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Battle Of The Forums: Deciding On A Venue For Arbitration

So you have sold a vehicle.  You have informed the customer that, per the Retail Installment Sales Contract, any and all disputes they may have with either the purchased vehicle or your dealership are subject to arbitration.  A dispute arises, you bring the case to our attention, and more likely than not, your case is no longer in the hands of the Superior Court with a more than likely hostile jury, and is now subject to a private arbitration.  The question then is where does the case progresses from here?  Exactly where do the parties arbitrate?  Who will arbitrate?  These questions frequently pop up even after the litigation of a motion to the court to compel arbitration between the parties, and as a result, the case stays in limbo for an indefinite period of time.

This is a trend that has occurred more recently with respect to the various arbitration forums available to both consumers and businesses alike.  It is clear that consumers very frequently avail themselves to all possible options when it comes to the procedure of their case and legal remedies, which serves as the primary reason they elect to utilize such arbitration forums like JAMS and ADR Services, Inc.  Meanwhile, a dealership’s preference to an arbitration forum like the American Arbitration Association is a logical preference, as it serves to be the most cost-effective course of action while expediting the cases in the simplest fashion and allowing the parties to litigate the action as they see fit; this includes discovery proceedings and other procedures the parties view to be appropriate on a case-by-case basis.

While the arbitration provision present in virtually every Retail Installment Sales Contract does provide that the consumer may propose a different provider, remember that their preference is certainly not dispositive, despite their contentions to the contrary.  Rather, the arbitration provisions make clear that you, as the dealer, select AAA, but Claimants’ selection of a different arbitration service provider is “subject to [the dealership’s] approval.”  The preference for AAA can logically be inferred from its low costs borne from its expedited procedures. This course of action is not by mistake, as it serves to act in accordance with California law as it pertains to any alternative dispute resolution.  After all, public policy strongly favors arbitration as a speedy and relatively inexpensive means of dispute resolution. (Ericksen, Arbuthnot, McCarthy, Kearney & Walsh, Inc. v. 100 Oak St. (1983) 35 Cal.3d 312, 322.)  It is an accepted and favored method of resolving disputes, praised by the courts as an expeditious and economical method of relieving overburdened civil calendars. (Madden v. Kaiser Found. Hosps. (1976) 17 Cal.3d 699, 706 – 707.)  As a result, it is no mistake that AAA serves as the most logical choice for an arbitration forum for both consumers and businesses.

This new “battle of the forums” has become more hotly contested over the last few months.  In light of the trend that consumers and businesses are unlikely to see eye-to-eye over this issue, this serves as an opportunity to explore the meaning of Cal. Code Civ. Proc. § 1281.6.  Section 1281.6 has become a statute which both sides are becoming more and more familiar with.  It serves to grant the court the discretion to appoint a selected arbitrator.  Thus, the trend has become more apparent to select, individually, arbitrators that have proven to be cost-efficient and effective as an alternative to choosing an entire forum like AAA.  As more cases fall under the same circumstances, we have sought to find meaning within the vague language of Section 1281.6, and have yielded some positive results, saving dealerships more money than they anticipate spending litigating in arbitration.

Robert Bouroudjian, Esq.


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