U.S. Court of Appeals for the First Circuit, Green Enterprises, LLC v. Hiscox Syndicates Limited at Lloyd’s of London; XL Catlin Lloyd’s Syndicate 2003; Amlin Lloyd’s Syndicate 2001; Canopius Lloyd’s Syndicate 4444; Noa Lloyd’s Syndicate 3902; Blenheim Lloyd’s Syndicate 5886; Brit Lloyd’s Syndicate 2987/2988, Docket No. 21-1542

Insurance Law

 

Motion to Compel Arbitration

 

Question of First Impression (First Circuit)

 

Conflicts Between State Laws Regulating Insurance and Acts of Congress

 

Preemption

 

Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. (A Self-Executing Treaty)

 

Comity

 

 

 

 

Green Enterprises, LLC ("Green"), a Puerto Rican recycling company, filed an insurance claim after a fire destroyed one of its plants. The underwriters of Green's insurance policy, all syndicates at Lloyd's of London ("Underwriters"), denied the claim, prompting Green to initiate this lawsuit. Pointing to an arbitration clause in the insurance policy, the district court declined to decide the parties' coverage dispute and granted Underwriters' motion to compel arbitration. Green then timely filed this appeal. As we will explain, this appeal presents a question of first impression in this circuit that turns on the interactions among Puerto Rico law, two federal statutes, and a multilateral treaty to which the United States is a party. For the following reasons, we affirm the judgment of the district court granting Underwriters' motion to compel arbitration and dismissing Green's claims without prejudice.

 

 

The arbitration clause provides: If the Insured and the Underwriters fail to agree in whole or in part regarding any aspect of this Policy, each party shall, within ten (10) days after the demand in writing by either party, appoint a competent and disinterested arbitrator and the two chosen shall before commencing the arbitration select a competent and disinterested umpire. The arbitrators together shall determine such matters in which the Insured and the Underwriters shall so fail to agree and shall make an award thereon, and if they fail to agree, they will submit their differences to the umpire and the award in writing of any two, duly verified, shall determine the same. The Parties to such arbitration shall pay the arbitrators respectively appointed by them and bear equally the expenses of the arbitration and the charges of the umpire.

 

 

Our analysis begins with the McCarran-Ferguson Act, Pub. L. No. 79-15, 59 Stat. 33 (1945) (codified at 15 U.S.C. §§1011–1015). Generally, a federal statute preempts any state law with which the federal statute directly conflicts. See PLIVA, Inc. v. Mensing, 564 U.S. 604, 617–18 (2011). The McCarran-Ferguson Act largely flips this general rule on its head as applied to conflicts between state laws regulating insurance and most acts of Congress. It states: "No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance... unless such Act specifically relates to the business of insurance." 15 U.S.C. §1012(b).

 

 

The McCarran-Ferguson Act specifically defines "State" to include Puerto Rico. 15 U.S.C. §1015. (Fn. 2).

 

 

The Supreme Court "has long recognized the distinction between self-executing treaties that automatically have effect as domestic law, and non-self-executing treaties that--while they constitute international law commitments--do not by themselves function as binding federal law." Medellín, 552 U.S. at 504.

 

 

Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 3 (the "Convention")—the multilateral treaty that Chapter II of the FAA "implements." See GE Energy Power Conversion Fr. SAS, Corp. v. Outokumpu Stainless USA, LLC, 140 S. Ct. 1637, 1644 (2020); 9 U.S.C. §201 ("The Convention shall be enforced in United States courts in accordance with this chapter.").

