STUART, Justice.
Guardian Builders, LLC, and E. Wayne Tackett (hereinafter referred to collectively as "Guardian") appeal from an order of the Madison Circuit Court denying their motion to vacate or modify an arbitration award entered in favor of Randy Uselton and his wife Melissa Uselton. We reverse and remand.
This Court previously dismissed a premature appeal filed by Guardian in this action. Guardian Builders, LLC v. Uselton, 130 So.3d 179 (Ala.2013). At that time, we summarized the history of the parties' dispute as follows:
130 So.3d at 180. However, before this Court considered the merits of Guardian's arguments in that appeal, we noted that the clerk of the Madison Circuit Court had never entered the arbitration award as the judgment of that court; therefore, the trial court's order purporting to deny Guardian's motion to vacate or modify the arbitration award — the order being appealed — was void. 130 So.3d at 184. See Rule 71B(f), Ala. R. Civ. P. (stating that, after an appeal of an arbitration award is initiated in the circuit court, "[t]he clerk of the circuit court promptly shall enter the award as the final judgment of the court"). Accordingly, we vacated the trial court's order and dismissed Guardian's appeal, noting that, "[e]ssentially, Guardian's appeal remains pending in the circuit court, awaiting further procedures under Rule 71B." 130 So.3d at 184.
On September 30, 2013, following our decision in Guardian Builders, the circuit court clerk entered the arbitration award in favor of the Useltons as the final judgment of the court pursuant to Rule 71B(f); on that same date Guardian moved the trial court to vacate or modify the award. Also that same day, the trial court denied Guardian's motion and Guardian filed its notice of appeal to this Court.
Guardian argues that the trial court erred by denying its motion to vacate or modify the arbitration award returned in favor of the Useltons and that, pursuant to the Federal Arbitration Act, 9 U.S.C. § 1 et seq. ("the FAA"), the judgment adopting the arbitration award should be reversed.
Hereford v. D.R. Horton, Inc., 13 So.3d 375, 378 (Ala.2009).
On appeal, Guardian does not take issue with the essence of the decision made by the arbitrator: That Guardian Builders negligently constructed and delivered to the Useltons a house containing substantial defects and deficiencies and, as a result, the Useltons were entitled to certain damages. Rather, Guardian objects only to a subset of the damages that were awarded the Useltons that were not directly related to the poorly constructed house, specifically, attorney fees and arbitration fees (including both the arbitrator fee and the forum fee charged by the Better Business Bureau of North Alabama ("the BBB"), which administered the arbitration).
When the arbitrator issued his interim decision on November 22, 2011, he awarded the Useltons $305,711.05 in damages, a sum that included a $10,311.05 arbitrator fee. The arbitrator further stated in that decision that Guardian would be liable for the Useltons' reasonable attorney fees and for the forum fee paid the BBB, and the arbitrator gave the Useltons 30 days to submit evidence of those costs. The Useltons' attorney subsequently submitted to the arbitrator an affidavit indicating that his contract with the Useltons entitled him to 45% of any amount recovered and the repayment of all expenses; accordingly, he requested an additional $137,569.97 for his contingency fee and $8,994.21 in litigation expenses, which included $1,121.50 for the forum fee paid to the BBB. On December 21, 2011, the arbitrator, over Guardian's objection that he lacked authority to award attorney and arbitration fees, issued his final decision awarding the Useltons a total of $452,275.20.
Guardian argues that the arbitration agreement entered into by it and the
Before we can determine whether the arbitrator exceeded his power in awarding the Useltons attorney fees, we must first determine what authority Guardian and the Useltons granted the arbitrator. The arbitration provision in the construction agreement executed by the parties provides, in whole:
Thus, by the terms of the arbitration provision, Guardian and the Useltons empowered an arbitrator deciding a dispute between them submitted to him or her to render a decision "he/she consider[ed] to be fair and just." However, because Guardian and the Useltons further agreed that arbitration services would be provided by the BBB, any limitations to the arbitrator's authority found in the BBB rules governing their dispute also apply. The BBB rules governing arbitration conducted pursuant to a binding predispute arbitration agreement do not expressly provide for or prohibit an award of attorney fees; however, they do contain the following provisions concerning an arbitrator's authority:
Guardian argues that the BBB rules expressly limit the arbitrator's authority to the scope of those rules and that the rules authorize an arbitrator to award only a remedy "that is permitted under applicable law." The construction agreement provides that the applicable law in this case is "the law of the State of Alabama," and, Guardian argues, "[i]t is well settled that `"Alabama follows the `American rule.'"'" Jones v. Regions Bank, 25 So.3d 427, 441 (Ala.2009) (quoting City of Bessemer v. McClain, 957 So.2d 1061, 1078 (Ala.2006), quoting in turn Battle v. City of Birmingham, 656 So.2d 344, 347 (Ala.1995)). The American rule generally provides that a prevailing party in litigation is not entitled to an award of attorney fees unless those fees are provided for by statute or by contract or if they are otherwise justified for certain equitable reasons. Classroomdirect.com, LLC v. Draphix, LLC, 992 So.2d 692, 710 (Ala.2008). There is no allegation in this case that any statute exists that would authorize an award of attorney fees for a cause of action such as the one brought by the Useltons, and it is undisputed that the parties did not agree by contract that the prevailing party in any dispute was entitled to compensation for their attorney fees.
