Guardian Builders, LLC v. Uselton
154 So. 3d 964
Ala.2014Background
- The Useltons sued Guardian Builders in Madison Circuit Court for negligent construction of their house; the dispute was sent to binding arbitration administered by the Better Business Bureau (BBB) of North Alabama.
- The arbitrator issued an interim award ($305,711.05) that included an arbitrator fee and stated Guardian would be liable for reasonable attorney fees and the BBB forum fee; the Useltons later submitted a contingency-fee claim and expense affidavit seeking additional attorney fees and expenses.
- The arbitrator’s final award totaled $452,275.20, which included attorney fees and arbitration/forum fees; Guardian objected that the arbitrator lacked authority to award those fees.
- Procedurally, the Madison Circuit Court initially entered an order before the arbitration award was entered as a final judgment; this Court vacated that order, the clerk later entered the arbitration award as final judgment, Guardian moved to vacate or modify, the trial court denied relief, and Guardian appealed.
- The arbitration clause empowered an arbitrator to render what he/she considered "fair and just" and incorporated BBB rules; BBB rules permit remedies "permitted under applicable law" and state the arbitrator is "not bound to apply legal principles" in reaching a fair resolution.
Issues
| Issue | Plaintiff's Argument (Useltons) | Defendant's Argument (Guardian) | Held |
|---|---|---|---|
| Whether the arbitrator exceeded authority by awarding attorney fees | The arbitration clause and BBB rules let the arbitrator grant what is "fair and just," and Rule 29.A says arbitrator need not apply legal principles; R.P. Industries supports fee awards in arbitration | BBB Rule 3 limits remedies to those "permitted under applicable law" (Alabama follows the American rule); no statute or contract authorizes attorney-fee award, and fees were not requested during arbitration | Arbitrator exceeded authority in awarding attorney fees; award of attorney fees vacated/removed |
| Whether the arbitrator exceeded authority by awarding arbitration/forum fees to Useltons | Arbitration fees are akin to costs and BBB rules allow remedies permitted by law; Useltons paid fees pre-hearing and contest reimbursement | Arbitration provision expressly required arbitration fees "shall be paid by both parties," so arbitrator could not order Guardian to pay Useltons’ arbitration fees | Arbitrator exceeded authority in ordering Guardian to pay arbitration fees; that portion of award vacated/modified |
| Whether vacating part of award requires setting aside entire award and remanding for trial | Useltons: Removing fees would defeat arbitrator’s intent and leave damages insufficient; whole award should be vacated | Guardian: Challenge framed under FAA §10; only portions exceeding authority should be set aside | Court declined to vacate entire award; modified judgment to subtract unlawful fee awards (no authority cited by Useltons under FAA to void whole award) |
| Standard of review and scope of court review over arbitration awards | N/A (procedural) | Courts’ review limited; vacatur permitted under FAA §10(a)(4) only if arbitrator exceeded powers; questions of law review de novo, factual findings for clear error | Applied narrow §10(a)(4) standard; concluded arbitrator exceeded authority as to fees but not compensatory damages |
Key Cases Cited
- R.P. Industries, Inc. v. S & M Equipment Co., 896 So.2d 460 (Ala. 2004) (discusses limits on vacatur under FAA §10(a)(4) and when arbitrators may award attorneys’ fees)
- Hereford v. D.R. Horton, Inc., 13 So.3d 375 (Ala. 2009) (explains appellate standard reviewing confirmation/vacatur of arbitration awards)
- Birmingham News Co. v. Horn, 901 So.2d 27 (Ala. 2004) (interpreting scope of arbitrator authority and §10 standards)
- White Springs Agricultural Chemicals, Inc. v. Glawson Investments Corp., 660 F.3d 1277 (11th Cir. 2011) (distinguishes court costs from attorney fees)
- Anderson v. Griffin, 397 F.3d 515 (7th Cir. 2005) (explains historical treatment and rationale for awarding court costs separately from attorney fees)
- Maxus, Inc. v. Sciacca, 598 So.2d 1376 (Ala. 1992) (further discussion of the limited role of courts reviewing arbitration awards)
- Reynolds v. Reynolds, 15 Ala. 398 (Ala. 1849) (classic statement that an award must conform to the submission and that excess beyond authority is void pro tanto)