 

 

The text of the Convention makes plain that Article II (3) provides a clear "directive to domestic courts." Medellín, 552 U.S. at 508. Article II (3) by its express terms directly commands courts to channel arbitrable disputes to arbitration: "The court... shall... refer the parties to arbitration...."As the Ninth Circuit described, "This provision is addressed directly to domestic courts, mandates that domestic courts 'shall' enforce arbitration agreements, and 'leaves no discretion to the political branches of the federal government whether to make enforceable the agreement-enforcing rule it prescribes.'" CLMS Mgmt. Servs. Ltd. P'shipv. Amwins Brokerage of Ga., LLC, 8 F.4th 1007, 1013 (9th Cir. 2021) (quoting Safety Nat'l Cas. Corp. v. Certain Underwriters at Lloyd's, London, 587 F.3d 714, 735 (5th Cir. 2009) (en banc) (Clement, J., concurring)), cert. denied, 142 S.Ct. 862 (2022). Based on this characterization, that court then concluded, "A straightforward application of the textual analysis outlined in Medellín compels the conclusion that Article II, Section 3 is self-executing...." Id.

 

 

(…) Green does not argue that insurance disputes generally constitute a subject that is not "capable of settlement by arbitration" under the Convention, and any such argument would be meritless. See Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 639 n. 21 (1985) ("Congress may specify categories of claims it wishes to reserve for decision by our own courts without contravening this Nation's obligations under the Convention. But we decline to subvert the spirit of the United States' accession to the Convention by recognizing subject-matter exceptions where Congress has not expressly directed the courts to do so."). (Fn. 7).

 

 

In sum, none of Green's arguments can overcome the self-executing nature of the plain text of Article II (3). That article, which is not an act of Congress, has the force of law and applies directly to preempt Puerto Rico law. We need not address whether Puerto Rico insurance law would reverse-preempt Chapter II of the FAA were Article II (3) non-self-executing.

 

 

The McCarran-Ferguson Act calls for reverse-preemption only of "Acts of Congress"; any policy preference expressed within it regarding state regulation of insurance does not bear on the relationship between state law and a self-executing treaty provision. And the policy considerations weigh strongly in favor of enforcement here, as "the emphatic federal policy in favor of arbitral dispute resolution... applies with special force in the field of international commerce." Mitsubishi Motors Corp., 473 U.S. at 631; see also id. at 629 ("Concerns of international comity, respect for the capacities of foreign and transnational tribunals, and sensitivity to the need of the international commercial system for predictability in the resolution of disputes require that we enforce the parties' arbitration agreement, even assuming that a contrary result would be forthcoming in a domestic context.").

 

 

For the foregoing reasons, the judgment of the district court is affirmed.

 

 

 

 

(U.S. Court of Appeals for the First Circuit, May 19, 2023, Green Enterprises, LLC v. Hiscox Syndicates Limited at Lloyd’s of London; XL Catlin Lloyd’s Syndicate 2003; Amlin Lloyd’s Syndicate 2001; Canopius Lloyd’s Syndicate 4444; Noa Lloyd’s Syndicate 3902; Blenheim Lloyd’s Syndicate 5886; Brit Lloyd’s Syndicate 2987/2988, Docket No. 21-1542)

 

U.S. Court of Appeals for the Ninth Circuit, Sean Wilson, v. Huuuge, Inc., a Delaware corp., Docket No. 18-36017

E-Commerce

Clickwrap Agreements

Browsewrap Agreements

Smartphone App User

Reasonable Notice of its Terms of Use

Constructive Notice

Contract Drafting

Motion to Compel Arbitration

Online Commerce: Traditional Principles of Contract Still Apply

Washington State Law

Argued and Submitted August 29, 2019 Seattle, Washington

The question of first impression for our court is under what circumstances does the download or use of a mobile application (“app”) by a smartphone user establish constructive notice of the app’s terms and conditions?

The panel affirmed the district court’s denial of HUUUGE Inc.’s motion to compel arbitration against a smartphone app user.

Under Washington law, the panel held that because Huuuge did not provide reasonable notice of its Terms of Use, the app user did not unambiguously manifest assent to the terms and conditions or the imbedded arbitration provision. The panel held that the app user had neither actual notice nor constructive notice of the Terms of Use, and thus was not bound by Huuuge’s arbitration clause in the Terms.

Wilson downloaded the app from Apple’s App Store in early 2017 and played Huuuge Casino for over a year.

