Achilles’ Shield And Judicial Review Of Arbitration Awards

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This month, I revisited the Huntington Library in San Marino, California. Among other things, I wanted to have another look at the Shield of Achilles, John Flaxman’s magnificent re-imagining of the shield crafted by Hephaestus and brought to Achilles by his mother, Thetis. Homer describes the shield in the Iliad. The silver-gilt shield is a stunning work of art, but it also depicts an important legal first – the first description of judicial arbitration in ancient Greece:

λαοὶ δ᾽ εἰν ἀγορῇ ἔσαν ἀθρόοι: ἔνθα δὲ νεῖκος
ὠρώρει, δύο δ᾽ ἄνδρες ἐνείκεον εἵνεκα ποινῆς
ἀνδρὸς ἀποφθιμένου: ὃ μὲν εὔχετο πάντ᾽ ἀποδοῦναι
δήμῳ πιφαύσκων, ὃ δ᾽ ἀναίνετο μηδὲν ἑλέσθαι:
ἄμφω δ᾽ ἱέσθην ἐπὶ ἴστορι πεῖραρ ἑλέσθαι. The men were crowded in the marketplace (agora): there a fight has arisen, two men quarrel about the penalty for a man who has perished. One man, professing to the people, maintains to have paid everything, the other denies taking anything at all. Both are eager to take the issue to an arbitrator.

Homer, Iliad, Bk 18, lines 497 – 501 (my translation). You can see this scene on this copy of the shield in the Royal Collection Trust (Click on the image to zoom, and look at the 4 o’clock position on the shield).

In our own time, battles continue to be fought concerning the enforceability of arbitration agreements, the scope of arbitration and the availability of judicial review of arbitration awards. Last week, the Second District Court of Appeal held that judicial review was available for an arbitrator’s decision not to require disgorgement of payments made to an unlicensed contractor. Adhout v. Hekmatjah, 2013 Cal. App. LEXIS 52 (Jan. 25, 2013). California Business & Professions Code Section 7031(b) provides that persons who hire an unlicensed contractor are entitled to reimbursement for compensation received by that contractor even if those persons know the contractor is not licensed. In Adhout, the arbitrators refused to require disgorgement an the plaintiff filed a petition to vacate the award in the Superior Court.

Code of Civil Procedure Section 1286.2 creates limited exceptions to the general rule that arbitration decisions are not reviewable for errors of fact or law. One exception is when the “arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted”. While one way in which an arbitrator can exceed her powers is to enforce an illegal contract, the Court of Appeal found that this was not the case in Adhout because the claimed illegality did not infect the entire contract. The Court of Appeal nonetheless found that judicial review was available because Section 7031 expresses a strong public policy mandating disgorgement.

I was surprised that the Court of Appeal in Adhout failed to mention Nitro-Lift Technologies v. Howard, 568 U.S. 372 (2012). In that case, the U.S. Supreme decisively rejected the Oklahoma Supreme Court’s invocation of public policy in deciding the validity of a non-compete clause, notwithstanding the parties’ agreement to arbitrate. See U.S. Supreme Court Holds That State Courts Must Not Assume The Arbitrator’s Role By Declaring Non-Compete Agreements Null And Void.

For more on arbitration and Section 7031, see Contract with Unlicensed Contractor is not Void Ab Initio.