The Fundamentals of Arbitrationin LouisianaUnderstanding 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 • 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
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 Commonly held beliefs:Arbitration v. Litigation Alternative Claim Resolution
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 Claims Resolution Processes:Arbitration v. Litigation 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 • 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 • 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: • 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 • 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 underLa. 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 underLa. 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 underLa. 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 underLa. 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 underLa. 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 underLa. 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 underLa. 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 underLa. 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 underLa. 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 underLa. 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 underLa. 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 underLa. 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 underLa. 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…