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Arbitration Fees Deemed Unreasonably High Arbitration; Claims Administration

Tuesday, August 03, 2004 02:32 pm

Arbitration Fees Deemed Unreasonably High Arbitration; Claims Administration

A California court has ruled that due to the "inordinately high"filing fees charged by the American Arbitration Association (AAA), a homeowner could force an architect and a contractor to pay the fees if those defendants insisted on arbitration of the homeowner's claim.

Joseph Francis entered into an architectural services agreement with Tracy Price to design the renovation of a home in Pacific Palisades and to monitor the construction of those improvements. Francis then signed a cost-plus construction contract with Westlan Construction, Inc.

In both cases, the parties utilized contract documents published by the American Institute of Architects calling for mediation and binding arbitration of disputes in accordance with the Construction Industry Arbitration Rules of the AAA. Neither agreement attached a copy of those rules.

Francis paid Westlan $1,168,000 for construction, well in excess of the estimated price of $790,000. Westlan then demanded an additional payment of $127,000 and estimated it would cost another $710,000 to complete the work, bringing the total to more than $2 million.

Francis filed suit against both Price and Westlan alleging, among other things, breach of contract. The architect and the contractor moved to stay litigation and compel arbitration in accordance with the terms of their respective contracts. A trial court set an order to show cause why the lawsuit should not be dismissed in order [...]

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