Case Title: Beacon Towers Condo. Trust v. Alex

Citation: 

Docket Number: SJC-11880

State: massachusetts

Court: Massachusetts Supreme Court

Date: 2016-01-07T00:00:00Z

Document:
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SJC-11880 
 
BEACON TOWERS CONDOMINIUM TRUST  vs.  GEORGE ALEX. 
 
 
 
Suffolk.     October 5, 2015. - January 7, 2016. 
 
Present:  Gants, C.J., Spina, Cordy, Botsford, Duffly, Lenk, & 
Hines, JJ. 
 
 
Arbitration, Attorney's fees. 
 
 
 
 
Civil action commenced in the Superior Court Department on 
November 14, 2013. 
 
 
The case was heard by Frances A. McIntyre, J. 
 
 
The Supreme Judicial Court on its own initiative 
transferred the case from the Appeals Court. 
 
 
 
J. Mark Dickison (Ryan A. Ciporkin with him) for the 
defendant. 
 
Mark A. Rosen for the plaintiff. 
 
 
 
GANTS, C.J.  Under G. L. c. 251, § 10, attorney's fees may 
not be awarded in arbitration proceedings "[u]nless otherwise 
provided in the agreement to arbitrate."  The issue presented in 
this case is whether an arbitration panel applying the 
commercial arbitration rules of the American Arbitration 
2 
 
Association (AAA rules), having found that the arbitration 
agreement did not authorize an award of attorney's fees, 
nonetheless may award attorney's fees based on its finding that 
"substantially all of the defenses were wholly insubstantial, 
frivolous and not advanced in good faith."  The appellant, 
George Alex, contends that the arbitration panel may award 
attorney's fees in these circumstances for either of two 
reasons:  first, because AAA rule 47(a) 1 authorizes an 
arbitrator to "grant any remedy or relief that the arbitrator 
deems just and equitable and within the scope of the agreement 
of the parties"; or second, because AAA rule 47(d)(ii) provides 
that an arbitrator may award attorney's fees if "it is 
authorized by law," and the award of attorney's fees in these 
circumstances is authorized by G. L. c. 231, § 6F.  We conclude 
that an arbitrator lacks the authority to award attorney's fees 
based on a finding that all the claims or defenses were wholly 
insubstantial, frivolous, and not advanced in good faith unless 
the parties have agreed that an arbitrator may award attorney's 
fees in these circumstances.  We therefore affirm the Superior 
Court judge's order vacating the arbitration panel's award of 
attorney's fees. 
                                                          
 
 
1 In October, 2013, following the arbitration of this 
matter, the commercial arbitration rules of the American 
Arbitration Association (AAA rules) were amended.  At that time, 
AAA rule 43 was renumbered as AAA rule 47.  To avoid confusion, 
we shall refer to the AAA rules as currently numbered. 
3 
 
 
Background.  The appellee, Beacon Towers Condominium Trust 
(trust), is the unit owners' organization for the Beacon Towers 
Condominium (condominium), an entity created pursuant to G. L. 
c. 183A, § 17.  The condominium is comprised of three adjacent 
buildings in the Back Bay section of Boston, with the addresses 
of 479, 481, and 483 Beacon Street.  The board of trustees for 
the trust (trustees) is the governing body of the trust, 
responsible for operating, maintaining, and managing the common 
areas and facilities of the condominium and the business of the 
trust.  Alex was the owner of two units -- one at 479 Beacon 
Street and one at 481 Beacon Street. 
 
In 2010, there was a major electrical fire at 483 Beacon 
Street that caused substantial damage throughout the building, 
rendering it uninhabitable.  The other two buildings were not 
affected.  Under G. L. c. 183A, § 17, and the trust's bylaw, the 
trustees were obligated to certify whether the fire damage 
exceeded ten per cent of the value of the condominium prior to 
undertaking any rebuilding.  If the damage exceeded ten per cent 
of the condominium's value, the trustees were required under 
§ 17 to submit their restoration plan to a vote and obtain the 
approval of seventy-five per cent of the unit owners before 
proceeding with the repairs. 
 
