Debt Arbitration in Florida

 

One of the issues we seem to be dealing with regularly is how to handle debt arbitration clauses in contracts.

For debt collection claims, at least in Florida, the cost of arbitration usually far outweighs any possible benefit to the client. Upon receipt of a claim we review the client’s contract with debtor. If there is an arbitration clause we will make the client aware that the debtor may seek enforcement of same but take the position that until debtor raises the issue, we can proceed with a lawsuit in state court. Upon receiving an arbitration demand, we usually call the debtor’s attorney to be sure his client is willing to pay the costs and fees associated with debt arbitration. We attempt to get the case mediated before we recommend that client spend money on arbitration. The American Arbitration Association fee schedule, in our opinion, is so costly that unless the claim is significant dollar wise and has at least a fair chance of collection after judgment, we may recommend the matter be handled by us on a flat fee through trial. This will at least give the client some certainty as to attorney fees but they will still have little to no control over costs.

We urge our clients to reconsider arbitration clauses in their agreements, or at the very least, attempt to exclude collection actions from arbitration. Many large financial institutions have valid reasons for having arbitration clauses in their credit agreements and promissory notes but we urge them to have their corporate counsel review them to carve out exceptions where the only dispute is payment of the obligation. Oftentimes, however, we find arbitration clauses in business contracts and the client has no idea who drafted the contract or they were using a form industry recommended contract without giving thought to possible consequences.

Despite the above issues, we currently have many active arbitrations pending in our office at this time. Discovery such as depositions, document production and interrogatories. is limited at the discretion of the arbitrator or the arbitration panel. Final hearing dates are set fairly quickly. Once the client has spent the money, proceeded with commencement of arbitration, we can get it to trial fairly quickly. The arbitrator is not a judge, the rules of evidence often are not as strictly construed as in a court of law and the arbitrator has very broad discretion to decide the case. Once an award is granted, the client will either need to file suit in state court to confirm the arbitration award, or if suit was filed initially and the court has stayed the case pending the arbitration, and, absent a gross abuse of discretion, the trial court will usually affirm the arbitrator’s award and the client can then proceed with collection of its judgment.

At Marcadis singer, PA we are happy to review your agreements to be sure they benefit you and not hinder your efforts to recover money from a debtor.

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