Case: Kam-Ko Bio-Pharm Trading Co. v. Mayne Pharma (USA) Inc., No. 07-35449 (9th Cir. March 11, 2009).
Status: Ready, Aim, Fire
After successfully compelling defendant into arbitration, plaintiff Kam-Ko could not pay the $220,000 arbitration fee. Kam-Ko claimed the fee was "substantively unconscionable" and brought a "motion for declaratory relief." The Ninth Circuit found the commercial contract in dispute specified mandatory arbitration with the International Chamber of Commerce (ICC) at Kam-Ko's request. The court also found that Kam-Ko had access to the fee structure when it chose the ICC and, under that structure, controlled the fee charged. Emphasizing the exclusively commercial nature of the dispute, the court found Kam-Ko remained bound by the terms of the arbitration provision despite the amount of the arbitration fee. Because Kam-Ko had failed to proceed to arbitration within the time ordered by the district court, the Courts of Appeals affirmed the dismissal with prejudice of all its claims.
- Know what you're asking for when you ask to step outside the judicial system. Take the time to look at the published procedures, fees and other requirements of the alternative forums you select or are agreeing to participate in. Don't just automatically assume arbitration will be faster, better or less expensive.
- The court here found that it is "well known" that international arbitrations can involve substantial fees. An agreement to resolve disputes in an ICC arbitration could easily mean that before any proceeding can occur, participants may need to come up with hundreds of thousands in arbitration fees up front.
You wrote it, you bought it. If you asked for, negotiated or suggested a contract term, rules of contract construction and karma generally mean that any court looking at the term is unlikely to find exceptional circumstances excusing you from it, particularly in commercial contracts involving sophisticated parties dealing at arm's length.
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