The trustees undertook the repairs without certifying that 
the fire damage was less than ten per cent of the value of the 
4 
 
condominium and without obtaining the approval of seventy-five 
per cent of the unit owners, and charged each unit owner his or 
her share of the costs in a special common expense assessment.  
The trustees assessed Alex $62,995 for the two units that he 
owned.  Alex paid the assessment under protest. 
 
The trust's bylaw requires that disputes regarding any 
determination or action of the trustees be submitted to 
arbitration.  Alex commenced an arbitration action challenging 
the propriety of the trustees' conduct regarding the fire damage 
repairs and the imposition of the assessment.  After a two-day 
arbitration, the arbitration panel found that the fire damage to 
the common areas and facilities exceeded ten per cent of the 
value of the condominium, and that the trustees committed a 
breach of their obligations under G. L. c. 183A, § 17, and the 
bylaw by restoring the common areas and facilities without a 
vote of the unit owners.  A majority of the panel declared that 
the special assessment against Alex was void and awarded him 
restitution of the amount he had already paid in special 
assessments.  A majority of the panel also awarded Alex 
attorney's fees in the amount of $48,750.2  The majority 
recognized that "[t]he arbitration agreement here does not 
                                                          
 
 
2 One member of the arbitration panel dissented from that 
part of the arbitration decision that ruled that the special 
assessment was void and that George Alex should be awarded 
restitution and attorney's fees. 
5 
 
provide for an award of fees," but reasoned that AAA rule 
47(d)(ii) allows an award of fees where "authorized by law" and 
that G. L. c. 231, § 6F, authorizes an award of reasonable 
attorney's fees where, as the majority determined in this case, 
substantially all of the defenses were wholly insubstantial, 
frivolous, and not advanced in good faith. 
 
The trust filed suit in the Superior Court, claiming that 
the arbitrators' award of attorney's fees exceeded the scope of 
the parties' arbitration agreement, and therefore was barred by 
G. L. c. 251, § 10.  A judge vacated the award of attorney's 
fees, concluding that such an award is not authorized by G. L. 
c. 231, § 6F, when ordered by an arbitrator because § 6F does 
not authorize an arbitrator to award attorney's fees.3  Alex now 
appeals from that order.  We transferred the case from the 
Appeals Court on our own motion. 
 
Discussion.  "[A]n arbitration award is subject to a narrow 
scope of review."  Superadio Ltd. Partnership v. Winstar Radio 
Prods., LLC, 446 Mass. 330, 333 (2006) (Superadio).  We do not 
review an arbitration award for errors of law or errors of fact.  
See Plymouth-Carver Regional Sch. Dist. v. J. Farmer & Co., 407 
Mass. 1006, 1007 (1990); Concerned Minority Educators of 
                                                          
 
 
3 Beacon Towers Condominium Trust (trust) also challenged 
the arbitrators' award of restitution to Alex.  The Superior 
Court judge affirmed that award, and the trust has not filed a 
cross appeal challenging that part of the judge's decision. 
6 
 
Worcester v. School Comm. of Worcester, 392 Mass. 184, 187 
(1984).  As set forth in G. L. c. 251, § 12, we review an 
arbitration award only to determine whether it "was procured by 
corruption, fraud or other undue means," whether the arbitrator 
was evidently partial, or whether the arbitrator exceeded the 
scope of his or her authority.  Superadio, supra at 334, quoting 
G. L. c. 251, § 12.  "An arbitrator exceeds his authority by 
granting relief beyond the scope of the arbitration agreement 
. . . by awarding relief beyond that to which the parties bound 
themselves . . . or by awarding relief prohibited by law."  
Superadio, supra, quoting Plymouth-Carver Regional Sch. Dist., 
supra.  The trust here contends that the arbitrators exceeded 
the scope of their authority for each of these reasons. 
 
As a general rule, we have interpreted G. L. c. 251, § 10, 
to prohibit the award of attorney's fees in arbitration 
proceedings unless the parties have entered into an agreement 
authorizing the award of such fees.  See Floors, Inc. v. B.G. 
Danis of New England, Inc., 380 Mass. 91, 91-92 (1980).4  
However, we have previously recognized two circumstances where 
an arbitrator may award monetary sanctions such as attorney's 
                                                          
 
 
4 General Laws c. 251, § 10, states, "Unless otherwise 
provided in the agreement to arbitrate, the arbitrators' 
expenses and fees, together with other expenses, not including 
counsel fees, incurred in the conduct of the arbitration, shall 
be paid as provided in the award." 
7 
 
fees despite the broad prohibition contained in G. L. c. 251, 
§ 10. 
 