Huuuge does not require users to affirmatively acknowledge or agree to the Terms before downloading or while using the app. Users can access Huuuge’s Terms in two ways: 1) reading the Terms before downloading the app, although the user is not required to do so; or 2) viewing the Terms during game play, which is similarly not necessary to play the game. Either way, the user would need Sherlock Holmes’s instincts to discover the Terms.

Typically, a user would first search for the app in a smartphone app store. One option is to download the app directly from the search results, in which case the user does not view anything that alerts him to the existence of the Terms. Alternatively, instead of a direct download, the user would need to click through to Huuuge Casino’s landing page. Next, the user must click on the small blue text stating “more” in the app’s description, which reveals the app’s full profile. The user would then need to scroll through several screen-lengths of text to encounter a paragraph that starts with “Read our Terms of Use,” and includes the text of a link to the Terms. The link, however, doesn’t magically conjure the Terms. Instead, the user must copy and paste or manually enter the URL into a web browser to access the Terms.

Once a user has downloaded the app, the user can play games immediately. During gameplay, a user can view the Terms by accessing the settings menu. The settings menu can be accessed by clicking on a three dot “kebob” menu button in the upper right-hand corner of the home page. If a user clicks on the button, a pop-up menu of seven options appears. The fifth option is titled “Terms & Policy” and reveals the Terms, including the arbitration agreement.

It is not necessary for a user to open the settings menu while playing the app. Nor is there a requirement to acknowledge or agree to the Terms when opening the app, creating an account, playing the game, or at any other point.

The FAA requires district courts to stay judicial proceedings and compel arbitration of claims covered by a written and enforceable arbitration agreement. 9 U.S.C. § 3.

Huuuge, as the party seeking to compel arbitration, must prove the existence of a valid agreement by a preponderance of the evidence. Norcia v. Samsung Telecomms. Am., LLC, 845 F.3d 1279, 1283 (9th Cir. 2017). To determine whether such an agreement exists, “federal courts ‘apply ordinary state-law principles that govern the formation of contracts.’” Nguyen v. Barnes & Noble Inc., 763 F.3d 1171, 1175 (9th Cir. 2014) (quoting First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995)).

The parties agree that Washington state law governs the validity of the arbitration agreement since there is no choice of law provision in the agreement and the district court has diversity jurisdiction. See First Options of Chi., Inc., 514 U.S. at 944.

As we have acknowledged many times, although online commerce has presented courts with new challenges, traditional principles of contract still apply. See, e.g., In re Holl, 925 F.3d 1076, 1084 (9th Cir. 2019).

In the context of online agreements, the existence of mutual assent turns on whether the consumer had reasonable notice of the terms of service agreement. Nguyen, 763 F.3d at 1177; Wilson v. Playtika, Ltd., 349 F. Supp. 3d 1028, 1037 (W.D. Wash. 2018).

(…) We now move to the issue of constructive notice. Just as we have applied traditional contract principles to online contracts, we do so here too. Online contracts fall into two broad categories. Nguyen, 763 F.3d at 1175-76. Clickwrap agreements require users to affirmatively assent to the terms of use before they can access the website and its services. Browsewrap agreements do not require the user to take any affirmative action to assent to the website terms. Id. In some situations, a user may not even know a website has a user agreement.

Huuuge’s agreement is unambiguously a browsewrap agreement. Wilson was not required to assent to Huuuge’s Terms before downloading or using the app—or at any point at all. Huuuge did not notify users that the app had terms and conditions, let alone put them in a place the user would necessarily see. Instead, a user would need to seek out or stumble upon Huuuge’s Terms, either by scrolling through multiple screens of text before downloading the app or clicking the settings menu within the app during gameplay.

In the absence of actual knowledge, a reasonably prudent user must be on constructive notice of the terms of the contract for a browsewrap agreement to be valid.

In Nguyen v. Barnes & Noble, we stressed that “the onus must be on website owners to put users on notice of the terms to which they wish to bind consumers.” Id. at 1179. The burden similarly falls on app operators.

