Opinion ID: 2613976
Heading Depth: 3
Heading Rank: 2

Heading: Review of Remedies

Text: (2) Intel contends that even if California precedents require deference to an arbitrator's assessment of arbitrability, a different, less deferential rule applies to an arbitrator's choice of remedies. Intel's position is neither logically persuasive nor supported by precedent. In providing for judicial vacation or correction of an award, our statutes (§§ 1286.2, subd. (d), 1286.6, subd. (b)) do not distinguish between the arbitrators' power to decide an issue and their authority to choose an appropriate remedy; in either instance the test is whether the arbitrators have exceeded their powers. Because determination of appropriate relief also constitutes decision on an issue, these two aspects of the arbitrators' authority are not always neatly separable. Morris v. Zuckerman, supra, 69 Cal.2d 686, illustrates this overlap between arbitrability and remedies. A contract required plaintiff and defendant to sell jointly owned land on demand of another party. When the demand was made, however, the plaintiff proposed selling to a company he controlled, and the defendant refused to comply. ( Id. at pp. 687-689.) The arbitrators decided the plaintiff and defendant were fiduciaries, and the proposed sale to a company controlled only by the plaintiff was an inequitable attempt to `squeeze out' the defendant. The arbitrators therefore declined to require the defendant to sign the new sale contract as written; instead they found he was obliged to execute the contract only if it was modified to include him as a one-half partner in the purchase. ( Id. at pp. 689, 691-694 & fn. 4.) This court, upholding the award, held it was within the arbitrators' power to decide the parties were fiduciaries, to consider that relationship in fashioning their award, and to make an award designed to prevent one party from taking unfair advantage of the other. ( Id. at pp. 693-694.) Although in Morris v. Zuckerman we did not explicitly state the issue in such terms, we there in fact upheld the arbitrators' choice of relief against a claim they exceeded their contractual authority. (69 Cal.2d at pp. 690-691.) The plaintiff contended the arbitrators had no authority to add conditions to the new sale contract; we held they could do so if they found equity and the parties' relationship required such relief. In reaching this conclusion we applied a rule of substantial deference to the arbitrators' jurisdictional determinations. ( Morris v. Zuckerman, supra, 69 Cal.2d at p. 690.) Morris thus implies an arbitrator's discretion to determine the extent of remedies is as great as his or her discretion to determine the related question of what issues are necessary to the decision. Deference to the arbitrator is also required by the character of the remedy decision itself. Fashioning remedies for a breach of contract or other injury is not always a simple matter of applying contractually specified relief to an easily measured injury. It may involve, as in the present case, providing relief for breach of implied covenants, as to which the parties have not specified contractual damages. It may require, also as in this case, finding a way of approximating the impact of a breach that cannot with any certainty be reduced to monetary terms. Passage of time and changed circumstances may have rendered any remedies suggested by the contract insufficient or excessive. As the United States Supreme Court explained in the leading case on review of arbitral remedies in the collective bargaining context, the arbitrator is required to bring his informed judgment to bear to reach a fair solution of a problem.... There the need is for flexibility in meeting a wide variety of situations. The draftsmen may never have thought of what specific remedy should be awarded to meet a particular contingency. ( Steelworkers v. Enterprise Corp. (1960) 363 U.S. 593, 597 [4 L.Ed.2d 1424, 1428, 80 S.Ct. 1358].) The choice of remedy, then, may at times call on any decisionmaker's flexibility, creativity and sense of fairness. In private arbitrations, the parties have bargained for the relatively free exercise of those faculties. Arbitrators, unless specifically restricted by the agreement to following legal rules, `may base their decision upon broad principles of justice and equity....' [Citations.] As early as 1852, this court recognized that, `The arbitrators are not bound to award on principles of dry law, but may decide on principles of equity and good conscience, and make their award ex aequo et bono [according to what is just and good].' [Citation.] ( Moncharsh, supra, 3 Cal.4th at pp. 10-11.) [8] Were courts to reevaluate independently the merits of a particular remedy, the parties' contractual expectation of a decision according to the arbitrators' best judgment would be defeated. Independent reevaluation by a court, moreover, is unlikely to be either expeditious or accurate. Arbitrations may, as this case demonstrates, be lengthy and complicated. The proceedings may be informal and a complete stenographic record may not be prepared. A reviewing court is thus not in a favorable position to substitute its judgment for that of the arbitrators as to what relief is most just and equitable under all the circumstances. Further, independent review of remedies, no less than of other arbitrated questions, would tend to increase the cost and delay involved. If the courts were free to intervene on these grounds [disagreement with the arbitrators' honest judgment as to remedy] the speedy resolution of grievances by private mechanisms would be greatly undermined. ( Paperworkers v. Misco, Inc. (1987) 484 U.S. 29, 38 [98 L.Ed.2d 286, 299, 108 S.Ct. 364].) We do not, by the above, intend to suggest an arbitrator's exercise of discretion in ordering relief is unrestricted or unreviewable. Such an extreme position enjoys no support in our statutes or cases. The powers of an arbitrator derive from, and are limited by, the agreement to arbitrate. ( Moncharsh, supra, 3 Cal.4th at p. 8.) Awards in excess of those powers may, under sections 1286.2 and 1286.6, be corrected or vacated by the court. Unless the parties have conferred upon the arbiter the unusual power of determining his own jurisdiction ( McCarroll v. L.A. County etc. Carpenters (1957) 49 Cal.2d 45, 65-66 [315 P.2d 322]), the courts retain the ultimate authority to overturn awards as beyond the arbitrator's powers, whether for an unauthorized remedy or decision on an unsubmitted issue. What does follow from the considerations discussed above is that review of remedies cannot be, as the Court of Appeal characterized it in this case, de novo. [9] Nor are Intel and allied amici curiae correct in describing judicial review of remedies as independent. To the contrary, an appropriately deferential review starts not from the beginning, but from the arbitrator's own rational assessment of his or her contractual powers and is dependent on (that is, rests on acceptance of) this and any other factual or legal determination made by the arbitrator. The principle of arbitral finality, the practical demands of deciding on an appropriate remedy for breach, and the prior holdings of this court all dictate that arbitrators, unless expressly restricted by the agreement or the submission to arbitration, have substantial discretion to determine the scope of their contractual authority to fashion remedies, and that judicial review of their awards must be correspondingly narrow and deferential.