Event is first discovered by an
            Insured.

                                             ·XII.

Solely with respect to the coverage provided by this endorsement, Clause 14. OTHER
INSURANCE AND INDEMNIFICATION is deleted in its entirety and replaced with the
following:




         BRo'lfl?hive Copy END 19

                                                                                                  84
                                     ENDORSEMENT#        19     (Continued)


This endorsement, effective 12:01 AM    August          1, 2008           forms a part of
policy number 00-665·25-96
issued to   WOODBURY FINANCIAL SERVICES, INC.
              THROUGH THE FINANCIAL SALES
              PROFESSIONALS RISK PURCHASING GROUP
by       National Union Fire Insurance Company of Pittsburgh, Pa.


     OTHER INSURANCE

     The coverage provided under Insuring Agreements 1.0, 1.E and 1.F shall be primary
     with respect to any other valid and collectible insurance available to any Insured,
     unless such other valid and collectible insurance is also stated to be primary. In that
     case, the Insurer will share with all other insurance by the method described below.
     1.    If all of the other insurance permits contribution by equal shares, the Insurer will
           follow this method also. Under this approach, each insurer shall contribute equal
           amounts in excess of the applicable Deductible until it has paid its applicable
           limit of insurance or none of the loss remains, whichever comes first.
     2.    If any of the other insurance does not permit contribution by equal shares, the
           Insurer will contribute by limits. Under this method, each insurer's share shall be
           based on the ratio of its applicable limit of insurance to the total applicable limits
           of insurance of all insurers.

                                              XIII.

Solely with respect to the coverage provided by this endorsement, the policy shall be
amended by adding the following clauses:

DUTIES IN THE EVENT OF A PERSONAL IDENTITY EVENT

A. Before coverage will apply under this policy, the Insured shall notify the Insurer in
   writing as soon as practicable within the Notice Period of a Personal Identity Event first
   discovered by an Insured during the Policy Period. Notice must include:
   1. How, when, and where the Personal Identity Event took place;
   2. The number of individuals and type of Personal Identification involved in the
        Personal Identity Event; and
   3. Upon request by the Insurer, the names and addresses of individuals affected by
        the Personal Identity Event.

B. The Insured shall also provide the Insurer written notice of any Claim or Administrative
   Action arising from such Personal Identity Event reported in accordance with paragraph
   A above, as soon as practicable after such Claim or Administrative Action is made.




         BRdlfEIIive Copy END 19

                                                                                                    85
                                    ENDORSEMENT#      19     (Continued)


This endorsement, effective 12:01 AM    August        1, 2008          forms a part of
policy number 00·665·25·96
issued to   WOODBURY FINANCIAL SERVICES, INC.
             THROUGH THE FINANCIAL SALES
             PROFESSIONALS RISK PURCHASING GROUP
by       National Union Fire Insurance Company of Pittsburgh, Pa.


     In the event of a Claim, the Insured shall immediately record the specifics of the Claim
     and the date such Insured first received such Claim. The Insured shall also:
     1.    Immediately send the Insurer copies of all demands, notices, summonses or other
           legal documents received in connection with the Claim;
     2.    Authorize the Insurer to obtain records and other information; and
     3.    Give the Insurer and any counsel the Insurer selects to represent an Insured in
           connection with a Suit or to investigate any Claim, full cooperation and such
           information as the Insurer or such counsel may reasonably require, including, but
           not limited to, assisting the Insurer or such counsel in:
           {i)   any investigation of a Claim, or other matter relating to the coverage
                 afforded under this policy (including submission to an examination by the
                 Insurer or its designee, under oath if required by the Insurer);
           (ii)  making settlements;
           (iii) enforcing any legal rights the Insured or the Insurer may have against any
                 person or entity who may be liable to the Insured;
           (iv) attending depositions, hearings and trials;
           (v) securing and giving evidence, and obtaining the attendance of witnesses;
                 and
           (vi) any inspection or survey conducted by the Insurer.

     In the event of an Administrative Action, the Insured shall notify the Insurer whether
     the Insured has any other insurance policy, prepaid legal service contract or legal
     practitioner retainer agreement available to him/her with respect to such
     Administrative Action. The Insured shall also:
     1.    Send to the Insurer, as soon as practicable, copies of any notices, complaints or
           other legal papers received in connection with any Administrative Action; and
     2.    Furnish the Insurer, upon its request, with records and other information and
           submit to an interview by the Insurer or its representative concerning the full
           extent of their knowledge of the events leading to the Administrative Action.
           The Insurer shall also be entitled to immediately receive upon request copies of
           any regulatory agency correspondence the Insured received relating to such
           Administrative Action, including without limitation any correspondence which
           may have predated the date of application for coverage under this policy.

C. Under all circumstances, no Insured shall admit any liability, assume any financial
   obligation, pay any money, or incur any expense in connection with any Personal
   Identity Event without the Insurer's prior written consent. If any Insured does, it will
   be at such Insured's own expense. The foregoing sentences of this paragraph C shall
   not apply to a settlement pursuant to the final paragraph of Clause 9 of this policy so




         BRoiJtEhive Copy END 19

                                                                                                86
                                    ENDORSEMENT#      19      (Continued)


This endorsement, effective 12:01 AM    August 1, 2008                  forms a part of
policy number 00-665-25-96
issued to   WOODBURY FINANCIAL SERVICES, INC.
             THROUGH THE FINANCIAL SALES
             PROFESSIONALS RISK PURCHASING GROUP
by       National Union Fire Insurance Company of Pittsburgh, Pa.

     long as the Insured provides the Insurer written notice of such settlement as soon as
     practicable, but in no case later than thirty (30) days after such settlement is reached
     in principle,

D. The Insured shall take reasonable steps to prevent a Personal Identity Event and to
   mitigate the Damages arising out of a Personal Identity Event. In all events, no Insured
   shall take any action, or fail to take any action, without the Insurer's prior written
   consent, which prejudices the Insurer's rights under this policy, except as indicated in
   the final paragraph of Clause 9 of this policy.

AUDIT

In addition to all other duties and obligations contained elsewhere in this policy, the Named
Insured shall allow the Insurer to examine and audit all of the Named Insured's records that
relate to coverage provided by the CORPORATE IDENTITY PROTECTION AMENDATORY
endorsement. The Insurer may conduct the audits during regular business hours during the
Policy Period and within three {3) years after the Policy Period ends.

NO POST POLICY PERIOD DISCOVERY

There shall be no coverage for any Personal Identity Event first discovered by an Insured
after the effective date and time of the expiration, cancellation or non-renewal of this
policy.


ALL OTHER TERMS, CONDITIONS, AND EXCLUSIONS REMAIN UNCHANGED.




                                                           AUT ORIZED REPR
              Arc~WA1effc~f?Ynternational   Group, Inc. All rights reserved.
         BROKER                 END19
                                                                                                87
                                                      ENDORSEMENT#           20

       This endorsement, effective 12:01 AM                    August 1, 2008                   forms a part of
       policy number   00-665-25·96
       issued to WOODBURY FINANCIAL SERVICES,     INC.
                     THROUGH THE FINANCIAL SALES
                     PROFESSIONALS RISK PURCHASING GROUP
       by           National Union Fire Insurance Company of Pittsburgh, Pa.
               THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.

                                                  TERRORISM EXCLUSION

       This insurance does not apply to loss, injury, damage, claim or suit, ar1smg directly or
       indirectly as a result of, in connection with, or relating to "terrorism" including but not
       limited to:
               1.      Any action taken in hindering or defending against an actual or expected
                       incident of "terrorism" regardless of any other cause or event that contributes
                       concurrently or in any sequence to the injury or damage; and
               2.      Any contemporaneous or ensuing loss caused by explosion, fire, heat,
                       vandalism, looting, theft, civil commotion, rebellion or insurrection.
       However, this exclusion only applies if one or more of the following are attributable to an
       incident of "terrorism":
               1.     The total of damages and/or loss to all types of property exceeds $25,000,000.
                      In determining whether the $25,000,000 threshold is exceeded, we will include
                      the replacement cost, without deduction for depreciation, for all damage
                      sustained by any property affected by the "terrorism" and business interruption
                      losses sustained by owners or occupants of damaged property; or
               2.     Fifty or more persons sustain death or serious physical injury. For the
                      purposes of this provision, serious physical injury means:
                      a.    Physical injury that involves a substantial risk of death; or
                      b.    Protracte.d and obvious physical disfigurement; or
                      c.    Protracted loss of or impairment of the function of any bodily member
                            or organ; or
               3.     The "terrorism" involves the actual, alleged or threatened use, release, escape,
                      dispersal, application and or existence of:
                      a.    Any nuclear reaction;
                      b.    Radioactive materials or "nuclear materials" in any form and from any
                            source;
                      c.    Radionuclides;
                      d.    Radiation emitted from any radioactive source whether natural or
                            manmade; and/or
                      e.    Electromagnetic pulses; or
               4.     The "terrorism" involves the actual, alleged or threatened use, release, escape,
                      dispersal and/or application of pathogenic or poisonous chemical or
                      "biological" materials, whether natural, manmade, living or dead.
      Multiple incidents of "terrorism" that occur within a seventy- two hour period and appear
      to be carried out in concert or to have a related purpose or common leadership will be
      considered to be one incident.
      DEFINITIONS · The following definitions shall apply:
      1.       "Terrorism" means the use or threatened use of force or violence against person or
               prop~rty, or cornrnission of an act dangerous to human life or property, or
                       Includes copyrighted material of Insurance Services Office, Inc. with its permission.
                                                        END 020
86203 (7/04)        BRO.KiiJ/Iive Copy                    Page 1 of 2



                                                                                                                  88
                                           ENDORSEMENT#            20      (continued)


               commission of an act that interferes with or disrupts an electronic or
               communication system, undertaken by any person or group, whether or not acting
               on behalf of or in any connection with any organization, government, power,
               authority or military force, when the effect is to intimidate, coerce or harm:
               a.     A government;
               b.     The civilian population of a country, state or community; or
               c.     To disrupt the economy of a country, state or community.
      2.       "Nuclear materials" means ''source material," "special nuclear material" or
               "by- product material." "Source material," "special nuclear material," and "by- product
               material" have the meanings given them in the Atomic Energy Act of 1954 or in any
               law amendatory thereof.
      3.       "Biological" materials includes all microorganisms, viruses, rickettsia, prions, nucleic
               acids, toxins, toxin- producing agents, and poisons produced by biological organisms.


      ALL OTHER TERMS, CONDITIONS AND EXCLUSIONS REMAIN UNCHANGED.




                                                                               AUTHORIZED REPRESENTATIVE



                      Includes copyrighted material of Insurance Services Office, Inc. with its permission.
                                                       END 020
86203 !7!04)        BROJfJiJIIive Copy                   Page 2 of 2



                                                                                                              89
                                         ENDORSEMENT#      21

       This endorsement, effective 12:01 AM      August 1, 2008           forms a part of
       policy number   00-665-25·96
       issued to WOODBURY FINANCIAL SERVICES, INC.
                 THROUGH THE FINANCIAL SALES
                 PROFESSIONALS RISK PURCHASING GROUP
       by      National Union Fire Insurance Company of Pittsburgh, Pa.
               THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.

                               COVERAGE TERRITORY ENDORSEMENT

      Payment of loss under this policy shall only be made in full compliance with all United
      States of America economic or trade sanction laws or regulations, including, but not
      limited to, sanctions, laws and regulations administered and enforced by the U.S. Treasury
      Department's Office of Foreign Assets Control ("OFAC").




                                                                AUTHORIZED REPRESENTATIVE




                                           END 021
89644 t7t05J   BROJfili:llfive Copy          Page 1 of 1



                                                                                                   90
                                            ENDORSEMENT#       22

       This endorsement, effective 12:01 AM    August         1, 2008           forms a part of
       policy number 00-665·25-96
       issued to   WOODBURY FINANCIAL SERVICES. INC.
                      THROUGH THE FINANCIAL SALES
                      PROFESSI(JNALS RISK PURCHASING GROUP
       by        Nat1ona1 Un1on Fire Insurance Company of Pittsburgh, Pa.
                MINNESOTA CANCELLATION/NON- RENEWAL AMENDATORY ENDORSEMENT


       Wherever used in this endorsement: 1) "we", "us", "our", and "Insurer" mean the
       insurance company which issued this policy; and 2) "you", "your", "named Insured", "First
       Named Insured", and "Insured" mean the Named Corporation, Named Organization, Named
       Sponsor, Named Insured, or Insured stated in the declarations page; and 3) "Other
       lnsured(s)" me'ans all other persons or entities afforded coverage under the policy.

       CANCELLATION/NONRENEWAL

       A.       No Insurer may cancel a policy of commercial liability and/or property insurance that
                has been in effect for ninety (90) days or more, except for . one or more of the
                following reasons:

                (1)    nonpayment of premium;

                (2)    misrepresentation or fraud made by or with the knowledge of the Insured or
                       Other lnsured(s) in obtaining the policy or in pursuing a claim under the
                       policy;

                {3)    actions by the Insured or Other lnsured(s) that have substantially increased
                       or substantially changed the risk insured;

                {4)    refusal of the Insured or Other lnsured(s) to eliminate known conditions that
                       increase the potential for loss after notification by the Insurer that the
                       condition must be removed;

                (5)    substantial change in the risk assumed, except to the extent that the Insurer
                       should reasonably have foreseen the change or contemplated the risk in
                       writing the contract;

                (6)    loss of reinsurance by the Insurer which provided coverage to the Insurer for
                       a significant amount of the underlying risk insured. A notice of cancellation
                       under this clause shall advise the Insured that the Insured has ten ( 10) days
                       from the date of receipt of the notice to appeal the cancellation to the
                       commissioner of commerce and that the commissioner will render a decision
                       as to whether the cancellation is justified because of the loss of reinsurance
                       within thirty (30) business days after receipt of the appeal;




76587 (08/02)    BRoftEhive Copy END 22


                                                                                                        91
                                              ENDORSEMENT#       22     (Continued)


        This endorsement, effective 12:01 AM    August          1, 2008            forms a part of
        policy number 00-665-25-96
        issued to   WOODBURY FINANCIAL SERVICES. INC.
                      THROUGH THE FINANCIAL SALES
                      PROFESSIONALS RISK PURCHASING GROUP
        by       National Union Fire Insurance Company of Pittsburgh. Pa.


                (7)    a determination by the comm1ss1oner that the continuation of the policy
                       could place the Insurer in violation of the insurance laws of this state; or

                {8)    nonpayment of dues to an association or organization, other than an
                       insurance association or organization, where payment of dues is a
                       prerequisite to obtaining or continuing the insurance. This provision for
                       cancellation for failure to pay dues does not apply to persons who are retired
                       at 62 years of age or older or who are disabled according to social security
                       standards.

       B.       Cancellation under A. clauses (2) to (8}, shall not be effective before sixty (60) days
                after notice to the Insured. The notice of cancellation shall contain a specific
                reason for cancellation as provided in A.

                A policy shall not be cancelled for nonpayment of premium pursuant to A. clause
                ( 1), unless the Insurer, at least ten ( 10) days before the effective cancellation date,
                has given notice to the Insured of the amount of premium due and the due date.
                The notice shall state the effect of nonpayment by the due date. No cancellation
                for nonpayment of premium shall be effective if payment of the amount due is
                made before the effective date in the notice.

       C.       NEW POLICIES- A and B do not apply to any insurance policy that has not been
                previously renewed if the policy has been in effect less than ninety (90} days at the
                time the notice of cancellation is mailed or delivered. No cancellation under this
                subdivision is effective until at least ten ( 10) days after the written notice to the
                Insured.

       D.       LONGER TERM POLICIES- A policy may be issued for a term longer than one year
                or for an indefinite term with a clause providing for cancellation by the Insurer for
                the reasons stated in A by giving notice as required by 8 at least sixty (60) days
                before any anniversary.

       E.       NONRENEWAL (NOTICE REQUIRED) - At least sixty (60) days before the date of
                expiration provided in the policy, a notice of intention not to renew the policy
                beyond the agreed expiration date must be made to the Insured by the Insurer. If
                the notice is not given at least sixty {60) days before the date of expiration provided
                in the policy, the policy shall continue in force until sixty (60) days after a notice of
                intent not to renew is received by the Insured.




76587 (08/02)    BRd/((;hive Copy END 22


                                                                                                            92
                                            ENDORSEMENT#         22     (Continued)


       This endorsement, effective 12:01 AM    August           1, 2008            forms a part of
       policy number 00-665-25-96
       issued to   WOODBURY FINANCIAL SERVICES, INC.
                     THROUGH THE FINANCIAL SALES
                     PROFESSIONALS RISK PURCHASING GROUP
       by        National Union Fire Insurance Company of Pittsburgh, Pa.


       F.       EXCEPTIONS- E does not apply if the Insured has insured elsewhere, has accepted
                replacement coverage, or has requested or agreed to nonrenewal.

       G.       Unless otherwise specifically required, proof of mailing of any notice shall be
                sufficient proof of notice.




       All other terms, conditions and exclusions shall remain the same.




                                                                      AUT 0 RIZED REPR
                      Arc./I!Yffefil~.R~ternational   Group, Inc. All rights reserved.
76587 (08/02)    BROKER                 END 22
                                                                                                     93
                                           ENDORSEMENT# 23

This endorsement, effective 12:01 AM       August 1, 2008                forms a part of
policy number   00·665·25·96
issued to WOODBURY FINANCIAL SERVICES,INC.
         THROUGH THE FINANCIAL SALES
         PROFESSIONALS RISK PURCHASING GROUP
by      National Union Fire Insurance Company of Pittsburgh. Pa.
                                     FORMS INDEX ENDORSEMENT

The contents of the Policy is comprised of the following forms:
                       EDITION
FORM NUMBER              DATE                       FORM TITLE

68909                    10/97 INSURANCE COMPANY SUPERVISORY ADMITTED DEC
68910                    10/97 INS COMPANY SUPERVISORY 68910 (10-97) ADMITTED GUTS
                                AMEND DECLARATIONS PAGE - ITEM 3(a)
                                AMEND INSURED AGENT DEDUCTIBLE
                                AMEND DEFINITION     {g)

                                AMEND DEFINITION (l) & DEFINTION (1)
                                AMEND EXCLUSION (J)
                                AMEND DEFINITION (k)
                                AMEND DEFINITION (k)(3)
                                AMEND DEFINITION {k) FINANCIAL PLANNER/FINANCIAL CONSULTANT
                                EXTENSION
                                PROPERTY & CASUALTY EXTENSION
                                AMEND EXCLUSION (b)
                                AMEND EXCLUSION     (g)
                                AMEND CLAUSE 3., EXCLUSIONS
                                MOLD EXCLUSION
                                AMEND SECTION 6(A) DISCOVERY PERIOD
                                IMPROPER   MUTUA~   FUND AND VARIABLE ANNUITY PRACTICES ENDORSEMENT
                                AIG NON-STACKING LIMITS ENDORSEMENT
                                FEE ARRANGEMENT EXCLUSION
                                NEW YORK AMENDATORY
                                CORPORATE IDENTITY PROTECTION AMENDATORY
86203                    07104 TERRORISM EXCLUSION
89644                    07105 COVERAGE TERRITORY ENDORSEMENT (OFAC)



                                            END023
                 Archive Copy
78859 t10/01l BROKER                         Page 1 of 2


                                                                                                      94
                                           ENDORSEMENT#      23


This endorsement, effective 12:01 AM        August 1, 2008             forms a part of
policy number   00-665·25-96
issued to WOODBURY FINANCIAL SERVICES, INC.
          THROUGH THE FINANCIAL SALES
          PROFESSIONALS RISK PURCHASING GROUP
by      National Union Fire Insurance Company of Pittsburgh, Pa.
                         I

                                     FORMS INDEX ENDORSEMENT

The contents of the ·Policy is comprised of the following forms:
                        EDITION
FORM NUMBER               DATE                       FORM TITLE

76587                    08/02 MINNESOTA CANCELLATION/NON-RENEWAL AMENDATORY ENDORSEMENT
78859                    10/01 FORMS INDEX ENDORSEMENT

        ALL OTHER TERMS, CONDITIONS AND EXCLUSIONS REMAIN UNCHAa


                                                                               2
                                                                                 artt
                                                                   AUTHORIZED REPRESENTATIVE




                                             END023
                   Archive Copy
78859 (10/01>   BROKER                       Page 2 of 2


                                                                                               95
                              CAUSE NO. D-1-GN-12-003985
                                                                               t:                              ~~
BRIAN O'GRADY, M.D. and        §                           IN THE DISTRICT COURT~                               u
THE O'GRADY FAMILY PARTNERSHIP,§
                                                                                           u:o.c:
                                                                                           ....   ~     f"')

LTD.                           §                                                           .g~ ~
                                                                                            "W~::
             Plaintiffs        §                                                            oE!
                                                §                                           ®0
                                                                                            Ftn
v.                                              §          TRAVIS COUNTY, TEXAS             r;:·~
                                                §                                           .::::
                                                                                            "0 ,_.
                                                                                                  t::
                                                                                             a;,_
DAVID MILLER, RIVER OAKS CAPITAL§                                                           :=o
                                                                                            u..
MANAGEMENT, INC., BRETT         §
SCHULICK                        §
              Defendants        §                          98TH JUDICIAL DISTRICT


                                     FINAL JUDGMENT


       ON THIS DAY came to be heard Brian O'Grady, M.D. and The O'Grady Family

Partnership, Ltd.'s Motion for Judgment.

