Arbitration: How One Man is Appealing the System

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

(Story by Carol Thompson) It’s a case of “buyer beware,” or in the case of one California resident, it’s a case of “beware of arbitration.”

The resident, who asked that his name not be used due to pending litigation, 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.
Palms Place is an upscale condo, according to its website, and boasts, “We’ll change how you see Las Vegas.”

For the man who thought he was getting a good investment, Palms Place did change how he viewed Las Vegas, and it wasn’t for the better.

Before signing the PSA, a certain Palms sales representative told him that purchasing the Unit would be a good investment because he could rent out the Unit for X number of dollars per night and make a profit, the man alleged in court papers filed June 14 appealing the decision of the American Arbitration Association (AAA).

As a real estate investor, the man decided it would be a good undertaking. He signed the PSA and sent Palms a total of $108,150 as a deposit.

However, the lawsuit alleges, the PSA disclaimed any notion that purchase of the Unit was made for the purpose of an investment or to make money renting the Unit to third parties, and instead created a scenario where Palms “would have you believe I would move myself and my business to a one bedroom hotel room in Las Vegas to live and work.”

The court filing further alleges that the PSA completely abrogated what the man was told by the Palms sales representatives. The disclaimers in the PSA were diametrically opposed to my understanding of the transaction.

He attempted to receive his deposit back on the premise that he was misled into believing the purchase was a real estate investment. Palms refused his request, so he joined a class-action lawsuit. That failed so the man filed an individual claim for arbitration in July 2011 and paid AAA an initial administration fee of $1,850 to file the claim.

His arbitration claim was deemed a commercial arbitration even though it was a simple straight forward real estate transaction.

After filing a claim, the sum of $1,850 was paid to AAA for the selection of an arbitrator to act as judge in the case. Both parties agreed upon William Turner to act as arbitrator. The man then received an additional invoice from AAA for $690 as a deposit to cover the arbitrator’s study and preparation time for a preliminary hearing to be scheduled by the parties.

Following the preliminary hearing/conference with Turner, Palms filed a Motion for Summary Judgment (“MSJ”). On December 5, 2011, the man paid $1,850 to the AAA for 10 hours of MSJ review, study, and Order preparation. Palms’ MSJ was denied by Turner and thereafter the parties agreed to attempt to settle the case utilizing the services of arbitrator Turner as mediator.

As of April 2012, the man had paid a total of $2,156.25 to the AAA as his share of the 8.5 hours of mediation and related expenses.

After the attempted mediation failed – the lawsuit alleges that Palms mediated in bad faith and refused to budge from its original dollar figure of $10,000 to settle – Turner recused himself as arbitrator and the parties selected a new arbitrator, Thomas Ryan, Esq., who was appointed arbitrator on June 18, 2012. As of that time, $6,546 had been paid to AAA with a subsequent invoice arriving July 10, 2012, in the amount of $6,750 associated with the appointment of the new arbitrator.

Dec. 10, 2012, the AAA sent the man a letter stating, “The arbitrator has requested that the Association collect an additional $5,000 as a deposit for anticipated arbitrator compensation.” This brought the total fees to $15,796.25.

As the man was only required to pay one-half the cost of the arbitration, AAA had presumably collected $31,592 from both the man and Palms. These fees were assessed prior to any trail or evidentiary hearing.

The purpose of arbitration is to relieve the courts of case burden and to provide a non-biased service to the public at what has been dubbed a cheaper alternative to the courts, but as this man found, not only would court litigation be less expensive, but the facts are far from considered and the laws governing the jurisdiction need not be followed.

Tomorrow: The testimony that wasn’t allowed

(Image: Flickr | Moyan_Brenn)