The Useltons, however, argue that the construction agreement empowered the arbitrator to grant any relief he considered "to be fair and just" and that the BBB rules reinforce this broad grant of authority inasmuch as those rules state that a decision shall be one that "the arbitrator considers fair." Moreover, although Guardian emphasizes the provision in Rule 3 of the BBB rules stating that the arbitrator "may award any remedy that is permitted under applicable law," the Useltons highlight the statement in Rule 29.A that "the arbitrator is not bound to apply legal principles in reaching what the arbitrator considers to be a fair resolution of the dispute."
The Useltons also cite this Court's decision in R.P. Industries, which, they say, supports their argument that Alabama law does not preclude an arbitrator from awarding attorney fees to the prevailing party. In R.P. Industries, this Court held that an arbitration panel did not exceed its powers in making an award of attorney fees, 896 So.2d at 470, and the Useltons note the similarity between the Construction Industry Arbitration Rules of the American Arbitration Association, which applied in that case and which provide that an arbitrator "`may grant any remedy or relief that the arbitrator deems just and equitable,'" 896 So.2d at 467 (emphasis omitted), and the BBB rules in this case, which provide that the decision returned by the arbitrator shall be one that the arbitrator "considers fair."
However, although R.P. Industries does provide some guidance for our resolution of this case, its utility is ultimately limited by the fact that the Construction Industry Arbitration Rules of the American Arbitration Association expressly authorize "`an award of attorneys' fees if all parties have requested such an award,'" 896 So.2d at 467 (emphasis omitted); in fact, both parties in R.P. Industries did request attorney fees. 896 So.2d at 470. No equivalent BBB rule exists in the present case, however. Moreover, although some courts have held that parties to an arbitration have implicitly authorized an arbitrator to make an award of attorney fees when both parties have made a request for attorney fees — even in the absence of any express delegation of that authority in the relevant arbitration agreement or applicable arbitration rules — there is no evidence in the record indicating that the Useltons made a request for attorney fees in this case, either in their complaint filed pre-arbitration or during the course of the arbitration proceedings.
We agree with Guardian that the arbitrator exceeded his authority by awarding the Useltons attorney fees. The BBB rules expressly state that the arbitrator's authority is limited by the scope of those rules and that he or she "may award any remedy that is permitted under applicable law." This is to say that the arbitrator may award only those remedies permitted by applicable law, in this case, Alabama law. As discussed supra, Alabama generally follows the American rule, which provides that parties are responsible for their own attorney fees, and no argument has been made indicating that the facts of this case warrant an exception to the application of that rule based on the existence of a relevant statute or agreement authorizing an award of attorney fees
Moreover, we are not convinced by the Useltons' argument that BBB Rule 29.A providing that the arbitrator "is not bound to apply legal principles in reaching what the arbitrator considers to be a fair resolution" is in conflict with, preempts, or creates ambiguity when considered in conjunction with, BBB Rule 3 limiting the arbitrator to awarding only those remedies "permitted under applicable law." Written documents "are to be construed as a whole so as to harmonize their parts whenever possible." Dudley v. Fridge, 443 So.2d 1207, 1211 (Ala.1983). Applying this principle to the BBB rules, one can see that although an arbitrator might not be bound to apply a specific legal principle, such as the Statute of Frauds, when reaching what he or she considers to be "a fair resolution" on the issue of liability, any remedy ultimately awarded must still be one "that is permitted under applicable law."
