April 12, 2017 Practice Points

Court Enforces Do-Over Provision

By Mona Ghogomu

In Condon v. Daland Nissan, Inc., 210 Cal. Rptr. 3d 655 (Cal. App. 1st Dist. 2016), a California court enforced an arbitration clause that entitled a party to a new arbitration if an award was entered against it in an amount over $100,000.
In Condon, the consumer, Condon, purchased a vehicle from Daland Nissan, Inc. and subsequently alleged that the dealership knowingly failed to disclose prior damage to the car. The sales contract required arbitration and provided that a party who has an award granted in excess of $100,000 against it "[m]ay request a new arbitration under the rules of the arbitration organization by a three-arbitrator panel."

The parties used ADR Services (ADR) to handle the arbitration, and Condon was granted an award in excess of $180,000. Pursuant to the arbitration agreement, Daland requested a new arbitration. ADR informed the parties it lacked authority to resolve their dispute over whether it could conduct a new arbitration and instructed the parties to seek a court order. In court, in addition to seeking a new arbitration, Daland sought to switch providers to the American Arbitration Association (AAA). Condon argued that ADR's lack of appellate rules precluded a second arbitration from being conducted, as the arbitration clause states that "a party may request a new arbitration under the rules of the arbitration organization by a three-arbitrator panel." The trial court affirmed the arbitration award, but its decision was reversed on appeal.

The appellate court held that the arbitration clause allows a "do-over" at the relevant party's request. The fact that ADR does not have a set of appellate rules does not preclude it from conducting a new arbitration. Although Daland requested that the arbitration be conducted by AAA, it did so only because Condon seemed to be objecting to a second arbitration by ADR. As Daland was "perfectly happy" to utilize ADR, the court upheld the arbitration clause and ruled that a new arbitration could be held by that organization.

Practice Point
Where an arbitration clause provides for a new arbitration in certain circumstances, California courts are willing to enforce it. The second arbitration is not considered an "appeal," but what the Condon court describes as "an arbitration repeat." Your initial choice of arbitration administrator may be critical though, as you probably will be required to utilize the same provider the second time around.

Keywords: arbitration, alternative dispute resolution, adr, litigation, lack of appellate rules, do-over, second arbitration

Mona Ghogomu is a 2017 J.D. candidate at DePaul University College of Law in Chicago, Illinois.

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