First, an arbitrator may award attorney's fees where a 
party prevails on a statutory claim in which the statute 
mandates the recovery of attorney's fees by the prevailing 
party.  See Drywall Sys., Inc. v. ZVI Constr. Co., 435 Mass. 
664, 673 (2002) ("We conclude that the directive that a 
prevailing party be awarded attorney's fees under G. L. c. 93A, 
§ 11, applies to arbitration awards of claims under § 11 despite 
the normal unavailability of attorney's fees in arbitration").  
In such a situation, the statutory requirement that attorney's 
fees be recovered "overrides the effect of G. L. c. 251, § 10."  
Id. 
 
Second, in Superadio, 446 Mass. at 338-339, we held that 
where the parties agreed that their arbitration shall be 
governed by the AAA rules, an arbitrator could award monetary 
sanctions to a party for discovery violations and noncompliance 
with discovery orders.  We reasoned that AAA rule 235 authorized 
an arbitrator to direct the production of documents and other 
information, and "to resolve any disputes concerning the 
                                                          
 
 
5 Our opinion in Superadio Ltd. Partnership v. Winstar Radio 
Prods., LLC, 446 Mass. 330 (2006) (Superadio), referred to 
certain language then in AAA rule 23.  Language regarding the 
arbitrator's authority to direct the production of documents and 
other information is now found in AAA rules 22, 23, and 44 and 
is substantially similar to the language referred to in 
Superadio. 
8 
 
exchange of information."  Id. at 338.  We concluded that the 
authority to award such sanctions for discovery violations and 
noncompliance with discovery orders was implicit in the 
authority granted to an arbitrator under this rule because "[t]o 
give arbitrators control over discovery and discovery disputes 
without the authority to impose monetary sanctions for discovery 
violations and noncompliance with appropriate discovery orders, 
would impede the arbitrators' ability to adjudicate claims 
effectively in the manner contemplated by the arbitration 
process."  Id. at 339. 
 
Alex contends that his award of attorney's fees may stand 
because the parties "otherwise agree[d]" to award counsel fees 
by incorporating the AAA rules, including AAA rule 47(a), which 
allows the arbitrator to "grant any remedy or relief that the 
arbitrator deems just and equitable and within the scope of the 
agreement of the parties," and AAA rule 47(d)(ii), which permits 
an award of counsel fees where "authorized by law." 
 
We begin by addressing Alex's argument that AAA rule 47(a) 
authorizes the award of attorney's fees where the arbitration 
panel found that substantially all of the trust's defenses were 
wholly insubstantial, frivolous, and not advanced in good faith.  
Alex claims that, in awarding fees based on this finding, the 
arbitration panel was granting relief that it deemed "just and 
equitable," as permitted under AAA rule 47(a). 
9 
 
 
There are two flaws in this argument.  First, AAA rule 
47(a) contains two requirements for the granting of "any remedy 
or relief":  the remedy or relief must be "just and equitable," 
and it must be within the scope of the arbitration agreement.  
Alex overlooks the second requirement, as he points to no 
provision of the parties' agreement that authorizes the award of 
attorney's fees.  Indeed, the arbitration panel determined, and 
we agree, that the trust's bylaw contains no such provision. 
 
In addressing this same argument, and likewise finding no 
agreement among the parties to award attorney's fees, the court 
in Asturiana De Zinc Mktg., Inc. v. LaSalle Rolling Mills, Inc., 
20 F. Supp. 2d 670, 675 (S.D.N.Y. 1998), quoting Matter of 
Arbitration Between Prudential-Bache Sec., Inc., & Depew, 814 F. 
Supp. 1081, 1083 (M.D. Fla. 1993) (Prudential-Bache), reasoned 
that "[t]he reference in the parties' agreement to arbitration 
before the AAA is . . . not a sufficient contractual basis for 
an award of fees, because although AAA [rule 47(a)] allows 
arbitrators to grant 'any remedy or relief that the arbitrator 
deems just and equitable and within the scope of the agreement 
of the parties,' this [r]ule merely 'refers back to the parties' 
contract and limits the scope of the arbitrator['s] authority to 
the contract's express terms.'"  See Prudential-Bache, supra at 
1084 (under AAA rule 47[a], arbitrators may award attorney's 
10 
 
fees only where contract "includes an express authorization" 
[emphasis in original]). 
 
