Jump to content

Termination of Arbitration for Nonpayment of Fees


Recommended Posts

This appears to be a potential tactic for JDB's attorneys to get the action out of arbitration and back to trial court. It would appear essential that a party to a terminated arbitration should request an order from the arbitrator spelling out in detail the grounds of the termination and the effect such termination should have on later proceedings. A motion to vacate the MTC Arbitration to the trial court would just recycle the whole process. The card holder Agreement calling for arbitration in this case would have little merit. The JDB's law firm potentially sways favor with the courts decision to vacate MTC motion resulting from fees paid for thousands of filings. Submitting a rebuttal to a motion to vacate arbitration due to non-payment and lack of arbitrators award might be grounds for a motion to dismiss due to "lack of prosecution" or non-conformance with court order?

I found this concerning excerpt:

What Is The Effect of Termination By The Arbitrators For Non-Payment?

As noted above, the paying party also has the option of allowing the arbitrator to dismiss the arbitration, and proceeding to litigation.  This option also gives rise to a host of additional strategy decisions.

Where an arbitration is terminated due to non-payment of fees, the parties should consider the legal effect of this termination.  The AAA, for instance, will tell you that the termination is “without prejudice,” meaning that the arbitration (or litigation) can be refiled with the AAA or in court, but the standard termination letters generally do not state this fact.  A judge could find that such a dismissal by the arbitrator is essentially “with prejudice.”  In one case, such a termination for non-payment was determined to be a “lack of prosecution” by the California Superior Court, subjecting a party to liability for costs as a non-prevailing party.  Worse still, an appellate court found that the termination by the arbitrator essentially constituted the law of the case, foreclosing the petitioner from prevailing in a future proceeding.  For a contrary opinion stating that such a termination is not an “award” of the arbitrator see Cinel v. Christopher (2012) 203 Cal.App. 4th 759, 767.

To avoid the potential for such an outcome, a party to a terminated arbitration should request an order from the arbitrator spelling out in detail the grounds of the termination and the effect such termination should have on later proceedings.  Such an order should be requested prior to the issuance of the arbitrator’s termination order, as such an order could be construed to divest the arbitrator of jurisdiction.

Parties to a terminated arbitration may also consider whether the statute of limitations to bring an action in court was equitably tolled for the duration of the arbitration.  See, Marcario v. County of Orange (2007) 155 Cal. App. 4th 397, 407.  To avoid statute of limitation issues, the parties should consider filing a court action and stipulating to stay the court proceeding pending resolution of the case through arbitration.

 

Conclusion

Parties to an arbitration must keep in mind the financial requirements of arbitration, not only for budgeting purposes, but for purposes of strategy.  By not paying the arbitration fees, respondents can essentially force the petitioner into the choice of paying arbitration fees for both sides or having the arbitration terminated.  This prospect of a party bearing all costs for both sides is exacerbated where the arbitrator is forced to rule upon extensive discovery motions and other motion practice.  Where the paying party refuses to pick up the non-paying party’s share, that party should take steps to clarify the grounds for termination by the arbitrator.

In sum, the financial element in arbitration has a profound impact on the process.  This is not to say that arbitration is worse or better than litigation: it is just a different game with its own set of rules, strategies, and costs.

Would welcome comments on this process. I suspect in Oregon it would just got back to Mandatory Court Appointed Arbitration for increased expense.

Link to comment
Share on other sites

@HueyPilot

When an arbitration is closed for non-payment of fees by the JDB, the arbitration forum will state that reason.   That’s where the court order to arbitrate comes into play.  By not paying fees, the JDB has disobeyed a court order.  It doesn’t get to disobey it and not be sanctioned in some way.  Upon a JDB’s refusal to pay fees, a consumer defendant can motion for dismissal of the lawsuit as a sanction for the plaintiff’s failure to comply with the order.  Courts have specific rules for failing to abide by court orders.

  • Like 1
Link to comment
Share on other sites

If you have an order from the court stating that the case should go into arbitration and the other side refuses to pay the fees (and you have), then the other side is disobeying a court order. They are not allowed to do that and get away with it any more than you would be able to disobey a court order and expect to get away with it.

What a defendant does in this case is file a motion for sanctions as @BV80 described above using the termination letter as your evidence that the other side disobeyed the court order and request that the court sanction them for their actions in contradiction of the court order. The consequence can be up to a dismissal with prejudice.

Most of the time however, when the fees are not paid, you will get a request for dismissal with prejudice from the other side's attorney because they know that is coming next anyways. If you have not hear from them, now would be a good time to contact them and ask what their next steps are before you file your motion for sanctions. That might make them realize that they are not going to get away with not following the order or the contract.

