Labor & Employment Law

Case-by-case determination of ability to pay arbitration fees and costs

Brady v. The Williams Capital Group (New York 03/25/2010)

Brady brought an Article 78 proceeding to compel the employer to pay the arbitrator's fee with respect to her Title VII wrongful discharge claim based on sex and race discrimination. The trial court dismissed the petition holding the fee-sharing provision of the arbitration agreement, rather than the American Arbitration Association's (AAA) "employer-pays" rule, governed. The New York Appellate Division reversed. The New York Court of Appeals remitted the matter to the trial court for a hearing on Brady's financial ability to share the costs of arbitration.

The court was mindful of the strong state policy favoring arbitration agreements and the equally strong policy requiring the invalidation of such agreements when they contain terms that could preclude a litigant from vindicating her statutory rights in the arbitral forum.

The court held that in this context, the issue of a litigant's financial ability is to be resolved on a case-by-case basis and that the inquiry should at minimum consider the following questions:

(1) whether the litigant can pay the arbitration fees and costs;

(2) what is the expected cost differential between arbitration and litigation in court; and

(3) whether the cost differential is so substantial as to deter the bringing of claims in the arbitral forum.

My view: This is the right way to do it, although some other courts seem to be confused by all of this.

Full post as published by Arbitration Blog on March 31, 2010 (boomark / email).