Second, if AAA rule 47(a) were interpreted to permit an 
arbitrator to award attorney's fees whenever it is "just and 
equitable," no matter whether the parties agreed to such an 
award, the effect would be to render superfluous AAA rule 
47(d)(ii), the more specific AAA rule governing the award of 
attorney's fees.  AAA rule 47(d)(ii) states, "The award of the 
arbitrator(s) may include . . . an award of attorney's fees if 
all parties have requested such an award or it is authorized by 
law or their arbitration agreement."  An AAA rule, like a 
statute or regulation, must "be 'construed so that effect is 
given to all its provisions, so that no part will be inoperative 
or superfluous.'"  Wolfe v. Gormally, 440 Mass. 699, 704 (2004), 
quoting Bankers Life & Cas. Co. v. Commissioner of Ins., 427 
Mass. 136, 140 (1998).  Cf. Biogen IDEC MA, Inc. v. Treasurer & 
Receiver Gen., 454 Mass. 174, 190 (2009) ("Principles governing 
statutory construction and application also apply to 
regulations").  Moreover, as with statutes and regulations, 
general language in the AAA rules "must yield to that which is 
more specific."  See Silva v. Rent-A-Center, Inc., 454 Mass. 
667, 671 (2009), quoting TBI, Inc. v. Board of Health of N. 
Andover, 431 Mass. 9, 18 (2000).  Under the AAA rules, rule 
47(a) is the general rule setting forth the permissible scope of 
11 
 
an arbitration award.  AAA rule 47(d)(ii) is the specific rule 
governing when an award may include attorney's fees. 
 
Alex contends that, just as we recognized an arbitrator's 
authority in Superadio to award monetary sanctions for discovery 
violations and noncompliance with discovery orders, so should we 
recognize an arbitrator's authority to award attorney's fees 
where it is just and equitable because the defense was not made 
in good faith.  The key difference, however, lies in the AAA 
rules concerning the specific sanctions at issue:  the version 
of rule 23 at issue in Superadio, governing discovery, broadly 
authorized the arbitrator "to resolve any disputes concerning 
the exchange of information," whereas rule 47(d)(ii) expressly 
limits the availability of attorney's fees in arbitration 
awards, allowing fees only where they are requested by the 
parties or authorized by law or agreement.  In Superadio, 446 
Mass. at 338-339, we emphasized the broad authority conferred by 
AAA rules 23 and 47(a),6 reasoning that 
"[n]oteworthy in these rules is the absence of any language 
limiting the means by which an arbitrator or arbitration 
panel may resolve discovery disputes, or language 
restricting the application of the broad remedial relief  
of [AAA] rule [47](a) to final awards (and precluding the 
grant of broad remedial relief to interim awards).  The 
rules, construed together, and supported by the broad 
arbitration provision in the agreement and the absence of 
any limiting language prohibiting a monetary sanction for 
                                                          
 
 
6  Our opinion in Superadio, 446 Mass. 330, referred to 
certain language then in AAA rule 45 that is now found in rule 
47.  See note 1, supra. 
12 
 
discovery violations, authorized the panel to resolve 
discovery dispute[s] by imposing monetary sanctions." 
 
AAA rule 47(d)(ii), in contrast, includes precisely such 
limiting language.  We cannot therefore import the reasoning of 
Superadio to this case, where a specific AAA rule exists 
restricting the availability of attorney's fees.  Such reasoning 
would undermine the statutory purpose of G. L. c. 251, § 10, 
which is to prohibit arbitrators from awarding attorney's fees 
unless the parties expressly agree otherwise.  We shall not 
infer such an agreement merely from the parties' agreement to 
AAA rule 47(a), when the parties also agreed to AAA rule 
47(d)(ii), which expressly limits when attorney's fees may be 
awarded.  To do so would invite the risk that the parties 
unwittingly allowed the arbitrator to award attorney's fees.  
Where the parties have incorporated the AAA rules into their 
arbitration agreement, AAA rule 47(d)(ii) exclusively governs 
the scope of authority for awards of attorney's fees. 
 
