When a party who has engaged in arbitration in good faith, is unable to afford to continue in such a forum, that party may seek relief from the Superior Court in the State of California.
If sufficient evidence is presented on these issues, and the court concludes the party’s financial status is not a result of the party’s intentional attempt to avoid arbitration, the court may issue an order specifying: (1) the arbitration shall continue so long as the other party to the arbitration agrees to pay, or the arbitrator orders it to pay, all fees and costs of the arbitration; and (2) if neither of those occur, the arbitration shall be deemed “had” and the case may proceed in the Superior Court.
At oral argument in this case, the defendants claimed that allowing parties to seek relief from arbitration in the courts based on their current financial condition creates an open invitation for abuse by those seeking to escape their arbitration obligations. the California appellate court opined “We seriously doubt parties will purposefully make themselves impecunious to have their cases returned to the courts. Regardless, we are more concerned with deep-pocketed parties leveraging their wealth to deprive their opponents of the right to resolve their disputes, than we are with parties choosing to bankrupt themselves as a way out of arbitration and into court. And, under our holding a court may not grant relief if the evidence demonstrates a party’s financial status is a result of the party’s intentional attempt to avoid arbitration. “
As our Supreme Court has explained, “[b]oth California and federal law treat the substitution of arbitration for litigation as the mere replacement of one dispute resolution forum for another, resulting in no inherent disadvantage.” (Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1152.) With the rising costs of arbitration (see Toyo Tire Holdings Of Americas Inc. v. Continental Tire North America, Inc. (9th Cir. 2010) 609 F.3d 975, 980-981), the California Appellate decision in Rae Weiler v. Marcus Millichap Real Estate Investments, Inc. California Fourth District Court of Appeal Division Three, ensures those compelled to arbitrate will not, as a result of finances, be inherently disadvantaged.
A very sound reasoned decision by the California Appellate Courts.
About the Author
Attorney Steven Peck has been practicing law since 1981. A former successful business owner, Mr. Peck initially focused his legal career on business law. Within the first three years, after some colleagues and friend’s parents endured nursing home neglect and elder abuse, he continued his education to begin practicing elder law and nursing home abuse law.