MCR OF AMERICA, INC., d/b/a Mortgage Credit Reports Inc. v. J. William GREENE.
No. 1274, Sept. Term 2000.
Court of Special Appeals of Maryland.
Nov. 26, 2002.
811 A.2d 331
Karen D. Amos, Ellicott City, for appellee.
Argued before MURPHY, C.J., KRAUSER, and STUART R. BERGER (Specially assigned), JJ.
KRAUSER, Judge.
We are asked to determine whether an arbitrator can impose sanctions on an attorney, representing a party to the arbitration, for misconduct. In this case, the arbitrator sanctioned the offending attorney1 by making him jointly responsible with his client for a portion of the award of fees and costs his client was ordered to pay, as the non-prevailing party in the proceeding below. In deciding this issue and others presented by the parties, we shall take this opportunity to illumine the role and powers of the arbitrator under Maryland law.
This case arose from an employment dispute. Appellant, MCR of America, Inc., (“MCR“),2 fired its marketing director,
Following what were apparently unnecessarily contentious proceedings, the arbitrator found that MCR had not breached its agreement with Greene by terminating his employment. She then ordered Greene, as the non-prevailing party on the principal issue before her, to reimburse MCR for all arbitration “fees and expenses” as well as attorney‘s fees incurred by MCR in defending against Greene‘s breach of contract claim. But MCR‘s victory was not complete nor Greene‘s defeat total. On his claim for unpaid wages, the arbitrator ordered MCR to pay Greene $2,676.92.
Then turning to Greene‘s counsel, whose “vexatious conduct” the arbitrator believed had unnecessarily complicated and prolonged the proceedings, she declared that he was “jointly responsible” with his client for a portion of the arbitration and legal fees to be paid to MCR. While the award of arbitration fees and expenses was upheld by the Circuit Court for Baltimore County, the award of legal fees was not. Cross-appeals to this Court followed.
Before this Court, MCR challenges the circuit court‘s vacation of the arbitrator‘s award of attorney‘s fees while Greene contests the court‘s affirmance of the arbitrator‘s award of fees and costs to MCR. Specifically, MCR presents two issues, which can be restated as one:
- Whether the circuit court erred in vacating the arbitrator‘s award of attorney‘s fees?
On cross-appeal, Greene presents the following issues, which we have set forth below largely as they appear in his brief:
- Whether the circuit court erred in confirming all fees and costs awarded pursuant to MCR‘s motion for sanctions.
- Whether the arbitrator was without authority to consider an award of sanctions.
Whether the award of fees/expenses based upon documents provided by MCR to the arbitrator ex parte following the close of the hearing constitutes misconduct, bias, prejudice, and denial of due process such that the award must be vacated. - Whether the arbitrator was without authority to extend personal liability of the award to Greene‘s counsel who was not a party to the arbitration or to the agreement requiring the parties to submit to arbitration.
- Whether the circuit court erred in refusing to vacate the arbitrator‘s decision and award.
For the reasons that follow, we shall affirm the circuit court‘s vacation of the arbitrator‘s award of attorney‘s fees but reverse its confirmance of the arbitrator‘s award of fees and expenses. In all other respects, we shall affirm the judgment of the circuit court.
BACKGROUND
MCR is engaged in the credit reporting business. It provides credit and investigative reports to businesses in the home mortgage industry. Hoping to expand that business, MCR hired Greene to be its marketing director and executive vice-president.
The terms of Greene‘s employment were memorialized in a written agreement between the parties. Paragraph 6 of that agreement, entitled “Breach,” states that the parties shall “by mutual agreement, develop written performance criteria including achievable goals regarding steps for the growth, expansion or diversification of the Corporation.” Under that paragraph, if Greene fails “to render services or accomplish the criteria or goals” agreed to by the parties or “to perform any material covenant or condition” of the agreement, MCR may terminate the agreement. Paragraph 8 of the agreement, entitled “Termination,” permits MCR to terminate Greene‘s employment “for justifiable cause” which includes “any disclosure by [Greene] to any person, firm or corporation... of any confidential information.”
In the event of a dispute between the Corporation and the Employee as to a termination of this agreement, such dispute shall be submitted to arbitration under the rules of the American Arbitration Association, and the decision of the arbitrator shall be final and binding upon all parties. The fees and expenses of any such action shall be bourne solely by the party against whom the decision is rendered.