       Based on that Motion, this Court hereby RENDERS judgment for Plaintiffs, Brian

O'Grady, M.D. and The O'Grady Family Partnership, LTD.

       Accordingly, this Court orders that Plaintiffs, Brian O'Grady and The O'Grady Family

Partnership, Ltd. recover the following from the Defendants, David Miller, Brett Schulick and

River Oaks Capital Management, Inc., jointly and severally:

       1.   $2,868,868.00 in compensatory damages (minus applicable settlement credits which
            leave compensatory damages at $2, 118,921.30).

       2.    Pre-judgment interest in the amount of $41,115.69. Prejudgment interest was
             calculated at the rate of 5% per annum from and including September 25, 2008,
             through and including the date of this Judgment and after applying all settlement
             credits.

       3.    Reasonable and necessary attorney fees in the amount of $819,314.50.

       4.    $300,000.00 in punitive damages.

       5.    After applying all applicable credits and recalculating prejudgment interest as noted
             above, the total recovery by Plaintiffs, Brian O'Grady and The O'Grady Family

                                                EXHIBIT

                                                    B
                                                                                                                96
         Partnership, Ltd. from Defendants, David 1\!filler, Brett Schulick and River Oaks
         Capital Management, inc. jointly and severally is: $3,279,351.49.

    6.   In addition to the Judgment minus credits listed in paragraph number 5 above,
         Plaintiffs Brian O'Grady and The O'Grady Family Partnership, LTD. shall recover
         from the Defendants, David Miller, Brett Schulick and River Oaks Capital
         Management, Inc., jointly and severally post-judgment interest on $3,279,351.49 at
         the highest rate allowed by Texas law, compounded annually, from the date this
         Final Judgment is entered unti I all amounts are paid in full.

    7.   This judgment finally disposes of all claims and all parties and is appealable.

    8.   The Court orders execution to issue for this Judgment.




X




                                                                                              97
                                     CAUSE NO.   D-1~G}'-i .. J2-003985


BRI:\N O'GRADY, JVLD. and                          §             E'~   THE D1STR1C
THE O'GRADY FAMILY PARTJ'.JERSHIP,                 §
LTD.                                               §
                       Plaintiffs,                 §
                                                   §
v.                                                  §            TRAVIS COUNTY, TEXAS
                                 §
DAVID MILLER, RIVER OAKS CAPITAL §
MANAGEMENT, INC., BRETT SCHULICK §
               Defendants.       §                               98TH JUDICIAL DISTRICT

                                ORDJER REQUIRING TURNOVER

        The Court considered the Application for Post-Judgment Turnover Over filed by BRJAN

O'GRADY, M.D. and THE O'GRADY FAMILY PARTNERSHIP, L TO. (collectively

"Plaintiffs" or "Applicants"), reviewed the papers on file, as well as all arguments, and believes

that Applicants hold and are entitled to collect upon a final, valid and subsisting judgment

against David Miller, River Oaks Capital Management, Inc., and Brett Schulick (collectively

"Defendants" or "Respondents").

        Finding~:   Plaintiffs have good faith reasons to believe that Defendants own non ..exempt

 rights to present or future property that cannot be ati:ached or levied upon by ordinary legal

 process, like assignable rights and/or causes of action belonging to Defendants. Plaintiffs further

 llave good faith reasons to believe that Defendants are insolvent and have no other way to satisfy

the February 28, 2013 final judgment against them than through turnover relief.

        Judgment Amount: Applicants own an unpaid final judgment against Respondents, dated

February 28,2013, in the principal amount of$3,279,351.49 plus interest.

        The following are orders of this Court.

         1.      Assignment of Non-Exempt Property. This Court finds, detem1ines and adjudges

 that Defendants are insolvent. This Court further orders that Plaintiffs are deemed owners of any

                                                                EXHIBIT

 ORDER REQUIRfNG TURNOVER


                                                                                                       98
causes of action that Defe!Jdants may ha·vc        agains~   any third party, including but not lir.:1ite.J   to


Defendants' insurers. SpecificaJ.ly, it is ordered that Plaimiffs are no\\· the o._v:1er of any potential

causes of action that might be asserted by or on behalf of the Respondents against National

Union Fire Irrsurance Company of Pittsburg, Pennsylvania, regarding National Union

Professional Liability Insurance Policy No. 00-665-25-96 and the Insured, Woodbury Financial

Services, Inc.       It is further ordered that, although not necessary in light of the above order

deeming Plaintiffs owners of any and all non-exempt property and/or interests, including but not

limited to any causes of action that Defendants may have against any third party, including but

not limited to Defendants' insurers, Defendants are ordered to execute assignments in favor of

Plaintiffs with regard to all causes of action belonging to Defendants, including but not limited to

any claims that might be asserted by or on behalf of Defendants against National Union Fire

Insurance Company of Pittsburg, Pennsylvania, regarding National Union Professional Liability

Insurance Policy No. 00-665-25-96 and the Insured, Woodbury Financial Services, Inc. Said

assignments must be produced within fourteen (14) days of entry of this Order to counsel for

Plaintiffs.

         2.         No_interfe~nce.     Every person with notice of this order is ordered to assist and

 not to interfere with Plaintiffs in the carrying out of this Order.

         3.         Relief in this Order is without_Q[ejudice.        The relief granted in this Order is

 without prejudice to further relief that can be requested through subsequent applications for

 turnover relief.



 Signed on     ...\\] t..J1:_   Z...~               , 2013.




                                                      2
 ORDER REQUIRING TURNOVER


                                                                                                                   99
           APPENDIX

             TAB E

AMERICAN ARBITRATION ASSOCIATION
    MANAGEMENT ORDER NO. 1
           (C.R. 310-311)
                               CAUSE NO. D-1-GN-13-002748

BRIAN O'GRADY, M.D. and                        §           IN THE DISTRICT COURT OF
THE O'GRADY FAMILY                             §
PARTNERSHIP, LTD., as owners of                §
the claim of David Miller, Brett               §
Schulick, and River Oaks Capital, Inc.         §
per the June 28, 2013 Turnover Order           §
of Judge Tim Sulak                             §
                   Plaintiffs,                 §           TRAVIS COUNTY, TEXAS
~                                              §
                                               §
NATIONAL UNION FIRE INSURANCE                  §
COMPANY OF PITTSBURGH, PA.,                    §
                                               §
                                               §
                    Defendant.                 §           53rd JUDICIAL DISTRICT


      ORDER CONFIRMING ARBITRATION AWARD AND FINAL JUDGMENT

       Pending before the Court is Defendant National Union Fire Insurance Company of

Pittsburgh, Pa.'s ("National Union") Motion to Confirm Arbitration Award and the Motion to

Vacate or Modify Arbitration Award filed by Plaintiffs Brian O'Grady, M.D. and The O'Grady

Family Partnership, Ltd. ("Plaintiffs"). In American Arbitration Association ("AAA") Case No.

01-14-0000-1777, panel members Hon. Raul A. Gonzalez, Susan G. Perin, and John K. Boyce,

III (the "Panel") found no genuine issue of material fact regarding the lack of coverage under

Insurance Agents Professional Liability Insurance Policy No. 665-25-96 (the "Policy") for a

FINRA arbitration award entered against David Miller, Brett Schulick, and River Oaks Capital

Management, Inc. ("Miller and Schulick"). The Panel found that National Union and American

International Group, Inc. ("AIG") are entitled to an award as a matter oflaw. The Panel held:

           •   that Miller and Schulick did not perform "professional services" as defined by the
               Policy in Endorsements 7 and 8, and that the Policy therefore provides no
               coverage.

           •   that the FINRA award's finding of "punitive damages pursuant to the Texas
               Deceptive Trade Practices Act ("DTPA"), and gross negligence" constitutes



                                                                                                    311
              "dishonest, malicious, [or] knowing! y wrongful" acts, and coverage under the
              Policy is excluded.

          •   that coverage for the Art Purchase Agreement and Team 02 is excluded under
              Endorsement 12 ofthe Policy.

          •   that AIG is neither an insurer under the Policy nor a party to the Policy.

      After considering the motion, any responses, replies, and argument of counsel, the Court

finds the motion to confirm should be GRANTED and the motion to vacate should be DENIED.

      IT IS THEREFORE ORDERED that the Final Summary Award dated February 6, 2015,

issued in AAA Case No. 01-14-0000-1777 by the Panel is CONFIRMED.

      IT IS FURTHER ORDERED AND ADJUDGED that Plaintiffs Brian O'Grady, M.D.

and The O'Grady Family Partnership, Ltd., as owners of the claim of David Miller, Brett

Schulick, and River Oaks Capital, Inc., TAKE NOTHING on their claims against National

Union and AIG.

      All relief requested in this case and not expressly granted is denied.

      Signed this_ day of _ _ _ _ _ , 2015.


                                                    JUDGE PRESIDING




                                                - 2-

                                                                                                 312
             APPENDIX

               TAB F

TEX. CIV. PRAC. & REM. CODE § 171.088
§ 171.088. Vacating Award, TX CIV PRAC & REM § 171.088




  Vernon's Texas Statutes and Codes Annotated
    Civil Practice and Remedies Code (Refs & Annos)
      Title 7. Alternate Methods of Dispute Resolution (Refs & Annos)
         Chapter 171. General Arbitration (Refs & Annos)
           Subchapter D. Court Proceedings (Refs & Annos)

                                    V.T.C.A., Civil Practice & Remedies Code § 171.088

                                                  § 171.088. Vacating Award

                                                          Currentness


(a) On application of a party, the court shall vacate an award if:


  (1) the award was obtained by corruption, fraud, or other undue means;


  (2) the rights of a party were prejudiced by:


     (A) evident partiality by an arbitrator appointed as a neutral arbitrator;


     (B) corruption in an arbitrator; or


     (C) misconduct or wilful misbehavior of an arbitrator;


  (3) the arbitrators:


     (A) exceeded their powers;


     (B) refused to postpone the hearing after a showing of sufficient cause for the postponement;


     (C) refused to hear evidence material to the controversy; or


     (D) conducted the hearing, contrary to Section 171.043, 171.044, 171.045, 171.046, or 171.047, in a manner that
     substantially prejudiced the rights of a party; or



  (4) there was no agreement to arbitrate, the issue was not adversely determined in a proceeding under Subchapter B, 1 and
  the party did not participate in the arbitration hearing without raising the objection.




                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                     1
§ 171.088. Vacating Award, TX CIV PRAC & REM § 171.088




(b) A party must make an application under this section not later than the 90th day after the date of delivery of a copy of the
award to the applicant. A party must make an application under Subsection (a)(1) not later than the 90th day after the date the
grounds for the application are known or should have been known.


(c) If the application to vacate is denied and a motion to modify or correct the award is not pending, the court shall confirm
the award.


Credits
Added by Acts 1997, 75th Leg., ch. 165, § 5.01, eff. Sept. 1, 1997.



Notes of Decisions (276)



Footnotes
1      V.T.C.A., Civil Practice & Remedies Code § 171.021 et seq.
V. T. C. A., Civil Practice & Remedies Code § 171.088, TX CIV PRAC & REM § 171.088
Current through Chapters effective immediately through Chapter 46 of the 2015 Regular Session of the 84th Legislature

End of Document                                                   © 2015 Thomson Reuters. No claim to original U.S. Government Works.




               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                                 2
             APPENDIX

               TAB G

TEX. CIV. PRAC. & REM. CODE § 171.091
§ 171.091. Modifying or Correcting Award, TX CIV PRAC & REM § 171.091




  Vernon's Texas Statutes and Codes Annotated
    Civil Practice and Remedies Code (Refs & Annos)
      Title 7. Alternate Methods of Dispute Resolution (Refs & Annos)
         Chapter 171. General Arbitration (Refs & Annos)
           Subchapter D. Court Proceedings (Refs & Annos)

                                    V.T.C.A., Civil Practice & Remedies Code § 171.091

                                         § 171.091. Modifying or Correcting Award

                                                          Currentness


(a) On application, the court shall modify or correct an award if:


  (1) the award contains:


     (A) an evident miscalculation of numbers; or


     (B) an evident mistake in the description of a person, thing, or property referred to in the award;


  (2) the arbitrators have made an award with respect to a matter not submitted to them and the award may be corrected without
  affecting the merits of the decision made with respect to the issues that were submitted; or


  (3) the form of the award is imperfect in a manner not affecting the merits of the controversy.


(b) A party must make an application under this section not later than the 90th day after the date of delivery of a copy of the
award to the applicant.


(c) If the application is granted, the court shall modify or correct the award to effect its intent and shall confirm the award as
modified or corrected. If the application is not granted, the court shall confirm the award.


(d) An application to modify or correct an award may be joined in the alternative with an application to vacate the award.


Credits
Added by Acts 1997, 75th Leg., ch. 165, § 5.01, eff. Sept. 1, 1997.



Notes of Decisions (58)

V. T. C. A., Civil Practice & Remedies Code § 171.091, TX CIV PRAC & REM § 171.091
Current through Chapters effective immediately through Chapter 46 of the 2015 Regular Session of the 84th Legislature



               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                             1
§ 171.091. Modifying or Correcting Award, TX CIV PRAC & REM § 171.091




End of Document                                           © 2015 Thomson Reuters. No claim to original U.S. Government Works.




              © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                          2
 APPENDIX

   TAB H

9. U.S.C.A § 10
§ 10. Same; vacation; grounds; rehearing, 9 USCA § 10




  United States Code Annotated
   Title 9. Arbitration (Refs & Annos)
      Chapter 1. General Provisions (Refs & Annos)

                                                        9 U.S.C.A. § 10

                                         § 10. Same; vacation; grounds; rehearing

                                                    Effective: May 7, 2002
                                                         Currentness


(a) In any of the following cases the United States court in and for the district wherein the award was made may make an order
vacating the award upon the application of any party to the arbitration--


  (1) where the award was procured by corruption, fraud, or undue means;


  (2) where there was evident partiality or corruption in the arbitrators, or either of them;


  (3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in
  refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any
  party have been prejudiced; or


  (4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award
  upon the subject matter submitted was not made.


(b) If an award is vacated and the time within which the agreement required the award to be made has not expired, the court
may, in its discretion, direct a rehearing by the arbitrators.


(c) The United States district court for the district wherein an award was made that was issued pursuant to section 580 of title 5
may make an order vacating the award upon the application of a person, other than a party to the arbitration, who is adversely
affected or aggrieved by the award, if the use of arbitration or the award is clearly inconsistent with the factors set forth in
section 572 of title 5.

CREDIT(S)
  (July 30, 1947, c. 392, 61 Stat. 672; Nov. 15, 1990, Pub.L. 101-552, § 5, 104 Stat. 2745; Aug. 26, 1992, Pub.L. 102-354, §
5(b)(4), 106 Stat. 946; May 7, 2002, Pub.L. 107-169, § 1, 116 Stat. 132.)



Notes of Decisions (1553)

9 U.S.C.A. § 10, 9 USCA § 10
Current through P.L. 114-40 approved 7-30-2015

End of Document                                                     © 2015 Thomson Reuters. No claim to original U.S. Government Works.



               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                                   1
                APPENDIX

                  TAB I

TEX. CIV. PRAC. & REM. CODE § 41.001-41.003
§ 41.001. Definitions, TX CIV PRAC & REM § 41.001




  Vernon's Texas Statutes and Codes Annotated
    Civil Practice and Remedies Code (Refs & Annos)
      Title 2. Trial, Judgment, and Appeal
         Subtitle C. Judgments
           Chapter 41. Damages (Refs & Annos)

                                    V.T.C.A., Civil Practice & Remedies Code § 41.001

                                                    § 41.001. Definitions

                                                Effective: September 1, 2003
                                                         Currentness


In this chapter:


  (1) “Claimant” means a party, including a plaintiff, counterclaimant, cross-claimant, or third-party plaintiff, seeking recovery
  of damages. In a cause of action in which a party seeks recovery of damages related to injury to another person, damage to
  the property of another person, death of another person, or other harm to another person, “claimant” includes both that other
  person and the party seeking recovery of damages.


  (2) “Clear and convincing” means the measure or degree of proof that will produce in the mind of the trier of fact a firm
  belief or conviction as to the truth of the allegations sought to be established.


  (3) “Defendant” means a party, including a counterdefendant, cross-defendant, or third-party defendant, from whom a
  claimant seeks relief.


  (4) “Economic damages” means compensatory damages intended to compensate a claimant for actual economic or pecuniary
  loss; the term does not include exemplary damages or noneconomic damages.


  (5) “Exemplary damages” means any damages awarded as a penalty or by way of punishment but not for compensatory
  purposes. Exemplary damages are neither economic nor noneconomic damages. “Exemplary damages” includes punitive
  damages.


  (6) “Fraud” means fraud other than constructive fraud.


  (7) “Malice” means a specific intent by the defendant to cause substantial injury or harm to the claimant.


  (8) “Compensatory damages” means economic and noneconomic damages. The term does not include exemplary damages.


  (9) “Future damages” means damages that are incurred after the date of the judgment. Future damages do not include
  exemplary damages.



                   © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                         1
§ 41.001. Definitions, TX CIV PRAC & REM § 41.001




  (10) “Future loss of earnings” means a pecuniary loss incurred after the date of the judgment, including:


    (A) loss of income, wages, or earning capacity; and


    (B) loss of inheritance.


  (11) “Gross negligence” means an act or omission:


    (A) which when viewed objectively from the standpoint of the actor at the time of its occurrence involves an extreme
    degree of risk, considering the probability and magnitude of the potential harm to others; and


    (B) of which the actor has actual, subjective awareness of the risk involved, but nevertheless proceeds with conscious
    indifference to the rights, safety, or welfare of others.


  (12) “Noneconomic damages” means damages awarded for the purpose of compensating a claimant for physical pain
  and suffering, mental or emotional pain or anguish, loss of consortium, disfigurement, physical impairment, loss of
  companionship and society, inconvenience, loss of enjoyment of life, injury to reputation, and all other nonpecuniary losses
  of any kind other than exemplary damages.


  (13) “Periodic payments” means the payment of money or its equivalent to the recipient of future damages at defined intervals.


Credits
Added by Acts 1987, 70th Leg., 1st C.S., ch. 2, § 2.12, eff. Sept. 2, 1987. Amended by Acts 1995, 74th Leg., ch. 19, § 1, eff.
Sept. 1, 1995; Acts 2003, 78th Leg., ch. 204, § 13.02, eff. Sept. 1, 2003.



Notes of Decisions (178)

V. T. C. A., Civil Practice & Remedies Code § 41.001, TX CIV PRAC & REM § 41.001
Current through Chapters effective immediately through Chapter 46 of the 2015 Regular Session of the 84th Legislature

End of Document                                                    © 2015 Thomson Reuters. No claim to original U.S. Government Works.




               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                                  2
§ 41.002. Applicability, TX CIV PRAC & REM § 41.002




  Vernon's Texas Statutes and Codes Annotated
    Civil Practice and Remedies Code (Refs & Annos)
      Title 2. Trial, Judgment, and Appeal
         Subtitle C. Judgments
           Chapter 41. Damages (Refs & Annos)

                                    V.T.C.A., Civil Practice & Remedies Code § 41.002

                                                   § 41.002. Applicability

                                                Effective: September 1, 2005
                                                         Currentness


(a) This chapter applies to any action in which a claimant seeks damages relating to a cause of action.


