This article is reprinted with permission from the August 15, 2005 issue of
The Legal Intelligencer © 2005 NLP IP Company
By: Charles Forer
Charles F. Forer is a member in the Philadelphia office of Eckert Seamans
Cherin & Mellott, LLC, where he is engaged in all types of Alternative
Dispute Resolution. He is a former co-chair of the Philadelphia Bar
Association's Alternate Dispute Resolution Committee, and he is a frequent
lecturer and writer on the use of ADR in a variety of settings. He can be
reached at 215.851.8406, and by email at email@example.com.
Robert hit a roadblock in his last arbitration proceeding. Representing
a bank, Robert duly served the arbitration demand on the bank’s high-net-worth
borrower who owed more than $600,000.00; presented all of his evidence at the
arbitration hearing at which the borrower was a no show; and received the
expected arbitration award for the full amount of the bank’s demand.
However, the Court denied the bank’s petition to confirm the arbitration
award. Apparent reason for the Court’s decision: under
Pennsylvania law, the Court – not
the arbitrator – determines the threshold issue of whether the parties agreed to
arbitrate their dispute.
The Court’s refusal to confirm the bank’s arbitration award is not only bad
news for Robert’s bank client. It also is bad news for the bank‘s other
arbitration matters in which the respondents likewise have flouted the
arbitration proceeding by refusing to participate.
Come to think of it, the Court’s refusal is bad news for any party that seeks
to prosecute its claims in an arbitration proceeding in which the other side
refuses to participate. Robert does not yet realize it, but his bank
client now will have to do the following in order to obtain a judgment against
- file its initial arbitration demand;
- serve the demand;
- obtain an apparent “award” in the arbitration proceeding;
- strike out in Court in seeking to confirm the arbitration award;
- file a lawsuit in order to obtain an order compelling arbitration;
- go back to arbitration and re-file the arbitration demand;
- serve the new arbitration demand;
- get yet another ex parte arbitration award; and
- obtain – finally! – a Court order that confirms the arbitration award and
enters judgment in favor of the bank.
It is no exaggeration to say that if Robert has any more tortuous matters
like this, his arbitration clients are going to have second thoughts about
Must Robert’s clients go through this lengthy, expensive and multi-step
process in order to obtain a judgment against a respondent who refuses to
participate in the arbitration? Is there any way to escape this
morass? Here are some things that Robert should suggest when he has the
courage to call up his bank client:
- Draft the arbitration provision differently. Arbitration
is a matter of contract. Courts respect the contracts that the parties
make. In initially drafting the arbitration clause, therefore, the parties
should say that the arbitrator decides the issue of arbitrability.
In First Options, Inc. v. Kaplan, 514 U.S. 938 (1995), the United
States Supreme Court held that "courts should not assume that the parties agreed
to arbitrate arbitrability unless there is 'clear and unmistakable' evidence
that they did so." At least under federal law, therefore, (a) the language
of the arbitration agreement determines whether the parties have agreed to
submit the arbitrability question to arbitration; and (b) the parties
accordingly should clearly provide that the arbitrator – and not the Court –
decides whether the parties have agreed to arbitrate their dispute.
For instance, the