*1 July S020997. [No. 1992.] MONCHARSH,
PHILIP I. Plaintiff and Appellant, al., & HEILY BLASE et Defendants and Respondents.
Counsel Moncharsh, I. Philip Townsend, in pro. per., Townsend & Paul W. Vapnek and Mark L. Pettinari for Plaintiff and Appellant. Blase,
DeWitt F. in pro. & per., Blase and R. Heily John Johnson for Defendants and Respondents.
Opinion decide, alia, the LUCAS, in this case to inter C. J. review granted We decision for errors of extent to which a trial court review an arbitrator’s below, decision is For the discussed we conclude an arbitrator’s law. reasons law, such error for errors of fact or whether or not reviewable generally to the injustice on the face of the award and causes substantial appears rule, are, however, which we general There limited to this parties. exceptions also discuss below.
Facts Moncharsh, hired On June an appellant Philip attorney, Blase, an & a law firm. As a condition of as respondent Heily employment firm, associate Moncharsh attorney signed agreement containing number of his One governing employment. various provisions aspects Employee- (hereafter X-C) “X referred to as stated: C. provision paragraph attorney cause, induce, entice, not to do agrees anything encourage, recommend, any mention or otherwise cause or contribute to suggest, Firm, Firm’s clients with and/or terminating attorney-client relationship Employee-attorney any or or Firm substituting retaining associating other firm their In the event that client Firm attorney legal any as counsel. should terminate the with and substitute Firm attorney-client relationship Employee-attorney Employee- firm or another or law attorney who[m] attorney attor- suggested, recommended or directed as client’s successor then, in ney, addition to costs which client owes to the time of Firm any up Employee-attorney substitution, such as to all fees which may actually receive from client or that client’s succcessor such attorney Employee- cases, (80%) receive will of said fee and Blase eighty percent attorney will receive of said fee.” (20%) twenty percent
Moncharsh terminated his with & Blase on employment February Heily Blase, Blase, 1988. DeWitt the senior & contacted 25 or partner Heily clients, 30 of Moncharsh’s agreements noted that had retainer they signed firm, with his and that he their Five explained handling would now be cases. clients, whose representation Moncharsh his association with predated Blase, & A Heily chose to have Moncharsh continue them. sixth to represent client, retained Ringhof, Moncharsh less than two weeks before he left the firm. Moncharsh continued to all six he left the represent clients after firm.
When Blase learned Moncharsh had received at the fees conclusion of cases, these six he a sought meruit share of the fees as well as a quantum percentage fees to X-C of the pursuant paragraph employment agree- ment. rejected Blase Moncharsh’s offer to the matter for a only settle invoked the arbitration meruit share fees. The then quantum an and the matter to agreement1 clause of the submitted employment arbitrator. matter submitted days testimony2
The arbitrator heard two and the was brief, (1) In & argued Heily on the briefs and his Moncharsh Blase exhibits. fees, (2) and was entitled to meruit share of the Moncharsh only quantum had oral to agreement differently brought Blase treat cases Moncharsh Blase, (3) with him & terminated Heily employment had agreement (4) and was therefore one and agreement of adhesion inapplicable, unenforceable, (5) therefore X-C because it and is unenforceable paragraph Bar, violates public policy, the Rules of Professional Conduct of the State and it (1972) because is inconsistent with Fracasse Brent Cal.3d 9], (1988) Cal.Rptr. Champion Superior 494 P.2d Court 624], brief,
In its (1) & Blase contended X-C Heily is clear and paragraph unconscionable, unequivocal, is not reasonable represented a to avoid attempt litigation was thus akin liquidated damages addition, provision. “To extent it becomes to the Arbitrator’s important decision,” &Heily alleged Blase that Moncharsh solicited the clients six him, remain with and further suggested Moncharsh retained those six because it was probable that financial settlements would soon be forthcom- ing all six matters. & Heily Blase contrasted these six with matters firm, other cases Moncharsh left with the all of which required a allegedly significant amount of additional work. legal favor,
The arbitrator ruled in &Heily Blase’s concluding oral side agreement between Moncharsh and Blase was never documented and that Further, Moncharsh was thus bound written agreement. employee that, arbitrator ruled “except for client Ringhof, [paragraph X-C] unconscionable, and it does not violate the rules of conduct. At professional the time Mr. Moncharsh contract, agreed to he was a employment mature, experienced with attorney, employable skills. Had he not been willing termination, to the agree (80/20) eighty/twenty he split could document, have simply refused to different, sign negotiated something if unsuccessful, negotiations were his choice leave was to his employment. 1The provided: arbitration clause “Any dispute arising Agreement out this shall be *7 subject to arbitration under the rules of the American Arbitration Association. No arbitrator alter, amend, shall have any power to modify change or any agreement. terms of this Employee-attorney.” The decision of arbitrator shall be binding final and on Firm None of the rules of the American Arbitration Association have bearing on issues raised in this case. hearing 2The before the arbitrator was not reported.
The Arbitrator excludes the client from the Ringhof eighty/ (80/20) because that client was at the of Mr. twenty twilight obtained split Heily with and an relationship eighty/twenty Blase, Moncharsh’s & (80/20) with to that client would be unconscionable.” split respect modify Moncharsh court to vacate and the arbitra- petitioned superior Proc., 1286.2; (Code statutory tion award. Civ. all references subsequent stated.) are this & code unless otherwise Blase Heily responded by that, (§ the court to confirm the award. The court ruled petitioning “The arbitrator’s law findings of both and fact are conclusive. questions A court cannot set aside an law matter egre- arbitrator’s error of no how rule, however, The court “where gious.” allowed to this exception error, error on the face of the award.” no such the trial court appears Finding denied Moncharsh’s to vacate and & Blase’s petition granted Heily petition to confirm the arbitrator’s award. rule,
On Court of also announced appeal, Appeal recognized cases, previous generally prohibiting review of the merits of the arbitrator’s noted, however, award. It that an exists when “an error of law exception on the face of the and then if appears ruling the error would result only substantial injustice.” Moncharsh claimed X-C Although violated paragraph law, Conduct, and the public policy, State Bar Rules of Professional and affirmed the appellate disagreed trial court judgment.
We review and granted directed the parties to address the limited issue of whether, conditions, and under what a trial court review an arbitrator’s decision.
Discussion 1. The General Finality Rule Arbitral in this case submitted their to an arbitrator pursuant
their written agreement. This case thus involves or private, nonjudicial, Womancare, 396, (See arbitration. Blanton v. (1985) Inc. 38 Cal.3d 401-402 & fn. 5 696 P.2d Cal.Rptr. [discussing 48 A.L.R.4th 109] differences between judicial arbitration].) nonjudicial cases arbitration, involving private of arbitration ... scope a matter of “[t]he Arbuthnot, agreement (Ericksen, between the parties” McCarthy, Kearney & Walsh, Inc. v. 100 Oak Street 35 Cal.3d “ 673 P.2d Ericksen]), and of an are powers 251] [hereafter arbitrator ‘[t]he ” limited and circumscribed the agreement stipulation of submission.’ (O’Malley v. Petroleum Maintenance Co. 48 Cal.2d 110 [308
9 v. Bookbinders’ O’Malley], Pac. Fire etc. Bureau P.2d quoting 9] [hereafter 111, 694].) (1952) 114 P.2d Cal.App.2d Union 115 [251 Procedure, and periodically as enacted Title 9 of Code of Civil scheme Legislature, statutory amended a represents comprehensive (§ this Through arbitration in state. 1280 et regulating private seq.) this scheme, “strong public detailed has a statutory Legislature expressed in favor arbitration as a means of policy relatively inexpensive speedy 322; (Ericksen, Madden supra, 35 Cal.3d at v. Kaiser dispute p. resolution.” 699, 882, (1976) 552 Hospitals Cal.Rptr. Foundation 17 Cal.3d 706-707 [131 734, 1178]; (1985) P.2d Superior Victoria v. 40 Cal.3d 750 Court [222 1, Lucas, J.]; P.2d v. Cal.Rptr. City 710 Oakland United opn. 833] [dis. 356, (1986) 523]; Public Employees Cal.Rptr. 179 363 see Cal.App.3d [224 220, (1987) also Express Shearson/American Inc. v. McMahon 482 U.S. 226 185, 193, Act, L.Ed.2d [96 S.Ct. Arbitration 9 U.S.C. [Federal 2332] § et arbitration].) federal seq., establishes in favor of policy Consequently, “ ” courts ‘indulge will every give intendment effect to such proceedings.’ (Doers 180, Bridge (1979) v. Golden Gate etc. Dist. 23 Cal.3d 189 [151 1261], 588 P.2d Cal.Rptr. Inv. Co. v. Townsend quoting Pacific Indeed, 489].) years ago more than 70 this “The explained: law policy arbitration recognizing agree ments and in their providing by statute for enforcement to encourage persons who to avoid wish incident to a civil to obtain delays action adjustment of their (Utah differences a tribunal of their choosing.” own Const. Co. v. Western Pac. Ry. Co. Cal. P. 631] Const.].) Utah [hereafter those who enter “Typically, into arbitration agree ments that their expect will resolved be without for necessity Womancare,Inc., contact with (Blanton the courts.” at fn. p. The arbitration clause included in the employment this agreement case specifically states that the arbitrator’s decision would be both binding final. The to this parties action clearly thus intended the arbitrator’s decision would be intent, final. Even had been there no such expression however, general it is the rule that ato private arbitration impliedly agree that the Indeed, arbitrator’s decision bewill both final.3 binding and “The very essence of the term ‘arbitration’ this connotes [in context] Womancare, Inc., (Blanton binding award.” 38 Cal.3d citing Domke (rev. on Commercial 1984) Arbitration ed. [hereafter 3We assume for this general discussion principles that an enforceable arbitration agreement exists. do not We address here legal the situation where one advances party theory that would the parties’ voluntary agreement vitiate (See to arbitration. submit 1281.2 “[g]rounds will order [court if exist revocation agreement”].)
10
state,
that,
Domke].) “When
of this
this court
early years
opined
arbitrator,
are
to leave their
to an
parties agree
dispute
they
presumed
(Montifiori
know that his
will
final
. .
be
and conclusive .
