Title: Pearson Dental Supplies v. Super. Ct.
Citation: 48 Cal. 4th 665
Docket Number: S167169
State: California
Issuer: California Supreme Court
Date: April 26, 2010

1 
Filed 4/26/10 
 
 
 
IN THE SUPREME COURT OF CALIFORNIA 
 
 
 
PEARSON DENTAL SUPPLIES, INC., 
) 
 
 
) 
 
Petitioner, 
) 
 
 
) 
S167169 
 
v. 
) 
 
 
) 
Ct.App. 2/4 B206740 
THE SUPERIOR COURT OF  
) 
LOS ANGELES COUNTY, 
) 
 
) 
Los Angeles County 
 
Respondent; 
) 
 
Super. Ct. No. BC 359605 
 
) 
LUIS TURCIOS, 
) 
 
) 
 
Real Party in Interest. 
) 
 ___________________________________ ) 
 
We have emphasized in our case law the limited nature of judicial review of 
contractual arbitration awards, concluding that, generally speaking, a court is not 
permitted to vacate an arbitration award when the award is based on errors of law.  
(Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 25, 28 (Moncharsh).)  We also have 
indicated that the scope of judicial review may be somewhat greater in the case of a 
mandatory employment arbitration agreement that encompasses an employee‟s 
unwaivable statutory rights.  (Armendariz v. Foundation Health Psychcare Services, Inc. 
(2000) 24 Cal.4th 83, 106-107 (Armendariz).) 
In the present case involving the resolution of a statutory employment 
discrimination claim, an arbitrator decided in favor of an employer against the employee 
on the grounds that the claim was time-barred under the one-year contractual deadline for 
2 
requesting arbitration.  The trial court vacated the award, concluding, as explained below, 
that the arbitrator had plainly misapplied the relevant tolling statute, Code of Civil 
Procedure section 1281.12.  The Court of Appeal, while agreeing with the trial court that 
the arbitrator had erred, held nonetheless that such error was not a valid basis for vacating 
an arbitration award and reversed the trial court. 
We conclude that the trial court and Court of Appeal are indeed correct that the 
arbitrator clearly erred in ruling that the employee‟s claim was time-barred.  We further 
conclude that under the particular circumstances of this case, in which a clear error of law 
by an arbitrator means that an employee subject to a mandatory arbitration agreement 
will be deprived of a hearing on the merits of an unwaivable statutory employment claim, 
the trial court did not err in vacating the award.  We therefore reverse the judgment of the 
Court of Appeal. 
In a second issue, the employee argues that language in the arbitration agreement 
indicating that he is relinquishing not only the right to go to court but also to access 
administrative remedies is unconscionable, and that therefore not only should the 
arbitration award be vacated but the entire arbitration agreement should be invalidated.  
As explained below, we conclude the language in question is reasonably susceptible to a 
lawful interpretation, and therefore reject the employee‟s claim of unconscionability. 
I. 
FACTUAL AND PROCEDURAL BACKGROUND 
Plaintiff Luis Turcios was hired as a janitor by defendant Pearson Dental Supplies, 
Inc., in February 1999.  He was terminated on January 31, 2006, at the age of 67.  He 
filed an administrative complaint with the Department of Fair Employment and Housing 
(DFEH) on April 5, 2006, claiming age discrimination.  On April 14, 2006, the DFEH 
issued a right-to-sue letter. 
On October 2, 2006, plaintiff filed a complaint against defendant in Los Angeles 
Superior Court alleging age discrimination in violation of the Fair Employment and 
3 
Housing Act (FEHA; Gov. Code, § 12900 et seq.), wrongful termination in violation of 
public policy, and breach of an implied-in-fact contract or obligation not to terminate him 
without good cause.  On November 8, 2006, Pearson filed a demurrer and motion to 
strike, contending plaintiff‟s claims of age discrimination and contractual violation were 
insufficiently detailed.  The trial court overruled the demurrer and motion to strike on 
December 11, 2006.  Defendant filed its answer on December 29, 2006, raising 31 
affirmative defenses.  In neither the demurrer nor the answer did defendant mention an 
arbitration agreement or plaintiff‟s obligation to arbitrate. 
The case proceeded with discovery, and in a joint case management conference 
statement submitted to the trial court on February 16, 2007, defendant requested a jury 
trial and anticipated the trial would last three days.  During a February 20, 2007, case 
management conference, defendant‟s counsel mentioned, for the first time, that there was 
an arbitration agreement in plaintiff‟s personnel file, and that this was something he 
“would have to explore.” 
On March 13, 2007, defendant filed a motion to compel arbitration, contending 
that plaintiff was bound by a dispute resolution agreement (DRA) he had signed in 
January 2001.  The agreement stated that “to avoid the inconvenience, cost, and risk that 
accompany formal administrative or judicial proceedings,” the parties agreed to arbitrate 
disputes arising out of the employment relationship.  The arbitration was to be conducted 
by a “mutually agreed upon arbitrator pursuant to the California Arbitration Act” (CAA; 
Cal. Code Civ. Proc., § 1280 et seq.)  The agreement also provided that any covered 
dispute “must be submitted to binding arbitration within one year from the date the 
dispute arose or the employee or Pearson first became aware of the facts giving rise to the 
dispute.  If any employment related dispute which may arise is not submitted to binding 
arbitration within one year from the date the dispute arose or the Employee or Pearson 
first became aware of facts giving rise to the dispute, Pearson and the Employee agree 
4 
that the claim shall be void and considered waived to the fullest extent allowed by law.”  
Plaintiff concurrently signed a document in Spanish advising him, inter alia, of the DRA 
and the intention to arbitrate disputes.   
On March 29, 2007, plaintiff filed an opposition to the petition to compel 
arbitration, arguing primarily that defendant had waived its right to demand arbitration by 
participating in the litigation.  Plaintiff, whose primary language was Spanish, also 
contended he had not understood the DRA and that therefore it was not a valid 
agreement.  On May 2, 2007, the trial court by written order granted defendant‟s petition.  
It rejected plaintiff‟s waiver arguments and found the agreement was valid and not 
unconscionable.  Plaintiff filed a writ petition challenging the trial court‟s order.  The 
Court of Appeal summarily denied the petition on May 31, 2007.   
On June 13, 2007, plaintiff and defendant agreed upon an arbitrator.  On July 24, 
2007, defendant filed with the arbitrator a motion for summary judgment, contending that 
plaintiff‟s claims were time-barred by the DRA, because they had been submitted to 
arbitration over a year after plaintiff‟s termination on January 31, 2006.  Plaintiff opposed 
the motion, contending that the one-year statute of limitations was substantively 
unconscionable, in part because it was shorter than the statute of limitations provided for 
FEHA claims.1  Plaintiff also claimed that, even if the one-year period was valid, it had 
not yet run, because it had been tolled pursuant to Code of Civil Procedure section 
1281.12, as discussed below, from the time the lawsuit was filed to 30 days after the time 
the order compelling arbitration became final.   
                                              
