Cyrus Dugger

Arbitration Gone Wild

From The Bay Area Houston Blog

Arbitration Gone Wild

If you think arbitration is faster, cheaper, and just as fair as our time honored civil court system, think again. The studies conducted by the Texas House and Senate have found the use of mandatory binding arbitration to be extremely costly and grossly unfair. Here is just one of many recent examples.

Steve B. Paxson is (was) an arbitrator with the American Arbitration Association, the largest non-profit arbitration firms in the country. In 2001 Paxson, as an arbitrator in a home defect case, ruled against the Falbaums, the homeowners of a Village Builders home with a failed foundation.

Last year AAA arbitrator Paxson exonerated the builder of every claim. Falbaum attorneys smelled a rat when they read in Paxson’s ruling that he ignored case law that the plaintiffs cited because he personally believed that the case (Perry Homes v. Alwattari) “was wrongly decided.”

Soon thereafter, the Falbaums learned that this “neutral” arbitrator had failed to disclose that he was the general counsel of the Greater Houston Builders Association (GHBA). In fact, while Paxson was arbitrating the Falbaum’s case, the GHBA asked him to prepare a brief urging the Texas Supreme Court to overturn Perry Homes (the court declined to do so). During this time, Paxson also testified before the Texas Legislature in support of legislation that sought to gut the Perry Homes decision.

Steve Paxson, a member of the Coats Rose lawfirm, did not think it was necessary to disclose that he was the general counsel of the Greater Houston Builders Association, which Village Builders was a member of, but a judge did, and threw out the award of $6000+ for attorneys fees.

You would have thought that after this embarrassing episode Mr. Paxson and the AAA, would have learned that hiding their baloney was immoral, but they didn’t.

This year Steve Paxson once again ruled against a homeowner for over $97,000 and once again, did not disclose he was the general council of the Greater Houston Builders Association. The homeowner sued Paxson and the AAA, but unfortunately, like the Falbaum’s case, the Appeals Court claimed the AAA and arbitrators are immune from lawsuits even for not disclosing blatant conflicts of interest. Twice!

At the very least Paxson is no longer an arbitrator with the AAA according to Richard Naimark, Senior Vice President for the AAA. Look for the above to go to the Texas Supreme Court.

So when you are thinking about signing your contract for a new home that has a mandatory binding arbitration clause with the American Arbitration Association, don’t just think again.

Just think.

Posted at 1:56 PM, Nov 20, 2006 in Permalink | Comments (0) | TrackBack (0)