Opinion
02-CV-6563 (NGG)(CLP).
July 16, 2003.
MEMORANDUM AND ORDER
Petitioners Universal Computer Services, Inc. ("UCS"), Universal Computer Consulting, Ltd. ("UCC") and Universal Computer Network, Inc. ("UCN") (collectively "Universal"), move the court for confirmation of an arbitration award pursuant to the Federal Arbitration Act, 9 U.S.C. § 9. Respondent Dealer Services, Inc. ("Dealer") opposes the motion to the extent it seeks attorneys' fees incurred by petitioners in confirming the arbitration award. For the reasons that follow, the motion to confirm, including the request for attorneys' fees, is granted.
BACKGROUND
The parties entered into a series of agreements for the provision, maintenance and service of computer equipment and peripherals. Each of the contracts contains a broad arbitration clause encompassing "any claim, grievance, or controversy" arising out the respective contract. (See Motion to Confirm Arbitration Award ("Petition"), Exh. B, § 18; Exh. C, § 18; Exh. D, § 11). Dealer brought an arbitration proceeding under the auspices of the American Arbitration Association ("AAA").
On July 11, 2002, an arbitrator issued a decision in Universal's favor, and, after considering issues of damages, issued an award on August 8, 2002 ("Award"). (See Petition, Exh. A). UCS was awarded $287,833.71, UCC was awarded $232,370.61, and UCN was awarded $11,608.91. Each award included a provision which stated that if the award was not paid within 30 days, interest "at the maximum legal rate for judgments in the State of Texas" shall accrue from that date (i.e., September 8, 2002) until it was paid. Pursuant to Texas Finance Code § 304.003(c)(2), the maximum legal rate for judgments is 10 percent. (See Attorney's Declaration in Support of the Motion to Confirm Arbitration Award, 1 9).
Although the Texas legislature amended § 304.003(c) of the Texas Finance Code to provide for five percent interest, that amendment is effective September 1, 2003. This action, therefore, is governed by the law as it existed prior to the amendment. See Act of June 11, 2003, ch. 204 (H.B. 4), sec. 6.01. 2003 Tex. Sess. Law Serv. ch. 204 (Vernon).
The Award also required Dealer to pay the full amount of the administrative fees and expenses of the AAA, and half of the compensation and expenses of the arbitrator. The total amount of the AAA's fees and expenses and the compensation of the arbitrator was $19,723.04. UCS advanced $4,825.98 of this amount to the AAA, and the Award requires Dealer to pay UCS this amount in addition to its award. Finally, the Award requires Dealer to pay the AAA $2,348.04, representing the amount still due for its fees and expenses and the compensation of the arbitrator.
Although not a model of clarity, the Award appears to state that of the total $19,723.04 due to the AAA for its fees and as compensation of the arbitrator, $2,348.04 remains due. This presumably includes the $4,825.98 advanced by UCS. Thus, Dealer is liable to the AAA for the remaining balance, and to UCS for the amount it advanced.
In their motion to confirm the Award, petitioners seek an additional judgment for attorneys' fees incurred in connection with this motion to confirm the Award. Petitioners cite provisions in each of the governing contracts which require Dealer to pay each of the petitioners "any and all expenses . . . including reasonable attorneys' fees [incurred] in collection of amounts due under this Agreement". (Petition, Exh. B, § 13; Exh. C, § 12; Exh. D, § 7). Respondent acknowledges that the parties' contracts provide for the payment of attorneys' fees, but opposes Universal's request on the ground that attorneys' fees, like other claims arising from the parties' agreements, are subject to arbitration. (See Memorandum of Law in Partial Opposition to Motion to Confirm Arbitration Award, at 2-3). Respondent argues that the court's role in confirming an arbitration award is limited and does not permit this additional award.
DISCUSSION
Even though this action is brought pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq., that act does not itself confer federal subject matter jurisdiction. See Perpetual Securities, Inc. v. Tang, 290 F.3d 132, 140 (2d Cir. 2002) ("the FAA creates a substantive body of law but does not, by itself, confer federal question subject matter jurisdiction to the district courts to entertain claims brought under the Act . . . jurisdiction would not exist unless there was an independent ground for jurisdiction"). The court has jurisdiction pursuant to 28 U.S.C. § 1332, as all of the petitioners are citizens of Delaware and Texas, and the respondent is a citizen of New York. The amount in controversy exceeds $75,000, exclusive of interest and costs.
