Kelly Sutherlin Mcleod Architecture, Inc. v. Schneickert
125 Cal. Rptr. 3d 83
Cal. Ct. App.2011Background
- KSMA and Schneickert submitted their contract dispute to AAA arbitration after a contract clause required arbitration of related claims.
- Arbitrator issued an interim award finding defamation and ordered a retraction; later a March 30, 2009 supplemental award cited Advanced Micro Devices and AA Rules to support a broad equitable remedy.
- Final award, dated July 27, 2009, awarded KSMA monetary damages and ordered Schneickert to issue a published retraction letter.
- Superior court vacated the retraction order as a First Amendment violation, corrected the award, and confirmed the corrected award.
- Both sides appealed: Schneickert seeks vacatur of the entire award; KSMA seeks confirmation of the award as corrected.
- California Court of Appeal held the arbitrator was authorized to grant a retraction but exceeded powers by inserting certain language, including an apology, in the retraction letter; the court remanded with directions to reinstate the amended retraction and confirm the award as corrected.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did arbitrator exceed powers by ordering a compelled retraction? | KSMA argues the retraction falls within equitable relief under AAA rules and contract. | Schneickert contends the retraction violates First Amendment rights and public policy. | Arbitrator authorized to compel retraction but overstepped by adding improper language. |
| Does the retraction language infringe First Amendment rights or public policy? | KSMA contends compelled correction is permissible when statements are defamatory. | Schneickert asserts compelled apology/formatting violates free speech protections. | Yes, the apology and certain phrases exceed permissible scope; strike them while preserving correction. |
| Can the court amend the retraction letter without affecting the merits of the award? | KSMA argues amending the letter is within §1286.6 and does not affect merits. | Schneickert contends any amendment could affect the merits of the decision. | Amendment to strike language does not affect the merits; correct the retraction letter as described. |
| Was Schneickert prejudiced by the denial of production of evidence on damages? | KSMA contends the denial did not prejudice the outcome given arbitral finality. | Schneickert argues lack of monetary-loss evidence undermined damages. | No reversible prejudice; arbitral finality preserves the award. |
Key Cases Cited
- Moncharsh v. Heily & Blase, 3 Cal.4th 1 (Cal. 1992) (establishes limited judicial review of arbitration awards)
- Advanced Micro Devices, Inc. v. Intel Corp., 9 Cal.4th 362 (Cal. 1994) (arbitrators may grant equitable relief beyond traditional court remedies)
- Jordan v. Department of Motor Vehicles, 100 Cal.App.4th 431 (Cal. Ct. App. 2002) (public policy considerations in arbitration; distinguish from Jordan factuals)
- Pearson Dental Supplies, Inc. v. Superior Court, 48 Cal.4th 665 (Cal. 2010) (arbiter's authority to decide within scope; review limits)
- Greenspan v. LADT, LLC, 185 Cal.App.4th 1413 (Cal. App. 2010) (scope of arbitrator's authority; submissions govern powers)
- Balboa Island Village Inn, Inc. v. Lemen, 40 Cal.4th 1141 (Cal. 2007) (limits on free speech in defamation context; correction allowed)
- Peregrine Myanmar Ltd. v. Segal, 89 F.3d 41 (2d Cir. 1996) (retraction orders in defamation matters; close link to remedy)
- Sunnyvale Unified School Dist. v. Jacobs, 171 Cal.App.4th 168 (Cal. Ct. App. 2009) (partial vacation of award; relevance to corrections)