California SCT Holds that an Agreement to Have Judicial Review of the Merits of an Arbitration Award Is Enforceable under Cal. Arbitration Act

Professors Arnold Rosenburg and William Slomanson brought the following case to my attention (this is a quotation from Prof. Rosenburg's email):

Last week, the California Supreme Court held in Cable Connection, Inc. v. DIRECTTV, Inc., No. S147767 (August 26, 2008) that an agreement to subject the merits of an arbitration award to judicial review for errors of law is enforceable under the California Arbitration Act. The U.S. Supreme Court six months earlier held in Hall Street Associates, L.L.C. v. Mattel, Inc., ___ U.S. ___, 128 S.Ct. 1396 (2008) that the contrary is true under the Federal Arbitration Act, but noted that its holding did not preempt state laws on arbitration.

This ruling has significant implications for commercial and consumer arbitration agreements. Drafters of arbitration clauses in California now have to weigh whether it is in their clients’ best interest to provide for judicial review or instead, to make the arbitration award effectively the final say on the merits of the dispute.