I have noted in two prior blogs that Arbitrators have nearly unlimited discretion to make mistakes and not follow the law, and their mistakes are protected by the courts. In a recent California case, buyers bought a house and learned that the pool and fence encroached on neighboring property. Claiming that the seller knew of the encroachment but failed to disclose, buyers pursued arbitration.
After the sale but before the arbitration the title insurance company paid the neighbor in exchange for a lot line adjustment, giving the buyer clear title. The buyers convinced the arbitrator to exclude evidence of the lot line adjustment, claiming that their damages were fixed on close of escrow.
The arbitrator excluded the evidence, and found that the buyers were damaged in the amount of $552,750, even though the problem was fixed before the arbitration.
The Court of Appeal vacated the arbitration agreement, finding that the seller’s rights were “substantially prejudiced” by the refusal to admit material evidence, grounds for setting aside an arbitration under CCP 1286.2(a)(5). (One judge dissented, not wanting to vacate the award.)
This is a good decision- the court properly applied the existing law regarding exclusion of evidence. However, it is just a reminder to arbitrators to let everything in. The arbitrator can ignore any or all the evidence and be protected by the courts- it is only by NOT allowing evidence in can the decision be reversed.
Burlage v. Superior Court (2009) 178 CalApp 4th 524