February 22, 2021

February 22, 2021:

Dallas Court of Appeals confirms that AAA Commercial Arbitration Rule R-47(d)(ii) means what it says: If all parties ask for attorneys' fees, the arbitrator has the power to award attorneys' fees even if such fees would otherwise not be recoverable.  Ninety Nine Physician Servs., PLLC v. Murray, No. 05-19-01216-CV, 2021 WL 711502 (Tex. App. -- Dallas Feb. 22, 2021) (unpublished).

The AAA Commercial Arbitration Rules apply when the parties provide for arbitration under those rules or when the parties provide for "arbitration by the AAA of a domestic commercial dispute without specifying particular rules."  R-1.  AAA Commercial Arbitration Rule R-47(d)(ii) provides that the "[a]ward of the arbitrator may include: . . . (ii) an award of attorneys' fees if all parties have requested such an award or it is authorized by law or their arbitration agreement."           

In Murray, the Dallas Court of Appeals confirmed that Rule R-47(d)(ii) empowers an arbitrator to award attorneys' fees when all parties have asked for attorneys' fees even if such fees would not otherwise be recoverable.  The court's reasoning was straightforward.  Under the plain language of this rule, "there [are] three circumstances in which the arbitrator [is] vested with the authority to award attorney's fees (1) if all parties requested such an award or (2) if it was separately authorized by law or (3) if it is authorized by the arbitration agreement."  Id. at 3.  Or means or: "Because of the use of the disjunctive 'or,' only one of the above criteria must be met in order for an award of attorney's fees to have been authorized by the Commercial Arbitration Rules.         
In Murray, the arbitration agreement did not authorize an award of attorneys' fees.  And Respondent contended that Claimant had not pleaded a cause of action that would entitle it to recover attorneys' fees.  But the Dallas appellate court found that because both sides had asked for an award of attorneys' fees, Rule R-47(d)(ii) authorized such an award.                

The lesson of Murray falls into the category of "be careful what you ask for."  When a Claimant in arbitration asks for attorneys' fees, the Respondent often reflexively asks for fees also.  But be careful.  If the arbitration agreement is silent about attorneys' fees and the Claimant has not pleaded a cause of action that would entitle it to attorneys' fees, you may choose to stand pat instead, particularly when the Claimant has a strong case and is likely to prevail.  The risk of asking for attorneys' fees is that you empower the arbitrator to award such fees to your opponent even though such fees would not be recoverable absent your request for fees.   

    

  

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