« #3 of 5 - Kristian v. Comcast Corp - limits on damages in arbitration | Main | #5 of 5 - Kristian v. Comcast Corp - discovery limitations »

#4 of 5 - Kristian v. Comcast Corp - attorney fees and costs
April 30, 2006 by Ross Runkel at LawMemo

Kristian v. Comcast Corp (1st Cir 04/20/2006) may apply to arbitration clauses in employment agreements, especially as to who pays attorney fees and costs.

This is #4 in a series of 5 on the Kristian case.

Background: Kristian was an antitrust case brought by cable TV subscribers against their cable provider. The provider moved to compel arbitration as required in the subscriber-provider contract. The 1st Circuit held that arbitration was required.

Making plaintiff responsible for attorney fees and costs: The contract provided:

The Company will pay for all reasonable arbitration filing fees and arbitrator's costs and expenses except that YOU ARE RESPONSIBLE FOR ALL COSTS THAT YOU INCUR IN THE ARBITRATION, INCLUDING, BUT NOT LIMITED TO, YOUR EXPERT WITNESSES OR ATTORNEYS.

Holding: The court held that the applying the above clause would burden the plaintiffs with "prohibitive" arbitration costs, preventing them from vindicating their statutory rights. However, the clause was severable.

Reasoning:

• First, before reaching the issue of costs and attorney fees, the court had already decided that (1) the case could proceed as a class action and (2) expert witness fees could be in the range of $300,000 to $600,000 and attorney fees could be $1 million.
• Second, the contract conflicts with both state and federal statutes, both of which provide for recovery of costs and attorney fees. The court rejected Comcast's reading of the contract, which was that it merely provided that plaintiffs must pay these items up-front but still can recover them if they prevail. The court found this argument "implausible."
• Third, the likely costs and attorney fees are so high that requiring plaintiffs to pay them would be such a great financial burden as to prevent them from vindicating their statutory rights.
• The court severed this clause from the contract and allowed the arbitration to proceed without it.

Applied to employment cases: Costs and attorney fees in most employment cases will not be as high as in this case, although they potentially could be in a large class-action case. Whatever the dollar amount, the test is whether the financial burden is so great that it will prevent a plaintiff from vindicating statutory rights.

My view: The court was really dealing with a clause that prevented cost-shifting and fee-shifting, and not with payment of the costs of the arbitration proceeding itself (such as arbitrator fees and administrative fees). Cost-shifting and fee-shifting is a remedy that the antitrust statutes allow, and that is allowed in many employment statutes. In my opinion, this issue should be covered by the following proposed rule: The arbitrator must have the authority to award whatever remedies a court could award.

	Web www.LawMemo.com  This form will search the LawMemo web site. It does not include the Caselaw Database.