The Fundamentals of Arbitration
in Louisiana
Understanding the Issues
March 18, 2011
For the
Louisiana Association of Tax Administrators
Daniel Lund, III
Alternative Claim Resolution
Goal of today’s presentation: to orient you to
traditional arbitration and the newly defined
context for tax matters by looking at
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What is arbitration, generally
Where your new rules apply
Typical arbitration procedure
The new procedure for tax arbitrations
Alternative Claim Resolution
Alternative Claim Resolution
The goal is the delivery of justice in a democracy. . .
in a time and in a manner that does not rob
it of meaning. This is the promise of
alternative dispute resolution; it is our
task to work for its fulfillment.
Professor A. Leo Levin
Keynote Address at the 1985 Annual
Chief Justice Earl Warren Conference
Alternative Claim Resolution
Alternative Claims Resolution Processes
Federal courts recognize and encourage Alternative
Dispute Resolution:
– Federal Rule of Civil Procedure 16(c)(2)(i) allows
for the use of dispute resolution procedures in lieu
of traditional courtroom litigation
– Federal Arbitration Act of 1988 establishes federal
substantive law favoring agreements to arbitrate
Alternative Claim Resolution
Arbitration
A method of dispute resolution involving one or
more neutral third parties who make a
determination regarding the dispute at issue.
Alternative Claim Resolution
Commonly held beliefs:
Arbitration v. Litigation
Arbitration
– Hearing may commence
quickly after claim is
filed
– Arbitrators typically are
technical experts,
familiar with industry
customs
– Typically less expensive
due to quicker
proceedings
– Discovery more
streamlined
Litigation
– Hearing may not begin
until years following
filing of claim
– Fact finders likely have
no industry expertise
– More expensive
procedure due to
protracted process
– Extensive discovery
procedure
Alternative Claim Resolution
Alternative Claims Resolution Processes:
Arbitration v. Litigation
Arbitration
– Absence of strict procedural
and evidentiary requirements
– Limited grounds of appeal
– Panel decisions have no
precedential effect on future
disputes
– Arbitration may occur at
location most convenient to
parties
Litigation
– Strict procedural and
evidentiary requirements are
followed
– Awards by court may be
appealed on many bases,
including factual disputes
– Decisions may have
precedential effect upon other
disputes
– Hearing must occur at proper
courthouse
Alternative Claim Resolution
What arbitration looks like
•
what is or is not subject to arbitration: absent specific
statute, almost always by contract only
– presumption of arbitrability
» overcome by proof to the contrary (that is, the
parties did not intend for something to be
arbitrable)
» or nullification of the agreement
What arbitration looks like
– challenges to arbitration: in court if the question is
whether the contract or provision calling for
arbitration is null/void
» reach of the clause: is for the arbitrator to decide
La. R.S. 47:337.51. Notice of assessment and right to
appeal or arbitration
A. Having assessed the amount determined to be due,
the collector shall send a notice by certified mail to
the taxpayer against whom the assessment is imposed
…[and] inform the taxpayer of the assessment and
that he has thirty calendar days from the date of the
notice to (a) pay the amount of the assessment; (b)
request mandatory arbitration pursuant to R.S.
47:337.51.1…(cont.)
La. R.S. 47:337.51. Notice of assessment and right to
appeal or arbitration (cont.)
B. If any dealer shall be aggrieved by any findings or
assessment of the collector, he may, within thirty days
of the receipt of notice of the assessment or finding,
do any of the following:
***
(c) Mail a written request for mandatory arbitration
pursuant to R.S. 47:337.51.1 without payment
under protest.
La. R.S. 47:337.81. Appeals from the
collector's disallowance of refund claim
***
(2) The taxpayer may appeal a denial of a claim
for refund to a court of competent jurisdiction
or mail a written request for mandatory
arbitration pursuant to R.S. 47:337.51.1…
La. R.S. 47:337.63. Remittance of tax under protest; suits to recover
A.(1)(a) Any taxpayer protesting the payment of any amount found due by the
collector or the enforcement of any provision of law in relation
thereto…shall give notice of intention to file suit for the recovery of such
tax or shall … make a written request for mandatory arbitration
pursuant to R.S. 47:337.51.1.
