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On the Penalties for Requesting a New Trial after an Arbitration Award

This blog provides an introduction to court-annexed arbitration here in Nevada and the penalties which may be incurred by requesting a trial de novo. In Nevada, parties are required to submit to arbitration before they can seek a trial de novo in a court of law. Generally speaking court-annexed arbitration programs set a jurisdictional limit dependent on the amount in controversy or the court itself can decide to mandate arbitration. Jurisdictional limits of $50,000 or less typically mandate the arbitration program. If parties aren't satisfied with the arbitrator's recommendation they are free to request a trial de novo. This request must be made within thirty days of the arbitration award being served on the parties. However certain penalties may be assessed for doing so.

Court-annexed arbitration programs typically have "penalty provisions" which may attach if either party requests a trial de novo. The purpose of which is to dissuade litigants from actually seeking a trial de novo. Without such penalty provisions there would be little incentive to fully participate in the arbitration program; as litigants would face zero repercussions by seeking a trial de novo. However, many consider the penalty provisions to be unconstitutional in their effect of limiting a litigant's right to a jury trial.

In Nevada the penalty provisions are particularly harsh, and arguably the most burdensome, of all those within the United States. Although there are strong policy arguments to be made in favor of the penalty provisions, the constitutionality of such provisions has been called into question for interfering with due process and equal protection under the law.

Nevada Revised Statute 38.259(2)(2) requires the written findings of an arbitrator to be admitted at any trial de novo. The Nevada Supreme Court has held that admitting the arbitrator's written findings does not violate the right to a jury trial. The concern remains, however, that jurors will rely on the arbitrator's written findings without fully considering the merits of a case in issuing their verdict.

The most damaging penalty may be the cost-shifting provision associated with requesting a trial de novo. NAR 20(b) shifts attorney's fees and costs to the party requesting a new trial if that party fails to improve upon the arbitrator's award by at least 20 percent for cases with initial awards under $20,000. These attorney's fees and costs will be shifted to the requesting party who fails to improve his position by more than 10 percent if the initial arbitration award is greater than $20,000.

Lastly, Nevada requires litigants to act in good faith. A party who fails to act in good faith in litigating its case during the arbitration proceedings risks waiving its right to a trial de novo. The Nevada Supreme Court held that it was proper to deny a trial de novo when a defendant did not comply with the plaintiff's discovery requests.