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The Michigan Court of Appeals held that a Michigan trial court properly vacated an arbitration award where the arbitrator exceeded her powers by committing an error of law.
In Skladanowski v. Clear Channel Radio, No. 261004, 2006 WL 3682184 (Mich. Ct. App. Dec. 14, 2006), Skladanowski, a saleswoman for Clear Channel Radio, planned to take leave under the Family and Medical Leave Act (FMLA).
Clear Channel paid commissions to its sales force when an advertisement "aired and billed," not when the sale was made. Based on this practice, Clear Channel advised Skladanowski that she would not be paid any commissions for advertisements that "aired and billed" during her FMLA leave. This decision prompted Skladanowski to resign and initiate arbitration.
The arbitrator issued an award in favor of Clear Channel. The trial court vacated the award and directed the arbitrator to enter an award in favor of Skladanowski.
On appeal, the Court examined whether the award was properly vacated based upon the Michigan rule that "[a]rbitrators exceed their powers when they act in contravention of controlling principles of law." As the Court explained, this rule requires a court to vacate an award when "it clearly appears from the face of the award that the arbitrator was led to the wrong conclusion through an error of law and that, but for the error, a substantially different award would have been made."
Applying this rule, the Court held that the trial court properly vacated the award because "[t]he arbitrator exceeded her authority by committing a clear error of law." Specifically, the Court concluded that the arbitrator erred in concluding that under the FMLA, Clear Channel did not have to pay Skladanowski any commissions for advertisements that "aired and billed" during her leave. This conclusion was based entirely on the Court's interpretation of the FMLA and not on any legal authority directly on point.
In general, an arbitrator's misapplication of the law will not support a finding that she exceeded her powers unless the parties have agreed that the arbitrator must follow the law, see, e.g., Rule 20D of the National Arbitration Forum Code of Procedure, or placed similar limitations on the arbitrator's decisionmaking. See KeyClick Outsourcing, Inc. v. Ochsner Health Plan, Inc., No. 06-CA-359, 2006 WL 3094077 (La. Ct. App. Oct. 31, 2006); Gueyffier v. Ann Summers, Ltd., 50 Cal.Rptr.3d 294 (Cal. Ct. App. Oct. 26, 2006).
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