And Paragraph 8(b) provides:
In the event of a dispute between the board of directors and the employee as to the existence of justifiable cause, such dispute shall be submitted to arbitration under the rules of the American Arbitration Association, and the decision of the arbitrator shall be final and binding upon all parties. The fees and expenses of any such action shall be bourne solely by the party against whom the decision is rendered.
In sum, Paragraph 6(b) requires that disputes “as to a termination” be arbitrated while Paragraph 8(b) requires that disputes “as to the existence of justifiable cause” be arbitrated. Both arbitration provisions state that “the fees and expenses of any such action shall be bourne solely by the party against whom the decision is rendered.” That language was the basis upon which the arbitrator awarded MCR fees and costs.
Greene began working for MCR on May 15, 1996. But over the next five months, MCR‘s business did not grow as planned. Consequently, among other cost-cutting measures, MCR reduced Greene‘s salary by fifty-three percent. That reduction, MCR informed Greene, was to “bring [his] salary down” to the level of the salaries of other employees, which had been reduced because of MCR‘s economic difficulties. Unfortunately, Greene discussed his salary reduction with the owner of a credit reporting company that MCR was attempting to purchase. The disclosure of that information, MCR claims, created questions as to its financial viability.
On June 8, 1997, Greene filed a complaint in the Circuit Court for Howard County against MCR, alleging breach of contract and a violation of Labor and Employment (“LE“)
After argument, this Court issued an unreported opinion.5 In that opinion, we observed that the parties’ employment agreement “mandates arbitration for disputes regarding ‘termination of [the] agreement’ and the ‘existence of justifiable
Thereafter, Greene filed a Statement of Claim with the American Arbitration Association, seeking, among other things, unpaid wages and damages for breach of contract. Greene also sought “reasonable attorney‘s fees ... pre-judgment interest and the costs of [the] action, including the submission fee and all hearing fees.” In reply, MCR filed an answer and a counterclaim for fraudulent misrepresentation, alleging that Greene misrepresented his “qualifications, abilities, and commitment” to MCR. As Greene did, MCR requested “the costs of the arbitration and all proceedings and attorneys’ fees incident thereto.”
In mid-July of 1999, a hearing was held before an arbitrator provided by the American Arbitration Association (“AAA“). Following that hearing, the AAA case manager, by letter dated July 20, 1999, informed the parties that “[p]ost-hearing briefs [were] to be filed on or before August 13, 1999.” The letter further stated that “[u]pon the filing of final briefs ... the arbitrator [would] declare the hearings closed.”
On August 20, 1999, one week after the letter‘s August 13, 1999 deadline, MCR filed a “Motion for Sanctions” with the Arbitrator. That motion claimed that “throughout the presentation of his case and the cross examination of Claimant‘s witnesses” Greene‘s attorney, among other things, “was argumentative in the extreme, constantly interfering with the examination of witnesses, and making repetitious arguments unrelated to the objection he was making” during discovery and the presentation of his case. His conduct and lack of preparation, the motion alleged, had “unduly prolonged” discovery and the arbitration hearing. It therefore requested reimbursement for counsel fees and other fees and costs it had
That decision awarded Greene $2,676.92 in unpaid wages pursuant to
After finding that MCR‘s total attorney‘s fees in the arbitration proceedings were $64,640.00 and determining that $45,000.00 of those fees were expended by MCR in defending Greene‘s contract claim, the decision declared that Greene “shall pay or reimburse to MCR: (i) American Arbitration Association administrative fees and expenses ..., (ii) Arbitrator‘s fees and expenses, (iii) MCR‘s attorney‘s fees in the amount of $45,000, [and] (iv) MCR‘s expenses in the amount of 8,479.66.”
Then, noting that “[t]hroughout the ensuing arbitration, Greene‘s counsel ... was variously obstructive, uncivil, pedantic, disrespectful of witnesses and his colleagues at the bar, and disparaging of the process of arbitration” and that his “redundant objections (to relevancy) and his vexatious pattern of examination of witnesses wasted considerable time and multiplied the costs of these proceedings,” the arbitrator ordered Greene and his counsel to pay MCR, “$8,500.00 of the attorney‘s fees incurred by and awarded to MCR, and ... $8,500.00 of the Arbitrator‘s fees incurred by and owed to the Arbitrator.” In awarding these amounts to MCR, the arbitrator stated that she was relying on the National Rules for the Resolution of Arbitration Disputes and “the Maryland State Bar Association Code of Civility, Rule 11 of the Federal Rules of Civil Procedure, and
Denying that request, the arbitrator stated she would “not redetermine the merits of any claim already decided....” She added, however, “because [Greene] apparently had not been timely provided with certain of [MCR‘s] submissions or fees calculations which accompanied the parties’ post-hearing brief, the arbitrator would entertain a request for modification if necessary to correct a computational error that might appear to Claimant upon reviewing the [MCR‘s] submission.” There is no indication in the record that Greene responded to that offer.
