Award of Attorney Fees upheld, even though not directly mentioned in the Contract

One of the well-known rules in American law is the “American Rule” on fees — unless a statute or contract says otherwise, the parties bear the expenses of their own lawyers. So in commercial disputes, it’s rare for the winning party to receive its fees, absent a clear agreement.

The Missouri Court of Appeals, Eastern District, just added a wrinkle to that decision. It held that a party to an agreement to arbitrate might indirectly create an attorney fee provision. The City of Chesterfield, Missouri, hired a contractor; the agreement required all disputes to go to the American Arbitration Association.

The AAA’s rules automatically create a right to attorney fees where all the parties submit a request for fees. The City included a generic request for relief, and the Arbitrators interpreted it as a request for fees — which the Arbitrators said was enough to trigger a “loser pays” rule. The Court of Appeals said existing Missouri law deferred to the Arbitrators on questions about the forum’s rules, so the City was required to pay the fees.

The AAA is a common arbitration forum; it’s worth remembering that arbitration, too, can turn out in unexpected ways.

The case was City of Chesterfield v. Frederich Construction, Inc., et al., No. 101916 (Mo.App.E.D. April 21, 2015).