Arbitration/Vacatur: “Manifest Disregard Of The Law” Is Manifestly Not A Ground For Vacating Arbitration Award Under California Law

 

Second District Division 2 Concludes That Arbitrator Did Not Disregard Choice Of Law Provision

     Roller Bearing Company of America (RBC) manufacturers roller bearing assembly parts and Honeywell International use them in engines it manufacturers.  Roller Bearing Company of America, Inc. v. Honeywell International, Inc., Case No. BS127074 (2nd Dist. Div. 2 August 23, 2012) (Chavez, J.) (unpublished) is a contract dispute between the two companies.  The arbitrator issued a ruling in favor of Honeywell in this breach of contract dispute, the judgment confirmed the award, and RBC appealed.

    

Inspector at the Fafnir Bearing Company inspecting large roller bearing which will probably end up in an Army tank.  1943.  Gordon Parks, photographer.  Library of Congress.

      The main issue in the case was whether the arbitrator disregarded a New York choice of law provision in order to consider inadmissible parol and extrinsic evidence to contradict the terms of the contract.  Honeywell argued that the arbitrator’s disregard of the parties’ contractual choice of law provision constituted “manifest disregard of the law.

     We posted on August 21, 2012 about Comerica Bank v. Howsam, et al. Case No. B232749 (2^nd Dist. Div. 5 August 20, 2012) (Turner, P.J., author)(partially published) , explaining that “manifest disregard of law” is not a ground for vacating an arbitrator’s award in California.  The grounds for vacatur are set forth in Cal. Code Civ. Proc. section 1286.2, and “manifest disregard of the law” is not one of those grounds.  The court concluded the same here, but then treated the argument as one that the arbitrator “exceeded the scope of his authority” by refusing to apply New York law governing parol evidence and integrated contracts.  The different label placed on the argument allowed the court to consider whether it provided a basis for vacating the award.  However, the court then concluded that the argument the arbitrator had disregarded New York law was “flatly contradicted” by the record.  The arbitrator had considered extrinsic evidence to interpret ambiguity, something permitted under New York law and the law of most states.

    RBC’s argument that the arbitrator admitted inadmissible parol and extrinsic evidence was “simply another way of saying that the arbitrator committed legal error.”  But legal error is not a ground for vacating an arbitration award. 

     Judgment affirmed.