Finally, because Greene‘s request for modification “identifie[d] no clerical, typographical, technical or computational error in the arbitrator‘s calculation of certain attorney‘s fees reasonably incurred by and awarded to MCR” and “[b]ecause [Greene] elected not to question the related computations (such as attorney hours spent on the case, hourly rates, double-billing, actual fee bills, and/or allocation of fees to particular claims)” in his request for modification, the arbitrator declared that “no modification shall follow pursuant to [AAA] Rule 35.”6
Thereafter, the parties filed cross motions to alter or amend the judgment, which the circuit court denied. MCR then noted this appeal, whereupon Greene filed a cross-appeal.
DISCUSSION
I.
MCR contends that the circuit court erred in vacating the arbitrator‘s award of attorney‘s fees. Citing Maryland statutory and common law standards for vacating such an award, MCR claims that “Greene adduced not a scintilla of evidence of corruption, fraud, undue means or evident partiality by the Arbitrator, or mistake of law or fact” and that the circuit court
But there are other grounds for vacating an arbitration award. The Arbitration Act also provides that an award shall be vacated if “[t]he arbitrators exceeded their powers.”
The parties’ agreement states only that “[t]he fees and expenses of any [arbitration] action shall be borne solely by the party against whom the decision is rendered.” No mention is made of attorney‘s fees, and, under such circumstances, the Court of Appeals has declared, the power to award attorney‘s fees “will not be presumed.” Department of Health and Mental Hygiene v. Campbell, 364 Md. 108, 124, 771 A.2d 1051 (2001). Moreover, the Arbitration Act plainly disfavors awarding such fees: it stresses that “[u]nless the arbitration agreement provides otherwise, the award may not include counsel fees.”
MCR‘s counters, however, that the parties’ agreement must provide for attorney‘s fees because both sides requested an award of such fees in their pleadings. This argument is unpersuasive. Attorneys routinely request such fees in pleadings they file even when there is only the slightest chance that such fees will be awarded. And once one side has requested them, it is inevitable that the other side will follow suit. Such requests are made with Pavlovian consistency and hence should play no interpretive role.
But even if the award was in error, once the award is made, can it be vacated under the prevailing standard of review? MCR thinks not. Citing O-S Corp. v. Samuel A. Kroll, Inc., 29 Md.App. 406, 348 A.2d 870 (1975), MCR claims that once the arbitrator has awarded attorney‘s fees, as occurred here, that award cannot be vacated, even if arbitrary, unless there is a finding that the award was based on a “completely irrational” interpretation of the arbitration contract. Because no such finding was made by the court below, MCR insists that the award of attorney‘s fees must stand.
That claim, however, collapses upon careful inspection: it is founded upon both a misconstruction of O-S Corp. and a misapplication of the “completely irrational” standard. The “completely irrational” standard may be an appropriate standard for reviewing arbitral interpretations of substantive provisions of a contract, but it is not an appropriate standard for reviewing an arbitrator‘s definition of his or her own powers, particularly when that definition is purportedly at odds with the underlying arbitration contract and disfavored by the Arbitration Act. Nor does O-S Corp. suggest otherwise.
O-S Corp. involved a construction dispute that was submitted to arbitration under the Arbitration Act. In that case, this Court held that, “when reviewing the fruits of an arbitrator‘s award, a judge may withhold only such as were tainted by improbity or based on a completely irrational interpretation of the contract.” Id. at 408-09, 348 A.2d 870. Hence, the
The arbitration award in O-S Corp. was an award for wages, fees, and overhead costs, allegedly owed under a construction contract to a building contractor. The issue in that case was not the arbitrator‘s power to make the award at issue, as in this case, but whether the arbitrator‘s award was based on a “completely irrational” interpretation of the construction contract. The two cases thus present different issues and, we believe, require different results. Indeed, it is one thing to grant the arbitrator broader discretion than a court of law has to interpret a contract, even though it is less reviewable, but quite another to invest the arbitrator with the same discretion when it comes to defining its own powers.
