Protecting the Forum: Proposed ORCP Changes May Affect Arbitration

The Oregon State Bar Committee on Court Procedure has announced that it is considering proposed amendments to the Oregon Rules of Civil Procedure. Normally, the clerical and procedural changes within the Oregon Rules of Civil Procedure (ORCP) are the exclusive province of lawyers. However, with the proposed changes governing arbitration, there may be a dramatic effect on where and how cases can be brought, especially if a contract contains a provision requiring arbitration.

Many construction contracts contain arbitration or alternative dispute resolution provisions. Standard form contracts, such as AIA form contracts contain provisions requiring arbitration before the American Arbitration Association (AAA). Courts disfavor forum and judge shopping, and are prone to honor arbitration clauses entered into between contracting parties, at arm's length. Frequently, parties who have entered into a contract requiring arbitration will find it is not in their best interests to proceed forward to arbitration. As a result, large amounts of time and money are spent fighting over the intent of arbitration clauses, which claims can be arbitrated, and before whom they can be arbitrated. Typically, those battles are waged in state court. With the proposed changes, all of that may change.

The ORCP allows a party to move for dismissal of a case as a matter of law that is without looking at the underlying facts. When a party makes such a motion, they argue that the very nature of the claim is not properly considered by the court. Under these circumstances, the court can dismiss a case if it does not contain the appropriate claim, or if it is barred as a matter of law. Until the recently proposed changes, the existence of an arbitration clause could not be used as a basis for dismissal of an action. Depending on tactical advantage, a party might embark on a war of attrition, by opposing or challenging the arbitration clause. The new proposed rules now specifically allow for dismissal of an action where there is an arbitration clause between the parties.

Under the proposed amendment, the following language would be added:

And (10) that retaining jurisdiction would contravene an enforceable contractual forum selection clause.

Translated out of the legalese, this provision means that a party may dismiss a lawsuit if there is a contract, which contains a clause requiring arbitration. Under the proposed rules, parties must assert this defense at the outset of the case or lose it.

The practical effect of this rule would be that if you have signed a contract with an arbitration clause, you are stuck with it, and cannot (at least without extreme difficulty) challenge it in court. This provision should dramatically cut down on the amount of unnecessary procedural posturing by parties to a contract. Of course, it should not affect claims against nonsignators to a contract, such as bond companies or other third parties.

The Council on Court Procedures will be meeting on December 14, 2002 at the Oregon State Bar in Lake Oswego to decide whether to adopt the rules as proposed. The council is accepting comments, which should be sent to:

Maurice J. Holland
Executive Director
Council on Court Procedures
1221 University of Oregon School of Law
Eugene, OR 97403-1221

and/or

Ralph C. Spooner
Chair
Council on Court Procedures
Spooner Much & Amman, PC
530 Center St NE #722
Salem OR 97301-3740

If you have any question about whether to sign a contract containing an arbitration provision, or the effect of the rules, you should, of course, contact your attorney.

This article is intended to inform the reader of general legal principles applicable to the subject area. It is not intended to provide legal advice regarding specific problems or circumstances. Readers should consult with competent counsel with regard to specific situations.

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