|
The Appellate Division of the New Jersey Supreme Court, in a case of first impression, held that an arbitrator lacked authority to issue a supplemental award, finding that the entry of a final award terminated the arbitrator’s power except for his limited statutory authority to modify, but not reconsider, the award.
In Kimm v. Blisset, LLC, 2006 WL 2465393 (N.J. Super. Ct. App. Div. Aug. 28, 2006), Kimm, an attorney, sued Blisset, claiming that Blisset was liable for unpaid attorney fees as the successor in interest to Kimm’s former client, On Set. Under his retainer agreement with On Set, Kimm was entitled to compensation for any time expended in a fee dispute or collection action.
Kimm and Blisset agreed to submit the fee dispute to binding arbitration with a retired judge acting as the arbitrator. At arbitration, Blisset argued for an award of attorney fees pursuant to a New Jersey rule proscribing frivolous lawsuits. Both parties requested attorney fees in their post-hearing briefs.
On February 4, 2004, the arbitrator issued an award finding Blisset partly liable for unpaid attorney fees as a successor to Kimm’s former client. The arbitrator did not award Kimm any attorney fees for time expended on the fee dispute, instead concluding that it would be better to follow the American Rule whereby each party is responsible for its own attorney fees.
On April 22, 2004, Kimm filed a motion with the arbitrator, arguing that the arbitrator failed to address the attorney fees provision in the retainer agreement. Blisset objected that the motion was improper because the arbitrator had already issued his final award. The arbitrator issued a “supplemental arbitration award,” finding that under the retainer agreement, Kimm was entitled to compensation for time expended in the fee dispute.
Kimm moved to confirm both awards. The trial court confirmed the original award but vacated the supplemental award, concluding that the arbitrator lacked authority to act once his original award had been issued. Kimm appealed.
In affirming the trial court, the Court applied the common law doctrine of functus officio, which provides that arbitrators have exhausted their powers once they make a final determination on matters submitted to them. As the Court explained, the newly-revised New Jersey Arbitration Act (“the Act”) established four exceptions to the doctrine by giving arbitrators authority to modify an award under limited circumstances. However, supplementing or reconsidering an award was not one of the available exceptions, meaning that the arbitrator exceeded his authority by issuing a supplemental award.
The Court recognized that the scope of arbitration is “dependent solely upon the parties’ agreement.” As such, parties can agree to circumscribe the functus officio doctrine. For example, Rule 43A(2) of the National Arbitration Forum Code of Procedure allows an arbitrator to reconsider an award that “contains evident material mistakes.”
Subscribe to a free weekly update on ADR case law and
legislation
|