The “completely irrational” standard was not reviewed by the Court of Appeals until Stephen L. Messersmith, Inc. v. Barclay Townhouse Associates, 313 Md. 652, 547 A.2d 1048 (1988). In that case, Barclay, a developer, entered into a contract with Messersmith, a drywall contractor, to do the drywall and metal stud work for a project that Barclay was constructing. Id. at 655, 547 A.2d 1048. A dispute arose, and Messersmith filed a petition to arbitrate the matter.
Claiming “that no written agreement to arbitrate existed,” Barclay and other interested parties challenged the jurisdiction of the arbitrators. Id. at 656, 547 A.2d 1048. Nonetheless, the arbitrators determined that they did in fact have
Denying that petition, the circuit court held that the arbitrators’ decision was not completely irrational, and therefore that it had no grounds on which to vacate the award under
Ultimately, this Court reversed that decision, reasoning that, “[b]ecause an arbitrator has no power to act in the absence of an agreement to arbitrate, the ‘completely irrational’ standard of review used for reviewing arbitration awards on the merits is totally inappropriate.” Barclay Townhouse Associates v. Stephen L. Messersmith, Inc., 67 Md.App. 493, 497, 508 A.2d 507 (1986). The Court of Appeals agreed. It declared “that the proper procedure for reviewing cases arising under § 3-224(b)(5) is to conduct a de novo review.” Id. at 664, 508 A.2d 507. The Court reasoned that while a deferential standard of review “is appropriate [] where the parties indisputably agree to submit to arbitration,” if “the arbitrator‘s very authority to adjudicate the dispute is challenged, such obedience to the arbitrators’ assertion of jurisdiction is clearly inapt.” Id. at 659-60, 508 A.2d 507.9
The National Rules for Arbitration Disputes (“AAA Rules“) were incorporated by the parties into their agreement. AAA Rule 34(e) states that an “arbitrator shall have the authority to provide for the reimbursement of representative fees, in whole or in part, as part of the remedy, in accordance with applicable law.” The “applicable law” here, however, is the Arbitration Act, and, as pointed out, that act disfavors the recovery of counsel fees “[u]nless the arbitration agreement provides otherwise.”
Moreover, the parties’ employment agreement provides that “fees and expenses” of arbitration “shall be bourne solely by the party against whom the decision is rendered,” but, as noted earlier, no mention is made of attorney‘s fees. And there is no reason to infer from that language that it encompasses anything more than the fees and expenses of the arbitrator. As the language of the parties’ agreement to arbitrate does not provide for the recovery of attorney‘s fees, we conclude that the circuit court did not err in vacating that award.
Also, we are not unmindful of the growing concern over the use of arbitration contracts to compel consumers and prospective employees to waive, in effect, important constitutional and statutory rights or be denied, in the case of consumers, needed goods and services, and, in the case of prospective employees, desirable employment. See, e.g., Senator Russell D. Feingold, Mandatory Arbitration: What Process Is Due?, 39 HARV. J. ON LEGIS., 281 (2002); Larry J. Pittman, The Federal Arbitra-
And it is that concern which renders us reluctant to find authority for an arbitrator to award attorney‘s fees when none has expressly be given by contract or granted by statute.
Cross Appeal
I.
