No Pay No Play: How to Solve the Non-Paying Party Problem in Arbitration - Chapter 41 - AAA Handbook on Arbitration Practice - Second Edition
Richard J. DeWitt is a principal at DeWitt Law/ Resolve Disputes in Coral Gables, Florida. He has over 35 years’ experience as a business and technology attorney and business executive. Mr. DeWitt serves as an arbitrator and mediator in domestic and international commercial, business, technology and employment disputes. He is a member of the American Arbitration Association's National Roster of Neutrals serving on its large, complex case panel, its commercial, employment and technology panels and its panel of Mediators the International Centre for Dispute Resolution Panel of Neutrals. He is also a Member of the CPR Institute panel of Neutrals and the CDRS Panel of Neutrals. He is a Florida Supreme Court Certificated Arbitrator and Florida Supreme Court Certified Circuit Civil Court Mediator. Mr. DeWitt is a member of the Florida Bar, a Fellow of the College of Commercial Arbitrators and Distinguished Fellow of International Academy of Mediators and a member of the National Academy of Distinguished Neutrals.
Richard J. DeWitt, III is an attorney at Arnstein & Lehr, LLP, in Ft. Lauderdale, Florida. He practices in the areas of land use, eminent domain, and government relations. He is a member of the Florida Bar
Originally from:
AAA Handbook on Arbitration Practice - Second Edition
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CHAPTER 41
NO PAY NO PLAY: HOW TO SOLVE THE
NON-PAYING PARTY PROBLEM IN ARBITRATION
Richard J. DeWitt and Richard J. DeWitt, III
Preface
We first wrote about this issue in the February – April 2005 Dispute
Resolution Journal. That article was subsequently updated, expanded and
published as Chapter 28 of the 2010 American Arbitration Association
Handbook on Arbitration Practice.
Our purpose in writing the Article and Chapter was to begin a
discussion in the Arbitration community regarding what we believed and
still believe is a serious issue of parties gaming the Arbitration Process.
Based on the articles1 and cases citing our article and the chapter we
were successful in initiating a discussion of the issue. However, though
there has been much discussion there has been little progress in resolving
the non-paying party problem.
The solution we proposed, though not fully embraced by the
Arbitration Community was partially, and we believe ineffectively
incorporated in the AAA Rules.
The one area of the law recent court decisions seem to be clarifying
is that the failure of a party to pay their share of the arbitrator’s fees and
costs constitutes a waiver of the right to arbitrate.
We have updated this chapter to reflect these developments with the
goal of continuing the discussion of this issue.
I. Introduction
A continuing complaint of parties who put arbitration clauses in their
commercial agreements is that they are not realizing the benefits of
arbitration due to the nonpaying party problem. The problem arises when
one party fails to pay its share of the required deposit for arbitrator
compensation and administrative arbitration fees. This chapter discusses the
practical implications and legal issues resulting from this problem and
proposes a solution that should preclude parties from using nonpayment of
deposits strategically as a means of “gaming” the arbitration process.
What happens when a party to arbitration fails to pay its share of a
required deposit covering arbitrator compensation and arbitration fees?
Generally, the other party is faced with the choice of: