A party who agrees to arbitrate cannot avoid an adverse arbitration award by ignoring the arbitration proceedings. Merchant Cash & Capital, LLC v. Ko, Case No. 14 Civ. 659(KPF) (S.D.N.Y. June 19, 2015).
Ko operated an auto body shop. He contracted with Merchant Cash, a company that purchases receivables from other businesses, taking $140,000 in exchange for his agreement to turn over $163,800 of his sales to Merchant Cash. As required by the parties’ agreement, Ko opened a designated bank account and used a special credit card processing company for his business transactions. After turning over approximately $5,500 of his sales receivables to Merchant Cash, Ko abruptly closed the bank account, stopped using the credit card terminal, and refused to make further payments to Merchant Cash.
Merchant Cash filed a breach of contract lawsuit. Following the parties’ agreement to arbitrate, the court entered an order staying the lawsuit pending arbitration before the AAA. After initial arbitration pleadings had been filed, Ko’s attorney withdrew as Ko’s counsel. The arbitrator issued orders urging Ko to obtain new counsel and advising him that if Ko chose not to participate in the arbitration, the matter might be heard and an award granted anyway.
Ko did not respond to the arbitrator’s orders, nor to subsequent communications regarding discovery and other matters related to the proceedings. The arbitrator notified Ko of preliminary hearings, sought opposition papers from him, and scheduled the final hearing. Ko did not participate in any part of the arbitration.