Arbitration is frequently touted as a less expensive and faster procedure to resolve disputes, preferable to resolution in court. Many contracts require it, and those that do frequently specify the American Arbitration Association as the forum. Parties, who are not bound by a prior agreement to arbitrate, may nonetheless agree to arbitration once a dispute arises.
Under California law, an attorney fee award to the prevailing party is available only when authorized by statute or pursuant to written agreement. While many contracts have an attorney fee provision, many do not. Whether or not a contract contains such a provision, or whether attorneys’ fees are authorized by statute, should always be considered before a party resorts to the court for resolution — likewise, it should always be considered before any arbitration filing.
The commercial rules of the AAA, for example, modify this result in one important respect. Rule R-43 provides for “an award of attorneys’ fees if all parties have requested such an award or it is authorized by law or their arbitration agreement.” The important change is, of course, that if all parties request such an award, the award may include an award of attorneys’ fees to the prevailing party, whether or not it is otherwise authorized.
If not authorized by law or prior agreement, it is wise to think twice before requesting attorneys’ fees in arbitration. There is, perhaps, no right choice except in hindsight. But if the issue is never considered and attorneys’ fees are blindly requested, I see a potential malpractice claim on the horizon.
Michael Daymude consults with clients and accepts cases involving contractual disputes subject to arbitration, including disputes before the American Arbitration Association. For other types of cases accepted, please scroll the Home and My Practice pages. If you are seeking a legal consultation or representation, call Michael at 818.971.9409.