Adr Update

• Publication year: 2023
• Author: Ramit Mizrahi

ADR UPDATE

AUTHOR^*

Ramit Mizrahi

PARTIES CANNOT CONTRACT FOR REVIEW OF AWARD ON THE MERITS BY APPELLATE COURT

Housing Authority of the City of Calexico v. Multi-Housing Tax Credit Partners XXIX, L.P., 94 Cal. App. 5th 1103 (2023)

The parties' arbitration agreement in this case provided that the arbitrator "shall endeavor to decide the controversy as though the arbitrator were a judge in a California court of law." It further provided that the parties would maintain their appeal rights and that the arbitrator's decision and "findings of fact and conclusions of law shall be reviewable on appeal upon the same grounds and standards of review as if said decision and supporting findings of fact and conclusions of law were entered by a court with subject matter and present jurisdiction."

After the arbitrator issued a final award denying all claims and counterclaims and declined to award attorneys' fees or costs, the plaintiffs sought review in the trial court. That court declined to review the award on the merits for errors of fact or law and declined to grant the plaintiffs' petition to partially reverse or vacate the award. It reasoned that the arbitration agreement provided for such a review only by the appellate court. The plaintiffs appealed.

The court of appeal reversed, holding that the trial court should have undertaken the review. It noted that "courts are not parties to arbitration agreements and are not bound by their terms." It reasoned that just as parties cannot agree that a legal dispute arising from their arbitration agreements will be resolved by the California Supreme Court, they have no ability to leapfrog over the superior court's original jurisdiction to undertake such a review by placing this authority in the hands of the court of appeal.

NO AUTHORITY TO ISSUE 3RD-PARTY SUBPOENAS FOR DISCOVERY DOCUMENTS

McConnell v. Advantest America, Inc., 92 Cal. App. 5th 596 (2023)

A few years ago, in Aixtron, Inc. v. Veeco Instruments, Inc.,¹ the court of appeal held that the California Arbitration Act (CAA)² does not provide for prehearing discovery subpoenas to third parties. Thus, with the exceptions of wrongful death and personal injury cases, third-party discovery subpoenas are not available in most arbitrated cases unless the parties explicitly contract to allow for them.

Some arbitrators have attempted a workaround: issuing subpoenas to third parties to appear and produce documents at a hearing set specifically "for the limited purpose of receiving documents," with the actual arbitration hearing on the merits—where testimony from the same nonparties could be sought—adjourned until a future date.

This case makes clear that such a workaround fails—and that where a "hearing" is merely a tactic to provide for discovery of information and documents from third parties, such subpoenas are invalid under the CAA.

That was the reality in this case, where the arbitrator issued broad third-party...