Industrial Steel Construction, Inc. v. Lunda Construction Co.

Lunda Construction Company (Lunda) (defendant) hired Industrial Steel Construction, Inc. (ISC) (plaintiff) to perform work on a bridge project. The parties’ contract stated that (1) any disputes regarding the contract would be submitted to private arbitration; (2) any procedural arbitration rules not specified in the contract would be filled in using the American Arbitration Association (AAA) Construction Industry Rules; (3) if ISC won a dispute, it could recover damages including its attorney’s fees and costs; and (4) if Lunda won a dispute, it could recover its damages. However, the contract did not specifically state whether Lunda’s recoverable damages included attorney’s fees and costs. A dispute arose regarding the quality of ISC’s work, and Lunda withheld payment. ISC sued Lunda in federal court. Pursuant to the contract, the court compelled the dispute to private arbitration. The private arbitrator determined that ISC’s work was defective and awarded Lunda approximately $85,000 to repair the work and the attorney’s fees Lunda had spent on the dispute. Lunda asked the federal district court to confirm the award. ISC objected that the contract did not specifically allow Lunda to recover attorney’s fees as an element of damages. Lunda argued that the contract did not prevent it from recovering attorney’s fees and that the gap-filling AAA rules allowed a prevailing party to recover its fees as part of the overall damages award. The district court confirmed the $85,000 repair award but refused to award Lunda its attorney’s fees, ruling that the arbitrator had lacked contractual authority to award the fees. Lunda appealed.