Users are put on constructive notice based on the conspicuousness and placement of the terms and conditions, as well as the content and overall design of the app. For example, courts will not enforce agreements where the terms are “buried at the bottom of the page or tucked away in obscure corners of the website,” especially when such scrolling is not required to use the site. Id. (citing to Specht v. Netscape Commc'ns Corp., 306 F.3d 17, 23 (2d Cir. 2002)). Similarly, courts decline to enforce agreements where the terms are available only if users scroll to a different screen, Hines v. Overstock.com, Inc., 668 F. Supp. 2d 362, 367 (E.D.N.Y. 2009), complete a multiple-step process of clicking non-obvious links, Van Tassell v. United Mktg. Grp., 795 F. Supp. 2d 770, 792-93 (N.D. Ill. 2011), or parse through confusing or distracting content and advertisements, Starke v. SquareTrade, Inc., 913 F.3d 279, 293 (2d Cir. 2019); Nicosia v. Amazon.com, Inc., 834 F.3d 220, 237 (2d Cir. 2016). Even where the terms are accessible via a conspicuous hyperlink in close proximity to a button necessary to the function of the website, courts have declined to enforce such agreements. Nguyen, 763 F.3d at 1178-79.

Huuuge’s app is littered with these flaws. When downloading the app, the Terms are not just submerged— they are buried twenty thousand leagues under the sea. (…) This is the equivalent to admonishing a child to “please eat your peas” only to then hide the peas. A reasonably prudent user cannot be expected to scrutinize the app’s profile page with a fine-tooth comb for the Terms.

Huuuge argues Wilson’s repeated use of the app places him on constructive notice since it was likely he would stumble upon the Terms during that time period. However, just as “there is no reason to assume that users will scroll down to subsequent screens simply because screens are there,” there is no reason to assume the users will click on the settings menu simply because it exists. Specht, 306 F.3d at 32. The user can play the game unencumbered by any of the settings.

Nothing points the user to the settings tab and nowhere does the user encounter a click box or other notification before proceeding. Only curiosity or dumb luck might bring a user to discover the Terms.

Instead of requiring a user to affirmatively assent, Huuuge chose to gamble on whether its users would have notice of its Terms. The odds are not in its favor.

(U.S. Court of Appeals for the Ninth Circuit, December 20, 2019, Sean Wilson, v. Huuuge, Inc., a Delaware corp., Docket No. 18-36017, For Publication)

Richey v. Autonation, Inc., S207536

Arbitration (California): as a condition of his hiring, plaintiff signed an agreement requiring that any employment dispute be settled by arbitration.  All disputes between Power Toyota and its employees were decided this way.  In relevant part, the arbitration agreement stated:  “Resolution of disputes shall be based solely upon the law governing the claims and defenses set forth in the pleadings and the arbitrator may not invoke any basis (including, but not limited to notions of ‘just cause’) other than such controlling law.”  The agreement did not include an express provision stating that courts could review any arbitration award for legal error.  (See Cable Connection, Inc. v. DIRECTTV, Inc. (2008) 44 Cal.4th 1334, 1355 (Cable Connection) [parties to arbitration may agree that an award is reviewable for legal error].)  The agreement did require the arbitrator to include a “written reasoned opinion” with his decision, which “shall be final and binding upon the parties.”  In its termination letter, Power Toyota stated that it dismissed plaintiff for engaging in outside employment while on a leave of absence, in violation of company policy. After receiving a right-to-sue letter from the Department of Fair Employment and Housing, plaintiff filed a complaint in superior court against Power Toyota and its parent companies, including AutoNation, Inc., Webb Automotive Group, Inc., and Mr. Wheels, Inc., and his direct supervisor, Rudy Sandoval (defendants), alleging multiple claims under the California Fair Employment and Housing Act (FEHA) (Gov. Code § 12900 et seq.) and the CFRA.  The claims included racial discrimination, harassment, retaliation for taking approved leave under the CFRA, and failure to reinstate following CFRA leave.  The trial court granted defendants’ motion to compel arbitration.   California law favors alternative dispute resolution as a viable means of resolving legal conflicts.  “Because the decision to arbitrate grievances evinces the parties’ intent to bypass the judicial system and thus avoid potential delays at the trial and appellate levels, arbitral finality is a core component of the parties’ agreement to submit to arbitration.”  (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 10 (Moncharsh).)  Generally, courts cannot review arbitration awards for errors of fact or law, even when those errors appear on the face of the award or cause substantial injustice to the parties.  (Id. at pp. 6, 28.)  This is true even where, as here, an arbitration agreement requires an arbitrator to rule on the basis of relevant law, rather than on principles of equity and justice.  (Cable Connection, supra, 44 Cal.4th at p. 1360 [“A provision requiring arbitrators to apply the law leaves open the possibility that they are empowered to apply it ‘wrongly as well as rightly.’ ”]; see City of Richmond v. Service Employees Intern. Union, Local 1021 (2010) 189 Cal.App.4th 663, 669, fn.1 [“The arbitration provision here, reciting generally that the arbitrator ‘shall . . . make no decisions in violation of existing law’ is a standard arbitration provision that does not provide for judicial review.”].)   