(b) This chapter establishes the maximum damages that may be awarded in an action subject to this chapter, including an action
for which damages are awarded under another law of this state. This chapter does not apply to the extent another law establishes
a lower maximum amount of damages for a particular claim.


(c) Except as provided by Subsections (b) and (d), in an action to which this chapter applies, the provisions of this chapter
prevail over all other law to the extent of any conflict.


(d) Notwithstanding any provision to the contrary, this chapter does not apply to:


  (1) Section 15.21, Business & Commerce Code (Texas Free Enterprise and Antitrust Act of 1983);


  (2) an action brought under the Deceptive Trade Practices-Consumer Protection Act (Subchapter E, Chapter 17, Business &
  Commerce Code) 1 except as specifically provided in Section 17.50 of that Act;



  (3) an action brought under Chapter 36, Human Resources Code; 2 or



  (4) an action brought under Chapter 21, Insurance Code. 3


Credits
Added by Acts 1987, 70th Leg., 1st C.S., ch. 2, § 2.12, eff. Sept. 1, 1987. Amended by Acts 1989, 71st Leg., ch. 380, § 5,
eff. Sept. 1, 1989; Acts 1995, 74th Leg., ch. 19, § 1, eff. Sept. 1, 1995; Acts 1995, 74th Leg., ch. 260, § 9, eff. May 30, 1995;
Acts 1997, 75th Leg., ch. 165, § 4.01, eff. Sept. 1, 1997; Acts 2003, 78th Leg., ch. 204, § 13.03, eff. Sept. 1, 2003; Acts 2005,
79th Leg., ch. 806, § 18, eff. Sept. 1, 2005.



Notes of Decisions (17)



               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                            1
§ 41.002. Applicability, TX CIV PRAC & REM § 41.002




Footnotes
1      V.T.C.A., Bus. & Com. Code § 17.41 et seq.
2      V.T.C.A., Human Resources Code § 36.001 et seq.
3      V.T.C.A., Insurance Code art. 21.01 et seq.
V. T. C. A., Civil Practice & Remedies Code § 41.002, TX CIV PRAC & REM § 41.002
Current through Chapters effective immediately through Chapter 46 of the 2015 Regular Session of the 84th Legislature

End of Document                                                 © 2015 Thomson Reuters. No claim to original U.S. Government Works.




              © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                                2
§ 41.003. Standards for Recovery of Exemplary Damages, TX CIV PRAC & REM § 41.003




  Vernon's Texas Statutes and Codes Annotated
    Civil Practice and Remedies Code (Refs & Annos)
      Title 2. Trial, Judgment, and Appeal
         Subtitle C. Judgments
           Chapter 41. Damages (Refs & Annos)

                                    V.T.C.A., Civil Practice & Remedies Code § 41.003

                                § 41.003. Standards for Recovery of Exemplary Damages

                                                Effective: September 1, 2003
                                                         Currentness


(a) Except as provided by Subsection (c), exemplary damages may be awarded only if the claimant proves by clear and
convincing evidence that the harm with respect to which the claimant seeks recovery of exemplary damages results from:


  (1) fraud;


  (2) malice; or


  (3) gross negligence.


(b) The claimant must prove by clear and convincing evidence the elements of exemplary damages as provided by this section.
This burden of proof may not be shifted to the defendant or satisfied by evidence of ordinary negligence, bad faith, or a deceptive
trade practice.


(c) If the claimant relies on a statute establishing a cause of action and authorizing exemplary damages in specified circumstances
or in conjunction with a specified culpable mental state, exemplary damages may be awarded only if the claimant proves by
clear and convincing evidence that the damages result from the specified circumstances or culpable mental state.


(d) Exemplary damages may be awarded only if the jury was unanimous in regard to finding liability for and the amount of
exemplary damages.


(e) In all cases where the issue of exemplary damages is submitted to the jury, the following instruction shall be included in
the charge of the court:

“You are instructed that, in order for you to find exemplary damages, your answer to the question regarding the amount of
such damages must be unanimous.”


Credits
Added by Acts 1987, 70th Leg., 1st C.S., ch. 2, § 2.12, eff. Sept. 1, 1987. Amended by Acts 1995, 74th Leg., ch. 19, § 1, eff.
Sept. 1, 1995; Acts 2003, 78th Leg., ch. 204, § 13.04, eff. Sept. 1, 2003.



               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                              1
§ 41.003. Standards for Recovery of Exemplary Damages, TX CIV PRAC & REM § 41.003




Notes of Decisions (282)

V. T. C. A., Civil Practice & Remedies Code § 41.003, TX CIV PRAC & REM § 41.003
Current through Chapters effective immediately through Chapter 46 of the 2015 Regular Session of the 84th Legislature

End of Document                                                 © 2015 Thomson Reuters. No claim to original U.S. Government Works.




              © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                                2
                  APPENDIX

                    TAB J

AAA COMMERCIAL RULES AND MEDIATION PROCEDURES
                                Commercial
                                 Arbitration Rules and Mediation Procedures

                                 Including Procedures for Large, Complex Commercial Disputes




                                 Available online at   adr.org/commercial
                                 Rules Amended and Effective October 1, 2013


Rules Amended and Effective October 1, 2013.                                   COMMERCIAL RULES 1
     Regional Vice Presidents
     States: Delaware, District of Columbia,         States: Indiana, Kentucky, North Carolina, Ohio,
     Maryland, New Jersey, Pennsylvania, Virginia    South Carolina, Tennessee, West Virginia
     P. Jean Baker, Esq.                             Michelle M. Skipper
     Vice President                                  Vice President
     Phone: 202.223.7093                             Phone: 704.643.8605
     Email: BakerJ@adr.org                           Email: SkipperM@adr.org

     States: Texas                                   States: Florida
     Andrew Barton                                   Rebecca Storrow, Ph.D.
     Vice President                                  Vice President
     Phone: 210.998.5750                             Phone: 954.372.4341
     Email: BartonA@adr.org                          Email: StorrowR@adr.org

     States: Alabama, Georgia                        States: Arizona, Colorado, Kansas, Idaho,
     John M. Bishop                                  Montana, Nebraska, Nevada, New Mexico,
     Vice President                                  Oklahoma, Utah, Wyoming
     Phone: 404.320.5150                             Lance K. Tanaka
     Email: BishopJ@adr.org                          Vice President
                                                     Phone: 303.831.0824
     States: Louisiana, Mississippi, Texas           Email: TanakaL@adr.org
     Ingeuneal C. Gray, Esq.
     Vice President                                  States: Arkansas, Illinois, Iowa, Michigan,
     Phone: 832.308.7893                             Minnesota, Missouri, North Dakota,
     Email: GrayI@adr.org                            South Dakota, Wisconsin
                                                     A. Kelly Turner, Esq.
     States: Connecticut, Maine, Massachusetts,      Vice President
     New Hampshire, Rhode Island, Vermont            Phone: 312.361.1116
     Karen Jalkut                                    Email: TurnerK@adr.org
     Vice President
     Phone: 617.695.6062                             States: New York
     Email: JalkutK@adr.org                          Jeffrey T. Zaino, Esq.
                                                     Vice President
     States: Alaska, California, Hawaii, Oregon,     Phone: 212.484.3224
     Washington                                      Email: ZainoJ@adr.org
     Serena K. Lee, Esq.
     Vice President
     Phone: 415.671.4053
     Email: LeeS@adr.org




     Case Management Vice Presidents and Directors
     Jeffrey Garcia                                  Harry Hernandez
     Vice President                                  Director
     Phone: 559.490.1860                             Phone: 972.702.8222
     Email: GarciaJ@adr.org                          Email: HernandezH@adr.org
     Administers cases in: AK, AZ, CA, HI, ID, MT,   Administers cases in: AR, CO, IA, IL, KS, LA,
     NM, NV, OR, UT, WA                              MN, MO, MS, ND, NE, OK, SD, TX, WI, WY

     John M. Bishop                                  Yvonne Baglini
     Vice President                                  Director
     Phone: 404.320.5150                             Phone: 866.293.4053
     Email: BishopJ@adr.org                          Email: BagliniY@adr.org
     Administers cases in: AL, DC, FL, GA, IN, KY,   Administers cases in: CT, DE, MA, ME, MI, NH,
     MD, NC, OH, SC, TN, VA                          NJ, NY, PA, RI, VT, WV




2   RULES AND MEDIATION PROCEDURES                                                  American Arbitration Association
Table of Contents
Important Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Standard Arbitration Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Administrative Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Mediation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Large, Complex Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9


Commercial Arbitration Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
   R-1. Agreement of Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
   R-2. AAA and Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
   R-3. National Roster of Arbitrators. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
   R-4. Filing Requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
   R-5. Answers and Counterclaims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
   R-6. Changes of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
   R-7. Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
   R-8. Interpretation and Application of Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
   R-9. Mediation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
   R-10. Administrative Conference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
   R-11. Fixing of Locale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
   R-12. Appointment from National Roster . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
   R-13. Direct Appointment by a Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
   R-14. Appointment of Chairperson by Party-Appointed Arbitrators or Parties . . . . . . . . 16
   R-15. Nationality of Arbitrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
   R-16. Number of Arbitrators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
   R-17. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
   R-18. Disqualiﬁcation of Arbitrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
   R-19. Communication with Arbitrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
   R-20. Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
   R-21. Preliminary Hearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
   R-22. Pre-Hearing Exchange and Production of Information . . . . . . . . . . . . . . . . . . . . . . 19
   R-23. Enforcement Powers of the Arbitrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
   R-24. Date, Time, and Place of Hearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
   R-25. Attendance at Hearings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
   R-26. Representation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
   R-27. Oaths . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Rules Amended and Effective October 1, 2013.                                                                      COMMERCIAL RULES 3
    R-28. Stenographic Record . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
    R-29. Interpreters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
    R-30. Postponements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
    R-31. Arbitration in the Absence of a Party or Representative . . . . . . . . . . . . . . . . . . . . . 22
    R-32. Conduct of Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
    R-33. Dispositive Motions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
    R-34. Evidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
    R-35. Evidence by Written Statements and Post-Hearing Filing of Documents or
    Other Evidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
    R-36. Inspection or Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
    R-37. Interim Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
    R-38. Emergency Measures of Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
    R-39. Closing of Hearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
    R-40. Reopening of Hearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
    R-41. Waiver of Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
    R-42. Extensions of Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
    R-43. Serving of Notice and Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
    R-44. Majority Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
    R-45. Time of Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
    R-46. Form of Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
    R-47. Scope of Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
    R-48. Award Upon Settlement—Consent Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
    R-49. Delivery of Award to Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
    R-50. Modiﬁcation of Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
    R-51. Release of Documents for Judicial Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
    R-52. Applications to Court and Exclusion of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
    R-53. Administrative Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
    R-54. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
    R-55. Neutral Arbitrator’s Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
    R-56. Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
    R-57. Remedies for Nonpayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
    R-58. Sanctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31




4   RULES AND MEDIATION PROCEDURES                                                                              American Arbitration Association
Preliminary Hearing Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
   P-1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
   P-2. Checklist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32


Expedited Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
   E-1. Limitation on Extensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
   E-2. Changes of Claim or Counterclaim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
   E-3. Serving of Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
   E-4. Appointment and Qualiﬁcations of Arbitrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
   E-5. Exchange of Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
   E-6. Proceedings on Documents and Procedures for the Resolution of Disputes
   Through Document Submission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
   E-7. Date, Time, and Place of Hearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
   E-8. The Hearing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
   E-9. Time of Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
   E-10. Arbitrator’s Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36


Procedures for Large, Complex Commercial Disputes . . . . . . . . . . . . . . . . . . . . . . . . 37
   L-1. Administrative Conference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
   L-2. Arbitrators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
   L-3. Management of Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38


Administrative Fee Schedules (Standard and Flexible Fees) . . . . . . . . . . . . . . . . . . . 38


Commercial Mediation Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
   M-1. Agreement of Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
   M-2. Initiation of Mediation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
   M-3. Representation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
   M-4. Appointment of the Mediator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
   M-5. Mediator’s Impartiality and Duty to Disclose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
   M-6. Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
   M-7. Duties and Responsibilities of the Mediator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
   M-8. Responsibilities of the Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
   M-9. Privacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
   M-10. Conﬁdentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
   M-11. No Stenographic Record . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43


Rules Amended and Effective October 1, 2013.                                                                     COMMERCIAL RULES 5
    M-12. Termination of Mediation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
    M-13. Exclusion of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
    M-14. Interpretation and Application of Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
    M-15. Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
    M-16. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
    M-17. Cost of the Mediation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44




6   RULES AND MEDIATION PROCEDURES                                                                             American Arbitration Association
     Commercial Arbitration Rules
     and Mediation Procedures
    (Including Procedures for Large, Complex Commercial Disputes)




Important Notice

These rules and any amendment of them shall apply in the form in effect at the
time the administrative ﬁling requirements are met for a demand for arbitration
or submission agreement received by the AAA®. To ensure that you have the
most current information, see our web site at www.adr.org.


Introduction

Each year, many millions of business transactions take place. Occasionally,
disagreements develop over these business transactions. Many of these disputes
are resolved by arbitration, the voluntary submission of a dispute to an impartial
person or persons for ﬁnal and binding determination. Arbitration has proven to be
an effective way to resolve these disputes privately, promptly, and economically.

The American Arbitration Association® (AAA), a not-for-proﬁt, public service
organization, offers a broad range of dispute resolution services to business
executives, attorneys, individuals, trade associations, unions, management,
consumers, families, communities, and all levels of government. Services are
available through AAA headquarters in New York and through ofﬁces located in
major cities throughout the United States. Hearings may be held at locations
convenient for the parties and are not limited to cities with AAA ofﬁces. In
addition, the AAA serves as a center for education and training, issues
specialized publications, and conducts research on various forms of alternative
dispute resolution.




Rules Amended and Effective October 1, 2013.                        COMMERCIAL RULES 7
Standard Arbitration Clause

The parties can provide for arbitration of future disputes by inserting the
following clause into their contracts:

      Any controversy or claim arising out of or relating to this contract, or the
      breach thereof, shall be settled by arbitration administered by the
      American Arbitration Association under its Commercial Arbitration Rules,
      and judgment on the award rendered by the arbitrator(s) may be entered
      in any court having jurisdiction thereof.

Arbitration of existing disputes may be accomplished by use of the following:

      We, the undersigned parties, hereby agree to submit to arbitration
      administered by the American Arbitration Association under its
      Commercial Arbitration Rules the following Controversy: (describe brieﬂy).
      We further agree that the above controversy be submitted to (one) (three)
      arbitrator(s). We further agree that we will faithfully observe this
      agreement and the rules, that we will abide by and perform any award
      rendered by the arbitrator(s), and that a judgment of any court having
      jurisdiction may be entered on the award.

The services of the AAA are generally concluded with the transmittal of the
award. Although there is voluntary compliance with the majority of awards,
judgment on the award can be entered in a court having appropriate jurisdiction
if necessary.


Administrative Fees

The AAA charges a ﬁling fee based on the amount of the claim or counterclaim.
This fee information, which is included with these rules, allows the parties to
exercise control over their administrative fees. The fees cover AAA administrative
services; they do not cover arbitrator compensation or expenses, if any, reporting
services, or any post-award charges incurred by the parties in enforcing the award.


Mediation

Subject to the right of any party to opt out, in cases where a claim or
counterclaim exceeds $75,000, the rules provide that the parties shall mediate
their dispute upon the administration of the arbitration or at any time when the
arbitration is pending. In mediation, the neutral mediator assists the parties in
8   RULES AND MEDIATION PROCEDURES                                   American Arbitration Association
reaching a settlement but does not have the authority to make a binding
decision or award. Mediation is administered by the AAA in accordance with its
Commercial Mediation Procedures. There is no additional ﬁling fee where parties
to a pending arbitration attempt to mediate their dispute under the AAA’s auspices.

Although these rules include a mediation procedure that will apply to many
cases, parties may still want to incorporate mediation into their contractual dispute
settlement process. Parties can do so by inserting the following mediation clause
into their contract in conjunction with a standard arbitration provision:

     If a dispute arises out of or relates to this contract, or the breach thereof,
     and if the dispute cannot be settled through negotiation, the parties
     agree ﬁrst to try in good faith to settle the dispute by mediation
     administered by the American Arbitration Association under its
     Commercial Mediation Procedures before resorting to arbitration,
     litigation, or some other dispute resolution procedure.

If the parties want to use a mediator to resolve an existing dispute, they can en-
ter into the following submission agreement:

     The parties hereby submit the following dispute to mediation
     administered by the American Arbitration Association under its
     Commercial Mediation Procedures. (The clause may also provide for the
     qualiﬁcations of the mediator(s), method of payment, locale of meetings,
     and any other item of concern to the parties.)

Large, Complex Cases

Unless the parties agree otherwise, the procedures for Large, Complex
Commercial Disputes, which appear in this pamphlet, will be applied to all cases
administered by the AAA under the Commercial Arbitration Rules in which the
disclosed claim or counterclaim of any party is at least $500,000 exclusive of
claimed interest, arbitration fees and costs. The key features of these procedures
include:

>    A highly qualiﬁed, trained Roster of Neutrals;
>    A mandatory preliminary hearing with the arbitrators, which may be conducted by
     teleconference;
>    Broad arbitrator authority to order and control the exchange of information,
     including depositions;
>    A presumption that hearings will proceed on a consecutive or block basis.

Rules Amended and Effective October 1, 2013.                             COMMERCIAL RULES 9
 Commercial Arbitration Rules

 R-1. Agreement of Parties*

 (a) The parties shall be deemed to have made these rules a part of their arbitration
     agreement whenever they have provided for arbitration by the American
     Arbitration Association (hereinafter AAA) under its Commercial Arbitration Rules
     or for arbitration by the AAA of a domestic commercial dispute without specifying
     particular rules. These rules and any amendment of them shall apply in the form
     in effect at the time the administrative requirements are met for a Demand for
     Arbitration or Submission Agreement received by the AAA. Any disputes
     regarding which AAA rules shall apply shall be decided by the AAA. The parties,
     by written agreement, may vary the procedures set forth in these rules. After
     appointment of the arbitrator, such modiﬁcations may be made only with the
     consent of the arbitrator.
 (b) Unless the parties or the AAA determines otherwise, the Expedited Procedures
     shall apply in any case in which no disclosed claim or counterclaim exceeds
     $75,000, exclusive of interest, attorneys’ fees, and arbitration fees and costs.
       Parties may also agree to use these procedures in larger cases. Unless the parties
       agree otherwise, these procedures will not apply in cases involving more than two
       parties. The Expedited Procedures shall be applied as described in Sections E-1
       through E-10 of these rules, in addition to any other portion of these rules that is
       not in conﬂict with the Expedited Procedures.
 (c) Unless the parties agree otherwise, the Procedures for Large, Complex
     Commercial Disputes shall apply to all cases in which the disclosed claim or
     counterclaim of any party is at least $500,000 or more, exclusive of claimed
     interest, attorneys’ fees, arbitration fees and costs. Parties may also agree to use
     the procedures in cases involving claims or counterclaims under $500,000, or in
     nonmonetary cases. The Procedures for Large, Complex Commercial Disputes
     shall be applied as described in Sections L-1 through L-3 of these rules, in
     addition to any other portion of these rules that is not in conﬂict with the
     Procedures for Large, Complex Commercial Disputes.
 (d) Parties may, by agreement, apply the Expedited Procedures, the Procedures for
     Large, Complex Commercial Disputes, or the Procedures for the Resolution of
     Disputes through Document Submission (Rule E-6) to any dispute.
 (e) All other cases shall be administered in accordance with Sections R-1 through R-58
     of these rules.

 * A dispute arising out of an employer promulgated plan will be administered under the AAA’s Employment
   Arbitration Rules and Mediation Procedures.




10   RULES AND MEDIATION PROCEDURES                                                     American Arbitration Association
R-2. AAA and Delegation of Duties

When parties agree to arbitrate under these rules, or when they provide for
arbitration by the AAA and an arbitration is initiated under these rules, they
thereby authorize the AAA to administer the arbitration. The authority and duties
of the AAA are prescribed in the agreement of the parties and in these rules, and
may be carried out through such of the AAA’s representatives as it may direct. The
AAA may, in its discretion, assign the administration of an arbitration to any of its
ofﬁces. Arbitrations administered under these rules shall only be administered by
the AAA or by an individual or organization authorized by the AAA to do so.

