Commercial Litigation and Arbitration

Attorneys’ Fees under the Federal Arbitration Act for Prevailing over Unsuccessful Attack on Arbitration Award

From Western Tech. Servs. Int’l v. Cauchous Indus., S.A., 2010 U.S. Dist. LEXIS 121269 (N.D. Tex. Nov. 16, 2010):

Petitioner Western Technology Services International, Inc. ("Petitioner" or "Westech") filed its Notice of Application and Application to Confirm Arbitration Award on June 4, 2009. Westech and Respondent Cauchos Industriales, S.A. ("Respondent" or "Cainsa") entered into three agreements that are at issue in the underlying arbitration (the "Agreements"). Westech instituted arbitration, seeking a declaration that it properly terminated the agreements and seeking contractual remedies. It later sought a preliminary injunction pursuant to these agreements. The arbitration panel held a hearing on May 13 and 14, 2009, and granted Westech's motion for preliminary injunction.

Westech sought confirmation of the arbitration panel's June 2, 2009 preliminary injunction (the "Preliminary Injunction"), and Cainsa moved to vacate the Preliminary Injunction and to preliminarily enjoin the effectuation of the Preliminary Injunction until the court ruled on its motion to vacate. Westech moved for sanctions against Cainsa, contending that its motions to vacate and for a preliminary injunction were frivolous.

On January 15, 2010, the court confirmed the Preliminary Injunction, denied Cainsa's motions for preliminary injunction, and granted Westech's motion for sanctions. The court also entered judgment confirming the Preliminary Injunction. Cainsa subsequently moved for reconsideration of the portion of the court's decision granting sanctions against it. The court held a hearing on the motion for reconsideration on April 7, 2010, and, on May 7, 2010, the court vacated the portions of its January 15, 2010 memorandum opinion and order sanctioning Cainsa. ***

Westech has now moved to recover its attorney's fees incurred in this enforcement action. It argues that Cainsa's challenges to the Preliminary Injunction were not cognizable under the Federal Arbitration Act ("FAA"), were frivolous, and were without legal justification. ***

A. Attorney's Fees Pursuant to the FAA

*** A district court may award attorney's fees against a party making challenges to arbitration awards that are not cognizable under the FAA, are frivolous, or are without legal justification. International Ass'n of Machinists & Aerospace Workers, Dist. 776 v. Texas Steel Co., 639 F.2d 279, 283 (5th Cir. 1981). ***

For the reasons that it determined that Cainsa should not be sanctioned, the court finds that Cainsa should not be held responsible for attorney's fees. *** Although ultimately unsuccessful, the court determines that Cainsa's arguments do not meet the standard set forth in International Association of Machinists. This is a close call, but the court will not exercise its discretion to award attorney's fees to Westech in light of its ultimate decision that Cainsa's actions were not sanctionable. The court finds that Cainsa's position regarding vacatur was arguably cognizable under the FAA, and that it was not frivolous or without some legal justification.

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