431,
(1853)
434.)
in the
Engels
3 Cal.
One commentator
“Even
explains,
absence of an
is
the essence of
explicit agreement, conclusiveness
expected;
the arbitration
is
shall
to rest.”
that an arbitral award
process
put
(Comment,
Continuing Prob
Judicial
to Arbitral Determinations:
Deference
(1976)
Finality
lems
Power and
23 UCLA L.Rev. 948-949 [hereafter
that,
Deference].) It
“The
Judicial
has thus been observed
parties [to
can take a measure of
that the arbitrator’s
knowing
comfort
arbitration]
(Oehmke,
award will almost
mean an end to the
Com
certainly
dispute.”
6:10,
(1987)
Oehmke].)
mercial Arbitration
140
[hereafter
This
informs the
choice of an
expectation
finality strongly
parties’
arbitral forum over a
one. The arbitrator’s decision should be the
judicial
end,
Feldman,
(See
not the
of the
Modern
beginning,
dispute.
Arbitration
413, 414,
(1961)
New
Arbitration Act
34 So.Cal.L.Rev.
ized—The
California
11.)
fn.
Expanding
availability
judicial
review of such decisions
“would tend to
to the arbitration
of the
deprive
parties
agreement
very
Court,
(Victoria
Superior
is intended to
advantages
process
produce.”
Lucas, J.];
supra,
Ensuring arbitral thus finality requires judicial intervention be process (City Employ- minimized. Oakland v. United Public ees, 363; (1979) 179 Cal.App.3d Lindholm v. Galvin 443, 167].) 450-451 Cal.Rptr. Because decision to [157 arbitrate grievances evinces the intent to parties’ judicial bypass system levels, and thus avoid potential delays at trial and arbitral appellate is a core finality component parties’ agreement to submit to arbitra- Thus, tion. an arbitration decision is final and conclusive because the parties have agreed that it be so. By ensuring that an arbitrator’s decision final and courts binding, assure that the simply receive the benefit of their bargain.4
Moreover, “[arbitrators, unless to act con specifically required law, with rules of formity base their decision broad upon principles justice and in equity, so doing may expressly a claim impliedly reject that, 4Professor suggests Feldman “Psychologically economically, parties having decider, would, whole, award, selected they their own on the be satisfied with his as the best Arbitration Law in California: (Feldman, which could be had under the circumstances.” Private Tribunals Private Government (1957) [discussing 30 So.Cal.L.Rev. law].) arbitration scheme under the 1927 (Sapp v. action.” have asserted successfully might that a party 233]; Morris v. see also P.2d (1949) 34 Cal.2d [212 Barenfeld 1000]; 446 P.2d Cal.2d Zuckerman Grunwald-Marx, P.2d Board 52 Cal.2d Inc. v. L.A.Joint *10 that, 1852, “The are not arbitrators 23].) court recognized As as this early law, decide on may principles but dry to award on principles bound conscience, et bono aequo make their award ex [accord and and good equity 74, 77.) 2 “As (1852) Cal. (Muldrow v. Norris to what is ing just good].” re immune from judicial awards are generally consequence, that arise may controversies view. ‘Parties who an stipulate agreement arbitration, to only reap it shall be settled by may expect out of nontechnical, summary procedure, that flow from the use of that advantages neither by paths also find themselves bound an award reached by but to (Case Alperson to review.’ subject judicial marked nor traceable and not 757, Foundation .)” . v. Kaiser (1960) (Nogueiro 181 759. . Cal.App.2d 1192, 478].) (1988) Hospitals Cal.Rptr. 203 1195 Cal.App.3d [250 Thus, that the parties both because it vindicates the intentions final, to ordinarily award be and because an arbitrator is not constrained that, law, “The decide it rule merits of according general to the rule of is review.” controversy subject between the are not parties 111; Diego San Col. (O’Malley, supra, 48 Cal.2d at Co. v. p. Griffith 501, 476, 1349]; (1955) Women 45 A.L.R.2d Cal.2d 510 P.2d 47 [289 Pacific 228, Vegetable Corp. (1946) Oil 233 P.2d v. C.S.T.Ltd. 29 Cal.2d 441] [174 review the Vegetable].) More courts will not specifically, [hereafter Pacific (Grunwald-Marx, of the arbitrator’s Inc. v. L.A. Joint validity reasoning. Board, 589; 52 Nogueiro Hospitals, Cal.2d at v. Kaiser Foundation p. 1195; supra, 203 at v. Anaheim Memorial Cal.App.3d Ray Wilson Co. p. 62]; Hospital Assn. Amer Cal.App.3d Cal.Rptr. 1091 [213 ican & Major League Players Nat. etc. Baseball Clubs v. Baseball Assn. (1976) 59 Baseball Cal.App.3d Cal.Rptr. 626] [hereafter Further, Players].) a court not review the of the evidence sufficiency Zuckerman, (Morris an at supporting arbitrator’s award. 69 Cal.2d 691; 238; Vegetable, supra, Nogueiro 29 Cal.2d at v. Kaiser Pacific 1195; Hospitals, supra, Foundation see Cal.App.3d generally, Award, (rev.) 133-134.) Cal.Jur.3d Arbitration and Thus, that, it is the rule general with narrow arbitrator’s exceptions, decision cannot be reviewed In reaffirming for errors of fact or law. this rule, we there is a risk that the arbitrator will make a general recognize risk, however, First, mistake. That for two reasons. volun- acceptable by arbitration, tarily have that risk submitting parties agreed bear return for a quick, inexpensive, conclusive resolution their dispute. America, Inc.
(See Way That Production Co. v. Directors Guild Way].) That As one 475] [hereafter take knowingly commentator “the to an arbitral explains, agreement the arbitrators and that this is by the risks of error of fact or law committed decisions by experts ‘trade-off’ order to obtain worthy speedy will be as reasoning accepted field whose practical experience worldly Proceedings Arbitral correct other Judicial Review experts.” (Sweeney, words, 254.) “In it is within the (1981-1982) 5 Fordham Int’l L.J. other When of the arbitrator to make a mistake either power legally factually. for the forum of arbitration to be bound parties opt they agree arbitrators, that forum like are fallible.” knowing judges, decision of (That Way,supra, p.at *11 Women, Diego Co. v. San 45 Cal.2d is Col. Griffith for case, In
illustrative. the contracted to build certain for plaintiff buildings the the defendant When work arose and college. delayed, was matter was submitted to When a arbitration ruled panel arbitration. split favor, the vacate the defendant’s moved the court to plaintiff superior award, alia, inter “the is harsh and claiming, arbitrary, inequi- decision table; law; that it is and that it not coextensive with the issues contrary contentions, (Id. stating, submitted.” “ This court these rejected The ‘Even if the arbitrator decided he did decide it. incorrectly, point [the] issue was admitted or have properly Right wrong parties before him. most, contracted that such a At it is an error decision should be conclusive. ” law, 515-516, (Id. by not reviewable the courts.’ at pp. quoting Crofoot 156, 189, Holdings Corp. (1953) P.2d Blair 119 Cal.App.2d 156] Grunwald-Marx, on other Inc. disapproved grounds, Posner [Crofoot (14 313)].) 56 Cal.2d 363 P.2d A second reason we tolerate the risk of an erroneous decision is why the Legislature because has reduced the risk to the of such a decision review in by providing involving circumstances serious problems itself, with the award or with the fairness of the arbitration As stated process. ante, title the Code of private governed by are 9 of proceedings Procedure, Civil the grounds sections 1280-1294.2. Section 1286.2 sets forth for vacation of an arbitrator’s It court pertinent part: award. states “[T]he (a) if The shall vacate award the court determines that: award [][] means; (b) There was procured by corruption, fraud or other undue fit] arbitrators; (c) The of such were corruption rights party [][] arbitrator; (d) The substantially misconduct of a neutral prejudiced by [][] arbitrators exceeded their and the cannot be corrected without powers submitted; (e) the merits of the decision or affecting controversy upon [f] The rights of such were the refusal of party substantially prejudiced by there- shown being cause sufficient hearing upon arbitrators to postpone material to evidence to hear the arbitrators the refiisal of for or contrary provisions conduct of the arbitrators or other controversy title.” of this of an arbitra- addition, for correction grounds section 1286.6 provides court, unless it in pertinent part: “[T]he That section states
tion award. 1286.2, the award correct shall to Section pursuant vacates the award (a) There was an that: if the determines [ft] it as corrected confirm in the description mistake or an evident figures evident miscalculation award; (b) The arbitrators referred to thing [ft] or any person, property affecting corrected without their the award be exceeded but powers submitted; (c) award is the controversy [ft] merits of the decision upon form, controversy.” the merits of the in matter not affecting imperfect of certain reduced the possibility has thus Legislature substantially 1286.2, (a), (§ subds. itself infecting forms of error arbitration process her arbitral (b), powers of his or (c)), exceeding scope of an arbitrator 1286.6, 1286.2, cor- (§§ (d), (b)), easily subd. of some obvious subd. 1286.6, (§ (a)), being of one party mistake in the award subd. rectable his or her side of *12 of a fair to unfairly opportunity present deprived 1286.2, with the (§ (e)), technical problem subd. or of some other dispute 1286.6, (c)). In (§ statutory provisions, subd. of these light represents risk of an erroneous decision residual to arbitrator’s parties that the savings and financial cost—obtaining acceptable expedience the judicial process. process provides—as compared decision is not Although it is thus the rule that an arbitrator’s general courts, Mon- reviewable for error either the trial or ordinarily appellate First, his case. charsh contends three to the rule exceptions general apply he if law is claims a court review an decision an error of may arbitrator’s injustice. face of the award and that error causes substantial apparent Second, 1286.2, (d).) (§ he claims the exceeded subd. arbitrator his powers. Third, he that are argues illegal courts will not enforce arbitration decisions or We each public violate discuss seriatim. policy. point
2. Error on the Face the Arbitration Decision A review of the pertinent shortage proclamations authorities no yields (i) that a court vacate an arbitrator’s when an error of law decision decision, (ii) on the face causes substantial and the error appears (See, Abbott v. Auto. Assn. injustice. e.g., State California Indeed, 580].) some cases hold the error Cal.App.3d Cal.Rptr. award, mention of resulting with no
need on the face of the only appear Plaza, (See, Cal.App.3d Park Ltd. v. e.g., injustice. Pietz noted, however, has 51].) Legislature As previously 1286.2) (§ 1286.6) of an (§ and for vacation correction grounds set forth grounds.” error of law is one arbitration award “[a]n at Hospitals, supra, Kaiser Foundation (Nogueiro exception that an additional cited.) Because Moncharsh contends and cases law and authorized both common rule for errors of law is general statute, continuing well as its next determine the of that notion as genesis we validity. Early