1  
Under FEHA, an administrative complaint filed with the DFEH must be filed 
within one year of the date of the alleged discriminatory action.  (Gov. Code, § 12960, 
subd. (d).)  The DFEH, if it decides not to pursue the matter, must issue a right-to-sue 
letter no later than a year after the complaint is filed.  (Id., § 12965, subd. (b).)  The 
complainant then has one year from the date of that letter to file a civil action.  (Id., subd. 
(d)(2).) 
5 
The arbitrator, in a brief letter, ruled in favor of defendant on October 17, 2007, 
and granted its motion for summary judgment.  The arbitrator stated simply that 
plaintiff‟s “failure to submit his claims and disputes to binding arbitration within the one-
year period as required by the Dispute Resolution Agreement or within the tolling period 
prescribed in Code of Civil Procedure section 1281.12 has resulted in a waiver of his 
right to proceed in this arbitration against his employer . . . .” 
Defendant petitioned the superior court to confirm the award on December 5, 
2007.  Plaintiff filed a motion to vacate the arbitrator‟s award on December 17, 2007.  
Plaintiff then filed an opposition to defendant‟s petition to confirm the arbitrator‟s award 
on December 26, 2007. 
The trial court vacated the arbitration award on January 28, 2008.  The court 
(Judge Alan Rosenfield) concluded that the arbitrator had made a clear error of law by, 
among other things, misinterpreting the tolling provisions of Code of Civil Procedure 
section 1281.12.  The court further concluded that under our holding in Armendariz, 
supra, 24 Cal.4th 83, the court was required to conduct judicial review sufficient to 
protect the plaintiff‟s unwaivable statutory rights arising from his FEHA claims and, 
pursuant to that authority, the court ruled the arbitrator had acted in excess of his 
jurisdiction and vacated the arbitration award. 
Defendant filed a timely appeal, and the Court of Appeal reversed.  Although the 
court rejected plaintiff‟s argument that the DRA‟s one-year limitation period was 
unconscionable, it agreed with plaintiff and with the court below that the arbitrator had 
“misapplied the tolling period provided by section 1281.12.”  The court nonetheless 
concluded that the arbitrator‟s erroneous decision “is insulated from judicial review and 
is not a proper basis upon which either to deny confirmation of the arbitration award or to 
vacate the award.” 
6 
Plaintiff petitioned for review in this court, raising two questions:  First, what 
standard of judicial review should a trial court employ to ensure that an employee‟s 
antidiscrimination claim brought under FEHA is adequately protected when arbitrated 
pursuant to a mandatory employment arbitration agreement?  Second, is a mandatory 
employment arbitration agreement restricting an employee from seeking administrative 
remedies for violations of FEHA unlawful?  We granted review. 
II. 
DISCUSSION 
A. Did the Trial Court Err by Vacating the Arbitration Award? 
In order to resolve the first issue presented by this case, we address two questions:  
First, did the arbitrator make an error of law in granting defendant summary judgment on 
the grounds that plaintiff‟s arbitral demand was time-barred?  Second, if the arbitrator did 
make such an error, was that sufficient grounds for the trial court to vacate the arbitration 
award? 
1. The Arbitrator Committed a Clear Error of Law 
In order to determine whether the arbitrator committed an error of law, we begin 
with the pertinent statute.  Code of Civil Procedure section 1281.12 states in full:  “If an 
arbitration agreement requires that arbitration of a controversy be demanded or initiated 
by a party to the arbitration agreement within a period of time, the commencement of a 
civil action by that party based upon that controversy, within that period of time, shall toll 
the applicable time limitations contained in the arbitration agreement with respect to that 
controversy, from the date the civil action is commenced until 30 days after a final 
determination by the court that the party is required to arbitrate the controversy, or 30 
days after the final termination of the civil action that was commenced and initiated the 
tolling, whichever date occurs first.” 
Neither of the parties disputes that Code of Civil Procedure section 1281.12 
applies in the present proceeding.  Here, the arbitration agreement required that a dispute 
7 
“must be submitted to binding arbitration within one year from the date the dispute arose” 
or “the claim shall be void and considered waived to the fullest extent allowed by law.”  
Plaintiff, the party required to initiate the action, instead commenced a civil action within 
the one-year period.  The commencement of this civil action therefore tolled the 
applicable time limitation until the final order compelling arbitration. 
According to its legislative history, the statute prevents “parties from being either 
forced to abide by arbitration agreements of dubious validity instead of seeking court 
evaluation, initiating costly and duplicative proceedings, or being unfairly deprived of 
any forum for resolution of the dispute.  Supporters observe that there are many 
legitimate reasons why a party might file a lawsuit in court, rather than demanding or 
pursuing arbitration.  Among these are the following:  (1) the plaintiff may believe the 
claims are not subject to arbitration because the arbitration agreement is unenforceable on 
grounds of unconscionability or similar concepts; (2) there may be a dispute about 
whether the particular claims at issue do or do not fall within the scope of an arbitration 
agreement; (3) the plaintiff may contend that one or more of the statutory grounds for 
denying a petition to compel arbitration set forth in Code of Civil Procedure section 
1281.2 exist, assuming the defendant does file a petition to compel arbitration in response 
to the plaintiff‟s filing of the lawsuit; (4) the plaintiff may prefer a court trial or jury trial 
and simply be hopeful that the defendant will not assert any right to arbitrate the claims, 
for whatever reason [indeed, the defendant may decide that it prefers a court proceeding 
as well]; and (5) the plaintiff might not even be aware that there is an arbitration 
agreement governing the controversy.”  (Assem. Com. on Judiciary, Analysis of Assem. 
Bill No. 1553 (2005-2006 Reg. Sess.) for hearing Apr. 5, 2005, p. 3, underlining and 
extra capitalization omitted.)  Thus, the statute unquestionably applies in the present case, 
when a plaintiff files a timely action in superior court, and a defendant, either deliberately 
8 
or through inadvertence, allows the lawsuit to proceed, asserting its right to arbitration 
only after the limitations period provided in the arbitration agreement has expired. 
The parties disagree, however, on how the tolling provision of Code of Civil 
Procedure section 1281.12 operates in the present case.  As recounted above, plaintiff 
was terminated on January 31, 2006, and filed a civil action on October 2, 2006, well 
within the one-year period.  The parties disagree on when the order to arbitrate became 
final, with defendant arguing the date was either April 12, 2007, when the trial court 
orally informed the parties of its ruling in favor of defendant‟s petition to compel 
arbitration, or May 2, 2007, when the trial court issued a written order.  Plaintiff affixes 
the date on May 31, 2007, when the Court of Appeal summarily denied plaintiff‟s writ 
petition challenging the trial court‟s grant of defendant‟s petition to compel arbitration.   
We do not know the arbitrator‟s reasons for concluding Code of Civil Procedure 
section 1281.12 did not save plaintiff‟s claim, but we do have defendant‟s arguments in 
defense of the arbitral decision, which may have been adopted by the arbitrator.  
Defendant states in its brief before this court:  “If the tolling provisions of Code of Civil 
Procedure section 1281.12 were applicable, then the one-year limitation period expired 
30 days after either April 12, 2007, when the trial court issued from the bench its final 
order, or May 2, 2007 when the trial court granted [defendant‟s] Petition to Arbitrate by 
Order.”  Therefore, plaintiff‟s first attempt to seek arbitration, which according to 
defendant was on June 13, 2007, when he agreed to an arbitrator, was untimely by 
defendant‟s reasoning. 
To understand the error of defendant‟s position, we begin with the meaning of 
“tolling.”  To “toll” has been defined most pertinently as “to stop the running of; abate 
.”  (Black‟s Law Dict. (8th ed. 2004) p. 1525.)  When it 
comes to the tolling of a statute of limitations, we have stated:  “Tolling may be 
analogized to a clock that is stopped and then restarted.  Whatever period of time that 
9 
remained when the clock is stopped is available when the clock is restarted, that is, when 
the tolling period has ended.”  (Woods v. Young (1991) 53 Cal.3d 315, 326, fn. 3.) 
The only way to make sense of defendant‟s position is to understand it as asserting 
that what is being tolled is not the running of the one-year contractual limitations period, 
but the contractual one-year deadline itself.  In other words, according to defendant‟s 
position, the contractual limitation period continues to run after a lawsuit is filed, but the 
actual one-year period deadline, if and when it is reached, is tolled, i.e., temporarily 
abated; the deadline then is reinstated 30 days after a plaintiff is compelled by judicial 
determination to arbitrate, leading to termination of the right to arbitrate if a plaintiff fails 
to initiate arbitration within that 30-day period.  What makes this interpretation untenable 
is not only that it is at variance with the common understanding of the term “tolling,” but 
also that it contradicts the express language of Code of Civil Procedure section 1281.12 
that tolling starts “from the date the civil action is commenced.”  This language 
establishes that what is being tolled is the running of the contractual limitations period 
itself, as plaintiff argues. 
Under a proper interpretation of Code of Civil Procedure section 1281.12, 
therefore, plaintiff‟s claim was not time-barred.  Leaving aside any tolling of the statute 
that may have resulted from the filing of a complaint with the DFEH, approximately 
eight months had passed between the time of the termination on January 31, 2006, and 
October 2, 2006, when plaintiff filed a complaint in superior court.  Choosing arguendo 
the earliest date defendant offers for when the trial court‟s order to arbitrate became final, 
April 12, 2007, then, by the terms of Code of Civil Procedure section 1281.12, the tolling 
ended 30 days after that, on May 12, 2007.  But the end of the tolling period simply 
means that the contractual limitations clock began to run again, not that the limitations 
period ended.  Because there were approximately four months left on the one-year 
limitation period when the civil action was filed, even if there was no FEHA tolling, then 
10 
plaintiff had four months from the May 12, 2007, date to initiate the arbitration.  
Plaintiff‟s initiation, which even by defendant‟s calculation was no later than June 13, 
2007, was well within this period.  Therefore, the trial court and the Court of Appeal 
were both correct in concluding that the arbitrator misapplied the tolling provision and on 
that basis erroneously granted summary judgment for defendant. 
2. Did This Error of Law Serve as a Proper Basis for Vacating the 
Arbitration Award? 
In assessing whether the trial court was correct in vacating the arbitrator‟s award 
due to arbitral error, we begin by reviewing pertinent case law.  In Moncharsh, supra, 3 
Cal.4th 1, a case involving an arbitration between an attorney and his former law firm 
over certain claims arising from his employment agreement, we noted that “arbitration 
proceedings are governed by title 9 of the Code of Civil Procedure, sections 1280-1294.2.  
Section 1286.2 sets forth the grounds for vacation of an arbitrator‟s award.  It states in 
pertinent part:  „[T]he court shall vacate the award if the court determines that:  [¶] (a) 
The award was procured by corruption, fraud or other undue means; [¶] (b) There was 
corruption in any of the arbitrators; [¶] (c) The rights of such party were substantially 
prejudiced by misconduct of a neutral arbitrator; [¶] (d) The arbitrators exceeded their 
powers and the award cannot be corrected without affecting the merits of the decision 
upon the controversy submitted; or [¶] (e) The rights of such party were substantially 
prejudiced by the refusal of the arbitrators to postpone the hearing upon sufficient cause 
being shown therefor or by the refusal of the arbitrators to hear evidence material to the 
controversy or by other conduct of the arbitrators contrary to the provisions of this 
title.‟ ”  (Moncharsh, supra, 3 Cal.4th at pp. 12-13.) 
We rejected a line of earlier cases that had held or suggested that notwithstanding 
these statutory criteria for vacating an arbitration award, an award may also be vacated 
when an error of law appears on the face of the arbitrator‟s decision and causes 
11 
substantial injustice.  (Moncharsh, supra, 3 Cal.4th at p. 13.)  Instead, after an extensive 
review of the historical development of arbitration and judicial review of arbitration 
awards, the court made clear “ „that in 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.‟ ”  (Id. at p. 25.)2 
The court further rejected the argument that Code of Civil Procedure section 
1286.2, subdivision (d) (now subd. (a)(4)), which authorizes an arbitration award to be 
vacated if the arbitrators “exceeded their powers,” was a basis for reviewing errors of law 
in an arbitration award.  “It is well settled that „arbitrators do not exceed their powers 
merely because they assign an erroneous reason for their decision.‟  [Citations.]  A 
contrary holding would permit the exception to swallow the rule of limited judicial 
review; a litigant could always contend the arbitrator erred and thus exceeded his powers.  
To the extent Moncharsh argues his case comes within section 1286.2, subdivision (d) 
merely because the arbitrator reached an erroneous decision, we reject the point.”  
(Moncharsh, supra, 3 Cal.4th at p. 28.) 
The Moncharsh court recognized “that there may be some limited and exceptional 
circumstances justifying judicial review of an arbitrator‟s decision” such as when 
“granting finality to an arbitrator‟s decision would be inconsistent with the protection of a 
party‟s statutory rights.”  (Moncharsh, supra, 3 Cal.4th at p. 32.)  Because the issue did 
not arise in that case, the Moncharsh court had no occasion to develop this exception. 
In Armendariz, supra, 24 Cal.4th 83, a case involving an alleged violation of the 
statutory right to be free of sexual harassment under FEHA, we considered the validity of 
                                              
