A significant question involving the California Arbitration Act, see, California Code
of Civil Procedure section 1280, et seq., has been whether a phrase in an arbitration
contract requiring that the arbitrator render an award in "accordance" with California
substantive law is sufficient to require judicial review of the arbitrator's award for errors in
applying California law. That question was answered in the recent California Court of
Appeal opinion in Gravillis v. Coldwell Banker Residential Broker Co. (2010) 182
Cal.App.4th 503 ("Gravillis Case").
In order to understand the Court's ruling in the Gravillis Case, some history is
necessary. The current version of the California Arbitration Act was enacted in 1961 and
provides that there will be no challenge to an arbitrator's award except in defined
circumstances, one of which is that the arbitrator is not permitted to exceed his or her
powers. See, California Code of Civil Procedure section 1286.2(a)(4). In the case of
Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1 ("Moncharsh Case"), the California Supreme
Court embraced the rule that an arbitrator's decision may not be reviewed for errors of fact
or law and that it was within the authority of the arbitrator to render a decision whether or
not the decision comported with the facts or applicable law. That holding was
distinguished in the case of Cable Connection, Inc. v. DIRECTV, Inc. (2008) 44 Cal. 4th 1434
("Cable Connection Case"), wherein the California Supreme Court held that an arbitration
clause which specifically provided for judicial review would permit judicial review in the
event that the arbitrator's decision did not comply with California law.
A question arose, which was addressed in the Gravillis Case, as to whether a simple
statement in an arbitration contract that the arbitrator's award is to be rendered in
"accordance" with California law would be sufficient to provide the basis for judicial
review as suggested in the Cable Connection Case. In the Gravillis Case, a homeowner had
purchased a home in California pursuant to the California Association of Realtors form
Purchase Agreement which provides, in pertinent part:
"Buyer and Seller agree that any dispute or claim in Law or equity
arising between them out of this Agreement or any resulting
transaction… shall be decided by neutral, binding arbitration… The
arbitrator… shall render an award in accordance with substantive
The homeowner later sued his brokers and two employees of the brokerage firm based on
the brokers' alleged failure to disclose known material facts and defects dealing with
termite infestation, earthquake damage and water intrusion. The brokers filed a motion to
compel arbitration under the Purchase Agreement, which was denied due to an exclusion
in the arbitration clause for claims dealing with bodily injury. The Court of Appeal
reversed the Trial Court and the matter was then arbitrated before retired Judge Enrique
Romero of ADR Services, Inc. The arbitrator awarded $347,671.00 in damages and
$47,076.35 in arbitral costs to the homeowner. The homeowner then filed a petition to
confirm the award and the brokers filed a petition to vacate the award arguing that the
arbitrator had committed several errors of law and that the Purchase Agreement required
judicial review of the award. The Trial Court then granted the Petition to Confirm filed by
the homeowner and the brokers, once again, appealed.
On this Appeal, the California Court of Appeal, Second Appellate District, citing the
Moncharsh Case held that a general statement in an arbitration clause that the arbitrator
was to render a decision in accordance with California law was not sufficient to provide the
basis for judicial review of the arbitrator's decision for errors of law. The Court of Appeals
opinion, which was quite lengthy, explained that the strong policy favoring private
arbitration, as set forth in Moncharsh Case, prohibited judicial review of the arbitrator's
decision absent a specific agreement by the parties, as occurred in the Cable Connection
Case, that such review would occur.
The Gravillis Case is an important decision in that it provides that an arbitration
award will not be subject to judicial review for errors of law unless the arbitration
agreement, in the first place, specifically states that judicial review has been preserved. The
authors expect that the California Association of Realtors will likely revisit the form
language for its Purchase Agreement and that other form arbitration contracts will be
amended as well.
About the Authors: Edward F. Morrison, Jr. is the founding partner and Brett C.
Drouet is a partner of The Morrison Law Group, a professional corporation. Their
biographies can be viewed at www.morrisonlawgroup.com.
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