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Miles Zaremski v. American Arbitration Association

May 9, 2012


The opinion of the court was delivered by: Judge Feinerman


Plaintiff Miles J. Zaremski worked as an arbitrator on a series of arbitrations pursuant to an agreement with Defendant American Arbitration Association, Inc. ("AAA"). The two parties to the arbitrations failed to pay Zaremski's monthly invoices, Zaremski refused to proceed with the arbitrations, AAA removed him as an arbitrator, and Zaremski sued AAA, seeking to recover the unpaid balance of his invoices as well as the fees he lost due to his allegedly wrongful removal. AAA has moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6). The motion is granted in part and denied in part.


The well-pleaded facts alleged in the complaint are assumed true on a Rule 12(b)(6) motion. See Reger Dev., LLC v. Nat'l City Bank, 592 F.3d 759, 763 (7th Cir. 2010). Also pertinent at the Rule 12(b)(6) stage are exhibits attached to the complaint, see Fed. R. Civ. P. 10(c); Witzke v. Femal, 376 F.3d 744, 749 (7th Cir. 2004), and exhibits attached to the parties' briefs that are "referred to" in the complaint and "central to [Plaintiff's] claim," Wright v. Associated Ins. Cos., 29 F.3d 1244, 1248 (7th Cir. 1994). See Hecker v. Deere & Co., 556 F.3d 575, 582 (7th Cir. 2009). To the extent an exhibit contradicts the complaint's allegations, the exhibit takes precedence. See Forrest v. Universal Sav. Bank, F.A., 507 F.3d 540, 542 (7th Cir. 2007).

Zaremski is an arbitrator with a specialty in Medicare. Doc. 1 at ¶ 5. AAA invited Zaremski to arbitrate a set of ten Medicare Demonstration Project cases between the State of New York and the federal Center for Medicare & Medicaid Services ("CMS"), which were scheduled to commence the week of February 15, 2011. Id. at ¶ 6. Zaremski indicated that he was interested. Id. at ¶ 11. The AAA case manager, Karen Fontaine, informed Zaremski that the cases were governed by an AAA rule providing that "billing arrangements must be made through the AAA and not with any party." Id. at ¶ 13. In November 2010, AAA sent Zaremski his appointment papers, consisting of a Notice of Appointment and Notice of Compensation Agreement. Id. ¶¶ 6, 15-16, 18; Doc. 16 at 29-34.

The Compensation Agreement provided that the parties to the arbitrations were responsible for paying Zaremski, and exculpated AAA from liability for any non-payment: "Payment for your compensation is the obligation of the parties and it is understood that the [AAA] has no liability, direct or indirect, for such payment." Doc. 16 at 30. The agreement then set forth the procedures by which Zaremski would be paid, and reiterated that AAA was not liable for any non-payment:

Unless you specify otherwise, the parties are advised that deposits are due 30 days prior to the first hearing. No later than two weeks prior to the hearing, the Case Manager will advise you of the total amount on deposit. Should the parties fail to make deposits in a timely manner, you must determine whether to go forward or suspend the proceedings until such time as deposits have been made. .

. . Your bills should be submitted in a format that is presentable to the parties, should detail the dates on which the charges were incurred and must correspond with the terms of compensation outlined herein. Upon receipt, the AAA will release payment from the amounts deposited by the parties. Should there be insufficient funds on deposit, you will not receive payment until the parties have made additional deposits. .

In the event your Award is delivered prior to payment by the parties of the agreed upon compensation, the [AAA] is authorized but not obligated to seek to collect these monies on your behalf by all lawful means to represent you in any action or proceeding for such recovery and to file a claim in any bankruptcy or insolvency proceeding for such monies. The [AAA] may prosecute and receive any recovery on behalf of the undersigned and has full authority to compromise or settle such claims as may be, in its discretion, appropriate. However under no circumstances whatsoever will the [AAA] be liable for any failure to collect any or all the monies due.

Ibid. Prior to executing the appointment papers, Zaremski told Fontaine that he would accept the appointment only "if his normal billing for fees and costs are followed as reflected in monthly billing to be paid within thirty days thereafter." Doc. 1 at ¶ 15. Fontaine agreed, and Zaremski signed the Compensation Agreement, but only after adding "Billing to be monthly per arrangement with the AAA." Ibid.; see also Doc. 16 at 31.

In late November 2010, Zaremski began preparing for the upcoming arbitrations. On December 1, 2010, Zaremski tendered invoices to Fontaine for his November 2010 work, expecting to be paid within thirty days. Doc. 1 at ¶ 20. Zaremski subsequently submitted monthly invoices for his work in December 2010, January 2011, February 2011, and March 2011. Id. at ¶ 22. The total bill came to $135,072.

Payment of the invoices was repeatedly delayed, prompting much back and forth between Zaremski and AAA. On December 21, 2010, Fontaine emailed Zaremski that she had "invoiced the parties for [November 2010], there should not be a problem getting paid for the time already spent. So keep sending the invoices as you incur time." Id. at ¶ 21. On January 7, 2011, she informed Zaremski that he should send all invoices to AAA and not the parties; she also told him for the first time that "the government does not provide the AAA with deposits by which Zaremski would receive his compensation." Id. at ¶¶ 24-25. One week later, Fontaine emailed Zaremski that the State of New York did not foresee any problems with the payment and that she would update him as soon as AAA received the "necessary forms" from the State. Id. at ¶ 26. On January 26, Fontaine emailed Zaremski that she had received the forms and was processing them. Id. at ¶ 27. Two days later, she informed Zaremski that she had sent the forms to the State. Id. at ¶ 28.

On February 4, 2011, not having received any payment, Zaremski entered an order continuing the proceedings until March 22. Id. at ¶ 31. On February 8, Fontaine emailed Zaremski, saying that she was processing the latest invoice for January 2011, noting that the State had been reviewing an earlier invoice, and assuring him that "invoicing will be completed this week." Id. at ¶ 32. Three days later, she emailed Zaremski that "[t]he invoices have been submitted to both CMS and NY. I have calls and emails out to both (sic) agency to get update as soon as I receive update I will advise." Id. at ¶ 33. On March 8, Fontaine reiterated to Zaremski that she had been following up with the parties about payment. Id. at ¶ 34.

On March 10, 2011, Zaremski cancelled the arbitrations on the ground that he had not been paid. Id. at ¶ 35. On March 15, Fontaine emailed Zaremski to say that she was processing his most recent invoices for February 2011. Id. at ¶ 36. A couple weeks later, counsel for AAA told Zaremski that the invoices contained errors that "must be corrected before final invoices can be provided to the parties for processing." Id. at ¶ 37. On May 12, at AAA's request, Zaremski resubmitted all of his invoices in a different format. Id. at ¶ 22. On July 30, AAA issued a check to ...

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