2  
We recently held that the parties could indeed expressly provide in an arbitration 
agreement for expanded judicial review.  (Cable Connections, Inc. v. DIRECTV, Inc. 
(2008) 44 Cal.4th 1334, 1340 (Cable Connections).)  No such contractual provision is at 
issue in the present case. 
12 
a mandatory employment arbitration agreement, i.e., an adhesive arbitration agreement 
that an employer imposes on the employee as a condition of employment.  (Armendariz, 
supra, 24 Cal.4th at pp. 91-92, 103, fn. 8.)  Although holding that such an agreement is 
enforceable, we concluded that “it is evident that an arbitration agreement cannot be 
made to serve as a vehicle for the waiver of statutory rights created by the FEHA” (id. at 
p. 101), because the enforcement of such rights was for the public benefit and was not 
waivable (id. at pp. 100-101).  We concluded that a party to such an arbitration agreement 
must be able to fully vindicate his or her statutory cause of action in the arbitral forum.  
(Id. at p. 101.)  In order to ensure such vindication, “we held that arbitration of claims 
under the FEHA is subject to certain minimal requirements:  (1) the arbitration agreement 
may not limit the damages normally available under the statute (Armendariz, supra, 24 
Cal.4th at p. 103); (2) there must be discovery „sufficient to adequately arbitrate their 
statutory claim‟ (id. at p. 106); (3) there must be a written arbitration decision and 
judicial review „ “sufficient to ensure the arbitrators comply with the requirements of the 
statute” ‟ (ibid.); and (4) the employer must „pay all types of costs that are unique to 
arbitration‟ (id. at p. 113).”  (Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1076.) 
In the present case, we are concerned with the third requirement above — 
adequate judicial review.  We quote in full this portion of Armendariz: “As the United 
States Supreme Court has stated:  „[A]lthough judicial scrutiny of arbitration awards 
necessarily is limited, such review is sufficient to ensure that arbitrators comply with the 
requirements of the statute‟ at issue.  (Shearson/American Express Inc. v. McMahon 
(1987) 482 U.S. 220, 232 (McMahon).)  In Moncharsh, we acknowledged that judicial 
review may be appropriate when „granting finality to an arbitrator‟s decision would be 
inconsistent with the protection of a party‟s statutory rights.‟  (Moncharsh, supra, 3 
Cal.4th at p. 32; see also Board of Education v. Round Valley Teachers Assn. (1996) 13 
Cal.4th 269, 276-277.) 
13 
“We are not faced in this case with a petition to confirm an arbitration award, and 
therefore have no occasion to articulate precisely what standard of judicial review is 
„sufficient to ensure that arbitrators comply with the requirements of [a] statute.‟  
(McMahon, supra, 482 U.S. at p. 232.)3  All we hold today is that in order for such 
                                              
