The California Supreme Court has added a new dimension to arbitration by permitting arbitration clauses subject to expanded judicial review. In Cable Connection, Inc. v. Directv, Inc., the court concluded that parties to a contract can include an arbitration clause expressly permitting a challenge to an award on grounds the arbitrator committed legal error.
The Cable Connection court, citing the statutory provision in the California Arbitration Act (CAA) authorizing appeals from awards if arbitrators "exceed their powers," interprets that section to incorporate the right of parties to draft arbitration clauses under the rubric of freedom of contract.
The California Supreme Court decision directly contradicts the U.S. Supreme Court decision in Hall Street Associates, L.L.C. v. Mattel, Inc., restricting grounds of appeal under the Federal Arbitration Act (FAA) to those specifically enumerated in the federal statute. According to the Hall Street court, the FAA does not permit parties to confer appellate jurisdiction on federal courts by contractually agreeing to an arbitration clause authorizing appeal of an arbitration award for legal error.
Both these decisions guarantee litigation not only in expanding the ability of the nonprevailing party in arbitration to appeal the award but in determining the relevant federal or state statute applicable to the case.
Comments