John J. Tollefsen Alternative Dispute Resolution Law Blog on Lawyers.com

Kam-Ko Bio-Pharm Trading Co. Ltd-Australasia v. Mayne Pharma (USA) Inc.,--- F.3d ----, (C.A.9 (Wash.))

Business people have been misinformed about arbitration. Most have been told that it is cheaper than litigation in court. Except in a few limited cases, it is much more expensive because the lawyers do the same work as in court and the arbitrators need to be paid. This case highlights the problem.

The contract between plaintiff and defendant required arbitration before the International Chamber of Commerce (ICC). The plaintiff was shocked to discover ICC required a $220,000 advance arbitration fee. It sued asking the court to declare the arbitration void because the fee was so high as to be substantively unconscionable under the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1-16, and Washington law.

The district court rejected plaintiff’s argument. The Circuit Court of Appeals affirmed since the contract was in a commercial context.

 In a consumer or employment contract setting, the outcome would be different.