Opinion ID: 2387101
Heading Depth: 1
Heading Rank: 4

Heading: Legal Error on the Face of the Award

Text: ¶ 7 Private arbitration in Washington State is governed exclusively by statute. Godfrey v. Hartford Cas. Ins. Co., 142 Wash.2d 885, 893, 16 P.3d 617 (2001). When the Brooms entered into the arbitration agreement and submitted their claims for resolution, arbitration was governed by the Washington Arbitration Act (WAA), former chapter 7.04 RCW. [2] The relevant provision permitted a court to vacate an arbitration award under the following circumstances: (1) Where the award was procured by corruption, fraud or other undue means. (2) Where there was evident partiality or corruption in the arbitrators or any of them. (3) Where the arbitrators were guilty of misconduct, in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence, pertinent and material to the controversy; or of any other misbehavior, by which the rights of any party have been prejudiced. (4) Where the arbitrators exceeded their powers, or so imperfectly executed them that a final and definite award upon the subject matter submitted was not made. (5) If there was no valid submission or arbitration agreement and the proceeding was instituted without either serving a notice of intention to arbitrate, as provided in RCW 7.04.060, or without serving a motion to compel arbitration, as provided in RCW 7.04.040(1). Former RCW 7.04.160. ¶ 8 Morgan Stanley focuses much of its argument on the statutory history of the WAA and the trial court's proper scope of review. But we previously addressed the scope of the trial court's review in Boyd v. Davis, 127 Wash.2d 256, 897 P.2d 1239 (1995), where we approved of facial legal error as an accepted basis for vacating an arbitral award. In Boyd, we suggested that such error indicates that the arbitrators exceeded their powers. 127 Wash.2d at 263, 897 P.2d 1239. ¶ 9 Our holding in Boyd was no outlier. We have repeatedly articulated a rule that explicitly includes facial errors of law as grounds for vacation. Davidson v. Hensen, 135 Wash.2d 112, 118, 954 P.2d 1327 (1998); Boyd, 127 Wash.2d at 263, 897 P.2d 1239; N. State Constr. Co. v. Banchero, 63 Wash.2d 245, 249-50, 386 P.2d 625 (1963). The Boyd majority embraced the existing rule, whereby facial legal error constitutes an instance in which arbitrators exceeded their powers, thus permitting vacation of the award. The Boyd concurrence correctly observed that this rule was originally adopted as an interpretation of Washington's 1925 arbitration act, which did include legal error as an explicit ground for vacation. Boyd, 127 Wash.2d at 266, 897 P.2d 1239 (Utter, J., concurring). The concurrence reasoned that we have improperly continued to apply this rule, ignoring the change in its statutory underpinnings. However, it is the Boyd majority that continues to guide us. Even after the enactment of the WAA, we have consistently approved of the Boyd rule, embracing facial legal error as a ground for vacation. ¶ 10 Morgan Stanley argues that we implicitly overruled Boyd when we approved of the Boyd concurrence in Malted Mousse, Inc. v. Steinmetz, 150 Wash.2d 518, 527, 79 P.3d 1154 (2003). However, as the Brooms point out, that reference to Boyd set no precedent. In Malted Mousse, we analyzed the standard of review governing mandatory arbitration. As part of that analysis, we contrasted the standards governing review of mandatory arbitration with those governing review of private arbitration. It was in this context that we referenced the Boyd concurrence, observing that the legal error standard for vacating a private arbitration award originated in a now-repealed statute. That reference played no part in our holdingthat grounds for vacating a private arbitration award do not apply to a mandatory arbitration award. Our holding in Malted Mousse thus provides no guidance in interpreting the grounds for vacating a private arbitration award. ¶ 11 Moreover, nothing in our Malted Mousse analysis can be read to overrule our previous cases. We have previously disapproved of overruling binding precedent sub silentio. State v. Studd, 137 Wash.2d 533, 548, 973 P.2d 1049 (1999). Thus, Morgan Stanley's argument that Malted Mousse implicitly overruled our prior cases and abandoned the facial legal error ground is unpersuasive. ¶ 12 Importantly, the legislature has not seen fit to clarify the statutory grounds for vacating an arbitral award. We have observed that `[t]he Legislature is presumed to be aware of judicial interpretation of its enactments,' and where statutory language remains unchanged after a court decision the court will not overrule clear precedent interpreting the same statutory language. Riehl v. Foodmaker, Inc., 152 Wash.2d 138, 147, 94 P.3d 930 (2004) (quoting Friends of Snoqualmie Valley v. King County Boundary Review Bd., 118 Wash.2d 488, 496-97, 825 P.2d 300 (1992)). After the Boyd court's characterization of facial legal error as an instance of arbitrators exceeding their powers, the legislature's failure to provide further clarification suggests its approval of that characterization. ¶ 13 Morgan Stanley argues, in essence, that we should overturn years of precedent approving of facial legal error as a ground for overturning arbitral awards. We have held that `[t]he doctrine of stare decisis requires a clear showing that an established rule is incorrect and harmful before it is abandoned.' State v. Devin, 158 Wash.2d 157, 168, 142 P.3d 599 (2006) (quoting Riehl, 152 Wash.2d at 147, 94 P.3d 930 (quoting In re Rights to Waters of Stranger Creek, 77 Wash.2d 649, 653, 466 P.2d 508 (1970))). Morgan Stanley and two amici, the Associated General Contractors and the Securities Industry and Financial Markets Association, argue that the facial legal error standard is harmful because it undermines the purposes of arbitration: finality and efficiency. But these arguments characterize the legal error standard as much broader than it is. ¶ 14 In fact, the facial legal error standard is a very narrow ground for vacating an arbitral award. When judicial review is limited to the face of the award, the purposes of arbitration are furthered while obvious legal error is avoided. But courts may not search the arbitral proceedings for any legal error; courts do not look to the merits of the case, and they do not reexamine evidence. Despite arguments to the contrary, the facial legal error standard does not permit courts to conduct a trial de novo when reviewing an arbitration award. Boyd, 127 Wash.2d at 262, 897 P.2d 1239. Through the years, our courts have applied the facial legal error standard carefully, vacating an award based on such error in only four instances, one of which was the case below. [3] Thus, given the narrowness of the facial legal error standard and the care with which it is applied, we see no harm in its continued application. ¶ 15 Washington is not the only state to provide for this type of review of arbitral awards. Other jurisdictions have also adopted a narrow facial legal error ground for vacating arbitration awards. See Anthony v. Kaplan, 324 Ark. 52, 918 S.W.2d 174, 178 (1996); First Health Group Corp. v. Ruddick, 393 Ill.App.3d 40, 331 Ill.Dec. 971, 911 N.E.2d 1201, 1213 (2009); Parr Constr. Co. v. Pomer, 217 Md. 539, 144 A.2d 69, 72 (1958); Washington v. Washington, 283 Mich.App. 667, 770 N.W.2d 908, 912 (2009); Tiberghein v. B.R. Jones Roofing Co., 151 N.H. 391, 856 A.2d 21, 24 (2004); State of New Jersey, Office of Employee Relations v. Commc'ns Workers of Am., 154 N.J. 98, 711 A.2d 300, 307 (1998); Welty v. Brady, 123 P.3d 920, 924 (Wyo.2005). ¶ 16 We hold that facial legal error falls within former RCW 7.04.160(4) as one instance in which arbitrators exceed their powers and that it is a valid ground to vacate an arbitration award.