Opinion
No. A03-953.
Filed May 11, 2004.
Appeal from the District Court, Hennepin County, File No. Ct 03-005110.
Justin P. Weinberg, Leonard, O'Brien, Spencer, Gale Sayre, Ltd., (for respondent).
Jason Schmickle, Hansen, Dordell, Bradt, Odlaug Bradt, P.L.L.P., (for appellant).
Considered and decided by Stoneburner, Presiding Judge, Anderson, Judge and Hudson, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2002).
UNPUBLISHED OPINION
The parties entered into a contract, and respondent claimed that appellant breached the contract. The parties submitted this case to arbitration, and the arbitrator awarded respondent attorney fees. The parties' contract states that each party shall pay for its own "expenses." Appellant moved to vacate the award on the ground that the arbitrator exceeded his authority. The district court confirmed the arbitrator's award, and we affirm.
FACTS
On May 9, 2000, appellant and respondent entered into a contract that required appellant to provide marketing services to respondent. The contract provided that appellant would find clients, respondent would provide services, the client would pay appellant, and appellant would then pay respondent. On September 24, 2002, respondent filed a demand for arbitration, alleging that appellant had wrongfully withheld monies from respondent. Respondent demanded, "[I]ts costs associated with these proceedings including reasonable attorneys' fees." Appellant did not object to respondent's demand for attorney fees. The arbitrator awarded respondent damages, which are not disputed here, and attorneys' fees, which appellant challenges.
After the award had been granted, appellant objected to the arbitrator's authority to award attorney fees and later moved the district court to vacate or modify the award. Respondent moved the district court to confirm the award. The district court confirmed the award and denied appellant's motion. This appeal followed.
DECISION
A court may not vacate an arbitration award if the award "draw[s] its essence" from the contract and is "in some rational manner . . . derived from the agreement." Ramsey County v. American Federation of State, County, and Municipal Employees, Council 91, Local 8, 309 N.W.2d 785, 792 (Minn. 1981) (quoting Amoco Oil Co. v. Oil, Chem. Atomic Workers Int'l Union, Local 7-1, Inc., 548 F.2d 1288, 1294 (7th Cir. 1977)); see also Minn. Stat. § 572.19 (2002) (listing conditions required for vacating an arbitration award). "Absent a clear showing that the arbitrators were unfaithful to their obligations, the courts assume that the arbitrators did not exceed their authority." Hilltop Constr., Inc. v. Lou Park Apartments, 324 N.W.2d 236, 239 (Minn. 1982) (citations omitted). One of the grounds to vacate an arbitration award is that the arbitrator exceeded his power. Minn. Stat. § 572.19, subd. 1(3) (2002). Arbitrators are the final judges of both law and fact and their "award[s] will not be reviewed or set aside for mistake of either law or fact in the absence of fraud, mistake in applying [their] own theor[ies], misconduct, or other disregard of duty." Cournoyer v. Am. Television Radio Co., 249 Minn. 577, 580, 83 N.W.2d 409, 411 (1957) (citation omitted).
The parties' contract states that, if they are unable to resolve disputes through negotiation, "then the parties agree to arbitration through the American Arbitration Association in Minneapolis, Minnesota. Each party shall bear its own expenses . . . In no event shall the arbitrator be entitled or empowered to award punitive damages." A contract that states specific items excludes, by implication, everything not expressed. Weber v. Sentry Ins., 442 N.W.2d 164, 167 (Minn. App. 1989).
The issue presented by this appeal is whether an arbitrator could rationally conclude he was empowered, under the remedies clause of the contract between the parties, to award attorneys' fees to respondent. The contract specifically prohibits the arbitrator from awarding punitive damages. But, while each party is to bear its own expenses, the contract is entirely silent on attorneys' fees, and the arbitrator could rationally conclude that the contract does not exclude attorneys' fees as an award. Furthermore, the arbitrator's authority to award attorney fees was not raised as an issue at the arbitration, and appellant has therefore waived this argument. See Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988) (holding that issues not raised at the district court are waived).
Nor does the contract language specifically prohibiting the arbitrator from awarding "expenses" necessarily lead to the conclusion that the arbitrator must exclude attorneys' fees from an award. Although not directly on point, it is instructive to note that the word "costs," which is every bit as ambiguous as "expenses," has been found to both include and exclude attorneys' fees, depending on the context. Bucko v. First Minn. Savs. Bank, 471 N.W.2d 95, 98 (Minn. 1991) (concluding that "costs" for rule 68 purposes does not include attorneys' fees); Koop v. Indep. Sch. Dist. No. 624, 505 N.W.2d 93, 96 (Minn. App. 1993) ("costs" under Minnesota Statute section 363.14 does include attorneys' fees). Given our very limited standard of review in arbitration matters, because there is no explicit prohibition against awarding attorneys' fees, and even though the interpretation adopted by the arbitrator is arguably not the best possible alternative, the arbitrator could rationally conclude that attorneys' fees are not "expenses," and he was therefore authorized under the contract to award attorneys' fees.
Affirmed.
I respectfully dissent. The contract between the parties provided that disputes were to be resolved through the American Arbitration Association, and "[e]ach party shall bear its own expenses." The term "expenses" is admittedly ambiguous, but we have routinely held that "[i]n construing contracts, words must be given their plain and ordinary meaning." Mattila v. Minnesota Power Light Co., 363 N.W.2d 842, 845 (Minn. App. 1985). In a contract between the parties in a business setting, the plain and ordinary meaning of the term "expenses" would include attorney's fees. Thus, the arbitrator was not authorized under contract to award attorney's fees.
In addition, rule 45 of the American Arbitration Association Commercial Arbitration Rules ". . . an award of attorneys' fees if all parties have requested such an award or it is authorized by law or their arbitration agreement." Appellant did not request that attorney's fees be awarded, and nothing in the arbitration agreement itself specifically authorizes an award of attorney's fees. On this record, the arbitrator exceeded its powers in violation of Minn. Stat. § 572.19, subd. 1(3) (2002), and accordingly, the award of attorney's fees should be vacated.