3  
The concurring and dissenting opinion claims that we mischaracterize this 
statement in McMahon, contending that the Supreme Court “repeatedly cites this very 
same statement when rejecting claims that the [Federal Arbitration Act‟s] provisions for 
judicial review, which do not authorize review for error, are too limited to protect rights 
under a statutory antidiscrimination law.”  (Conc. & dis. opn., post, at p. 8.)  However, 
the concurring and dissenting opinion‟s categorical statement that “the FAA‟s provisions 
for judicial review . . . do not authorize review for error” (conc. & dis. opn., post, at p. 8) 
is inaccurate, and the matter is in fact far more complex.  As reviewed in Hall Street 
Associates, L.L.C. v. Mattel, Inc. (2008) 552 U.S. 576, 584-585, federal courts have long 
held that “manifest disregard of the law” is a ground for vacating an arbitration award, 
although there was controversy among the circuits about the extent to which that 
formulation authorizes review for legal error.  Even after Hall Street, in at least a number 
of circuits, the “manifest disregard” standard survives, not as an independent ground for 
vacating arbitration awards, but as part of the statutory authorization that arbitration 
awards may be vacated when arbitrators “exceed their powers.” (9 U.S.C. § 10(a)(4); see 
Comedy Club, Inc. v. Improv West Assocs. (9th Cir.2009) 553 F.3d 1277, 1290; Citigroup 
Global Mkts., Inc. v. Bacon (5th Cir.2009) 562 F.3d 349, 357; Stolt-Neilsen SA v. 
Animalfeeds International Corp. (2nd Cir. 2008) 548 F.3d 85, 94-95.)  It has been said 
that the manifest disregard standard permits vacutur of arbitration awards under certain 
circumstances when an arbitrator‟s decision “strains credulity” (Stolt-Neilsen SA, supra, 
548 F.3d at pp. 92-93), and it is indeed questionable whether the arbitrator‟s ruling in the 
present case would have survived application of that standard were this case being 
litigated in federal court (see Comedy Club, Inc., supra, at pp. 1290-1294).  It is against 
the background of this “manifest disregard of the law” standard that the above quotation 
from McMahon must be understood.   
Moreover, in this case we interpret and apply the California Arbitration Act, not 
federal law.  No matter how the Supreme Court eventually resolves the judicial review 
issue under the Federal Arbitration Act, we need not and do not move in lockstep with 
the federal courts in matters of judicial review of arbitration awards, as we recently 
reaffirmed in Cable Connections in departing from Hall Street by permiting parties to 
contract to expand judicial review of legal error.  (Cable Connections, supra, 44 Cal.4th 
at pp. 1354-1355.)  We have also gone our own way in Moncharsh, articulating a strict 
review standard precluding vacatur for legal error that does not include a “manifest 
(footnote continued on next page) 
14 
judicial review to be successfully accomplished, an arbitrator in a FEHA case must issue 
a written arbitration decision that will reveal, however briefly, the essential findings and 
conclusions on which the award is based.  While such written findings and conclusions 
are not required under the CAA [citations], nothing in the present arbitration agreement 
precludes such written findings, and to the extent it applies to FEHA claims the 
agreement must be interpreted to provide for such findings.  In all other respects, the 
employees‟ claim that they are unable to vindicate their FEHA rights because of 
inadequate judicial review of an arbitration award is premature.”  (Armendariz, supra, 24 
Cal.4th at pp. 106-107.)   
                                                                                                                                                                           
(footnote continued from previous page) 
disregard” exception, while at the same time leaving open the possibility of greater 
judicial review, as discussed above, in the case of rulings inconsistent with the protection 
of statutory rights.  (Moncharsh, supra, 3 Cal.4th at p. 32.)  We elaborated on this 
statutory exception in Armendariz and do so again today, and in doing so recognize that 
McMahon‟s statement that judicial review of arbitration awards is “sufficient to ensure 
that arbitrators comply with the requirements of [a] statute” (McMahon, supra, 482 U.S. 
at p. 232) has a normative as well as a descriptive meaning.  Significantly, the concurring 
and dissenting opinion neither repudiates the above statement in McMahon, nor proposes 
a coherent alternative interpretation of that statement.   
Finally, the concurring and dissenting opinion‟s position, especially viewed 
together with our holding in Cable Connections, would significantly increase the level of 
inequality in our arbitration system.  While those with resources to negotiate may, if they 
wish, obtain full judicial review of an arbitrator‟s legal error, those on whom contracts of 
adhesion are imposed would receive no judicial review even of plain arbitral errors that 
result in a denial of a hearing on the merits on an unwaivable statutory claim.  The 
concurring and dissenting opinion implicitly contends that such gross inequality is 
mandated by the CAA.  For reasons explained in this opinion, we disagree. 
 
 
 
   
15 
More recently, in Cable Connections, in deciding that parties may contract for 
heightened judicial review, we recognized the “public policy exceptions to the general 
rule of limited [judicial] review”; for example, “when unwaivable statutory rights are at 
stake, this court has repeatedly held that review must be „ “sufficient to ensure that 
arbitrators comply with the requirements of the statute.” ‟ ”  (Cable Connections, supra, 
44 Cal.4th at p. 1353, fn. 14, quoting the portion of Armendariz cited above.) 
In the present case, we are faced precisely with the question that was prematurely 
posed in Armendariz, i.e., the proper standard of judicial review of arbitration awards 
arising from mandatory-arbitration employment agreements that arbitrate claims asserting 
the employee‟s unwaivable statutory rights.  As an initial matter, we reject the suggestion 
of amicus curiae Employers Group, echoed by the concurring and dissenting opinion, that 
all Armendariz requires is a written arbitral award.  Obviously, we did not envision such 
a written award as an idle act, but rather as a precondition to adequate judicial review of 
the award so as to enable employees subject to mandatory arbitration agreements to 
vindicate their rights under FEHA.  That being said, we note that the arbitrator‟s award in 
the present case did not even comply with the requirements set forth in Armendariz that 
“an arbitrator in a FEHA case must issue a written arbitration decision that will reveal, 
however briefly, the essential findings and conclusions on which the award is based.”  
(Armendariz, supra, 24 Cal.4th at p. 107.)  The arbitrator stated that plaintiff had failed to 
“submit his claims and disputes to binding arbitration within the one-year period as 
required by the Dispute Resolution Agreement or within the tolling period prescribed in 
Code of Civil Procedure section 1281.12,” without explaining, even briefly, his reasoning 
as to why plaintiff did not benefit from the tolling period. 
Nor need we decide whether the rules suggested by plaintiff and amicus curiae 
California Employment Lawyers Association is correct that all legal errors are reviewable 
in this context, or that all errors involving the arbitration statute itself are reviewable.  We 
16 
address only the case before us, and a narrower rule is sufficient for its resolution.  Here, 
as a result of the arbitrator‟s clear legal error, plaintiff‟s claim was incorrectly determined 
to be time-barred.  Indeed, the legal error misconstrued the procedural framework under 
which the parties agreed the arbitration was to be conducted, rather than misinterpreting 
the law governing the claim itself. 4  It is difficult to imagine a more paradigmatic 
example of when “granting finality to an arbitrator‟s decision would be inconsistent with 
the protection of a party‟s statutory rights” (Moncharsh, supra, 3 Cal.4th at p. 32) than 
the present case, in which, as a result of allowing the procedural error to stand, and 
through no fault of the employee or his attorney, the employee will be unable to receive a 
hearing on the merits of his FEHA claims in any forum.  Nor can it be plausibly argued 
that plaintiff merely received the justice he bargained for.  It is beyond dispute that there 
was no opportunity for bargaining over the arbitration agreement in this case. 
We therefore hold that when, as here, an employee subject to a mandatory 
employment-arbitration agreement is unable to obtain a hearing on the merits of his 
FEHA claims, or claims based on other unwaivable statutory rights, because of an 
arbitration award based on legal error, the trial court does not err in vacating the award.  
Stated in other terms, construing the CAA in light of the Legislature‟s intent that 
employees be able to enforce their right to be free of unlawful discrimination under 
FEHA, an arbitrator whose legal error has barred an employee subject to a mandatory 
arbitration agreement from obtaining a hearing on the merits of a claim based on such 
                                              
