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A California state appeals court affirmed the confirmation of an arbitration award, despite challenges for procurement by fraud and arbitrator misconduct, where the arbitration record clearly indicated that the award could be sustained on other independent contractual grounds.
In Ray v. Cingular Wireless, LLC, No. B195981, 2007 WL 4100136 (Cal. Ct. App. Nov. 19, 2007), Ray entered into an agreement with AT&T Wireless to sell cellular service in two Central California counties. Ray also entered into an agreement with All American, an AT&T Wireless distributor, to sell cellular services in Los Angeles County. Later, LA Tel acquired All American, and Cingular acquired AT&T Wireless.
Ray was later served with notice by Cingular to cease usage of AT&T Wireless trademarks in her store, giving Ray five days in which to comply. After an inspection of her store revealed AT&T signage was still in use, Cingular gave Ray final notice to comply by removing AT&T Wireless signage within five days. When Ray failed to do so, Cingular terminated its agreement with Ray. This "for cause" termination was rescinded two weeks later, but Cingular did exercise its right to terminate the agreement without cause by serving Ray with 90 days notice. Shortly after this notice, LA Tel also terminated its agreement with Ray.
Ray then commenced an arbitration proceeding against Cingular, claiming that Cingular had breached their agreement, violated the covenants of good faith and fair dealing, and tortuously interfered with Ray's agreement with LA Tel. After a hearing, the arbitrator found in favor of Cingular.
The arbitrator specifically found that Cingular's termination with cause was made without sufficient notice, but that its termination without cause with 90 days notice was within Cingular's rights under the agreement. The arbitrator also found that there was no evidence offered that Cingular's goal of reducing the number of distributors was part of a tortuous scheme to pressure or get rid of Ray. Finally, the arbitrator found no evidence that Cingular had interfered with Ray's LA Tel agreement, since there was no written agreement between the parties and Ray's relationship with LA Tel had never been approved by Cingular.
Ray filed numerous requests for reconsideration and to reopen the arbitration hearings; the arbitrator considered Ray's requests, but ultimately denied them all, and entered an award in favor of Cingular.
Two weeks later, Cingular petitioned the trial court to confirm the award. Ray responded with a motion to vacate the award, alleging that the award was obtained by corruption or fraud and that the arbitrator engaged in misconduct by refusing to postpone hearings or consider evidence material to the dispute. Ray specifically alleged that Cingular had failed to furnish an entire set of email communication that Ray claimed showed Cingular's tortious interference with her LA Tel agreement. The trial court disagreed, ultimately confirming Cingular's award and denying Ray's motion to vacate.
On appeal, the Court held that Ray had failed to demonstrate that Cingular's award was procured by fraud or that the arbitrator had engaged in misconduct and failed to consider all relevant evidence. The Court affirmed the award's confirmation.
The Court rejected Ray's contention that the award was procured by fraud due to Cingular's failure to produce the entire set of its email communication with LA Tel. The Court observed that this alleged failure did not constitute fraud or perjury, as it was not "a willfully false statement, under oath, of a material fact." The email in question, according to the Court, mentioned earlier communication with LA Tel, and did not misrepresent the nature of the communication. Furthermore, the Court found that production of the earlier email would not have altered the outcome of the arbitration, since the arbitrator found independent grounds under the agreement for Cingular to permissibly terminate the relationship with the requisite 90 days notice.
The Court also rejected Ray's allegation that the arbitrator engaged in misconduct and failed to consider all material evidence. According to the Court, the record clearly showed that the arbitrator considered all evidence Ray submitted during her requests for reconsideration and to reopen the proceedings. The Court also found that even if the arbitrator did not receive all Ray's submissions, there was nothing in the submissions that would suggest the arbitrator would have decided differently; Ray had no written agreement with LA Tel that could have been interfered with at the time of Cingular's termination without cause.
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