Opinion ID: 1532391
Heading Depth: 4
Heading Rank: 3

Heading: Disclosure of Arbitration Fees

Text: Petitioners next contend that the lender's failure to disclose the fees associated with an arbitration effectively concealed the significance of the arbitration clause and should render the arbitration agreement unconscionable. Sovereign Bank responds that the arbitration agreement cannot be invalidated on the basis of speculative costs and that arbitration, in contrast to the often substantial costs of litigation, may be a more cost-effective means for the petitioners to pursue their claims. Petitioners have submitted several cases from other jurisdictions in support of their contention that the potential accumulation of an unknown sum in arbitration fees serves to discourage them from pursuing their claim. The cases cited by petitioners, however, as noted by the Court of Special Appeals, involve arbitration fees severely in excess of the mandatory fees in the instant case. Sovereign Bank relies primarily on the factually-similar case of Green Tree Financial Corp.-Alabama v. Randolph, 531 U.S. 79, 121 S.Ct. 513, 148 L.Ed.2d 373 (2000), in which the United States Supreme Court directly addressed the question of fees potentially incurred in respect to arbitration proceedings. In Green Tree Financial, a mobile home buyer brought a class-action suit against the lender for alleged Truth in Lending Act (TILA) and Equal Credit Opportunity Act (ECOA) violations in the loan agreement, which required that all disputes arising from or related to the contract were to be resolved by binding arbitration. Id. at 82, 121 S.Ct. at 518. The Supreme Court affirmed the determination of the United States Court of Appeals for the Eleventh Circuit that the lower court's order compelling arbitration and dismissing the underlying litigation issues was a final, appealable order, but reversed the Eleventh Circuit's holding that the arbitration agreement's silence as to the filing fees, arbitrators' costs, and other arbitration expenses had rendered the arbitration provision unenforceable because it exposed the buyer to potentially steep arbitration costs. Id. at 84, 121 S.Ct. at 518-19. Acknowledging that the Green Tree Financial parties had provided no detail of the expected arbitration fees and costs, the Supreme Court observed that while the existence of large arbitration costs could preclude a litigant of limited resources from effectively pursing her claims in an arbitral forum, [t]he `risk' that [the buyer] will be saddled with prohibitive costs is too speculative to justify the invalidation of an arbitration agreement. Id. at 90-91, 121 S.Ct. at 522 (alteration added). Effectively, Green Tree Financial placed upon the party asserting the prohibitive expense the burden of showing the likelihood of incurring such costs. Id. at 92, 121 S.Ct. at 522. In addition, we note that although the arbitration clause in the present case specifically articulates neither the costs and fees of the arbitration, nor who is to pay these fees and costs, nor how they might be allocated, it delineates that the arbitration is to be conducted under the Code of Procedure of the National Arbitration Forum, whose fee schedule was noted as a model for fair cost and fee allocation in Green Tree Financial. See Id. 531 U.S. at 95 n. 2, 121 S.Ct. at 524 n. 2 (Ginsburg, J., concurring in part and dissenting in part). In a case decided shortly after Green Tree Financial, the United States Court of Appeals for the Fourth Circuit observed it would be inappropriate to apply a broad per se rule to the efficacy of an arbitral forum: The cost of arbitration, as far as its deterrent effect, cannot be measured in a vacuum or premised upon a claimant's abstract contention that arbitration costs are `too high.' Rather, an appropriate case-by-case inquiry must focus upon a claimant's expected or actual arbitration costs and his ability to pay those costs, measured against a baseline of the claimant's expected costs for litigation and his ability to pay those costs. Another factor to consider in the cost-differential analysis is whether the arbitration agreement provides for fee-shifting, including the ability to shift forum fees based upon the inability to pay. We note that parties to litigation in court often face costs that are not typically found in arbitration, such as the cost of longer proceedings and more complicated appeals on the merits. Bradford v. Rockwell Semiconductor Systems, Inc., 238 F.3d 549, 556 n. 5 (4th Cir.2001) (rejecting argument that arbitration clause containing a fee-splitting provision which required employee to share the arbitration costs and pay half the arbitrator's fee rendered the arbitration agreement per se unenforceable). In the case sub judice petitioners tally their anticipated costs of arbitration, based on the fee schedule of the National Arbitration Forum [8] at approximately $720.00. This figure is, indeed, approximate, because it includes both the mandatory filing fee to be paid by the consumer claimant ( i.e., petitioners) as well as fees that are likely to be paid by Sovereign Bank or that will be divided between both the petitioners and Sovereign Bank. The Court of Special Appeals noted that the arbitration would likely be more expedient and less procedurally cumbersome for petitioners than would a circuit court trial. Because the fees arising from the arbitration cannot be predicted in detail and petitioners have not shown them to be unduly burdensome, we cannot find the arbitration agreement's absence of a cost schedule or cost allocation to be unconscionable.