{"id":896320,"date":"2019-08-20T10:49:23","date_gmt":"2019-08-20T16:49:23","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=896320"},"modified":"2019-08-20T10:49:29","modified_gmt":"2019-08-20T16:49:29","slug":"waving-goodbye-to-arbitration","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/waving-goodbye-to-arbitration\/","title":{"rendered":"Waving Goodbye to Arbitration"},"content":{"rendered":"\n

Henry Allen Blair | Stinson<\/a> | August 9, 2019<\/p>\n\n\n\n

I can\u2019t believe we\u2019re more than a week into August! I don\u2019t know about you, but I feel like I\u2019m going to have to say goodbye to summer too soon. I love fall, so maybe that\u2019s not so bad?<\/p>\n\n\n\n

Anyway, speaking of farewells, this week we get a back-to-the-basics refresher from the Eleventh Circuit on waving bye-bye to the right to arbitrate. Although the particulars involved a consumer arbitration agreement, the key reasoning applies more broadly to all arbitrations.<\/p>\n\n\n\n

In\u00a0Freeman v. SmartPay Leasing, LLC<\/em>, 771 Fed.Appx. 926 (11th Cir. 2019), SmartPay and Freeman entered into an agreement providing that the party initiating arbitration could choose either the AAA or JAMS rules and administrative services.<\/p>\n\n\n\n

Freeman had a beef with SmartPay. So, she sued SmartPay in federal district court. Shortly thereafter, the parties filed a joint motion to stay and to refer the dispute to binding arbitration. Freeman selected JAMS as the arbitration forum, she filled out the required form, and she paid a $250 initial filing fee.<\/p>\n\n\n\n

This is where things went off the rails. SmartPay alleged that there were important procedural differences between the parties\u2019 arbitration agreement and the JAMS rules. The details aren\u2019t overly important, but the gist is that SmartPay argued those differences meant that this wasn\u2019t truly a \u201cconsumer arbitration\u201d under JAMS rules. (Basically, SmartPay didn\u2019t want to have to pay all of the costs of the arbitration, other than the initial $250 that Freeman paid.)<\/p>\n\n\n\n

JAMS didn\u2019t buy it. It said that it wouldn\u2019t administer the \u201cconsumer arbitration\u201d unless and until SmartPay finished paying $950 in filing fees and waived any provisions in the parties\u2019 agreement contrary to JAMS\u2019s Consumer Minimum Standards. SmartPay stood firm by its position that this wasn\u2019t a \u201cconsumer arbitration.\u201d So it refused to pay the balance of filing fee. It ultimately took the position that if JAMS wouldn\u2019t administer the arbitration, the case would have to be dismissed and refiled with the AAA.<\/p>\n\n\n\n

JAMS did dismiss, but Freeman opted not to refile with the AAA. Instead, she went back to the district court and asked that the stay be lifted. She argued that SmartPay had waived its right to demand arbitration by refusing to pay the remaining initial filing fee. The district court agreed.<\/p>\n\n\n\n

On appeal, the Eleventh Circuit noted that under FAA \u00a7 3, a district court should stay the litigation \u201cuntil such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.\u201d Default includes waiver. Waiver, in turn, hinges on whether a party has acted inconsistently with the right to arbitrate and that inconsistent behavior has prejudiced the other party.<\/p>\n\n\n\n

The Eleventh Circuit agreed that SmartPay had waived its rights by failing to pay the filing fee. In so doing, it said the issue of whether the alleged conflicts between the arbitration agreement and the JAMS rules could be reconciled was one for the arbitrator. By refusing to pay the balance of the initial filing fee, SmartPay acted inconsistently with its right to demand arbitration. In turn, that prejudiced Freeman because it precluded her from seeking relief through her chosen arbitral forum.<\/p>\n\n\n\n

I\u2019m sympathetic to SmartPay in one sense: JAMS seemingly required SmartPay to waive its procedural arguments before it even got into arbitration. That\u2019s problematic. But the lesson of the case is that arbitral institutions aren\u2019t arbitrators. SmartPay could have and should have made its procedural arguments to the arbitrator. It agreed to JAMS as a forum. Once it did, couldn\u2019t escape that forum on the grounds that the forum was applying arguably the wrong rules. That should have been taken up with the arbitrator herself.<\/p>\n","protected":false},"excerpt":{"rendered":"

Henry Allen Blair | Stinson | August 9, 2019 I can\u2019t believe we\u2019re more than a week into August! I don\u2019t know about you, but I feel like I\u2019m going to have to say goodbye to summer too soon. I love fall, so maybe that\u2019s not so bad? Anyway, speaking of farewells, this week we get… Continue reading Waving Goodbye to Arbitration<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[41],"tags":[9895,42],"class_list":["post-896320","post","type-post","status-publish","format-standard","hentry","category-arbitration","tag-advise-consult","tag-arbitration-2","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nWaving Goodbye to Arbitration - 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