Appellate Law

No appeal from order vacating partial arbitration award

By Greg May

One of the frustrations for parties forced to arbitrate their claims rather than pursue them in court is the unavailability of a direct route of appeal from the arbitration award. Generally, the only way to get out from under an adverse award is to petition the superior court to vacate the award (Code Civ. Proc., § 1285 et seq.), and then only on very limited grounds such as fraud, corruption, or misconduct by the arbitrator, generally unrelated to the substantive merits of the decision. If you’re on the other side ? i.e., you were the prevailing party in the arbitration ? you can take some comfort from the fact that if the loser in arbitration successfully gets the award vacated, you can appeal that order, unless it includes an order for a rehearing in arbitration. (Code Civ. Proc., § 1294, subd. (c).)

But that’s not always the case. In a decision late last year, Judge v. Nijjar Realty, Inc. (2014) 232 Cal.App.4th 619, the Court of Appeal held that when the arbitration award that is vacated fails to dispose of all arbitrable issues, the order vacating the partial award is not appealable. The appellant had procured a “clause construction award” that construed the arbitration clause to allow arbitration of class and representative claims but left the merits of those claims to later hearings. Respondent successfully petitioned the trial court to vacate the award, and the appeal followed.

After some interesting discussion about the degree to which the Federal Arbitration Act (9 U.S.C. § 1 et seq.) governs California arbitration procedure, the court finds that appealability of the order is governed by California state law rather then the FAA, and turns next to to the language in the California Arbitration Act. (Code Civ. Proc., § 1280 et seq.) Noting the plain language of Code of Civil Procedure section 1294, subdivision (c), that an aggrieved party may appeal from an “order vacating an award unless a rehearing in arbitration is ordered,” and further noting that no rehearing was ordered, the court notes that the issue presented  is “whether the trial court?s order in this case vacated an arbitration ‘award.’ ”

If that seems like a slam dunk, think again. The CAA provides that an “award” must “include a determination of all the questions submitted to the arbitrators the decision of which is necessary in order to determine the controversy.” Since the order in this case concerned only clause construction and left other issues for future hearings, there was no appeal from the order vacating the “award.”

This closely parallels the requirement that a superior court judgment be “final,” resolving all issues among the parties, in order to be appealable. The court notes that the same policy reasons underscoring this “one final judgment” rule also support requiring a final arbitration award as a condition of appeal from an order vacating it. Without such a limitation, the court reasons, all manner of interim arbitration awards could result in appeal from orders vacating them, defeating arbitration’s intended role as “a quick and efficient form of alternative dispute resolution.” Moreover, says the court, it would be anomalous to allow appeal from orders vacating arbitration awards when no appeal would lie from their counterparts in a civil action.

The obvious question left unanswered by Judge is whether the superior court has jurisdiction to hear a petition to confirm or vacate an interim award in the first place. The court explicitly noted the issue was left hanging, since it had no occasion to decide it, but opined that a superior court’s jurisdiction in such a case is doubtful, and implicitly encouraged the appellant to file a motion fore reconsideration in the trial court upon remand. (232 Cal.App.4th at p. 634, fn. 12.) From what I can tell from the somewhat cryptic online docket for the superior court, it looks like the appellant did just that, and the motion is still under consideration as of this writing. Another trip to the Court of Appeal in the near future seems likely.

Full post as published by The California Blog of Appeal on September 09, 2015 (boomark / email).