a. The Common Law Rule Norris, Muldrow], with Cal. 74 We Muldrow v. begin [hereafter this state. enactment arbitration statutes case before the arising Muldrow, to submit they agreed arose between arbitrators, final and whose decision “should be matter to a of three panel Norris, the (Ibid.) losing a decision and conclusive.” arbitrators reached favor, we ruled his quote to vacate the award. This court party, sought rule of contradictory it opinion length exemplifies because those early days: review that has been modified form since repeated examine, is, of the Court “The we as to the point propose power first well settled principle below to into the award now before us. It is a inquire statutes, will set aside awards courts of absence equity, fraud, accident, mistake, the mistake and it makes no difference whether submission, true, arbitrators have general be one of fact or law. It is under a law cannot be to decide the law and facts: and a mere mistake of upon power taken of. The arbitrators are not bound to award on advantage principles *13 conscience, law, and decide on and dry may equity good but of principles If, however, to decide aequo make their award ex et bono. mean they law, law, the will set their award to the and mistake the courts according general aside. A distinction to have been taken the books between seems In well and awards. the case of a it to be special general finding, appears aliunde', settled that courts will not into mistakes evidence but inquire by by where the arbitrators have made a matter of any point judicial inquiry record, it mistake the law a spreading upon they palpable The mere act material their award will be set aside. point, [Citation.] forth their must be setting purpose enabling reasons considered for In those to take all cases where advantage dissatisfied of them. [Citation.] the arbitrators the reasons of their are to have give finding, they supposed law, intended to decide refer the for the according opinion to to point aside; cases, law, In if the Court. such mistake the the award must be set they made having same been intended to give, the opinion they for it is not cited, ‘these says, the Court In the case already mistake. through [Citation.] commended, decide may often as arbitrators awards are not to be special for their reasons good and not give between equity parties, with perfect Court, decision; it must stand before the when a award is once special but correctness, legal tested by principles.’ [Citations.]” its own intrinsic by fall 77-78.) (2 Cal. at us, have “In the before the arbitrators
The Muldrow court concluded: case it their was based: and finding which grounds upon set forth particular cited, that the correctness of the already princi- follows from the authorities have been is governed proper which must be to ples by they supposed (2 78.) Cal. at subject judicial inquiry.” p. that, law, Muldrow, an at common
Although acknowledged thus decision, mere and that “a arbitrator need not follow the law at a arriving (2 77), law taken of’ Cal. at advantage p. opinion mistake of cannot be may and held an arbitrator statement that an award reached qualified nevertheless be reversed if the . . the record” and upon error . “spread[] (Ibid.) the mistake is Muldrow also stated and material “palpable point.” decision, that when an arbitrator his the award was gives reasons support its subject judicial oversight, full-blown and “must stand and fall own correctness, 78.)5 (Id. intrinsic tested at by legal p. principles." term, Tyson Later that same this court addressed the issue. again (1852) 2 Wells Cal. their agreed to submit commercial referee, to a dispute losing whose decision was to be final. When party challenged the referee’s accorded a ruling, finality this court concluded referee’s statute report pursuant ruling was the same as for arbitrator’s (Id. 130.) at common law. that an any suggestion This time avoiding review, arbitrator’s was we “it subject decision stated: unqualified judicial rule, be as the settled that the will the award regarded Court not disturb of, of an arbitrator. . . it unless error which is whether be of complained awards, Muldmw, 5By ensuring some measure of control over arbitral typical of courts early exhibiting suspicion private from that era in arbitration as a means Thus, resolution. for example, courts had held that a common law submission to Academy Sciences (See arbitration was revocable at prior time to the award. California Cal.Jur., Fletcher 855]; Cal. P. Arbitration and Award 209 [33 *14 addition, unenforceable, early agreements In courts held disputes to arbitrate future were both (Blodgett Co. v. Bebe Co. (1923) at common law and under early statutes. 665 Cal. 190 38, 1070]; Feldman, P. Arbitration Law in Private Tribunals 26 A.L.R. California: Government, Private 382.) 30 p. So.Cal.L.Rev. at Even under the initial arbitration statutes, agreement courts held invalid an that the arbitrator’s decision was final and that no (Kreiss 617, appeal 740]; could v. Hotaling In (1892) be taken therefrom. Cal. 621 P. 96 610, Hendy re Joshua Machine (1908) Works 1110].) Cal.App. P. 9 611 [99 (Id. 131.) fact, Although the award.” at p. on the face of law or appears Muldrow, there was no Cal. following to be purported court (Id. at point.” and material must be on a “palpable that the error qualification later, Headley In v. Reed again. we addressed the issue Six months reference, wrote, “According to we case involving Cal. another on [Muldrow], referee can be set aside only in the decision of the rule settled (Id. on its apparent fraud error law or gross account of or face.” fact into a new factor added.) Headley injected court thus italics assertion that did not Muldrow's test—gross repeat Muldrow error—but review. judicial to full-blown subject arbitrator’s decision was cases—Muldrow, Headley—involved arbitration Tyson, These three early reference, arbitration) to (or functionally equivalent which was considered them, the rule beginnings we can perceive at common law. From if on the appeared error ruling review of an arbitrator’s permitting face of the award. Statutory Law Development
b. The before decided, the Legislature cases were Around the time the aforementioned the rules governing Act of and established enacted the Civil Practice act, Legislature specified of that arbitration. section 386 statutory Court, “The award. which a could vacate an arbitrator’s grounds on motion, . . : . following grounds vacate the award either of upon 2d. That the or fraud: corruption 1st. That it was procured by H] H] misconduct, in refusing, error committed gross arbitrators were or guilty shown, to hear refusing pertinent or hearing, on cause postpone evidence, rights in a manner which or otherwise acted improperly, their exceeded were That the arbitrators party prejudiced: [f] [3d.] omitted, award; refused, improperly their or that or making they powers them; that the award is consider a of the matters submitted part Sess., X, IV, indefinite, tit. ch. (Stats. Second performed.” or cannot be 112-113, Act.) Practice Signif- hereafter section 386 of the Civil if review there there was no provision permitting judicial icantly, express a court permitted was a error on the face of the award. Nor was gross correctness,” as [legal] if it lacked “intrinsic vacate an award it concluded Muldrow, 77-78. supra, Cal. at suggested pages Peachy the Civil Practice Act This court first considered section 386 of case, In that (hereafter Peachy). losing et al. v. Ritchie Cal. 205 award, other among claiming to an arbitration moved to vacate party *15 evidence,” and “the to hear pertinent refused that “the arbitrators things 206.) court “refused The trial (Id. at p. exceeded their powers.” arbitrators 207.) the (Id. Although at p. grounds. the motion” on procedural entertain fall within seemed to to vacate in of the motion support asserted grounds vacation, examine refused to this court statutory grounds then-existing below, to vacate grounds the asserted finding the decision of insufficient, re-affirmance of is but a Our Statute “wholly [ft] have law, they might than rights no higher common gives mistake, The accident. fraud or in case of of equity asserted a court Statute, misconduct, improper apply was intended by contemplated fact, contra-distinguished as juror, a witness or such as that of conduct fully was of Arbitration The whole doctrine mere error of judgment, from [ft] Norris, in which 2 Cal. in the case of Muldrow reviewed this Court by arbitrators, and finding not disturb the general we decided that we would mentioned.” in the cases there set aside except that an award could be in original.) (Peachy, supra, punctuation capitalization Cal. at p. First, it failed to reasons. Peachy The for two opinion noteworthy Thus, raised although appellant the terms of the statute. strictly construe 386 of were under section permitted for review that grounds apparently failed to hear (i.e., pertinent Act claims that the arbitrator Civil Practice declined to invoke those exceeded the court evidence and his powers), Instead, merely the new statute it concluded that statutory provisions. no granted disputants law and that the statute affirmation of common The court its enactment. than would have had before greater rights they on the asserted to attack an award litigant concluded permitting differences. adjusting private would this mode of statutory grounds destroy (Peachy, supra, 207.) Cal.
Second, review of arbitration Peachy reaffirmed the availability judicial Muldrow, mentioning awards limited in Cal. expressly as fraud, Thus, mistake, 386 of and accident. the enactment of section despite Act, Civil Practice review of arbitration availability law established principles awards was still controlled common (Peachy, Cal. at cases. earlier law, the common first suggested evolution from an away emphasis in Carsley continued the enactment of the Civil Practice Act of case, In Iron
Lindsay (1859) 14 Cal.
Salamander
partners
390.
their
to an
desired to dissolve their
and submitted
partnership
Works
arbitrator,
moved
Lindsay successfully
who found
favor. When
Carsley’s
award,
trial
Carsley
support
the trial court to vacate
appealed.
decision,
alia,
award was properly
court’s
inter
that the
Lindsay argued,
*16
This court
that
rejected
and evidence.
was
to law
contrary
vacated because it
can be
an Arbitrator
aware that an award of
“we are not
reasoning,
argument,
was not
this ground
An
on
impeachment
this
...
ground.
on
impeached
Act,
were,
statute,
law, and,
(Practice
if it
our
[§]
at common
admissible
the award can
which alone
as those
seq.)
grounds,
upon
et
other
prescribes
(Carsley, supra,
p.
District Court
motion.”
upon
be vacated
74;
Muldrow,
added,
2 Cal.
supra,
citing
in
second
original,
first italics
and its
205.)