R-3. National Roster of Arbitrators

The AAA shall establish and maintain a National Roster of Arbitrators (“National
Roster”) and shall appoint arbitrators as provided in these rules. The term
“arbitrator” in these rules refers to the arbitration panel, constituted for a
particular case, whether composed of one or more arbitrators, or to an individual
arbitrator, as the context requires.

R-4. Filing Requirements

(a) Arbitration under an arbitration provision in a contract shall be initiated by the
    initiating party (“claimant”) ﬁling with the AAA a Demand for Arbitration, the
    administrative ﬁling fee, and a copy of the applicable arbitration agreement from
    the parties’ contract which provides for arbitration.
(b) Arbitration pursuant to a court order shall be initiated by the initiating party ﬁling
    with the AAA a Demand for Arbitration, the administrative ﬁling fee, and a copy of
    any applicable arbitration agreement from the parties’ contract which provides for
    arbitration.
      i.    The ﬁling party shall include a copy of the court order.
      ii. The ﬁling fee must be paid before a matter is considered properly ﬁled. If the
          court order directs that a speciﬁc party is responsible for the ﬁling fee, it is
          the responsibility of the ﬁling party to either make such payment to the AAA
          and seek reimbursement as directed in the court order or to make other such
          arrangements so that the ﬁling fee is submitted to the AAA with the Demand.
      iii. The party ﬁling the Demand with the AAA is the claimant and the opposing
           party is the respondent regardless of which party initiated the court action.
           Parties may request that the arbitrator alter the order of proceedings if
           necessary pursuant to R-32.
(c) It is the responsibility of the ﬁling party to ensure that any conditions precedent
    to the ﬁling of a case are met prior to ﬁling for an arbitration, as well as any time
    requirements associated with the ﬁling. Any dispute regarding whether a condition
    precedent has been met may be raised to the arbitrator for determination.

Rules Amended and Effective October 1, 2013.                                COMMERCIAL RULES 11
 (d) Parties to any existing dispute who have not previously agreed to use these rules
     may commence an arbitration under these rules by ﬁling a written submission
     agreement and the administrative ﬁling fee. To the extent that the parties’
     submission agreement contains any variances from these rules, such variances
     should be clearly stated in the Submission Agreement.
 (e) Information to be included with any arbitration ﬁling includes:
       i.   the name of each party;
       ii. the address for each party, including telephone and fax numbers and e-mail
           addresses;
       iii. if applicable, the names, addresses, telephone and fax numbers, and e-mail
            addresses of any known representative for each party;
       iv. a statement setting forth the nature of the claim including the relief sought
           and the amount involved; and
       v.   the locale requested if the arbitration agreement does not specify one.
 (f) The initiating party may ﬁle or submit a dispute to the AAA in the following
     manner:
       i.   through AAA WebFile, located at www.adr.org; or
       ii. by ﬁling the complete Demand or Submission with any AAA ofﬁce, regardless
           of the intended locale of hearing.
 (g) The ﬁling party shall simultaneously provide a copy of the Demand and any
     supporting documents to the opposing party.
 (h) The AAA shall provide notice to the parties (or their representatives if so named)
     of the receipt of a Demand or Submission when the administrative ﬁling
     requirements have been satisﬁed. The date on which the ﬁling requirements are
     satisﬁed shall establish the date of ﬁling the dispute for administration. However,
     all disputes in connection with the AAA’s determination of the date of ﬁling may
     be decided by the arbitrator.
 (i) If the ﬁling does not satisfy the ﬁling requirements set forth above, the AAA shall
     acknowledge to all named parties receipt of the incomplete ﬁling and inform the
     parties of the ﬁling deﬁciencies. If the deﬁciencies are not cured by the date
     speciﬁed by the AAA, the ﬁling may be returned to the initiating party.


 R-5. Answers and Counterclaims

 (a) A respondent may ﬁle an answering statement with the AAA within 14 calendar
     days after notice of the ﬁling of the Demand is sent by the AAA. The respondent
     shall, at the time of any such ﬁling, send a copy of any answering statement to
     the claimant and to all other parties to the arbitration. If no answering statement
     is ﬁled within the stated time, the respondent will be deemed to deny the claim.
     Failure to ﬁle an answering statement shall not operate to delay the arbitration.




12   RULES AND MEDIATION PROCEDURES                                         American Arbitration Association
(b) A respondent may ﬁle a counterclaim at any time after notice of the ﬁling of the
    Demand is sent by the AAA, subject to the limitations set forth in Rule R-6. The
    respondent shall send a copy of the counterclaim to the claimant and all other
    parties to the arbitration. If a counterclaim is asserted, it shall include a statement
    setting forth the nature of the counterclaim including the relief sought and the
    amount involved. The ﬁling fee as speciﬁed in the applicable AAA Fee Schedule
    must be paid at the time of the ﬁling of any counterclaim.
(c) If the respondent alleges that a different arbitration provision is controlling, the
    matter will be administered in accordance with the arbitration provision submitted
    by the initiating party subject to a ﬁnal determination by the arbitrator.
(d) If the counterclaim does not meet the requirements for ﬁling a claim and the
    deﬁciency is not cured by the date speciﬁed by the AAA, it may be returned to the
    ﬁling party.


R-6. Changes of Claim

(a) A party may at any time prior to the close of the hearing or by the date
    established by the arbitrator increase or decrease the amount of its claim or
    counterclaim. Written notice of the change of claim amount must be provided to
    the AAA and all parties. If the change of claim amount results in an increase in
    administrative fee, the balance of the fee is due before the change of claim
    amount may be accepted by the arbitrator.
(b) Any new or different claim or counterclaim, as opposed to an increase or decrease
    in the amount of a pending claim or counterclaim, shall be made in writing and
    ﬁled with the AAA, and a copy shall be provided to the other party, who shall have
    a period of 14 calendar days from the date of such transmittal within which to ﬁle
    an answer to the proposed change of claim or counterclaim with the AAA. After
    the arbitrator is appointed, however, no new or different claim may be submitted
    except with the arbitrator’s consent.


R-7. Jurisdiction

(a) The arbitrator shall have the power to rule on his or her own jurisdiction, including
    any objections with respect to the existence, scope, or validity of the arbitration
    agreement or to the arbitrability of any claim or counterclaim.
(b) The arbitrator shall have the power to determine the existence or validity of a
    contract of which an arbitration clause forms a part. Such an arbitration clause
    shall be treated as an agreement independent of the other terms of the contract.
    A decision by the arbitrator that the contract is null and void shall not for that
    reason alone render invalid the arbitration clause.
(c) A party must object to the jurisdiction of the arbitrator or to the arbitrability of a
    claim or counterclaim no later than the ﬁling of the answering statement to the
    claim or counterclaim that gives rise to the objection. The arbitrator may rule on
    such objections as a preliminary matter or as part of the ﬁnal award.

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 R-8. Interpretation and Application of Rules

 The arbitrator shall interpret and apply these rules insofar as they relate to the
 arbitrator’s powers and duties. When there is more than one arbitrator and a
 difference arises among them concerning the meaning or application of these
 rules, it shall be decided by a majority vote. If that is not possible, either an
 arbitrator or a party may refer the question to the AAA for ﬁnal decision. All other
 rules shall be interpreted and applied by the AAA.

 R-9. Mediation

 In all cases where a claim or counterclaim exceeds $75,000, upon the AAA’s
 administration of the arbitration or at any time while the arbitration is pending,
 the parties shall mediate their dispute pursuant to the applicable provisions of
 the AAA’s Commercial Mediation Procedures, or as otherwise agreed by the
 parties. Absent an agreement of the parties to the contrary, the mediation shall
 take place concurrently with the arbitration and shall not serve to delay the
 arbitration proceedings. However, any party to an arbitration may unilaterally
 opt out of this rule upon notiﬁcation to the AAA and the other parties to the
 arbitration. The parties shall conﬁrm the completion of any mediation or any
 decision to opt out of this rule to the AAA. Unless agreed to by all parties and
 the mediator, the mediator shall not be appointed as an arbitrator to the case.

 R-10. Administrative Conference

 At the request of any party or upon the AAA’s own initiative, the AAA may
 conduct an administrative conference, in person or by telephone, with the parties
 and/or their representatives. The conference may address such issues as
 arbitrator selection, mediation of the dispute, potential exchange of information,
 a timetable for hearings, and any other administrative matters.

 R-11. Fixing of Locale

 The parties may mutually agree on the locale where the arbitration is to be held.
 Any disputes regarding the locale that are to be decided by the AAA must be
 submitted to the AAA and all other parties within 14 calendar days from the date
 of the AAA’s initiation of the case or the date established by the AAA. Disputes
 regarding locale shall be determined in the following manner:

 (a) When the parties’ arbitration agreement is silent with respect to locale, and if the
     parties disagree as to the locale, the AAA may initially determine the place of


14   RULES AND MEDIATION PROCEDURES                                        American Arbitration Association
     arbitration, subject to the power of the arbitrator after appointment, to make a
     ﬁnal determination on the locale.
(b) When the parties’ arbitration agreement requires a speciﬁc locale, absent the
    parties’ agreement to change it, or a determination by the arbitrator upon
    appointment that applicable law requires a different locale, the locale shall be that
    speciﬁed in the arbitration agreement.
(c) If the reference to a locale in the arbitration agreement is ambiguous, and the
    parties are unable to agree to a speciﬁc locale, the AAA shall determine the
    locale, subject to the power of the arbitrator to ﬁnally determine the locale.


The arbitrator, at the arbitrator’s sole discretion, shall have the authority to
conduct special hearings for document production purposes or otherwise at
other locations if reasonably necessary and beneﬁcial to the process.

R-12. Appointment from National Roster

If the parties have not appointed an arbitrator and have not provided any
other method of appointment, the arbitrator shall be appointed in the following
manner:

(a) The AAA shall send simultaneously to each party to the dispute an identical list
    of 10 (unless the AAA decides that a different number is appropriate) names of
    persons chosen from the National Roster. The parties are encouraged to agree to
    an arbitrator from the submitted list and to advise the AAA of their agreement.
(b) If the parties are unable to agree upon an arbitrator, each party to the dispute
    shall have 14 calendar days from the transmittal date in which to strike names
    objected to, number the remaining names in order of preference, and return the
    list to the AAA. The parties are not required to exchange selection lists. If a party
    does not return the list within the time speciﬁed, all persons named therein shall
    be deemed acceptable to that party. From among the persons who have been
    approved on both lists, and in accordance with the designated order of mutual
    preference, the AAA shall invite the acceptance of an arbitrator to serve. If the
    parties fail to agree on any of the persons named, or if acceptable arbitrators are
    unable to act, or if for any other reason the appointment cannot be made from
    the submitted lists, the AAA shall have the power to make the appointment
    from among other members of the National Roster without the submission of
    additional lists.
(c) Unless the parties agree otherwise, when there are two or more claimants or two
    or more respondents, the AAA may appoint all the arbitrators.




Rules Amended and Effective October 1, 2013.                               COMMERCIAL RULES 15
 R-13. Direct Appointment by a Party

 (a) If the agreement of the parties names an arbitrator or speciﬁes a method of
     appointing an arbitrator, that designation or method shall be followed. The notice
     of appointment, with the name and address of the arbitrator, shall be ﬁled with the
     AAA by the appointing party. Upon the request of any appointing party, the AAA
     shall submit a list of members of the National Roster from which the party may, if it
     so desires, make the appointment.
 (b) Where the parties have agreed that each party is to name one arbitrator, the
     arbitrators so named must meet the standards of Section R-18 with respect to
     impartiality and independence unless the parties have speciﬁcally agreed
     pursuant to Section R-18(b) that the party-appointed arbitrators are to be
     non-neutral and need not meet those standards.
 (c) If the agreement speciﬁes a period of time within which an arbitrator shall be
     appointed and any party fails to make the appointment within that period, the
     AAA shall make the appointment.
 (d) If no period of time is speciﬁed in the agreement, the AAA shall notify the party
     to make the appointment. If within 14 calendar days after such notice has been
     sent, an arbitrator has not been appointed by a party, the AAA shall make the
     appointment.


 R-14. Appointment of Chairperson by Party-Appointed Arbitrators or Parties

 (a) If, pursuant to Section R-13, either the parties have directly appointed arbitrators,
     or the arbitrators have been appointed by the AAA, and the parties have
     authorized them to appoint a chairperson within a speciﬁed time and no
     appointment is made within that time or any agreed extension, the AAA may
     appoint the chairperson.
 (b) If no period of time is speciﬁed for appointment of the chairperson, and the
     party-appointed arbitrators or the parties do not make the appointment within
     14 calendar days from the date of the appointment of the last party-appointed
     arbitrator, the AAA may appoint the chairperson.
 (c) If the parties have agreed that their party-appointed arbitrators shall appoint the
     chairperson from the National Roster, the AAA shall furnish to the party-appointed
     arbitrators, in the manner provided in Section R-12, a list selected from the
     National Roster, and the appointment of the chairperson shall be made as
     provided in that Section.




16   RULES AND MEDIATION PROCEDURES                                         American Arbitration Association
R-15. Nationality of Arbitrator

Where the parties are nationals of different countries, the AAA, at the request of
any party or on its own initiative, may appoint as arbitrator a national of a country
other than that of any of the parties. The request must be made before the time
set for the appointment of the arbitrator as agreed by the parties or set by these
rules.

R-16. Number of Arbitrators

(a) If the arbitration agreement does not specify the number of arbitrators, the
    dispute shall be heard and determined by one arbitrator, unless the AAA, in its
    discretion, directs that three arbitrators be appointed. A party may request three
    arbitrators in the Demand or Answer, which request the AAA will consider in
    exercising its discretion regarding the number of arbitrators appointed to the
    dispute.
(b) Any request for a change in the number of arbitrators as a result of an increase or
    decrease in the amount of a claim or a new or different claim must be made to
    the AAA and other parties to the arbitration no later than seven calendar days
    after receipt of the R-6 required notice of change of claim amount. If the parties
    are unable to agree with respect to the request for a change in the number of
    arbitrators, the AAA shall make that determination.


R-17. Disclosure

(a) Any person appointed or to be appointed as an arbitrator, as well as the parties
    and their representatives, shall disclose to the AAA any circumstance likely to give
    rise to justiﬁable doubt as to the arbitrator’s impartiality or independence,
    including any bias or any ﬁnancial or personal interest in the result of the arbitration
    or any past or present relationship with the parties or their representatives. Such
    obligation shall remain in effect throughout the arbitration. Failure on the part of a
    party or a representative to comply with the requirements of this rule may result in
    the waiver of the right to object to an arbitrator in accordance with Rule R-41.
(b) Upon receipt of such information from the arbitrator or another source, the AAA
    shall communicate the information to the parties and, if it deems it appropriate to
    do so, to the arbitrator and others.
(c) Disclosure of information pursuant to this Section R-17 is not an indication that the
    arbitrator considers that the disclosed circumstance is likely to affect impartiality
    or independence.




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 R-18. Disqualiﬁcation of Arbitrator

 (a) Any arbitrator shall be impartial and independent and shall perform his or her
     duties with diligence and in good faith, 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.
 (b) The parties may agree in writing, however, that arbitrators directly appointed by a
     party pursuant to Section R-13 shall be non-neutral, in which case such arbitrators
     need not be impartial or independent and shall not be subject to disqualiﬁcation
     for partiality or lack of independence.
 (c) Upon objection of a party to the continued service of an arbitrator, or on its own
     initiative, the AAA shall determine whether the arbitrator should be disqualiﬁed
     under the grounds set out above, and shall inform the parties of its decision,
     which decision shall be conclusive.


 R-19. Communication with Arbitrator

 (a) No party and no one acting on behalf of any party shall communicate ex parte
     with an arbitrator or a candidate for arbitrator concerning the arbitration,
     except that a party, or someone acting on behalf of a party, may communicate
     ex parte with a candidate for direct appointment pursuant to R-13 in order to
     advise the candidate of the general nature of the controversy and of the
     anticipated proceedings and to discuss the candidate’s qualiﬁcations, availability,
     or independence in relation to the parties or to discuss the suitability of
     candidates for selection as a third arbitrator where the parties or party-designated
     arbitrators are to participate in that selection.
 (b) Section R-19(a) does not apply to arbitrators directly appointed by the parties
     who, pursuant to Section R-18(b), the parties have agreed in writing are
     non-neutral. Where the parties have so agreed under Section R-18(b), the AAA
     shall as an administrative practice suggest to the parties that they agree further
     that Section R-19(a) should nonetheless apply prospectively.
 (c) In the course of administering an arbitration, the AAA may initiate
     communications with each party or anyone acting on behalf of the parties either
     jointly or individually.
 (d) As set forth in R-43, unless otherwise instructed by the AAA or by the arbitrator,
     any documents submitted by any party or to the arbitrator shall simultaneously be
     provided to the other party or parties to the arbitration.




18   RULES AND MEDIATION PROCEDURES                                          American Arbitration Association
R-20. Vacancies

(a) If for any reason an arbitrator is unable or unwilling to perform the duties of the
    ofﬁce, the AAA may, on proof satisfactory to it, declare the ofﬁce vacant. Vacancies
    shall be ﬁlled in accordance with the applicable provisions of these rules.
(b) In the event of a vacancy in a panel of neutral arbitrators after the hearings have
    commenced, the remaining arbitrator or arbitrators may continue with the hearing
    and determination of the controversy, unless the parties agree otherwise.
(c) In the event of the appointment of a substitute arbitrator, the panel of arbitrators
    shall determine in its sole discretion whether it is necessary to repeat all or part of
    any prior hearings.


R-21. Preliminary Hearing

(a) At the discretion of the arbitrator, and depending on the size and complexity of
    the arbitration, a preliminary hearing should be scheduled as soon as practicable
    after the arbitrator has been appointed. The parties should be invited to attend
    the preliminary hearing along with their representatives. The preliminary hearing
    may be conducted in person or by telephone.
(b) At the preliminary hearing, the parties and the arbitrator should be prepared
    to discuss and establish a procedure for the conduct of the arbitration that is
    appropriate to achieve a fair, efﬁcient, and economical resolution of the dispute.
    Sections P-1 and P-2 of these rules address the issues to be considered at the
    preliminary hearing.


R-22. Pre-Hearing Exchange and Production of Information

(a) Authority of arbitrator. The arbitrator shall manage any necessary exchange of
    information among the parties with a view to achieving an efﬁcient and
    economical resolution of the dispute, while at the same time promoting equality
    of treatment and safeguarding each party’s opportunity to fairly present its claims
    and defenses.
(b) Documents. The arbitrator may, on application of a party or on the arbitrator’s own
    initiative:
      i.    require the parties to exchange documents in their possession or custody on
            which they intend to rely;
      ii. require the parties to update their exchanges of the documents on which they
          intend to rely as such documents become known to them;
      iii. require the parties, in response to reasonable document requests, to make
           available to the other party documents, in the responding party’s possession
           or custody, not otherwise readily available to the party seeking the
           documents, reasonably believed by the party seeking the documents to exist
           and to be relevant and material to the outcome of disputed issues; and

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       iv. require the parties, when documents to be exchanged or produced are
           maintained in electronic form, to make such documents available in the form
           most convenient and economical for the party in possession of such
           documents, unless the arbitrator determines that there is good cause for
           requiring the documents to be produced in a different form. The parties
           should attempt to agree in advance upon, and the arbitrator may determine,
           reasonable search parameters to balance the need for production of
           electronically stored documents relevant and material to the outcome of
           disputed issues against the cost of locating and producing them.


 R-23. Enforcement Powers of the Arbitrator

 The arbitrator shall have the authority to issue any orders necessary to enforce
 the provisions of rules R-21 and R-22 and to otherwise achieve a fair, efﬁcient and
 economical resolution of the case, including, without limitation:

 (a) conditioning any exchange or production of conﬁdential documents and
     information, and the admission of conﬁdential evidence at the hearing, on
     appropriate orders to preserve such conﬁdentiality;
 (b) imposing reasonable search parameters for electronic and other documents if the
     parties are unable to agree;
 (c) allocating costs of producing documentation, including electronically stored
     documentation;
 (d) in the case of willful non-compliance with any order issued by the arbitrator,
     drawing adverse inferences, excluding evidence and other submissions, and/or
     making special allocations of costs or an interim award of costs arising from such
     non-compliance; and
 (e) issuing any other enforcement orders which the arbitrator is empowered to issue
     under applicable law.