The California Arbitration Act (Code Civ. Proc., § 1280 et. seq.) and the Federal Arbitration Act (9 U.S.C. § 10 et seq.) provide limited grounds for judicial review of an arbitration award.  Under both statutes, courts are authorized to vacate an award if it was (1) procured by corruption, fraud, or undue means; (2) issued by a corrupt arbitrator; (3) affected by prejudicial misconduct on the part of the arbitrator; or (4) in excess of the arbitrator’s powers.  (Code Civ. Proc., § 1286.2, subd. (a); 9 U.S.C. § 10 (a).)  An award may be corrected for (1) evident miscalculation or mistake; (2) issuance in excess of the arbitrator’s powers; or (3) imperfection in the form.  (Code Civ. Proc., § 1286.6; 9 U.S.C. § 11.)  Our analysis concerns whether the arbitrator acted in excess of his powers when he rejected plaintiff’s claim.  (Code Civ. Proc., § 1286.2, subd. (a)(4).)

Arbitrators may exceed their powers by issuing an award that violates a party’s unwaivable statutory rights or that contravenes an explicit legislative expression of public policy.  (See, e.g.,  Board of Education v. Round Valley Teachers Assn. (1996) 13 Cal.4th 269, 272-277 [arbitrator exceeded powers by giving effect to collective bargaining provisions that violated statutory rights in Ed. Code]; California Dept. of Human Resources v. Service Employees Internat. Union, Local 1000 (2012) 209 Cal.App.4th 1420, 1434 [arbitrator lacked power to make an award that violated explicit public policy favoring legislative oversight of state employee contracts when he interpreted a memorandum of understanding between union and state to require salary increases the Legislature did not approve].)  However, “ ‘arbitrators do not ordinarily exceed their contractually created powers simply by reaching an erroneous conclusion on a contested issue of law or fact, and arbitral awards may not ordinarily be vacated because of such error . . . .’ ”  (Cable Connection, supra, 44 Cal.4th at p. 1360.)  We first explored “narrow exceptions” to the “general rule that . . . an arbitrator’s decision cannot be reviewed for errors of fact or law” in Moncharsh, supra, 3 Cal.4th at page 11.  Moncharsh noted that judicial review may be warranted when a party claims that an arbitrator has enforced an entire contract or transaction that is illegal.  (Id. at p. 32, citing Loving & Evans v. Blick (1949) 33 Cal.2d 603, 609 [arbitrator could not enforce contract that otherwise would have been void under state law because contractor was unlicensed] and All Points Traders, Inc. v. Barrington Associates (1989) 211 Cal.App.3d 723, 738 [holding that arbitrator could not enforce contract awarding commission to unlicensed real estate broker in violation of state law].)  Moncharsh observed that in the absence of an express written accord in the arbitration agreement, arbitrators may decide cases based on “ ‘broad principles of justice and equity.’ ”  (Moncharsh, supra, 3 Cal.4th at p. 10.)  The court acknowledged that there may be “exceptional circumstances justifying judicial review of an arbitrator’s decision when a party claims illegality affects only a portion of the underlying contract.  Such cases would include those in which granting finality to an arbitrator’s decision would be inconsistent with the protection of a party's statutory rights.”  (Moncharsh, supra, 3 Cal.4th at p. 32.)  Most recently, we revisited the standard of review for arbitration awards involving unwaivable statutory rights in Pearson Dental Supplies, Inc. v. Superior Court (2010) 48 Cal.4th 665 (Pearson Dental).  There, an arbitrator committed a “clear error of law” by misapplying a relevant tolling statute and incorrectly holding that an employee’s claim was time-barred, thus depriving the plaintiff of a hearing on the merits.  (Id. at p. 670.)  Pearson Dental recognized that the tolling provision of Code of Civil Procedure section 1281.12 applied to the case.  We held that when “an employee subject to a mandatory employment arbitration agreement is unable to obtain a hearing on the merits of his FEHA claims, or claims based on other unwaivable statutory rights, because of an arbitration award based on legal error, the trial court does not err in vacating the award.”  (Pearson Dental, at p. 680.)  Pearson Dental, however, recognized its limited application.  Despite being “faced precisely with the question that was prematurely posed in Armendariz, i.e., the proper standard of judicial review of arbitration awards arising from mandatory arbitration employment agreements that arbitrate claims asserting the employee’s unwaivable statutory rights” (Pearson Dental, supra, 48 Cal.4th at p. 679), we observed that the legal error that occurred actually denied the plaintiff a hearing on his claim’s merits.  The arbitrator “misconstrued the procedural framework under which the parties agreed the arbitration was to be conducted, rather than misinterpreting the law governing the claim itself” (id. at pp. 679-680), a distinction that explained the narrow application of our holding and one that also guides the scope of our review here.  Pearson Dental emphasized that its legal error standard did not mean that all legal errors are reviewable.  (Id. at p. 679.)  The arbitrator had committed clear legal error by (1) ignoring a statutory mandate, and (2) failing to explain in writing why the plaintiff would not benefit from the statutory tolling period.  The error addressed in Pearson Dental therefore kept the parties from receiving a review on the merits.  Its narrow rule was sufficient to resolve the case.  (Ibid.)  Plaintiff here has not advocated for a greater scope of judicial review in cases involving unwaivable statutory rights, and thus, there is no reason to go beyond the framework Pearson Dental established  (Cal. S. Ct., Jan. 29, 2015, Richey v. Autonation, Inc., S207536).

