Arizona Court of Appeals Division One holds that A.R.S. § 12-3025 authorizes recovery of non-taxable expenses and not just taxable costs.

RS Industries and the Candrians agreed to arbitrate their disputes relating to a stock swap.  After finding for the Candrians, the arbitrator awarded them over $1 million in attorneys’ fees and over $211,000 in expenses.  RS Industries moved the superior court to vacate the award and the Candrians moved to affirm.  The superior court denied RS’s motion and awarded the Candrians another $55,000 in fees and taxable costs incurred in the proceeding pursuant to A.R.S. § 12-3025.

RS Industries appealed, arguing that both the arbitrator and superior court erred in awarding fees and costs. The Court of Appeals disagreed.  With regard to the arbitrator’s award, the Court noted that it could only overturn the award if the arbitrator exceeded his powers in granting it.  Observing that RS’s fundamental contentions were that the arbitrator ruled incorrectly and not that the arbitrator lacked authority to rule under the arbitration agreement and applicable law, the Court affirmed. 

The Court likewise affirmed the superior court’s confirmation of the award.  RS did not dispute that the superior court had authority to award the Candrians attorneys’ fees and costs for their successful confirmation of the arbitration award pursuant to A.R.S. § 12-3025 but argued that the fee award was unreasonable and that the superior court improperly reimbursed the Candrians for non-taxable expenses, as opposed to just taxable costs.  

Reviewing for abuse of discretion, the Court concluded the fee award was reasonable.  Further, the Court disagreed that the superior court erred by awarding non-taxable expenses rather than solely taxable costs.  Unlike other fee statutes which permit recovery of only “taxable” costs, the Court observed that § 12-3025 contemplates recovery of the “reasonable expenses of litigation.”  Given the statute’s broader language and underlying policy of encouraging finality of arbitration awards, the Court held that § 12-3025 authorizes recovery of non-taxable expenses and not just taxable costs.

Presiding Judge Johnsen authored the opinion; Judges Orozco and Jones joined.