UPDATED JANUARY 2014
In the past, Florida applied special rules with respect to the authority of arbitrators to award attorney’s fees. Under the old Florida Arbitration Code, Fla. Stat. §682.11 provided that “Unless otherwise provided in the agreement or provision for arbitration, the arbitrators’ and umpire’s expenses and fees, together with other expenses, not including counsel fees, incurred in the conduct of the arbitration, shall be paid as provided in the award.”
Florida courts have interpreted that statute’s exclusion of “counsel fees” from an arbitrator’s award to mean that trial courts, rather than arbitrators, have the sole right to determine the issue of attorney’s fees unless the parties expressly waive this statutory right, as well as the exclusive jurisdiction to determine whether such a waiver has occurred. However, the parties may voluntarily agree to allow the issue of attorney’s fees to be decided by the arbitrator. See Turnberry Assocs. v. Service Station Aid, Inc., 651 So. 2d 1173, 1174 (Fla. 1995).
Where the arbitration presents theories under which the prevailing party may recover attorney’s fees, Florida courts place upon arbitrators the responsibility of identifying the theories upon which the respective parties prevailed so that a reviewing court can ascertain whether a basis exists to grant the requested relief. Moser v. Barron Chase Securities, Inc., 783 So. 2d 231 (Fla. 2001). Nevertheless, it remains the court’s job to determine entitlement to and amount of any award of attorney’s fees.
The Florida courts considering the issue have ruled that the foregoing special limitation on an arbitrator’s power to award attorney’s fees applies even to cases covered by the Federal Arbitration Act. See Orkin Exterminating Co. v. Petsch, 872 So.2d 259, 263 (Fla.2nd DCA 2004) (“We note that even when the federal ArbitrationAct governs an arbitration agreement, Florida law controls the award of attorney’s fees.Lee v. Smith Barney, Harris Upham & Co., 626 So.2d 969, 971 (Fla. 2d DCA 1993);see also Cassedy v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 751 So.2d 143, 146-47 (Fla. 1st DCA 2000).”).
Two cases decided by the Supreme Court suggest that, even under the old statute, if industry rules are incorporated into the arbitration agreement by reference, and those rules provide that the arbitrator may decide the issue of attorney’s fees, the rules trump the Florida statute on this issue. In Mastrobuono, Inc. v. Shearson Lehman Hutton, Inc., 514 U.S. 52 (1995), the arbitration agreement contained a New York choice-of-law provision, but incorporated the NASD rules as well. The NASD rules appear to allow the arbitrator to award punitive damages, which is not permitted under New York law. The Court concluded that only New York substantive law applied, but that the authority of the arbitrator pursuant to the NASD rules superseded the limitation on that authority imposed by New York procedural law; accordingly, the arbitrator could award punitive damages regardless of the New York rule.
Similarly, in Preston v. Ferrer, ___ U.S. ___ (February 2008), California law applied to the arbitration agreement but that same agreement incorporated the construction rules of the American Arbitration Association. The Court held that the “best way to harmonize” the parties’ adoption of the AAA rules and their selection of California law “is to read the latter to encompass prescriptions governing the substantive rights and obligations of the parties, but not the State’s ‘special rules limiting the authority of arbitrators.’” As the AAA rules provided that the arbitrator had the power to determine the existence or validity of a contract of which an arbitration clause forms a part, those incorporated rules prevailed over California law requiring that the validity of the contract initially be determined by a state administrative agency.
In the author’s opinion, these two cases stand for the proposition that, if procedural rules are incorporated into the arbitration agreement authorizing the arbitrator to decide the issue of attorney’s fees (e.g., the rules of the National Arbitration Forum or the AAA Employment rules), the arbitrator is entitled to resolve the issue of attorney’s fees notwithstanding Fla. Stat. §682.11.
The foregoing discussion described the law before the Florida Arbitration Code was revised. The new version of the Code allows arbitrators to award reasonable attorney’s fees if such fees are authorized by law or in an agreement between the parties to the arbitration. §682.11(2), Fla. Stat. (2013). As noted elsewhere in another article, this revision applies to new agreements to arbitrate made on or after July 1, 2013, and on July 1, 2016 will apply to all arbitration agreements regardless of when made.