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Since the Federal Arbitration Act (FAA) neither provides for nor prohibits the awarding of attorney’s fees, an arbitration panel did not exceed its powers in awarding costs and attorney’s fees to an investment institution, according to the Texas Court of Appeals.
In Banc of America Investment Services, Inc. v. Lancaster, No. 2-06-314-CV, 2007 WL 2460277 (Tex. App. Aug. 31, 2007), Lancaster invested in securities through Banc of America. As a customer, Lancaster signed three account agreements containing mandatory arbitration provisions.
After seeing her investments decline, Lancaster filed suit against Banc of America alleging violation of the Deceptive Trade Practices Act, Texas Securities Act, and breach of fiduciary duty. The trial court granted Banc of America’s motion to compel arbitration.
The arbitration panel denied the relief sought by both sides, but awarded Banc of America costs and expenses. Banc of America asked that the award be confirmed, while Lancaster asked that a judgment be entered where all parties take nothing.
The lower court confirmed part of the panel’s award, but did not mention Banc of America’s award for costs and expenses. On appeal, Banc of America requested that this Court reverse the lower court’s final judgment and confirm the arbitration award in its entirety.
Banc of America argued that the lower court’s failure to confirm the award of costs and expenses was error. In response, Lancaster argued that the arbitration panel exceeded its power in awarding attorney’s fees because the panel found no recoverable injury for either party.
The Court noted that vacatur of an arbitration award is only permitted on very narrow grounds. In reviewing the arbitration award, the Court also noted that the award of costs and expenses was partially intended to compensate Banc of America for securing the hearing of the claims in the forum contractually agreed upon – namely, the arbitration panel.
Under the FAA, an award of attorney’s fees is not provided for or prohibited, and as such, the panel did not exceed its authority in awarding costs and expenses to Banc of America. Accordingly, the Court held that the lower court erred in not confirming the costs and expenses award to Banc of America.
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