SW Legal studies in Business

Parties to Arbitration May Not Agree to Judicial Review of Arbitration Award
Description California appeals court held that a clause in an arbitration agreement that allowed judicial review of an award was contrary to the state's arbitration law and consequently made the entire arbitration agreement void and unenforceable.
Topic Alternate Dispute Resolution
Key Words Arbitration; Judicial Review; Unenforceable Agreement
C A S E   S U M M A R Y
Facts Dr. Crowell contracted to provide emergency room service to Downey Community Hospital Foundation (DCHF) for two years. The agreement required arbitration of disputes in accordance with the California Arbitration Act (CAA). The parties added a clause that the arbitrator was required to prepare written findings of fact and conclusions of law. Either party could petition a court to review the arbitrator's award. The court would have authority to overturn the award in whole or in part should it not be supported by substantial evidence or should there be an error of law. The parties got into a dispute. DCHF contended that the agreement was unenforceable as a matter of law because the judicial review clause was contrary to the CAA. The trial court agreed that the clause in the arbitration agreement was unenforceable. Crowell appealed.
Decision

Affirmed. The parties to the arbitration agreement could not expand court jurisdiction to review awards. Such judicial review is contrary to the CAA, which only allows judicial review in case of fraud, corruption or other serious issue. Hence, the arbitration agreement itself is unenforceable. The judicial review provision was so central to the agreement that it could not be severed from it. The parties would have to create a new arbitration agreement should they want to arbitrate a dispute. The court cannot reform the arbitration contract by eliminating the unenforceable provision; reform is only to correct mistakes, not to save an illegal contract.

Citation Crowell v. Downey Community Hospital Found., 115 Cal.Rptr.2d 810 (Ct. App., Calif., 2002)

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