Carsley
progeny,
cited Muldrow
Peachy,
Although
Cal.
supra,
reliance on
greater
its
position
place
it is clear the court had
shifted
subtly
which an arbitration
exclusive
grounds
as the
statutory provisions
could be vacated.
when,
Act
the Civil Practice
in
section 386 of
This trend continued
former section
as Code of Civil Procedure
change
was codified without
(1900)
By in unfettered that courts could suggestion indulge Muldrow's perpetuate Indeed, the review the “intrinsic of an arbitrator’s decision. correctness” true; scheme concluded was courts opposite following legislative those set forth statute. vacating exclusively for an award were grounds court, however, rule. to this general Connor retained an exception upon review of errors holding, judicial “spread Muldrow’s permitting (Muldrow, 2 Cal. at affecting record” and material “palpable point” 77), a rule permitting In re Connor into transmogrified error, section although review an award if former “gross” it contained to vacate an award. 1287 did not as a reason specify ground permissible Connor, Thus, (In re supra, 128 Cal. at although emphasizing award, exclusivity an arbitration statutory grounds vacating Connor court retained a rule more vestige *17 common law that provided generous judicial oversight. later, Connor,
Sixteen years this court retreated somewhat from In re 279, supra, 128 Cal. returned the rule in earlier apparently developed Muldrow, 74, (most cases 2 notably supra, Peachy, supra, Cal. and especially 205), 4 Cal. deemphasized exclusivity statutory grounds of the for Const., 156, an award. In vacating supra, Utah Cal. a 174 arose dispute between a railroad and a construction over whether a had been company debt arbitrator, The discharged. submitted their in to an who ruled the railroad’s favor. The construction moved to vacate the award company and appealed when the trial court denied its We motion. affirmed the trial decision, Muldrow, 74, court’s 2 citing supra, Cal. its “The progeny. arbitration, code are in aid provisions of the common-law remedy thereof, reaffirmance and do not alter its An award principles. [Citations.] made upon unqualified submission cannot be on the impeached ground law, that it is contrary unless the error on appears its face and causes 390; substantial injustice. (Carsley Lindsay, [supra,] v. 14 Cal. Morse on Arbitration, Const., 296.)” (Utah supra, 160-161.) 174 Cal. 390,
Although Carsley Lindsay, v. supra, Cal. in cited support, basis for this court’s apparent resurrection of the common law dominated view of judicial ante, review of arbitration awards is As puzzling. explained, 17-18, at pages Carsley held that an arbitrator’s award cannot be “im- peached” law, merely because it contained an error of and that even if it could, section 386 of the Civil Practice (then Act codified in verbatim former 1287) section set forth the grounds exclusive to vacate an award. (Carsley v. Lindsay, supra Thus, 394.) at p. close scrutiny Carsley reveals does not Const, support the proposition for which in was cited it Utah opinion. Morse,
Utah Const’s citation to The Law of (1872), Arbitration and Award is similarly unavailing. That treatise states that when parties submit to an submission, arbitrator under a general “such award is conclusive well as fact; the law as the and the court upon the return such an award will not referees, inquire authorized, whether the thus have decided correctly upon of law principles (Id. clear, or not.” omitted.) at p. fn. As is Morse does not provide Const., for the support conclusion in Utah supra, 174 Cal. that a court can vacate an arbitration award for a error legal appearing face of the award causing substantial injustice.
By Const., the time this court decided Utah supra, 174 Cal. the law governing judicial review of arbitration in awards was a state of flux. “intrin- review of an award’s unfettered
initial common law view permitting Muldrow, correctness,” had fallen supra, in first set Cal. sic forth review an er- rule permitting an alternate importantly, More wayside. substan- causing error—on the face “gross” ror—or perhaps, Muldrow, advent statutes waned with the injustice, begun tial also with area, 1872) had also (first apparently then governing 390), although Cal. (Carsley Lindsay, supra, fallen into disfavor Connor, (In re Cal. abandoned. completely notion was not Const., 1916, however, had been revived Utah By notion Const, Indeed, decisions in last 156. Utah has been cited appellate Cal. Plaza, Pietz, supra, (See, Park Ltd. e.g., this years very proposition. *18 1927, of 1420.) After the of review p. limits further, by this time additional shaped arbitration awards would evolve still legislation.
c. Law Development the After of 1926, to a viable alternate the of arbitration as By popularity private dissatisfac- “[Widespread outside court was in decline. resolving disputes often expressed tion with laws arbitration been our respecting [had] commerce, men general- chambers mercantile and business of associations B, (First the Cal. exhibit p. Judicial Council of ly.” Rep. addition, orga- were indications the First there Report].) [hereafter (See of the Fifteenth Proceedings nized bar also arbitration. opposed private Feldman, 70-73, in Annual Cal. Assn. quoted State Bar Meeting Government, in Tribunals Private Arbitration Law Private California: 1926, 42.) In supra, Angeles County Los So.Cal.L.Rev. at fn. p. arbitrate; filed County clerk three submissions to Alameda reported only its 57.) (First supra, filed that year. p. no were reported petitions Report, could be to reason for the dearth of submissions to arbitration traced First, two no more efficient than private regular factors. arbitration was to rule judicial adjudication statutory permitting disputant due to revoke her to “at time before the award any his or submission arbitrate Second, 1283; (Former 58.) made.” also First private see Report, as a method particularly dispute viewed valuable agreeing resolution because courts would not enforce contractual provisions Co., Bebe (Blodgett to submit to arbitration. Co. v. disputes future Cal. at p. when,
These the Legislature flaws were remedied perceived (Stats. amended ch. governing the statutes arbitration. private et statutes in response We infer that seq.) by amending existing California, Judicial Council of intended to report Legislature encourage use of arbitration. The 1927 amendments thus private repre- sent a clear legislative favor of expression public policy private arbitration as an alternate method of resolution.
In addition to those changes, former section forth 1287—setting grounds for vacating arbitration award—was recodified and renumbered newas section 1288. That section “In either of provided pertinent part: cases the following court of the in which superior county city county award, said arbitration was had must make an order vacating upon application any (o) to the Where party arbitration: the award was H] (b) fraud procured by corruption, or undue means. Where there was [][] arbitrators, corruption (c) or either of them. Where the arbitrators H] misconduct, were guilty refusing suffi- postpone hearing, upon shown, evidence, cient cause inor hear refusing to and material pertinent misbehaviors, or of controversy; other any which the rights have party been (d) Where the prejudiced. arbitrators exceeded their [][] them, mutual, or so powers, executed imperfectly that a final and definite award, submitted, upon matter subject (Stats. was not made.” ch. *19 225, 9, 406-407.) §
The in major changes the new (i) statute were: the in addition subdivision (a) permitting means”; vacation when the award was procured by “undue (ii) and the (d) addition to subdivision permitting vacation when the arbitra- mutual, tors “so imperfectly executed powers] that a final and [their definite award . . . was (Former not made.” Stats. ch. p. § 407.)
The limits of judicial review of an arbitration award under the 1927
amendments were addressed in
Vegetable, supra,
In
The that, Vegetable court stated “The merits of the controversy Pacific between the parties are not subject to judicial review. By section 1288 of the Code of Civil Procedure the superior court has power to vacate an award [quoting terms of section (Pacific Vegetable, supra, 1288].” 29 Cal.2d at Later, 233.) p. the court “The explained, form and sufficiency evi- dence, and the and credibility good faith of the parties, absence of award, for are not matters an obtaining or undue means fraud
corruption, empha- the court twice (Id. at It is that significant review.” judicial award, never reiterated but statutory grounds vacating sized the face of review for an error on common law based rule permitting old Vegetable In this substantial injustice. way, causes Pacific law— the common that former section 1288—and not suggested court awards.6 limits of review of arbitration established the judicial 228, the issue murky A few 29 Cal.2d years Vegetable, after Pacific much- awards some gained review of arbitration scope Corp., Holdings Cal.App.2d v. Blair needed clarity. Crofoot Peters, then Justice Crofoot], Presiding Justice Raymond 156 [hereafter One, District, Division the Court for the First Appeal Appellate After stock deal. fraud a involving alleged complex confronted a case York, interested were filed in and New numerous lawsuits California entire agreed Following presenta- to submit the matter arbitration. arbitrator, he a award accompa- of evidence to rendered five-page tion fifteen pages. nied and two hundred by findings opinions covering (Blair) Corporation favor Blair judgment Holdings overall result was court to correct Blair moved against successfully superior Crofoot. award, confirm the and Crofoot appealed. outset, amend- that after Appeal At Court of explained Procedure, were of Civil written arbitrate agreements ments the Code law was “no field for common exclusively by statute there governed 181.) The . (Crofoot, supra, arbitration to . . operate arbitrator argument therefore Crofoot’s appellate rejected *20 submitting never a the jurisdiction lacked because Blair secured court order [1927], the that both undoubtedly cases to arbitration. “Prior to it was law state, in the and existed in this that statutory common law arbitrations a of was deemed to be absence order of submission the arbitration [a court] arbitration, in law and that common law arbitration the common such as not be entered only could be enforced action could by independent 1927, however, statutory Since these limitations on judgment. a . . . [f] 228, were Vegetable, supra, implied statutory grounds 6Although Cal.2d thus the 29 Pacific “ exclusive, ‘The ambiguous, its for it also noted that meaning ultimate somewhat of the preventing are for the statutory provisions manifestly purpose for a review thereof sole error, misconduct, fraud, or mistake has gross of the proceeding, corruption, misuse where ” (Id. at proceeding.’ carried award to of a to the prejudice party been into the the substantial Const., 159, Utah added.) quotation supra, Cal. italics Because this p. quoting p. 174 at flowing challenger discussing requirement prejudice came in a the a must show paragraph that error, however, rule the court to embrace the old alleged from it is doubtful the meant causing a of the award appeared to vacate an award when on the face permitting court error injustice. substantial
23 (Id. 180-181.) After of the noting no at some longer arbitration exist.” pp. arbitration, appellate between law and the statutory differences common statute, concluded, Legislature court “that 1927 adoption scheme statutory applicable intended a all-inclusive adopt comprehensive arbitrate, in doctrines to all and that such cases the agreements written (Id. 182.)7 a were at to common law arbitration abolished.” applicable p. circum On the was more of arbitral court question finality, Crofoot “The so clear to a court’s of spect, admitting powers law not as quite had the review over law. The cases held that the court questions of earlier law, face of to review errors at least where power they appeared upon award.[8](In Frick, 836]; Co. re 290 P.2d Utah Const. Cal.App. Co., Ry. 631].) Pac. The later have Western Cal. 156 P. cases gone much farther to the award even as granting finality to questions C.S.T., Ltd., law. In Vegetable [supra,] Oil Cal.2d Corp. Pacific 233, it was held that ‘The merits of the between the bluntly controversy ” are not subject (Crofoot, supra, review.’ Cal.App.2d at 185.) After p. cases that note an arbitrator need rule surveying law, with the conformity court made dramatic a conclusion: Crofoot “Under these cases it must be held limiting absence some award, clause in the agreement, the merits of either on law, fact or questions except provided not be reviewed as (Crofoot, supra, added.) statute." at italics Cal.App.2d This bold statement reflected the end result of many years of evolution law, Muldrow, from law common roots of through Cal. of the rule growth permitting review of errors on the face the award Const., (Utah 160-161), 174 Cal. at through important changes occasioned by the 1927 interpreted amendments as first by Pacific Vegetable,supra, 29 Cal.2d Crofoot, then definitively by supra, 119 .2d 156. Cal.App Later of this court relied on the opinions heavily reasoning and conclusion of the to declare opinion sole grounds Crofoot 7This concliusion was years scholarly foreshadowed three earlier article on which the relied, (see Crofoot, supra, The article noted that Crofoot statue, present “The principles by point. detailed one. contravenes common law point almost common Legislative purpose applicable *21 might abolish law be found alone. from this fact The statute guideposts obliterates all previous permitted under which the statutes notice common whether one was contracting statutory for law arbitration. It is reasonable voluntarily who agree writing by in to arbitrate should be bound the statute and should afterthought not as an be to permitted escape through their the portals from contract the of common Labor and Commercial the (Kagel, law.” Arbitration Under Arbitration California 799, Statue (1950) 38 Cal.L.Rev. 8At point, this the court inserted a “But prior footnote stated: even it 1927 Crofoot Connor, only ‘gross’ was held that reviewable—In re of an were errors arbitrator 128 Cal. 279, 282 P. 862].” [60
24 (See O’Malley, were set forth statute. arbitration award those vacating Women, 111-112; Col. Diego Co. v. San 48 Cal.2d at supra, pp. for Griffith 515-516.) 45 Cal.2d at supra, 156, major supra, large
In
119
years following Crofoot,
Cal.App.2d
the
former
conclusion that
decisions also
appellate
adopted
of
ity
Crofoot
award.
