It is not unusual for attorneys to ignore a contractual arbitration provision and institute litigation to pursue a client’s claim. A defendant that wants to take advantage of the arbitration provision will then typically move to compel arbitration. Sometimes, they will bolster the motion either in court or the ensuing arbitration by adding a counterclaim for breach of contract to recover the damages incurred in seeking to stop the litigation in favor of arbitration.
A recent decision by a California federal judge in Eddie Golikov v. Walmart Inc. adds a new dimension that should cause counsel to take notice. Golikov is a class action brought on behalf of a named plaintiff arising from his purchase of olive oil from Walmart. The complaint erroneously alleged that the olive oil was purchased from a Walmart store when in fact it was purchased online. As an online purchase, it was subject to Walmart’s Terms of Use for website orders, including a requirement that the claims be arbitrated.
Finding that counsel’s failure to heed the arbitration provision was reckless, the court ordered that sanctions in the form of attorneys’ fees be imposed against plaintiff’s counsel.
The takeaway: out of self-interest, attorneys should be attentive to a contract’s dispute resolution provision and not cavalierly ignore provisions requiring arbitration of disputes.
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