March 16, 2020
By Carol Z. Smith
The only thing worse than telling your client that it lost the case is telling your client that it also has to pay the opposing party’s attorney’s fees. This is especially true when there was no contract or statute providing for an award of attorney’s fees. That was the case for the losing party in City of Chesterfield v. Frederich Construction, Inc.
The city of Chesterfield, Missouri, hired Frederich Construction, Inc. (FCI) for work on two construction projects. Both construction contracts contained provisions stating that all disputes between the parties would be subject to arbitration under the Construction Industry Arbitration Rules of the American Arbitration Association (AAA), but did not contain provisions for the award of attorney’s fees.
Disputes arose under both contracts and the parties proceeded to arbitration. In its claims in arbitration against FCI, Chesterfield requested the arbitrator award its attorney’s fees as one item of relief. FCI similarly requested an attorney’s fee award. The arbitrators found in favor of FCI and included attorney’s fees in its awards. Chesterfield did not contest the first award. With respect to the second award, Chesterfield filed a motion to vacate the attorney’s fee portion of the award, claiming that the arbitrators had exceeded their authority because the contract between the parties did not contain a provision for allowing attorney’s fees, there was no statutory basis for the fee award, and there were no special circumstances warranting a fee award.
The arbitrators, however, concluded they were authorized to award attorney’s fees because the parties incorporated the AAA rules into their contracts, and one of the AAA rules provided for an award of fees – if both parties requested fees. The court agreed and confirmed the award. Even though Chesterfield did not have a contractual or statutory basis to recover attorney’s fees, because it requested an award of its attorney’s fees in its request for relief, as did FCI, Chesterfield had to pay FCI’s fees.
AAA Rule R-48(d) provides that “the award of the arbitrator … may include … an award of attorney’s fees if all parties have requested such an award or it is authorized by law or their arbitration agreement.”
The lesson? Be careful what you ask for in arbitration.