Greene contends that the circuit court erred in confirming the arbitrator‘s award of, in the words of that court, “all fees and costs pursuant to MCR‘s Motion for Sanctions.” In making that award, the arbitrator principally relied on Rule 11 of the Federal Rules of Civil Procedure, the AAA Rules, and
Before we address those reasons, however, we must first clarify the nature of the court‘s ruling and thus the issue now before us. The “fees and costs” of which the court speaks, are, we assume, the arbitration fees and costs, owed by Greene alone, as the non-prevailing party, or owed by Greene and his attorney, as sanctions; they presumably do not include the legal fees owed by Greene and his attorney as sanctions. That is because when the circuit court vacated the general award of attorney‘s fees, which Greene alone was ordered to pay, it by implication vacated the award of attorney‘s fees,
In support of his claim that the court erred in not vacating that award—which, as we just discussed, applies only to the portion of that award which still stands, namely, the arbitrator‘s fees and costs—Greene advances four arguments. First, he asserts that the arbitrator had no authority to award sanctions pursuant to
In determining whether the arbitrator had the authority to sanction Greene‘s counsel, we note that private arbitration “is a matter of contract,” Gold Coast Mall, Inc. v. Larmar Corp., 298 Md. 96, 103, 468 A.2d 91 (1983), and that an “arbitrator [] derives his or her power from the arbitration
Although not precisely on point, the Court of Appeals’ decision in Curtis G. Testerman Co., supra, lends support to this conclusion. There, the Court of Appeals addressed the issue of “[w]hether one who is neither a party to the arbitration agreement nor a signatory of the underlying contract can be bound by an arbitration award.” Testerman, 340 Md. at 574, 667 A.2d 649. The Court found that “Testerman clearly signed the contract as an agent for a disclosed principal,” and thus was “not bound by the arbitration clause in the contract as an agent.” Id. at 577, 667 A.2d 649. “[T]he only way that Testerman [could have been] compelled to arbitrate,” the Court continued, was “if an agreement to arbitrate exist[ed] between the Bucks and Testerman in his individual capacity.” Id. at 578, 667 A.2d 649.
The Court‘s reasoning in Testerman is applicable here. Just as the arbitrator in Testerman had no jurisdiction over Curtis Testerman because he was not a party to the arbitration agreement, only the representative of a party, the arbitrator in this matter had no authority to make Greene‘s counsel, as a representative of Greene, responsible for any portion of its award, as sanctions or otherwise.
But it is more than the weight of contrary case law that tempers our enthusiasm for approving the power of arbitrators to sanction counsel for misconduct. Our reluctance is born of a recognition that, under prevailing standards of judicial review, the arbitrator‘s power to sanction, once
We further note that the three principal authorities relied upon by the arbitrator in awarding sanctions—Federal Rule 11, AAA Rules, and Maryland Rule 1-341—do not provide the basis for such an award here.
Nor does
And finally, AAA Rule 34(d) states that an “arbitrator may grant any remedy or relief that the arbitrator deems just and equitable, including any remedy or relief that would have been available to the parties had the matter been heard in a court.” That rule was incorporated into the parties’ agreement. But it does not mention sanctions, and it is simply too vague and ambiguous for us to conclude that it granted the arbitrator the right to impose sanctions.
We conclude this portion of the opinion by returning to the language used by the circuit court in confirming the arbitrator‘s award of sanctions. In the words of that court, it confirmed “all fees and costs awarded pursuant to the Motion for Sanctions.” For the reasons outlined earlier in this opinion, we believe the court was referring only to the “arbitration fees and costs” portion of the sanctions award and not the “legal fees and costs” portion of that award. But if it did intend to confirm the arbitrator‘s award of legal fees, that award cannot stand as it was made under circumstances that denied both Greene and his attorney due process of law.
A court may “set aside an [arbitration] award where ‘the proceedings lacked fundamental fairness.‘” Parks v. Sombke, 127 Md. App. 245, 254, 732 A.2d 907 (1999) (quoting Chillum-Adelphi Volunteer Fire Dept. Inc., v. Button & Goode, Inc., 242 Md. 509, 517, 219 A.2d 801 (1966)). Moreover, “Constitutional due process is applicable to the assessment of attorney‘s fees for litigation misconduct.” Needle v. White, Mindel, Clarke and Hill, 81 Md. App. 463, 480, 568 A.2d 856 (1990). “Fair notice and an opportunity for a hearing on the record should be provided.” Id. These principles are no less applicable in private arbitration proceedings. Blitz v. Beth Isaac Adas Israel Congregation, 115 Md. App. 460, 475, 694 A.2d 107 (1997) (stating that a court may exercise its power to vacate an arbitration award when a “denial of due process has tainted the legitimacy of the award“), rev‘d on other grounds, 352 Md. 31, 720 A.2d 912 (1998); Kovacs v. Kovacs, 98 Md. App. 289, 304-05, 633 A.2d 425 (1993) (“[I]f arbitration proceedings do not conform to notions of basic fairness or due process, the court would be justified in refusing to confirm an award.“)
Greene did file a “Request to Modify the Award.” In that request, Greene argued, among other things, that he was not provided with an opportunity to examine and object to the bills. He then asserted that he could have objected to the bills on several grounds, “including, but not limited to, the amount of time [MCR‘s] counsel allegedly billed on the case,
In disposing of that request, however, the arbitrator stated that she could not “redetermine the merits of any claim already decided.” She further asserted that under Rule 35, she could only modify the award to correct “clerical, typographical, technical or computational errors.” We further note that under the Arbitration Act, an arbitrator may modify an award only for clarification on the following three grounds:
- There was an evident miscalculation of figures or an evident mistake in the description of any person, thing, or property referred to in the award;
- The arbitrators have awarded upon a matter not submitted to them and the award may be corrected without affecting the merits of the decision upon the issues submitted; or
- The award is imperfect in a matter of form, not affecting the merits of the controversy.
