A recent Law 360 story by Emma Cueto, “6th Circ. Orders Atty Fee Paid in Power Co.’s $5M Arbitration,” reports that the Sixth Circuit has overturned a lower court decision regarding attorney fees in a nearly $5 million contract dispute between a power company and its supplier, with the appellate court ruling that the contract did allow for the court to grant attorney fees even though the arbitrator could not.
The court said in a split decision that Bay Shore Power Company had made a case that even though its contract with supplier Oxbow Energy Solutions LLC expressly did not allow an arbitrator to award attorney fees, it was reasonable to interpret other provisions as allowing a court to make such an award. As such, the majority said, the Ohio trial court was wrong to conclude that the seemingly contradictory provisions closed off the possibility of attorney fees.
"Ultimately, the provisions at issue can either be read together to permit the recovery of attorneys' fees in court but not before an arbitration panel, or they are hopelessly contradictory and unenforceable," U.S. Circuit Judge Eric L. Clay wrote for the majority. "Bay Shore presents a reasonable construction of the terms to harmonize them while Oxbow only presents reasons to be skeptical of Bay Shore's interpretation. None of those reasons are compelling."
In a dissent, U.S. Circuit Judge Eric E. Murphy said that, while he also disagreed with the trial court's reasoning, the request for attorney fees before the trial court went against the Federal Arbitration Act and the terms of the agreement and should have been denied.
The FAA gave the court the authority to confirm an award, but by requesting attorney fees of the court, Judge Murphy wrote, Bay Shore was essentially asking the court to modify the award. However, he said, courts are not permitted to reverse an arbitration panel's decision that attorney fees are not allowed.
In addition, he added, the contract specifically mandated that all disputes that could not be resolved informally or through mediation submit to arbitration. There was nothing in the contract that allowed for a special judicial proceeding over attorney fees, he said.
The parties filed for arbitration in 2016 after failing to work out the dispute in mediation, according to the decision. In 2017, the arbitration panel sided with Bay Shore and awarded it nearly $5 million in damages, plus costs and interest, the decision said.
However, the arbitration panel concluded that it could not grant attorney fees because of a clause in the contract at the heart of the dispute, which specified that attorney fees in an arbitration could not be awarded and should be paid separately, according to the decision. Bay Shore filed to confirm the award and also asked the court to award attorney fees.
It pointed to two other provisions in the contract that mandated that attorney fees be awarded, according to the decision. The three provisions could be reconciled, it argued, if the contract prevented only an arbitrator or arbitration panel — but not a court — from granting such fees. The trial court rejected this analysis, but the majority of the Sixth Circuit panel found it to be a valid interpretation. The appellate court sent the case back to the trial level with instructions to calculate reasonable attorney fees.