An Arbitrator's Authority to Award: Attorney Fees for Bad-Faith Arbitration - Dispute Resolution Journal - Vol. 60, No. 2
John Hinchey is a partner at King & Spalding LLP and serves as deputy group leader in the firm’s Global Transactions Practice Group. His focus is on construction and commercial contracting matters. He was previously an assistant attorney general for the State of Georgia, and a special counsel to two state Commissions to study and propose reforms to the judicial system. He currently serves on the panel of the American Arbitration Association, the London Court of International Arbitration, the CPR Institute, the Georgia Arbitrators’ Forum, the Closure ADR Group, Inc., and the Association of International Petroleum Negotiators. He is also a member of the Chartered Institute of Arbitrators. Thomas Burch is an associate in the Construction and Global Transactions Practice Group at King & Spalding’s Atlanta office.
Originally from Dispute Resolution Journal
This article discusses an arbitrator’s authority under federal and state law, and the American Arbitration Association Commercial Arbitration Rules, to award attorney fees for bad-faith conduct during arbitration. Additionally, it examines the definition of bad faith and provides a justification for allowing arbitrators to make bad-faith awards.
During the classical period of Roman law, attorneys did not charge fees for legal advice or services.1 Consequently, high legal fees were no deterrent to filing a lawsuit. To ensure that parties did not abuse these free services and initiate litigation in bad faith, Roman jurists adopted the principle of lis crescens in duplum, which allowed them to double the judgment against anyone who initiated litigation without good cause.2 So began the long-standing tradition of penalizing parties for bad-faith litigation.3
Approximately 2000 years later, the U.S. Supreme Court adopted bad faith as an exception to the “American Rule” on shifting attorney fees.4 While the Court did not explain whether this exception applied in arbitration, it has since pushed a “national policy favoring arbitration,”5 which has caused arbitration to become significantly more prevalent in the American adjudicatory process. As a result, courts have struggled to determine the extent, if any, that the principle of penalizing parties for bad faith applies in modern arbitration.
The answer depends on several factors. First, does the parties’ contract grant the arbitrator authority to award attorney fees? If so, then the answer is clear. The arbitrator can make an award of attorney fees for bad-faith arbitration. If not, then one must look to the law that governs the arbitration agreement. That is the subject of this article.
We discuss an arbitrator’s authority to award attorney fees for bad-faith arbitration under the Federal Arbitration Act (FAA), the Uniform Arbitration Act (UAA), the 2000 Revised Uniform Arbitration Act (RUAA), and the American Arbitration Association’s (AAA) Commercial Arbitration Rules. We also examine the definition of bad faith, and preemption under the Federal Arbitration Act, and we provide a brief justification for allowing arbitrators to make bad-faith awards.