Because of the narrow grounds upon which an arbitrator can modify an arbitration award, Greene did not have the opportunity to challenge the award in his “Request for Modification.” As the arbitrator pointed out, he was limited to only addressing “computational errors.” Having been initially denied the opportunity to oppose appellant‘s request for attorney‘s fees and then the opportunity to challenging the ensuing award of such fees, except for computational errors, Greene and his attorney, we conclude, were denied due process of law as to the award of attorney‘s fees as sanctions.
II.
Greene contends that the arbitrator was “partial” and engaged in misconduct by “exceed[ing] her authority” and arbi-
When alleging partiality, “[t]he moving party must prove facts sufficient to permit an inference that there was indeed partiality by an arbitrator.” Graceman v. Goldstein, 93 Md. App. 658, 666, 613 A.2d 1049 (1992) (citing Wyndham v. Haines, 305 Md. 269, 279, 503 A.2d 719 (1986)). “A party asserting that error was committed by an arbitration panel bears the burden of showing, by the record, that the error occurred.” Kovacs, 98 Md. App. at 303, 633 A.2d 425. “Mere allegations and arguments contesting the validity of an award, unsubstantiated by the record, are insufficient to meet that burden.” Id. And the moving party‘s burden, we note, “is a heavy one.” Baltimore Teachers Union, American Federation of Teachers, Local 340, AFL CIO v. Mayor and City Council of Baltimore, 108 Md. App. 167, 182, 671 A.2d 80 (1996). Moreover, “[a] mere error in the laws or failure on the part of the arbitrators to understand or apply the law will not justify judicial intervention, and the courts’ function in confirming or vacating a commercial award is severely limited.” Southern Maryland Hosp. Center v. Edward M. Crough, Inc., 48 Md. App. 401, 407, 427 A.2d 1051 (1981) (quoting Ludwig Honold Mfg. Co. v. Fletcher, 405 F.2d 1123, 1127 (3rd Cir. 1969)). A court “shall not vacate the award or refuse to confirm the award on the ground that a court of law or equity could not or would not grant the same relief.”
Greene also contends that the arbitrator exceeded her authority in deciding MCR‘s counterclaim, and that in doing so, “demonstrat[ed] her partiality and misconduct which tainted the entire proceedings.” Greene‘s argument is curious, because the arbitrator found in his favor on the counterclaim. We shall nonetheless consider the issue.
One of the two arbitration provisions of the parties’ agreement is Paragraph 6 of that agreement. It provides that the parties are to develop jointly for Greene “written performance criteria including achievable goals regarding steps for the growth, expansion or diversification” of MCR. (Emphasis added). But it warns that Greene‘s failure to achieve the performance criteria developed, or his failure to “perform any material covenant or condition” of the agreement, unless “by reason of illness, injury or accident ... shall be deemed a default” under the agreement. According to Paragraph 6, following a waiting period, MCR is entitled to “terminate [the] Agreement” if Greene has not remedied the default.
Paragraph 6 provides that if a dispute arises “as to the termination of [the] agreement, such dispute shall be submitted to arbitration.” In other words, any dispute over termi-
MCR‘s counterclaim for fraudulent misrepresentation was based on Greene‘s alleged misrepresentations during employment negotiations as to his “qualifications, abilities, and commitment” to MCR. These claims are intertwined with Paragraph 6 of the parties’ employment agreement. The arbitration clause in Paragraph 6 provides that a dispute over termination of the agreement shall be resolved in arbitration. The agreement could be terminated for Greene‘s failure to achieve performance goals or “perform any material covenant or condition” of the agreement. That the parties were to establish performance goals by mutual agreement and in “good faith” was certainly a “material covenant or condition” of the agreement, and any alleged misrepresentation by Greene as to his qualifications and abilities necessarily implicates his obligation to negotiate in good faith with MCR in setting performance goals. Thus, MCR‘s counterclaim was arbitrable.
