Court Cannot Decide if Notice of Arbitration was Timely.

The Decision is the Arbitrator's Alone.

Heights at Issaquah Ridge, Owners Ass'n v. Burton Landscape Group, Inc. --- P.3d ----, Wash.App. Div. 1, 2009. January 20, 2009

Many in the legal profession have come to dislike arbitration. The arbitrator does not have to make consistent decisions, follow the law closely, or even make finding of fact. There is little accountability. Most awards are secret. Arbitrators market themselves to major law firms to find arbitration work. It is little wonder that most consumer contracts (from investment firms to cellular telephone networks) require an arbitration clause as a condition of service. Big corporations have better chances in arbitration than in the courts. Nevertheless, the courts in Washington and many other states blindly support arbitration clauses and extend the power of the arbitrator beyond the language in the contracts.

Division I of the Court of Appeals of Washington in Heights at Issaquah Ridge was ask to decide what looked like a simple case.

The contract provided that “[a]ny controversy or Claim arising out of or related to the Contract, or the breach thereof, shall be settled by arbitration.” The General Contract defined “claim” as a demand or assertion by one of the parties seeking, as a matter of right, adjustment or interpretation of Contract terms, payment of money, extension of time or other relief with respect to the terms of the Contract. The term Claim also includes other disputes and matters in question between the Owner and Contractor arising out of or relating to the contract. Claims must be made by written notice.”

The arbitration clause further provided that “claims by either party be made within 21 days after occurrence of the event giving rise to such Claim or within 21 days after the claimant first recognizes the condition giving rise to the Claim, whichever is later.”

It seemed obvious to the trial court that no demand had been made within 21 days. The trial court said the 21 days was a condition precedent to arbitration and within the purview of the court.

The Court of Appeals said the bias for arbitration is so strong that the determination whether the 21 day time limit was met must be decided by an arbitrator. Federal courts are in agreement with this rule.

As a practical matter, this means the parties must pay for an arbitration. If the arbitrator rules that the claim was untimely, they must go back to court. If the arbitrator finds a way to stretch the rules (e.g. equitable tolling) so that the arbitration can continue (and it is in the arbitrator’s self interest to do so), there is probably no appeal of that decision.

No wonder many lawyers agree that arbitration is not justice. It is time for the courts to rethink their favoritism toward arbitration.