As discussed in our article on Defaults in Court, once an opposing party fails to appear and contest your complaint in a court of law, one may enter default against that party and one only goes to court to prove actual damages. (In some jurisdictions some damages may even be proven by documents filed with the Court.) Liability is presumed established by the entry of default.
Arbitration is a different forum than a court of law and has certain advantages in cost and time required to obtain relief as more fully discussed in our article on Arbitration of Business Disputes. However, what occurs if the opposing party in arbitration fails to appear and contest your demand in arbitration? Is the procedure the same as for a court of law?
Most arbitrations occur under the auspices of the American Arbitration Association (“AAA”) or JAMS. This article shall discuss process under AAA arbitration.
The answer is no and this article shall discuss the most critical differences.
Basic Rules of Default in American Arbitration Association Actions:
In the event that a party fails to appear at the arbitration, the arbitration must still proceed and the claimant must still prove both liability and damages. There is no presumption that the opposing party is liable simply because they failed to appear. Claimant must put on its entire case.
. The party who is present must present evidence in support of their claim. An arbitrator may not issue an award solely on the default of a party. American Arbitration Association Commercial Arbitration Rules and Mediation Procedures, R-31 (herein “AAA, __.”) .
R-31. Arbitration in the Absence of a Party or Representative Unless the law provides to the contrary, the arbitration may proceed in the absence of any party or representative who, after due notice, fails to be present or fails to obtain a postponement. An award shall not be made solely on the default of a party. The arbitrator shall require the party who is present to submit such evidence as the arbitrator may require for the making of an award.
With regard to the presentation of evidence, the parties must offer evidence as is relevant and material to the dispute and shall produce evidence as the arbitrator may deem necessary to an understanding and determination of the dispute. (AAA, R-34.)
It is not necessary to confirm to the legal rules of evidence. (Id.) All evidence shall be taken in the presence of all of the arbitrators and all of the parties, except where any of the parties is absent, in default, or has waived the right to be present. (Id.)
The arbitrator may also allow for the presentation of evidence by alternative means including video conferencing, internet communication, telephonic conferences and means other than an in-person presentation. (AAA, R-32.) However, such alternative means must afford a full opportunity for all parties to present any evidence that the arbitrator deems material and relevant to the resolution of the dispute and, when involving witnesses, provide an opportunity for cross-examination. (Id.)
Resolution of disputes through document submission rather than live testimony is allowed only when the claim is for less than $25,000. (AAA, E-6.) In all other cases:
The arbitrator has wide discretion as to the amount of evidence required and at times, when the opposing party is not present, some arbitrators actually cross examine the claimant as to all aspects of the case, becoming, defacto, the opposing party for purposes of proof. The arbitrators probably conclude that it is only fair to force the claimant to present a case that can withstand some questioning by the arbitrator. This is noticeably different from the average court default in which the court assumes liability and only seeks evidence as to extent of damages.
It is useful when planning a default hearing to communicate directly with the arbitrator and ask for the extent of proof the arbitrator wishes. If that is not possible, the wise claimant will simply present the full case, beginning with proof of liability and ending with damages, and prepare witnesses to withstand cross examination from the arbitrator as to key aspects of the entire case.
That said, this writer’s experience is that the arbitrator will not insist upon prolonged presentation of evidence and if a prima facie case for liability is established, will quickly concentrate on the extent of damages that can be proven. Of key import to any arbitrator is proof that the respondent did receive full notice of the hearing and had the right to appear clearly made apparently to him or her. Once that is established, most default hearings take less than half a day, especially if full documentation is carefully prepared ahead of time so that the arbitrator can easily see how the damages were computed.