70 The Alabama Lawyer 439 (2009). The Arbitration Alternative - Some Common Issues.

• Author: BY WILLIAM D. COLEMAN

The Alabama Lawyer

2009.

70 The Alabama Lawyer 439 (2009).

The Arbitration Alternative - Some Common Issues

The Arbitration Alternative - Some Common IssuesBY WILLIAM D. COLEMANThis article focuses upon some common issues that the civil litigation practitioner may face when a client's dispute is to be resolved in arbitration. In addition to the "recent" popularity of mediation in Alabama,(fn1) arbitration as an alternative to litigation has become a more prevalent form of dispute resolution in recent years.(fn2) This is especially true for the business world in general and certain industries in particular. The practitioner should be aware of potential pitfalls to be avoided and some ordinary issues that, as a practical matter, will influence the conduct of the arbitration proceedings in the filing, discovery and hearing stages.

Filing a Lawsuit when Demand for Arbitration is Filed

Arbitration is an alternative to litigation. So, if a demand for arbitration is filed, should one also file a lawsuit? Yes, in most cases, and for a number of reasons - usually because of statutes of limitations and occasionally for other reasons, such as statutory venue requirements. The safest practice when demanding arbitration in Alabama is to file suit concurrently with the filing of the demand and to file a concomitant motion with the court to stay the action pending arbitration.

This practice is consistent with Section 3 of the Federal Arbitration Act (FAA), 9 U.S.C.A., § 3, which requires that the court grant a stay pending arbitration upon the application of either party:

If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.

The practice is routinely, but not always, followed by Alabama attorneys when filing arbitration demands. There are a number of Alabama appellate decisions that have reviewed a trial court's grant or failure to grant a motion to stay. Most recently, the Alabama Supreme Court stated it would "pretermit discussion of whether [a party] was entitled to a mandatory stay under § 3 of the FAA" because it concluded the trial court in any event had abused its discretion under Alabama law by not granting a stay pending arbitration. Johnson v. Jefferson County Racing Ass'n, Inc., 1 So. 3d 960, 968 (Ala. 2008) (noting the court's previous decisions had given implicit support to the proposition that the trial court had discretion under Alabama law to determine whether an action compelled to arbitration should be stayed or dismissed).

The statutes of limitations in Alabama generally refer to filing "an action" in court in order to satisfy the timeliness requirements of the statutes. One may argue that Alabama has not squarely addressed the question of whether filing a demand for arbitration would be sufficient for an arbitrator to find the time requirement for filing "an action" satisfied or whether, in all events, the issue of timeliness would be solely for the arbitrator to decide. However, there are a number of Alabama decisions that strongly suggest that, unless a lawsuit is filed and not dismissed, the statutes are not tolled.

The Alabama Supreme Court has stated that a stay is preferable to a dismissal of the action because the latter creates the potential for injustice in situations where, through no fault of the plaintiff, the arbitration cannot be conclude or some of the plaintiffs' claims are not arbitrated, resulting in a time bar to refiling the unarbitrated claims in court. Porter v. Colonial Life & Accident Insurance Co., 828 So. 2d 907, 908 (Ala. 2002); See also, Johnson v. Jefferson County Racing Ass'n, Inc., 1 So. 3d at 970.

Similar, in Mostella v. N & N Motors, 840 So. 2d 877, 880 (Ala. 2002) the court noted:

When a trial court enters an order compelling arbitration, a stay of the proceedings in the trial court during the pendency of the arbitration protects the plaintiff from facing the prospect of the expiration of an applicable statute of limitations or from paying another filing fee in the event future legal proceedings become necessary. An order compelling arbitration should not constitute an adjudication on the merits; therefore, a trial court should not dismiss with prejudice a case in which arbitration is ordered.

As indicated earlier, another reason to file a lawsuit (and request that it be stayed) is that some statutory causes of actions require an action to be instituted in a specific venue. The Alabama mechanics' and materialsmen's lien law (hereinafter "mechanics' lien law") serves as a good example. The limitation period to file "an action" to enforce a mechanics' lien is six months from when the entire indebtedness became due. Ala. Code § 35-11-221 (1975). The mechanics' lien statute requires that an action for the enforcement of a lien over $50 be filed in the "circuit court having jurisdiction in the county in which the property is situated." Ala. Code§ 35-11-220 (1975). Since filing suit in accordance with the statute is a step to perfection of the lien, the requirement must be adhered to even if the dispute is subject to an arbitration agreement. Assuming the other steps to perfection are met, by filing suit in the circuit where the project is located, the lien is perfected and the action can then be stayed pending a determination in arbitration of the amount due, if any, on the lien.

Incidentally, it has been held that the filing of a lien prior to the filing of a demand for arbitration does not substantially invoke the litigation process nor does it substantially prejudice the party opposing arbitration. Paragon Ltd., Inc. v. Boles, 987 So. 2d 561 (Ala. 2007).

Finally, another reason to file a lawsuit and have it stayed pending arbitration proceedings is to have an involved court available to assist with the enforcement of subpoenas issued by the arbitrator. See Section IV below.

Unauthorized Practice of Law Issues

Lawyers who represent clients across state lines need to ensure compliance with requirements of the forum state. When considering pro hac vice admission in another state, one must consult both the state's professional rules and its rules governing admission. In years past, there was considerable apprehension about those requirements. See generally, Diane Leigh Babb, Take Caution When Representing Clients Across State Lines: The Services Provided May Constitute the Unauthorized Practice of Law, 50 Ala. L. Rev. 5353 (1999).

Fortunately, for lawyers engaged in an alternative dispute resolution practice that sometimes crosses state lines, many jurisdictions have adopted or substantially adopted Rule 5.5 of the American bar Association's Model Rules of Professional Conduct. Alabama has adopted a modified version of the ABA Model Rule of Professional Conduct R. 5.5(c)(3) which allows multijurisdictional arbitration practice without a pro hac vice admission. Rule 5.5(B)(2) of the Alabama Rules of Professional Conduct permits lawyers admitted in other states to represent clients in Alabama on a temporary or incidental basis "in or reasonably related to a pending or potential arbitration, mediation, or other alternative dispute resolution proceeding held or to be held" in Alabama or in another jurisdiction. Although Rule 5.5(B) states it is subject to the requirements of Rule VII, Rules Governing Admission to the Alabama State Bar, it is not apparent that Rule VII requires a pro hac vice admission in arbitration proceedings.

Nevertheless, the Office of General Counsel of the Alabama State Bar has opined, albeit only in informal opinions, that foreign attorneys do have to obtain pro hac vice admission where a court is involved. The standard informal opinion of the Office of General Counsel states:

In response to your query, the Office of General Counsel has opined in previous informal opinions that a foreign attorney may not participate in a court-annexed or ordered arbitration without first being admitted pro hac vice. If the arbitration is not court-annexed or ordered, then the foreign attorney may participate without first obtaining pro hac vice admission.

So, if a court in Alabama or another state orders a case or discreet issues in a case to arbitration, and if the hearing will be in Alabama, any foreign attorney who will participate as an advocate in the arbitration proceeding will need to obtain pro hac vice admission. However, an attorney participating in an arbitration proceeding as an arbitrator is not "practicing law" and therefore is not required to be admitted pro hac vice.

Injunctive Relief

A party to an arbitration agreement who finds a need for interim measures, such as an injunction, usually has alternative routes available to seek relief - either in arbitration or in court - without waiving the right to arbitrate.

Although interim relief arguably would be within the power of any person chosen by the parties to arbitrate their disputes, most ADR organizations expressly provide for such interim relief. See...