4  
We requested supplemental briefing by the parties on the meaning of Code of 
Civil Procedure section 1286.2, subdivision (a)(5), which provides in pertinent part that 
one of the grounds for vacating an arbitration award is “other conduct of the arbitrators 
contrary to the provisions of this title.”  Because we resolve this case on the above 
grounds, we need not address whether the arbitrator‟s misinterpretation of section 
1281.12 falls within the scope of the “other conduct” clause of section 1282.6, 
subdivision (a)(5). 
17 
right has exceeded his or her powers within the meaning of Code of Civil Procedure 
section 1286.2, subdivision (a)(4), and the arbitrator‟s award may properly be vacated.  
(See Armendariz, supra, 24 Cal.4th at pp. 106-107.) 
B. The Restriction of Administrative Remedies 
As noted, the second question posed by plaintiff‟s petition for review is whether 
language in a mandatory employment-arbitration agreement restricting an employee from 
seeking administrative remedies for violations of FEHA is lawful.  As will be recalled, 
the arbitration agreement between plaintiff and defendant contained language stating that 
it was the intention of the parties to the agreement “to avoid the inconvenience, cost, and 
risk that accompany formal administrative or judicial proceedings.”  (Italics added.)  He 
contends that this language must be interpreted as precluding plaintiff from seeking 
administrative remedies, and that such a provision is contrary to public policy.  This 
provision, plaintiff contends, combined with the shortened statute of limitations noted 
above, renders the arbitration agreement unconscionable.  Plaintiff therefore argues that 
we should not only uphold the trial court‟s vacatur of the arbitration award, but that we 
should invalidate the entire arbitration agreement and order the case to proceed in court. 
As recounted, although plaintiff resisted defendant‟s petition to compel arbitration, 
he did so on the grounds that defendant had waived the right to compel arbitration, and 
had failed to present the arbitration agreement in an understandable form.  He did not 
raise the issue of unconscionability based on preclusion of administrative remedies.  We 
therefore conclude that plaintiff has forfeited this issue.  (See Cummings v. Future Nissan 
(2005) 128 Cal.App.4th 321, 328-329 [party to arbitration agreement is generally obliged 
to raise unconscionability issues in court at the time she initially resists arbitration]; see 
also Moncharsh, supra, 3 Cal.4th at pp. 30-31 [a party contending the entire arbitration 
agreement is unlawful generally must raise the issue at the outset in the trial court].) 
18 
We also conclude that the claim fails on the merits.  First, we read the above 
quoted language as merely precatory, i.e., as a statement of purpose, that does not in itself 
operate to preclude plaintiff from pursuing any administrative remedy.  Second, even if 
the agreement were understood to preclude “formal administrative . . . proceedings,” it 
would not be unlawful in all possible applications.  It is true that the United States 
Supreme Court has recognized in EEOC v. Waffle House, Inc. (2002) 534 U.S. 279 that 
an arbitration agreement between an employer and an employee is not effective to bar the 
Equal Employment Opportunity Commission from prosecuting statutory 
antidiscrimination violations.  And we have stated in Armendariz, supra, 24 Cal.4th at 
page 99, footnote 6, anticipating Waffle House:  “Nothing in this opinion . . . should be 
interpreted as implying that an arbitration agreement can restrict an employee‟s resort to 
the Department of Fair Employment and Housing, the administrative agency charged 
with prosecuting complaints made under the FEHA, or that the department would be 
prevented from carrying out its statutory functions by an arbitration agreement to which it 
is not a party.”   
But as the United States Supreme Court recently recognized in Preston v. Ferrer 
(2008) 522 U.S. 346 [128 S.Ct. 978], an arbitration agreement could, under federal law, 
validly limit the resort of an employee to an administrative agency that acts as an 
adjudicator, rather than as a prosecutor, of employment claims, such as the Labor 
Commissioner in this state.  (Id. at p. 359.)  Even assuming an arbitration clause 
purporting to override the statutory jurisdiction of an administrative adjudicator would 
violate California law, state law would be preempted when applied to an arbitration 
agreement covered by the Federal Arbitration Act.  (522 U.S. at p. 360.) 
When an arbitration provision is ambiguous, we will interpret that provision, if 
reasonable, in a manner that renders it lawful, both because of our public policy in favor 
of arbitration as a speedy and relatively inexpensive means of dispute resolution, and 
19 
because of the general principle that we interpret a contractual provision in a manner that 
renders it enforceable rather than void.  (Roman v. Superior Court (2009) 172 
Cal.App.4th 1462, 1473; see also Civ. Code, § 3541 [“[a]n interpretation which gives 
effect [to an agreement] is preferred to one which makes void”]; Civ. Code, § 1643 [if 
possible without violating the parties‟ unambiguous intent, a contract is interpreted so as 
to make it “lawful, operative, definite, reasonable and capable of being carried into 
effect”].)  In the present case, we construe the language of the arbitration agreement, 
stating that the parties to the agreement intend “to avoid the inconvenience, cost, and risk 
that accompany formal administrative or judicial proceedings,” as stating an intention to 
lawfully preclude or restrict the parties to the arbitration agreement from submitting their 
claims for adjudication to an administrative entity such as the Labor Commissioner, at 
least to the extent set forth by the United States Supreme Court in Preston.  We therefore 
conclude that the inclusion of a provision limiting resort to an administrative forum does 
not render the arbitration agreement unconscionable or unenforceable.5 
                                              
5 
Plaintiff also contends that the one-year statute of limitations provided in the 
arbitration agreement is unlawful and independently renders the agreement 
unconscionable.  As noted above, under FEHA, an administrative complaint with the 
DFEH must be filed within one year of the date of the alleged discriminatory action.  
(Gov. Code, § 12960, subd. (d).)  The DFEH , if it decides not to pursue the matter, must 
issue a right-to-sue letter within a year after the charges are filed.  (Id., § 12965, subd. 
(b).)  The complainant then has one year from the date of that letter to file a civil action.  
(Id.,  subd. (d)(2).)  Plaintiff claims, inter alia, that because the one-year provision in the 
contract does not explicitly include the above provisions for filing claims with the DFEH, 
and appears to adhere to a rigid one-year deadline, it is contrary to public policy and 
renders the arbitration agreement unconscionable. 
 
This issue was not presented in the petition for review.  Generally we will not 
decide issues not raised in the petition for review or answer, although we have discretion 
to do so.  (Cal. Rules of Ct., rule 8.516(b).)  Here, the main focus of the briefing was on 
whether the trial court correctly vacated the arbitration award, not on whether the 
arbitration agreement was unconscionable because of an allegedly unlawful limitations 
provision.  Moreover, as discussed above, plaintiff did not advance this unconscionability 
(footnote continued on next page) 
20 
Finally, the Court of Appeal noted that defendant advanced certain “procedural 
arguments” as to why the trial court improperly granted plaintiff‟s petition to vacate the 
award, and deemed these moot in light of its determination that the trial court had erred in 
vacating the award.  These issues pertain to the timeliness and sufficiency of plaintiff‟s 
opposition to Pearson‟s petition to confirm the arbitration award, and whether these 
alleged defects undermined the validity of the trial court‟s order vacating the arbitration 
award.  We now remand the case to the Court of Appeal to have it decide these issues. 
III. 
DISPOSITION 
The judgment of the Court of Appeal is reversed and the cause is remanded for 
proceedings consistent with this opinion. 
 
