Opinion ID: 3172980
Heading Depth: 2
Heading Rank: 2

Heading: The Award of Attorney’s Fees & Costs

Text: We conclude, however, that the District Court erred in awarding the respondent carrier the fees and costs it incurred in seeking to confirm the award, and pause to explain why we think the award untenable. “Our basic point of reference when considering the award of attorney’s fees is the bedrock principle known as the American Rule: Each litigant pays his own attorney’s fees, win or lose, unless a statute or contract provides otherwise.” Baker Botts L.L.P. v. ASARCO LLC, 135 S. Ct. 2158, 2164 (2015). In the proceeding below, the District Court determined that this “default rule,” id. at 2168, was displaced by contract. The Court awarded fees and costs to the respondent carrier under a provision of the charter agreement which reads: “BREACH. Damages for breach of this Charter shall include all provable damages, and all costs of suit and attorney fees incurred in any action hereunder.” J.A. 31. 11 We hold that this result was in error. By its terms, this provision authorizes a fee award against a party that breaches the charter agreement, as part of the non‐breaching party’s damages. There was no finding below, nor indeed any suggestion, that the petitioner shipper breached the charter agreement. The respondent carrier argues that the award may be sustained on the theory that the shipper breached the parties’ contract not through any conduct related to the transport of the shipper’s cargo to South Korea, but through its conduct in litigation. The carrier reasons that the parties agreed to be bound by the arbitral panel’s decision, and the shipper breached that understanding by resisting entry of judgment on the award. For two reasons, we are unconvinced. First, the parties agreed to arbitrate, but they also consented to confirmation of the arbitral award in any court of competent jurisdiction. See J.A. 31. In so doing, they agreed that a federal court would have authority to confirm the award under the standards provided in the FAA. See 9 U.S.C. § 9 (“If the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant to arbitration, . . . any party to the arbitration may apply to the court . . . for an order confirming the award, and thereupon the court must grant such an order unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of this title.”); Phoenix Aktiengesellschaft v. Ecoplas, Inc., 391 F.3d 433, 436 (2d Cir. 2004). The parties having effectively incorporated FAA review into their contract, the argument that the shipper breached that 12 contract by making arguments the FAA permits is unconvincing. See I/S Stavborg v. Nat’l Metal Converters, Inc., 500 F.2d 424, 426 (2d Cir. 1974) (“One purpose of [9 U.S.C. § 9] is to ensure that the parties have affirmatively agreed to the application of the federal substantive law contemplated by the Act to the interpretation of the arbitration agreement into which they have entered.”).3 Second, even if the contract did oblige the shipper to forbear from resisting confirmation of the award, it would be to that extent unenforceable. Read that way, the contract would authorize a federal court to confirm the arbitral award while effectively preventing that court from ensuring that the award complied with the FAA. We have held that “[p]arties seeking to enforce arbitration awards through federal‐court confirmation judgments may not divest the courts of their statutory and common‐law authority to review both the substance of the awards and the arbitral process for compliance with § 10(a) and the manifest disregard standard.” Hoeft v. MVL Grp., Inc., 343 F.3d 57, 66 (2d Cir. 2003), abrogated on other grounds by Hall St. Assocs., 552 U.S. at 584–85. Accordingly, we reject 3 This is not to suggest that the parties’ affirmative consent to confirmation was required before a federal court could confirm the arbitral award. It was not: the award in this case fell under the New York Convention, which (unlike the FAA) “does not in any way condition confirmation on express or implicit consent.” Phoenix Aktiengesellschaft, 391 F.3d at 436; see also 9 U.S.C. § 207, note 2, ante. We simply conclude that the parties’ decision to expressly include a consent‐to‐confirmation term in their contract convincingly demonstrates their intent to incorporate principles of FAA review into their agreement. 13 the argument that the shipper breached the charter agreement by seeking to vacate the award. The carrier argues in the alternative that the award can be sustained under 28 U.S.C. § 1927,4 which authorizes a court to assess “costs, expenses, and attorneys’ fees” against any attorney who “so multiplies the proceedings in any case unreasonably and vexatiously.” But an award under § 1927 is proper only “when there is a finding of conduct constituting or akin to bad faith.” State St. Bank v. Inversiones Errazuriz, 374 F.3d 158, 180 (2d Cir. 2004) (internal quotation marks omitted). The attorney’s actions must be “so completely without merit as to require the conclusion that they must have been undertaken for some improper purpose such as delay.” Id. A finding of bad faith or improper purpose is not warranted on this record. The petitioner shipper’s arguments on appeal (which mirror its arguments below) are not convincing. Yet the shipper ties its reasoning, however flawed, to recognizable legal concepts. Its manifest‐disregard argument relies on the proposition, not on its face absurd, that arbitrators manifestly disregard the law when the facts they find flatly and obviously preclude the legal conclusions they reach. Its “corruption” and “misbehavior” arguments rely on the disclosure‐based framework we have applied in evident‐ More accurately, the carrier states in conclusory fashion that the award 4 can be upheld under 28 U.S.C. § 1927. See Respondent’s Br. 51. 14 partiality cases. See, e.g., Applied Indus. Materials Corp. v. Ovalar, 492 F.3d 132, 137‐38 (2d Cir. 2007). These are, as we say, unconvincing arguments, but not so unconvincing as to require the conclusion that they are made for an improper purpose. Perhaps something in the record could support a fee award under § 1927. But we have not found it, and the respondent carrier has made no effort to identify it. Accordingly, we must reverse the District Court’s award of attorney’s fees and costs.