If you won your arbitration, it is vexing to have to spend many thousands more in attorneys’ fees opposing a motion to vacate the arbitration award. (That is especially true if you signed up for arbitration thinking it was faster and avoided appeals.) But, can you ask the court to award you the attorneys’ fees you incurred in confirming the arbitration award? That is a much more complicated question than it should be, and the Sixth Circuit took it on recently in Crossville Medical Oncology, P.C. v. Glenwood Systems, LLC, 2015 WL 1948329 (6th Cir. May 1, 2015).
In Crossville, two businesses had claims against each other in arbitration. Glenwood won. The arbitrator awarded Glenwood over $200,000 in damages, plus about $16,000 in attorneys’ fees. The losing party then challenged the award by arguing the arbitration agreement was invalid. The federal district court disagreed and confirmed the award. Glenwood then asked the district court to award it the attorneys’ fees it incurred in confirming the arbitration award. The district court denied the motion.
The Sixth Circuit affirmed the denial of fees. It analyzed the possibility of recovering fees to confirm an arbitration award by using the following rules/guidelines:
- “The FAA neither contemplates nor precludes an award of attorneys’ fees.” So, just like in any other situation, fees are only available if authorized by statute or contract. In this case, Glenwood only made arguments under its contract.
- The court may not award fees, even if an arbitration agreement authorizes fees to a prevailing party, if the arbitration agreement has broad language sending all disputes to arbitration. (Because then, even the dispute over the winner’s fees in confirming the arbitration award must go to an arbitrator.)
- Similarly, the court may not award fees if the arbitration agreement shows the parties’ intended to grant the power to award fees only to the arbitrator (not a court) .
- [Another guidepost from the 8th Circuit last year: if the arbitrator didn’t grant the winner its attorneys’ fees during the arbitration, the court is not likely to grant the winner fees incurred in post-arbitration proceedings.]
This is a very useful analysis that should help other courts confronting the issue. In short, to ask a court for fees on confirmation of the award, a party must be able to show that a statute or contract authorizes the fee recovery, and that that dispute does not fall within the scope of the arbitration clause.
It also offers an important tip for drafters of arbitration clauses. If you really want to emphasize the binding and final nature of the arbitration by making it onerous for a party to challenge the award, then you may want to consider having a statement along these lines in the arbitration agreement: “In order to discourage any dispute over the confirmation of the resulting arbitration award, the parties agree that the court hearing any challenge to the award may award fees incurred in post-arbitration proceedings to the party who prevailed in the arbitration if and when the award is confirmed.”
Here is my own tip for those litigating this issue: there is room for parties who succeed in getting arbitration awards confirmed (or vacated) to make arguments for attorneys’ fees under the applicable state uniform arbitration act. The argument goes like this: 1) Even when the FAA applies, state acts may be applicable as a gap-filler; 2) Section 25 of therevised uniform act states that a “court may add reasonable attorney’s fees and other reasonable expenses of litigation incurred” after hearing motions to confirm or vacate arbitration awards; and 3) that is appropriate in my case because my opponent continually thwarted the goal of arbitration to be efficient and final (etc, etc). Try it and let me know how it works.
By Liz Kramer