Supreme Court Issues Arbitration Decision in Pearson Dental

This is a busy morning for cases we've been watching. The California Supreme Court has issued its opinion in Pearson Dental Supplies, Inc. v. Superior Court (Turcios) (April26, 2010) (original post here).

We have emphasized in our case law the limited nature of judicial review of contractual arbitration awards, concluding that, generally speaking, a court is not permitted to vacate an arbitration award when the award is based on errors of law. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 25, 28 (Moncharsh).) We also have indicated that the scope of judicial review may be somewhat greater in the case of a mandatory employment arbitration agreement that encompasses an employee’s unwaivable statutory rights. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 106-107 (Armendariz).)

In the present case involving the resolution of a statutory employment discrimination claim, an arbitrator decided in favor of an employer against the employee on the grounds that the claim was time-barred under the one-year contractual deadline for requesting arbitration. The trial court vacated the award, concluding, as explained below, that the arbitrator had plainly misapplied the relevant tolling statute, Code of Civil Procedure section 1281.12. The Court of Appeal, while agreeing with the trial court that the arbitrator had erred, held nonetheless that such error was not a valid basis for vacating an arbitration award and reversed the trial court.

We conclude that the trial court and Court of Appeal are indeed correct that the arbitrator clearly erred in ruling that the employee’s claim was time-barred. We further conclude that under the particular circumstances of this case, in which a clear error of law by an arbitrator means that an employee subject to a mandatory arbitration agreement will be deprived of a hearing on the merits of an unwaivable statutory employment claim, the trial court did not err in vacating the award. We therefore reverse the judgment of the Court of Appeal.

In a second issue, the employee argues that language in the arbitration agreement indicating that he is relinquishing not only the right to go to court but also to access administrative remedies is unconscionable, and that therefore not only should the arbitration award be vacated but the entire arbitration agreement should be invalidated. As explained below, we conclude the language in question is reasonably susceptible to a lawful interpretation, and therefore reject the employee’s claim of unconscionability.

I will post a follow-up when I have the time to review in detail.