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Harrington v. Pulte Home Corp.9/27/2005
osts and fees creat a risk that she [would] be required to bear prohibitive arbitration costs . . . and thereby force her to forego" her claims. Id. at 90. The Court recognized that the existence of large arbitration costs could preclude a litigant from effectively vindicating her right, but found the record absent of any proof of those costs. Id. at 81.
Thus, the Court deemed the "risk" of prohibitive costs "too speculative to justify the invalidation of arbitration agreement." Id. at 91.
The Court has made it clear that arbitration is appropriate only " o long as the prospective litigant effectively may vindicate" his or her rights in the arbitral forum. Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 28 (1991) (discussing statutory rights). As such, arbitration costs are directly related to a litigant's ability to pursue such a claim. Blair v. Scott Specialty Gases, 283 F.3d 595, 605 (3rd Cir. 2002). Arizona courts explain that the primary purpose of arbitration is to provide an inexpensive and speedy final disposition of disputes, as an alternative to litigation. Canon Sch. Dist., No. 50 v. W.E.S. Const. Co., Inc., 180 Ariz. 148, 152, 882 P.2d 1274, 1278 (1994); Rancho Pescado, Inc. v. N.W. Mut. Life Ins. Co., 140 Ariz. 174, 182-83, 680 P.2d 1235, 1243-44 (App. 1984) (holding that the "primary attraction of arbitration" is providing an "expeditious and inexpensive method of dispute resolution").
In Randolph, the Supreme Court adopted a case-by-case approach to determining whether fees imposed under an arbitration agreement deny a potential litigant the opportunity to vindicate his or her rights. 531 U.S. at 92. It also placed the burden upon the party seeking to invalidate the agreement to demonstrate that arbitration would be prohibitively expensive. Id.
Additionally, Randolph dictates that arbitration agreements are enforceable in the absence of individualized evidence to establish that the costs of arbitration are prohibitive. Id. at 91-92. "To invalidate the [arbitration] agreement on that [speculative] basis would undermine the liberal federal policy favoring arbitration." Id. at 91 (citation and internal quotation omitted); see also Sydnor, 252 F.3d at 306 (" ailure of an arbitration agreement to address costs and fees does not alone make the agreement unenforceable."). Arizona has the same policy favoring arbitration. See A.R.S. ยง 12-1501 (stating that arbitration agreements are generally enforceable).
Appellees represented to the superior court that costs to proceed as the arbitration clause required, under the Construction Industry Arbitration Rules of the AAA, would require an initial filing fee of $6,000 for claims between $500,000 and $1,000,000, plus a case service fee of $2,500. Applying the rules of class arbitration would trigger an additional $3,250 filing fee. Claims may be heard by one or three arbitrators at the discretion of the AAA, and these arbitrators must be compensated at their stated rate for conference and study time (a rate not part of the record). In addition, parties to arbitration must pay for rental of a hearing room. Appellees also argued that, depending on the ultimate size of the class and whether punitive damages were recoverable, the actual amount at issue could be much larger, which would affect the arbitration fees. Appellants did not dispute the fee schedule set out by appellees. Thus, we accept the amounts that are of record as accurate.
Appellees' claims are for amounts between $500,000 and $1,000,000. The costs of record are small when compared to the amount they seek to recover and compared to the amount they would likely have to pay in litigation expenses if arbitration we
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