We reach a similar conclusion with regard to the arbitration fees the arbitrator ordered Guardian to pay. As the Useltons correctly note, court costs are distinguishable from attorney fees. See White Springs Agric. Chems., Inc. v. Glawson Invs. Corp., 660 F.3d 1277, 1282 (11th Cir.2011) (recognizing that a general demand for costs does not encompass a request for attorney fees). The American rule applied in Alabama generally prohibits a losing party from being ordered to pay the attorney fees incurred by the prevailing party, but the American rule does not prohibit an award of court costs to the prevailing party. In practice, such awards are commonplace and specifically authorized by Rule 54(d), Ala. R. Civ. P., which provides that, "[e]xcept when express provision therefor is made in a statute, costs shall be allowed as of course to the prevailing party unless the court otherwise directs." Our Rule 54(d) is modeled on Rule 54(d), Fed.R.Civ.P., and, in Anderson v. Griffin, 397 F.3d 515, 522 (7th Cir.2005), the United States Court of Appeals for the Seventh Circuit offered an explanation for the differing treatment of court costs and attorney fees under the American rule:
Assuming, therefore, that arbitration fees are the functional equivalent of court costs, an award of arbitration fees to the prevailing party in an arbitration proceeding might be a remedy permitted under Alabama law and thus within the authority of an arbitrator operating under the BBB rules unless there is a more specific provision in the parties' agreement that would prevent such an award.
The arbitration provision in the construction agreement executed by the Useltons and Guardian provides that "[t]he arbitration fees shall be based upon the
We agree with Guardian; the arbitrator exceeded his authority by ordering Guardian to pay the Useltons' arbitration fees in light of the clear language in the arbitration provision requiring those fees to "be paid by both parties." In Flack-Beane Lumber Co. v. Bass, 258 Ala. 225, 228, 62 So.2d 235, 238 (1952), we stated:
Inasmuch as the arbitrator awarded the Useltons their arbitration expenses, the award did not conform with the parties' arbitration agreement and is, accordingly, due to be reversed.
Finally, we consider the Useltons' argument that, if any portion of the arbitration award is vacated, we must set aside the award in its entirety and remand the case for a new trial in the Madison Circuit Court. They state in their brief:
The Useltons' brief, p. 27. Thus, the Useltons' argument is essentially that the arbitrator's award should be vacated as it relates to the compensatory damages he awarded because those damages are now insufficient to make the Useltons whole. However, we have stated that a party seeking the vacation or modification of an arbitration award must frame its arguments by reference to § 10 (or § 11) of the FAA. Cavalier Mfg., Inc. v. Gant, 143 So.3d 762, 769 (Ala.2013). The Useltons have not cited the FAA, any other statute, or any caselaw in support of their argument that if any part of the entire arbitration award is vacated the entire award should be vacated, and we accordingly grant the argument no further consideration. See White Sands Grp., L.L.C. v. PRS II, LLC, 998 So.2d 1042, 1058 (Ala. 2008) ("Rule 28(a)(10)[, Ala. R.App. P.,] requires that arguments in briefs contain
Guardian appealed the order of the Madison Circuit Court denying Guardian's motion to vacate or modify an arbitration award entered in favor of the Useltons because, Guardian argued, the arbitrator lacked the authority to award the Useltons attorney fees and arbitration fees. We agree that the arbitrator exceeded his authority by awarding those remedies. Attorney fees were not authorized by the parties' agreement, and the BBB rules governing their arbitration limited the remedies available to the arbitrator to those permitted under Alabama law, which incorporates the American rule generally prohibiting losing parties from being ordered to pay the attorney fees of prevailing parties. Moreover, the arbitration provision in the construction agreement expressly provided that "the arbitration fees ... shall be paid by both parties." Accordingly, the trial court's judgment is reversed and the cause remanded for the trial court to enter a modified judgment subtracting attorney fees and arbitration fees from the award made to the Useltons.
REVERSED AND REMANDED.
BOLIN, PARKER, SHAW, MAIN, WISE, and BRYAN, JJ., concur.
MURDOCK, J., concurs in the rationale in part and concurs in the result.
MOORE, C.J., concurs in the result in part and dissents in part.
MURDOCK, Justice (concurring in the rationale in part and concurring in the result).
