Opinion ID: 203351
Heading Depth: 1
Heading Rank: 4

Heading: The Basis for the Panel's Dismissal of the Appellants' Counterclaims and Third-Party Claims with Prejudice

Text: We agree that the Panel dismissed appellant's counterclaims and third-party claims primarily as a sanction. When initially asked at the May hearing to justify its decision to dismiss, the Panel stated that the decision included consideration of the merits of those claims. After being challenged on this point by appellants' counsel, who asserted that the merits of these claims had not even been briefed or argued, the Panel, before explaining its decision further, recessed to review the matter. After its executive session was completed, the Panel reconvened and stated that its decision to dismiss the counterclaims and third-party claims with prejudice was based on the dismissal provisions of Rule 10305, which permit dismissal as a sanction for willful and intentional material failure to comply with an order of the arbitrator(s) if lesser sanctions have proven ineffective. The sanction issue was certainly before the Panel at the time of its ruling. The appellees' numerous petitions in the months leading up to the hearing were framed as requests for sanctions rather than as arguments contesting the viability of appellants' claims. That the appellees would seek a sanction in response to the appellants' conduct during discovery is not surprising. The appellants readily admit that they had failed to comply fully with the discovery requests in February and March of 2005. The discovery material that the appellee did receive, on February 22, was unintentionally convoluted. Further, Kashner Davidson had sought a sanction against appellants on several separate occasions. Nevertheless, we cannot ignore the Panel's own statement, offered immediately before the executive session, that it considered the merits of appellants' claims in deciding to dismiss them. That consideration could not plausibly disappear during the brief executive session. Thus, in some fashion, the Panel's assessment of the merits of these claims informed its decision to dismiss them as a sanction.