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A California appellate court held that an arbitrator did not exceed his powers when he resolved a dispute that was clearly within the arbitration agreement's scope.
In Exatron, Inc. v. DiFrancesco, No. H030262, 2007 WL 1567637 (Cal. Ct. App. May 31, 2007), DiFrancesco and Exatron entered into a licensing agreement. A dispute arose over royalty payments and DiFrancesco terminated Exatron's license. In response, Exatron submitted an arbitration claim against DiFrancesco.
The arbitrator ruled in Exatron's favor and a court confirmed the arbitration award. DiFrancesco appealed alleging the arbitrator exceeded his powers.
The Court held that the arbitrator did not exceed his powers. An arbitrator does not exceed his powers merely by assigning an erroneous decision. Rather, an arbitrator exceeds his powers when he resolves issues that are outside the scope of the arbitration agreement. Moreover, a party cannot voluntarily submit a dispute to an arbitrator, await the outcome, and if the outcome is unfavorable proceed to challenge the arbitrator's authority.
The Court rejected DiFrancesco's argument that the arbitrator lacked authority to hear the dispute because it involved the agreement's termination. The Court found the arbitration agreement covered "any continuing dispute" including those pertaining to the agreement's termination. Under DiFrancesco's interpretation, it would be conceivable that a party could terminate the agreement without affording the other party with an opportunity to object. The Court rejected DiFrancesco's interpretation.
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