Thoughts About Arbitration
Terry Bartholomew
homeowner advocacy group (no longer in existence), at the suggestion of
a member, examined mediation and arbitration as a possible legislative
agenda item. Based on the following paper by Frank Short,
frs...@prodigy.net, the CHR BOD overwhelmingly chose, as its official
position, NOT to support mediation and arbitration. With Frank's
permission I am retyping his paper and making it available to you.
The comments in quotation marks at the beginning of the numbered
paragraphs were taken from the proposal presented to CHR.
1. "...no arbitrator or mediator can, knowingly or not, permanently take
away any part of any one of our constitution-provided rights at any
time!"
Implicit in this statement is the unsupported conclusion that
arbitrators do not have authority to render decisions or to formulate
remedies inconsistent with the law.
Here's the law: According to "American Jurisprudence", one of the
foremost legal encyclopedias, "An award will not be held invalid under
the common law merely because unjust, inadequate, excessive, or contrary
to the law." This statement generally applies whether state or federal
law is involved. The Federal Arbitration Act, 9 U.S.C. § 1 et. seq,
sets forth the very limited criteria under which a federal court will
invalidate an arbitrator's award. An appeal to the court that has as
its basis a claim that the arbitrator's decision was "contrary to the
law" faces summary dismissal because this is NOT a valid criterion for
appeal. Examples of the language used by federal courts in rejecting
such appeals include: "Courts are generally prohibited from vacating
arbitrations awards on the basis of errors of law or interpretation."
"An arbitration award will not be vacated on the ground that the
arbitrators misinterpreted applicable law." "An arbitration award will
not be set aside because of an error on the part of the arbitrators in
their interpretation of the law."
2. "...if an out-of-court mistake is made, the court system is always
available for remedy!"
Here's the law: The United States District Court for the Eastern
District of Virginia, ruled on this issue last year. A dispute
involving an employment contract was submitted, pursuant to the
provisions of the contract, to "binding arbitration." The employment
contract stated that it was to be construed according to the State of
Virginia, and that, in the event of arbitration, the rules of the
American Arbitration Association would be applied. To make a long story
short, one of the parties was unhappy with the arbitrator's decision,
and appealed to the court system.
You see, he thought "the court system is always available...etc."
The court--in dismissing the challenge to the arbitrator's award--stated
that, "Perhaps RFC (the party taking the appeal) intends to argue that
the arbitrators exceeded their powers by misinterpreting the contract or
by committing an error of law. If so, the argument fails because as a
matter of law neither reason constitutes a ground on which an award can
be vacated"
3. "The duty of an arbitrator, like that of a judge, is, of course, to
uphold the law!"
Well, to the extent--and only to the extent-- that every citizen is
under a duty to obey the law, I suppose I'd have to mark this statement
"TRUE" on a TRUE/FALSE exam. By now, however, you understand that the
real issue doesn't concern the "duty" of an arbitrator. It concerns the
power of an arbitrator--and the extent to which a homeowner can
effectively challenge mistakes or abuse incident to the use of that
power. A "duty" that won't be enforced by a court isn't much of a
"duty" for an arbitrator, and it doesn't confer much protection on a
homeowner.
However, here's some more law: "Arbitrators generally are not bound by
principles of substantive law or rules of evidence and thus an error of
law or fact will not justify vacation of an arbitrator's award"
"Generally, an error of law by an arbitrator is not grounds for vacating
an award. It is within the power of an arbitrator to make a mistake
either legally or factually. When parties opt for the forum of
arbitration they agree to be bound by the decision of that forum knowing
that arbitrators, like judges, are fallible."
In other words, homeowner, if you resort to an arbitrator, do so with
your eyes open. "You pays your money and you takes your chance."
Think about it-- the judicial attitude toward review of an arbitrator's
award makes good legal sense--from the court's perspective. The whole
idea is to rid the court's docket of as many cases as can be disposed of
through non judicial means. "If every so called "victim of injustice at
the hands of an arbitrator" can get right back in court, all we have
done is delay the cases, not remove them,
Well, you ask, if arbitration won't necessarily help a Homeowner, does
it follow that the use of arbitration might hurt a Homeowner?
Consider the following scenario:
The Commonwealth of Virginia adopts--without any change--the Hawaii
Arbitration Rules and establishes, pursuant to those rules a Court
Annexed Arbitration Program.
