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Court Annexed Arbitration and Attorney Fees

By: Steven J. Mack, Esq. 

In the event you find yourself in a lawsuit less than $50,000.00, you will be forced to participate in the Court Annexed Arbitration program.  In other words, you must arbitrate by a court appointed arbitrator prior to being able to have your matter heard before a judge.  In the event you are unhappy with the outcome of arbitration, you may then ask for a De Novo review of your case before a judge, as long as you participated in the arbitration in good faith[1].  A De Novo review gives you the chance to have your case completely reheard by the court, but your result must be better than you received at arbitration in order to be a prevailing party and obtain attorney’s fees and costs[2]. Are you entitled to your attorney fees and costs in arbitration? The short answer is maybe and some.  If you are suing pursuant to written agreement, and that agreement states that the prevailing party is entitled to reasonable attorney fees and costs, the prevailing party can be awarded attorney fees at the discretion of the arbitrator as to what is reasonable (same as a court).   However, if you are suing under some other principal, such as an oral contract or negligence, you are limited to a maximum recovery of $3000.00 in attorney fees[3].  Your costs, however, are recoverable subject to arbitrator review and approval.[4] What constitutes a recovery and prevailing party for purposes of recovering attorney fees and costs? If you have a provision in your written agreement, and you either are awarded money or successfully defend a lawsuit, you are generally considered the prevailing party and are entitled to an award of fees as stated and provided in that agreement.[5] If you do not have a written agreement, you may make an offer of judgment (no matter the claim amount).  If you are successful at arbitration, and prevail for more than you offered, you may be awarded your attorney fees and costs[6], however, under the arbitration rules you are limited to $3000.00[7]. Your costs are only limited by review of the arbitrator (same as with court).[8] If you do not have a written agreement, and your recovery is less than $20,000.00 and you are the prevailing party at arbitration you may recover your attorney fees, by statute[9], but again, pursuant to the arbitration rules, your attorney’s fees are limited to $3000.00[1].  Your costs are only limited by review of the arbitrator (same as with court).[2] What constitutes a recovery of less than $20,000.00 for the purposes of the statute?[3] This is the tricky part.  If you are a defendant wherein the plaintiff loses and the arbitrator finds in your favor but does not award you a dime of actual recovery, is that less than $20,000.00?  Common sense would say yes, however, the courts do not agree[4].  For the purposes of the statute, the Supreme Court of Nevada has reasoned that the wording and application of the statute would only consider an actual monetary award to constitute a recovery of less than $20,000.00[5].  Likewise, if you have a counterclaim, and the arbitrator finds in your favor, but fails to award any actual dollar amount, it is possible that you would be unable to recover attorney fees, under the statute, for the same reason. Exception: The sole exception to recovery under the statute, to which a recovery amount is not attached, is the determination by the court (or arbitrator) that the lawsuit was brought or maintained without reasonable grounds or for harassment purposes[6].  The courts (and arbitrators) are supposed to construe this statute liberally in favor of awarding attorney’s fees, however, the limits of arbitration would appear to still exist[7]. The bottom Line: Without a written agreement stating that the prevailing party is entitled to attorney’s fees and costs, the prevailing party’s recovery may be limited to costs only and each party may be responsible for their own attorney fees.  At the most, without a written agreement, under the court annexed arbitration program a prevailing party is entitled to a maximum attorney’s fees award of $3000.00, if the proper steps are taken.  This should be taken into account when deciding to bring a law suit that is valued less than $50,000.00, and is subject to the court annexed arbitration program.  

  [1] NAR 22(A) [2] See, NAR 20(B)(2)(a) wherein award must exceed 20 percent of arbitrator’s award if claim is less than $20,000, and NAR 20(B)(2)(b) wherein award must exceed 10 percent of arbitrator’s award if claim is greater than $20,000, in order for the non-requesting De Novo party to obtain attorney’s fees and costs.  The prevailing party is entitled to attorney’s fees, however, if successful at a De Novo trial, subject to reasonableness as determined by the court. See, NAR 20(B)(1). [3] NAR 16(E) [4] See NRS 18.020 [5] See NAR 16(E), an offer of judgment could affect who is determined to be the prevailing party. [6] See, NAR 16(D) [7] See, NAR 16(E) [8] See, NRS 18.020 [9] See, NRS 18.010(2)(a) [10] NAR 16(E) [11] See, NRS 18.020 [12] NRS 18.010(2)(a) allows for attorney fees when the prevailing party has not recovered more than $20,000. [13] See, Smith v. Crown Financial Services of America, 111 Nev. 277, 286, 890 P.2d 769, 775 (1995) [14] See also, Thomas v. The City of North Las Vegas, 122 Nev. 82, 86, 127 P.3d 1057. 1060 (2006) [15] See, NRS 18.010 (2)(b) Without regard to the recovery sought, when the court finds that the claim, counterclaim, cross-claim or third-party complaint or defense of the opposing party was brought or maintained without reasonable ground or to harass the prevailing party. The court shall liberally construe the provisions of this paragraph in favor of awarding attorney’s fees in all appropriate situations. It is the intent of the Legislature that the court award attorney’s fees pursuant to this paragraph and impose sanctions pursuant to Rule 11 of the Nevada Rules of Civil Procedure in all appropriate situations to punish for and deter frivolous or vexatious claims and defenses because such claims and defenses overburden limited judicial resources, hinder the timely resolution of meritorious claims and increase the costs of engaging in business and providing professional services to the public. (in pertinent part) [16] NAR 16(E)  

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