Construction Arbitration Clause Calling For Expanded Judicial Review Must Be Explicit And Unambiguous

Parties to construction arbitrations who are disappointed with the arbitrator's award are often doubly-disappointed to learn that they have very little chance of successfully appealing in a court to overturn the arbitrator's decision. Because arbitration is intended to be a final and complete alternative dispute resolution process, judicial review of the arbitrator's award is quite limited. Ordinarily a court may not review the merits of the dispute, or overturn an arbitration award on ground that the arbitrator made legal errors or erred in applying the law to the facts. In general, a court is authorized to overturn an arbitration award only where (i) the award was procured by corruption or fraud; (ii) there was corruption or misconduct by the arbitrator, (iii) the arbitrator exceeded his or her powers, (iv) the arbitrator refused to postpone the hearing despite there being good cause to do so and that prejudices the parties, or (v) the arbitrator failed to disclose potential grounds on which he or she could be disqualified or refused to disqualify himself when there was cause to do so. See, e.g., Cal. Civ. Proc. Code 1286.2.

To expand the scope of judicial review beyond these parameters and obtain something akin to an ordinary right of appeal, parties have attempted to "contract around" the statutory provisions, and have included language in their arbitration agreements providing for appeal or judicial review of the substance of the arbitrator's decision. In a recent decision, the California Court of Appeal held that to be enforceable, an agreement for expanded scope of judicial review of the arbitrator's award must be explicit and unambiguous, and language in the arbitration agreement stating that the arbitrator must render an award "in accordance with substantive California law" is not sufficient. Gravillis v. Coldwell Banker Residential Brokerage Company, 182 Cal. App. 4th 503 (2010). In Gravillis, the plaintiff had purchased a home using a standard form California purchase agreement which included a clause requiring arbitration of any disputes arising out of the agreement. The arbitration clause stated that the arbitrator "shall render an award in accordance with substantive California law." 182 Cal. App. 4th at 508. Before he moved into the home, plaintiff discovered it had extensive structural damage which left it essentially uninhabitable. Plaintiff filed a lawsuit in court against his real estate brokers for failing to disclose...