 
 
 
 
 
MORENO, J. 
 
WE CONCUR: GEORGE, C. J. 
 
KENNARD, J. 
 
WERDEGAR, J. 
 
 
                                                                                                                                                                           
(footnote continued from previous page) 
claim before the trial court in resisting defendant‟s motion to compel arbitration, and it is 
therefore forfeit.  (See Cummings v. Future Nissan, supra, 128 Cal.App.4th at pp.  328-
329.)  We therefore decline to decide this issue. 
1 
 
 
CONCURRING AND DISSENTING OPINION BY BAXTER, J. 
 
 
I dissent from part II.A. (part A) of the majority‟s decision (ante, at pp. 6-
17), which holds this:  Even if the parties to a mandatory employment arbitration 
agreement did not agree to arbitral conformity with rules of law or to expanded 
judicial review, the arbitral resolution of the employee‟s statutory age 
discrimination claim is subject to court review if the claim was found time-barred.  
If the court determines that the arbitral award in the employer‟s favor reflects an 
error of law, then the award must be vacated pursuant to Code of Civil Procedure1 
section 1286.2, subdivision (a)(4) (section 1286.2(a)(4)), which requires vacatur 
when a court finds “[t]he arbitrators exceeded their powers and the award cannot 
be corrected without affecting the merits of the decision upon the controversy 
submitted.” 
I cannot join in this unsupported and unprecedented move to judicialize the 
arbitration process.  The majority misapplies section 1286.2(a)(4) and the 
principles articulated in Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1 
(Moncharsh) and Armendariz v. Foundation Health Psychcare Services, Inc. 
(2000) 24 Cal.4th 83 (Armendariz), so as to significantly undermine the strong 
public policy favoring arbitration as a fair, quick, and inexpensive means of 
resolving disputes.  Because I believe that review of the arbitral decision here is 
unauthorized, my dissent to part A expresses no opinion as to whether the 
                                              
1  
Unless otherwise indicated, all further statutory references are to this code. 
2 
arbitrator‟s application of the contractual time bar was legally erroneous, but 
assumes for purposes of argument that it was.2 
At the same time, I concur in part II.B. of the majority‟s decision, which 
concludes plaintiff has forfeited the claim challenging the arbitration agreement as 
unconscionable and unenforceable.  (Maj. opn., ante, at p. 17.) 
I. 
Moncharsh, supra, 3 Cal.4th 1, is our seminal decision governing judicial 
review of arbitration awards.  Moncharsh was decided in the context of an 
employment dispute that did not involve a claim for violation of the Fair 
Employment and Housing Act (FEHA; Gov. Code, § 12900 et seq.).  In assessing 
the extent to which a trial court may review an arbitral decision for errors of law, 
Moncharsh emphasized that minimizing judicial intervention in the arbitration 
process vindicates the intentions and expectations of the parties to an arbitration 
agreement in two significant ways. 
First, “[b]ecause the decision to arbitrate grievances evinces the parties‟ 
intent to bypass the judicial system and thus avoid potential delays at the trial and 
appellate levels, arbitral finality is a core component of the parties’ agreement to 
submit to arbitration.  Thus, an arbitration decision is final and conclusive because 
the parties have agreed that it be so.  By ensuring that an arbitrator‟s decision is 
final and binding, courts simply assure that the parties receive the benefit of their 
bargain.”  (Moncharsh, supra, 3 Cal.4th at p. 10, first italics added, fn. omitted; 
                                              
2  
As part A of the majority opinion indicates, there is no precedent governing 
the interpretation and application of Code of Civil Procedure section 1281.12 and 
its tolling provision.  Accordingly, while I assume for purposes of argument that 
the arbitral decision reflects legal error, I do not accept the majority‟s suggestion 
that it amounts to a “manifest disregard of the law.”  (Maj. opn., ante, at p. 13, 
fn. 3.) 
3 
see also Cable Connection, Inc. v. DIRECTV, Inc. (2008) 44 Cal.4th 1334, 1355, 
quoting Moncharsh (Cable Connection); Berglund v. Arthroscopic & Laser 
Surgery Center of San Diego, L.P. (2008) 44 Cal.4th 528, 534 (Berglund).) 
Second, “ „[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.  [Citations.]‟ ”  (Moncharsh, 
supra, 3 Cal.4th at pp. 10-11; see also Cable Connection, supra, 44 Cal.4th at p. 
1355, quoting Moncharsh; Berglund, supra, 44 Cal.4th at p. 534.)  Hence, parties 
to an arbitration agreement “ „ “may expect not only to reap the advantages that 
flow from the use of that nontechnical, summary procedure, but also to find 
themselves bound by an award reached by paths neither marked nor traceable and 
not subject to judicial review.”  [Citation.]‟ ”  (Moncharsh, at p. 11.)  Indeed, by 
voluntarily submitting to arbitration, the contracting parties have “agreed to bear 
[the risk of arbitral error] in return for a quick, inexpensive, and conclusive 
resolution to their dispute.”  (Ibid., italics added; see also Berglund, at p. 534.) 
The Legislature, having enacted a comprehensive statutory scheme 
regulating private arbitration (the California Arbitration Act; § 1280 et seq.), 
“expressed a „strong public policy in favor of arbitration as a speedy and relatively 
inexpensive means of dispute resolution.‟ ”  (Moncharsh, supra, 3 Cal.4th at p. 9.)  
Therefore, “[a]bsent a clear expression of illegality or public policy undermining 
this strong presumption in favor of private arbitration, an arbitral award should 
ordinarily stand immune from judicial scrutiny.”  (Id. at p. 32.) 
4 
Upon carefully weighing these considerations, Moncharsh concluded that, 
where, as here, there is no limiting clause in the parties‟ arbitration agreement,3 an 
arbitral award “is not subject to judicial review except on the grounds set forth in 
sections 1286.2 (to vacate) and 1286.6 (for correction).  Further, the existence of 
an error of law apparent on the face of the award that causes substantial injustice 
does not provide grounds for judicial review.”  (Moncharsh, supra, 3 Cal.4th at p. 
33; see also Moshonov v. Walsh (2000) 22 Cal.4th 771, 775.)  Applying these 
principles in the instant case leads to only one conclusion:  the arbitral decision 
finding plaintiff‟s FEHA claim time-barred is not subject to judicial review and 
vacatur, even though the decision is based on a legal error that forecloses plaintiff 
from proceeding on the merits of that claim. 
In holding to the contrary, the majority concludes judicial review and 
vacatur are proper under section 1286.2(a)(4), which authorizes vacatur of an 
arbitration award if the arbitrators exceeded their powers.  (Maj. opn., ante, at pp. 
16-17.)  That is plain wrong.  “It is well settled that „arbitrators do not exceed their 
powers merely because they assign an erroneous reason for their decision.‟  
[Citations.]  A contrary holding would permit the exception to swallow the rule of 
limited judicial review; a litigant could always contend the arbitrator erred and 
thus exceeded his powers.”  (Moncharsh, supra, 3 Cal.4th at p. 28 [addressing the 
predecessor to § 1286.2(a)(4)]; see also Gueyffier v. Ann Summers, Ltd. (2008) 43 
Cal.4th 1179, 1184; Moshonov v. Walsh, supra, 22 Cal.4th at p. 779.) 
                                              
