Can Attorney’s Fees Be Awarded in Securities Arbitrations?
In 2013, the Florida Legislature adopted the Revised Florida Arbitration Act (the “Revised Act”). One of the major changes in the Revised Act is the amendment to section 682.11, which, for the first time, gives arbitrators the authority to award attorneys’ fees.
The relevant language in section 682.11(2) provides that an “arbitrator may award reasonable attorney fees and other reasonable expenses if such an award is authorized by law in a civil action involving the same claim or by the agreement of the parties to the arbitration proceeding.” (Emphasis added).
Why is this amendment significant? Because previously, arbitrators lacked the authority to make awards of attorney’s fees absent a stipulation by the parties. Under the amendment, however, it is now clear that a party stipulation is not required and the arbitrators may make an award of attorney’s fees if such an award would be permitted in court.
This means that if a civil claim were brought in court under a statute or contract that otherwise would provide attorney’s fees to the prevailing party, the same claim brought in arbitration now will entitle the arbitrators to make an attorney’s fees award to the prevailing party.
The amendment has implications that bear on both commercial and securities arbitrations. Oftentimes, in a commercial arbitration, the contract in dispute provides fee-shifting to the prevailing party. Before the amendment, the prevailing party would have to try the case to conclusion and then litigate the attorney’s fees portion of the case in court at additional expense and time.
Similarly, in a FINRA securities arbitration, it is common for a claimant to assert a claim under the Florida Investor Protection Act (Ch. 517, Florida Statutes). Before the amendment, the prevailing party would have had to file an action in court to litigate the reasonable attorney’s fees incurred. The big change under the revised statute is that the prevailing party no longer needs to initiate a second proceeding in court to recover attorney’s fees. The award may be rendered by the same arbitrators who decide the merits of the case.
The wild card of the amendment is it now can be argued that section 57.105, Florida Statutes applies in arbitration. Section 57.105 is the Florida Statute that gives a court the discretion to award attorney’s fees against the losing party, and the losing party’s counsel, for filing a frivolous case. Because 57.105 expressly states that it applies to actions filed in court, the game changer is that 57.105 now arguably may be applied in arbitration. This inevitably will lead to parties filing more motions for sanctions in arbitration.
In sum, the statutory amendment in section 682.11 that allows arbitrators to award attorney’s fees to the prevailing party is likely to change the arbitration landscape and increase the risks associated with bringing commercial and securities arbitrations.