Charles D. Gall, pursuant to the governing documents of the Fortress
Europa Community Association, seeks access to all books and records of
the association. Fortress Europa, on the advice of its attorney,
suggests arbitration. Charles, who is short of change anyway, gladly
agrees. After all the governing documents say he's got a right to "all
books and records."
Meanwhile, the Fortress Europa folks are conducting a "damage control"
exercise. How much "harmless" information will they have to give
Charles to get by the arbitrator? There's the usual collection of dusty
skeletons that even "troublemakers" on the Board of Directors will never
see, (maybe 1/2 of 1% of the Association files). Then, of course,
there's the personnel information, defined to include anything related
to salaries, benefits, pay scales, etc. -- maybe 5-10% of the records
are in this area. Then there is a body of material over which some
colorable claim of privilege exists: attorney client information,
privacy rights of individual members of the Fortress who are late in
assessment payments, etc. -- maybe 25 to 30 % of the material.
So the Association concludes that showing Charles as much as 60 to 70
percent of its records will cause minimal inconvenience or turbulence.
This step is very important, as you'll soon see, because it establishes
a crucial "point spread" upon which the association will seek to
capitalize.
Both sides present cases to the arbitrator. There is, of course , no
transcription or recording of the Arbitrators hearing permitted. After
all, we don't need that kind of record unless we're trying to facilitate
an informed, effective review by an appellate court, right?
Fortress Europa, as usual, is represented by CAI affiliated counsel.
The Association argues that Mr Gall is a nuisance, a sore loser in the
last election of the Burgomasters, and that--at most--he's entitled to
see only 55% of the Association records. The "sore loser" evidence,
which would be inadmissible at a trial, is allowed by the Arbitrator
pursuant to the Arbitration Rules. This really offends Charles' concept
of justice, but more importantly, it contributes to his loss of
composure at the hearing--and that's exactly what the Association wanted
to do.
Charles of course represents himself, and introduces the governing
documents Fortress Europa, and his correspondence with the Association
requesting access to books and records, as his exhibits.
The Arbitrator awards Charles access to 65% of the Association records.
The Arbitrator does not tender any findings of fact or conclusions of
law, but then he is not required to do so under the Arbitration Rules.
Charles looks at the 65% of the documents, and is more fired up than
ever. After reluctantly deciding not to contact the Corleone family, he
now seeks out a member of the equally famous lawyer lobby.
Here's what the lawyer tells Charles:
Nothing in the newly adopted Virginia Arbitration Rules requires an
Arbitrator to correctly apply the law of the Commonwealth. Therefore,
while i agree that the Arbitrator misconstrued your governing documents
and ignored important case law, these mistakes do not entitle you to
relief.
Although you have a right to request a trial "de novo", to do so exposes
you to a serious new risk: Unless, at the trial "de novo", you improve
your position by at least 15% above the Arbitrator's award, you are
exposed to serious sanctions from the court. This means that, even if
you overcome all the obstacles of adverse case law and a non existent
record and convince the court that the Arbitrator was wrong, and that
you are entitled to more than he awarded you, you've also got to prevail
by more than 15%. Otherwise, the sanctions that may be imposed by the
court include up to $5,000,00 in attorney fees you'll be required to pay
the Association's lawyer, the costs of any jury, and any other costs
incurred by Fortress Europa incident to the trial "de novo".
Now you understand the role and the significance of the "point spread"
in the Hawaii Arbitration Rules.
Now you understand why I think an attorney would want Lloyds of London
writing his malpractice policy before ever advising a homeowner client
with a solid case based on the homeowner's RIGHTS to consider
arbitration.
Now--I hope--you have a better appreciation of the basis for CAI's
enthusiastic support for arbitration, and the reasons why we, as a
Board, should stand on our resolution.
RIGHTS ARE NON NEGOTIABLE.
Bruce
you can waive the right to an attorney. Furthermore, Your rights can
only be violated by the state.
Terry Bartholomew
>
> Rights are negotiable, watch a cop show, listen to the Miranda warnings,
> you can waive the right to an attorney. Furthermore, Your rights can
> only be violated by the state.
You just hang on to those thoughts, Bruce!
Bruce
Terry Bartholomew wrote:
>
> Bruce wrote:
> >
> > Rights are negotiable, watch a cop show, listen to the Miranda warnings,
> > you can waive the right to an attorney. Furthermore, Your rights can
> > only be violated by the state.
>