Sunday, April 5, 2015

Sanctions Awarded For Interference with Arbitration

Sanctions Awarded For Interference with Arbitration


      A recent decision from the Court of Appeals Affirmed an award of sanctions against a person who interfered with an arbitration.  Cher-o-kee Truckbodies v. E.S.T. Tool & Machine, Inc., No. 2013-CA-001062-MR (Ky. App. March 27, 2015).

      Susan Cherry had an undefined relationship with Cher-o-kee.  In turn, Cher-o-kee and A.S.T. had a contractual dispute which was per the agreement referred to arbitration.  The arbitration took place, with $26,587.85 awarded to Cher-o-kee and $9,879.79 to E.S.T., yielding a net of $16,708.06 to Cher-o-kee.  Cher-o-kee moved for a new hearing, and both it and E.S.T. submitted arguments (presumably written).

      Before the arbitrator could rule as to the motion for a new hearing, Cherry sent an ex parte letter to the arbitrator insisting that he disqualify himself on the basis that in 2003 he had donated five hundred dollars to the Attorney General campaign of Greg Stumbo, father of [E.S.T.s] attorney. The decision makes clear that Cherrys then attorney was unaware of the letter.  The arbitrator contacted the KBA Ethics Hotline, who determined that the arbitrator did not have a conflict of interests.  Unhappy with that determination, Cherry again ex parte wrote to the arbitrator demand[ing] to know if the arbitrator had any other connections to the father of opposing counsel.  In response the arbitrator recused himself because he did not want to continue dealing with Cherrys persistent accusations. 

      E.S.T. moved the Court to sanction Cherry under Rule 11, seeking the attorney fees and costs it had incurred in the arbitration.  It also sought dismissal of the action, or to approve the findings and award made by the arbitrator.  The trial court (i) awarded E.S.T. the monetary relief (attorney fees and expenses) it had requested, and (ii) declined to award Rule 11 sanctions.  In addition, the trial court approved the withdrawal of Cherrys attorney.

      On appeal, Cherry proceeded pro se; how she was able to do so when a non-attorney may not represent a legal entity is not discussed.  While she argued that her conduct did not rise to the standard required for Rule 11, the Court of Appeals noted that was not the question.  Rather, the point was whether she abused the process of Court-ordered arbitration.  Citing Gentry v. Gentry, 798 S.W.2d 928, 938 (Ky. 1990), it was observed that a court has wide discretion to award fees when a partys conduct and tactics waste the courts and attorneys time.’”  Finding that an arbitrator is equivalent to a judge and that ex part communications are improper, it was observed that if Cherry thought the arbitrators determination was incorrect her recourse was review of the award by the courts.

We conclude that by persisting in circumventing our legal procedures, Cherry is responsible for the prolonged post-arbitration proceedings, comprising nearly three years.  Therefore the trial court did not abuse its discretion when it awarded fees to E.S.T.

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