California Supreme Court Decision Expands Arbitrators’ Powers
June 9, 2008
California law has traditionally allowed superior court judges to vacate an arbitration ruling if the arbitrator has exceeded their “power” - a term that is, unfortunately, not nearly as broad in scope as it sounds. In fact, arbitrators’ awards and decisions are normally only at risk when they attempt to alter the terms or provisions of a disputed contract (unless said contract allows it), or if there is evidence of fraud or other gross misconduct (ie. bribe) during the proceeding. The superior court can not vacate an award merely because it disagrees with the arbitrator’s ruling or there is evidence of an error in the arbitrator’s decision.
On June 9th of this year the California Supreme Court reaffirmed arbitrators’ discretion in deciding cases and finding facts by ruling that, although arbitrators can not alter the terms of a contractual agreement between parties without universal consent, they can excuse technicalities in a contract if their enforcement would produce an unfair result.
The arbitrator in the case in question, Gueyffier v. Ann Summers, Ltd., 43 Cal. 4th 1179 (2008), decided that Gueyffier did not have to provide Ann Summers with 60 days notice to cure contractual breaches because doing so would have been an “idle act” as the breaches were not curable. See below for more information on the Supreme Court’s ruling.
The lesson here is to be completely clear and exhaustively instructive when ENTERING into a contract with another party – especially when an arbitration clause is inescapable. My strong advice to everyone is to go into every contract with your eyes open and always assume the worst. Remember that everyone is on their best behavior going into a deal, and although it’s hard to believe things could get ugly, you must assume they will. And remember this: If you don’t ask for something you want or need before the contract is signed, you’ll almost never get it afterwards.
Below is an excerpt from the California Supreme Court’s decision:
“On petition of a party to an arbitration (see §§ 1285, 1286.4), the superior
court is to vacate an arbitrator’s award if “[t]he arbitrators exceeded their powers
and the award cannot be corrected without affecting the merits of the decision
upon the controversy submitted.” (§ 1286.2, subd. (a)(4).) As we have explained
in prior cases, however, this provision does not supply the court with a broad
warrant to vacate awards the court disagrees with or believes are erroneous.
When parties contract to resolve their disputes by private arbitration, their
agreement ordinarily contemplates that the arbitrator will have the power to decide
any question of contract interpretation, historical fact or general law necessary, in
the arbitrator’s understanding of the case, to reach a decision. (Moshonov v.
Walsh, supra, 22 Cal.4th at pp. 775-777; Advanced Micro Devices, Inc. v. Intel
Corp., supra, 9 Cal.4th at pp. 372-375; Moncharsh v. Heily & Blase, supra, 3
Cal.4th at p. 28.) Inherent in that power is the possibility the arbitrator may err in
deciding some aspect of the case. Arbitrators do not ordinarily exceed their
contractually created powers simply by reaching an erroneous conclusion on a
contested issue of law or fact, and arbitral awards may not ordinarily be vacated
because of such error, for “ ‘[t]he arbitrator’s resolution of these issues is what the
parties bargained for in the arbitration agreement.’ ” (Moshonov v. Walsh, at pp.
775-776, quoting Moncharsh v. Heily & Blase, at p. 28.)
An exception to the general rule assigning broad powers to the arbitrators
arises when the parties have, in either the contract or an agreed submission to
arbitration, explicitly and unambiguously limited those powers. (Advanced Micro
Devices, Inc. v. Intel Corp., supra, 9 Cal.4th at pp. 375-376, 383.) “The powers of
an arbitrator derive from, and are limited by, the agreement to arbitrate.
[Citation.] Awards in excess of those powers may, under sections 1286.2 and
1286.6, be corrected or vacated by the court.” (Id. at p. 375.) The scope of an
arbitrator’s authority is not so broad as to include an award of remedies “expressly
forbidden by the arbitration agreement or submission.” (Id. at p. 381.)
Click here to read the entire decision.
Excellent Blog. I’ve been reading along and just wanted to say hi. I will be reading more of your posts in the future.
- Jason.
Most of these Judges are bias to one side or the other. Mine was bias to Kaiser from the moment she walked into the room. She allowed perjury to be told day after day and when it was proved beyonde the point she chould not ignore it. She lip glossed it an dgave me 15% of my costs with very wierd explainations. U’t like what part of perjury can’t you say and due to the nature of it,the subject was followed up the ladder and all the Care Providers commited it with the ecception of 1. Why is Purjury no a crime in Arbitration? How can the Apposing sit on my fraud fileing for three months which was done before ruleiing, and the apposing counsil lied to the civil judge during vacate proceedings stating that I just didn’t like the award. He never mentioned the fraud case he had literaly been sitting on for 4-5 months. Now I am being told the case filed in Alameda County needs to go to the adjuster then a nother Law Firm. When dose misleading a Judge not become a crime. I sate there in my wheelchair as he didn’t notice I was weeling up behind hime and he told the Judge I use the wheelchari that was paid for my Medicare was just a prop and I could walk. She would not evern read the STay or the Vacate documents outlineing the fraud tha the Arbitration was too connected to address. It is all one big expencive dog and pone show. I have no faith in the American Justice system anymore after a Civil Superior Judge and flip through a 5,000. carelully writen vacate and say “I’m not going to read this. Where is my Justice? Now they was to add little clauses to my getting the check. I don’t think they can. If anyone knows please share.