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August 23, 1990


The opinion of the court was delivered by: Wexler, District Judge.


David Raff ("plaintiff") initiated this action to recover fees with respect to his service as arbitrator in connection with a labor dispute. Defendant Maggio, as the employer involved with the arbitrated labor dispute, is liable for half the cost of the arbitrator's fees pursuant to a collective bargaining agreement. Currently before the Court are the parties' cross-motions for summary judgment. After a brief recitation of the facts, the Court will address the motions.


Defendant is the sole proprietor of a skilled nursing home facility in Patchogue, New York. He owns and operates the facility and is responsible for all management decisions. As operator of the home, defendant entered into a collective bargaining agreement with Local 1199 of the Drug Hospital and Health Care Employees Union ("Local 1199"), which agreement was in effect in 1987 and 1988. One clause of the agreement stated that unresolved grievances between the parties were to be arbitrated pursuant to the Voluntary Labor Arbitration Rules of the American Arbitration Association ("AAA Rules"). The agreement further stated that the arbitrator's award would be conclusive and binding, and that each party would equally bear the fees and expenses of the arbitrator.

Plaintiff herein was designated to sit as arbitrator for an unresolved grievance involving defendant's discharge of an employee. He presided over four hearings before issuing an opinion and award ordering the reinstatement of the employee. Each party was billed for half of plaintiff's $5,500 fees and costs. Local 1199 timely paid its portion, however, defendant withheld his share of the bill.

While plaintiff's demand for payment went unanswered, defendant appealed to this Court to vacate the arbitrator's award on the basis that it violated public policy. This Court confirmed the award. Maggio v. Local 1199, 702 F. Supp. 989 (E.D.N.Y. 1989). Several weeks after confirmation, plaintiff mailed a third request for payment to defendant's counsel at the time, who in turn forwarded the request to defendant along with instructions advising him to pay the fee. At that point, defendant informed plaintiff that he was considering further appeal of the matter and would continue to withhold payment. Following an appeal, the Second Circuit affirmed this Court's decision without opinion. Maggio v. Local 1199, 880 F.2d 1319 (2d Cir. 1989). Nevertheless, Maggio still refused to pay his share as he considered appealing the case to the Supreme Court.

On September 28, 1989, plaintiff filed the complaint in the case at bar seeking his arbitration fee in addition to interest and attorneys' fees. Only then did defendant attempt to settle the matter by offering payment of plaintiff's fee, plus interest and costs, but excluding attorneys' fees. This particular offer by defendant was made only after defendant's petition for a writ of certiorari in the previous matter was denied by the Supreme Court on October 30, 1989. Maggio v. Local 1199, ___ U.S. ___, 110 S.Ct. 329, 107 L.Ed.2d 319 (1989). Furthermore, defendant's offer was conditioned upon discontinuance with prejudice of the entire action, thereby precluding plaintiff from pursuing his claim for attorneys' fees.

Plaintiff rejected this offer and demanded that payment include attorneys' fees. Defendant's answer to the complaint, dated November 30, 1989, consented to entry of a judgment for plaintiff's arbitration fee plus interest and court costs, but again refused to pay attorneys' fees. Thus, the only issue remaining is whether or not plaintiff is entitled to attorneys' fees. It is to be noted that defendant's motion for dismissal of the instant case on the ground that this Court lacked subject matter jurisdiction was denied in a previous decision. Raff v. Maggio, 734 F. Supp. 592 (E.D.N.Y. 1990).


Pursuant to Rule 56 of the Federal Rules of Civil Procedure, a party is entitled to summary judgment when it is shown that "there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In addition, "[t]he burden falls on the moving party to establish that no relevant facts are in dispute." Donahue v. Windsor Locks Bd. of Fire Comm'rs, 834 F.2d 54, 57 (citations omitted). With these principles in mind, the Court turns to the case at bar.

A. Attorneys' Fees

The commonly referred to "American Rule" is that a prevailing party in litigation may not recover attorneys' fees from the losing party. Instead, each party must pay his own attorneys' fees. Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 247, 95 S.Ct. 1612, 1616, 44 L.Ed.2d 141 (1975). However, the Supreme Court has recognized the following three exceptions to this general rule: (1) cases in which a statute or enforceable contract provides for an award of attorneys' fees; (2) cases in which a prevailing plaintiff confers a common benefit upon a class or fund; and (3) where a party willfully disobeys a court order or "`when the losing party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons. . . .'" Id. at 257-60, 95 S.Ct. at 1621-23 (citations omitted).

Plaintiff's asserted ground for summary judgment with respect to attorney's fees is that defendant has acted in bad faith. Specifically, Raff alleges that Maggio's meritless and persistent refusal to pay the arbitration fee for over seventeen months, action which necessitated this lawsuit, justifies an award of attorneys' fees.

Defendant argues that his motion for summary judgment should be granted because Raff is not entitled to an award of attorneys' fees as a matter of law. Assuming, arguendo, that his motion is denied, Maggio asserts that plaintiff's motion should be denied because under the bad faith doctrine, the issue of bad ...

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