Opinion ID: 2613976
Heading Depth: 3
Heading Rank: 4

Heading: Relationship of Relief to Rights Under Contract

Text: Intel maintains that, whatever the general standard, the cases establish one bright-line rule: [A]rbitrators may not award a remedy that conflicts with express terms of the arbitrated contract. To the extent this means arbitrators may not award remedies expressly forbidden by the arbitration agreement or submission, the point is well taken. How the violation of `an express and explicit restriction on the arbitrator's power' ( Hecla Min. Co. v. Bunker Hill Co., supra, 617 P.2d at p. 869) could be considered rationally related to a plausible interpretation of the agreement is difficult to see. Thus, for example, where a collective bargaining agreement provided for arbitration solely of `grievance[s],' and defined a grievance as `a complaint or claim against the employer,' the arbitrator was without power to award the employer damages against the union. ( Carpenter Local 1027 v. Lee Lumber & Bldg. Material (7th Cir.1993) 2 F.3d 796, 798-799.) [13] Even where the parties' original contract included a broad arbitration clause, the arbitrator's powers may be restricted by the limitation of issues submitted. (See, e.g., Totem Marine Tug & Barge v. North Am. Towing (5th Cir.1979) 607 F.2d 649, 650-651 [where arbitrated claim sought only return expenses, and claimant's brief in arbitration conceded charter hire was not at issue, arbitrator exceeded powers in awarding charter hire as damages].) (4) To the extent Intel is advocating a broader rule  that arbitrators may not award a party benefits different from those the party could have acquired through performance of the contract  the cases do not support its position. No exact correspondence is required between the rights and obligations of a party had the contract been performed and the remedy an arbitrator may provide for the other party's breach. In Morris v. Zuckerman, supra, 69 Cal.2d 686, for example, we held it within the arbitrator's power, as a remedy for the plaintiff's breach of fiduciary duties, to excuse the defendant from executing a document the parties' underlying contract required him to execute; the arbitrator properly created a condition to the required sale, although the original contract had no such limitation. ( Id. at pp. 688, 694.) Similarly, the union in Local 120 v. Brooks Foundry, Inc., supra, 892 F.2d 1283, had no contractual right to a payment of $13,000, but the award was proper to alleviate the effects of the company's breach. In Anderman/Smith Co. v. Tenn. Gas Pipeline Co., supra, 918 F.2d 1215, a dispute over the pricing of natural gas, the court approved an award requiring certain prices to remain in effect for one year and requiring any future price changes to be approved by the arbitrators, although the contract contained different, comprehensive provisions for price changes. ( Id. at pp. 1217, 1219-1220; see also Engis Corp. v. Engis Ltd., supra, 800 F. Supp. at pp. 629-630 [arbitrator within powers in requiring one party to delete Engis from its corporate name, even though contract specifically granted it right to use name]; Hecla Min. Co. v. Bunker Hill Co., supra, 617 P.2d at p. 870 [arbitrator could invalidate price schedule imposed by party while in breach although schedule was otherwise valid under contract]; Malekzadeh v. Wyshock, supra, 611 A.2d at pp. 22-23 [in dispute between general and limited partners, arbitrator could, as practical necessity, delegate managerial duties to independent third party, although contract assigned those duties to general partner].) As these examples demonstrate, arbitrators, unless expressly restricted by the agreement of the parties, enjoy the authority to fashion relief they consider just and fair under the circumstances existing at the time of arbitration, so long as the remedy may be rationally derived from the contract and the breach. The rights and obligations of the parties under the contract as it was to be performed are not an unfailing guide to the remedies available when the contract has been breached. It follows that parties entering into commercial contracts with arbitration clauses, if they wish the arbitrator's remedial authority to be specially restricted, would be well advised to set out such limitations explicitly and unambiguously in the arbitration clause. Because parties to arbitration agreements do have the power to limit possible remedies in this manner (as the dissent acknowledges), we do not believe our holding will, as the dissent speculates, discourage arbitration.