Professor Alan Scott Rau Comments on Dealer Computers v. Old Colony Motors

by Alan Scott Rau

Can this possibly be right?

For one thing, I would have thought that ordering the payment of a deposit should be a matter for the court, not the arbitrator: It seems to be a question of whether and how to “order the parties to arbitration in accordance with their agreement” under section 4 of the FAA—-not a question of the “procedure” for the arbitration. What if the respondent is challenging the very existence of an arbitration agreement? Do the arbitrators have to proceed to adjudicate that matter before they can turn to the question of whether they will be paid to adjudicate it? Cases like Howsam suggest that it is indeed up to the arbitrators to decide whether to go ahead in the absence of a deposit—but if they decide that they’re not willing to go ahead, it shouldn’t be up to them to order a recalcitrant party to pay the deposit. Leaving aside the obvious fact that asking the arbitrators to do this—to rule on whether a party is obligate to pay his fee up front— seems to present the arbitrators with a direct conflict of interest.

And then, what does the court mean, anyway? The claimant has to be given the option of making the deposit if the respondent refuses—but I don’t see how the claimant can be actually ordered to do so; what if he just doesn’t wish to proceed on that basis?

I would welcome the reactions of readers, in particular if they happen in their experience to have run across problems like this: How did they handle it?