When Is an "Arbitration" Not an Arbitration? When a Sitting Judge Serves as a Private Arbitrator

Dispute Resolution Journal, Aug-Oct 2005 by Smith, Charles H

Federal and state courts often urge parties to use alternative dispute resolution (ADR) in order "[t]o achieve more effective and efficient dispute resolution in a complex society."1 ADR is favored since it is usually more economical with respect to time and cost. The court system and a well-developed private ADR industry are readily available to provide binding arbitration, mediation, settlement conferences and other processes.

However, the zeal by judges to employ the ostensibly streamlined procedures of ADR has led them to suggest having a dispute decided before a sitting trial court judge who is supposedly going to preside as an "arbitrator" and issue a binding award.2 In the two California cases discussed in this article, these awards were appealed, but not for jurisdictional reasons. The court of appeal had to raise the issue of whether a sitting superior court judge could conduct a private arbitration, which has different procedures from a court proceeding. The answer, not surprisingly, is no.

This article discusses these cases and some precautions that counsel and parties can take to avoid ending up in an "arbitration" that is, instead, a court trial without any right to appeal.

The Elliott Case

In Elliott & Ten Eyck Partnership v. City of Long Beach,3 the parties sued each other in connection with an oil and gas lease. They had a dispute resolution provision in their contract calling for two party-appointed experts and a third neutral expert. At a status conference, the supervising judge suggested that the parties have a sitting judge decide the case as an "arbitrator." The parties agreed and settled on Judge Charvat as the arbitrator. Counsel made it clear at their first appearance before Judge Charvat that they had agreed his decision would be final and binding with no appeal.

After several days of hearings conducted over a seven-month period, Judge Charvat issued a "Decision of Arbitrator" in favor of the plaintiffs. The decision was on court stationery and the judge's signature appeared over a signature line that read "Richard F. Charvat, Arbitrator." Both sides filed motions with Judge Charvat for their attorney fees. The defendants separately filed a motion for a supplemental decision on contested issues that were not decided in the first decision. Judge Charvat responded by issuing a "Supplement to Decision of Arbitrator Filed," which modified and added to the original decision. The Supplemental Decision concluded with the statement, "The court shall retain jurisdiction to enforce this award."

The plaintiffs moved to vacate, arguing that Judge Charvat's Supplemental Decision exceeded the statutory authority arbitrators have to correct awards, and, therefore, was invalid. The defendants opposed this motion, contending that the parties never intended to limit Judge Charvat's authority, and that the case was conducted like a trial. Another judge denied the motion to vacate without stating any reasons. The plaintiffs appealed.

The California Court of Appeal affirmed the order denying the motion to vacate. It framed the issue as whether "Judge Charvat, in hearing and deciding the case, was limited to the authority of a contract arbitrator under the [California Arbitration] Act"4 which governs binding arbitration proceedings in California. If Judge Charvat's authority was so limited, "his supplement to decision was void" in accordance with venerable case audiority.5

The court observed that even though the dispute resolution provision did not use the term "arbitrate" or its derivatives, the proceeding before Judge Charvat was, strictly speaking, an "arbitration" because the judge was a neutral third-party decision maker selected by the parties, the parties had an opportunity to be heard, and the decision was binding, since they waived the right to appeal.

However, the court held that the proceeding was not a binding arbitration under the California Arbitration Act (CAA) because Judge Charvat was an acting judicial officer. The court also based its decision on these factors:

* Judge Charvat was not paid by the parties.

* He was not privately retained by them.

* He conducted the proceedings in court, in a manner similar to a bench trial.

* Although he signed papers referring to himself as an arbitrator, the papers also bore the imprimatur of the court.

* His supplemental order provided that "The court shall retain jurisdiction to enforce the award."6

* As a judicial officer, Judge Charvat "was bound to be faithful to the law. Accordingly he was precluded by Article VI, Section 17 of the California Constitution from accepting public employment other than as a judge."

The court concluded that

it was the overarching and commanding objective intent of the parties to have a judge, acting as a judicial officer, decide their case. The proceedings were not those of contract arbitration, subject to the Act, but rather those of a bench trial subject to the waivers of the parties (chiefly the right to appeal) that conferred an extraordinary effect to the decision.7