Ierna v. Arthur Murray Intern., Inc.

• Decision Date: 14 December 1987
• Docket Number: No. 86-5804,86-5804
• Citation: 833 F.2d 1472
• Parties: RICO Bus.Disp.Guide 6816 F.F. "Dusty" IERNA, P.Y. Costello, Inc., a Florida corporation, Richard S. Wilbur, Orlando Dance Studio Corp., a Florida corporation, Altamonte Springs Dance Studio Corp., a Florida corporation, Joseph P. Davenport, Tony D. Fudge, Tee Dee of St. Petersburg, Inc., a Florida corporation, Corporation 101, a Florida corporation, Corporation 102, a Florida corporation, Leslie Herman, Dance Studios of Charleston, Inc., a South Carolina corporation, Daniel Caballero, Wanda Mattox, Mattox Enterprises, Inc., a Louisiana corporation, Jacqueline Walls, T.A.A.M., Inc., a Georgia corporation, Town & Country of Baton Rouge, Inc., a Louisiana corporation, Jacques Debeve, Rosalyn Debeve, P.A.M., Inc., an Arizona corporation, T.A.M., Inc., an Arizona corporation, Plaintiffs-Appellants, v. ARTHUR MURRAY INTERNATIONAL, INC., a Delaware corporation, Sam Costello, George Theiss, Charles Pistole, Harold Plummer, James Banta, Philip Masters, Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1472

833 F.2d 1472

RICO Bus.Disp.Guide 6816

F.F. "Dusty" IERNA, P.Y. Costello, Inc., a Florida

corporation, Richard S. Wilbur, Orlando Dance Studio Corp.,

a Florida corporation, Altamonte Springs Dance Studio Corp.,

a Florida corporation, Joseph P. Davenport, Tony D. Fudge,

Tee Dee of St. Petersburg, Inc., a Florida corporation,

Corporation 101, a Florida corporation, Corporation 102, a

Florida corporation, Leslie Herman, Dance Studios of

Charleston, Inc., a South Carolina corporation, Daniel

Caballero, Wanda Mattox, Mattox Enterprises, Inc., a

Louisiana corporation, Jacqueline Walls, T.A.A.M., Inc., a

Georgia corporation, Town & Country of Baton Rouge, Inc., a Louisiana corporation, Jacques Debeve, Rosalyn Debeve, P.A.M., Inc., an Arizona corporation, T.A.M., Inc., an Arizona corporation, Plaintiffs-Appellants, v. ARTHUR MURRAY INTERNATIONAL, INC., a Delaware corporation, Sam Costello, George Theiss, Charles Pistole, Harold Plummer, James Banta, Philip

Masters, Defendants-Appellees.

No. 86-5804.

United States Court of Appeals,

Eleventh Circuit.

Dec. 14, 1987.

Irving Morris, Newark, N.J., Franzblau & Falkin, P.A., S.M. Chris Franzblau, Greenberg, Margolis, Ziegler, Schwartz, Dratch, Fishman, Franzblau & Falkin, P.A. Roseland, N.J., for plaintiffs-appellants.

Marc P. Seidler, Rudnick & Wolfe, Chicago, Ill., for defendants-appellees.

Appeal from the United States District Court for the Southern District of Florida.

Before VANCE and CLARK, Circuit Judges, and GARZA, ^* Senior Circuit Judge.

VANCE, Circuit Judge:

This case involves an award by an arbitration panel of attorneys' fees to the prevailing party. This appeal presents the issues of whether the attorneys' fees award is integral or collateral to the decision on the merits, and whether the district court properly remanded the case to the arbitrators to determine the amount of costs and expenses to be awarded. We defer to the arbitration panel's interpretation of the arbitration provisions in the franchise agreements at issue, and hold that the award of attorneys' fees was proper.

I.

This case has bounced around a bit before this current appeal. On November 3 1982 a group of twenty-seven present and former franchisees sued Arthur Murray International, Inc. and several of its present and former officers, directors, and shareholders. The amended complaint alleged causes of action under the Federal Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. Secs. 1961-1968, Florida statutory law, and various common law theories of fraud and breach of contract. On September 19, 1983 the district court denied the defendants' motion to dismiss, but granted their motion for a stay of the proceedings pending arbitration pursuant to arbitration provisions of the franchise agreements. ¹

On March 30, 1984 plaintiffs filed their demand for arbitration. Hearings were held before the arbitration panel in October and December of 1984, and on April 14, 1985 the arbitrators denied all of the plaintiffs' claims. The panel also ordered that the administrative fees of the American Arbitration Association be borne by the plaintiffs, and that the compensation for the neutral arbitrator appointed by the Association be borne by the parties equally. This award is not central to the current appeal.

The defendants then filed a motion in the district court to modify the arbitral award to include costs, expenses and attorneys' fees, or in the alternative to confirm the award but remand the case to the arbitration panel to determine costs and expenses. Defendants apparently had neglected to ask the arbitrators for costs and attorneys' fees, or at least had failed to present any evidence before the arbitrators on the issue. On September 23, 1985 the district court remanded the case to the arbitrators, who by a 2-1 vote awarded $128,738.52 to defendants, including $95,000 for attorneys' fees. After more motions and hearings before the district court, the court on April 23, 1986 confirmed the amended arbitral award and denied plaintiffs' motion to vacate it.

