California Mediation and Arbitration

Arbitration/Stays: Is There An Automatic Stay Pending Appeal When Arbitration is Denied in Federal Court?

Corporate Counsel Article Points Out That There Is A Split Among The Federal Circuits

    In an April 2, 2012 article in Corporate Counsel online, entitled “In Arbitration, a Right to an Automatic Stay Pending Appeal?”, authors Elbert Lin and J. Andrew Law point out that there is a split among the federal circuits.  The majority holds that appeal of the denial of a motion to compel arbitration automatically stays district court proceedings.  But the 9th, 5th, and 2nd circuits reject the majority view, making it possible for litigants to battle on in district court while the issue concerning the right to arbitrate is being appealed.

     The authors explain:

“The split turns on the application of Griggs v. Provident Consumer Discount Co., 459 U.S. 56 (1982). In Griggs, the Supreme Court held that ‘[t]he filing of a notice of an appeal is an event of jurisdictional significance—it confers jurisdiction on the court of appeals and divests the district court of its control over those aspects of the case involved in the appeal.’ Id. at 58 (emphasis added). The courts of appeals have disagreed over what is ‘involved in’ an appeal of an order denying arbitration.”

    The authors argue that the minority view is an anachronism evincing a resistance to arbitration that the Federal Arbitration Act was intended to overcome, and that review may be “on the horizon” by a Supreme Court majority that has underscored the benefits of private arbitration.

Arbitration/Stay: Inability to Pay Costs of Arbitration Not Good Enough Reason to Lift Stay of Lawsuit

 

Vestigial Powers of Court Following Stay Leave It Without Power to Lift Stay Under the Circumstances

     MKJA sued 123 Fit Franchising alleging that it had been fraudulently induced to enter into franchise agreements. The defendant commenced arbitration in Colorado pursuant to an arbitration, and sought a stay in California of the lawsuit pursuant to Cal. Code Civ. Proc. section 1281.4. Apparently the arbitration in Colorado never really got underway, plaintiff concluding that it was too expensive to arbitrate in Colorado. Plaintiff asked the trial court in California to lift the stay because the arbitration was unconscionable. The trial court believed that Plaintiff should be able to pursue its claim in some forum, and had exhausted efforts to do so in Colorado. It lifted the stay.  MKJA, Inc. v. 123 Fit Franchising, LLC, 191 Cal.App.4th 643 (2011).

     Defendant appealed the lifting of the stay.

     Held: "[A] party's inability to afford to pay the costs of arbitration is not a ground on which a trial court may lift a stay of litigation that was imposed pursuant to section 1281.4. Accordingly, we reverse the trial court's order lifting the stay.”

     Query whether a helpful arbitration provision could be drafted that would address the circumstance in which a party is financially unable to pay the arbitrator’s fees.

  Vestigial:  Human appendix.  Wikipedia.