Once Again, Second District, Division 1 Gets to Explore Legal Consequences of Not Paying All the Arbitrator’s Fees
The parties in Cinel v. Barna, Case No. B232380 (2nd Dist. Div. 1 May 18, 2012) (Johnson, J.) (unpublished) have undoubtedly expended lots of attorney’s fees by now, exploring the legal consequences of not paying the arbitrator’s fees. On February 29, 2012, we blogged about Cinel v. Christopher, 203 Cal.App.4th 759 (2012) (Johnson, J.). Back then, the question was: what happens when a party doesn’t pay the arbitrator’s fees, and the arbitrator terminates the arbitration? When one of the parties, Christopher, petitioned to confirm an award as a result of the termination, the arbitrator denied the petition. The Court of Appeal concluded that the “denial” was tantamount to a “dismissal” of the petition to confirm the award –an appealable order – but that the trial court correctly dismissed the petition and ordered the matter to trial, because the arbitrator never reached the merits.
Another party, Barna, has now argued that he, Barna, never waived his right to arbitrate, that he paid his portion of the arbitrator’s fees, and that the trial court should therefore compel arbitration. Perhaps he was disappointed that Cinel didn’t pay everyone’s unpaid arbitrator’s fees, because apparently Cinel is a billionaire. But Cinel was not legally obligated to pay every one else’s arbitration’s fees, as altruistic as such a gesture might be. In fact, Cinel, who originally filed suit in state court for fraud, was not the party who sought arbitration in the first place.
Waiver is the interesting issue here: “[D]efendants have waived their right to arbitrate by refusing to reach a resolution with Cinel on the fee dispute.” Remember, waiver in the context of arbitration doesn’t require intentional relinquishment of a known right – simply acting inconsistently with pursuing one’s right to arbitrate may lead to waiver. That’s what happened here where the parties were offered an opportunity to “work it out” among themselves and failed to do so. The result: waiver of the right to arbitrate.
If the parties have no agreement how to pay an arbitrator, then pursuant to statute, everyone has an obligation to pay their pro rata share. Cal. Code Civ. Proc. section 1284.2. In the case of AAA arbitration, the AAA rules take over. Here, the AAA panel, ”under the authority of the AAA Rules, ordered the parties to split the fees of the nonpaying parties; when the paying parties refused to do so, the arbitration was terminated. . . . . Barna cannot use the nonpaying parties as a proxy to extort payment of the entire amount of the nonpaying parties fees’ from Cinel, who did not demand arbitration in the first place.”
The Court of Appeal also expressed concern that if Barna could revive the arbitration, the parties risked falling into an “infinite loop.” Once again, someone wouldn’t pay their fair share of the arbitration, and again, the arbitrator would terminate the arbitration. And once again, someone would insist that he had paid his fair share, and the arbitration should proceed. And so on . . . .
Above: Allen Hastings’ “Infinite Loop.”
Result: Affirmance of the trial court’s order denying the motion to compel arbitration.
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