Chapter 9 - § 9.5 • STAYING OR DISMISSING PENDING ARBITRATION BY THE ARBITRATOR WHEN NO CIVIL ACTION IS PENDING

JurisdictionColorado
§ 9.5 • STAYING OR DISMISSING PENDING ARBITRATION BY THE ARBITRATOR WHEN NO CIVIL ACTION IS PENDING

If a respondent in an arbitration is to assert that the dispute is not the subject of arbitration, he or she potentially may either (1) refuse to participate, allow a default proceeding, and raise the issue when application for confirmation of award is made; (2) move the arbitrator to dismiss the arbitration; (3) participate in the arbitration, after objecting to the arbitrator to preserve the right to raise the issue if the claimant moves to confirm an award; or (4) commence a judicial proceeding to stay the arbitration. Options (2) and (3) run some risk of waiving the objections to arbitration.

If the respondent commences a civil action, the court determines whether it or the arbitrator has jurisdiction to determine the arbitrability issue.16 If the arbitrator is to determine the issue, the issue is remanded to the arbitrator.

If the respondent makes timely objection to the arbitrator as to the arbitrability of the dispute, the arbitrator may decide the issue or, if it is an issue to be determined by the court, leave the issue undecided and proceed with the arbitration. The objection perhaps is preserved for subsequent determination by the court, but perhaps not. Or, the arbitrator may determine the issue, recognizing such determination is ultimately for the court, and that the arbitrator's decision is merely advisory.

On the other hand, a court has jurisdiction to stay an arbitration proceeding upon a showing that there is no agreement to arbitrate.17 Similarly, a court should stay the arbitration where it is clear that the dispute is beyond the scope of arbitration.18 However, if there is a reasonable basis for construing the arbitration agreement to cover the dispute, the issue should be determined by the arbitrator.19

The Colorado federal courts follow the principle that the court determines the validity of an arbitration agreement, unless the agreement is clear that the parties intended to submit the issue to the ar-bitrator.20 Applying this principle, the Tenth Circuit held that an arbitration panel exceeded its authority by proceeding with the arbitration before a judicial determination of the arbitrability of the dispute.21 The claimant/plaintiff commenced National Association of Securities Dealers (NASD) arbitration. The respondent/defendant objected to the arbitration on the ground it had not entered into an agreement to arbitrate. NASD proceeded with the arbitration and made an award in favor of the claimant. However, the respondent did not participate except to object to NASD's arbitration jurisdiction. Then...

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