Are There Limits on a Trial Court's Ability to Correct an Arbitration Award?
Arbitration awards are generally not subject to appeal, but they can be corrected by the trial court. Are there limits on the trial court's ability to correct an arbitration award? Last month, the Fourth District Court of Appeal published a new decision addressing this issue. To find out what they decided, watch the video and read my case summary below.
New CA Arbitration Decision
E-Commerce Lighting, Inc. v. E-Commerce Trade LLC (2022) _ Cal.App.5th _ , 2022 WL 17547124: The Court of Appeal reversed the trial court’s order denying plaintiff’s motion to confirm an arbitration award, and granting defendant’s petition (supported by intervenor Banc of California, National Association’s (the bank)) to correct the arbitration award to eliminate the setoff awarded by the arbitrator. In 2015, defendant purchased plaintiff’s assets for $11.5 million. As part of the purchase defendant gave plaintiff a promissory note for $2.5 million. Defendant also obtained two loans from the bank, one for $5 million and the other for approximately $1.25 million. Plaintiff, defendant and the bank agreed that the promissory note to plaintiff would be subordinated to the bank loans. Plaintiff later sued defendant, defendant moved to compel arbitration, and the parties stipulated to arbitrate. The bank was not a party to the arbitration. Plaintiff claimed breach of the promissory note and defendant claimed breach of the asset purchase agreement. The arbitrator find in favor of both parties, concluding that defendant owed plaintiff $2,756,635.66 and plaintiff owed defendant $2,611,463.58. The arbitrator concluded that an offset was allowable, and issued a single final award of the difference of $145,172.08 to plaintiff. The trial court granted the motion to correct the award, and denied the petition to confirm it, because it concluded that the arbitrator’s setoff effectively allowed plaintiff to circumvent the subordination agreement with the bank. The Court of Appeal reversed. Per Code of Civil Procedure section 1286.6(b), the trial court could correct the award only without affecting the merits of the decision upon the controversy submitted. A party cannot use a petition to correct an arbitration award as an appeal of an arbitrator’s considered decision. Based on the facts presented, including that the arbitration parties had disputed whether a setoff was available, the Court of Appeal concluded that the correction affected the merits of the arbitrator’s decision and was therefore improper. (C.A. 4th, December 9, 2022.)
 There is a dissenting opinion in this case.
I still take a few select civil cases where I represent plaintiffs or defendants in business, insurance bad faith, personal injury, real property and wrongful death actions. Using my experience as a California civil trial lawyer since 1980, and a member of the American Board of Trial Advocates since 1995, my goal is to get each client the best possible result. My clients get the benefit of big firm experience with small firm attention and reasonable rates. To discuss a potential case, email me at [email protected], or call me at (619) 990-4312.
I also help attorneys and their clients by serving as a mediator, arbitrator and referee at ADR Services, Inc., handling cases in the areas of business, commercial, employment, insurance bad faith, insurance coverage, landlord-tenant (commercial and residential), legal malpractice, medical malpractice, personal injury, real property and wrongful death. To schedule an ADR matter with me, contact my case manager at ADR services, Haward Cho, [email protected], (213) 683-1600.
Until my next blog post, stay safe and healthy.
Monty A. McIntyre, Esq.
Master Lawyer Mentoring™
Civil Trial Attorney
Mediator, Arbitrator & Referee
California Case Summaries™
CA Civil Trial Attorney Since 1980
ABOTA Member Since 1995
Past President San Diego County Bar Assn., SD ABOTA Chapter
Phone: (619) 990-4312. Email: [email protected]