Greene contends that “critical findings of the arbitrator‘s Decision and Award were without any rational basis in law or fact” and “clearly rise to the level of gross mistake.” Specifically, he attacks the arbitrator‘s conclusion that sufficient “default notice was given to Greene,” alleging that the evidence upon which she based that finding was insufficient. He also claims that the arbitrator “illogically” found that Greene‘s disclosure of his salary reduction violated Paragraph 7 of the parties’ agreement. He further asserts that if that disclosure occurred, it was a result of “MCR‘s breach of the Agreement by fraudulently seeking to invoke paragraph 7 of the agreement based on its false assertions of company-wide salary reductions.” He argues that “[i]n light of MCR‘s fraudulent conduct, MCR is estopped from invoking the provisions of paragraph 8 to its benefit.” Finally, Greene asserts that the arbitrator “lost all sense of neutrality when she accepted MCR‘s late filing of a Motion for Sanctions and received, ex parte, bills supporting the motion.”
We also find unpersuasive Greene‘s contention that the arbitrator should have awarded him “fees and expenses” because he prevailed in two of the three issues before the arbitrator. The arbitration provisions in the parties’ agreement state that “fees and expenses ... shall be borne solely by the party against whom the decision is rendered.”
It is unclear, however, whether Greene contends that, since the arbitrator decided two issues in his favor, he should have been awarded “fees” with respect to those issues, or whether Greene is claiming that since he prevailed on two out of three issues, he was entitled to an award of “fees” and MCR was not. Either way, we find no merit to Greene‘s position.
To resolve this question, we return to the language of the parties’ agreement. The agreement states that “fees and expenses ... shall be borne solely by the party against whom the decision is rendered.” It impliedly leaves to the arbitrator‘s discretion as to which party prevailed. In this instance, the arbitrator apparently concluded, with some justification, that the principal issue before her was Greene‘s breach of contract claim and that most of the time, money, and energy of the parties was spent in litigating that issue. Indeed, the validity of Greene‘s back wages claim was conceded by MCR before the proceedings began. We see no reason to disturb the arbitrator‘s conclusion as to this issue.
JUDGMENT VACATING ARBITRATOR‘S AWARD OF ATTORNEY‘S FEES IS AFFIRMED.
JUDGMENT CONFIRMING ARBITRATOR‘S AWARD OF SANCTIONS AGAINST GREENE AND GREENE‘S COUNSEL IS REVERSED.
COSTS TO BE PAID BY APPELLANT.
Concurring Opinion by MURPHY, Chief Judge.
While I concur in the judgment, I am concerned about parties to an arbitration proceeding conducted pursuant to an
The Court of Appeals has made it clear that the Maryland Lawyers’ Rules of Professional Conduct (MLRPC) have “the force of law,” Post v. Bregman, 349 Md. 142, 164, 707 A.2d 806 (1998). I am therefore persuaded that, when the arbitration agreement does not authorize the arbitrator to impose sanctions on a lawyer who is “throughout the ... arbitration, ... obstructive, discouraging of the process of arbitration, [and whose] objections ... and ... examination of witnesses wasted considerable time and multiplied the costs of [the] proceedings,” Maryland law entitles the party who has been victimized by such misbehavior to assert a separate civil action, against the offending party and/or the attorney for the offending party, in order to recoup reasonable—but needlessly incurred—costs and counsel fees.
Notes
LE 3-507.1. provides:
(a) In General.--Notwithstanding any remedy available under § 3-507 of this subtitle, if an employer fails to pay an employee in accordance with § 3-502 or § 3-505 of this subtitle, after two weeks have elapsed from the date on which the employer is required to have paid the wages, the employee may bring an action against the employer to recover the unpaid wages.
(b) Award and costs.-If, in an action under subsection (a) of this section, a court finds that an employer withheld the wage of an employee in violation of this subtitle and not as a result of a bona fide dispute, the court may award the employee an amount not exceeding 3 times the wage, and reasonable counsel fees and other costs.
Within twenty (20) days after the transmittal of an award, any party, upon notice to the other parties, may request the arbitrator to correct any clerical, typographical, technical or computational errors in the award. The arbitrator is not empowered to redetermine the merits of any claim already decided.