Although I agree in the main with the analysis set out in Part III of the main opinion, I write separately to be clear that, in my view, even in the absence of the "BBB rules" cited in the main opinion, the parties' contractual agreement that the arbitrator was empowered to render a decision "he/she consider[ed] to be fair and just" does not qualify as an agreement for one party to pay the other's attorney fees within the meaning of those cases identifying three exceptions to the "American rule" disallowing such payments. See generally Classroomdirect.com, LLC v. Draphix, LLC, 992 So.2d 692, 710 (Ala.2008). Nor do I read this clause in the parties' arbitration agreement, or any provision of the BBB rules, to constitute a submission to the arbitrator of the question whether to award an attorney fee or to award the arbitration fees. See 154 So.3d at 972 n. 5.
As to the issue of the arbitration fees, I concur in the result reached in Part IV of the main opinion but respectfully decline to join the premise set out near the outset of the analysis. Specifically, I am not inclined to "assume" for the sake of discussion that "arbitration fees are the functional equivalent of court costs," 154 So.3d at 973; nor would I leave open the corollary possibility that "an award of arbitration fees to the prevailing party ... might be a remedy permitted under Alabama law and thus within the authority of an arbitrator operating under the BBB rules unless there is a more specific provision in the parties' agreement that would prevent such an award." 154 So.3d at 973. The general rule of "costs" was developed in and for normal civil litigation — in a court — where such costs are by nature generally "modest" and "incidental" (not to mention predictable and easily calculated without likelihood of dispute). See Anderson v. Griffin, 397 F.3d 515, 522 (7th Cir.2005) (explaining why mere "costs" traditionally have been viewed differently than attorney
As to the issue discussed in Part V of the main opinion — whether the entire award must be set aside in this case — it appears that the dispositive principle would be that which was reaffirmed by this Court in R.P. Industries, Inc. v. S & M Equipment Co., 896 So.2d 460 (Ala.2004):
896 So.2d at 464 (quoting Reynolds v. Reynolds, 15 Ala. 398, 403 (1849)). In this case, it is appropriate to consider the arbitrator's award to be void only pro tanto because it is not the case that the award of attorney fees and the award of the arbitration fees "cannot, without injustice, be separated" from the remainder of the arbitrator's award.
MOORE, Chief Justice (concurring in the result in part and dissenting in part).
I concur in reversing the award of attorney fees, but I respectfully dissent from reversing the award of the arbitration fees.
I have three objections to applying the Federal Arbitration Act, 9 U.S.C. § 1 et seq. ("the FAA"), to enforce predispute arbitration agreements. I explained two of my three objections in my dissent in Selma Medical Center, Inc. v. Fontenot, 824 So.2d 668, 677 (Ala.2001) (Moore, C.J., dissenting):
Third, it appears to me that the FAA is unconstitutional under the Seventh Amendment to the United States Constitution, which provides:
At the time the Seventh Amendment was ratified, the common law provided that parties could agree to submit a dispute to arbitration only after a dispute had arisen, but any agreement to submit disputes to arbitration before a dispute had arisen was considered an improper attempt to divest courts of their jurisdiction. See Home Ins. Co. of New York v. Morse, 87 U.S. (20
In this case, if the arbitration agreement was unenforceable under the principles stated above, then the Useltons would have been entitled to their day in court. If the Useltons had won the court battle, then they would not have been entitled to attorney fees pursuant to the American rule. Classroomdirect.com, LLC v. Draphix, LLC, 992 So.2d 692, 710 (Ala.2008). If the arbitration agreement was enforceable, then I would agree with the main opinion that the arbitrator exceeded the scope of his powers in awarding attorney fees. But because of my concerns about the applicability of the FAA in this case, I concur only in the result as to the issue of attorney fees.
Arbitration costs, however, are another matter. If the Useltons had not been forced to arbitration and had then prevailed in court, they would have been awarded costs. Rule 54(d), Ala. R. Civ. P. Moreover, even if the arbitration agreement was enforceable, the agreement does not preclude the arbitrator from awarding costs to the prevailing party. The agreement simply states that "[t]he arbitration fees ... shall be paid by both parties." This provision requires each party to pay arbitration costs up front but says nothing about whether the arbitrator is precluded from awarding costs to the prevailing party, which would have been awarded by a court of law in Alabama, at the end of the arbitration proceeding. I also note that the Better Business Bureau of North Alabama Rules provide that "[t]he arbitrator may award any remedy that is permitted under applicable law." Thus, it is clear to me that the agreement does not prohibit the arbitrator from awarding costs to the prevailing party.
Guardian's brief, p. 21.