One of the most frequently asked questions when a party is faced with litigation is whether or not they will be able to recover attorney fees. The general rule is that attorney fees cannot be awarded unless there is a contract provision or statute permitting their award. An exception to this rule is if there is a finding of bad faith on the part of one of the parties, which is a difficult standard to meet.

The rules in an arbitration administered by the American Arbitration Association (“AAA”) changed this general rule. Under AAA Rule 48 (d)(ii) “[t]he award of the arbitrator may include an award of attorneys’ fees if all parties have requested such an award or it is authorized by law or their arbitration agreement.” (Emphasis added.) This means that if the parties file a demand for arbitration on the AAA Demand for Arbitration form and check the box for attorneys fees and the opposing party files an answer to the demand on the AAA Answering Statement form and also checks the box for attorneys fees or in its answer demands attorney fees, they can be awarded by the arbitrator. At least one state court has determined that this is because both parties have “agreed” to the award of attorney fees.

Under the Mississippi Construction Arbitration Act, Miss. Code Ann. § 11-15-119(4), “An arbitrator may award attorney’s fees and costs to a prevailing party.” This is statutory authority granting the power of the arbitrator to award attorney fees. There is no similar provision in Mississippi’s general arbitration statutes found at Miss. Code Ann. §§ 11-15-1 et seq.

The important point to take away from this information is if both parties demand attorney fees, be prepared to accept the risk of not prevailing on the merits of your case and being compelled to pay attorney fees even where the contract does not require such payment. When you negotiate a contract, know what any arbitration clause in the contract provides and consider whether you need to modify it to write out AAA Rule (d)(ii) and/or Miss. Code Ann. § 11-15-119(4) to limit the award of attorney fees.

Once a party receives an arbitration award, it does not necessarily mean that it will voluntarily be paid. Frequently, the party receiving the arbitration award must have it confirmed by the court and converted into a judgment. However, the party against whom the award has been made may challenge the award and seek to have it vacated. If the dispute involves an agreement related to construction, the parties must follow the procedures set forth in the Construction Arbitration Act, Miss. Code Ann. §11-15-101, et seq. If the dispute is unrelated to construction, the parties must follow the procedures set forth in the Mississippi Arbitration Act ("MMA"), Miss. Code Ann. §11-15-1, et seq. In a recent decision, the Mississippi Court of Appeals found the party against whom an award had been granted failed not only to timely challenge the arbitration award but also failed to set forth sufficient grounds to justify vacating the arbitration award and reversed the trial court’s findings. [click here to view decision].

In reversing the trial court, the Court of Appeals first considered the timeliness requirements for vacating an arbitration award under both the MMA and the Federal Arbitration Act ("FAA"), 9 U.S.C. §§1, et seq. Under the FAA, a motion to vacate must be served within three months after the award is filed or delivered. 9 U.S.C.§12. However, under the MMA provides as follows:

An application to vacate or modify an award shall be made to the court at the term next after the making and publication of the award, upon at least five days’ notice, in writing, being given to the adverse party, if there be time for that purpose; and if there be not time, such court, or the judge thereof, may, upon good cause shown, order a stay of proceeding upon the award, either absolutely or upon such terms as shall appear just, until the next succeeding term of court.

 

Miss. Code Ann. §11-15-27.  Because the challenging party complied with neither of these provisions, the Court of Appeals found the trial court had erred when it concluded the challenger’s motion for vacation was timely.

In addition, the challenger did not set forth any of the grounds that might justify the vacating of an arbitration award. These grounds are very limited and set forth in 9 U.S.C. §10(a) or under Miss. Code Ann. §11-15-23. Accordingly, the Court of Appeals reversed the trial court for finding otherwise.

Although this case dealt with the MMA, the Mississippi Construction Arbitration Act also has strict filing deadlines for challenging an arbitration award and extremely limited grounds for challenging an award. It is therefore imperative that upon receipt of the arbitration award contractors consult their lawyer or the Mississippi Construction Arbitration Act to determine the time limitations for modifying or vacating an arbitration award.

Arbitration has found some favor in the construction industry with parties over the last decade in part because of its finality. Unlike civil litigation, the right to appeal an arbitrator’s award is extremely limited under the Mississippi Construction Arbitration Act, Miss. Code Ann. §11-15-101, et seq. The specific grounds for vacating an arbitrator’s award are set forth in Miss. Code Ann. § 11-15-133(1).  Click here to read Miss. Code Ann. § 11-15-133(1).

The Mississippi Court of Appeals recently considered a challenge to an arbitrator’s award which was confirmed by the circuit court. (It appears from the opinion that the arbitration was governed by the Construction Industry Arbitration Rules for the American Arbitration Association.) The appellant objected to the arbitrator’s decision not to grant appellant a continuance when requested and also prohibiting appellant from introducing evidence that it had not produced during discovery. The Court found that the refusal to grant the continuance was justified by the appellant’s dilatory conduct in refusing to pay its half of the arbitration cost and its four changes in legal counsel. The Court also found the arbitrator acted within its authority when it denied appellant’s admission of evidence where it failed to produce any documents during the discovery period or prior to the arbitration.

Once again, the lesson to be learned is that while arbitration is a more informal proceeding than litigation, there are procedural rules that govern arbitration. When an arbitrator renders a decision on these procedural matters, the courts will be inclined to enforce such decision because of the extremely narrow scope of appellate review.

If you have ever been the apparent low bidder on a public construction project and had your bid rejected because of an irregularity in the bid documents, you are not alone.  What is even more frustrating, and will make you fighting mad, is when the public agency decides to waive the same irregularity of a competitor when you are the second low bidder.  Perhaps the best way to avoid this situation is to make sure that you have completed your bid in strict accordance with the instructions to bidders.  I know it is difficult to focus on all the particulars when less than an hour before the bid is to be submitted subcontractors and suppliers are sending in prices or changing the ones previously provided.  Here is a simple bid checklist that may help you avoid those last minute mistakes.

  • Read the "Instruction to Bidders" when you obtain a copy of the solicitation to make sure that there are no unusual or different bid requirements. 
    • Pre-Bid Conference
    • Bid Bond
    • Site Visit
    • Listing of Subcontractors
  • Prepare the bid envelope in advance, identifying (1) the project, (2) the person to whom the bid is to be submitted, (3) the location where the bid is to be submitted and (4) the date and time for the submission of the bid.  ALWAYS PLACE CERTIFICATE OF RESPONSIBILITY NUMBER ON THE OUTSIDE OF THE ENVELOPE.
  • Complete the bid form and check to determine whether all the blank spaces for prices are completed with a dollar amount or a "—" or "-0-".
  • Check your addition and multiplication for unit prices and total bid price.
  • Acknowledge all Amendments/Addenda to the solicitation.
  • List subcontractors, if required.
  • Sign and date the bid documents.
  • Check the bid bond, if required, to make sure that it is in the correct amount and proper form.
  • Place bid documents and bid bond, if required, into envelope and submit.

In the event you are determined to be the apparent low bidder, and your bid is not more than ten percent (10%) above the amount of funds allocated for the project, it is likely that you will be awarded the contract.