Link to comment
Share on other sites

This strategy would close a potential for a loophole. 

It however begs a question of which motion would the court address first. 

Motion to void the MTC Arbitration Staying Proceedings or

Motion for sanctions with termination letter asking for dismissal 

I would think the next phone call would be to the JDB lawyer for conference on the motion fulfilling that requirement. 

Link to comment
Share on other sites

2 hours ago, BV80 said:

@HueyPilot

When an arbitration is closed for non-payment of fees by the JDB, the arbitration forum will state that reason.   That’s where the court order to arbitrate comes into play.  By not paying fees, the JDB has disobeyed a court order.  It doesn’t get to disobey it and not be sanctioned in some way.  Upon a JDB’s refusal to pay fees, a consumer defendant can motion for dismissal of the lawsuit as a sanction for the plaintiff’s failure to comply with the order.  Courts have specific rules for failing to abide by court orders.

Will that be typical of an JAMS Arbitration that is closed do to non-payment and referred back to the Trial Court. Do we have a suggested template for this request for sanctions. 

Link to comment
Share on other sites

19 minutes ago, WhoCares1000 said:

Most of the time however, when the fees are not paid, you will get a request for dismissal with prejudice from the other side's attorney because they know that is coming next anyways. If you have not hear from them, now would be a good time to contact them and ask what their next steps are before you file your motion for sanctions. That might make them realize that they are not going to get away with not following the order or the contract.

With these requests for dismissal with prejudice can we include a cost bill for expenses to date or is that a separate Court function. 

Link to comment
Share on other sites

Concerns for divesting the arbitrator of jurisdiction:

To avoid the potential for such an outcome, a party to a terminated arbitration should request an order from the arbitrator spelling out in detail the grounds of the termination and the effect such termination should have on later proceedings.  Such an order should be requested prior to the issuance of the arbitrator’s termination order, as such an order could be construed to divest the arbitrator of jurisdiction.

 

Should we be concerned about this potential for a countermeasure.

Link to comment
Share on other sites

45 minutes ago, HueyPilot said:

Will that be typical of an JAMS Arbitration that is closed do to non-payment and referred back to the Trial Court. Do we have a suggested template for this request for sanctions. 

Every time a poster has reported back on the issue, they’ve said they got a letter or email from the arbitration forum that the case was closed due to nonpayment.  Here is JAMS rule 6(c).

(c) If, at any time, any Party has failed to pay fees or expenses in full, JAMS may order the suspension or termination of the proceedings. JAMS may so inform the Parties in order that one of them may advance the required payment. If one Party advances the payment owed by a non-paying Party, the Arbitration shall proceed, and the Arbitrator may allocate the non-paying Party's share of such costs, in accordance with Rules 19(e) and 26(c). An administrative suspension shall toll any other time limits contained in these Rules or the Parties' Agreement.

There is no template for the request for sanctions.  However, just cite the rule.  Here is ORCP 54B(1):

B Involuntary dismissal.

          B(1) Failure to comply with rule or order. For failure of the plaintiff to prosecute or to comply with these rules or any order of court, a defendant may move for a judgment of dismissal of an action or of any claim against that defendant.

 

Link to comment
Share on other sites

22 minutes ago, BV80 said:

Every time a poster has reported back on the issue, they’ve said they got a letter or email from the arbitration forum that the case was closed due to nonpayment.  Here is JAMS rule 6(c).

This is what happened in my JAMS case involving a JDB.  JAMS sent a letter to the parties saying the case was closed due to non-payment.

  • Like 1
Link to comment
Share on other sites

@BV80  If one of the larger JDBs was involved in multiple arbitration cases that were closed because they failed to pay, wouldn't JAMS or AAA eventually refuse to administer future cases involving them due to their repeated failure to comply with the arbitration rules?

 

Link to comment
Share on other sites

7 hours ago, LaneBlane said:

@BV80  If one of the larger JDBs was involved in multiple arbitration cases that were closed because they failed to pay, wouldn't JAMS or AAA eventually refuse to administer future cases involving them due to their repeated failure to comply with the arbitration rules?

 

The arbitration forums could refuse, but it seems they will go ahead and administer a case when there is a court order.  I believe @BackFromTheDebthas experienced that.

  • Like 1
Link to comment
Share on other sites

14 hours ago, HueyPilot said:

With these requests for dismissal with prejudice can we include a cost bill for expenses to date or is that a separate Court function. 

