Facts
Natare Corporation and Duraplastec Systems have a long history of competition against one another, during which they have spread disparaging information against one another as a means of unsettling the competition. These activities have resulted in 2 lawsuits against one another and an agreement to refer to arbitrage in the case of similar unlawful behavior of one towards the other. Whoever is found guilty, then, is entitled to at least 5,000 dollars in damages, unless greater losses have been proven in court, as well as reasonable compensation of attorney fees and costs associated with the litigation.
Natare corporation filed for arbitrage after Duraplastec started to spread disparaging information again, which Natare alleged resulted in them losing a contract. The corporation then demanded 45,000 dollars in liquidated damages and a compensation of attorney fees. They failed to prove the reasoning for the damages and had to settle for 5,000 dollars. Natare was also not compensated for attorney fees. The company sought to review the arbitrator’s decision, which was upheld by the Trial Court and reversed by the Court of Appeals, before reaching Indiana Supreme Court.
Issue
Natare corporation sustains that they are entitled to a compensation of attorney fees as per their agreement for lawsuit settling in 1998, which states that the party that suffered from defamatory statements is entitled to reasonable compensation of attorney fees.
Decision
Indiana Supreme Court sustained that the arbitrator exercised his responsibility to determine whether or not to award the attorneys any fees was reasonable, and that the conclusion that it was not was prudent. Thus, Natare corporation is not entitled to any attorney compensation.
Reason
Natare corporation is seeking a compensation of its attorney fees on the grounds of Uniform Arbitration Act of 2005. According to the Act, a side is entitled to a compensation if one or several of the following issues have been met:
- If the award was procured by corruption or fraud;
- If the arbitrator was proven to be partial or there is evidence of corruption and/or misconduct towards the rights of any party;
- If the arbitrator exceeded their powers and it’s impossible to correct the award without placing controversy on the decision;
- If the arbitrator refused to postpone the hearing and did not hear all of the evidence to be presented in the court.
In addition, Natare cited that “the arbitrator exceeded his authority by refusing to apply the attorney fees and costs provision of the [settlement agreement] and the portion of the award addressing attorneys fees and costs should be vacated pursuant to [Indiana Code section] 34-57-2- 13(a)(3).”
However, the justices reviewing the case disagreed with Natare’s version of events. According to the reasoning provided in the court decision, stating that the arbitrator did not exceed his power in refusing to award Natare for attorney services due to the language of the contract. The contract said that reasonable compensation was to be awarded to the party that suffered liquidated damages. However, Natare failed to prove that the company suffered damages, as the failed contract prior had nothing to do with the defamation, thus making only the award of 5,000 dollars applicable. Natare’s claim was that the arbitrator did not consider the award, and had thus exceeded his power.
However, it was fully within the arbitrator’s power to rule that the “reasonable compensation” for the event would be 0, as the company did not incur any attorney expenditures. In fact, the arbitration was put in place in lieu of two lengthy lawsuits that the company had between each other, with a settlement being a way to expedite the process and reduce the amount of time and expenditures required to reach a settlement.
The argument provided by Natare that, perhaps, the issue of attorney fees was not presented to the arbitrator prior and that they might be entitled to reimbursement as per the Indiana Code Section 34-57-2-14(a)(2). However, they did not present any evidence that the arbitrator has forgotten or otherwise did not consider the attorney fees prior to having been presented with the conditions, so there is reasonable to assume, for several separate reasons, that the arbitrator did, in fact, consider this outcome prior to asserting that no payment was warranted in this situation.
To summarize, Natare has no legal ground to stand on in regards to the arbitrator unlawfully refusing to provide payment for the attorney services, because the language of the agreement between the two companies clearly left the decision-making capacity in that regard for the arbitrator, which he exercised. The fallback argument of the arbitrator either ignoring or overlooking their responsibility to confer fees was not supported as the company failed to provide any evidence of such. The decision made by the Trial Court, was, thus, affirmed. All three judges, including Shepard, C. J., Dickson, B., and Rucker, J. J. concurred with this reasoning, no dissenting opinions made.