Labor & Employment Law

NASD arbitrators botched attorney fee award

A prevailing plaintiff is entitled to statutory attorney fees in an ADEA case, but NASD arbitrators acted "in manifest disregard of law" by capping the fee award by the amount agreed to in the attorney-client fee agreement.

Bernhard Porzig claimed his employer discharged him in violation of the Age Discrimination in Employment Act (ADEA), and his claim went to arbitration by a National Association of Security Dealers (NASD) arbitration panel.

The panel found for Porzig on the merits and awarded $220,079. The panel did not award attorney fees or costs, and assessed $13,840.75 in forum, filing, and arbitrators' fees against Porzig. The trial court vacated the award as to attorney fees and costs.

Porzig's attorney represented to the panel that $82,437.81 was Porzig's obligation under the attorney fee agreement. The panel's revised award included $83,500 in attorney fees plus an order that Porzig's lawyer repay $82,437.81 to Porzig.

Porzig v. Dresdner, Kleinwort, Benson (2nd Cir 08/07/2007)

The 2nd Circuit held that the attorney fee award was "in manifest disregard of law" and the panel had no jurisdiction to order the attorney to return funds to Porzig.

1. As to attorney fees, the court concluded that the arbitrators had used the contingency fee agreement to set a cap, which is contrary to established precedent. In ADEA cases, a prevailing plaintiff's attorney fees are normally calculated by a lodestar analysis and should include fees for pursuing the statutory right to fees.
2. As to the panel's award directing the attorney to reimburse fees, the court the court held this to be a violation of the Federal Arbitration Act (FAA) because neither the attorney nor Porzig had agreed to arbitrate the attorney fee contract.
   

Full post as published by Arbitration Blog on August 10, 2007 (boomark / email).