- Arbitration Provisions: What If NAF or AAA Refuse to Hear Your Claim?
- November 21, 2012 | Author: David Brown
- Law Firm: Weltman, Weinberg & Reis Co., L.P.A. - Cleveland Office
In 2009, both the National Arbitration Forum (NAF) and the American Arbitration Association (AAA) made clear that they will no longer accept many types of consumer debt collection arbitrations. Unfortunately, these two organizations are the same organizations designated as the arbitration forum of choice in many standard arbitration agreements. So, what is a creditor to do in the event that one of these organizations refuses to accept an otherwise valid claim for arbitration involving a consumer debt collection? The answer may lie in the underlying agreement to arbitrate.
As indicated above, many arbitration agreements spell out the name of a specific arbitration forum - such as the NAF or the AAA - where all claims for arbitration should be submitted. Obviously, a problem will occur if the arbitration provider listed in the arbitration agreement refuses to accept the claim of arbitration. If this happens, there are a few options that should be considered. First, the arbitration agreement may list a second or third available arbitration venue. Many arbitration agreements provide a list of alternative arbitrators. If this is the case, the party seeking arbitration may simply proceed by selecting an arbitrator from the list that will agree to hear its claim, and filing its claim there. Afterward, it is imperative that the filing party asks for and follows the arbitrator’s rules of arbitration, as each forum or provider may differ substantially in their requirements.
Otherwise, if the arbitration agreement fails to include a list of potential arbitration forums, the party seeking arbitration should review the arbitration agreement for language indicating that a “mutually agreeable arbitrator” may be used in lieu of the named arbitrator. For instance, an arbitration agreement may state, “all disputes of any kind shall be submitted to the AAA for arbitration under its then prevailing arbitration rules, or to any other mutually agreeable arbitrator”. If this is the case, the parties are free to choose an arbitrator that is agreeable and convenient to all involved. The arbitrator might be a national organization, a local firm, or a division of the state or federal court in the location where either party resides.
Finally, if arbitration is still intended, and neither of the recommendations above apply, the party seeking arbitration may seek the advice or intervention of a court of law, directing that arbitration proceed within the court itself, or in an outside agency otherwise ordered. That said, a lawsuit should only be filed as a last resort as some state courts have found that “an agreement to arbitrate is waived by any action of a party which is inconsistent with the right of arbitration.” Although there is a strong presumption in favor of arbitration, a party can waive its contractual right to arbitration. In fact, the consensus is that “a party may waive an agreement to arbitrate by engaging in two courses of conduct: (1) taking actions that are completely inconsistent with any reliance on an arbitration agreement; and (2) delaying its assertion to such an extent that the opposing party incurs actual prejudice.”
In summary, parties wishing to arbitrate consumer collection disputes may not be able to do so through the large national arbitration forums like the NAF or the AAA. If this is the case, the agreement to arbitrate should be consulted to see if other options are expressly stated therein. If not, the party seeking arbitration should contact legal counsel for assistance in how to best accomplish the intent of the parties, in filing an arbitration and/or legal act.
Sutherland Asbill & Brennan LLP, NAF announces that it will no longer arbitrate consumer disputes, and AAA comes tumbling after, July 27, 2009, http://www.lexology.com/library/detail.aspx?g=afabb7b7-d9fe-4082-84c7-556e1ee45bb2
Hathaway Development Company, Inc. v. Advantage Fire Sprinkler Company, Inc. (2008), 290 Ga.App. 374.
Johnson Associates Corp. v. HL Operating Corp., 680 F.3d 713 (6th Cir. 2012).