We now turn to Alex's argument that the arbitrators' award 
of attorney's fees was authorized by AAA rule 47(d)(ii) because 
it was "authorized by law," specifically G. L. c. 231, § 6F, 
which allows a "court" to award attorney's fees where 
"substantially all of the defenses . . . were wholly 
insubstantial, frivolous and not advanced in good faith."  
Section 6F is the statutory codification of the bad faith 
13 
 
exception, recognized at common law, to the "American Rule" that 
counsel fees are not among the costs awarded to a successful 
litigant.  See Wong v. Luu, 472 Mass. 208, 215 (2015); Preferred 
Mut. Ins. Co. v. Gamache, 426 Mass. 93, 95 (1997). 
 
An arbitrator, however, is not a "court" that may award 
attorney's fees under § 6F.  General Laws c. 231, § 6E, supplies 
the definitions that apply to § 6F, and it defines "court" as 
"the supreme judicial court, the appeals court, the superior 
court, the land court, any probate court and any housing court, 
and any judge or justice thereof."  The Legislature's omission 
of the District Court and Boston Municipal Court suggests its 
intention to restrict the applicability of § 6F to proceedings 
in the specific courts that are enumerated.  See Tilman v. 
Brink, 74 Mass. App. Ct. 845, 852-854 (2009) (District Court 
cannot award attorney's fees under § 6F because it is not 
included in statutory definition of "court" under § 6E).  See 
also Monahan Corp. N.V. v. Whitty, 319 F. Supp. 2d 227, 231 (D. 
Mass. 2004) (when Legislature limited application of § 6F to 
specific courts, it "said what it meant and meant what it 
said"). 
 
Our review of the legislative history shows that the 
omission of the Boston Municipal Court and the District Court 
from the statutory definition of "court" in § 6E was not a 
legislative oversight, but the result of a deliberate 
14 
 
legislative act.  The original version of the bill that 
eventually was enacted as § 6E originated in the House, and 
provided that the word "'Court' shall include the Supreme 
Judicial Court, the Appeals Court, the Superior Court, the Land 
Court, the Municipal Court of the City of Boston and any Probate 
Court, District Court and Housing Court, and any judge or 
justice thereof."  1976 House Doc. No. 1315.  The Senate then 
amended the bill by, among other things, removing "the Municipal 
Court of the City of Boston" and "the District Court" from the 
definition of "court."  See 1976 House J. 2733.  The House 
concurred in the Senate amendments, and this version of the bill 
was then adopted and signed by the Governor, enacting G. L. 
c. 231, §§ 6E-6G.  1976 House J. 2733.  See St. 1976, c. 233, 
§ 1.  The removal of two of the trial court departments from the 
definition of "court" demonstrates the Legislature's intention 
to limit the applicability of § 6F to cases in only some trial 
court departments.  Where the word "court" was not even meant to 
include all courts, it would be absurd for us to interpret the 
term even more broadly to include arbitrators. 
 
Nor was it irrational for the Legislature to exclude 
arbitrators from the definition of "court" under § 6E and 
thereby, in the absence of agreement, deprive arbitrators of the 
authority to award attorney's fees where substantially all of 
the claims or defenses "were wholly insubstantial, frivolous and 
15 
 
not advanced in good faith."  If the Legislature had granted 
arbitrators this authority, they potentially could exercise it 
without restraint, because an arbitrator's finding that 
substantially all of a party's claims or defenses "were wholly 
insubstantial, frivolous and not advanced in good faith" is a 
composite finding of fact and law that, absent fraud, is not 
subject to review by a court.  See Plymouth-Carver Regional Sch. 
Dist., 407 Mass. at 1007. 
 
Conclusion.  The judgment of the Superior Court vacating 
the arbitrators' award of attorney's fees is affirmed. 
 
 
 
 
 
 
 
So ordered.