Moncharsh v. Heily & Blase - 3 Cal. 4th 1, 10 Cal. Rptr. 2d 183, 832 P.2d 899 (1992)

Rule:

Arbitrators, 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. 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 according to what is just and good. As a consequence, arbitration awards are generally immune from judicial review. Parties who stipulate in an agreement that controversies that may arise out of it shall be settled by arbitration, 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. 

Facts:

Although an attorney terminated his employment with a law firm, he continued to represent some of the clients who had signed retainer agreements with his former firm. After a dispute arose between the firm and the attorney regarding the firm's claim for a quantum meruit share of the fees, as well as a percentage of the fees pursuant to a fee-splitting provision of the attorney's former employment contract, the parties submitted the dispute to arbitration. Although the attorney claimed that the fee-splitting provision was illegal, the arbitrator ruled in favor of the law firm. Both parties sought judicial action on the arbitrator's award, and the trial court granted the law firm's petition to confirm the award. The appellate court affirmed.

Issue:

Was an arbitration award reached under a contractual agreement subject to judicial review?

Answer:

No

Conclusion:

The court affirmed the lower court's judgments and held that an arbitration award reached under a contractual agreement was not subject to judicial review except on the grounds set forth in Cal. Civ. Proc. Code §§ 1286.2, 1286.6. The court held that it found no reason why the strong presumption in favor of the finality of the arbitral award should not apply. Further, an error of law apparent on the face of the award that caused substantial injustice did not provide grounds for judicial review.