(b) In the case of sales or use taxes that are required to be collected and
remitted by a selling dealer as provided for in R.S. 47:337.17, the
purchaser, in order to avail himself of the alternative remedy provided by
this Section… shall give notice of the purchaser's intention to file suit
for recovery of the tax or to make a written request for mandatory
arbitration pursuant to R.S. 47:337.51.1. (cont.)
La. R.S. 47:337.63. Remittance of tax under protest; suits to
recover (cont.)
***
D. Upon request of a taxpayer and upon proper showing by
such taxpayer that the principle of law involved in an
additional assessment is already pending before the courts
for judicial determination or before an arbitration panel …
the taxpayer, upon agreement to abide by the decision of
the courts, an arbitration panel, or by a final judgment of a
court upon a timely appeal of a decision of an arbitration
panel, may remit the additional assessment under protest,
but need not file an additional suit or make another
mandatory arbitration request…
Louisiana Arbitration Law:
Louisiana Revised Statute 9:4201 et seq.
•
Arbitration is favored if specified/agreed to
§4202. Stay of proceedings brought in violation of
arbitration agreement
If any suit or proceedings be brought upon any issue
referable to arbitration under an agreement in writing
for arbitration, the court in which suit is pending,
upon being satisfied that the issue involved in the suit
or proceedings is referable to arbitration under such
an agreement, shall on application of one of the
parties stay the trial of the action until an arbitration
has been had…
§4203. Remedy in case of default; petition and notice; hearing and
proceedings
A. The party aggrieved by the alleged failure or refusal of another to perform
under a written agreement for arbitration, may petition any court of record
having jurisdiction of the parties, or of the property, for an order directing
that the arbitration proceed in the manner provided for in the
agreement. Five days' written notice of the application shall be served
upon the party in default. Service shall be made in the manner provided by
law for the service of a summons.
***
E. Failure to pay within ten business days any deposit, fee, or expense
required under the arbitration process shall constitute default in the
arbitration proceeding. A party aggrieved by the default shall be entitled to
remove the matter under arbitration in its entirety to a court of competent
jurisdiction and shall be entitled to attorney fees and costs in addition to
other remedies as provided in this Section.
§4210. Motion to vacate award; grounds; rehearing
***
A. Where the award was procured by corruption, fraud, or undue means.
B. Where there was evident partiality or corruption on the part of the
arbitrators or any of them.
C. Where the arbitrators were guilty of misconduct in refusing to postpone the
hearing… or in refusing to hear evidence pertinent and material to the
controversy, or of any other misbehavior by which the rights of any party
have been prejudiced.
D. Where the arbitrators exceeded their powers or so imperfectly executed
them that a mutual, final, and definite award upon the subject matter
submitted was not made.
Where an award is vacated … the court may… direct a rehearing by the
arbitrators.
Filing the arbitration
•
•
•
•
finding the right company
selecting the arbitrator
– one or three arbitrators?
– arbitrator disclosures/disqualification
the arbitration complaint
the arbitration response
Motion practice in arbitration
• all telephone conferences
Setting the arbitration hearing dates
• location
Discovery in arbitration
• What often happens…
Accessing documents and witnesses
• Arbitrators can issue subpoenas, La. R.S.
9:4206
Other prehearing matters
• exchange of documents/agreement on
exhibits
• evidentiary motions
• preparation of witnesses
• prehearing briefs (non-confidential)
The arbitration hearing
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informality
no transcript typically; no record!
opening statements
order of presentation of case
examination of witnesses by both sides
The arbitration hearing
• use of exhibits
– admissibility/relevance
– be really organized: there will not be clerk
taking in exhibits/no offering of exhibits for
introduction in evidence
• motions during the hearing
• rebuttal witnesses
• closing the hearing
– will there be post hearing briefs?