vacating
for
an arbitration
1288 set forth the exclusive means
section
(Cecil
249,
P.2d
(1956) 142
251
Cal.App.2d
[298
24]
v. Bank America
of
.
reviewed
as provided
.
.
not be
may
except
merits of
[“the
708,
statute”];
(1956)
Co.
146
Corp.
Paving
Cal.App.2d
Downer
Union
4,
[same];
(1958)
13
Wetselv. Garibaldi
159 Cal.App.2d
715
P.2d 756]
[304
Grunwald-Marx,
524],
other
Posner v.
grounds,
P.2d
disapproved
[323
Inc.,
[same];
Murray
Ulene
Millman
supra,
sion (1956 Sess.) res. ch. (Assem. Reg. revised. Cone. Res. No. Stats. be to the 264.) The was transmitted Topic commission’s report (Recommendation in Study Pertaining Governor December 1960. (Dec. 1960) (1960) Law Arbitration Cal. Revision Com. Rep. [hereafter review, the report Arbitration On the Study].) subject scope that, “Nothing the California statute defines explained permissible however, have, of review Numerous rulings courts. court scope the limits for following basic which set developed principles review: fact or absence of some [f ] law . . . [f] limiting not be reviewed Merits clause of an except the arbitration arbitration award as provided agreement. H] for either on statute questions . . . [9] [][] review are for proceedings of arbitration Statutory provisions misuse where preventing proceedings corruption, sole purpose Crofoot, O’Malley, this Cal.2d proposition, report 9For cited among other cases. *22 mistake[10] fraud, misconduct, error has been carried into the award gross or (Arbitration the party to the substantial of a to prejudice proceedings.” G-54, added.) supra, G-53 to italics Study, end the
The Arbitration that should be the of Study emphasized arbitration are not and that “the of and review ordinary concepts judicial appeal law based on this applicable assump- arbitration awards. Settled case is (Arbitration supra, G-54.) tion.” After the state of the surveying Study, p. law, the concluded that do not “at- report although the California statutes awards, the exact court of . . express limits of review arbitration . tempt no reason exists the case law it good codify into California statute as Further, (Ibid.) presently exists.” recommended that report “present grounds for vacating unchanged.” (Id. an award should be left substantially G-57.) at p. California Law Revision Commission thus report law, concluded that the state of the by Crofoot, supra, as represented should not progeny, by any statutory its be altered amendments.
The California Legislature thereafter enacted a revision of the arbitration (Stats. statutes. ch. 1540 et Former section which p. seq.) vacated, had forth grounds set on which an award could be was slightly 1286.2, altered and renumbered as new section and this section still controls The new are today.11 grounds restatement of “substantially grounds set out in a bit (Feldman, more archaic form in the 1927 statute.” Arbitration Act, New Arbitration at Modernized—The So.Cal.L.Rev. California 433.) It significant is that there is mention permitting no of rule judicial review for errors on the face apparent arbitration award causing substantial injustice. We infer from may this omission that Legislature rule, intended to reject instead adopt position taken in is, case law endorsed in the Study, Arbitration “that in the absence of some clause in the limiting agreement, merits award, law, either on or questions fact not be reviewed except as provided the statute.” (Crofoot, supra, 119 Cal.App.2d at p.
The Legislature’s intent further revealed by an examination of other statutes. For example, for providing arbitrating disputes arising from contracts, public construction section 1296 directs that “a shall . . . 10Although the phrase “gross inclusion of the may suggest error or mistake” the commis (or approved recognized) sion permitting judicial least rule gross review on errors notion, the face of the causing injustice, report stating, substantial later refutes this gross “Even a error mistake in an judgment grounds arbitrator’s is not sufficient vacation, (Arbitration unless the error Study, amounts actual or constructive fraud.” G-55.) 12-13, 11The current version of ante. quoted pages section 1286.2 is *23 26 it either that if review of the award determines award after
vacate the it is based on an error evidence or that by not substantial supported award is re judicial in provision specifically providing law.” By of 1286,2, error, infer that the in we but not section view and correction in review judicial private to confer traditional did not intend Legislature ‘“ statute, subject one contains with reference to arbitration cases. “Where from a similar statute provision the omission of such a given provision, a different to show that significant a related ... is concerning subject ’ 749, (1977) 755 (People v. 19 Cal.3d Drake intention existed.” [Citation.]” 720, 622].) P.2d Cal.Rptr. 566 [139 and moved origins
The thus from its common law law has evolved A ma in statute. delineated scheme rooted towards a more clearly mle, the modem California decisions have followed jority appellate 228, Crofoot, Vegetable, supra, 29 Cal.2d established Pacific 156, private limit review generally 119 Cal.App.2d (See, e.g., 1286.2 and those sections grounds specified awards to 1286.6. 86, (1985) 92-93 Cal.App.3d v. 173 Severtson Williams Construction Co. Galvin, 400]; at 450- Cal.App.3d Lindholm v. 95 Cal.Rptr. [220 498; 451; Clara-San Players, supra, 59 Santa Cal.App.3d Baseball (1974) No. 332 40 Benito Elec. Contractors’ Assn. v. Local Union etc. 909]; Co. v. Farm Mut. Auto. Ins. 437 State Cal.Rptr. Cal.App.3d [114 683]; Jones v. (1972) Cal.Rptr. 28 402 Guleserian Cal.App.3d [104 100]; Allen (1971) Cal.Rptr. Kvistad 19 840-843 Cal.App.3d [97 247]; (1969) 275 641 Exchange Cal.App.2d Cal.Rptr. [80 Interinsurance Durand Wilshire Co. Ins.
415].)
