Arbitrator and NAA member Lise Gelernter discusses a recent decision by a U.S. District Court involving attorney’s fees when a party seeks to vacate an arbitration award.
Parties seeking to vacate arbitration awards should think hard about the legal basis for such a claim before going into court. Otherwise, they may end up paying the opposing party’s legal fees.
In a federal district court case in Alabama decided on February 15, 2018, Judge L. Scott Coogler held that an employer had to pay the union $22,000 for attorney’s fees the union had incurred in its opposition to the employer’s unjustified motion to vacate an arbitration award. Peco Foods, Inc. v. Retail, Wholesale, and Department Store Union, Midsouth Council, Docket No. 7:16-cv-01345-LSC, 2018 WL 905367 (N.D. Ala. 2/15/18). The court relied on a 1970 Fifth Circuit opinion which had held that a federal district court could award attorney’s fees “where it determines that a party has without justification refused to abide by the award of an arbitrator.”
In the Peco Foods case, the employer had fired an employee for making potentially threatening comments, but an arbitrator had issued an award that found there was no just cause for any discipline and ordered that the employee should be returned to work. Peco sought to vacate the award in court, claiming that the arbitrator had erred and that the award violated public policy. The union counterclaimed and sought enforcement of the award. The court found that it could not set aside the award because Peco was, essentially, asking the court to review the merits of the arbitrator’s decision. But the Supreme Court had made it clear years ago that judges cannot set aside awards just because they disagree with the arbitrator’s reasoning. As long as the arbitrator’s award “draws its essence from the collective bargaining agreement,” and the arbitrator is not dispensing “his own brand of industrial justice,” the award is valid. Steelworkers v. Enterprise Wheel & Car Corp., 363 U.S. 593, 597 (1960). The Peco court explained that because “the scope of review for a labor arbitration award is so narrow, Peco’s only chance for prevailing was for the Court to substitute its judgment for the arbitrator’s and to engage in a review of the merits of the decision – something it cannot do.”
The union then sought attorney’s fees. Because Peco acted “without justification” in seeking vacatur, the court held that Peco was responsible for the union’s attorney’s fees. The court said: “In sum, Peco attempted to salvage an arbitration loss through litigation that had no sound basis in the law and should pay the Union’s costs of defending such an unnecessary and groundless action.”
Other courts have noted that a court’s power to award attorney’s fees for an unjustified failure to comply with or opposition to an arbitration award. See e.g. United Steel, Paper & Forestry, Rubber, Mfg., Energy, Allied Indus. & Serv. Workers Int’l Union v. Wise Alloys, LLC, 807 F.3d 1258, 1274 (11th Cir 2006) (noting similar doctrines are applicable to arbitration proceedings governed by the Labor Management Relations Act and the Federal Arbitration Act) ; International Chemical Workers Union (AFL-CIO), Local No. 227 v. BASF Wyandotte Corp., 774 F.2d 43, 47 (2d Cir. 1985).