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Posts Tagged ‘ADR’

Employers Should Consider “Prevailing Party” Language In Arbitration Clauses

Posted on: March 13th, 2019

By: Ken Menendez

Employers seeking to discourage frivolous claims by employees may wish to consider utilizing a “prevailing party” clause as part of their agreement to arbitrate.

Many employers utilize arbitration as a means of avoiding the generally greater cost and uncertainty of litigation in employment cases. Agreements to arbitrate are even more prevalent in employment agreements with highly compensated or professional employees.

One of the advantages of arbitration is the ability of the parties to the agreement to establish the rules governing the arbitration and arbitration award. In addition to procedural and logistical guidelines, the parties to an arbitration agreement may also authorize the arbitrator or arbitrators to award the costs, including attorney’s fees, of the arbitration to the prevailing party in the arbitration.

Such a clause might read as follows:

The arbitrators shall award the costs and expenses of the arbitration, including attorney’s fees, to the prevailing party as determined by the arbitrators in their discretion.

A “prevailing party clause” such as the foregoing may reduce the number of baseless claims against an employer, as potential claimants will have to weigh the risk of paying the employer’s costs in the event that the arbitrators rule that the employer was the prevailing party.

The foregoing arbitration clause requires the award of costs to the prevailing party. The drafters of the clause could, if they wished to do so, also make the award of costs discretionary simply by changing the word “shall” to “may.” It is also important to note that the foregoing clause requires the arbitrators to determine which party is the prevailing party. Because many employment cases contain both claims and counterclaims, placing the responsibility for identifying the prevailing party on the arbitrators eliminates subsequent disputes between the parties regarding which party was the prevailing party.

If you have any questions or would like more information, please contact Ken Menendez at [email protected].

Before bringing or defending an enforcement action filed in court involving an HOA, ask, does your state first require ADR or that a request for ADR be made?

Posted on: March 12th, 2019

By: Michael Shepherd

As courts across the country become more congested, many courts now order the parties to participate in some form of alternative dispute resolution, such as mediation or non-binding arbitration. When it comes to Homeowners Associations, many state legislatures have taken the affirmative step of requiring HOAs or owners bringing an enforcement action to at least request ADR before filing a lawsuit in court.

It is important to carefully examine your state’s laws to see (1) whether ADR or a request for ADR is required and (2) under what circumstances. For example, California only requires a request for ADR in civil actions that (1) solely seek declaratory, injunctive, or writ relief; (2) solely seek declaratory, injunctive, or writ relief in conjunction with monetary damages not in excess of the limits for small claims actions; and (3) seek to foreclose on an owner’s interest. Cal. Civil Code §§ 5930(b) and 5705. Moreover, a request for ADR is not required in California if the action is filed in small claims court or if preliminary or injunctive relief is necessary. Cal. Civil Code §§ 5930(c) and 5950(a)(3).

In California, the Davis-Sterling Act prevents associations or owners from filing an enforcement action in court before the parties have attempted to submit their dispute to ADR. An enforcement action is defined as a civil action brought to enforce the Davis-Sterling Act, to enforce the Nonprofit Mutual Benefit Corporation Law, or to enforce the governing documents of the HOA. Cal. Civil Code § 5925(b). ADR can take the form of mediation, arbitration, conciliation, or any other nonjudicial procedure that involves a neutral party in the decision-making process. While there is no requirement that the parties participate in ADR, a party’s unreasonable refusal to participate in ADR may be considered when attorney’s fees and costs are recoverable. Cal. Civil Code § 5960. Furthermore, the parties must file a certificate of compliance with the civil action stating that ADR was requested or that a request is not required under the circumstances. Failure to file the certificate of compliance exposes the complaint to a demurrer or a motion to strike.

In today’s world of congested courts, it is important to be apprised of when ADR is required as it is often implemented as a way to relieve court dockets. This is just as true in enforcement actions involving HOAs. Therefore, before bringing or defending an enforcement action involving an HOA, be sure to learn whether your state requires ADR or a request for ADR.

If you have any questions or would like more information, please contact Michael Shepherd at [email protected].