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According to the Idaho Supreme Court, a party may be precluded from recovering statutorily authorized attorney fees if the arbitration agreement does not expressly provide for the same.
In Barbee v. WMA Securities, Inc., No. 30131/31298, 2006 WL 2795613 (Idaho Sept. 29, 2006), the Bentleys demanded arbitration with WMA, according to the terms of their investment contract. The arbitration agreement between the Bentleys and WMA did not include an express provision allowing parties to recover attorney fees. The arbitration panel issued an award in favor of the Bentleys, but did not award attorney fees.
In their motion to confirm the arbitration award, the Bentleys requested that the district court award attorney fees because the statute governing their dispute with WMA permitted recovering attorney fees. The district court held that attorney fees cannot be added to an arbitration award at a confirmation hearing and that the arbitrators are prohibited by the Idaho Uniform Arbitration Act (IUAA) from awarding attorney fees when the arbitration agreement does not include an express provision to award such fees.
The Bentleys filed a separate court action to obtain the attorney fees under the relevant securities statute, appealed the trial court’s ruling, and assigned their right to recover attorney fees to their attorney, Barbee.
On appeal, the Court confirmed the district court’s holding that attorney fees for Idaho Securities Act (ISA) violations require an underlying action, adversarial in nature, before recovery, and are therefore not recoverable in a confirmation proceeding, which has no underlying adversarial claim.
The Court also determined that Barbee could not recover attorney fees by filing a separate lawsuit because Idaho securities laws require that costs be awarded together with damages. Barbee argued that the separate lawsuit should be allowed because the Bentleys were precluded from filing a pre-arbitration suit because of their contract, which required arbitration.
In its analysis of this argument, the Court held that the arbitration agreement’s waiver of any right to seek remedies in court was “void” because Idaho securities laws invalidate waivers of the ISA provisions as against public policy. In summary, the Court concluded that had the Bentleys filed suit before going to arbitration, the court would have found the arbitration agreement to be void under the ISA, and the Bentleys could then have brought their claim in court and requested that attorney fees and costs be awarded in addition to damages.
However, the Bentleys submitted to arbitration governed by state law. The IUAA provides that “attorney fees can be awarded in an arbitration proceeding only if provided for in the parties’ agreement to arbitrate.” The agreement between the Bentleys and WSA did not expressly provide that attorney fees could be awarded. Thus, once the arbitration procedure was complete, so was the opportunity to recover attorney fees.
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