Mandatory arbitration of fraud-based UPUAA claims

To maintain a civil or criminal case under the Utah Pattern of Unlawful Activity Act (UPUAA), the elements of one or more underlying criminal offenses must be shown.  The eligible “predicate” crimes range from gambling promotion to unlawful dealing with property by a fiduciary to tampering with a witness.

Perhaps the most common underlying criminal offense used to support a UPUAA claim or charge is Communications Fraud, Utah Code Annotated Section 76-10-1801.  If it is a civil case, a UPUAA claim based on Communications Fraud may be subject to mandatory arbitration.  Utah Code Ann. Section 76-10-1605 says: “All actions arising under this section which are grounded in fraud are subject to arbitration under Title 78B, Chapter 11, Utah Uniform Arbitration Act.”

At least one Utah trial court has construed this provision as requiring the submission of UPUAA claims to arbitration even when a corporate defendant litigated in court for years before moving to compel arbitration shortly before trial.  (Usually, proceeding with litigation waives a right to demand arbitration later.  However, the trial court said that concept may apply to contractual arbitration provisions, but not statutory arbitration provisions.)

Two potential wrinkles of compelling arbitration of UPUAA claims:

1) You may end up with two litigation/arbitration tracks, as UPUAA claims may be carved off from other claims.  For example, in that same case, after the defendant’s motion to compel arbitration of the UPUAA claims was granted, the trial court allowed the plaintiff to proceed to trial on his other state law claims – for example, common law fraud or Consumer Sales Practices Act claims – while simultaneously pursuing UPUAA claims against the same defendant in arbitration.

2) A successful plaintiff can claim attorney fees regardless of whether the case is in regular court or arbitration.  See Section 76-10-1605(2) (“(2)  A party who prevails on a cause of action brought under this section recovers the cost of the suit, including reasonable attorney fees.”)  Under a quirk of statutory wording, however, a successful defendant might only be able to seek fees if the case stays in court.  Section 76-10-1605  says:   “(8)  If an action, claim, or counterclaim brought or asserted by a private party under this section is dismissed prior to trial or disposed of on summary judgment, or if it is determined at trial that there is no liability, the prevailing party shall recover from the party who brought the action or asserted the claim or counterclaim the amount of its reasonable expenses incurred because of the defense against the action, claim, or counterclaim, including a reasonable attorney’s fee.”  An argument could be made that the words “trial” and “summary judgment” are terms of art that are limited to court proceedings.  An arbitration hearing is not a trial (for example, normal rules of evidence do not apply), and arbitrations are not governed by the rule of civil procedure providing for “summary judgment.”