3  
Parties to an arbitration agreement may limit the arbitral process by 
expressly agreeing that “legal errors are an excess of arbitral authority that is 
reviewable by the courts.”  (Cable Connection, supra, 44 Cal.4th at p. 1361.)  The 
majority acknowledges that no limiting clause exists in this case.  (Maj. opn., ante, 
at p. 11, fn. 2.) 
5 
The majority also reasons that, because “there was no opportunity for 
bargaining over the arbitration agreement in this case,” it cannot be said that 
“plaintiff merely received the justice he bargained for.”  (Maj. opn., ante, at p. 16.)  
That reasoning is faulty.  Although a court will scrutinize an arbitration provision 
in an adhesion contract to determine whether the provision is unduly oppressive or 
unconscionable, and therefore subject to revocation (see § 1281.2, subd. (b); 
Armendariz, supra, 24 Cal.4th at pp. 113-114), the adhesive nature of a contract 
appears irrelevant once the arbitration provision is found enforceable and the 
question remaining for determination is whether section 1286.2 authorizes judicial 
review and vacatur.  Contrary to the majority‟s suggestion, if an employee signed 
an employment contract containing an enforceable arbitration agreement as a 
condition of employment (Moncharsh, supra, 3 Cal.4th at pp. 6-7), then the risk of 
arbitral mistake is acceptable because the parties “voluntarily” submitted to the 
arbitration and “agreed to bear that risk in return for a quick, inexpensive, and 
conclusive resolution to their dispute.”  (Id. at p. 11.)4 
II. 
Unlike Moncharsh, Armendariz, supra, 24 Cal.4th 83, did not concern 
judicial review of an arbitration award.  Rather, Armendariz arose in the context of 
                                              
4  
Moncharsh‟s conclusion that an enforceable arbitration agreement is 
subject to the limited judicial review provided in the California Arbitration Act is 
in accord with the views of the United States Supreme Court.  For instance, in 
Gilmer v. Interstate/Johnson Lane Corp. (1991) 500 U.S. 20 (Gilmer), the high 
court rejected the contention that inequality in bargaining power is a sufficient 
reason to categorically preclude enforcement of compulsory arbitration 
agreements in the employment context; at the same time, the court found that 
claims for violations of the Age Discrimination in Employment Act of 1967 (29 
U.S.C. § 621 et seq.) are arbitrable, and that the limited judicial review provided in 
the Federal Arbitration Act (FAA; 9 U.S.C. § 1 et seq.) is adequate to vindicate 
such claims.  (Gilmer, at p. 32, fn. 4.) 
6 
a petition to compel arbitration and addressed only the enforceability of a 
mandatory employment arbitration agreement.  (Id. at pp. 91-92.)  Rejecting the 
contention that employees may never be compelled to arbitrate discrimination 
claims brought under the FEHA, Armendariz concluded “such claims are in fact 
arbitrable if the arbitration permits an employee to vindicate his or her statutory 
rights.”  (Id. at p. 90.) 
As Armendariz explained, an employment agreement for mandatory 
arbitration of a FEHA claim is valid and enforceable if the agreement (1) does not 
limit the remedies normally available under the FEHA; (2) allows discovery 
sufficient to adequately arbitrate the FEHA claim; (3) provides for a written 
arbitration decision that will reveal, however briefly, the essential findings and 
conclusions on which the award is based; and (4) does not require the employee to 
bear any type of expenses greater than the usual costs incurred during litigation 
(that is, the employer must pay costs that are unique to arbitration).  (Armendariz, 
24 Cal.4th at pp. 103-113; but see Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 
1064, 1085-1089 (conc. & dis. opn. of Baxter, J.) [disagreeing with Armendariz‟s 
views on cost allocation in light of Green Tree Financial Corp.-Ala. v. Randolph 
(2000) 531 U.S. 79].)  If the arbitration agreement does not make these 
requirements explicit, then the requirements are to be implied, so long as they are 
not inconsistent with the agreement.  (See Armendariz, at pp. 104, 106, 107, 113.)  
When a mandatory arbitration agreement satisfies the Armendariz requirements, 
then a petition to compel arbitration of a FEHA claim is properly granted. 
There appears no question here that the parties‟ mandatory arbitration 
agreement may be interpreted consistently with the four Armendariz requirements.  
That being the case, the superior court found the agreement enforceable and sent 
the matter to arbitration.  In contrast to the situation in Armendariz, the parties 
here actually appeared before an arbitrator, who made an award in defendant‟s 
7 
favor after hearing evidence and arguments on an affirmative defense.  But 
because the instant matter concerns the cross-petitions to confirm or vacate that 
award, and not the earlier petition to compel arbitration, the parties deserve to 
receive the benefit of their bargain.  That bargained-for benefit is the enforcement 
of the arbitration award pursuant to the California Arbitration Act and the 
principles articulated in Moncharsh, supra, 3 Cal.4th 1, which prohibit judicial 
review and vacatur of the award for legal error, even if such error bars a hearing 
on the merits of plaintiff‟s FEHA claim. 
In hunting down support for expanding judicial involvement in the 
arbitration process, the majority states:  “The Moncharsh court recognized „that 
there may be some limited and exceptional circumstances justifying judicial 
review of an arbitrator‟s decision‟ such as when „granting finality to an arbitrator‟s 
decision would be inconsistent with the protection of a party‟s statutory rights.‟  
(Moncharsh, supra, 3 Cal.4th at p. 32.)  Because the issue did not arise in that 
case, the Moncharsh court had no occasion to develop this exception.”  (Maj. opn., 
ante, at p. 11.) 
The majority does not say so, but Moncharsh supported its suggestion that 
protection of a statutory right may warrant an exception to the general rule of 
nonreviewability with an “accord” citation to Shearson/American Express Inc. v. 
McMahon (1987) 482 U.S. 220, 225-227 (McMahon), and a parenthetical notation 
describing McMahon as holding that “federal statutory claims are arbitrable under 
the Federal Arbitration Act unless party opposing arbitration demonstrates „that 
Congress intended to preclude a waiver of judicial remedies for the statutory rights 
at issue.‟ ”  (Moncharsh, supra, 3 Cal.4th at p. 32.)  Thus, with a nod to 
McMahon, Moncharsh left open the possibility that judicial review and vacatur 
may be appropriate if confirmation of an arbitration award were to contravene a 
party‟s statutory right to trial. 
8 
In support of its more invasive form of judicial review, the majority does in 
fact quote a portion of Armendariz that in turn quotes a different part of 
McMahon.  (Maj. opn., ante, at pp. 12-13.)  But nothing in McMahon suggests that 
judicial review for legal error is appropriate when plaintiffs assert claims based on 
unwaivable substantive rights protected by statute.  If anything, McMahon and 
later Supreme Court decisions espouse views to the contrary. 
In McMahon, supra, 482 U.S. 220, a brokerage firm and its registered 
representative were sued by their customers for alleged violations of the Racketeer 
Influenced and Corrupt Organizations Act and the Securities Exchange Act of 
1934 (Exchange Act).  Despite the statutory nature of the plaintiffs‟ claims, the 
Supreme Court emphasized that the “duty to enforce arbitration agreements is not 
diminished when a party bound by an agreement raises a claim founded on 
statutory rights.”  (McMahon, at p. 226.)  As the high court explained, “ „[b]y 
agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights 
afforded by the statute; it only submits to their resolution in an arbitral, rather than 
a judicial, forum.‟ ”  (Id. at pp. 229-230.) 
It bears emphasis that the Supreme Court found no basis for limiting 
arbitration of the plaintiffs‟ Exchange Act claims, even though the substantive 
protections of the Exchange Act, like those of the FEHA, cannot be waived by 
agreement.  (McMahon, supra, 482 U.S. at pp. 227-230.)  In the part of McMahon 
that Armendariz quotes, the high court remarked that “although judicial scrutiny of 
arbitration awards necessarily is limited, such review is sufficient to ensure that 
arbitrators comply with the requirements of the statute” at issue.  (McMahon, at p. 
232; see Armendariz, supra, 24 Cal.4th at p. 106.)  Given the text of McMahon‟s 
statement, its use as a springboard for expanding permissible review beyond the 
statutory grounds is puzzling.  Indeed, the Supreme Court repeatedly cites this 
very same statement when rejecting claims that the FAA‟s provisions for judicial 
9 
review, which do not authorize review for error, are too limited to protect rights 
under a statutory antidiscrimination law.  (14 Penn Plaza LLC v. Pyett (2009) ___ 
U.S.____, ____, fn. 10 [129 S.Ct. 1456, 1471, fn. 10] [addressing claim under Age 
Discrimination in Employment Act of 1967]; Gilmer, supra, 500 U.S. at p. 32, fn. 
4 [same]; cf. Hall Street Associates, L.L.C. v. Mattel, Inc. (2008) 552 U.S. 576, 
584-589 [grounds provided in FAA for vacatur are exclusive and do not permit 
judicial review for arbitral errors, even when parties contract to limit arbitral 
finality in this way].) 
Consistent with the Supreme Court‟s decision in McMahon, our recognition 
that a statutory right may warrant an exception to the general rule of 
nonreviewability was previously restricted to situations in which arbitration 
impaired a statutory right to a judicial forum.  (Aguilar v. Lerner (2004) 32 Cal.4th 
974, 981-983 [judicial review of arbitrator‟s decision appropriate because 
enforcement of the attorney-client arbitration agreement at issue contravened the 
client‟s right under a specific statutory scheme to reject an arbitrator‟s decision 
and proceed to trial]; Board of Education v. Round Valley Teachers Assn. (1996) 
13 Cal.4th 269, 276-277 [judicial review of arbitrator‟s decision permissible where 
party claimed “an „explicit legislative expression of public policy‟ that issues 
involving the reelection of probationary teachers not be subject to arbitration”]; 
see also Berglund, supra, 44 Cal.4th at pp. 538-539 [allowing full judicial review 
of arbitral discovery orders against nonparties to arbitration agreement in order to 
preserve the nonparties‟ legal rights].)  But employees have no statutory right to a 
trial or judicial review of FEHA claims, and this narrow exception has no 
application here. 
In short, there is nothing in Armendariz, or in McMahon, or in any other 
authority cited by the majority, that supports judicial review and vacatur when an 
arbitrator rules in favor of an affirmative defense that forecloses a hearing on the 
10 
merits of an unwaivable statutory claim.  Given the vast number of statutory 
schemes that can be claimed to protect unwaivable rights, as well as the myriad 
ways in which legal error can be claimed to preclude or impair a hearing on the 
merits, the majority‟s holding makes for an exception that will surely “swallow the 
rule of limited judicial review.” (Moncharsh, supra, 3 Cal.4th at p. 28.)5 
III. 
Part A of today‟s decision and the logic supporting it are confounding.  The 
decision runs counter to the settled principle that arbitrators generally may rely on 
broad principles of justice and equity to reject a claim.  It also contradicts our 
seminal case holding that an error of law causing substantial injustice does not 
provide grounds for judicial review.  Perhaps most troubling, the decision is 
irreconcilable with the fundamental premise that the risk of arbitral error is what 
                                              
