Originally from:

AAA Handbook on Arbitration Practice - Second Edition

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CHAPTER 39

AN ARBITRATOR’S AUTHORITY TO AWARD
ATTORNEY FEES FOR BAD-FAITH ARBITRATION

John W. Hinchey and Thomas V. Burch

I. Introduction

During the classical period of Roman law, attorneys did not charge fees
for legal advice or services.1 Consequently, high legal fees were no deterrent
to filing a lawsuit. To ensure that parties did not abuse these free services
and initiate litigation in bad faith, Roman jurists adopted the principle of lis
crescens in duplum, which allowed them to double the judgment against
anyone who initiated litigation without good cause.2 So began the longstanding
tradition of penalizing parties for bad-faith litigation.3

Approximately 2000 years later, the U.S. Supreme Court adopted
bad faith as an exception to the “American Rule” on shifting attorney
fees.4 While the Court did not explain whether this exception applied in
arbitration, it has since pushed a “national policy favoring arbitration,”5
which has caused arbitration to become significantly more prevalent in
the American adjudicatory process. As a result, courts have struggled to
determine the extent, if any, that the principle of penalizing parties for
bad faith applies in modern arbitration.

The answer depends on several factors. First, does the parties’
contract grant the arbitrator authority to award attorney fees? If so, then
the answer is clear. The arbitrator can make an award of attorney fees for
bad-faith arbitration. If not, then one must look to the law that governs
the arbitration agreement. That is the subject of this chapter.

We discuss an arbitrator’s authority to award attorney fees for badfaith
arbitration under the Federal Arbitration Act (FAA), the Uniform
Arbitration Act (UAA), the 2000 Revised Uniform Arbitration Act
(RUAA), and the American Arbitration Association’s (AAA) Commercial
Arbitration Rules. We also examine the definition of bad faith, briefly
address preemption under the FAA, and provide a short justification for
allowing arbitrators to make bad-faith awards.