 R-24. Date, Time, and Place of Hearing

 The arbitrator shall set the date, time, and place for each hearing. The parties
 shall respond to requests for hearing dates in a timely manner, be cooperative in
 scheduling the earliest practicable date, and adhere to the established hearing
 schedule. The AAA shall send a notice of hearing to the parties at least 10 calendar
 days in advance of the hearing date, unless otherwise agreed by the parties.




20   RULES AND MEDIATION PROCEDURES                                       American Arbitration Association
R-25. Attendance at Hearings

The arbitrator and the AAA shall maintain the privacy of the hearings unless the
law provides to the contrary. Any person having a direct interest in the arbitration
is entitled to attend hearings. The arbitrator shall otherwise have the power to
require the exclusion of any witness, other than a party or other essential person,
during the testimony of any other witness. It shall be discretionary with the
arbitrator to determine the propriety of the attendance of any other person.

R-26. Representation

Any party may participate without representation (pro se), or by counsel or any
other representative of the party’s choosing, unless such choice is prohibited by
applicable law. A party intending to be so represented shall notify the other party
and the AAA of the name, telephone number and address, and email address if
available, of the representative at least seven calendar days prior to the date set
for the hearing at which that person is ﬁrst to appear. When such a representative
initiates an arbitration or responds for a party, notice is deemed to have been
given.

R-27. Oaths

Before proceeding with the ﬁrst hearing, each arbitrator may take an oath of
ofﬁce and, if required by law, shall do so. The arbitrator may require witnesses to
testify under oath administered by any duly qualiﬁed person and, if it is required
by law or requested by any party, shall do so.

R-28. Stenographic Record

(a) Any party desiring a stenographic record shall make arrangements directly with
    a stenographer and shall notify the other parties of these arrangements at least
    three calendar days in advance of the hearing. The requesting party or parties
    shall pay the cost of the record.
(b) No other means of recording the proceedings will be permitted absent the
    agreement of the parties or per the direction of the arbitrator.
(c) If the transcript or any other recording is agreed by the parties or determined by
    the arbitrator to be the ofﬁcial record of the proceeding, it must be provided to
    the arbitrator and made available to the other parties for inspection, at a date,
    time, and place determined by the arbitrator.
(d) The arbitrator may resolve any disputes with regard to apportionment of the costs
    of the stenographic record or other recording.



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 R-29. Interpreters

 Any party wishing an interpreter shall make all arrangements directly with the
 interpreter and shall assume the costs of the service.

 R-30. Postponements

 The arbitrator may postpone any hearing upon agreement of the parties, upon
 request of a party for good cause shown, or upon the arbitrator’s own initiative.

 R-31. Arbitration in the Absence of a Party or Representative

 Unless the law provides to the contrary, the arbitration may proceed in the
 absence of any party or representative who, after due notice, fails to be present
 or fails to obtain a postponement. An award shall not be made solely on the
 default of a party. The arbitrator shall require the party who is present to submit
 such evidence as the arbitrator may require for the making of an award.

 R-32. Conduct of Proceedings

 (a) The claimant shall present evidence to support its claim. The respondent shall
     then present evidence to support its defense. Witnesses for each party shall also
     submit to questions from the arbitrator and the adverse party. The arbitrator has
     the discretion to vary this procedure, provided that the parties are treated with
     equality and that each party has the right to be heard and is given a fair
     opportunity to present its case.
 (b) The arbitrator, exercising his or her discretion, shall conduct the proceedings with
     a view to expediting the resolution of the dispute and may direct the order of
     proof, bifurcate proceedings and direct the parties to focus their presentations on
     issues the decision of which could dispose of all or part of the case.
 (c) When deemed appropriate, the arbitrator may also allow for the presentation of
     evidence by alternative means including video conferencing, internet
     communication, telephonic conferences and means other than an in-person
     presentation. Such alternative means must afford a full opportunity for all parties
     to present any evidence that the arbitrator deems material and relevant to the
     resolution of the dispute and, when involving witnesses, provide an opportunity
     for cross-examination.
 (d) The parties may agree to waive oral hearings in any case and may also agree to
     utilize the Procedures for Resolution of Disputes Through Document Submission,
     found in Rule E-6.




22   RULES AND MEDIATION PROCEDURES                                        American Arbitration Association
R-33. Dispositive Motions

The arbitrator may allow the ﬁling of and make rulings upon a dispositive motion
only if the arbitrator determines that the moving party has shown that the motion
is likely to succeed and dispose of or narrow the issues in the case.

R-34. Evidence

(a) The parties may offer such evidence as is relevant and material to the dispute and
    shall produce such evidence as the arbitrator may deem necessary to an
    understanding and determination of the dispute. Conformity to legal rules of
    evidence shall not be necessary. All evidence shall be taken in the presence of all
    of the arbitrators and all of the parties, except where any of the parties is absent,
    in default, or has waived the right to be present.
(b) The arbitrator shall determine the admissibility, relevance, and materiality of the
    evidence offered and may exclude evidence deemed by the arbitrator to be
    cumulative or irrelevant.
(c) The arbitrator shall take into account applicable principles of legal privilege, such
    as those involving the conﬁdentiality of communications between a lawyer and
    client.
(d) An arbitrator or other person authorized by law to subpoena witnesses or
    documents may do so upon the request of any party or independently.


R-35. Evidence by Written Statements and Post-Hearing Filing of Documents or
Other Evidence

(a) At a date agreed upon by the parties or ordered by the arbitrator, the parties shall
    give written notice for any witness or expert witness who has provided a written
    witness statement to appear in person at the arbitration hearing for examination.
    If such notice is given, and the witness fails to appear, the arbitrator may disregard
    the written witness statement and/or expert report of the witness or make such
    other order as the arbitrator may consider to be just and reasonable.
(b) If a witness whose testimony is represented by a party to be essential is unable or
    unwilling to testify at the hearing, either in person or through electronic or other
    means, either party may request that the arbitrator order the witness to appear
    in person for examination before the arbitrator at a time and location where the
    witness is willing and able to appear voluntarily or can legally be compelled to do
    so. Any such order may be conditioned upon payment by the requesting party of
    all reasonable costs associated with such examination.
(c) If the parties agree or the arbitrator directs that documents or other evidence be
    submitted to the arbitrator after the hearing, the documents or other evidence
    shall be ﬁled with the AAA for transmission to the arbitrator. All parties shall be
    afforded an opportunity to examine and respond to such documents or other
    evidence.

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 R-36. Inspection or Investigation

 An arbitrator ﬁnding it necessary to make an inspection or investigation in
 connection with the arbitration shall direct the AAA to so advise the parties. The
 arbitrator shall set the date and time and the AAA shall notify the parties. Any
 party who so desires may be present at such an inspection or investigation. In the
 event that one or all parties are not present at the inspection or investigation, the
 arbitrator shall make an oral or written report to the parties and afford them an
 opportunity to comment.

 R-37. Interim Measures

 (a) The arbitrator may take whatever interim measures he or she deems necessary,
     including injunctive relief and measures for the protection or conservation of
     property and disposition of perishable goods.
 (b) Such interim measures may take the form of an interim award, and the arbitrator
     may require security for the costs of such measures.
 (c) A request for interim measures addressed by a party to a judicial authority shall
     not be deemed incompatible with the agreement to arbitrate or a waiver of the
     right to arbitrate.


 R-38. Emergency Measures of Protection

 (a) Unless the parties agree otherwise, the provisions of this rule shall apply to
     arbitrations conducted under arbitration clauses or agreements entered on or
     after October 1, 2013.
 (b) A party in need of emergency relief prior to the constitution of the panel shall
     notify the AAA and all other parties in writing of the nature of the relief sought
     and the reasons why such relief is required on an emergency basis. The application
     shall also set forth the reasons why the party is entitled to such relief. Such notice
     may be given by facsimile or e-mail or other reliable means, but must include a
     statement certifying that all other parties have been notiﬁed or an explanation of
     the steps taken in good faith to notify other parties.
 (c) Within one business day of receipt of notice as provided in section (b), the AAA
     shall appoint a single emergency arbitrator designated to rule on emergency
     applications. The emergency arbitrator shall immediately disclose any
     circumstance likely, on the basis of the facts disclosed on the application, to affect
     such arbitrator’s impartiality or independence. Any challenge to the appointment
     of the emergency arbitrator must be made within one business day of the
     communication by the AAA to the parties of the appointment of the emergency
     arbitrator and the circumstances disclosed.




24   RULES AND MEDIATION PROCEDURES                                         American Arbitration Association
(d) The emergency arbitrator shall as soon as possible, but in any event within two
    business days of appointment, establish a schedule for consideration of the
    application for emergency relief. Such a schedule shall provide a reasonable
    opportunity to all parties to be heard, but may provide for proceeding by
    telephone or video conference or on written submissions as alternatives to a
    formal hearing. The emergency arbitrator shall have the authority vested in the
    tribunal under Rule 7, including the authority to rule on her/his own jurisdiction,
    and shall resolve any disputes over the applicability of this Rule 38.
(e) If after consideration the emergency arbitrator is satisﬁed that the party seeking
    the emergency relief has shown that immediate and irreparable loss or damage
    shall result in the absence of emergency relief, and that such party is entitled to
    such relief, the emergency arbitrator may enter an interim order or award granting
    the relief and stating the reason therefore.
(f) Any application to modify an interim award of emergency relief must be based on
    changed circumstances and may be made to the emergency arbitrator until the
    panel is constituted; thereafter such a request shall be addressed to the panel.
    The emergency arbitrator shall have no further power to act after the panel is
    constituted unless the parties agree that the emergency arbitrator is named as a
    member of the panel.
(g) Any interim award of emergency relief may be conditioned on provision by the
    party seeking such relief for appropriate security.
(h) A request for interim measures addressed by a party to a judicial authority shall
    not be deemed incompatible with this rule, the agreement to arbitrate or a waiver
    of the right to arbitrate. If the AAA is directed by a judicial authority to nominate a
    special master to consider and report on an application for emergency relief, the
    AAA shall proceed as provided in this rule and the references to the emergency
    arbitrator shall be read to mean the special master, except that the special master
    shall issue a report rather than an interim award.
(i) The costs associated with applications for emergency relief shall initially be
    apportioned by the emergency arbitrator or special master, subject to the power
    of the tribunal to determine ﬁnally the apportionment of such costs.


R-39. Closing of Hearing

(a) The arbitrator shall speciﬁcally inquire of all parties whether they have any further
    proofs to offer or witnesses to be heard. Upon receiving negative replies or if
    satisﬁed that the record is complete, the arbitrator shall declare the hearing closed.
(b) If documents or responses are to be ﬁled as provided in Rule R-35, or if briefs are
    to be ﬁled, the hearing shall be declared closed as of the ﬁnal date set by the
    arbitrator for the receipt of briefs. If no documents, responses, or briefs are to
    be ﬁled, the arbitrator shall declare the hearings closed as of the date of the last
    hearing (including telephonic hearings). If the case was heard without any oral
    hearings, the arbitrator shall close the hearings upon the due date established for
    receipt of the ﬁnal submission.


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 (c) The time limit within which the arbitrator is required to make the award shall
     commence, in the absence of other agreements by the parties, upon the closing
     of the hearing. The AAA may extend the time limit for rendering of the award only
     in unusual and extreme circumstances.


 R-40. Reopening of Hearing

 The hearing may be reopened on the arbitrator’s initiative, or by the direction of
 the arbitrator upon application of a party, at any time before the award is made. If
 reopening the hearing would prevent the making of the award within the speciﬁc
 time agreed to by the parties in the arbitration agreement, the matter may not
 be reopened unless the parties agree to an extension of time. When no speciﬁc
 date is ﬁxed by agreement of the parties , the arbitrator shall have 30 calendar
 days from the closing of the reopened hearing within which to make an award
 (14 calendar days if the case is governed by the Expedited Procedures).

 R-41. Waiver of Rules

 Any party who proceeds with the arbitration after knowledge that any provision
 or requirement of these rules has not been complied with and who fails to state
 an objection in writing shall be deemed to have waived the right to object.

 R-42. Extensions of Time

 The parties may modify any period of time by mutual agreement. The AAA or the
 arbitrator may for good cause extend any period of time established by these
 rules, except the time for making the award. The AAA shall notify the parties of
 any extension.

 R-43. Serving of Notice and Communications

 (a) Any papers, notices, or process necessary or proper for the initiation or
     continuation of an arbitration under these rules, for any court action in connection
     therewith, or for the entry of judgment on any award made under these rules may
     be served on a party by mail addressed to the party or its representative at the last
     known address or by personal service, in or outside the state where the arbitration
     is to be held, provided that reasonable opportunity to be heard with regard to the
     dispute is or has been granted to the party.
 (b) The AAA, the arbitrator and the parties may also use overnight delivery or
     electronic facsimile transmission (fax), or electronic (e-mail) to give the notices
     required by these rules. Where all parties and the arbitrator agree, notices may be
     transmitted by e-mail or other methods of communication.



26   RULES AND MEDIATION PROCEDURES                                        American Arbitration Association
(c) Unless otherwise instructed by the AAA or by the arbitrator, any documents
    submitted by any party to the AAA or to the arbitrator shall simultaneously be
    provided to the other party or parties to the arbitration.
(d) Unless otherwise instructed by the AAA or by the arbitrator, all written
    communications made by any party to the AAA or to the arbitrator shall
    simultaneously be provided to the other party or parties to the arbitration.
(e) Failure to provide the other party with copies of communications made to the
    AAA or to the arbitrator may prevent the AAA or the arbitrator from acting on any
    requests or objections contained therein.
(f) The AAA may direct that any oral or written communications that are sent by a
    party or their representative shall be sent in a particular manner. The failure of a
    party or their representative to do so may result in the AAA’s refusal to consider
    the issue raised in the communication.


R-44. Majority Decision

(a) When the panel consists of more than one arbitrator, unless required by law or by
    the arbitration agreement or section (b) of this rule, a majority of the arbitrators
    must make all decisions.
(b) Where there is a panel of three arbitrators, absent an objection of a party or
    another member of the panel, the chairperson of the panel is authorized to
    resolve any disputes related to the exchange of information or procedural matters
    without the need to consult the full panel.


R-45. Time of Award

The award shall be made promptly by the arbitrator and, unless otherwise agreed
by the parties or speciﬁed by law, no later than 30 calendar days from the date of
closing the hearing, or, if oral hearings have been waived, from the due date set
for receipt of the parties’ ﬁnal statements and proofs.

R-46. Form of Award

(a) Any award shall be in writing and signed by a majority of the arbitrators. It shall be
    executed in the form and manner required by law.
(b) The arbitrator need not render a reasoned award unless the parties request such
    an award in writing prior to appointment of the arbitrator or unless the arbitrator
    determines that a reasoned award is appropriate.




Rules Amended and Effective October 1, 2013.                                COMMERCIAL RULES 27
 R-47. Scope of Award

 (a) The arbitrator may grant any remedy or relief that the arbitrator deems just and
     equitable and within the scope of the agreement of the parties, including, but not
     limited to, speciﬁc performance of a contract.
 (b) In addition to a ﬁnal award, the arbitrator may make other decisions, including
     interim, interlocutory, or partial rulings, orders, and awards. In any interim,
     interlocutory, or partial award, the arbitrator may assess and apportion the fees,
     expenses, and compensation related to such award as the arbitrator determines is
     appropriate.
 (c) In the ﬁnal award, the arbitrator shall assess the fees, expenses, and compensation
     provided in Sections R-53, R-54, and R-55. The arbitrator may apportion such fees,
     expenses, and compensation among the parties in such amounts as the arbitrator
     determines is appropriate.
 (d) The award of the arbitrator(s) may include:
       i.   interest at such rate and from such date as the arbitrator(s) may deem
            appropriate; and
       ii. an award of attorneys’ fees if all parties have requested such an award or it is
           authorized by law or their arbitration agreement.


 R-48. Award Upon Settlement—Consent Award

 (a) If the parties settle their dispute during the course of the arbitration and if the
     parties so request, the arbitrator may set forth the terms of the settlement in a
     “consent award.” A consent award must include an allocation of arbitration costs,
     including administrative fees and expenses as well as arbitrator fees and expenses.
 (b) The consent award shall not be released to the parties until all administrative fees
     and all arbitrator compensation have been paid in full.


 R-49. Delivery of Award to Parties

 Parties shall accept as notice and delivery of the award the placing of the award or
 a true copy thereof in the mail addressed to the parties or their representatives
 at their last known addresses, personal or electronic service of the award, or the
 ﬁling of the award in any other manner that is permitted by law.

 R-50. Modiﬁcation of Award

 Within 20 calendar days after the transmittal of an award, any party, upon notice
 to the other parties, may request the arbitrator, through the AAA, to correct any
 clerical, typographical, or computational errors in the award. The arbitrator is not
 empowered to redetermine the merits of any claim already decided. The other

28   RULES AND MEDIATION PROCEDURES                                          American Arbitration Association
parties shall be given 10 calendar days to respond to the request. The arbitrator
shall dispose of the request within 20 calendar days after transmittal by the AAA
to the arbitrator of the request and any response thereto.

R-51. Release of Documents for Judicial Proceedings

The AAA shall, upon the written request of a party to the arbitration, furnish to
the party, at its expense, copies or certiﬁed copies of any papers in the AAA’s
possession that are not determined by the AAA to be privileged or conﬁdential.

R-52. Applications to Court and Exclusion of Liability

(a) No judicial proceeding by a party relating to the subject matter of the arbitration
    shall be deemed a waiver of the party’s right to arbitrate.
(b) Neither the AAA nor any arbitrator in a proceeding under these rules is a
    necessary or proper party in judicial proceedings relating to the arbitration.
(c) Parties to an arbitration under these rules shall be deemed to have consented that
    judgment upon the arbitration award may be entered in any federal or state court
    having jurisdiction thereof.
(d) Parties to an arbitration under these rules shall be deemed to have consented
    that neither the AAA nor any arbitrator shall be liable to any party in any action for
    damages or injunctive relief for any act or omission in connection with any
    arbitration under these rules.
(e) Parties to an arbitration under these rules may not call the arbitrator, the AAA, or
    AAA employees as a witness in litigation or any other proceeding relating to the
    arbitration. The arbitrator, the AAA and AAA employees are not competent to
    testify as witnesses in any such proceeding.


R-53. Administrative Fees

As a not-for-proﬁt organization, the AAA shall prescribe administrative fees to
compensate it for the cost of providing administrative services. The fees in effect
when the fee or charge is incurred shall be applicable. The ﬁling fee shall be
advanced by the party or parties making a claim or counterclaim, subject to ﬁnal
apportionment by the arbitrator in the award. The AAA may, in the event of
extreme hardship on the part of any party, defer or reduce the administrative fees.

R-54. Expenses

The expenses of witnesses for either side shall be paid by the party producing
such witnesses. All other expenses of the arbitration, including required travel
and other expenses of the arbitrator, AAA representatives, and any witness and

Rules Amended and Effective October 1, 2013.                               COMMERCIAL RULES 29
 the cost of any proof produced at the direct request of the arbitrator, shall be
 borne equally by the parties, unless they agree otherwise or unless the arbitrator
 in the award assesses such expenses or any part thereof against any speciﬁed
 party or parties.

 R-55. Neutral Arbitrator’s Compensation

 (a) Arbitrators shall be compensated at a rate consistent with the arbitrator’s stated
     rate of compensation.
 (b) If there is disagreement concerning the terms of compensation, an appropriate
     rate shall be established with the arbitrator by the AAA and conﬁrmed to the
     parties.
 (c) Any arrangement for the compensation of a neutral arbitrator shall be made
     through the AAA and not directly between the parties and the arbitrator.