There were more motions still to come, however. On April 30 the defendants, apparently having forgotten to raise the issue in their previous appearances before the district court, filed a motion to tax the costs of the two confirmation proceedings. The plaintiffs filed on May 6 a motion for reconsideration of the April 23 order and for denial of defendants' motion to tax costs. On May 22 the district court denied the plaintiffs' motion for reconsideration. The plaintiffs, however, already had filed a notice of appeal to this court on May 21 (No. 86-5411). The district court meanwhile awarded defendants $9,473.25 in confirmation costs on September 5 without remanding to the arbitration panel, and plaintiffs appealed this order twenty-five days later (No. 86-5804).

The defendants next filed a motion in this court on November 22, 1986 to dismiss the appeal in No. 86-5411 because plaintiffs' motion for reconsideration was still pending in the district court when they filed the notice of appeal. On January 6, 1987 this court dismissed plaintiffs' appeal in No. 86-5411. Plaintiffs responded by filing a motion in this court to amend their appeal fo the district court's September 5 order taxing confirmation costs (No. 86-5804) to include an appeal of the April 23 order confirming the amended arbitral award. Plaintiffs argued that the April 23 order did not become final and appealable until the district court's September 5 order.

On March 20, 1987 a panel of this court deferred ruling on plaintiffs' motion to amend the notice of appeal in No. 86-5804. The court instructed all parties to address in their briefs both the procedural issues and the merits of the case.

II.

A.

Appellees argue initially that the only order properly before this court on appeal is the district court's September 5 order awarding confirmation costs of $9,473.25 and not the April 23 order awarding costs and attorneys' fees of $128,738.52. The resolution of this issue depends on whether the award of costs and attorneys' fees is integral or collateral to the merits of the case. If the award is integral to the merits, then the April 23 order was not final and appealable until September 5, when the district court made its final award of the costs associated with the confirmation proceedings. ²

Whether a district court order resolving all issues in a case except an award for attorneys' fees is final and appealable depends on the circumstances. ³ C.I.T. Corp. v. Nelson, 743 F.2d 774, 775 (11th Cir.1984); McQurter v. City of Atlanta, 724 F.2d 881, 882 (11th Cir.1984) (citing Holmes v. J. Ray McDermott & Co., 682 F.2d 1143, 1146 (5th Cir.1982), cert. denied, 459 U.S. 1107, 103 S.Ct. 732, 74 L.Ed.2d 956 (1983)). The test in this circuit is well established:

When attorney's fees are similar to costs or collateral to an action, a lack of determination as to the amount does not preclude the issuance of a final, appealable judgment on the merits. When, however, the attorney's fees are an integral part of the merits of the case and the scope of relief, they cannot be characterized as costs or as collateral and their determination is a part of any final, appealable judgment.

Holmes, 682 F.2d at 1146 (citations omitted); see also Beckwith Mach. Co. v. Travelers Indem. Co., 815 F.2d 286, 288-89 (3rd Cir.1987) (collecting Fifth and Eleventh Circuit cases applying the Holmes test). ⁴ This test has evolved pursuant to the Supreme Court's directive that the inquiry should focus on whether or not the attorneys' fees are "compensation for the injury giving rise to an action" and whether the "award is uniquely separable from the cause of action...." White v. New Hampshire Dep't of Employment Sec., 455 U.S. 445, 452, 102 S.Ct. 1162, 1166, 71 L.Ed.2d 325 (1982); C.I.T. Corp., 743 F.2d at 775. ⁵

When the parties contractually provide for attorneys' fees, the award is an integral part of the merits of the case. See C.I.T. Corp., 743 F.2d at 775 (guaranty agreement); see also F.H. Krear & Co. v. Nineteen Named Trustees, 776 F.2d 1563, 1564 (2nd Cir.1985) (contract); Oxford Prod. Credit Ass'n v. Duckworth, 689 F.2d 587, 588-89 (5th Cir.1982) (promissory note). ⁶ In this case, the parties to both franchise agreements provided that the prevailing party would be entitled to costs and expenses. ⁷ Paragraph 21(h)(7) of the 1977 agreement provides: "The prevailing party in arbitration shall be awarded in addition to damages, injunctive relief, specific performance or other relief, any and all costs of investigation and proof of facts, arbitrators' fees, and other costs of arbitration, as applicable." Paragraph 20(b) of the 1981 agreement provides in part: "The prevailing party in the arbitration shall be awarded, in addition to any other relief granted, all of its costs and expenses of any such arbitration proceeding, including reasonable attorneys' fees."

Because the parties provided in their agreement for costs and expenses to be awarded to the prevailing party, the award is integral to the merits. The district court's order, therefore, did not become final and appealable until the court calculated the final award of costs and expenses to appellees as prevailing parties. This occurred on September 23, when the district court awarded appellees the $9,473.25 in confirmation costs. Because appellants appeal from that order, we treat the notice of appeal as amended and hold that the entire case is now properly before this court.

B.

Appellants argue that the district court committed reversible error by confirming the arbitrators' award. Appellants interpret the language of the 1977 agreement, which only awards to the prevailing party "any and all costs of investigation and proof of facts ... and other costs of arbitration," to preclude the award of attorneys' fees. ⁸ Thus they argue that the arbitrators were without authority to award attorneys' fees to appellees.

Appellants...