A motion to confirm an arbitration award is essentially a "summary proceeding that merely makes what is already a final arbitration award a judgment of the court." Florasynth, Inc. v. Pickholz, 750 F.2d 171, 176 (2d Cir. 1984). Thus, when presented with a motion to confirm an arbitration award pursuant to section 9 of the FAA, the power of a federal court is extremely limited. Section 9 provides that any party to an arbitration may move to confirm an award within one year after it is made. Here, the final Award was rendered on August 8, 2002, and petitioners filed the instant action on December 17, 2002. Faced with a petition for an order to confirm an award, "the court must grant such an order unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11." 9 U.S.C. § 9 (emphasis added). Section 10 provides several narrow grounds for vacating an arbitration award, while section 11 permits modification or correction of an award. Respondent has made no application to either vacate or modify the Award, nor does it oppose confirmation of the Award. Accordingly, the arbitration Award is hereby confirmed in full.
Respondent, however, opposes any additional award of attorneys' fees incurred in connection with this motion to confirm as beyond the court's power. Alternatively, respondent argues that any such award must be submitted for arbitration pursuant to the broad arbitration clause in each of the contracts.
This argument wholly lacks merit since it would require a successful party in the arbitration proceeding to move for judicial confirmation of the fee award, then return to the arbitrator to obtain an additional award for fees incurred in confirming the first fee award, return to court to have that award confirmed, and so on, ad infinitum. The court cannot sanction, much less order, this type of endless and multiplicitous course of conduct.
Although the American Rule precludes a prevailing party from recovering attorneys' fees, see Hirschfeld v. Board of Elections in City of New York, 984 F.2d 35, 40 (2d Cir. 1993), Rule 54 of the Federal Rules of Civil Procedure permits such claims if the moving party can support its motion by "statute, rule, or other grounds entitling the moving party to the award." Fed.R.Civ.P. 54(d)(2)(B); see also Overseas Private Investment Corp. v. Marine Shipping Corp., 2002 WL 31106349, at *2 (S.D.N.Y. Sept. 19, 2002) (citing Rule 54). In this case, the parties' contracts provide the requisite "grounds entitling the moving party" to fees.
As noted above, each of the relevant contracts contains an almost identical provision that requires Dealer to pay each of the petitioners "any and all expenses . . . including reasonable attorneys' fees [incurred] in collection of amounts due under this Agreement". (Petition, Exh. B, § 13; Exh. C, § 12; Exh. D, § 7). This broadly-worded provision clearly evinces the parties' intent to include attorneys' fees as recoverable expenses. Moreover, the contracts envisioned judicial confirmation of any arbitration award. (See Petition, Exh. B, § 18; Exh. C, § 18, Exh. D, § 11). Reading these provisions in tandem clearly supports the conclusion that attorneys' fees incurred in a proceeding, such as this one, to enforce an arbitration award are recoverable.
This conclusion is also supported by cases in which attorneys' fees were awarded in actions to confirm an arbitration award, where the underlying agreement contained language similar to the language present here. See, e.g., Page Int'l Ltd. v. Adam Maritime Corp., 53 F. Supp.2d 591, 599 (S.D.N.Y. 1999) (awarding fees where contract language provided that "[d]amages for breach of this Charter shall include all provable damages, and all costs of suit and attorney fees incurred in any action thereunder"); Elite Inc. v. Texaco Panama Inc., 777 F. Supp. 289, 292 (S.D.N.Y. 1991) (same).
Finally, I note that this court, under its inherent equitable powers, may award attorneys' fees where a party acts "in bad faith, vexatiously, wantonly, or for oppressive reasons." F. D. Rich Co. v. United States ex rel. Indus. Lumber Co., 417 U.S. 116, 129 (1974). "As applied to suits for the confirmation and enforcement of arbitration awards, the guiding principle has been stated as follows: when a challenger refuses to abide by an arbitrator's decision without justification, attorney's fees and costs may properly be awarded." International Chem. Workers Union v. BASF Wyandotte Corp., 774 F.2d 43, 47 (2d Cir. 1985) (quotation marks omitted) (quoting Bell Prod. Engineers Ass'n v. Bell Helicopter Textron, 688 F.2d 997, 999 (5th Cir. 1982)). In this case, Dealer has not paid the Award for almost a year. Nor has it offered any justification for its failure to pay. Thus, it has only itself to blame for the additional costs petitioners have incurred in confirming and enforcing this arbitration award.
CONCLUSION
For the foregoing reasons the arbitration award dated August 8, 2002 is hereby confirmed in full. Petitioner UCS has judgment against respondent in the amount of $287,833.71, plus 10% interest annually from September 8, 2002 until paid. Petitioner UCC has judgment against respondent in the amount of $232.370.61 plus 10% interest annually from September 8, 2002 until paid. Petitioner UCN has judgment against respondent in the amount of $11,608.91 plus 10% interest annually from September 8, 2002 until paid. Petitioner UCS has an additional judgment against respondent in the amount of $4,825.98. Respondent is also liable to the AAA in the amount of $2,348.04.
Petitioners' motion for attorneys' fees incurred in connection with this petition to confirm is hereby granted. This matter is referred to Magistrate Judge Cheryl Pollak to conduct an inquest as to the amount of attorneys' fees.
SO ORDERED.