California Appellate Court Affirms Second Tier Arbitral Award that Reversed Original (Web)
April 13, 2005
Cummings v. Future Nissan, 2005 WL 805173 (Cal. App. 3 Dist. 4/8/05): California Courts confirm award rendered in “appellate” arbitration.
On April 8, California’s Third District Appellate Court affirmed a lower court’s order confirming an award rendered by an “appellate” arbitrator. In this case, a plaintiff bringing a case against her employer for wrongful dismissal had prevailed in arbitration, and that award had been reversed in a second-level review in which the second arbitrator found in favor of the employer.
After the initial arbitration, the defendant in this case moved for modification of the award by the arbitrator on the ground that he had refused to admit evidence rebutting the prima facie case presented by the plaintiff. At the same time, the company initiated the contractually agreed upon second level of arbitral review. The initial arbitrator denied the defendant’s modification motion, and the parties stipulated to the appointment of a second arbitrator who ruled in favor of the compnay. Meanwhile, the plaintiff petitioned the trial court for confirmation of the initial award, asserting that the contractual provision calling for a second level of arbitral review was unconscionable.
The trial court found that nothing in the second-level review was unconscionable so long as the defendant bore the cost of review and it was completed within a reasonable period of time, because it was equally applicable to both parties and did not otherwise derogate the purpose of contractual arbitration, and also because the plaintiff had failed to raise the issue in her initial opposition to arbitration. The plaintiff filed another motion in court, protesting the procedures followed in the second arbitrator’s review, and again the court found that the terms of the arbitration agreement were not unconscionable. The court granted the defendant’s motion to confirm the award, again denying the plaintiff’s claims of unconscionability and public policy arguments.
The plaintiff pointed to a number of aspects of the second level of review as rendering it unconscionable, including the length of time taken to complete it, costs, involvement of the original arbitrator in settling the record, creation of the settled record, and failure of the arbitrator to apply the same standard of deferential review that would be applied by the court when reviewing a motion to confirm an arbitral award.
The Appellate Court found that, as the trial court had previously noted, most of the cost and delay in the matter was attributable to the plaintiff and had been paid by the defendant. Additionally, nothing in the arbitration clause precluded participation of the original arbitrator in settling the record or use of a settled record and the second arbitrator was not bound to the scope of deferential review to which the court would be required to adhere. The court noted that “ it would otherwise be pointless to have a second level of review if the second arbitrator could not do any more than a trial court on a motion to vacate to an award.”
The Appellate court held that the plaintiff did not articulate any viable exceptions to the rule that an arbitrator’s decision cannot be reviewed for errors of fact or law, denying her claim that the second arbitrator erred in concluding as a matter of law that her dismissal did not violate important public policy, and affirming the trial court’s confirmation of the second arbitral award. .