When the Arbitration Is Not Governed by the FAA: A Reminder About Procedure, Substance, and Fee Exposure

A recent Pennsylvania Superior Court decision offers an important reminder for lawyers and their clients: not every arbitration connected to a commercial dispute is administered under the Federal Arbitration Act or a state statutory arbitration scheme. Sometimes, the arbitration exists because the parties later agree to submit an already-pending case to a private arbitrator. When that happens, the procedural rules governing review of the award may look very different from what many litigants expect.

That distinction mattered in Murnick Property Group, LLC v. 910 MacDade Investors, LLC, a case arising out of a failed real estate transaction and a later fight over attorneys’ fees. The losing party tried to vacate an amended fee award of more than $463,000, arguing among other things that the underlying claims did not actually arise under the purchase agreement and that the arbitrator had not adequately addressed its objections. The Superior Court affirmed the trial court’s decision confirming the award.

The case is worth attention for two separate reasons. First, it highlights how a court may read a contract’s fee-shifting clause broadly enough to cover tort-based claims that are closely tied to the agreement, even when no formal breach of contract claim was pleaded. Second, and more subtly, it shows how much turns on the source of the arbitration itself. Here, the parties’ later agreement to arbitrate changed the procedural posture in a meaningful way. The arbitration was treated as common law arbitration, which sharply limited the available grounds for judicial review.

For attorneys handling business disputes, that is not a technical side note. It can determine whether a dissatisfied party has a realistic chance of undoing an award, especially a substantial fee award.

The dispute began as litigation, not arbitration

The underlying dispute came out of a proposed real estate deal involving property intended for a Wawa business center. Murnick alleged that 910 MacDade had misrepresented the status of certain parcels involved in the transaction. According to the opinion, the seller owned only five of the seven parcels, while the remaining two were subject to a ninety-nine-year lease with the Borough of Collingdale. Murnick terminated the purchase agreement during due diligence, its deposit was returned, but litigation followed anyway over alleged fraudulent misrepresentation and breach of the implied covenant of good faith and fair dealing.

That procedural history matters. This was not a case in which the parties began in arbitration under a preexisting arbitration clause contained in the purchase agreement. Instead, the matter was filed in court, litigated for some time, and only later diverted into arbitration when the parties executed a separate agreement to arbitrate in May 2023.

That later step changed the legal framework.

Why the FAA did not control the administration of this arbitration

Many lawyers instinctively think of the FAA whenever arbitration is involved, especially in commercial disputes. But that instinct can obscure an important threshold question: what is the source of the arbitration, and what law governs the arbitration process itself?

In this case, the Superior Court began its analysis by stating that the arbitration was a matter of common law arbitration because the parties agreed to submit the pending matter to binding arbitration through a later agreement to arbitrate. That classification carried major consequences. Under Pennsylvania law, common law arbitration awards are subject to an extremely limited form of review. A court may not vacate or modify such an award absent a clear showing that a party was denied a hearing, or that fraud, misconduct, corruption, or some other irregularity caused an unjust, inequitable, or unconscionable award.

That is a markedly different posture from the way lawyers often frame challenges under the FAA or a statutory arbitration act. The court emphasized that arbitrators in common law arbitration are the final judges of both law and fact, and that an award is not reversible merely because the arbitrator may have made a mistake.

That point should not be overlooked. The opinion is a reminder that there can be a real separation between the substantive rights at issue in the dispute and the procedural regime governing the arbitration and judicial review. Here, the substance of the parties’ dispute still implicated the purchase agreement and its fee provision. But the administration and review of the arbitration did not proceed under the FAA or Pennsylvania’s statutory arbitration provisions simply because the dispute had some connection to a contract or commercial transaction. Instead, the later agreement to arbitrate placed the matter into Pennsylvania’s common law arbitration framework.

For litigators, that means the path into arbitration matters almost as much as the claims themselves.

The fee clause still mattered, even though the claims sounded in tort

The losing party argued that there was no substantive basis for an attorneys’ fee award because the complaint did not plead breach of contract. Instead, it alleged fraudulent inducement and related misconduct. That is a familiar argument. Parties often contend that a contractual fee-shifting clause should not apply where the pleaded claims sound in tort rather than contract.

The Superior Court rejected that position.

The purchase agreement contained a prevailing-party provision allowing recovery of reasonable attorneys’ fees and costs in any controversy, claim, dispute, or proceeding between the parties “concerning” the agreement. The court focused on that wording. It reasoned that the complaint did not merely mention the purchase agreement in passing. Rather, the complaint expressly alleged that Murnick executed the purchase agreement in reliance on the alleged misrepresentations, and that it would not have entered the agreement but for those representations.

That was enough for the court. In its view, the case clearly concerned the purchase agreement even if the claims were framed as fraudulent inducement rather than breach of contract. The opinion described it as a stretch to argue otherwise.

