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In refusing to order the American Arbitration Association (AAA) to enter default judgment against an employer who refused to pay the entire cost of arbitration, a New York trial court held that the parties' agreement to equally split arbitration costs trumped the AAA rules requiring an employer to pay the entire cost of an employment discrimination arbitration proceeding.
In Lofxaine C. Brady, v. The Williams Capital Group, Index No. 114198/06 (N.Y. Sup. Ct. June 29, 2007), Williams, a securities broker, hired Brady as a salesperson of fixed income securities. Brady later filed an arbitration claim against Williams, alleging discrimination in violation of state and federal law.
The AAA rules require an employer to pay the entire arbitration costs, but the arbitration agreement between Williams and Brady required the parties to split the arbitration costs equally. In accordance with its rules, AAA sent Williams' attorney a bill for $42,300, which represented the entire advance payment for arbitrator compensation. Upon receipt of the bill, Williams asked Brady to pay half of the fee in accordance with the parties' arbitration agreement. AAA received no payment and thus cancelled the proceedings.
When AAA cancelled the proceedings, Brady sought a court order compelling AAA to enter a default judgment against Williams.
The Court held that the arbitration agreement's terms superseded the AAA rules because absent the agreement, there would be no forum in which to conduct the arbitration. The parties unambiguously agreed to bind themselves to the AAA rules "except as provided in the Agreement."
The Court was unpersuaded by Brady's argument that it would be unfair to require her to pay half the arbitration costs, as she had voluntarily agreed to pay. Finally, Brady failed to prove that the fee burden was so onerous that it deprived her of the opportunity to enforce her rights, as evidenced by her earlier decision to pursue her discrimination claim with the New York State Division of Human Rights.
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