|
A California Court of Appeals has upheld an award for the owner of the Staples Center despite claims by a cleaning supply company that the arbitrator had exceeded his authority in issuing that award.
In Healthy World, Inc. v. L.A. Arena Funding, LLC, No. B188017, 2007 WL 1491890 (Cal. Ct. App. May 23, 2007), Healthy World, Inc. (HWI) entered into two, linked five-year agreements with L.A. Arena Funding ("LAAF," owner of the Staples Center): the first, a suite rental agreement; the second, a cleaning product placement agreement.
Basically, these "pay to play" agreements required HWI to rent a suite in exchange for LAAF exclusively purchasing HWI's cleaning products for the years covered by the contracts. Both agreements contained arbitration provisions.
Approximately three years into the agreements, HWI notified LAAF that "due to the overall sate of the economy and recession," it would be unable to renew its suite agreement. When LAAF sought damages through arbitration, the arbitrator found HWI in default, and awarded LAAF $341,000 in licensing fees.
HWI sought to have the award vacated, arguing arbitrator misconduct. Specifically, HWI claimed that the arbitrator had exceeded his powers by granting a remedy prohibited by an "anti-waiver" provision, by essentially rewriting two other provisions of the contract, and by finding the suite agreement constituted a license, not a lease.
The Court rejected each of HWI's arguments in turn. Regarding the "anti-waiver" clause, the Court found that, although the arbitrator had used the term "waiver" in discussing HWI's decision to ignore LAAF's use of a competitor's floor wax, "the waiver remark was irrelevant to the arbitrator's rejection of the fraud allegation."
Regarding the alleged "rewrites," the Court found that the arbitrator had simply made reasonable interpretations of existing contract terms. A reading different from the one favored by HWI did not transform a legitimate interpretation into an illegitimate rewrite.
Finally, regarding the arbitrator's finding that the suite agreement constituted a license rather than a lease was supported by the plain language of the agreement itself. As a result, the fact that LAAF did not file for unlawful detainer before "evicting" HWI did not violate public policy.
Subscribe to a free weekly update on ADR case law and
legislation
|