 R-56. Deposits

 (a) The AAA may require the parties to deposit in advance of any hearings such sums
     of money as it deems necessary to cover the expense of the arbitration, including
     the arbitrator’s fee, if any, and shall render an accounting to the parties and return
     any unexpended balance at the conclusion of the case.
 (b) Other than in cases where the arbitrator serves for a ﬂat fee, deposit amounts
     requested will be based on estimates provided by the arbitrator. The arbitrator will
     determine the estimated amount of deposits using the information provided by
     the parties with respect to the complexity of each case.
 (c) Upon the request of any party, the AAA shall request from the arbitrator an
     itemization or explanation for the arbitrator’s request for deposits.


 R-57. Remedies for Nonpayment

 If arbitrator compensation or administrative charges have not been paid in full,
 the AAA may so inform the parties in order that one of them may advance the
 required payment.

 (a) Upon receipt of information from the AAA that payment for administrative
     charges or deposits for arbitrator compensation have not been paid in full, to
     the extent the law allows, a party may request that the arbitrator take speciﬁc
     measures relating to a party’s non-payment.
 (b) Such measures may include, but are not limited to, limiting a party’s ability to
     assert or pursue their claim. In no event, however, shall a party be precluded from
     defending a claim or counterclaim.



30   RULES AND MEDIATION PROCEDURES                                         American Arbitration Association
(c) The arbitrator must provide the party opposing a request for such measures with
    the opportunity to respond prior to making any ruling regarding the same.
(d) In the event that the arbitrator grants any request for relief which limits any party’s
    participation in the arbitration, the arbitrator shall require the party who is making
    a claim and who has made appropriate payments to submit such evidence as the
    arbitrator may require for the making of an award.
(e) Upon receipt of information from the AAA that full payments have not been
    received, the arbitrator, on the arbitrator’s own initiative or at the request of the
    AAA or a party, may order the suspension of the arbitration. If no arbitrator has yet
    been appointed, the AAA may suspend the proceedings.
(f) If the arbitration has been suspended by either the AAA or the arbitrator and the
    parties have failed to make the full deposits requested within the time provided
    after the suspension, the arbitrator, or the AAA if an arbitrator has not been
    appointed, may terminate the proceedings.


R-58. Sanctions

(a) The arbitrator may, upon a party’s request, order appropriate sanctions where a
    party fails to comply with its obligations under these rules or with an order of the
    arbitrator. In the event that the arbitrator enters a sanction that limits any party’s
    participation in the arbitration or results in an adverse determination of an issue
    or issues, the arbitrator shall explain that order in writing and shall require the
    submission of evidence and legal argument prior to making of an award. The
    arbitrator may not enter a default award as a sanction.
(b) The arbitrator must provide a party that is subject to a sanction request with the
    opportunity to respond prior to making any determination regarding the sanctions
    application.




Rules Amended and Effective October 1, 2013.                                COMMERCIAL RULES 31
 Preliminary Hearing Procedures

 P-1. General

 (a) In all but the simplest cases, holding a preliminary hearing as early in the process
     as possible will help the parties and the arbitrator organize the proceeding in a
     manner that will maximize efﬁciency and economy, and will provide each party a
     fair opportunity to present its case.
 (b) Care must be taken to avoid importing procedures from court systems, as such
     procedures may not be appropriate to the conduct of arbitrations as an alternative
     form of dispute resolution that is designed to be simpler, less expensive and more
     expeditious.


 P-2. Checklist

 (a) The following checklist suggests subjects that the parties and the arbitrator should
     address at the preliminary hearing, in addition to any others that the parties or
     the arbitrator believe to be appropriate to the particular case. The items to be
     addressed in a particular case will depend on the size, subject matter, and
     complexity of the dispute, and are subject to the discretion of the arbitrator:
      (i)     the possibility of other non-adjudicative methods of dispute resolution,
              including mediation pursuant to R-9;
      (ii)    whether all necessary or appropriate parties are included in the arbitration;
      (iii)   whether a party will seek a more detailed statement of claims, counterclaims
              or defenses;
      (iv)    whether there are any anticipated amendments to the parties’ claims,
              counterclaims, or defenses;
      (v)     which
              (a) arbitration rules;
              (b) procedural law; and
              (c) substantive law govern the arbitration;
      (vi)    whether there are any threshold or dispositive issues that can efﬁciently be
              decided without considering the entire case, including without limitation,
              (a) any preconditions that must be satisﬁed before proceeding with the
                  arbitration;
              (b) whether any claim or counterclaim falls outside the arbitrator’s jurisdiction
                  or is otherwise not arbitrable;
              (c) consolidation of the claims or counterclaims with another arbitration; or
              (d) bifurcation of the proceeding.



32   RULES AND MEDIATION PROCEDURES                                             American Arbitration Association
     (vii) whether the parties will exchange documents, including electronically stored
           documents, on which they intend to rely in the arbitration, and/or make
           written requests for production of documents within deﬁned parameters;
     (viii) whether to establish any additional procedures to obtain information that is
            relevant and material to the outcome of disputed issues;
     (ix)    how costs of any searches for requested information or documents that
             would result in substantial costs should be borne;
     (x)     whether any measures are required to protect conﬁdential information;
     (xi)    whether the parties intend to present evidence from expert witnesses, and
             if so, whether to establish a schedule for the parties to identify their experts
             and exchange expert reports;
     (xii) whether, according to a schedule set by the arbitrator, the parties will
             (a) identify all witnesses, the subject matter of their anticipated testimonies,
                 exchange written witness statements, and determine whether written
                 witness statements will replace direct testimony at the hearing;
             (b) exchange and pre-mark documents that each party intends to submit;
                 and
             (c) exchange pre-hearing submissions, including exhibits;
     (xiii) the date, time and place of the arbitration hearing;
     (xiv) whether, at the arbitration hearing,
             (a) testimony may be presented in person, in writing, by videoconference, via
                 the internet, telephonically, or by other reasonable means;
             (b) there will be a stenographic transcript or other record of the proceeding
                 and, if so, who will make arrangements to provide it;
     (xv) whether any procedure needs to be established for the issuance of subpoenas;
     (xvi) the identiﬁcation of any ongoing, related litigation or arbitration;
     (xvii) whether post-hearing submissions will be ﬁled;
     (xviii) the form of the arbitration award; and
     (xix) any other matter the arbitrator considers appropriate or a party wishes
           to raise.
(b) The arbitrator shall issue a written order memorializing decisions made and
    agreements reached during or following the preliminary hearing.




Rules Amended and Effective October 1, 2013.                                   COMMERCIAL RULES 33
 Expedited Procedures

 E-1. Limitation on Extensions

 Except in extraordinary circumstances, the AAA or the arbitrator may grant a
 party no more than one seven-day extension of time to respond to the Demand
 for Arbitration or counterclaim as provided in Section R-5.

 E-2. Changes of Claim or Counterclaim

 A claim or counterclaim may be increased in amount, or a new or different claim
 or counterclaim added, upon the agreement of the other party, or the consent
 of the arbitrator. After the arbitrator is appointed, however, no new or different
 claim or counterclaim may be submitted except with the arbitrator’s consent. If an
 increased claim or counterclaim exceeds $75,000, the case will be administered
 under the regular procedures unless all parties and the arbitrator agree that the
 case may continue to be processed under the Expedited Procedures.

 E-3. Serving of Notices

 In addition to notice provided by Section R-43, the parties shall also accept
 notice by telephone. Telephonic notices by the AAA shall subsequently be
 conﬁrmed in writing to the parties. Should there be a failure to conﬁrm in writing
 any such oral notice, the proceeding shall nevertheless be valid if notice has, in
 fact, been given by telephone.

 E-4. Appointment and Qualiﬁcations of Arbitrator

 (a) The AAA shall simultaneously submit to each party an identical list of ﬁve
     proposed arbitrators drawn from its National Roster from which one arbitrator
     shall be appointed.
 (b) The parties are encouraged to agree to an arbitrator from this list and to advise
     the AAA of their agreement. If the parties are unable to agree upon an arbitrator,
     each party may strike two names from the list and return it to the AAA within
     seven days from the date of the AAA’s mailing to the parties. If for any reason the
     appointment of an arbitrator cannot be made from the list, the AAA may make
     the appointment from other members of the panel without the submission of
     additional lists.
 (c) The parties will be given notice by the AAA of the appointment of the arbitrator,
     who shall be subject to disqualiﬁcation for the reasons speciﬁed in Section R-18.
     The parties shall notify the AAA within seven calendar days of any objection to the
     arbitrator appointed. Any such objection shall be for cause and shall be conﬁrmed
     in writing to the AAA with a copy to the other party or parties.

34   RULES AND MEDIATION PROCEDURES                                       American Arbitration Association
E-5. Exchange of Exhibits

At least two business days prior to the hearing, the parties shall exchange copies
of all exhibits they intend to submit at the hearing. The arbitrator shall resolve
disputes concerning the exchange of exhibits.

E-6. Proceedings on Documents and Procedures for the Resolution of Disputes
Through Document Submission

Where no party’s claim exceeds $25,000, exclusive of interest, attorneys’ fees and
arbitration costs, and other cases in which the parties agree, the dispute shall be
resolved by submission of documents, unless any party requests an oral hearing,
or the arbitrator determines that an oral hearing is necessary. Where cases are
resolved by submission of documents, the following procedures may be utilized
at the agreement of the parties or the discretion of the arbitrator:

(a) Within 14 calendar days of conﬁrmation of the arbitrator’s appointment, the
    arbitrator may convene a preliminary management hearing, via conference call,
    video conference, or internet, to establish a fair and equitable procedure for the
    submission of documents, and, if the arbitrator deems appropriate, a schedule for
    one or more telephonic or electronic conferences.
(b) The arbitrator has the discretion to remove the case from the documents-only
    process if the arbitrator determines that an in-person hearing is necessary.
(c) If the parties agree to in-person hearings after a previous agreement to proceed
    under this rule, the arbitrator shall conduct such hearings. If a party seeks to have
    in-person hearings after agreeing to this rule, but there is not agreement among
    the parties to proceed with in-person hearings, the arbitrator shall resolve the
    issue after the parties have been given the opportunity to provide their respective
    positions on the issue.
(d) The arbitrator shall establish the date for either written submissions or a ﬁnal
    telephonic or electronic conference. Such date shall operate to close the hearing
    and the time for the rendering of the award shall commence.
(e) Unless the parties have agreed to a form of award other than that set forth in
    rule R-46, when the parties have agreed to resolve their dispute by this rule, the
    arbitrator shall render the award within 14 calendar days from the date the hearing
    is closed.
(f) If the parties agree to a form of award other than that described in rule R-46, the
    arbitrator shall have 30 calendar days from the date the hearing is declared closed
    in which to render the award.
(g) The award is subject to all other provisions of the Regular Track of these rules
    which pertain to awards.




Rules Amended and Effective October 1, 2013.                              COMMERCIAL RULES 35
 E-7. Date, Time, and Place of Hearing

 In cases in which a hearing is to be held, the arbitrator shall set the date, time,
 and place of the hearing, to be scheduled to take place within 30 calendar days
 of conﬁrmation of the arbitrator’s appointment. The AAA will notify the parties in
 advance of the hearing date.

 E-8. The Hearing

 (a) Generally, the hearing shall not exceed one day. Each party shall have equal
     opportunity to submit its proofs and complete its case. The arbitrator shall
     determine the order of the hearing, and may require further submission of
     documents within two business days after the hearing. For good cause shown, the
     arbitrator may schedule additional hearings within seven business days after the
     initial day of hearings.
 (b) Generally, there will be no stenographic record. Any party desiring a stenographic
     record may arrange for one pursuant to the provisions of Section R-28.


 E-9. Time of Award

 Unless otherwise agreed by the parties, the award shall be rendered not
 later than 14 calendar days from the date of the closing of the hearing or, if oral
 hearings have been waived, from the due date established for the receipt of the
 parties’ ﬁnal statements and proofs.

 E-10. Arbitrator’s Compensation

 Arbitrators will receive compensation at a rate to be suggested by the AAA
 regional ofﬁce.




36   RULES AND MEDIATION PROCEDURES                                      American Arbitration Association
Procedures for Large, Complex Commercial Disputes

L-1. Administrative Conference

Prior to the dissemination of a list of potential arbitrators, the AAA shall, unless
the parties agree otherwise, conduct an administrative conference with the
parties and/or their attorneys or other representatives by conference call. The
conference will take place within 14 calendar days after the commencement of
the arbitration. In the event the parties are unable to agree on a mutually
acceptable time for the conference, the AAA may contact the parties individually
to discuss the issues contemplated herein. Such administrative conference shall
be conducted for the following purposes and for such additional purposes as the
parties or the AAA may deem appropriate:

(a) to obtain additional information about the nature and magnitude of the dispute
    and the anticipated length of hearing and scheduling;
(b) to discuss the views of the parties about the technical and other qualiﬁcations of
    the arbitrators;
(c) to obtain conﬂicts statements from the parties; and
(d) to consider, with the parties, whether mediation or other non-adjudicative
    methods of dispute resolution might be appropriate.


L-2. Arbitrators

(a) Large, complex commercial cases shall be heard and determined by either one
    or three arbitrators, as may be agreed upon by the parties. With the exception
    in paragraph (b) below, if the parties are unable to agree upon the number of
    arbitrators and a claim or counterclaim involves at least $1,000,000, then three
    arbitrator(s) shall hear and determine the case. If the parties are unable to
    agree on the number of arbitrators and each claim and counterclaim is less than
    $1,000,000, then one arbitrator shall hear and determine the case.
(b) In cases involving the ﬁnancial hardship of a party or other circumstance, the AAA
    at its discretion may require that only one arbitrator hear and determine the case,
    irrespective of the size of the claim involved in the dispute.
(c) The AAA shall appoint arbitrator(s) as agreed by the parties. If they are unable to
    agree on a method of appointment, the AAA shall appoint arbitrators from the
    Large, Complex Commercial Case Panel, in the manner provided in the regular
    Commercial Arbitration Rules. Absent agreement of the parties, the arbitrator(s)
    shall not have served as the mediator in the mediation phase of the instant
    proceeding.




Rules Amended and Effective October 1, 2013.                              COMMERCIAL RULES 37
 L-3. Management of Proceedings

 (a) The arbitrator shall take such steps as deemed necessary or desirable to avoid
     delay and to achieve a fair, speedy and cost-effective resolution of a Large,
     Complex Commercial Dispute.
 (b) As promptly as practicable after the selection of the arbitrator(s), a preliminary
     hearing shall be scheduled in accordance with sections P-1 and P-2 of these rules.
 (c) The parties shall exchange copies of all exhibits they intend to submit at the
     hearing at least 10 calendar days prior to the hearing unless the arbitrator(s)
     determines otherwise.
 (d) The parties and the arbitrator(s) shall address issues pertaining to the pre-hearing
     exchange and production of information in accordance with rule R-22 of the AAA
     Commercial Rules, and the arbitrator’s determinations on such issues shall be
     included within the Scheduling and Procedure Order.
 (e) The arbitrator, or any single member of the arbitration tribunal, shall be authorized
     to resolve any disputes concerning the pre-hearing exchange and production of
     documents and information by any reasonable means within his discretion,
     including, without limitation, the issuance of orders set forth in rules R-22 and R-23
     of the AAA Commercial Rules.
 (f) In exceptional cases, at the discretion of the arbitrator, upon good cause shown
     and consistent with the expedited nature of arbitration, the arbitrator may order
     depositions to obtain the testimony of a person who may possess information
     determined by the arbitrator to be relevant and material to the outcome of the
     case. The arbitrator may allocate the cost of taking such a deposition.
 (g) Generally, hearings will be scheduled on consecutive days or in blocks of
     consecutive days in order to maximize efﬁciency and minimize costs.


 Administrative Fee Schedules (Standard and Flexible Fees)

 FOR THE CURRENT ADMINISTRATIVE FEE SCHEDULE, PLEASE VISIT
 www.adr.org/feeschedule.




38   RULES AND MEDIATION PROCEDURES                                         American Arbitration Association
Commercial Mediation Procedures

M-1. Agreement of Parties

Whenever, by stipulation or in their contract, the parties have provided for
mediation or conciliation of existing or future disputes under the auspices of the
American Arbitration Association or under these procedures, the parties and
their representatives, unless agreed otherwise in writing, shall be deemed to
have made these procedural guidelines, as amended and in effect as of the date
of ﬁling of a request for mediation, a part of their agreement and designate the
AAA as the administrator of their mediation.

The parties by mutual agreement may vary any part of these procedures
including, but not limited to, agreeing to conduct the mediation via telephone or
other electronic or technical means.

M-2. Initiation of Mediation

Any party or parties to a dispute may initiate mediation under the AAA’s auspices
by making a request for mediation to any of the AAA’s regional ofﬁces or case
management centers via telephone, email, regular mail or fax. Requests for
mediation may also be ﬁled online via WebFile at www.adr.org.

The party initiating the mediation shall simultaneously notify the other party or
parties of the request. The initiating party shall provide the following information
to the AAA and the other party or parties as applicable:

      (i) A copy of the mediation provision of the parties’ contract or the parties’
          stipulation to mediate.
      (ii) The names, regular mail addresses, email addresses, and telephone numbers
           of all parties to the dispute and representatives, if any, in the mediation.
      (iii) A brief statement of the nature of the dispute and the relief requested.
      (iv) Any speciﬁc qualiﬁcations the mediator should possess.


M-3. Representation

Subject to any applicable law, any party may be represented by persons of the
party’s choice. The names and addresses of such persons shall be communicated
in writing to all parties and to the AAA.



Rules Amended and Effective October 1, 2013.                                COMMERCIAL RULES 39
 M-4. Appointment of the Mediator

 If the parties have not agreed to the appointment of a mediator and have not
 provided any other method of appointment, the mediator shall be appointed in
 the following manner:

       (i) Upon receipt of a request for mediation, the AAA will send to each party a list
           of mediators from the AAA’s Panel of Mediators. The parties are encouraged
           to agree to a mediator from the submitted list and to advise the AAA of their
           agreement.
       (ii) If the parties are unable to agree upon a mediator, each party shall strike
            unacceptable names from the list, number the remaining names in order of
            preference, and return the list to the AAA. If a party does not return the list
            within the time speciﬁed, all mediators on the list shall be deemed
            acceptable. From among the mediators who have been mutually approved
            by the parties, and in accordance with the designated order of mutual
            preference, the AAA shall invite a mediator to serve.
       (iii) If the parties fail to agree on any of the mediators listed, or if acceptable
             mediators are unable to serve, or if for any other reason the appointment
             cannot be made from the submitted list, the AAA shall have the authority to
             make the appointment from among other members of the Panel of Mediators
             without the submission of additional lists.


 M-5. Mediator’s Impartiality and Duty to Disclose

 AAA mediators are required to abide by the Model Standards of Conduct for
 Mediators in effect at the time a mediator is appointed to a case. Where there
 is a conﬂict between the Model Standards and any provision of these Mediation
 Procedures, these Mediation Procedures shall govern. The Standards require
 mediators to (i) decline a mediation if the mediator cannot conduct it in an
 impartial manner, and (ii) disclose, as soon as practicable, all actual and potential
 conﬂicts of interest that are reasonably known to the mediator and could
 reasonably be seen as raising a question about the mediator’s impartiality.

 Prior to accepting an appointment, AAA mediators are required to make a
 reasonable inquiry to determine whether there are any facts that a reasonable
 individual would consider likely to create a potential or actual conﬂict of interest
 for the mediator. AAA mediators are required to disclose any circumstance likely
 to create a presumption of bias or prevent a resolution of the parties’ dispute
 within the time-frame desired by the parties. Upon receipt of such disclosures,
 the AAA shall immediately communicate the disclosures to the parties for their
 comments.

40   RULES AND MEDIATION PROCEDURES                                            American Arbitration Association
The parties may, upon receiving disclosure of actual or potential conﬂicts of
interest of the mediator, waive such conﬂicts and proceed with the mediation.
In the event that a party disagrees as to whether the mediator shall serve, or in
the event that the mediator’s conﬂict of interest might reasonably be viewed as
undermining the integrity of the mediation, the mediator shall be replaced.

M-6. Vacancies

If any mediator shall become unwilling or unable to serve, the AAA will appoint
another mediator, unless the parties agree otherwise, in accordance with section
M-4.

