This blog, written by Thomas E. Rutledge, focuses primarily on business entity law in Kentucky. Postings on contract law, contractual and statutory construction, and the entity law of other jurisdictions appear as well. There may as well be some random discussions of classical, medieval and renaissance history.
Sunday, April 5, 2015
Sanctions Awarded For Interference with Arbitration
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 Cherry’s 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
response the arbitrator recused himself “because
he did not want to continue dealing with Cherry’s
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 Cherry’s 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 party’s ‘conduct and tactics …waste the court’s and attorney’s
that an arbitrator is equivalent to a judge and that ex part communications are
improper, it was observed that if Cherry thought the arbitrator’s
determination was incorrect her recourse was review of the award by the courts.
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.