Beware of the Attorneys' Fee Trap In Arbitration!
Did you know that the Commercial Arbitration Rules for the American Arbitration Association permit an arbitrator to award attorneys' fees if all parties have requested such an award? Pursuant to R-43 of the Rules, the arbitration award may include "an award of attorneys' fees if all parties have requested such an award."
In other words, if you file a demand for arbitration and request fees, and the respondent files an answering statement requesting fees, then the arbitrator may award the prevailing party fees even if there is no agreement providing for the recovery of fees! Therefore, if neither side is legally entitled to the recovery of attorneys' fees, you must be very careful not to unwittingly request attorneys' fees in your arbitration demand or answering statement because it could end up costing your client the other side's attorneys' fees.
Jeffrey Huron is the founder of Huron law group, a litigation firm that handles business, real estate and entertainment disputes.