Arbitration

Arbitration

By:Michael F. Swick
Vice President - General Counsel, The American Kennel Club, Inc.

The American Kennel Club (AKC) has implemented an arbitration process for disputes or claims arising out of registration matters and disputes or claims arising out of event entries. At the present time, this process is only applicable to claims made against the AKC.

Effective April 1, 2004, the Board had voted to add clubs to this process as to disputes or claims arising out of event entries. It is not, however, mandatory for clubs to participate. They may choose to opt out. After April 1, the entry forms will include the clubs as part of the arbitration clause and process. A club may opt out by telling its superintendent to include the opt out language in the premium list, or if it does not use a superintendent, a club may contact the AKC legal department at 212-696-8310 for the opt out language. This form language has already been provided by the AKC to the superintendents and will override the arbitration language on the entry form. If your premium list is being prepared before April 1 for a show after April 1, you may direct the use of this opt out language now if your club does not want to arbitrate claims made against it.

The AKC has received approval for its use of arbitration from its insurance company and from the insurance company, which underwrites the club program, featured on the AKC web-site through Equisure and Acordia. If your club insurance is written by some other entity, your club should opt out until it gets written approval for the use of arbitration. Most insurance companies favor the use of arbitration. If you are told that it could take months for approval, you should seriously consider changing brokers or insurance companies.

Arbitration is administered by private organizations as opposed to litigation which is administered by public courts. We have chosen the American Arbitration Association (AAA) which is one of the older, more well known organizations, though there are numerous organizations which administer arbitration. Copies of the rules of the AAA governing arbitration may be obtained by contacting the nearest AAA office. You may be represented by counsel in this process and generally the rules of evidence are adhered to by the parties and arbitrators. An arbitration is commenced by contacting the nearest office of the American Arbitration Association and filing a demand for arbitration. If a claim or counterclaim is made against you in arbitration, you should notify your insurance company just as in litigation. Under this system, the proceedings are not open to the public as in court and thus have a greater level of confidentiality. There may or may not be a transcript. In arbitration, adverse decisions carry less precedent and draw less publicity. Arbitration hearings after commencement proceed along the lines of a trial with each side presenting its evidence and then giving a closing either orally or by brief.

With the caveat that for the most part, we, i.e., the AKC and the club usually expect to be the defendant, there are several further advantages. In order to initiate a proceeding, a claimant must pay a filing fee based on the amount of the claim. For example, a claim in excess of $1,000,000 requires a filing fee of $8,500 which is non-refundable. This serves two purposes for a defendant or respondent. One, unsupported damages of ludicrous amounts will not be claimed, and second, you have to think twice about the merits of your case before writing the check. Lawyers are not going to front or loan these fees, and in a lot of states it would be unethical to do so. Additionally, as far as fees, the claimant will have to contribute to the daily fees and costs for the arbitrators who will range in number from one to three depending on the amount of the claim. These fees will serve as an impediment to the frivolous claim.

In arbitration, you also for the most part can get a quicker resolution and closure to the matter. While complicated matters can involve as much discovery and time as litigation, in most cases you are not going to have to deal with endless depositions, interrogatories and document productions. This is one particular reason why insurance underwriters like arbitration. This ability to limit discovery is also the ability to limit our expenses, which is particularly good with the higher deductibles. You are also less likely to be faced with punitive damages or an adverse award of attorneys fees.

In arbitration the decision makers, i.e. the arbitrators are usually business people who may be retired as opposed to juries who on an individual basis may lack expertise in any certain area, are worried about getting back to their job and are more likely to act on a basis of emotion.

When the proceeding is over and an award is entered in most states, the matter is concluded. Endless appeals are not part of the arbitration process as most jurisdictions limit the grounds for appeal to such grounds as fraud, bias on the part of the arbitrator, or the arbitrators exceeding their authority.

It should be noted that claimants will still attempt to file suit in court stating that they did not realize they had agreed to arbitrate. This will result in a motion to compel. Usually, not only state law but federal law under the Federal Arbitration Act will uphold an agreed upon proper arbitration clause.

Conclusion

This article is for informational use only. It is not intended to be exhaustive on this subject. It is not and should not be considered a legal opinion or advice. Laws change from time to time and differ from state to state. Arbitration law is a creature of state and federal law. You are advised to seek professional counsel before taking any action based upon information contained in this article.