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Bowater, Inc., v. Zager: Arbitrators Do Not Have To Be Attorneys

Alabama's highest court has considered whether arbitrators are required to be licensed attorneys.

Bowater Incorporated ("Bowater") was the successor in interest to a long-term timber lease. A group who claimed to be the owners ("Owners") of the leased property brought a lawsuit against Bowater, claiming that the lease only entitled Bowater to access a portion of the Owners' land, not the entire parcel.

Pursuant to the lease, Bowater filed a motion seeking to compel arbitration and also an order staying the legal proceedings so that an arbitration could take place. The lease contained a procedure in which all disputes would be arbitrated by a three person panel composed of members of the Society of American Foresters ("Society") that the parties would designate. The trial court sent the dispute to arbitration, but also determined that the dispute must be arbitrated by licensed attorneys. The trial court based its decision on a prior case decided by the Supreme Court of the United States, in which the Court stated that an arbitrator was a "judge". The court stated that since "judges" must be licensed attorneys in Alabama, so too must the arbitrators be licensed attorneys. Bowater appealed the trial court's ruling.

The Supreme Court of Alabama reversed the trial court's determination that the arbitrators must be licensed attorneys. The court first looked at the Federal Arbitration Act. The federal law requires that whenever the parties have agreed to arbitrate a dispute, all lawsuits should be stayed until the arbitration process is completed "in accordance with the terms of the agreement". Another section of the federal law also states that the method for choosing arbitrators designated by the parties in their agreement to arbitrate "shall be followed". Similarly, Alabama law requires that courts follow the terms of an agreement to arbitrate. Thus, the court determined that the terms of the agreement should be followed by the trial court.

The next question was whether there was a requirement in the state that all arbitrators must have a license to practice law. If a license to practice law was required, that would obviously limit the court's ability to enforce the terms of the parties agreement to arbitrate, since few if any members of the Society are licensed attorneys. The court found that there was no such requirement in Alabama law. First, the court found that the quote from the Supreme Court case was taken out of context, as the Supreme Court has upheld arbitrations conducted by nonlawyers in later cases. Second, the court found that there was no requirement in the state that judges must have a law license. Indeed, the only requirements for serving as a probate judge are residency-related. Therefore, the court reversed the trial court's ruling that the arbitrators must be licensed attorneys.

The final argument raised by the Owners was that the chosen Society arbitrators would be engaged in the unauthorized practice of law if they did not have a law license. Alabama defines the practice of law as someone who "as a vocation…settles, adjusts or compromises…disputed accounts, claims or demands" between two different parties. The Owners argued that since the arbitrators were resolving disputes, they needed to have a law license. The court rejected this argument, finding that this definition only applied to those who pursued these activities as a "vocation". Since the members of the Society were not professional arbitrators, there was no requirement that they have a law license. Thus, the court rejected this argument as well.

Bowater, Inc., v. Zager, 901 So. 2d 658 (Ala. 2004).