The award
• forms of award
• rights of appeal/finality
• no precedential value/effect
The award: modification
§4211. Motion to modify or correct award; grounds
A. Where there was an evident material
miscalculation of figures or … description of any
person, thing, or property referred to in the award.
B. Where the arbitrators have awarded upon a matter
not submitted to them …
C. Where the award is imperfect in matter of form
not affecting the merits of the controversy.
The award: confirming and enforcing the award
§4209. Motion to confirm award; jurisdiction;
notice
At any time within one year after the award is
made any party to the arbitration may apply to
the court in and for the parish within which the
award was made for an order confirming the
award…
Unique arbitration issues/characteristics:
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confidential nature of arbitration
filing and administrative costs
•
costs of initiating and participating in arbitration:
pleadings
•
cost of arbitrators
•
handling/administrative costs of administrative
agencies
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ex parte communication with the arbitrator prohibited
–
delays/extensions
–
penalties for failing to comply with interim arbitrator
orders
Unique arbitration issues/characteristics:
– what it is not: mediation
• What is mediation?
• Can you mediate and arbitrate?
– arbitration waiver
– ethical implications: conflicts of interest not
disclosed
– arbitrators not bound to apply the law (but
compared to the objection in Federal Arbitration
Act regarding manifest disregard of the law)
Arbitration procedure under
La. R.S. 47:337.51.1
Generally, taxpayer/dealer has 30 calendar
days from the date of the notice from taxing
authority to request mandatory arbitration
pursuant to R.S. 47:337.51.1
• Different timing for appeals from the
collector's disallowance of refund claim
and tax refund claims for taxes paid
pursuant to R.S. 47:337.17 (certain taxes
paid in are to be placed in escrow)
Arbitration procedure under
La. R.S. 47:337.51.1
A(2) A proper, timely mailed request for
mandatory arbitration shall suspend any
collection action by the collector, and shall
suspend the running of any prescription or
other time limit or requirement to act in any
provision of law or ordinance until the
arbitration panel provided for in this Section
has issued a final written decision…
Arbitration procedure under
La. R.S. 47:337.51.1
B.(1)(a) Upon receipt of the notification of the
request for arbitration, the collector shall
provide written notification to the secretary of
the Department of Revenue and the Executive
Director of the Louisiana Association of Tax
Administrators of the pending arbitration
proceeding.
Arbitration procedure under
La. R.S. 47:337.51.1
B.(1)(b)(i) The taxpayer and the collector shall each select one
arbitrator from the registry of arbitrators provided for in
Subparagraph (d) of this Paragraph within ten days of receipt
of the notification of the request for arbitration. The two
arbitrators selected shall then jointly agree on a third arbitrator
to complete a panel of three. The arbitrators shall then select
one of the three as a chief arbitrator.
(ii) If the two arbitrators selected are unable to jointly agree on a
third arbitrator to complete the panel, they shall select one of
themselves to be the chief arbitrator and may proceed with the
arbitration, except that the decision of the panel must be
agreed to by both arbitrators.
Arbitration procedure under
La. R.S. 47:337.51.1
B.(1)(b)(iii) An arbitrator selected by either party may
not have had any business relationship with either
party within the last five years or at the time of
selection be engaged in negotiations or other contacts
with either party relative to entering into such a
business relationship.
(c) In the event a taxpayer or a collector fails or refuses
to comply with the arbitration procedure within the
time periods provided for in this Subsection, plus any
additional time as may be granted upon request by
such party, the other party may appoint an arbitrator
on behalf of such failing or refusing party.
Arbitration procedure under
La. R.S. 47:337.51.1
B.(1)(d)(i) Arbitrators for the panel shall be selected from the
registry of arbitrators compiled in accordance with this
Subsection.
(ii) The Board of Directors of the Louisiana Association of Tax
Administrators shall annually appoint not less than ten
arbitrators to the registry, each of whom shall be board
certified tax administrators…
(iii) The Business and Industry Committee of the Louisiana
Association of Tax Administrators, the Louisiana Association
of Business and Industry, and the Society of Louisiana CPAs
jointly shall appoint not less than ten arbitrators to the registry,
each of whom shall possess at least five years of experience in
the area of sales and use tax.