5  
Apart from the above, I also question the majority‟s decision to allow 
judicial review and vacatur of an arbitral award only where the arbitrator 
erroneously rules in favor of the employer, but not when the ruling wrongly favors 
the employee.  Although we generally find a lack of mutuality in an arbitration 
agreement troublesome when it favors the employer as the party with superior 
bargaining power (see Armendariz, supra, 24 Cal.4th at pp. 114-121), I see no 
basis or rationale for imposing a one-sided rule of judicial review where, as here, 
neither party can be faulted for the situation.  In contrast to the majority‟s rule, 
each of the express statutory grounds for vacating or correcting an award is neutral 
in its application to the parties.  (§§ 1286.2, 1286.6.) 
 
Moreover, because the FAA preempts all state laws and rules disfavoring 
arbitration (see Allied-Bruce Terminix Cos. v. Dobson (1995) 513 U.S. 265, 271-
272), I have the additional concern that the FAA precludes this court from 
burdening the arbitral process as the majority does here, in the absence of an 
express legislative intent allowing such burdens.  (See generally Little v. Auto 
Stiegler, Inc., supra, 29 Cal.4th at pp. 1089-1095 (conc. & dis. opn. of Brown, J.) 
[disagreeing with majority‟s application of the Armendariz requirements to an 
action alleging wrongful termination in violation of public policy (Tameny 
claims)].) 
11 
contracting parties bargain for in exchange for a quick, inexpensive, and 
conclusive resolution to their dispute. 
I am aware that applying Moncharsh has a harsh effect on the employee in 
this instance.  But it is not for us to second-guess the legal or equitable basis of the 
arbitral award.  The employer‟s assertion of the time bar was a valid affirmative 
defense, and there is nothing to suggest the parties were unable to fairly present 
their arguments to the arbitrator on that question.  Where, as here, there is no 
limiting clause and no statutory right to a trial or judicial forum, the effect of 
allowing review and vacatur of the arbitral award is to frustrate the parties‟ 
contractual expectations and to defeat the strong public policy favoring arbitration. 
 
 
 
 
 
 
BAXTER, J. 
WE CONCUR: 
CHIN, J. 
CORRIGAN, J. 
 
 
See next page for addresses and telephone numbers for counsel who argued in Supreme Court. 
 
Name of Opinion Pearson Dental Supplies, Inc. v. Superior Court 
__________________________________________________________________________________ 
 
Unpublished Opinion 
Original Appeal 
Original Proceeding 
Review Granted XXX 166 Cal.App.4th 71 
Rehearing Granted 
 
__________________________________________________________________________________ 
 
Opinion No. S167169 
Date Filed: April 26, 2010 
__________________________________________________________________________________ 
 
Court: Superior 
County: Los Angeles 
Judge: Alan S. Rosenfield 
 
__________________________________________________________________________________ 
 
Attorneys for Appellant: 
 
Law Offices of Russell F. Behjatnia and Russell F. Bahjatnia for Petitioner. 
 
Jones Day, George S. Howard, Jr., and Kristine S. Tremble for Employers Group as Amicus Curiae on 
behalf of Petitioner. 
 
 
__________________________________________________________________________________ 
 
Attorneys for Respondent: 
 
No appearance of Respondent. 
 
Altshuler Berzon, Michael Rubin, Rebecca Smullin; Lavi & Ebrahimian, N. Nick Ebrahimian, Joseph Lavi, 
Jordan D. Bello; The deRubertis Law Firm and David M. deRubertis for Real Party in Interest. 
 
McGuinn, Hillsman & Palefsky, Cliff Palefsky and Keith Ehrman for California Employment Lawyers 
Association as Amicus Curiae on behalf of Real Party in Interest. 
 
 
 
 
 
 
 
 
Counsel who argued in Supreme Court (not intended for publication with opinion): 
 
Russell F. Bahjatnia 
Law Offices of Russell F. Behjatnia 
14401 Gilmore Street, Suite 100 
Van Nuys, CA  91401 
(818) 779-8888 
 
George S. Howard 
Jones Day 
12265 El Camino Real, Suite 200 
San Diego, CA  92130 
(858) 314-1200 
 
Michael Rubin 
Altshuler Berzon 
177 Post Street, Suite 300 
San Francisco, CA  94108 
(415) 421-7151 
 
Cliff Palefsky 
McGuinn, Hillsman & Palefsky 
535 Pacific Avenue 
San Francisco, CA  94133 
(415) 421-9292