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Litigation

: CalBizLit

Binding Arbitration Award Reversed For Excluding "Material Evidence" Causing Substantial Prejudice

By Bruce Nye

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CalBizLit is not personally a huge fan of binding arbitration, although many of our clients are. CBL realizes that arbitration often reduces the likelihood of a "high end," or runaway verdict. This is why defendants tend to favor arbitration and plaintiffs don't. But it isn't much cheaper than traditional dispute resolution. And because a binding arbitration award is scarcely ever reversible (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1), either side can get hit with an off-the-wall, arbitrary result and not be able to do much about it. Or is that so?

For your consideration, CBL offers Burlage v. Superior Court Of Ventura County (Spencer) (August 31, 2009) ___ Cal.App.4th ___ (2d Civil No.B211431). This is from the court that was reversed by the Supremes seventeen years ago in Moncharsh, and apparently, the court of appeal is still smarting.

More after the jump.

The Court is fairly amusing in writing about Moncharsh:

In 1991, we wrote what we thought was a routine arbitration opinion. (Moncharsh v. Heily & Blase (Apr. 2, 1991, B048936) [nonpub. opn.].) We relied on decades of precedent in our unpublished decision to affirm the arbitration award because no error appeared on the face of the award. In dicta, we noted that had the error appeared on the face of the award and created substantial prejudice, we would have reversed.

To our surprise, our Supreme Court granted review. Our holding was affirmed, but our dicta "reversed." (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1.) Oh well, nobody's perfect. Moncharsh held that judicial review of an arbitrator's decision regarding questions of fact or law is extremely limited. Thus, even though an error of law appears on the face of an arbitration award and causes substantial injustice, it is not subject to judicial review in the absence of a limiting clause or as provided by statute. (Id. at p. 25.)

And now, this court does it again. Short version: JAMS arbitrator excludes evidence showing that plaintiff didn't really suffer any damages. Said arbitrator proceeds to issue a seven figure award. Defendant moves to set aside award. Superior Court grants motion on the basis of Code of Civil Procedure section 1286.2, subdivision (a)(5), which requires vacation of an arbitration award when a party's rights are "substantially prejudiced" by the arbitrator's refusal to hear "evidence material to the controversy."

Court of appeal affirms, 2-1. Remember, under Auto Equity Sales, Inc. v. Superior Court of Santa Clara County (1962) 57 Cal. 2d 450, every trial court in the state is required to follow this unless another court of appeal reaches a contrary decision or the Supreme Court grants a hearing (in which case the decision immediately becomes unciteable). CBL will be monitoring this -- if a petition for hearing is filed, which seems likely, the ever erratic CBL crystal ball foresees the Supremes taking it.

Full post as published by CalBizLit on August 31, 2009 (boomark / email).