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February 4, 2004: The arbitrator issued a written opinion and award, finding the defendant Blisset responsible for $10,760 in attorneys' fees under a successor theory of liability. The arbitrator rejected defendants' claim for frivolous litigation sanctions. Without addressing the fee-shifting provisions in the underlying retainer agreement, the arbitrator denied plaintiff's application for fees as well, noting essentially that the American rather than the English rule should apply.
The arbitrator's decision was clearly erroneous as to this point. The arbitrator simply ignored plaintiff's claim for contractual fee shifting ,[link widoczny dla zalogowanych], and rested his decision on the wrong grounds.
April 22,[link widoczny dla zalogowanych], 2004: Kimm filed a "motion" with the arbitrator reiterating his claim for supplemental attorneys' fees. Kimm referred to the arbitrator's decision regarding plaintiff's request for fees as "dictum" and argued that the contractual fee-shifting issue remained undecided. Kimm submitted a Certification of fees at this time for $16,[link widoczny dla zalogowanych],575.10 (for his collection fees in bringing the claim). The defendants objected, contending that the arbitrator's award was final, divesting the arbitrator of jurisdiction to act.
August 18, 2004: The arbitrator issued a "supplemental arbitration award",[link widoczny dla zalogowanych], granting plaintiff $8,287.55 for supplemental attorneys' fees incurred in connection with collecting the underlying fee.
August 25,[link widoczny dla zalogowanych], 2004: Kimm filed a motion in the Bergen County Law Division seeking to confirm both the February 4,[link widoczny dla zalogowanych], 2004 award and August 18,[link widoczny dla zalogowanych], 2004 "supplemental award" as judgments. Defendants opposed and filed a cross-motion to vacate the "supplemental award",[link widoczny dla zalogowanych], arguing that plaintiff's request for fees was denied in the February 4, 2004 award, that the parties had entered no agreement to permit the arbitrator to continue to act thereafter,[link widoczny dla zalogowanych], and that the August 18,[link widoczny dla zalogowanych], 2004 "supplemental award" was therefore unenforceable and void. The Law Division agreed with the defendants, entering judgment on the February 4, 2004 award,[link widoczny dla zalogowanych], and vacating the supplemental award of August 18, 2004. Plaintiff appealed.
August 28, 2006: In a decision by Judge Helen Hoens, the Appellate Division affirmed the Law Division. Though arbitration is a "favored remedy", it remains,[link widoczny dla zalogowanych], at its heart,[link widoczny dla zalogowanych], a creature of contract. "[S]tate contract-law principles generally govern a determination whether a valid agreement to arbitrate exists. "[T]he arbitrator's powers are limited by the agreement of the parties and an arbitrator may not exceed the scope of the powers granted to him or her by the parties". "[W]ithout an agreement to the contrary, the power of the arbitrator is simply to issue an award that resolves a dispute"; the parties can't force her to give her reasons for the award or write a decision explaining her award. Nor can either party appeal errors of law as if they were in court, subject to very limited exceptions. In the absence of agreement the parties' rights are entirely governed by statute.
The right of arbitrators to act,[link widoczny dla zalogowanych], or to decide,[link widoczny dla zalogowanych], is exhausted as soon as they decide a case and render an award. "They have no power after having made an award to alter it; the authority conferred on them is then at an end." Bayne v. Morris,[link widoczny dla zalogowanych], 68 U.S. (1 Wall.) 97, 99, 17 L. .Ed. 495, 496 (1863). Once arbitrators "have executed their award and declared their decision they are functus officio and have no power or authority to proceed further." An arbitrator's power is terminated after making an award, notwithstanding the invalidity of his award or his reasoning.
The common law and statutory exceptions to functus officio relate to correction of computational or clerical mistakes apparent on the face of the award, to adjudication of an issue which was submitted but not decided,[link widoczny dla zalogowanych], and for necessary clarifications of an ambiguity in the decision. These exceptions are narrowly construed, and do not apply in this case. The result in this case appears to fairly apply existing law, but also thwarts the legitimate expectations of Mr. Kimm.
This train wreck could have been avoided at any number of junctures in the process,[link widoczny dla zalogowanych], not least of all by the arbitrator who could have written in his initial award that he was reserving decision on the issue of supplemental attorneys' fees pending submission of additional certifications and argument. The arbitrator may have meant to say this, but he didn't, and Mr. Kimm is out of luck. Functus officio is one area where arbitration may be more procedurally rigid than our court rules,[link widoczny dla zalogowanych], and where no general rule of relaxation (R. 1:1-2) is available to save the a party from his, or the arbitrator's, fatal misstep.
This article is for informational purposes only and does not constitute legal advice. For your specific situation,[link widoczny dla zalogowanych], consult an attorney licensed in your jurisdiction.
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