Arbitrage en droit californien : comme condition de son engagement par son employeur, l’employé a signé un contrat exigeant que tout litige relevant du droit du travail soit réglé par arbitrage. Cette disposition est contenue dans tous les contrats que l’employeur de cette affaire signe avec ses employés. La clause d’arbitrage dispose notamment que la résolution des litiges ne peut se fonder que sur le droit applicable aux prétentions respectives des parties, à l’exclusion de toute autre base, telle par exemple la notion de « motif justifié ». La convention d’arbitrage ne contient pas de clause stipulant que les Tribunaux sont compétents pour revoir, en droit, la sentence arbitrale. Une telle clause est admise selon la jurisprudence. La convention d’arbitrage en l’espèce impose à l’arbitre d’inclure des considérants écrits à sa décision, laquelle est finale et lie conséquemment les parties. Dans sa lettre de licenciement adressée à son employé, l’employeur motiva la résiliation des rapports de travail par le fait que l’employé s’était engagé dans d’autres activités professionnelles alors qu’il se trouvait en incapacité de travail, cela en violation de la politique de l’entreprise. Après avoir obtenu le droit d’ouvrir action par lettre du Département dédié aux affaires d’emploi et d’habitation « équitable », l’employé ouvrit action contre son employeur et contre son supérieur hiérarchique devant le Tribunal californien de première instance. Parmi les nombreux griefs émis par l’employé figure la violation du droit à retrouver ses fonctions auprès de l’employeur. La cour de première instance, saisie à ce sujet par la partie employeur, se dessaisit au profit de l’arbitrage. Le droit californien favorise les moyens alternatifs de résolution des litiges. La jurisprudence Moncharsh précise que dans la mesure où la décision des parties de recourir à l’arbitrage démontre l’intention des parties de contourner le système judiciaire, évitant ainsi des délais potentiels en première instance et en instances de recours, la finalité de l’arbitrage constitue une composante fondamentale de l’accord des parties de se soumettre à un arbitrage. De manière générale, les Tribunaux californiens ne peuvent revoir les décisions arbitrales pour erreur portant sur les faits ou portant sur le droit, même lorsque ces erreurs apparaissent de manière évidente, ou même lorsqu’elles causent une injustice substantielle aux parties. Cela est également vrai lorsque, comme en l’espèce, une convention d’arbitrage impose à l’arbitre de trancher selon la loi applicable plutôt que selon les principes de l’équité et de la justice. Une jurisprudence précise à ce sujet qu’une disposition de la convention d’arbitrage indiquant de manière générale que l’arbitre ne saurait rendre de décision en violation de la loi applicable est une disposition standard qui ne saurait conférer compétence au système judiciaire. Aussi bien la loi californienne sur l’arbitrage que la loi fédérale sur l’arbitrage ne