520 P.3d 902
Or. Ct. App.2022Background
- Floor Solutions employed Johnson as salesperson, later promoted him to president/CEO under a written employment agreement containing a broad arbitration clause covering disputes about the agreement and the employment relationship.
- Floor Solutions fired Johnson in June 2019 and alleged theft, misconduct, misappropriation, and fiduciary breaches; it sued in circuit court and sought a preliminary injunction (denied) and then agreed to arbitrate.
- A three-member arbitration panel, after a two-day hearing, issued a preliminary award in favor of Johnson, finding no breach and concluding Floor Solutions had wrongfully withheld wages; the panel denied Floor Solutions’ post-award motions and issued a final award.
- Floor Solutions petitioned the trial court to vacate the award under ORS 36.705(1)(d) on the ground that the arbitrators exceeded their powers (arguing a “manifest disregard of the law”).
- The trial court denied vacatur, confirmed the award, and entered judgments (including a supplemental judgment for future commissions); Floor Solutions appealed, arguing that ORS 36.705(1)(d) incorporates the federal “manifest disregard” standard.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether ORS 36.705(1)(d) incorporates a "manifest disregard of the law" standard as a basis to vacate an award | The RUAA’s (adopted by Oregon) commentary and federal practice support recognizing "manifest disregard" so arbitrators who ignored controlling law exceeded their powers | "Manifest disregard" is not a statutory ground in ORS 36.705(1)(d); courts must not insert it and review remains narrowly confined | Court held ORS 36.705(1)(d) does not include "manifest disregard"; Oregon declined to import that standard |
| Whether the arbitrators exceeded their powers in this case by deciding issues covered by the arbitration clause and allegedly misapplying law (breach/fiduciary duty and wage penalty calculations) | The panel manifestly disregarded law in finding no breach and in awarding penalty wages inconsistent with ORS 652.150 | Issues arbitrated were within the agreement’s scope; absent a statutory ground (or invocation of the narrow "grossly erroneous" exception), courts cannot vacate for legal errors | Court affirmed—because the issues were within the arbitration scope and "manifest disregard" is not a vacatur ground, the panel did not exceed its authority |
Key Cases Cited
- Nieto v. City of Talent, 295 Or App 625 (discussing narrow standard of judicial review for arbitrator awards)
- Couch Investments, LLC v. Peverieri, 359 Or 125 (parties’ agreement defines contours of arbitrable disputes)
- McKeown v. McKeown, 317 Or App 616 (same: agreements limit arbitrable issues)
- Seller v. Salem Womens Clinic, Inc., 154 Or App 522 (arbitration awards should not be disturbed for errors of law or fact)
- Brewer v. Allstate Insurance Co., 248 Or 558 (recognizes narrow exception when arbitrator’s errors "exceed powers" by being grossly erroneous)
- Elk Creek Management Co. v. Gilbert, 353 Or 565 (legislature’s adoption of a model act signals deliberate choices by drafters)
- 3000 Investment Corp. v. Teed, 313 Or App 619 (describing the "grossly erroneous" exception and its demanding standard)