Arbitration: The Testimony That Wasn’t Allowed

By: The VNN Team  //  Investigative Reports, Ripoffs & Scams

(Story by Carol Thompson) Arbitration, designed to be the American consumers convenient way to settle conflict resolution, has been a nightmare for many going through the process—a process that begs the question of fairness.

As VNN reported yesterday, a California resident had signed a Condominium Unit Purchase Sale Agreement (PSA) on or about July 14, 2005, with Palms Place, LLC to purchase a unit at the Palms Place Condominium Hotel and Spa in Las Vegas with the understanding that it was investment property. In simple terms, the buyer intended to rent the condo out in anticipation of a return on investment.

Exactly what, if any, rental stipulations Palms had were unknown to the buyer, but it wasn’t for lack of seeking the information. The buyer had been requesting enrollment into the rental program for approximately three years.

Email correspondence between the purchaser and Palms Home Owner Relations Manager Julie Chapman exchanged April 29, 2008, indicate a bizarre response to a simple question.

“It is crazy that I’ve had to ask for this info over and over and over again for about three years now. I need specifics with complete details and an agreement to enroll in the program rather than some generic FAQ saying that I can rent my unit,” the man who purchased the condo wrote.

Chapman responded, “Until just a few months ago, the final details of the rental program were not finalized. Palms Place, LLC, the Developer who sold you the unit, has requested that I not distribute any additional rental program materials, including the full rental agreement, until after you have funded your purchase.”

Palms refused to provide the information until the purchase was funded. The buyer was apprehensive to fund without knowing the scope of the program. Palms had been holding a deposit of $108,150 interest-free for nearly three years.

The buyer responded to Chapman by asking why the secrets until the deal closes. “This is weird,” he wrote. “When I purchased I was told they were putting the final touches on the program and would have details for me soon. Three years is not “soon.”

Chapman answered by stating that the policy to not distribute any further rental program materials until after the close of escrow was done upon the advice of legal counsel, hence, no further information would be forthcoming.

Unwilling to purchase not knowing exactly what he was buying, the man then instructed his attorney to contact Thomas K. Land, executive vice-president and CFO of Palms Place, LLC demanding the contract be voided and the deposit immediately returned.

That didn’t happen and the matter went before the American Arbitration Association (AAA). The AAA’s official mission and vision statement, according to the association’s website, are based on three core values: integrity, conflict management, and service. “The AAA has long held its mediators and arbitrators to strict codes of ethics and model standards of conduct to ensure fairness and impartiality in conflict management.”

According to U.S. Code § 7, “The arbitrators… may summon in writing any person to attend before them or any of them as a witness and in a proper case to bring with him or them any book, record, document, or paper which may be deemed material as evidence in the case.”

But that didn’t happen in the buyer’s case. A key witness, George Maloof, Jr., the manager of Palms Place, was granted a protective order, which excused him from giving testimony at the arbitration hearing. The excerpts of testimony from Land, taken Sept. 14, 2012, show that Maloof was involved with the day-to-day operation of the Palms Place project.

Deposition Transcript Excerpts of Thomas Land, September 14, 2012:
[Questioning by Mr. Otto pp. 12:24-31:23]

“Q. You’re familiar with George Maloof; correct?

A. Yes.

Q. And he was involved in the Palms Place, LLC, project?

A. Yes.

Q. Was he personally involved? In other words, day-to-day.

A. Yes.

Q. What did he do day-to-day–or what were his duties?

A. Well, George was, let’s say, the representative of ownership. Right? George was integral in the design of the building. George was really the decision maker, short of needing a decision by an entire ownership group, on, really, all facets of the building.

Q. All facets–sales, marketing—

A. Yes.

Q. –included? Was he in the office? You know, I’m not asking you for his weekly work schedule. But was he hands-on int(sic) office as the project was developed and sold and marketed?

A.Yes. Chapman also gave similar testimony, stating that Maloof was “hands on” in regard to the project. Despite this, Maloof was not compelled to testify.

The buyer is seeking court remedy, adding further costs to an already costly arbitration process, a process that the buyer believes was not done in fairness.

For consumers who believe they weren’t given fair and equitable treatment in arbitration, a plea to the court is their only recourse.

Once arbitration is completed, the decision of the arbitrator is deemed final. (Image: Flickr | StockMonkeys.com)