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In a complex case involving the dissolution of a dental practice partnership, the California Court of Appeal held that parties are free to substitute their own rules or those of an established ADR provider in exchange for state laws setting a time limit for corrections of an arbitral award.
In Porteous v. Porteous, No. A111847, 2006 WL 3308430 (Cal. Ct. App. Nov. 15, 2006), Lawrence and Leland Porteous, who went by the names Dr. Larry and Dr. Lee, were twin brothers who formed a dental practice partnership in three California locations. The brothers’ partnership agreement contained an arbitration clause. When the parties began discussing a separation of their practices, they initiated arbitration to determine how their interests should be divided.
After several revisions, the arbitrator issued a January 2005 “Final Award,” which was followed by an “Amended and Corrected Final Award” in February 2005. Dr. Lee filed a motion to confirm the award with certain corrections, and the lower court granted his motion. Dr. Larry appealed, arguing that the February 2005 corrections were untimely and that the trial court erred in “correcting” and “clarifying” the award.
On appeal, the Court rejected Dr. Larry’s contention that the arbitrator’s February 2005 corrections – which occurred 45 days after the January 2005 Final Award was issued – were untimely. However, the Court reversed some of the corrections and clarifications made by the trial court. Although the arbitrator’s corrections occurred after the 30-day limit imposed by Cal. Civ. Proc. Code §1284, the parties had selected arbitration rules that set no absolute deadline for corrections. California law clearly provides that parties to an arbitration agreement can set their own time limits and procedures in lieu of statutory requirements. A contrary holding would allow parties to “gamble on a favorable outcome” of a request for correction and then attack the authority of the arbitrator to decide the matter once they have lost.
The Court did side with Dr. Larry in reversing some of the trial court’s corrections, which were based on an alleged “evident miscalculation of figures.” Since no miscalculation was evident on the face of the award or readily apparent from any documentation, the lower court erred in increasing the award.
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