Is Binding Arbitration Always Binding? Errors and Improprieties Can Cause an Arbitration Award to be Reversed.
Many have heard of “arbitration" or “binding arbitration." Arbitration is a proceeding outside the court system, where a private arbitrator or arbitrators are appointed to preside over a case, when the parties have agreed to have their case be heard in arbitration where there is no jury.
Arbitration can be “binding" or “non-binding." Binding arbitration is when the arbitrators findings and decision are final, and non-appealable. There are cases and statutes, however, that establish a basis upon which arbitration awards can be challenged in court.
The statutory grounds for vacating or correcting arbitration awards are set forth in sections 1286.2 and 1286.4 of the Code of Civil Procedure. While these are usually characterized as narrow exceptions, these statutory exceptions are broader than most attorneys realize. In reality, there are opportunities for setting aside standard “binding" arbitration awards, as established in the cases below.
- Vacating an Award After Trial Court Improperly Removed Arbitrator: An arbitration award was vacated where the trial court had improperly removed the first arbitrator and appointed a successor. Bosworth v. Whitmore (2006) 135 Cal.App.4th 536
- Violation of Public Policy as Exceeding Authority: An arbitration award award was partially vacated where the arbitrator exceeded his power by awarding public employees a pay increase where the matter was subject to legislative approval. California Dept. of Human Resources v. Service Employees Int’l Union, Local 1000(2012) 209 Cal.App.4th 1420.
- Restricting a Party’s Right to Representation: An arbitration award was vacated where the arbitrator excluded from the proceeding a corporate party’s attorney and representative. Hoso Foods, Inc. v. Columbus Club, Inc.(2010) 190 Cal.App.4th 881
- Improper Ex Parte Communications Between Arbitrators: The Court of Appeal affirmed an order vacating a medical malpractice arbitration award that was procured by “undue means," where there was ex parte contact between the doctor’s party arbitrator and the neutral arbitrator while the award was pending. Maaso v. Signer(2012) 203 Cal.App.4th 362.
- Failure to Disclose Conflicts: The Court of Appeal vacated a medical malpractice arbitration award where the doctor’s attorney failed to disclose to plaintiff’s attorney that he belonged to the same arbitration provider firm as the arbitrator.Gray v. Chiu(2013) 212 Cal.App.4th 1355.
- Improper Impaneling of Arbitrators: An award rendered by a single arbitrator was vacated where parties’ agreement called for a panel of three arbitrators. Parker v. McCaw(2005) 125 Cal.App.4th 1494.
- Failure to Admit Material Evidence: Burlage v. Superior Court (2009) 178 Cal.App.4th 524. Arbitrator’s exclusion of evidence was a reversible error.
These and several other cases establish that binding arbitration awards are not always the end of the story. There are circumstances, improprieties, and plain mistakes that if brought to light can cause an arbitration award to reversed.