Arbitration procedure under
La. R.S. 47:337.51.1
B)(2)(a) After his selection, the chief arbitrator shall provide a
written request to the taxpayer and the collector for the
submission of a detailed statement of fact or law in support of
their positions and such other documents as the parties deem
necessary, which are to be provided to each member of the
panel and to the other party within thirty days of the date of the
request.
(b) The chief arbitrator shall then designate a time and place for
a hearing, unless a hearing is specifically waived in writing by
both parties.
(c) All records, documentation, testimony, and other submissions
related to the arbitration proceeding shall be subject to the
provisions of R.S. 47:1508 et seq.
Arbitration procedure under
La. R.S. 47:337.51.1
(B)(3)(a)(i) After due consideration of the statements
and documents provided to the panel, and any
additional submissions required by the panel, and
argument and evidence submitted at the hearing, the
panel shall issue a written decision.
(ii)(aa) Decisions of the panel relating to common sales
tax law as defined in R.S. 47:337.2(C)(1)(b) shall
require consultation with the Department of Revenue
prior to the rendering or issuance of the decision.
Arbitration procedure under
La. R.S. 47:337.51.1
(3)(a)(ii)(bb)(I) Unless the panel is composed of two
members as provided for in Item (1)(b)(ii) of this
Subsection and therefore requires both members to
agree on a decision, the decision shall be the opinion
of at least a majority of the panel; provided that any
dissenting panel member may submit reasons for
dissent from the majority. The decision shall be
rendered within sixty days of the conclusion of the
hearing, or within sixty days of timely receipt of
the statements and documents in the absence of a
hearing.
Arbitration procedure under
La. R.S. 47:337.51.1
(B)(4) The parties to the arbitration proceeding provided for
in this Section shall share equally in the cost of such
proceeding, provided that each party shall bear its own
respective costs of providing the necessary documentation,
witnesses, travel, or other costs and expenses of the arbitration
proceeding.
(5)(a) The decision of the panel shall be in writing and shall
state the legal and factual reasons upon which the decision
is based.
(b) A copy of the decision shall be sent to the taxpayer, the
collector, the Executive Director of the Louisiana Association
of Tax Administrators, and the secretary of the Department of
Revenue.
Arbitration procedure under
La. R.S. 47:337.51.1
C.(1)(a) The decision of the panel may be appealed by the collector or the
taxpayer within thirty calendar days after the decision has been rendered
and signed by filing a petition with the district court of the parish in which
the political subdivision is located with a copy of the arbitration panel's
decision attached and setting forth specifically any errors which may have
been committed by the arbitration panel in reaching its decision.
(b) If the decision of the arbitration panel has found any tax, interest, or
penalty to be due, and the taxpayer has not paid under protest as provided
for in R.S. 47:337.63, the taxpayer shall post bond, with surety approved by
the district court conditioned upon the payment of the tax as finally
determined, together with any interest, additional amounts or additions to
the tax provided for by law, payable to the collector, in an amount not to
exceed one and one-half times the amount of the tax, interest, and penalty
found to be due in the decision of the arbitration panel, and the posting of
such bond shall be a condition precedent to any appeal for review in any
district court.
Arbitration procedure under
La. R.S. 47:337.51.1
(C)(2) The appeal of the decision of the arbitration
panel shall be a trial de novo; however, a court
may consider the decision of the arbitration panel
in rendering its decision on the appeal. The
judgment of any such court shall be subject to
further appeal, suspensive only, in accordance
with law. If a suspensive appeal is taken from a
judgment of the district court no further bond
need be posted and the bond originally posted
remains in full force and effect to guarantee the
payment of any tax, interest, and penalty until
final decision of the court.
Arbitration procedure under
La. R.S. 47:337.51.1
C.(3)(a) If a decision of the arbitration panel
is not appealed as provided for in this
Section within thirty calendar days after the
decision has been rendered and signed by
the panel, it shall be binding on the
parties…
Fin