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Appeal From Compulsory Arbitration?

Appeals from Arbitration are common. Litigants will sometimes appeal from an arbitration award in order to continue the negotiation process or where they are disappointed with an arbitration award. The tactic makes sense. An appeal from compulsory arbitration will result in a trial de novo before a superior court Judge or Jury. But it is not without risk.

Rule 77 (f) allows the party defending the appeal (appellee) to collect its reasonable attorney’s fees where the party bringing the appeal (appellant) does not receive an award on the appeal at least 23% more favorable than the sums awarded in arbitration. This rule can turn a win into a loss. An Appellant who does not do substantially better on Appeal can be required to pay the legal fees of the Appellee.

Rule 77 (f) is set forth below in its entirety.
A recent Arizona case, Granville v. Howard, has set forth new factors to guide the Court in determining the reasonableness of a fee award on an appeal from Compulsory Arbitration. These factors are:

1. Was the arbitration appeal filed in good faith,

2. How close was the award to the 23% threshold of Rule 77 (f),

3. What was the amount in controversy,

4. Could the matter have been settled after arbitration,

5. Was the failure to meet the 23% threshold a result of a change in evidence at the trial de novo,

6. How much in legal fees is the requesting party required to pay his attorney, and
7. Did the fee shifting provisions of Rule 77(f) cause some of the fees at issue to be incurred.

The lesson to be learned from this is that an appeal from compulsory arbitration must be carefully considered. Most people are familiar with the general proposition that the party losing a lawsuit must, in some cases, pay the winning party’s attorney fees. Rule 77 (f) can change this so that a winning party might still have to pay the losing party’s attorney fees–and turn the win into a loss.

RULE 77 (f)
(f) Costs and Fees on Appeal. The deposit provided for in subparagraph (b) of this rule shall be refunded to the appellant if the judgment on the trial de novo is at least twenty-three percent (23%) more favorable than the monetary relief, or more favorable than the other type of relief, granted by the arbitration award or other final disposition. If the judgment on the trial de novo is not more favorable by at least twenty-three percent (23%) than the monetary relief, or more favorable than the other relief, granted by the arbitration award or other final disposition, the court shall order the deposit to be used to pay, or that the appellant pay if the deposit is insufficient, the following costs and fees unless the court finds on motion that the imposition of the costs and fees would create such a substantial economic hardship as not to be in the interests of justice:
(1) to the county, the compensation actually paid to the arbitrator;
(2) to the appellee, those costs taxable in civil actions together with reasonable attorneys’ fees as determined by the trial judge for services necessitated by the appeal; and (3) reasonable expert witness fees incurred by the appellee in connection with the appeal.
Upon final disposition of the case and lacking an order from the court for the disposition of the deposit provided for in paragraph (b) of this rule, the clerk of court shall refund the deposit to the party making the deposit.