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The Sixth Circuit Court of Appeals affirmed a district court order imposing sanctions on an attorney who disregarded an order to arbitrate. This decision continues the recent trend of cases reminding litigants that frivolous arbitration challenges are subject to sanctions.
In Legair v. Circuit City Stores, Inc., 213 F. App'x 436 (6th Cir. 2007), Legair sued Circuit City, his former employer, for alleged race discrimination.
Circuit City filed a motion to compel arbitration pursuant to an arbitration policy that was implemented during Legair's employment. The district court initially reserved its ruling but granted the motion after the Sixth Circuit upheld the same arbitration agreement in a separate case. See Morrison v. Circuit City Stores, Inc., 317 F.3d 646 (6th Cir. 2003).
Despite a failed motion for reconsideration, Legair's attorney continued to resist arbitration by failing to conduct discovery, seeking the arbitrator's removal, and refusing to participate in scheduled conferences and hearings. Based on the attorney's disregard for the order to arbitrate, the district court sanctioned him for contempt and ordered him to reimburse Circuit City for $7,822 in attorney fees. The district court also confirmed an arbitration award in Circuit City's favor.
On appeal, Legair argued that the arbitration agreement was unconscionable and therefore unenforceable. The Court rejected Legair's unconscionability challenge because Circuit City's "extensive effort" to explain the arbitration agreement to its employees showed an absence of procedural unconscionability.
In challenging the order for sanctions, Legair's attorney claimed that a sanction in excess of several hundred dollars would likely bankrupt him. However, as the Court observed, Legair's attorney provided no documentation to substantiate his claim. Moreover, even if Legair's attorney had proven his financial status, "it was still within the [district] court's discretion to impose the sanction it felt it necessary to serve the cause of deterrence."
In conjunction with B.L. Harbert International, LLC v. Hercules Steel Co., 441 F.3d 905 (11th Cir. 2006), this case puts litigants on notice that courts will impose sanctions on parties who undermine the efficiency gains of arbitration by raising frivolous challenges to arbitration proceedings and awards. As the court explained in Hercules Steel, "[a] realistic threat of sanctions may discourage baseless litigation over arbitration awards and help fulfill the purposes of the pro-arbitration policy contained in the [Federal Arbitration Act]." 441 F.3d at 913-14.
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