Keep a close watch on those arbitration arguments, especially as they relate to the scope of the arbitrator’s power as defined by the arbitration agreement. That’s the lesson of J.C. Gury Co. v. Nippon Carbide Industries (USA) Inc., case no. B194926 (June 29, 2007), in which the Second District Court of Appeal holds that Nippon waived the contractual limitation on the power of the arbitrator by its conduct during the arbitration, and thus may not petition to vacate the award on the ground the arbitrator exceeded his powers.
The agreement stated that the arbitrator “shall not have the power to change, alter or modify” any term of the parties’ agreement. Nonetheless, J.C. Gury Co. argued in arbitration that Nippon’s warranty limitation and consequential damages exclusion were unconscionable and thus unenforceable. Nippon addressed these arguments on the merits, and there were two days of relevant testimony. The Court readily finds the arbitrator exceeded his power by declaring the provisions unenforceable, but affirms the judicial confirmation of the award because Nippon, by addressing the unconscionability argument on the merits without ever objecting to the lack of the arbitrator’s power to declare a provision unconscionable, waived the issue of the arbitrator’s power.
Arbitration is different from trial in a lot of ways. But the possibility of inadvertently waiving grounds for review isn’t one of them.