Court Opinion

ID: 3167763
Source: CourtListenerOpinion
Date Created: 2016-01-07 15:04:40.312524+00
Date Added: 2024-06-11T07:38:45.953224
License: Public Domain

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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
                                           1
reasons:   first, because AAA rule 47(a)       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.