M-7. Duties and Responsibilities of the Mediator

      (i) The mediator shall conduct the mediation based on the principle of party
          self-determination. Self-determination is the act of coming to a voluntary,
          uncoerced decision in which each party makes free and informed choices as
          to process and outcome.
      (ii) The mediator is authorized to conduct separate or ex parte meetings and
           other communications with the parties and/or their representatives, before,
           during, and after any scheduled mediation conference. Such communications
           may be conducted via telephone, in writing, via email, online, in person or
           otherwise.
      (iii) The parties are encouraged to exchange all documents pertinent to the relief
            requested. The mediator may request the exchange of memoranda on issues,
            including the underlying interests and the history of the parties’ negotiations.
            Information that a party wishes to keep conﬁdential may be sent to the
            mediator, as necessary, in a separate communication with the mediator.
      (iv) The mediator does not have the authority to impose a settlement on the
           parties but will attempt to help them reach a satisfactory resolution of their
           dispute. Subject to the discretion of the mediator, the mediator may make
           oral or written recommendations for settlement to a party privately or, if the
           parties agree, to all parties jointly.
      (v) In the event a complete settlement of all or some issues in dispute is not
          achieved within the scheduled mediation session(s), the mediator may
          continue to communicate with the parties, for a period of time, in an ongoing
          effort to facilitate a complete settlement.
      (vi) The mediator is not a legal representative of any party and has no ﬁduciary
           duty to any party.




Rules Amended and Effective October 1, 2013.                                 COMMERCIAL RULES 41
 M-8. Responsibilities of the Parties

 The parties shall ensure that appropriate representatives of each party, having
 authority to consummate a settlement, attend the mediation conference.

 Prior to and during the scheduled mediation conference session(s) the parties
 and their representatives shall, as appropriate to each party’s circumstances,
 exercise their best efforts to prepare for and engage in a meaningful and
 productive mediation.

 M-9. Privacy

 Mediation sessions and related mediation communications are private
 proceedings. The parties and their representatives may attend mediation
 sessions. Other persons may attend only with the permission of the parties and
 with the consent of the mediator.

 M-10. Conﬁdentiality

 Subject to applicable law or the parties’ agreement, conﬁdential information
 disclosed to a mediator by the parties or by other participants (witnesses) in the
 course of the mediation shall not be divulged by the mediator. The mediator
 shall maintain the conﬁdentiality of all information obtained in the mediation,
 and all records, reports, or other documents received by a mediator while serving
 in that capacity shall be conﬁdential.

 The mediator shall not be compelled to divulge such records or to testify in
 regard to the mediation in any adversary proceeding or judicial forum.

 The parties shall maintain the conﬁdentiality of the mediation and shall not rely
 on, or introduce as evidence in any arbitral, judicial, or other proceeding the
 following, unless agreed to by the parties or required by applicable law:

       (i) Views expressed or suggestions made by a party or other participant with
           respect to a possible settlement of the dispute;
       (ii) Admissions made by a party or other participant in the course of the
            mediation proceedings;
       (iii) Proposals made or views expressed by the mediator; or
       (iv) The fact that a party had or had not indicated willingness to accept a proposal
            for settlement made by the mediator.



42   RULES AND MEDIATION PROCEDURES                                         American Arbitration Association
M-11. No Stenographic Record

There shall be no stenographic record of the mediation process.

M-12. Termination of Mediation

The mediation shall be terminated:

      (i) By the execution of a settlement agreement by the parties; or
      (ii) By a written or verbal declaration of the mediator to the effect that further
           efforts at mediation would not contribute to a resolution of the parties’
           dispute; or
      (iii) By a written or verbal declaration of all parties to the effect that the mediation
            proceedings are terminated; or
      (iv) When there has been no communication between the mediator and any party
           or party’s representative for 21 days following the conclusion of the mediation
           conference.


M-13. Exclusion of Liability

Neither the AAA nor any mediator is a necessary party in judicial proceedings
relating to the mediation. Neither the AAA nor any mediator shall be liable to
any party for any error, act or omission in connection with any mediation
conducted under these procedures.

M-14. Interpretation and Application of Procedures

The mediator shall interpret and apply these procedures insofar as they relate
to the mediator’s duties and responsibilities. All other procedures shall be
interpreted and applied by the AAA.

M-15. Deposits

Unless otherwise directed by the mediator, the AAA will require the parties to
deposit in advance of the mediation conference such sums of money as it, in
consultation with the mediator, deems necessary to cover the costs and expenses
of the mediation and shall render an accounting to the parties and return any
unexpended balance at the conclusion of the mediation.




Rules Amended and Effective October 1, 2013.                                  COMMERCIAL RULES 43
 M-16. Expenses

 All expenses of the mediation, including required traveling and other expenses
 or charges of the mediator, shall be borne equally by the parties unless they
 agree otherwise. The expenses of participants for either side shall be paid by the
 party requesting the attendance of such participants.

 M-17. Cost of the Mediation

 FOR THE CURRENT ADMINISTRATIVE FEE SCHEDULE, PLEASE VISIT
 www.adr.org/feeschedule.




44   RULES AND MEDIATION PROCEDURES                               American Arbitration Association
© 2015 American Arbitration Association, Inc. All rights reserved. These rules are the copyrighted property of the
American Arbitration Association (AAA) and are intended to be used in conjunction with the AAA’s administrative services.
Any unauthorized use or modiﬁcation of these rules may violate copyright laws and other applicable laws.
Please contact 800.778.7879 or websitemail@adr.org for additional information.
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                      800.778.7879 | websitemail@adr.org | adr.org
                          APPENDIX

                            TAB K

                Leshin v. Oliva, --- S.W.3d ---,
2015 WL4554333 (Tex.App.—San Antonio, July 29, 2015, no pet. h.)
Leshin v. Oliva, Not Reported in S.W.3d (2015)


                                                                 reverse the trial court's judgment and remand the matter for
                                                                 further proceedings so that the trial court may consider the
                  2015 WL 4554333
                                                                 issue of arbitrability and conduct an independent review on
    Only the Westlaw citation is currently available.
                                                                 that issue.
          SEE TX R RAP RULE 47.2 FOR
    DESIGNATION AND SIGNING OF OPINIONS.
                                                                                      BACKGROUND
                Court of Appeals of Texas,
                      San Antonio.                               Pioquinto Ramon Davila and his wife, Guadalupe Rosalinda
                                                                 Davila, created The Davila Family Trust, naming themselves
       Richard Leshin, Successor Trustee of The
                                                                 trustees and lifetime beneficiaries of the trust. The Davilas
        Davila Family Trust, Trust A, Appellant
                                                                 funded the trust with all of their property, including a
                          v.
                                                                 substantial amount of stock in the International Bank
        Juan Gerardo Oliva and Rosina Oliva,                     of Commerce of Laredo, now known as International
     Individually and as Successor Trustee of The                Bankshares Corp. and sometimes referred to as IBC Bank.
      Davila Family Trusts B, C, and D, Appellees                The trust was set up as a revocable trust to become partially
                                                                 irrevocable upon the death of either Pioquinto or Guadalupe,
                 No. 04–14–00657–CV |                            whichever occurred first. It also included the following
             Delivered and Filed: July 29, 2015                  arbitration agreement:

From the 406th Judicial District Court, Webb County, Texas,                  Any controversy between the Trustees
Trial Court No. 2008–CVF–000855–D4, Honorable Oscar J.                       and any controversy between the
Hale Jr., Judge Presiding                                                    Trustee and any other parties to
                                                                             this Trust, including Beneficiaries,
Attorneys and Law Firms
                                                                             involving the construction or
Carlos M. Zaffirini Sr., Zaffirini & Castillo, Guadalupe                     application of any of the terms,
Castillo, Laredo, TX, for Appellant.                                         provisions, or conditions of this Trust
                                                                             shall, on the written request of any
Allen F. Cazier, David Claybourne Snell, San Antonio, TX,                    disagreeing party served on the other
for Appellee.                                                                or others, be submitted to arbitration.
                                                                             The parties to such arbitration shall
Sitting: Karen Angelini, Justice, Marialyn Barnard, Justice,                 each appoint one person to hear
Rebeca C. Martinez, Justice                                                  and determine the dispute and, if
                                                                             they are unable to agree, then the
                                                                             persons so chosen shall select another
               MEMORANDUM OPINION                                            impartial arbitrator whose decision
                                                                             shall be final and conclusive upon
Opinion by: Marialyn Barnard, Justice
                                                                             all parties. The cost of arbitration
 *1 This is an appeal from a trial court's judgment confirming               shall be borne by the losing party
an arbitration award in favor of appellees, Juan Gerardo Oliva               or parties, in such proportion as
and Rosina Oliva, Individually and as Successor Trustee of                   decided in arbitration proceedings.
The Davila Family Trusts B, C, and D (collectively “the                      Such arbitration shall comply with
Olivas”). On appeal, appellant Richard Leshin, Successor                     the Commercial Arbitration Rules of
Trustee of The Davila Family Trust, Trust A, raises two                      the American Arbitration Association,
related issues, contending the trial court erred in confirming               140 West 51st Street, New York, New
the award because the arbitrator exceeded his powers by                      York, 10020.
issuing an award against him in his individual capacity when
he was not subject to the claims or served with notice.          Guadalupe died first, and pursuant to the trust's terms, it
Because we conclude the arbitrator exceeded his powers, we       was divided into four separate trusts, now known as Trusts



               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                         1
Leshin v. Oliva, Not Reported in S.W.3d (2015)


A, B, C, and D. Trust D was also known as the GST
Trust. Pioquinto served as trustee of each trust until his          Claimant, Rosina Oliva, Successor Trustee, is awarded
death. Pioquinto executed two amendments to Trust A,                reasonable and necessary attorney's fees and litigation
providing that all his personal and household effects of every      expenses in the sum of $4,175.00 to be paid by Richard
kind be distributed to Juan Gerardo upon Pioquinto's death,         Leshin.
appointing Leshin to serve as successor trustee to Trust A,
                                                                    Claimant, Rosina Oliva, Successor Trustee, is awarded
and increasing the bequest for his new wife, Alma Guadalupe
                                                                    American Arbitration Association expenses in the sum of
Lozano Davila. Shortly thereafter, a dispute arose between
                                                                    $12,950.91, as shown by the records of the AAA in this
the Olivas and Pioquinto, and the Olivas filed a petition for
                                                                    case, to be paid 60% by Richard Leshin. Therefore, Richard
an accounting in Webb County District Court. In response,
                                                                    Leshin, shall reimburse Rosina Oliva the additional sum
Pioquinto filed a motion to compel arbitration, which was
                                                                    of $7,770.55, representing that portion of said fees and
granted. The Olivas then filed their claim with the American
                                                                    expenses in excess of the apportioned costs previously
Arbitration Association (“AAA”). As the matter proceeded
                                                                    incurred by Rosina Oliva.
to arbitration, Pioquinto died. After Pioquinto's death, Leshin
was named successor trustee of Trust A and Rosina was
                                                                  Despite the arbitrator's award, Leshin failed to distribute
ultimately named successor trustee of Trusts B, C, and D.
                                                                  any of the relevant property to Juan Gerardo. Rather, in
The Olivas eventually agreed not to prosecute their claim,
                                                                  his capacity as Successor Trustee of Trust A, he filed an
and the case was closed. However, in 2013, Rosina filed an
                                                                  application to vacate the award on the basis that the arbitrator
“Original Claim in Arbitration” with the AAA, requesting
                                                                  exceeded his powers when he issued an award against Leshin
an accounting and seeking a declaratory judgment. Juan
                                                                  in his individual capacity. The trial court rendered judgment
Gerardo intervened, alleging Leshin failed to take possession
                                                                  confirming the award. This appeal followed.
of Pioquinto's personal and household effects and deliver
them to him when Pioquinto died. An arbitration proceeding
was held, and at the conclusion of arbitration, the arbitrator
issued an arbitration award in favor of Juan Gerardo and                                   ANALYSIS
Rosina. As is relevant to this appeal, the award included the
                                                                  Leshin contends the trial court erred in confirming the award
following provisions:
                                                                  against him in his individual capacity because he was never a
   *2 Richard Leshin, Trustee, shall provide to Juan              party in his individual capacity, nor was he served with notice
  Gerardo Oliva within thirty (30) days a full and complete       in his individual capacity. Although stated as two separate
  accounting, and distribution of all of the personal and         issues, we construe Leshin's ultimate complaint to be that the
  household effects of Pioquinto Ramon Davila as of               arbitrator exceeded his powers in issuing an award against
  September 11, 2010. If such property cannot be distributed      him in his individual capacity, and therefore, the trial court's
  to Claimant Juan Gerardo Oliva, Juan Gerardo Oliva is           judgment confirming the award must be reversed.
  awarded money damages equal to the fair and reasonable
  value of the property, which amount is $79,426.00 against
  Richard Leshin, Individually and as Trustee.
                                                                                       Standard of Review
     ***
                                                                  We review a trial court's decision to confirm or vacate an
  Claimant, Juan Gerardo Oliva, is awarded reasonable and         arbitration award de novo. Centex/Vestal v. Friendship W.
  necessary attorney's fees and litigation expenses in the sum    Baptist Church, 314 S.W.3d 677, 683 (Tex.2010); GJR Mgmt.
  of $5,755.00 to be paid by Richard L. Leshin.                   Holdings, L.P. v. Jack Raus, Ltd., 126 S.W.3d 257, 263
                                                                  (Tex.App.–San Antonio 2003, pet. denied). This standard
  Claimant, Juan Gerardo Oliva, is awarded American               for reviewing arbitration awards stems from our state's
  Arbitration Association expenses in the sum of the amount       policy strongly favoring the arbitration of disputes. See
  of $5,595.01 to be paid by Richard L. Leshin.                   Rachal v. Reitz, 403 S.W.3d 840, 842 (Tex.2013); CVN Grp.
                                                                  v. Delgado, 95 S.W.3d 234, 238 (Tex.2002). Because an
     ***                                                          arbitration award has the same effect as a judgment of a court
                                                                  of last resort, we give the award great deference and indulge



               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                             2
Leshin v. Oliva, Not Reported in S.W.3d (2015)


every reasonable presumption in favor of the award and none      party to the arbitration agreement in his individual capacity,
against it. CVN Grp., 95 S.W.3d at 238; City of Laredo v.        nor served with a notice of claim in his individual capacity.
Mojica, 399 S.W.3d 190, 195 (Tex.App.–San Antonio 2012,          Accordingly, he contends he was not subject, in his individual
pet. denied). We may not substitute our judgment for that        capacity, to arbitration or any award stemming therefrom.
of the arbitrator merely because we would have reached a
different decision. Kosty v. S. Short Harbour Cmty. Ass'n,       In response, Juan Gerardo contends Leshin failed to come
Inc., 226 S.W.3d 459, 463 (Tex.App.–Houston [1st Dist.]          forth with a complete record to establish the basis for his
2006, pet. denied). Accordingly, the review of an arbitration    claims, and therefore, this court cannot vacate the award.
award is “extraordinarily narrow,” and only in extreme cases     Alternatively, should we hold the record is sufficient to
will a trial court vacate an award. Centex/Vestal, 314 S.W.3d    determine Leshin's claims, the Olivas argue the arbitrator
at 683; CVN Grp., 95 S.W.3d at 238; Mojica, 399 S.W.3d at        did not exceed his powers because the arbitrator had the
195; GJR Mgmt. Holdings, 126 S.W.3d at 263.                      power to determine whether Leshin, as an individual, was
                                                                 a party subject to arbitration. In other words, the Olivas
 *3 A reviewing court will not set aside an arbitration award    contend the arbitrator had the power to determine the issue
for a mere mistake of fact or law. Mojica, 399 S.W.3d            of arbitrability—what claims may be submitted to arbitration
at 195. In fact, absent specific common law or statutory         and who is bound by an arbitration agreement—based on
grounds for vacating, modifying, or correcting an award,         the broad language of the arbitration agreement, the AAA
a reviewing court must confirm an arbitration award. CVN         Commercial Arbitration Rules, and sections 114.008(a) and
Grp., 95 S.W.3d at 238. Statutory grounds for vacating,          114.0832(d) of the Texas Property Code. See Saxa Inc. v.
modifying, or correcting an award can be found in the Federal    DFD Architecture Inc., 312 S.W.3d 224, 229 (Tex. App–
Arbitration Act as well as the Texas General Arbitration Act.    Dallas 2010, pet. denied). Accordingly, it is the Olivas'
9 U.S.C. § 10(a); TEX. CIV. PRAC. & REM.CODE ANN.                position that Leshin failed to establish a statutory or common
§ 171.088(a)(3) (West 2014). Pursuant to these statutes, a       law ground for vacating the award.
trial court may vacate an arbitration award for any one of
several enumerated reasons, including the contention that
the arbitrator exceeded his powers. 9U.S.C. § 10(a); TEX.        a. Complete Record
CIV. PRAC. & REM.CODE ANN. § 171.087 (West 2014);                 *4 Juan Gerardo contends we cannot hold the trial court
Elgohary v. Herrera, 405 S.W.3d 785, 789 (Tex.App.–              erred in confirming the award against Leshin individually
Houston [1st Dist.] 2013, no pet.); Rapid Settlements, Ltd. v.   because Leshin failed to come forth with a complete record
Green, 294 S.W.3d 701, 706 (Tex.App.–Houston [1st Dist.]         for us to review to support his arguments. Specifically, Juan
2009, no pet.).                                                  Gerardo complains the absence of the arbitration transcript
                                                                 prevents this court from determining whether the award
An arbitrator exceeds his powers if he decides matters not       should be vacated. We disagree.
properly before him. Elgohary, 405 S.W.3d at 789. He
also exceeds his power, as Leshin asserts in this matter,        We recognize a non-prevailing party who seeks to vacate
when he issues an award against a party who is not               an arbitration award bears the burden of bringing forth a
subject to arbitration. Id.; Rapid Settlements, 294 S.W.3d at    complete record in the trial court that establishes the basis
706. Therefore, we must determine whether the arbitrator         for vacating the award. See Centex/Vestal, 314 S.W.3d at
exceeded his powers when he concluded Leshin—in his              684. Generally, without a complete record and specifically
individual capacity—was bound to arbitrate and subject to an     without an arbitration transcript, we presume the evidence
individual award. See Elgohary, 405 S.W.3d at 789; Rapid         was adequate to support the award, and accordingly, we
                                                                 will uphold it. Id.; see also Anzilotti v. Gene D. Liggin,
Settlements, 294 S.W.3d at 706. 1
                                                                 Inc., 899 S.W.2d 264, 267 (Tex. App–Houston [14th Dist.]
                                                                 1995, no pet.) (“Without a record, we are to presume that
                                                                 adequate evidence was presented to support the arbitration
             Arbitrator Exceeded His Powers?                     award”) In accordance with this principle, several Texas
                                                                 appellate courts have held that there can essentially be
As stated above, we construe Leshin's ultimate complaint to      no appellate review of an arbitrator's decision without a
be that the arbitrator exceeded his powers by issuing an award   complete record of the evidence presented to the arbitrator.
against him in his individual capacity when he was neither a     See Statewide Remodeling, Inc. v. Williams, 244 S.W.3d


               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                          3
Leshin v. Oliva, Not Reported in S.W.3d (2015)


