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July 2013: Arbitration Victory on Motion to Vacate

July 2013

The firm recently succeeded in vacating an eight figure arbitration award issued against one of its clients based on errors of law and legal reasoning in the Panel Majority’s award. The claimant asserted causes of action for breach of contract and other claims against a firm client and sought tens of millions of dollars in damages. The arbitration panel majority ruled in favor of the claimant—over a vigorous dissent of the third arbitrator—by disregarding or misapplying a number of basic legal principles regarding contract interpretation, including parol evidence, ratification, and set-off.

Quinn Emanuel immediately filed a motion to vacate the arbitration award based on the arbitrators’ legal errors in issuing the award and argued that the award should be vacated because the arbitration provision at issue provided that “the arbitrators shall not have the power to commit errors of law or legal reasoning and the award may be vacated or corrected on appeal to a court of competent jurisdiction.” The firm argued that Supreme Court precedent preventing parties from expanding the scope of judicial review of arbitrations under the Federal Arbitration Act was inapplicable here because the contract, and the review of the award, was governed by the California Arbitration Act, which allows parties to (1) contractually limit the powers of arbitrators to make legal errors; and (2) agree to expanded judicial review. Quinn Emanuel then argued the Panel Majority erred as a matter of law by, among other things, failing to apply the correct standard regarding ratification, ignoring the plain language of the agreement, improperly relying on legally irrelevant parol evidence, and awarding damages that were expressly precluded by the agreement.

The Los Angeles Superior Court adopted Quinn Emanuel’s argument regarding the scope of judicial review, i.e., that it was permitted to review the arbitrators’ reasoning, and vacated the award in its entirety, finding in favor of the firm client on every ground of error asserted.