Arbitration Insight No. 26



The question whether an arbitration award is final or appealable is answered by Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, Cable Connection, Inc. v. DIRECTV, Inc. (2008) 44 Cal.4th 1334 and Pearson Dental Supplies, Inc. v. Superior Court (2010) 48 Cal.4th 665. Moncharsh holds, “It is the general rule that, with narrow (statutory) exceptions (such as arbitrators exceeding their powers), an arbitrator’s decision cannot be reviewed for errors of fact or law.” (At p. 11.) Thus, “[a]rbitrators, unless specifically required to act in conformity with rules of law, may base their decision upon broad principles of justice and equity, and in doing so may expressly or impliedly reject a claim that a party might successfully have asserted in a judicial action.” (Id. at pp. 10-11.) Cable Connection provides that parties may expressly agree to obtain judicial review of an arbitration award. (At p. 1340.) Pearson Dental Supplies holds that an error of law by an arbitrator in a FEHA case can be reviewed by the trial court, where the employee was subject to a mandatory arbitration agreement. (At pp. 669-670.)

The waiver language by the parties in Cable Connection was “[t]he arbitrators shall not have the power to commit errors of law or legal reasoning, and the award may be vacated or corrected on appeal to a court of competent jurisdiction for any such error.” Harshad & Nasir Corp. v. Global Sign Systems, Inc. (2017) 14 Cal.App.5th 523 holds that arbitration waiver language to be binding need not be identical to the language in Cable Connection. (Harshad at p. 536.) The acceptable waiver wording in Harshad was “The arbitrator shall apply the substantive law of the State of California and the United States, if such law would apply if the matter were decided in court, in deciding the issues submitted to arbitration. The parties agree that the decision of the [a]rbitrator and the findings of fact and conclusions of law shall be reviewed on appeal to the trial court and thereafter to the appellate courts upon the same grounds and standards of review as if said decision and supporting findings of fact and conclusions of law were entered by a court with subject matter and present jurisdiction.”

The guiding principle for crafting effective waiver language to arbitration awards is that “the parties constrain the arbitrators’ authority by requiring a dispute to be decided according to the rule of law, and make plain their intention that the award is reviewable for legal error.” (Cable Connection at p. 1355; emphasis in the original.) Harshad’s above terms satisfied that standard.

Judge Michael D. Marcus (Ret.)
ADR Services, Inc.
1900 Avenue of the Stars, Suite 250
Los Angeles, California 90067
(310) 201-0010

Copyright Michael D. Marcus, September 2017

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