California: Equity Arbitration OK!
June 9, 2008
SACRAMENTO, CA -- The California Supreme Court today, in effect approved net-ARB's use of equity arbitration. Equity arbitration guidelines allow arbitrators to decide cases based on fairness and to excuse technicalites when not doing so would produce an unfair result. (see » net-ARB's Arbitrator Guidlines)
The case of Gueyffier v. Ann Summers, Ltd., 43 Cal. 4th 1179 (2008) pitted a lingerie and "adult accessory" store franchisor against a failed franchisee whose store went belly-up immediately after his grand opening was greeted by a hoard of angry neighbors pelting the store with tomatoes.
The original case was a routine breach of contract and was decided in arbitration. In reaching his decision, the arbitrator let slide a technicality that would have caused the decision to go the other way, an inequitable result in the arbitrator's eyes.
The appellant argued that the arbitrator's "equitable excusal" exceeded his power. The Court disagreed, defining the enormous magnitude of an arbitrator's power to restore equity.
"Absent an express and unambiguous limitation in the contract or the submission to arbitration, an arbitrator has the authority to find the facts, interpret the contract,
and award any relief rationally related to his or her factual findings and contractual interpretation."
You can read the entire opinion here » California Supreme Court.