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The submission of a demand and filing fees to an arbitration administrator in a particular amount at the commencement of proceedings does not function as a cap on a party's potential recovery at arbitration, according to the North Carolina Court of Appeals.
In Carroll v. Ferro, No. COA07-1417, 2008 WL 4007461 (N.C. Ct. App. Sept. 2, 2008), Carroll and Ferro entered into a business venture to develop land and sell manufactured housing. The parties entered into several operations contracts that contained arbitration agreements.
A dispute arose regarding the venture, and Carroll filed suit against Ferro. Upon Ferro's petition, the trial court ordered the dispute to arbitration. The arbitrator ultimately issued an award in favor of Carroll of over $2.6 million in actual and treble damages for unfair and deceptive business practices.
Carroll moved to confirm the award. Ferro opposed, alleging that the arbitrator had exceeded his powers by issuing an award in an amount over $1 million. Ferro noted that Carroll's amended filing and associated fee with the American Arbitration Association (AAA) contemplated a demand of less than $1 million. The trial court modified the award.
Upon Carroll's first appeal, the Court held that the trial court had improperly modified the award based on insufficient factual findings. Carroll v. Ferro, 633 S.E.2d 708, 710-11 (N.C. Ct. App. 2006). On remand, the trial court modified the award again, interpreting the demand and fee submitted to AAA as setting a $1 million cap on damages. See American Arbitration Association Commercial Case Filing Fees, 1 (requiring a $6,000 initial filing fee for claims between $500,000 and $1 million).
Upon Carroll's second appeal, the Court acknowledged that the arbitrator had referred to the amount of Carroll's filing fee as setting a "cap" on any recovery, but held that the fee "is not an unequivocal limit on the parties' damages." Noting that the arbitration agreement and the incorporated AAA rules did not specify that recovery would be capped based upon the amount of the submitted filing fee, the Court found the agreement and rules allowed the arbitrator "latitude in fashioning an appropriate remedy" by assessing both actual and treble damages that increased the amount of recovery above the $1 million figure.
Accordingly, because the arbitrator was designated wide latitude in awarding damages, regardless of the filing fee submitted at commencement of the arbitration proceedings, the Court held that the arbitrator had not exceeded his authority and remanded the matter to the trial court for confirmation of the original award.
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