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The Court of Appeals for the Ninth Circuit affirmed the vacatur of an arbitration award on grounds that the arbitrator exceeded his authority by deciding the question of arbitrability where the parties did not delegate questions of arbitrability to the arbitrator.
In Thomas Kinkade Co. v. Kayne, No. 05-15245, 2007 WL 1544430 (9th Cir. May 24, 2007), Kayne Galleries contracted with Kinkade to sell Kinkade's artwork. David Kayne signed the contract as the president of the gallery. However, he did not sign in his personal capacity. Kinkade invoked the arbitration clause in regards to a dispute over payment.
The arbitrator determined that Kayne's personal liability was arbitrable and found in Kinkade's favor against both Kayne Galleries and Kayne personally. The district court vacated the award on the basis that the arbitrator had exceeded his authority by determining the arbitrability of Kayne's personal liability. Kinkade appealed.
In a two-paragraph opinion, the Court agreed with the district court. Parties must "clearly and unmistakably" agree to the arbitrator's authority to decide jurisdiction over a given issue. See First Options of Chicago v. Kaplan, 514 U.S. 938, 943-44 (1995). Kayne specifically stated that he was only signing in his capacity as president of the gallery. He did not agree to arbitration of his personal liability.
The Court affirmed the district courts' vacatur of the arbitration award because the clause did not clearly establish the arbitrator's authority to decide jurisdiction of Kayne's personal liability. The Court did not, however, examine the underlying arbitration agreement in any detail in the opinion, nor quote or paraphrase the provisions of the agreement that led the Court to its conclusion.
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