Construction Law

Arbitrators award attorneys fees, contract notwithstanding

By Werner Sabo

On April 9, 2009, the Second Circuit Court of Appeals in ReliaStar Life Insurance v. EMC National Life, affirmed an award by a panel of arbitrators that imposed a sanction of attorneys fees and costs on the losing party for failing to arbitrate in good faith. The arbitration agreement stated that each party would bear the expenses of its own arbitrator and its own attorneys. The arbitrators, after the hearings that awarded ReliaStar some $21 million, found that the conduct of National was "lacking good faith."  National moved to vacate that part of the order awarding more than $3 million in attorney and arbitrator fees as well as almost $700,000 in costs. The trial court agreed that the arbitrators exceeded their powers, but the appellate court reversed and reinstated the award.

The court took the position that a broad arbitration clause confers inherent authority on arbitrators to sanction a party that participates in the arbitration in bad faith and that such a sanction may include an award of attorney's or arbitrator's fees. Further, the award was compensatory and not punitive, so it did not violate a policy against punitive arbitration awards.

Full post as published by Construction Attorney Blog on April 15, 2009 (boomark / email).