This with of decisions other states. large majority view consistent Act, than Uniform Arbitration more Although adopted California has (See Ann. U. half the have U. Laws states done so. West’s Act, Pt., 1.) The statutory grounds Arbitration Ann. Pocket Cum. vacate a arbitration award set forth the uniform law mirror private largely 1286.2, however,12 have those codified in and most states concluded section (See, are and Const. Co. v. e.g., that these exclusive. VerdexSteel grounds 240]; Supervisors (1973) P.2d Board Ariz.App. Affiliated pertinent part: 12 of the Arbitration Act states in 12Section Uniform “(a) application an where: Upon party, of a the court shall vacate means; “(1) procured corruption, The award was fraud or other undue “(2) or corruption was evident as a neutral partiality by appointed There arbitrator prejudicing rights any party; the arbitrators misconduct “(3) powers; arbitrators exceeded their being shown “(4) upon sufficient cause postpone hearing The arbitrators refused to so controversy hear or otherwise conducted therefor or refused to evidence material *24 1976) Marketing, Coatings, 340 Dyco (Fla.Dist.Ct.App. Inc. v. Chem. & Inc. 1240, 1242, 675; 1977) (Fla. So.2d Morrison-Knudson So.2d cert. den. 353 663, 760]; (1983) Bingham Corp. v. Makahuena 66 Hawaii 668 P.2d [675 36, 42 P.2d County (1983) Com’n v. Elec. Co. 105 Idaho Interstate [665 1046, Club, 1052]; (1982) Racquet 110 Konicki v. Oak Brook Inc. Ill.App.3d 217, 1333, State, Admin., 1337]; Sightes 223 Dept, N.E.2d Per. Div. v. [441 of 445, 450; 1981) Sulphur v. Build City 416 N.E.2d Southern (Ind.Ct.App. of 1207, 1210, 629; 1991) ers cert. den. 579 So.2d 587 So.2d (La.Ct.App. 1006, Plymouth-Carver (1990) School Dist. v. J. Farmer 407 Mass. 1007 1284, N.E.2d AFSCME 96 v. Arrow Council [rescript opinion]; [553 1285] 295, 299; (Minn. Reg. 1984) head Corr. Savage Bd. 356 N.W.2d Educ. Ass’n 289, 1237, (1984) v. Cty. Trustees Richland 214 P.2d Mont. 295-296 [692 of 1240]; Casino, 269, Shy New (1987) Clown Inc. 103 v. Baldwin Nev. 271 524, curiam]; P.2d [per Kearny PBA 21 Kearny No. v. Town [737 525] of 208, 393, (1979) 399]; 81 Cyclone N.J. 220-221 Roofing A.2d Co. v. [405 224, 872, (1984) 879]; David M. LaFave Co. 312 N.C. 233-234 S.E.2d [321 647, (S.D. 1984) 649; v. Aamot Eneboe 352 N.W.2d Util. Trailer Sales Salt (Utah 1327, 1329; Lake 1987) v. Fake P.2d 740 Milwaukee Police Ass’n v. 175, City 133, (1979) Milwaukee 92 Wis.2d 181-182 N.W.2d 136- [285 137]; but see Texas & Fitzgerald 1986) WestOil Gas v. Corp. 726 P.2d (Wyo. 1056, 1060-1061 [finding statutory grounds to vacate an arbitration award exclusive].) not rest,
Although the matter would seem to have been several Califor put nia decisions rendered since the 1961 statutory amendments have inexplica bly Const., 156, resurrected the view Utah supra, 174 Cal. an arbitration award be vacated when an error on the face appears award and causes (See, substantial injustice. Schneider v. e.g., Kaiser Foun dation Hospitals (1989) 215 227]; Cal.App.3d 1317 Cal.Rptr. [264 Plaza, Pietz, 1420; Park Ltd. v. at Cal.App.3d Ray Wilson Co. p. Assn., 1091; Anaheim Hospital Memorial supra, 166 at Cal.App.3d Ensign (1981) Hirsch v. 17]; Cal.App.3d Cal.Rptr. Abbott Assn., 771; State Auto Campbell v. Cal.App.3d California Farmer’s Ins. 175]; Exch. 111-112 Cal.Jur.3d, Award, 83, see generally, Arbitration and 145-147.) § of the light development of decisional law as exclusive the embracing grounds award, statutory to vacate an arbitration as well as the apparent hearing, contrary the provisions of Section as to prejudice substantially rights of a party; or “(5) There no agreement arbitration and the adversely issue was not determined in proceedings under Section 2 party and the participate did not hearing the arbitration raising without objection; but the fact that the relief was such that it could not or would granted not be aby equity ground law or vacating refusing to confirm (7 Act, the award.” West’s U. Laws Ann. (a).) U. Arbitration subd. to vacate nonstatutory grounds generally
intent exclude Legislature limit award, line cases that Vegetable/Crofoot we adhere to the an Pacific cases which there awards those review of private Those decisions the award. to vacate or correct statutory ground exists a the face of appears review of award where an error law permitting of view that causing injustice perpetuated point substantial have therefore view arbitration and are with the modern of private is inconsistent disapproved. *25 His Powers
3. The Arbitrator Did Not Exceed 1286.2, (d), for vacation of subdivision provides Section be and the award cannot powers award “The arbitrators exceeded their when controversy the the merits of the decision affecting upon corrected without the rule to argues statutory exception submitted.” Moncharsh this his case. review arbitration awards to judicial applies of generally precluding unclear, however, have conclude is what Moncharsh would us theory It on not settled that “arbitrators do the arbitrator exceeded his It is well powers. reason for their exceed because an erroneous they assign their powers merely 111; Culinary Hotel v. (O'Malley, supra, 48 Cal.2d at Hacienda decision.” 305].) A Union 175 Cal.App.3d Workers the rule limited would the to swallow of holding permit exception contrary review; the erred and thus could contend arbitrator judicial litigant always within argues exceeded the extent his case comes his To Moncharsh powers. 1286.2, (d) reached an section subdivision because the arbitrator merely decision, the reject point. erroneous we
Moreover, subject our to the consistent with arbitration statutes limited it the of post, “powers” discussed section is within exceptions submitted” by the arbitrator to resolve the entire “merits” of the “controversy 1286.6, 1286.2, (§ (c).) the (d); (b), the subd. parties. Obviously, subd. all “merits” include the contested of law and fact submitted to issues The of what the arbitrator for decision. arbitrator’s resolution these issues is argue the arbitration Moncharsh does not parties bargained agreement. that the arbitrator’s award strayed scope parties’ agreement of beyond issues did by resolving agreement not to arbitrate. agree arbitrate out con- encompassed “[a]ny dispute arising employment of’ tract. The fees attorney’s following over allocation parties’ dispute contract; clearly termination of arose out of employment employment arbitrator’s award no more than Under these dispute. does resolve circumstances, in resolving the arbitrator was his “powers” ques- within tions of law to him. The is to vacation or presented subject Moncharsh. correction based of the asserted statutory grounds Illegality 4. the Contract Permits Judicial Review Moncharsh next award is subject judicial contends arbitrator’s review is paragraph illegal because X-C the employment agreement in violation of on the public Focussing policy. fee-splitting provision he contends that the limited employment agreement, scope despite awards, review of arbitration such been review has available historically contract, thereof, when one or the party alleges underlying portion award, resulting or in Before illegal violation public policy. addressing claim, the merits of the we first discuss whether Moncharsh adequately preserved issue for review. appellate
a. Waiver &
Respondent Heily Blase Moncharsh waived the issue suggests illegality failing object We ground. arbitration on this reject *26 because, below, claim as we explain Moncharsh’s that allegation paragraph true, X-C was even if illegal, (i) does render either illegal the entire employment agreement, (ii) the to arbitrate agreement itself. Accordingly, one, his claim an illegality he arbitrable did not waive the issue by failing object to arbitration on this ground. exists,
Section 1281.2 states that when a written agreement arbitrate the court shall the compel to arbitrate their it dispute “unless determines that: (b) Grounds exist revocation . . . [f] for agreement.” [f] of (Italics added.) Although this statute does not state whether expressly grounds contract, must exist to revoke the entire the arbitration agreement only, contract, or some other provision of the a fair reading of statutory scheme reveals the Legislature must have meant revocation of arbitration agreement.
For example, section “A 1281 states written agreement to submit existing controversy... is valid . . . save such upon grounds as for exist the revocation of (Italics added.) contract.” Section 1281.2 also speaks terms of an “arbitration agreement” a and “written agreement Thus, to arbitrate.” the plain meaning of section 1281.2 requires enforcement of arbitration agreement unless there grounds exist for revocation of that agreement.
If a contract includes an arbitration agreement, grounds exist to contract, revoke the entire such grounds would also vitiate the arbitration Thus, agreement. if an otherwise enforceable arbitration agreement is con- contract, tained in an illegal a party may avoid arbitration altogether. (Cali- State Council Carpenters Superior v. 11 Court Cal.App.3d fornia 30 Superior Court Carpenters]; Bianco Cal.Rptr. 625] [hereafter [89 322].) Cal.App.2d Cal.Rptr. contrast, only a goes portion when—as here—the
By alleged illegality entire (that agreement), does not include the arbitration contract (Green issue of remains arbitrable. illegality, controversy, including 689]; (1989) Hospital Cal.App.3d Mt. Diablo Dist. 157; Players, supra, Carpenters, supra, 11 Baseball Cal.App.3d at p. (H.C.), J.) (dis. illegality of Brown opn. [“question arbitrators”].)13 is one which be considered alleged rule not contend the illegality We this here. Moncharsh does apply Nor he does constitutes to revoke the entire contract. grounds employment voids the arbitration clause of contract. alleged illegality contend the was a Accordingly, provision question legality fee-splitting Thus, to first required in the first Moncharsh was not arbitrator instance. the issue for raise the the trial court order to illegality preserve issue later review. however, waived, failed to issue would have been had Moncharsh with the
raise it other conclusion is inconsistent Any arbitrator. before arbitration, decide basic which is to private finally purpose Moreover, rights, between the we to sit his parties. permit party cannot decision, should he an adverse he could content suffer knowledge *27 A in a award. then raise the issue motion to vacate the arbitrator’s illegality rule would a level that we gamesmanship” condone contrary “procedural (Ericksen, have as of arbitration.” “undermining advantages condemned at supra, by 35 Cal.3d a rule determination [rejecting permitting arbitration]; courts of issues submission to see also preliminary prior to Dewor Developments (1983) Christensen v. 33 Cal.3d 783-784 [191 R2d filing lawsuit [condemning pre-arbitration 1088] order obtain that would Such pleadings opponent’s legal strategy].) to reveal a waste of arbitral and time not be judicial and resources should permitted. 13Ericksen, case, we held compel Cal.3d does not a different result. In that that party agreement when one to an arbitration claimed fraud in the inducement of the contract, one, entire controversy question was nevertheless an arbitrable and arbitrator, whether a properly by fraud existed was not court of law. determined Although (§ 1281.2), in the agreement" fraud inducement could result in “revocation of the we that distinguished illegality underlying case from those in a claimed party which (Ericksen, supra, 316-317, Moreover, agreement. pp. requiring at a fn. we reasoned party claiming justified fraud in the inducement to submit the claim to arbitration was because, difference “The between breach of contract and such fraudulent inducement turns into, upon of a party’s determination state of mind at the time the was entered and we contract ought eyes practical party not close our to the a rule would allow a consequences of which commitment (Id. 322-323.) by relying avoid an arbitration upon that distinction." (i)
We is thus hold that unless a is entire contract party claiming (ii) the is he or she need illegal, agreement arbitration itself not illegal, illegality process, raise question prior participating long so as issue is raised before tire arbitrator. Failure to raise the claim however, arbitrator, judicial before waives the claim for future arbitrator, review. Because Moncharsh raised the issue before the illegality the issue was thus for our review. properly preserved
