Opinion ID: 167996
Heading Depth: 2
Heading Rank: 1

Heading: Arbitrators Exceeded Their Powers Under Virginia Law

Text: 11 In her motion to vacate the attorneys' fees' portion of the arbitral award, Hollern first argued the arbitrators lacked authority to award attorneys' fees. See 9 U.S.C. § 10(4). She claimed the arbitrators erred in relying on Colorado law to support the award of attorneys' fees. Instead, Hollern contended the arbitration should have been governed by Virginia law in accordance with the terms of the Option Account Agreement she entered into with Wachovia. Virginia has adopted the Uniform Arbitration Act (UAA), which contains the following provision regarding attorneys' fees: 12 Unless otherwise provided in the agreement to arbitrate, the arbitrator's expenses and fees incurred in the conduct of the arbitration, and all other expenses, not including counsel fees, incurred in the conduct of the arbitration shall be paid as provided in the award. 13 Va.Code Ann. § 8.01-581.07. Although Virginia state courts have not yet interpreted or applied this provision, Hollern argued it prohibits an arbitral award of attorneys' fees unless the parties expressly provide for such an award in their arbitration agreement. Hollern contended the Option Account Agreement did not expressly authorize an award of attorneys' fees, and thus, the arbitrators exceeded their authority in awarding such fees. The district court agreed that Virginia law, not Colorado law, governed the arbitration proceeding. Further, it determined Virginia law prevented an award of attorneys' fees under the facts of this case because the parties had not expressly authorized the arbitrators to award attorneys' fees. The district court therefore vacated the attorneys' fees portion of the award. 14 In assessing the scope of the arbitrators' authority, we are mindful of the strong presumption requiring all doubts concerning whether a matter is within the arbitrators' powers to be resolved in favor of arbitrability. Shankle v. B-G Maint. Mgmt. of Colo., Inc., 163 F.3d 1230, 1233 (10th Cir.1999). Even assuming Virginia law applies and requires parties to expressly authorize an award of attorneys' fees in their arbitration agreement, as Hollern contends, 3 the parties have satisfied that requirement in this case. Accordingly, the arbitrators did not exceed their powers under Virginia law in awarding Wachovia attorneys' fees. 15 Although the Option Account Agreement itself did not expressly permit an award of attorneys' fees, the parties' subsequent submissions to the arbitrators amended the original arbitration agreement to expressly authorize attorneys' fees. Arbitrators derive their authority from the parties' arbitration agreement. United Food & Commercial Workers, Local Union No. 7R v. Safeway Stores, Inc., 889 F.2d 940, 946 (10th Cir.1989). The parties may extend that authority, however, in their submissions to the arbitrators so long as the submissions do not violate an express provision of the original arbitration agreement. Id. After the parties executed the Option Account Agreement, Hollern submitted an NASD Statement of Claim wherein she explicitly requested an award of attorneys' fees. She reaffirmed her desire to have the arbitrators decide the issue of attorneys' fees by indicating she was seeking attorneys' fees on the Claim Information Sheet. Wachovia did not object to the arbitrators' authority to award attorneys' fees. Instead, in its Answer to Hollern's Statement of Claim, Wachovia also explicitly requested an award of attorneys' fees. Most importantly, the parties then entered into a Uniform Submission Agreement. The Uniform Submission Agreement expressly incorporated Hollern's Statement of Claim and Wachovia's Answer, and indicated the parties agreed to submit all issues identified in those pleadings to arbitration. By incorporating their pleadings, including their parallel requests for attorneys' fees, into the Uniform Submission Agreement, the parties expressly empowered the arbitrators to award attorneys' fees. See Plunkett v. Plunkett, 271 Va. 162, 624 S.E.2d 39, 42 (2006) (indicating that incorporating a document by reference into a contract makes that document an express part of the contract). 16 The parties' authorization of the award of attorneys' fees, however, went even further. The arbitrators noted at the end of the arbitration hearing that both Hollern and Wachovia had requested attorneys' fees in their submissions. Accordingly, the arbitrators directed each party to submit an affidavit of attorneys' fees. Neither party objected to the arbitrators' authority to award attorneys' fees. Instead, both parties submitted motions seeking attorneys' fees. Hollern argued the arbitrators had authority to award attorneys' fees pursuant to NASD Code Rule 10215 and Colo. Rev.Stat. § 13-17-102(4). Wachovia also asserted attorneys' fees were permitted under § 13-17-102(4). In accordance with the parties' requests, the arbitrators decided the issue of attorneys' fees, granting fees to Wachovia. 17 In determining the parties did not expressly agree to permit an award of attorneys' fees, the district court relied on Carson v. PaineWebber, Inc., 62 P.3d 996 (Colo.Ct.App.2002). 4 In Carson, the parties entered into an arbitration agreement that was silent on the issue of attorneys' fees. See id. at 1000. The claimant requested attorneys' fees in its Statement of Claim and the respondent made a corresponding request in his Answer. Id. at 997. Additionally, both parties signed a Uniform Submission Agreement wherein they agreed to submit the issues identified in their pleadings to arbitration. Id. The arbitrators subsequently awarded attorneys' fees to the claimant, and the respondent appealed. Id. In reviewing the award, the state court first observed Colorado courts have interpreted the UAA attorneys' fees' provision to prohibit an award of attorneys' fees unless the parties have specifically authorized the arbitrator to address the issue. Id. at 1000. It then concluded the parties' mutual requests for attorneys' fees in their pleadings alone were not sufficient to demonstrate the parties specifically agreed to permit the award. Id. 18 Although Carson's application of Colorado law does not control our application of Virginia law, we note Carson would not prohibit an award of attorneys' fees under the facts of this case. Colorado courts have acknowledged parties may expand the scope of their original arbitration agreement by subsequently submitting matters outside the agreement to arbitration. Compton v. Lemon Ranches, Ltd., 972 P.2d 1078, 1080 (Colo.Ct.App.1999). The court in Carson merely determined parties' parallel requests for attorneys' fees in their pleadings and their execution of a Uniform Submission Agreement are insufficient to authorize an award of attorneys' fees. Carson, 62 P.3d at 1000. Here, however, in addition to filing pleadings requesting attorneys' fees and executing a Uniform Submission Agreement, the parties also filed affidavits and motions for attorneys' fees. In their motions, the parties explicitly argued the arbitrators had authority to award attorneys' fees pursuant to Colo.Rev.Stat. § 13-17-102(4). Further, neither party objected to the arbitrators' authority to award attorneys' fees during the arbitration. The parties' submissions to the arbitrators in this case, which exceed those at issue in Carson, are sufficient to constitute an express authorization to award attorneys' fees. 5 Therefore, the arbitrators did not exceed their powers under Virginia law in awarding attorneys' fees, and the district court erred in vacating the attorneys' fees' portion of the arbitral award on this ground.