Arbitration and attorneys' fees: a pandora's box; with the recent Florida Supreme Court decision in Moser, expanded judicial review of arbitrations awards may become a reality.

• Author: Nussbaum, Frank

Arbitration, a privatization of civil justice, is a process without the right to a jury trial, and is free of the constraints of certain constitutional rights. Moreover, until very recently, the bases for appeal of an arbitration award were very limited, thereby preventing the parties from becoming enmeshed in a lengthy and time-consuming appellate review process. (1) Notwithstanding these constraints and limitations, arbitration has increasingly found favor in the federal courts (2) and the business community. Businesses prefer the anonymity of arbitration, and those who generally favor it believe that arbitration relieves clogged court dockets and involves fewer costs. Arbitration is also considered a favored alternative when: there is a need to offset power imbalances; there is a high volume of disputes that need to be resolved between the parties; parties need to be compelled to attend and participate (which is mandated by arbitration clauses); and there is a need for privacy. (3) Consequently, many business institutions have made arbitration mandatory in many of their contractual relationships.

Arbitration has assumed an expanding role for resolving disputes in the areas of education, employment, health care, sports, (4) securities, and credit card disputes. Despite the foregoing, members of the Bar are generally resistant to use arbitration as an alternative method of resolving disputes because: 1) a perception exists among the Bar that arbitrators are encouraged to reach "equitable and just" results, as opposed to adhering strictly to substantive and procedural law; (5) 2) arbitration limits the use of technical legal arguments to exclude testimony, such as the rule against hearsay; and 3) pretrial discovery and pretrial motion practice are severely limited in arbitration proceedings. More significantly, as the amounts in controversy become larger, counsel prefer that they have the option of seeking relief through the traditional, expanded judicial review afforded through the judicial process.

However, with the recent Florida Supreme Court decision in Moser v. Barron Chase Securities, Inc., 783 So. 2d 231 (Fla. 2001), the most significant of the foregoing aversions to arbitration, to wit, the touted "finality" of arbitration awards, may have come to an end and expanded judicial review of arbitration awards may become a reality.

The Moser Decision

The Moser court reviewed a case that began with an arbitration brought by the claimant, who was with the National Association of Securities Dealers (NASD), now known as NASD Dispute Resolution, Inc. Ms. Moser alleged various claims against the broker and the securities firm Barron Chase Securities, Inc. Included was a claim under F.S. [section] 517.211(6) (1997), the Florida Blue Sky law, which provides for the award of attorneys' fees to the prevailing party. This situation arises in many arbitration cases where parties request attorneys' fees to be awarded to the prevailing party pursuant either to statute or contract. With the Florida Legislature's recent overhaul of F.S. [section] 57.105, which now mandates that courts apply sanctions, i.e., attorneys' fees, when a movant has prevailed over an unsupported argument, pleading, or cause of action, it is not unreasonable to anticipate that the request for fees in arbitration proceedings will be standard, based on that statute. Whether arbitrators can choose to ignore [section] 57.105 demands for attorneys' fees in arbitration proceedings is a critical issue related to the "manifest disregard" of the law issue discussed below.

Moser sought to directly address the issue of entitlement to attorneys' fees incident to arbitration, since it wished to resolve what it called

substantial confusion as to the procedure and appropriate forum for recovering attorneys' fees incident to arbitration proceedings ... arbitrating parties may waive their right to have the circuit court address the issue and agree that the arbitrators may do so.... Notwithstanding, confusion remains as to the authority of a trial court to award fees when an arbitration award is silent or ambiguous as to whether the award was based on a legal theory that carried with it an entitlement to attorneys' fees. (6) In Moser, the arbitration panel found in favor of Ms. Moser on her claims and stated in the award that "the Claimant's request for attorneys' fees is referred to a court of competent jurisdiction." The arbitration panel, however, did not specifically state under which of the claims that Ms. Moser alleged in her statement of claim(s) the panel based its award. When the matter was brought before the circuit court, the court affirmed the arbitration award and awarded attorneys' fees to Ms. Moser based on the attorneys' fee language in the arbitration panel's award. The court's ruling was appealed to the Second District Court of Appeal, which reversed the ruling, holding that the circuit court did not have the authority to award attorneys' fees to Ms. Moser because the arbitration panel's award did not specify that Ms. Moser prevailed on her [section] 517 claim (the only claim pursuant to which she could recover attorneys' fees).

Ms. Moser appealed to the Florida Supreme Court, which stated that the decision of the Second District Court of Appeal in Moser was in conflict with the Fifth District Court of Appeal decision in Josepthal Lyon & Ross, Inc. v. Durham, 734 So. 2d 487 (Fla. 5th DCA 1999), and that this issue needed resolution by the Florida Supreme Court. The Florida Supreme Court considered the contradictory testimony regarding the actual practice of the drafting of NASD arbitration panel awards and considered the testimony of one expert witness who testified that, at NASD arbitrator training, arbitrators were encouraged not to specify the decisional bases of their awards and to render only "bare bones" awards, so as to prevent the potential for further litigation after the rendering of the award. (7) Moser was clear that parties in an arbitration have a substantive and procedural due process right to have the issue of attorneys' fees decided in the circuit court and not by the arbitration panel. However, indirect references in an arbitration award referring the issue of attorneys' fees to a court of competent jurisdiction signaled to the circuit court that the arbitration panel considered the claimant to be entitled to the award of attorneys' fees.

Moser requires arbitration panels, when there are multiple claims, to specifically identify on what bases the claimant has prevailed, and on what theory the award is based. The failure to do so will result in the circuit court sending the case back to the arbitrators with instructions to specify in the arbitration "the theory under which the claimant prevailed or [to] otherwise clearly indicate whether the claimant has prevailed on a theory that would permit the trial court to award fees."

Then, in a seemingly contradictory statement, the Florida Supreme Court stated in Moser that

under the code [the Florida Arbitration Code] it has been held that an award does not have to reflect the precise reasoning, findings of fact, conclusions of law, or ultimately the basis upon which a decision was arrived at by the arbitrators. See generally Prudential-Bache Securities, Inc. v. Shuman, 483 So. 2d 888, 889 (Fla. 3d DCA 1986).

The Shuman court reasoned that the legal basis of an award is immaterial to the subsequent determination by a trial court of whether an award should be vacated. The fact that the relief granted is such that it could not or would not be...