b. Illegality Judicial Review Claims Moncharsh
Although acknowledges general rule an arbitra factual, tor’s as legal, well as determinations are final subject review, he judicial argues that review of the arbitrator’s decision warranted on the facts this In he case. claims that the support, fee-splitting of the contract that provision and enforced interpreted arbitrator was “illegal” and of “public violative as reflected in policy” provi several claims, sions of the Rules of Professional he Conduct. Such has illegality, recognized been as a ground judicial review as stated a line of cases from this emanating Loving court’s decision in & Evans v. Blick Cal.2d 603 P.2d Loving 23] & [hereafter Evans]. Evans, &
Loving Cal.2d involved a about money due on a construction contract for remodeling done Blick’s appellant arbitrator, premises. his before the pleading Blick as claimed a “separate and special defense” that respondent contractors could not recover legally because they were unlicensed violation of Business and Professions favor, Code. arbitrator found respondents’ moved to confirm they the award. Blick objected to the award on grounds that one of the respon dents was unlicensed in violation of the code. The trial granted confirm, motion to but that judgment was reversed by this court. Although we recognized the general rule that the merits of dispute before an review, arbitrator are not subject to judicial give “the rules which finality *28 the arbitrator’s determination of of ordinary fact or law questions of are inapplicable where the issue illegality the entire transaction raised in of a for the proceeding enforcement of the (Id. arbitrator’s award.” at p. added.) italics
The Court of Traders, Appeal reached a similar in result All Points Inc. v. Barrington Associates 211 723 Cal.App.3d 780] [here- case, after All Points In that Barrington (hereafter Traders]. Associates firm, Barrington), an investment banking of a sought payment commission for its in assistance negotiating transfer of all the stock corporate All appellant Points Traders. The arbitrator in found favor and Barrington’s Nevertheless, the Court of Appeal confirmed the the trial court award. reversed, invalid between the was agreement the commission finding real did not hold a Barrington its because entirety and unenforceable section license Business Professions Code estate broker’s as required Legislature The selected court reasoned appellate et seq. “[t]he its intention and has public expressed means specific protect action to bringing from an section an unlicensed broker [prohibiting commission],” com of the contract for a and that collect a “[enforcement against the statute and public mission be direct contravention of would Traders, added].) supra, (All Points at policy.” [italics Traders, Evans, supra, supra, & All Points Loving Both Cal.2d ruling review an arbitrator’s judicial permitted By where entire or transaction illegal. claimed the contract party contrast, of the overall single provision employ- Moncharsh but a challenges Evans, nor ment neither & All Points Loving contract. Accordingly, Traders, of his claim.14 judicial authorizes review limited circum- exceptional
We that there be recognize some a party review of arbitrator’s decision when justifying judicial stances an cases claims contract. Such only portion underlying affects illegality those in an arbitrator’s decision finality would include which granting rights. would of a protection statutory be inconsistent with party’s (Accord Express 482 U.S. Shearson/American Inc. McMahon 192-194,107 225-227 claims statutory L.Ed.2d S.Ct. 2332] [federal are under Act arbi- opposing arbitrable the Federal Arbitration unless party tration demonstrates “that intended to a waiver of Congress preclude judicial issue”].) remedies for statutory rights however, explicit legislative policy,
Without expression public courts be award on ground. should reluctant to invalidate an arbitrator’s this is clear: the its Legislature already strong support reason has expressed in title 9 Code finality arbitration and the of arbitral awards private (§ of Civil Procedure. et a clear seq.) expression illegality Absent arbi- private this favor of public policy undermining strong presumption tration, an immune ordinarily arbitral award should stand from scrutiny. contends, arbitrator, X-C is
Moncharsh as he did that paragraph before because, alia, inter rules illegal public and violates it violates former policy *29 Side Hospital Webb v. West District 14To the extent that 946 [193 judicial routinely where suggests review of an is available arbitrator’s decision 80] party merely illegal, disapprove suggestion. one claims that a of a we portion contract is fees], 2-107 2-108 certain types unconscionable [prohibiting [prohibiting 2-109 an splitting arrangements], [prohibiting agreements restricting fee and of the Rules of Conduct of State attorney’s right practice], Professional however, nothing Bar.15We the Rules of Professional Conduct at perceive, issue in this case that an of what is suggests by resolution arbitrator an essentially fee would or would ordinary improp- be inappropriate erly interest. review of the arbitra- protect public Accordingly, judicial tor’s decision is unavailable.
Conclusion We conclude that an award reached an arbitrator to a contrac- by pursuant agreement tual is subject arbitrate not review on the except (to set grounds vacate) forth (for correction). sections 1286.2 and 1286.6 Further, the existence of an error lawof on the face of the award apparent that causes injustice substantial does not provide judicial review. grounds
Finally, normal rule of limited judicial review be avoided contract, a claim that a provision construed arbitra- applied tor, is “illegal,” rare except cases when according finality to the arbitra- tor’s decision would be with the incompatible of a protection right. statutory We conclude that Moncharsh has no why demonstrated reason the strong in favor of the presumption finality arbitral award should not apply here.
The judgment of the Court of is affirmed. Appeal Panelli, J., Arabian, J., Baxter, J., J., and George, concurred. and Dissenting.
KENNARD, J., Concurring majority holds that when trial a court is an presented with arbitration award erroneous on its will face and cause substantial injustice, court has no choice but to ante, confirm it. (Maj. opn., Because an order confirming arbitration award results in the of a entry judgment with same force and effect judgment Proc., as civil (Code 1287.4), action Civ. majority’s holding requires our trial courts not only to tolerate substantial but injustice, to become its active agent.
I cannot join I majority opinion. will not to a agree decision inflicting this state’s upon trial courts a duty to injustice promote by confirming arbitration awards they know to be manifestly wrong substantially 2-107, 15Rules 2-108, 2-109, Professional Conduct former rules were recodified in substantially 4-200, 2-200, 1-500, same form in new rules respectively. *30 although never implied necessarily Nor can I unjust. accept proposition, of that the favor opinion, general policy stated in the majority directly do obligation solemn is than the important judiciary’s arbitration more justice. the rule the decisional law statutory compels this state’s or
Nothing legisla- On has contrary, majority misperceived announces. majority statute, intent, deci- misunderstood the tive the relevant misconstrued for decisions. Worst law of review establishing scope sional all, legitimized defined and has forsaken that has majority goal society—to role in strive judiciary’s always justice.
I end It government. is “Justice is the object justice. The government been, it ever and ever will until society. pursued, is the end of civil It has be Madison, obtained, (James The in the pursuit.” be until be lost liberty Federalist, 51.) As to the United States Constitution No. the preamble affirms, our to “establish country justice.” founded a has the Every
Justice is obligation judiciary. power special as to make them and the to “amend and control its and orders so duty process Proc., (a)(8).) (Code When justice.” conform to law and Civ. subd. § statutes, will are do so they way construe courts enjoined Proc., Code, 2; Code, 4; 4; Ed. Civ. Code Civ. promote justice. (E.g., § § § Code, And, to do Pen. because the of our is very purpose legal system (Sand between the Concrete Service Co. justice 257]), are para- the interests Cal,.App.2d Cal.Rptr. justice (Travis in all Co. legal mount Southern proceedings Pacific short, 700]). is the “sole justice Gitelson, A Trial justification (Gitelson Judge’s of our law and courts.” & Instrumentality Duty Credo Must Include His to be an Justice Affirmative 7, 8.) (1966) Santa Clara Law. The never mentions the to do majority obligation judiciary’s paramount it justice, and the rule announces—which trial courts endorse requires decisions known to be substantially unjust—is very filling its antithesis. By its discussion with references to expectations parties, develop- ment of decisional law over the intent as century, course of legislative statute, evidenced considerations our both that these majority implies justice. its and that are than support holding they important doing more nothing both For can be majority wrong on counts. the judiciary, more than This self-evident that no important justice. is so proposition *31 see, Moreover, is as we shall respect further elaboration necessary. law, contract, the of decisional the relevant parties’ development freedom to statute, and belie rather than legislative support ascertainable intent majority’s holding.
II resolution, As a is and method of arbitration faster generally judicial than it fewer error. cheaper proceedings, safeguards but has against reason, For this must parties agree who to be deemed to binding have accepted system. increased risk of error inherent their chosen itself, majority takes this proposition, unobjectionable and from it jumps to the conclusion that who parties agree to arbitration also to thereby agree be bound award that on face is by its erroneous and results manifestly injustice. substantial But the conclusion defies both and logic experience. Reasonable would contracting never assume a risk that so unnec- essary self-destructive.
The majority when it goes substantial mere astray equates injustice with a mistake. The two are not the same. Mistakes occur in the commonly course of dispute resolution proceedings without producing injustice. substantial As our state Constitution recognizes, determining whether a mistake has been made, and occurred, determining whether an injustice has are separate Const., (Cal. VI, distinct inquiries. art. cannot set aside a [court judgment for error unless error resulted miscarriage justice].)
Parties who agree to resolve their disputes by arbitration should not do not expect trial busy courts to comb the records of arbitration proceedings and, so, determine whether error has if occurred effect of error. But they no doubt do expect, and ought be able to that if the expect, face its is erroneous and results in substantial a court asked injustice, confirm the action, award will turn a blind eye to the of its consequences but will instead take the only course consistent with its fundamental man- date, and will vacate the award.
Moreover, even if the parties were to do what is virtually by inconceivable expressly that the agreeing arbitrator’s award would be if binding even substantially unjust, the agreement would not bind the The exer- judiciary. cise power cannot be controlled or compelled private agree- ment (See or stipulation. State Auto. Assn. Inter-Ins. Bureau California Superior Court 50 Cal.3d P.2d 1156]; Industries, Clarendon Ltd. v. Nu-West (3d Inc. 1991) Cir. F.2d 127, 129 [“action court can be neither nor purchased parleyed by remarked, should has a court United States Court Supreme As the
parties”].) Co. (Precision Co. v. Automotive “the abettor iniquity.” refuse be 1381, 1386, 993].) 65 S.Ct. 324 U.S. L.Ed.
