2016-00829240
URS Corporation vs Coast Community College District
The parties dispute whether the arbitrator?s award is subject to review pursuant to CCP ? 1296, i.e. whether the court may vacate the award if it determines that the award is not supported by substantial evidence or that it is based on an error of law. The Court finds that, based on the evidence presented, the parties did not expressly agree that the arbitrator?s award must be supported by law and substantial evidence, and, accordingly, that the writ petition is to be decided pursuant to CCP ? 1286.2 rather than Section 1296.
? ? ?[I]n the absence of some limiting clause in the arbitration agreement, the merits of the award, either on questions of fact or of law, may not be reviewed except as provided in the statute.? ? ? (Cable Connection, Inc. v. DIRECTV, Inc. (2008) 44 Cal.4th 1334, 1340.) ??Moreover, [a]rbitrators, unless specifically required to act in conformity with rules of law, may base their decision upon broad principles of justice and equity, and in doing so may expressly or impliedly reject a claim that a party might successfully have asserted in a judicial action.? (Id. at 1355 [internal quotes omitted].)
And as noted by Petitioner URS, ?[i]f the parties constrain the arbitrators? authority by requiring a dispute to be decided according to the rule of law, and make plain their intention that the award is reviewable for legal error, the general rule of limited review has been displaced by the parties? agreement. Their expectation is not that the result of the arbitration will be final and conclusive, but rather that it will be reviewed on the merits at request of either party.? (Id. [italics in original].) Thus, the California Supreme Court has held that ?the general rule of limited review? of an arbitration award is displaced where the parties agree to limit the arbitrator?s authority and to expand the court?s scope of review.
In this case, the agreement at Art. VII, ? 4 provides as follows: ?Any arbitration award shall be subject to confirmation, vacation or correction under the procedures and on the grounds specified in the California Code of Civil Procedure, including, without limitation, Section 1296.? This language is ambiguous on its face as it implicitly references ? 1286.2 (a CCP provision setting forth limited grounds upon which an arbitration award may be vacated) and also ?include[s] without limitation? CCP ? 1296. As it turns out, this ambiguity is only one reason why ? 1296 does not apply here.
Even if the parties had expressly and unambiguously agreed that the scope of the court?s review of the arbitration award would be subject to CCP ? 1296, that agreement still would be insufficient. Significantly, there is no express agreement to limit the arbitrator?s authority in ruling on the award. Nor does the language of CCP ??1296 supply the missing term. Section 1296 provides as follows:
The parties to a construction contract with a public agency may expressly agree in writing that in any arbitration to resolve a dispute relating to the contract, the arbitrator’s award shall be supported by law and substantial evidence. If the agreement so provides, a court shall, subject to Section 1286.4, vacate the award if after review of the award it determines either that the award is not supported by substantial evidence or that it is based on an error of law.
Thus, ?section 1296 authorizes review for legal error without any specific agreement to that effect. The parties to a public construction contract need only provide that the award must be supported by law and substantial evidence.? (Cable Connection, Inc., supra, 44 Cal.4th at 1357.) Put another way, if the parties expressly agree to limit the arbitrator?s authority, then Section 1296 expands the court?s scope of review of the arbitration award without the need for the parties to specifically agree to it. Section 1296 does not, however, stand for the converse. In short, what is missing here is the essence of ? 1296, i.e., an express provision that the arbitrator must issue an award that is supported by law and substantial evidence. Such a provision is required before the court can review the award for lack of substantial evidence and errors of law under Section 1296.
The court therefore finds that in order for ? 1296 to apply, the parties were required to expressly agree to limit the arbitrator?s authority, by stating that his award must be supported by the law and/or evidence. Not only does this finding comport with the language of CCP ? 1296, but it does not frustrate the ?strong public policy in favor of arbitration as a speedy and relatively inexpensive means of dispute resolution.? (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9.) If an arbitrator?s authority is not so expressly limited, then they ?do not ordinarily exceed their contractually created powers simply by reaching an erroneous conclusion on a contested issue of law or fact.? (Cable Connection, Inc., supra, 44 Cal.4th at 1360.) Simply stated, if the court were to adopt the position of URS, it would lead to the inconsistent result that an arbitrator could properly issue an award under one standard, but the same award would be subject to review under an entirely different standard.
In light of the foregoing, the parties should be prepared to discuss a briefing schedule and page limits with respect to the remaining arguments in URS?s petition to vacate arbitration award and the College District?s response thereto.