Use of Arbitration an Inviting, Albeit Complex, Form of Civil Litigation Resolution

Louisiana strongly favors arbitration between parties when they have a dispute. Generally, it is less expensive and less time consuming than taking the case to trial. The arbitrator will determine the outcome of the damages based on an assessment of all of the circumstances in the case. Each side presents their side of the story so that the arbitrator can make a fair determination of the damages.

In many cases, once the arbitrator makes a decision, neither side can contest the decision unless it violates the law in some way. The Supreme Court of Louisiana has stated, “Because of the strong public policy favoring arbitration, arbitration awards are presumed to be valid. Errors of fact or law do not invalidate a fair and honest arbitration award.” National Tea Co. v. Richmond, 548 So.2d 939, 932 (La. 1989). This type of thinking makes it very difficult to set aside a decision of an arbitrator once it is completed. A case from the parish of St. Landry illustrates this idea.

In that case, the plaintiffs, a family that included two small children, bought a mobile home that they later discovered had mold in the walls and the roof had rotted. The mold likely contributed to their children’s breathing problems, and the family sought damages from both the manufacturer and the seller of the mobile home. The parties were required to arbitrate because the family signed an Arbitration Agreement shortly after they bought the mobile home.

First, they attempted mediation, and that failed, so the family requested an arbitrator from the American Arbitration Association (AAA). The family wanted binding arbitration so the dispute would get settled quickly. However, once the arbitrator made his decisions, the family was unhappy with the amount that they received because it gave them only fifteen percent of the purchase price for the mobile home ($8,843.85) and one third of the cost of the experts involved in the arbitration ($10,991.01). The arbitrator did not award any damages related to the breathing issues that the children suffered.

The family took the issue to court so as to attempt to set aside the arbitrator’s decision. The court pointed out the validity presumption demanded by the Supreme Court of Louisiana and applied Louisiana Revised Statues 9:4210, which explains when the court can set aside an arbitration award. According to the Revised Statues, there are only a few instances where an arbitration result would be set aside – fraud, corruption, undue means, issues with refusing to listen to evidence, prejudicial actions, manifest disregard for the law, or when the arbitrator exceeded his powers. In this case, the family attempted to argue that the arbitrator had a manifest disregard for the law and that he exceeded his powers because the arbitrator found that there were defects, but only awarded part of the purchase price when the family stated that they would not have bought the mobile home if they knew about the defects. The court was not persuaded by their argument, however, because the court gives a great deal of deference to the arbitrator’s decision, and it found that the arbitrator’s decision was “fair and honest.”

The family also argued that they did not realize what the Arbitration Agreement was, did not read it, and no one explained it to them, therefore it was invalid, and they should not be required to arbitrate. The court pointed out that because they sought binding arbitration from the AAA, then the family could not challenge the validity of the Arbitration Agreement that they signed shortly after purchasing the mobile home.

Accordingly, the court affirmed the decision of the arbitrator, including the damage amounts. It is important to note that the court does have the power to adjust the award should they determine that the damages are too high or too low. However, the court cannot look into the merits of the decision-making process, unless the arbitration has one of the errors the code mentions, and substitute the arbitrator’s decision for its own.

Because of its binding nature, arbitration should be conducted with the help of an experienced lawyer. Arbitration is common in personal injury and insurance disputes, so the Berniard Law Firm, who specializes in these areas, is particularly helpful if you have legal issues regarding arbitration.