Ill *32 arbitration review of holding radically To its support curtailing awards, 1850. of California since the the decisional law majority surveys decisions, uniformly is which almost Undeterred the plain language the holding, majority attempts penetrate to the contrary majority’s in flow more than to trace the ebb and of surface order opinions Thus, the relies on what judicial thought. majority currents of century’s dark decisions, “transmogrification” principles, it terms “subtle shifts” at odds alleged in on “close are to be opinion scrutiny” and citations one that ante, at (Maj. opn., text. opinion’s with a clear statement law the 17-18, 18-19, 19.) majority’s As an or telepathy, exercise divination discus- legal majority’s discussion But as sober fascinating. analysis, is outset, consistently—until is From this court has wrong. sion simply use the judicia- should refuse to now—acknowledged permit courts injustice. awesome a substantial ry’s power perpetrate coercive 2 (1852) Cal. In the cited v. Norris majority, first decision Muldrow 74, it award this court held that would not enforce an erroneous arbitration 77.) (Id. when the on a and point.” p. error was material “palpable used and material Although formulation—“palpable this court a verbal from the that became point”—different injustice” term “substantial Ry. Pac. standard later Const. Co. v. Western (e.g., cases Utah expression 156, (1916) To 631]), Co. Cal. P. is the same. concept 174 160-161 [162 or be on a an must be of real “palpable point,” importance material error or, (Webster’s (1988) 733), Dict. great Ninth New consequence Collegiate words, in other error injustice. an that causes substantial very “gross Other decisions used the term error” to describe early Headley (1852) ground same an v. Reed vacating (E.g., arbitration award. 322, 325; 279, 2 An (1900) 862].) Cal. re Connor P. error In 128 Cal. 282 [60 is if it “gross” glaringly is noticeable “because of inexcusable badness Dict., (Webster’s New objectionableness.” Ninth Collegiate Thus, error,” the term like the and material formu “gross “palpable point” lation, become represents early articulation of what has subsequently as causing injustice. known error substantial read, court, semantically, Fairly although varying decisions of this will not uniformly support judiciary that the firmly proposition award and enforce an arbitration knowingly substantially perpetuate when determining court has the same standard for unjust. adopted This (See People court should decline to follow rule known as law of the case. Shuey (1975) 13 Cal.3d 533 P.2d Cal.Rptr. 211] [120 [“a manifest misapplication existing resulting injus- substantial principles accord, Farms, tice”]; George Agricultural Arakelian Inc. v. Labor Relations 749].) Bd. Cal.3d P.2d Cal.Rptr. correctly Courts have our decisions. case Appeal interpreted case, after they have reaffirmed rule that a will vacate an award when error the face of the causes substantial appears Barber, Southard, injustice. (E.g., Stanley, Cobler v. Brown & Associates Traders, 868]; Points Cd.App.3d All Inc. *33 723, v. Barrington (1989) 211 Associates Cal.App.3d 736 Cal.Rptr. [259 780]; National League Players’ Football Assn. League v. National Football 192, Management (1986) 147]; 188 Council Cal.App.3d Cal.Rptr. 199 [233 Ray Wilson Co. Hospital (1985) v. Anaheim Memorial Assn. 166 Cal.App.3d 1081, 62]; 1090 v. Cal.Rptr. (1977) [213 Abbott State Auto. Assn. California 763, 580]; 68 Cal.App.3d Campbell 771 Ins. Cal.Rptr. [137 v. Farmers Exch. 105, (1968) 260 175].) Cal.App.2d Cal.Rptr. [67 Searching for some departure from this line of prominent the authority, relies majority heavily on the Court in Appeal decision v. Blair Crofoot Holdings Corp. (1953) 119 P.2d Cal.App.2d on (disapproved [260 156] Grunwald-Marx, 169, another ground Posner v. Inc. 56 Cal.2d 297, 313]), 363 P.2d but its reliance is misplaced. cites Crofoot C.S.T., this opinion court’s Vegetable Corp. Oil v. Ltd. Pacific Cal.2d 228 P.2d for proposition 441] courts had recently narrowed somewhat the review of arbitration awards for legal error. (Crofoot, supra, 185.) at But neither p. Vegetable nor suggests Crofoot Pacific that review had become so narrow that were courts confirm obliged to awards Indeed, containing obvious error causing injustice. substantial Pacific “ Vegetable affirms that courts review arbitration prevent awards to ‘misuse fraud, misconduct, proceeding, error, where corruption, gross or mistake has been carried into the award to the prejudice substantial of a party ” to the proceeding.’ (Pacific Vegetable,supra, at p. Utah quoting Const. Co., Ry. Co. Western Pac. Thus, added.) 174 Cal. italics error is a legal award, basis on proper which to challenge an arbitration that “the provided error on its face appears and causes injustice.” substantial (Utah Co., Co. Const. Ry. WesternPac. notes,
As the majority does state that the opinion merits of an Crofoot arbitration award not be may reviewed judicially as except provided 156, 186.) (Crofoot Holdings Corp., supra, v. Blair
statute. 1286.2, statute, does Procedure section Code of Civil Because relevant for challenged bemay in so words that an arbitration not say many concludes error injustice, majority substantial causing obvious wrong. this is But conclusion ground. not vacate an award this court otherwise, not, mandate negative implication Our statute does injustice.
IV five grounds vacating of Civil section lists Code Procedure 1286.2 Although statutory margin.1 This list is reproduced award. these if any the statute that a court vacate award” only states “shall statute majority construes the as grounds present, precluding defined in ground specifically from an arbitration award on vacating list, ignores construing statutory majority the statute. thus statute’s legislative history. its from essentially unchanged
Code of Civil Procedure section 1286.2 is 225, 9, 406), and the same (Stats. materially ch. predecessor sess., X, (Stats. tit. enacted in 1851 second original as provision *34 ante, IV, 386, 20-21.) The 112-113). (See at pp. ch. maj. opn., § (Stats. in form in enacted section 1286.2 its Legislature present 461, 2, 1540) a and of the Califor following ch. recommendation p. study (Recommendation to Relating nia Law Commission. and Study Revision (Dec. 1960) (1961), Law Com. G-1 et Arbitration 3 Cal. Revision Rep. and ex its the the commission report Legislature, to seq.) separately Be of awards. subject judicial addressed the of review arbitration pressly law accurately subject, cause the commission stated California on this statute, com the of the the reading because its statement belies majority’s is worth in detail: mission’s comment some quoting by review “Nothing permissible in statute scope the of California defines have, however, following rulings the courts. Numerous court developed [<¡[](5) . set the for court review: . . principles any basic which limits review for the sole for a of arbitration are Statutory provisions proceedings refusal of the prejudiced conduct of the or controversy corruption 1“(a) by the award the refusal The award was by submitted; misconduct of neutral arbitrators arbitrators cannot be corrected without of the arbitrators procured or to [ft] contrary arbitrators; postpone a (e) by corruption, The to the to hear rights arbitrator; [ft] hearing provisions (c) of evidence affecting such The fraud [ft] upon party rights (d) of this title.” or other undue material sufficient cause The were of such merits arbitrators exceeded to the substantially prejudiced of the decision party means; controversy being were [5] shown (b) There was substantially their or upon by therefor powers by the other fraud, corruption, of misuse of where proceedings purpose preventing misconduct, into the award error or mistake has been carried to gross a . . . Neither substantial to prejudice party proceedings. H] to the exact attempt Arbitration Act nor other state statutes express Uniform good And exists to limits court review of arbitration awards. no reason (Rec- into the statute case as it exists.” codify California law presently Arbitration, ommendation Law Revision Study Relating Cal. G-53-G-54, omitted, added.) Com. fns. italics Rep., pp. commission, words,
The did intend or other to either alter codify judicially grounds established an arbitration award. challenging Contrary view, to the Code of Civil majority’s Procedure section 1286.2 was never meant to define the of review the courts” “permissible scope or Thus, the exact “express limits court review of arbitration awards." statute does not a preclude court from an vacating ground well established decisional law. In words that track the closely language this court used Vegeta- Pacific C.S.T., Ltd., 228, 240,
ble Corp. Oil supra, 29 Cal.2d the commission acknowledged that one review to purpose gross errors prevent or mistakes from carried an being into award to the prejudice substantial is, party, injustice. (Recommendation substantial and Study Relating to Arbitration, supra, Cal. Law (1961), G-55.) Revision Com. Code Rep. of Civil Procedure section 1286.2 be may not read as a court from barring vacating arbitration award when these are conditions present. majority evade the attempts obvious of the commission’s import
statement by referring “[ejven language another part report a gross error or mistake in an arbitrator’s judgment is not sufficient grounds for vacation unless the error amounts to actual constructive fraud.” (Maj. *35 ante, 25, opn., 10.) fn. But this statement in not portion commission’s report setting forth the basic governing judicial principles Moreover, review. it is derived from a federal district court case expressly recognizing that “Gross error or mistake prejudicing substantially rights of a party” ground is a for vacating an arbitration award under California (Lundblade law. 795, Continential (N.D.Cal. 1947) Ins. Co. 74 F.Supp. Finally, word “fraud” as in used the commission’s statement includes a mistake that the fair prevents exercise of judgment (California Sugar Etc. Agency 274, v. Penoyar (1914) 167 Cal. 279 P. 671]), [139 thus includes gross errors or mistakes that in result injustice. substantial conclude, if
Even one were to contrary to of the Law report Revision Commission, that Code Civil Procedure section 1286.2 defines the per- courts, missible of review the scope it still would not follow that a court 40 face and resulting an award error the award’s appearing
cannot vacate
for
statute,
if
in
vacate an award
it
Under the
court must
injustice.
substantial
and the
exceeded their
award
powers
determines that
arbitrators
“[t]he
the decision
affecting
upon
corrected without
merits of
cannot be
Proc., 1286.2,
(Code
(d).) As the
Civ.
subd.
Courts
controversy submitted.”
their
exceed
recognized
again,
statutory
have
time and
arbitrators
Appeal
in
make
that is
face and results
they
when
an award
erroneous on its
powers
Southard,
Barber,
Stanley,
Cobler v.
Brown &
injustice. (E.g.,
substantial
Traders,
518, 526;
Associates,
Points
Inc. v.
supra,
All
Cal.App.3d
Associates,
736;
723,
v. Mosley
Barrington
supra,
Cal.App.3d
Greenfield
735,
314];
Ray
744-745
Wilson Co. v.
Cal.App.3d
Cal.Rptr.
1081, 1090;
Assn.,
Hospital
Memorial
Ab
Anaheim
Cal.App.3d
771;
Assn.,
State
bott v.
Auto.
see also
California
Superior
Times Mirror Co. v.
Court
53 Cal.3d
1333 [283
813 P.2d
not confined
jurisdiction
subject-
240] [excess
matter
but includes acts
excess of
as defined
jurisdiction,
authority
statutes,
Constitution,
decisions];
v. District Court
Abelleira
[same].)
Appeal (1941)
Cal.2d
P.2d
V I disagreement majority opinion, with the of the Despite my reasoning agree with the result it in which error reaches. This is not case appearing on the face of an injustice. arbitration award would cause a substantial
The was agreement between negotiated sophisticated parties; disparity substantial; bargaining power between the there is no indication of harm to the clients or other third there is no basis parties; award arbitrator’s that the fees were finding wholly disproportion- Therefore, ate services rendered. was not substantially unjust.
Conclusion result, I concur I Although cannot majority join support sanctioned and judicially enforced substantial injustice. majority’s hold- ing most violates the obligation basic and is inconsistent judiciary, *36 with our both well-established decisional law and our statute.
Mosk, J., concurred. Appellant’s petition for a denied rehearing September 1992. Mosk, J., Kennard, J., were the opinion that the should be petition granted.