564, 568–69 (Tex.App.–Dallas 2008, no pet.) (refusing to            and unmistakable evidence that he, in his individual capacity,
determine if arbitrator committed gross mistake due to lack         did not agree to arbitrate the issue of arbitrability, i.e., who is
of complete record); Gamble v. Grand Homes 2000, L.P.,              bound by an arbitration agreement. See Saxa Inc., 312 S.W.3d
334 S.W.3d 1, 1 (Tex.App.–Dallas 2007, no pet.) (noting lack        at 229.
of record of arbitration proceedings as reason for rejecting
appellants' arguments); Grand Homes 96, L.P. v. Loudermilk,          *5 The Olivas counter, arguing the arbitrator did not exceed
208 S.W.3d 696, 706 (Tex.App.–Fort Worth 2006, pet.                 his powers because the decision to determine whether Leshin,
denied) (“[T]he lack of a record of the arbitration proceedings     in his individual capacity, was a party to the arbitration
prevents review of these issues.”); GJR Mgmt. Holdings,             agreement and bound thereby was within the arbitrator's
L.P., 126 S.W.3d at 263–64 (“Because we have no record              power. To support this contention, the Olivas point to
[of the arbitration proceedings], we have no way of judging         the broad language of the arbitration agreement and the
whether bad faith or failure to exercise honest judgment in         arbitration agreement's reference to the AAA Commercial
fact occurred”).                                                    Arbitration Rules as clear and unmistakable evidence that
                                                                    Leshin agreed in his individual capacity to submit the
However, in some cases, the application of the general rule         determination of whether he is a party to the arbitration
only limits—rather than prevents—an appellate court's ability       agreement to the arbitrator. The Olivas also assert the
to determine whether an arbitrator exceeded his powers. See         arbitrator's powers to determine this issue arise from sections
Centex/Vestal, 314 S.W.3d at 685. Typically, the scope of an        114.008(a) and 114.0832(d) of the Texas Property Code.
arbitrator's power is derived from the arbitration pleadings,
motions, and documents containing the arbitration agreement.        To address these arguments, we begin with the fundamental
Id. Here, the appellate record consists of the arbitration          concept that arbitration is a matter of contract law. Roe
award, the pleadings regarding Leshin's request to vacate           v. Ladymon, 318 S.W.3d 502, 510 (Tex.App.–Dallas 2010,
the award, and a copy of the trust agreement containing             no pet.). It is a universally accepted principle of contract
the arbitration agreement. Accordingly, because the scope           law that an individual must be a party to a contract in
of the arbitrator's powers is ultimately derived from these         order to be bound by it. Rapid Settlements, 294 S.W.3d at
documents, we conclude the lack of the arbitration transcript       706. In other words, under general rules of contract law,
does not preclude this court from considering the merits of         a contract cannot bind a nonparty, i.e. a non-signatory. Id.
Leshin's appeal. See id. Therefore, we will consider Leshin's       Similarly, an arbitration agreement between specific parties
claim that the arbitrator exceeded his powers, and the Olivas'      cannot generally bind nonparties, i.e. non-signatories. GM Oil
contention that Leshin's status was a matter for the arbitrator     Properties, Inc. v. Wade, No. 01–08–00757–CV, 2012 WL
to decide, i.e., an issue of arbitrability. However, in doing so,   246041 at *6 (Tex. App–Houston [1st Dist.] Jan. 26, 2012,
we presume any existing evidence supports the award. See id.        no pet.) (mem.op.) (“It is a foundational principle that a party
                                                                    cannot be compelled to arbitrate when a party has not agreed
                                                                    to do so.”); Roe, 318 S.W.3d at 511. However, in certain
b. Arbitrability                                                    instances, a nonparty, i.e. a non-signatory, may be bound by
In this case, as previously noted, Leshin contends the              the terms of an arbitration agreement just as a nonparty, i.e.
arbitrator exceeded his powers when he issued an award              non-signatory, may be bound by any other contract. Roe, 318
against Leshin in his individual capacity. Leshin presents two      S.W.3d at 511.
bases for this contention. Leshin first asserts the arbitrator
exceeded his powers when he implicitly determined Leshin,           Whether a person or entity is a party to an arbitration
in his individual capacity, was a party to the arbitration          agreement, and therefore bound by any award issued as
agreement. According to Leshin, he was not a party to the           a result of the arbitration proceeding, is a question of
arbitration agreement in his individual capacity, only in his       arbitrability. Howsam v. Dean Witter Reynolds, Inc., 537 U.S.
capacity as trustee. Therefore, Leshin concludes we must            79, 83 (2002); First Options of Chicago, Inc. v. Kaplan,
reverse the trial court's judgment confirming the award and         514 U.S. 938, 943–44 (1995). The question of arbitrability
render judgment that Leshin, in his individual capacity, was        encompasses what claims may be submitted to arbitration and
not a party to the arbitration agreement, and therefore, not        who can be bound to an arbitration agreement. See Saxa Inc.
subject to the award issued against him in that capacity. To        v. DFD Architecture Inc., 312 S.W.3d 224, 229 (Tex. App–
support his position, Leshin relies on cases involving non-         Dallas 2010, pet. denied) (“These ‘gateway matters' include
signatories to arbitration agreements, arguing there is clear


                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                                 4
Leshin v. Oliva, Not Reported in S.W.3d (2015)


whether the parties agreed to arbitrate and whether a claim         issue of arbitrability. Thus, according to the Olivas, it was
or dispute is encompassed in the agreement to arbitrate.”).         within the arbitrator's power to implicitly conclude that
The case before us raises the issue of arbitrability only with      Leshin, in his individual capacity, was a party subject to
regard to the question of who is bound to and by the arbitration    the arbitration award. The Olivas rely on Saxa Inc. v. DFD
agreement and any award; there is no issue with regard to           Architecture Inc. for the proposition that a broad arbitration
what claims were submitted. The specific question is who            clause can create a presumption of arbitrability. 312 S.W.3d
—the arbitrator or the courts—decides who is a party to the         at 229–31. In Saxa, the court stated “a court must examine
arbitration agreement and bound thereby.                            the arbitration agreement to decide if, when construed under
                                                                    the relevant state law, the agreement evidences a clear and
On more than one occasion, the United States Supreme Court          unmistakable intention that the arbitrators will have the
has concluded that the question of arbitrability is a “gateway”     authority to determine the scope of arbitration.” Id. at 229.
issue for judicial determination absent evidence that the           The court then went on to address the language of the
parties clearly and unmistakably provided otherwise. See            arbitration agreement. Id. However, in Saxa, the parties to
Howsam, 537 U.S. at 83 (“[A] gateway dispute about whether          the arbitration agreement, DFD Architecture, Inc. and Saxa,
the parties are bound by a given arbitration clause raises          Inc., did not dispute that they both entered into a written
a ‘question of arbitrability’ for a court to decide.”); First       arbitration agreement; instead, at issue was whether that
Options, 514 U.S. at 946 (holding that question about whether       arbitration agreement bound third parties, who sought to
party is required to arbitrate dispute is subject to independent    join an arbitration proceeding already pending between DFD
review by courts). Likewise, the Texas Supreme Court has            Architecture, Inc. and Saxa, Inc. Id. at 226–27. In considering
stated the question of arbitrability is a “gateway matter” to       the broad language of the arbitration agreement, the court
be determined by a court, rather than an arbitrator, unless         recognized it was not “confronted with a non-signatory to
the parties clearly and unmistakably provide otherwise. In re       the arbitration agreement contesting whether it is bound by a
Labatt Food Serv., L.P., 279 S.W.3d 640, 644 (Tex.2009); In         signatory's agreement to arbitrate.” Id. at 230.
re Weekley Homes, L.P., 180 S.W.3d 127, 131 (Tex.2005). In
cases where the reviewing court determines that the parties         The case before us, contrary to Saxa Inc. v. DFD Architecture
“clearly and unmistakably” agreed to submit the issue of            Inc., involves a non-signatory—Leshin, who in his individual
arbitrability to the arbitrator, then it should defer to the        capacity did not sign the trust agreement that included the
arbitrator's decision on the issue. First Options, 514 U.S. at      arbitration agreement. See Elgohary, 405 S.W.3d at 789. An
943; Elgohary, 405 S.W.3d at 790; Roe, 318 S.W.3d at 514.           agent in his individual capacity is a non-signatory when that
On the other hand, in the absence of “clear and unmistakable        agent signs an agreement with an arbitration provision in his
evidence” that the parties agreed to the contrary, then the         representative capacity. See Elgohary, 405 S.W.3d at 789
ultimate power to decide the issue of arbitrability lies with the   (identifying Herrera, in individual capacity, as non-signatory
courts. First Options, 514 U.S. at 943; Elgohary, 405 S.W.3d        when he signed arbitration agreement as partner of L.P.); Roe,
at 790; Roe, 318 S.W.3d at 514. Accordingly, in determining         318 S.W.3d at 515 (indicating partner's signature on contract
whether the arbitrator exceeded his powers by implicitly            does not render him party to contract in individual capacity,
deciding Leshin, in his individual capacity, was a party to         and thus, issue is whether non-signatory can be bound by
the arbitration agreement, we must determine whether Leshin,        arbitration). Here, Leshin signed the trust agreement, which
individually, and the Olivas clearly and unmistakably agreed        contained the arbitration provision, in his capacity as trustee.
to submit the issue of arbitrability—who was a party to and         Accordingly, Leshin, in his individual capacity, is a non-
bound by the arbitration agreement—to the arbitrator. See           signatory. See Elgohary, 405 S.W.3d at 789; Roe, 318 S.W.3d
First Options, 514 U.S. at 943; Elgohary, 405 S.W.3d at 790;        at 515. Therefore, we hold the court's analysis in Saxa Inc.
Roe, 318 S.W.3d at 514. In making this determination, as            v. DFD Architecture Inc. is inapplicable here. See Elgohary,
noted above, we must presume any existing evidence supports         405 S.W.3d at 789; Roe, 318 S.W.3d at 515.
the award. Centex/Vestal, 314 S.W.3d at 685.
                                                                    In cases involving non-signatories, courts do not consider
 *6 The Olivas point to the broad language of the arbitration       the terms of the arbitration agreement as any evidence when
agreement and its governance by the AAA Commercial                  looking for “clear and unmistakable evidence” as to whether
Arbitration Rules as clear and unmistakable evidence that           parties agreed to arbitrate the issue of arbitrability. First
Leshin, individually, and the Olivas agreed to arbitrate the        Options, 514 U.S. at 943 (focusing on intent of parties to



                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                              5
Leshin v. Oliva, Not Reported in S.W.3d (2015)


dispute rather than arbitration agreement); Elgohary, 405            conclude that neither the broad language of the arbitration
S.W.3d at 790 (stating that terms of contracting parties'            agreement, nor the reference to AAA Commercial Arbitration
agreement is not evidence that nonparty agreed to arbitrate);        Rules, even if considered together, constitutes clear and
Roe, 318 S.W.3d at 514 (“We find it significant that when            unmistakable evidence that Leshin, in his individual capacity,
the [United States] Supreme Court in First Options looked            agreed to submit the gateway issue of arbitrability to the
for clear evidence of an agreement to arbitrate arbitrability, it    arbitrator. See First Options, 514 U.S. at 943; Elgohary, 405
did not even address the terms of the arbitration agreement.”).      S.W.3d at 791–92; Roe, 318 S.W.3d at 517. Therefore, there
Therefore, although we generally presume any existing                is no evidence upon which we can uphold the arbitration
evidence supports the award, the broad language of the               award. See Centex/Vestal, 314 S.W.3d at 685.
arbitration clause, which is the evidence relied upon by the
Olivas as clear and unmistakeable evidence, is no evidence            *7 The Olivas next direct our attention to sections
in this case because Leshin is a non-signatory. To constitute        114.008(a) and 114.0832(d) of the Texas Property Code,
evidence in cases involving non-signatories, we must look            arguing these provisions vest the arbitrator with the power to
at whether the parties to the dispute before the courts—i.e.,        determine that Leshin, in his individual capacity, was a party
Leshin, in his individual capacity, and the Olivas—clearly           to the arbitration agreement. Section 114.0832(d) of the Texas
and unmistakably agreed to arbitrate the issue of arbitrability,     Property Code indicates a trustee can be held personally
rather than whether the parties to the contract containing the       liable for tortious acts committed when acting as trustee, and
arbitration clause—i.e. Leshin, in his capacity as trustee, and      section 114.008 of the Texas Property Code outlines the ways
the Olivas—agreed to arbitrate the issue of arbitrability. See       a court may compel a trustee to remedy such a breach of
First Options, 514 U.S. at 943; Elgohary, 405 S.W.3d at 790;         trust. TEX. PROP.CODE ANN. §§ 114.008 and 114.0832
Roe, 318 S.W.3d at 514.                                              (West 2014). The Olivas' argument is misplaced. Whether
                                                                     sections 114.008(a) and 114.0832(d) of the Texas Property
In the context of non-signatories, i.e. agents in their individual   Code compel a non-signatory to arbitrate is a question for
capacity, appellate courts have recognized a number of               the trial court to determine when conducting an independent
situations in which the evidence did not amount to clear and         determination on the issue of arbitrability. See Elgohary,
unmistakable evidence of the parties' agreement to arbitrate         405 S.W.3d at 793 (recognizing theories which court could
the issue of arbitrability, and thus was not evidence to             compel non-signatory to arbitrate during its independent
support an arbitration award. For example, evidence that             review).
an individual signed the arbitration agreement as an agent
in his representative capacity is not clear and unmistakable         Accordingly, we hold because there is no clear and
evidence that the individual, in his individual capacity,            unmistakable evidence that Leshin, in his individual capacity,
agreed to arbitrate the issue of arbitrability. See Elgohary,        agreed to submit the gateway issue of arbitrability to the
405 S.W.3d at 790–91; Roe, 318 S.W.3d at 515–16. Also,               arbitrator, there is no evidence upon which we can uphold
evidence that the arbitration agreement references the AAA           the arbitration award. See First Options, 514 U.S. at 943;
Commercial Arbitration Rules, and the fact that those rules          Elgohary, 405 S.W.3d at 791–92; Roe, 318 S.W.3d at 517.
allow an arbitrator to decide his own jurisdiction is also           Here, the trial court, not the arbitrator, should have decided
not clear and unmistakable evidence of a non-signatory's             the “gateway issue” of whether Leshin, in his individual
agreement to arbitrate the issue of arbitrability. See Elgohary,     capacity, agreed to arbitrate the issue of arbitrability. See
405 S.W.3d at 791–92 (holding partner's agreement to                 First Options, 514 U.S. at 943; Elgohary, 405 S.W.3d at
arbitrate under AAA rules is not clear and unmistakable              790; Roe, 318 S.W.3d at 514. Having decided the question
evidence partner, in individual capacity, agreed to arbitrate        of arbitrability is one for judicial determination, we hold
under AAA rules); Roe, 318 S.W.3d at 517 (holding L.L.P.'s           the arbitrator exceeded his powers by implicitly determining
agreement to arbitrate in accordance with AAA rules was not          Leshin, individually, was a party to the arbitration agreement,
clear and unmistakable evidence of individual's agreement            and thereby bound by any award in his individual capacity.
to submit gateway issue of arbitrability to arbitrator). Lastly,
an agreement's “successors and assigns clause” does not
amount to clear and unmistakable evidence of an agreement to
                                                                                        Rendition or Remand?
arbitrate the issue of arbitrability. See Elgohary, 405 S.W.3d
at 792–93. Accordingly, we disagree with the Olivas and



                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                              6
Leshin v. Oliva, Not Reported in S.W.3d (2015)


                                                                          that could bind a non-signatory to arbitration. See Elgohary,
Leshin asserts that if we conclude the arbitrator exceeded his
                                                                          405 S.W.3d at 794.
powers, we must render judgment that he was not a party
to the arbitration agreement, and therefore, not bound by the
                                                                          Accordingly, we reverse the trial court's judgment confirming
award. Leshin essentially asks this court to determine whether
                                                                          the arbitration award. However, we remand the matter for
he was, individually, a party to the arbitration provision.
                                                                          further proceedings to allow the trial court to conduct an
Leshin's request loses sight of the fact that the trial court acted
                                                                          independent review to determine whether Leshin, in his
prematurely in confirming the award.
                                                                          individual capacity, could be compelled by a court to arbitrate
                                                                          under any legal theory. See id. Because of our disposition, we
As explained above, the gateway issue of determining
                                                                          need not consider Leshin's issue concerning lack of service.
whether a non-signatory is a party to the arbitration agreement
was for the trial court—not the arbitrator—to determine.
When given that opportunity, the trial court must conduct
an independent review of whether there are any applicable                                        CONCLUSION
theories in which a court could compel a non-signatory
to arbitrate. See Elgohary, 405 S.W.3d at 793. We have                     *8 Based on the foregoing, we hold the arbitrator exceeded
reviewed the record and nowhere therein did the trial court               his powers by implicitly determining Leshin was a party to
conduct an independent review to determine whether any                    the arbitration agreement and issuing an award against Leshin
theory compelled Leshin, in his individual capacity, to                   in his individual capacity. Whether Leshin was a party to the
arbitrate. See id at 793 (requiring independent review to                 arbitration agreement under some legal theory is a question
determine whether court could compel non-signatory to                     of arbitrability, which is for the trial court to determine.
arbitration); Roe, 318 S.W.3d at 514 (remanding case for                  Therefore, we reverse the trial court's judgment confirming
independent review regarding arbitrability absent clear and               the arbitration award and remand the matter to the trial court
unmistakable evidence party agreed to arbitrate). Rather, at              for further proceedings. Specifically, we remand for the trial
the hearing on the motion to vacate the arbitration award,                court to consider the arbitrability issue and determine whether
the trial court erroneously concluded the issue of arbitrability          there is any legal theory that would allow the trial court to
was within the arbitrator's jurisdiction as a general rule of             compel Leshin, in his individual capacity, to arbitrate and be
arbitration. Therefore, the trial court confirmed the arbitration         bound by any ensuing award.
award on the basis that “there is no evidence to convince this
court that the arbitrator did not have jurisdiction to include
                                                                          All Citations
Leshin as an individual” without first considering the theories
                                                                          Not Reported in S.W.3d, 2015 WL 4554333


Footnotes
1       We recognize there is disagreement between the Olivas regarding whether the arbitrator actually issued an award against
        Leshin in his individual capacity. Juan Gerardo maintains that portions of the award are against Leshin in his individual
        capacity, not merely in his capacity as trustee. However, in her brief and at oral argument, Rosina attempts to concede
        that the award of attorney's fees and AAA costs in her favor are against Leshin only in his capacity as trustee, not in his
        individual capacity. In other words, Rosina contends the arbitration award, at least as to her, is not against Leshin in his
        individual capacity. However, as we explain below, whether Leshin, individually, is a party to the arbitration and subject
        to an award emanating therefrom is a gateway issue for the trial court. Moreover, the language in the award with regard
        to attorney's fees and AAA costs is essentially the same with regard to both Juan Gerardo and Rosina. Thus, we hold
        Rosina's attempted concession has no impact on our holding or judgment.


End of Document                                                       © 2015 Thomson Reuters. No claim to original U.S. Government Works.




                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                                    7
                              NO. 13-15-00312-CV

                    IN THE COURT OF APPEALS
         FOR THE THIRTEENTH JUDICIAL DISTRICT OF TEXAS
                        AT CORPUS CHRISTI


                      BRIAN O'GRADY, M.D. AND
               THE O'GRADY FAMILY PARTNERSHIP, LTD.
                             Appellants,
                                        v.
     NATIONAL UNION FIRE INSURANCE COMP ANY OF PITTSBURGH,
                               P.A.,
                             Appellee.


         Appealed from the 53rd District Court of Travis County, Texas


                                VERIFICATION


    Before me, the undersigned notary, on this day personally appeared Emily J.
Seikel, the affiant, a person whose identity is known to me. After I administered
an oath to affiant, affiant testified:

1.     "My name is Emily J. Seikel. I am over 18 years of age, of sound mind, and
       capable of making this affidavit. I am the attorney of Appellants' Brian
       O'Grady, M.D. and The O'Grady Family Partnership, Ltd. The facts in this
       affidavit are within my personal knowledge and are true and correct.

2.     "I certify and verify that I have reviewed the Appellants' Brief and
       concluded that every factual statement in the Brief is supported by
       competent evidence included in the appendix or record, and that the items
       contained in the Appendix and the Clerk's Record are accurate copies of
       pleadings and other court papers that are material to the Appell n ' Brief.

                                             L:~
                                      Emily J. Seikel
                                                          ;) c_
STATE OF TEXAS                          §
                                        §
TRAVIS COUNTY                           §

      SUBSCRIBED AND SWORN TO before me on this the 19th day of August
2015, to certify which witness my hand and seal of office.



      ,..~i!,.'Y'~~·.. KATY HENNINGS
    it ••if.~.\    • I
                       NOTARY PUBLIC                     e of Texas
    \~\.   -~t;    ~of Texae
     ...~~:~f./ Oomm. Exp. 0&-03-2017
                        CERTIFICATE OF SERVICE

      I HEREBY CERTIFY that a true and correct copy of the above and
foregoing was served upon the following parties via electronic mail by the Court’s
CM-ECF system on this the 19th day of August 2015, as follows:

      Robert S. Harrell
      Jon C. Rice
      Andrea L. Fair
      Norton Rose Fulbright US LLP
      1301 McKinney, Suite 5100
      Houston, Texas 77010
      Counsel for Appellee
                                     /s/ Emily J. Seikel
                                     Emily J. Seikel