That depends on the negotiations. Most people are happy to get out of a 4 figure debt for a couple of hundred dollars in court and arbitration fees that they don't bother to ask. In fact, here in Minnesota, it costs $600 just to get to arbitration between court fees and arbitration fees so I tell Minnesota litigants to offer the $600 at the start before proceedings actually get to court (due to pocket docket rules). If the JDB comes looking to settle, you can certainly ask for it and see what they say.

Now there are certain states such as California that indeed allows you to expense costs so part of that is dependent on what state you are in.

Link to comment
Share on other sites

7 hours ago, LaneBlane said:

@BV80  If one of the larger JDBs was involved in multiple arbitration cases that were closed because they failed to pay, wouldn't JAMS or AAA eventually refuse to administer future cases involving them due to their repeated failure to comply with the arbitration rules?

 

I think the arbitration forums look past that when there is a court order to arbitrate because the court order will supersede their rules on matters such as that.

  • Like 1
Link to comment
Share on other sites

14 hours ago, HueyPilot said:

This strategy would close a potential for a loophole. 

It however begs a question of which motion would the court address first. 

Motion to void the MTC Arbitration Staying Proceedings or

Motion for sanctions with termination letter asking for dismissal 

I would think the next phone call would be to the JDB lawyer for conference on the motion fulfilling that requirement. 

"Your honor, we do not agree with your order and refuse to follow it, therefore please void it."

That is what they would be saying with their motion to void MTC arbitration proceedings. Even if that motion was heard first, you file an opposition motions saying that the arbitration proceedings were terminated by the other party's malfeasance using the letter that you get from the arbitration forums showing that they refused to pay the fees. Any attorney who have an ounce of credibility will not bring such a motion before a judge and any judge would see right through such a motion and might even get pissed off at it (after all, they are telling the court that they refuse to follow its orders). Besides, imagine the slippery slope that would open up if a judge simply voids a motion because a party refuses to follow the courts order. I am sure that such a motion would be denied and it will immediately be the motion for sanctions that would be heard next by a judge who is probably now steaming mad at the suing party.

So yes, if the JDB attorneys did decide to file a motion to void arbitration, I would certainly call their lawyer and explain to them that it will not end well in court if they pursue that path. If they plaintiff chooses to continue to do so, on their head so be it.

Link to comment
Share on other sites

Just thought I'd mention something...   I filed a demand for arbitration under an arbitration provision that included the following language:

  1. No matter which party initiates the arbitration, we will advance or reimburse filing fees and other costs or fees of arbitration.
     
  2. If either party fails to submit to arbitration following a proper demand to do so, that party will bear the costs and expenses, including reasonable attorneys’ fees, incurred by the party compelling arbitration.

I'd check the arbitration agreement to see if there's anything similar written.

After the JDB failed to pay, the court case was dismissed without prejudice.  Now I'm waiting until 2022 for the SOL to pass so I can file a small claims case against the JDB to recoup nearly $700.00.

 

 

Link to comment
Share on other sites

  • 3 weeks later...

Did you have to file a motion to dismiss with the Court after the Arbitration Forum was closed or did the attorney for the JDB file for dismissal. 

It seems like you should be able to file a cost bill with the court and get some kind of prevailing party fees. 

o defendant: Upon discontinuance or dismissal or when judgment is rendered in the defendant's favor on the merits, $200. To the prevailing party: $5.50 for the cost of filing a satisfaction of the judgment.
Link to comment
Share on other sites

10 hours ago, HueyPilot said:

Did you have to file a motion to dismiss with the Court after the Arbitration Forum was closed or did the attorney for the JDB file for dismissal. 

It seems like you should be able to file a cost bill with the court and get some kind of prevailing party fees. 

o defendant: Upon discontinuance or dismissal or when judgment is rendered in the defendant's favor on the merits, $200. To the prevailing party: $5.50 for the cost of filing a satisfaction of the judgment.

Interesting because $200 would not even scratch the surface of the court costs. It is about $300 - $350 just to start a case (and each party must pay that) and another $75 for each motion in Minnesota. This does not include the arbitration fees.

Link to comment
Share on other sites

I totally agree. It's the same here in Oregon. As Pro se you can't get attorney fees in any state. As prevailing part I thought the possibility may exist to file a "Cost Bill" for all your expenses including the 200.00 PP Fee. Worst case scenario you may be eligible to claim on the Sec 549.02 statute. I know its a drop in the bucket by why leave anything on the table. Hopefully it leads to the JDB's displeasure somewhat. 

Link to comment
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

 Share

×
×
  • Create New...