In a decision that was handed down earlier this month, an arbitration appellate panel upheld a $31 million breach of contract award against actor Kevin Spacey.

Normally - as in this case - arbitration proceedings are kept strictly confidential.

So how did this become public?

Simple: Spacey didn't abide by the award, forcing the other side to file in California State Court in order to confirm the arbitration panel's monetary award. And at that point, at least some of what transpired at the arbitration became a matter of public record.

What Typically Happens in the Aftermath of an Arbitration

Similar to what happens at the conclusion of a trial in court, a decision and award is rendered at the conclusion of an arbitration. Granted, there may be some procedural differences as to the manner that the decision and award is rendered in the context of an arbitration, but the end result insofar as this particular issue is concerned, remains substantially the same, with an award that is reduced to written form, and a breakdown for how that award is calculated.

How an Arbitration Award Differs, Procedural Speaking, From an Award in Court 

If a losing defendant fails to pay a judgment that was entered against him in a timely way, there are various procedural mechanisms and rules setting forth how to enter that judgment and start collection proceedings against that defendant. In the arbitration context, however, there are a number of hoops that the prevailing claimant must jump through before they can start proceedings to collect on a judgment, because as a threshold matter, an arbitrator's decision and award must first be converted into a judgment - which can only be rendered by the courts - before any collection proceedings can begin.

Therefore, if the losing party at an arbitration fails to pay the award in a timely way, the claimant will first need to bring a separate legal action in court to confirm the arbitrator's award - which will presumably be opposed by the losing party - and only if they also prevail in securing such a judgment, can the prevailing claimant start collection proceedings on the award.

And that is precisely what appears to have happened in this case, and explains why this action was just filed in California Superior Court; simply put, neither Spacey, nor his affiliated companies, have paid the $31 million in damages that were awarded against them by the arbitrator or the arbitration appeals panel for breach of contract and attorneys' fees, which forced MCR to bring formal suit to recoup the damages that they had been awarded.

Why Spacey is Highly Unlikely to Prevail in Seeking to Overturn the Arbitration Award

There are two reasons why Spacey is almost certain to lose any bid to overturn the arbitration award, one based on a general principle of law, the other, specific to his case:

First, in his particular case, the arbitration award was rendered after an apparently lengthy hearing with approximately 20 witnesses, and that the award was in large part predicated on the arbitrator's assessment of the witnesses' credibility, and then upheld by a separate appeals panel.

Second, as I've noted elsewhere, arbitration awards are, as a general rule, extraordinarily difficult to overturn, even in the best of circumstances, and absent all the complicating factors of his particular matter. 

Jonathan Cooper
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Non-Compete, Trade Secret and School Negligence Lawyer
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