This part of the decision carries a practical lesson of its own. Fee-shifting clauses using broad language such as “concerning,” “relating to,” or “arising out of or connected with” an agreement can reach more broadly than lawyers sometimes assume. A party may believe it has pleaded around the contract by styling claims as fraud, negligent misrepresentation, or some other business tort. But if the gravamen of the case is that the claimant entered the agreement because of alleged misstatements, the court may still view the dispute as one concerning the contract.

In other words, the absence of a breach-of-contract count does not necessarily insulate a party from fee exposure.

Procedure and substance were separated in an important way

This is where the case becomes especially interesting. On one hand, the purchase agreement remained central enough to provide the substantive basis for fee shifting. On the other hand, the arbitration’s procedure and the standard for judicial review were not drawn from the FAA or a statutory arbitration act.

That split is easy to miss, but it is critically important.

Lawyers often treat arbitration as a single package. They may assume that if a dispute involves a contract, then the arbitration clause, the governing law, the procedural framework, and the judicial review standards all move together. This case shows that they do not always move together.

Here, the contract supplied a fee provision that the arbitrator could apply. But the court looked to the later agreement to arbitrate when deciding what type of arbitration it was and what review standard applied. That meant the losing party faced a narrow and unforgiving path in court. It was not enough to argue that the arbitrator got the law wrong, failed to discuss every objection in detail, or reached the wrong number. Under common law arbitration review, those kinds of complaints generally do not get far.

That distinction is not just academic. It can shape litigation strategy from the moment the parties begin discussing whether to divert a pending case into arbitration.

The challenge to the amended award also failed

There was another wrinkle. The first fee award had been remanded because the trial court wanted more detailed findings and legal analysis. After remand, the arbitrator issued an amended decision and increased the award to $463,313.50. Murnick argued that the amended award still fell short because it did not specifically address every category of objection, including alleged vagueness, excessiveness, duplication, and unsuccessful work.

The Superior Court rejected that argument as well.

The court noted that the arbitrator had reviewed the submissions, applied the relevant law, and made reasoned conclusions about the hourly rates, hours expended, and overall reasonableness of the work in a fact-intensive and complicated case spanning years. The court also pointed out that the arbitrator had not rubber-stamped the request wholesale. Certain items were excluded as unreasonable, including some fees for a second lawyer at the arbitration and other items totaling roughly $40,000.

The appellate court was plainly unwilling to transform the remand order into a requirement that the arbitrator produce a line-by-line opinion responding to every challenge raised by the losing party. And once again, the limited review standard mattered. In common law arbitration, courts are not looking for perfection. They are looking for serious process defects such as fraud, corruption, denial of a hearing, or other irregularity leading to an unjust award.

That is a very high bar.

Why this case matters to business litigators and their clients

For attorneys advising clients in business disputes, this decision is a reminder to think carefully at two different levels.

First, examine the breadth of the contract language. A prevailing-party clause tied to disputes “concerning” an agreement can create meaningful fee risk even where the claimant tries to frame the case in tort. If the contract is central to the story of the case, a court may find that the fee clause applies.

Second, be precise about the arbitration vehicle. When parties stipulate midstream to private arbitration, they should not assume that the familiar FAA framework automatically governs every aspect of the proceeding. The source of the arbitration agreement, the wording of that agreement, and applicable state law may place the matter into a very different procedural box. That can dramatically narrow later judicial review.

From a client-management perspective, those distinctions should affect settlement analysis. A party considering arbitration after litigation has begun may view it as a quicker or more private alternative to trial. It may indeed be that. But counsel should also evaluate what rights of review are being surrendered and whether a fee-shifting clause could magnify the downside risk if the result goes badly.

This case is also a good reminder that once parties choose arbitration, they should do so with care. The arbitration agreement should be drafted with the same level of attention as the underlying contract. Questions about governing law, scope, procedure, reasoned awards, fee issues, and review should be addressed explicitly whenever possible rather than left for later argument.

A broader lesson for ADR planning

Cases like this also underscore the value of thoughtful dispute-resolution planning before the parties are in crisis. A well-drafted arbitration clause or post-dispute arbitration agreement can provide clarity on administration, governing rules, fee exposure, and the form of the award. A poorly considered one can leave parties fighting not only about the merits, but also about what procedural law applies and how limited the court’s role will be afterward.

That is one reason experienced neutrals can add value well before a final hearing occurs. In the right business dispute, early mediation or other ADR processes can help the parties assess risk before fee exposure escalates further. And when arbitration is the chosen path, careful attention to the governing framework can prevent expensive surprises later.

For counsel and clients facing demanding commercial disputes, the best outcomes often come from understanding not just the claims, but the architecture of the process itself. Nationwide ADR works with parties in business, tort, consumer, and employment matters to help bring that kind of clarity to arbitration and mediation alike. In complex cases, the right process design can matter almost as much as the merits.

This Pennsylvania decision is a strong example of that truth. The substantive dispute concerned the purchase agreement. The fee provision in that agreement carried real force. But the arbitration’s administration and review were governed by something else entirely. And in the end, that procedural nuance helped shape the outcome.