mettent à disposition que des moyens limités pour recourir judiciairement contre une sentence arbitrale. Selon les deux lois, les Tribunaux sont autorisés à annuler une sentence arbitrale (1) si elle a été obtenue par corruption, fraude, ou influence (2) si elle a été rendue par un arbitre corrompu, (3) si elle est affectée par une inconduite de l’arbitre entrainant préjudice, ou (4) si elle résulte d’un excès de pouvoir de l’arbitre. Une sentence arbitrale peut être corrigée pour (1) erreur de calcul ou autre erreur évidente, (2) décision rendue par un arbitre qui excède ses pouvoirs, ou (3) imperfection formelle.

La présente espèce se limite à déterminer si l’arbitre a excédé ses pouvoirs. Un arbitre peut excéder ses pouvoirs s’il rend une décision arbitrale qui porte atteinte à un droit impératif d’une partie, droit auquel il ne peut être dérogé conventionnellement, ou qui porte atteinte à une politique publique expressément exprimée par le législateur. Par exemple, un arbitre n’a pas la compétence de rendre une sentence ordonnant une hausse de salaire en faveur d’employés publics : il existe en effet une politique publique explicite en Californie en faveur d’une supervision par le législateur des contrats de travail des employés publics, et le législateur n’avait pas approuvé une telle hausse salariale. La jurisprudence Moncharsh constitue un autre exemple : la compétence judiciaire peut être donnée si une partie allègue que la décision arbitrale a donné effet à un contrat illégal ou à une transaction illégale (tel par exemple un contrat conclu avec un maître d’état qui n’est pas muni d’une licence officielle de pratiquer). La jurisprudence Moncharsh a en outre observé qu’en l’absence d’un accord écrit express figurant dans la convention d’arbitrage, l’arbitre peut décider un cas sur la base de larges principes de justice et d’équité. Dans sa jurisprudence Pearson Dental, la Cour Suprême de Californie a examiné à nouveau les critères permettant à un Tribunal de revoir, respectivement annuler, une sentence arbitrale qui repose sur des questions juridiques réglées par une loi revêtant caractère impératif. Dans cette affaire Pearson Dental, un arbitre avait commis une “claire erreur de droit” en appliquant de manière erronée une loi permettant une suspension de délai et en considérant de manière incorrecte qu’une requête d’un employé était prescrite, le privant ainsi d’une audience sur le fond, la loi en question étant impérative. A bon droit, le Tribunal de première instance a annulé la sentence. On voit ainsi un exemple dans lequel une sentence arbitrale peut être annulée. Toute erreur de droit ne permet pas l’annulation. Par ailleurs, il est à préciser que l’annulation de la sentence dans la jurisprudence Pearson Dental est fondée sur la claire erreur de droit commise par l’arbitre, en (1) ignorant une exigence légale impérative, et (2) en omettant d’expliquer par écrit pourquoi l’employé n’était pas susceptible de bénéficier d’une suspension de délai.