In Baize v. Eastridge Companies, (— Cal.Rptr.3d —, 2006 WL 2457952, Cal.App. 2 Dist., Aug. 25, 2006), a California Court of Appeal considered the issues of whether a court may review an arbitration award on the basis that the arbitrator failed to correctly apply California law, and whether a trial court erred when it allowed an employee to amend a judgment to add an additional defendant that the employee alleged was an alter ego of his employer.
The Court of Appeal held that a court may not review an arbitrator’s award for claimed errors of law and that the trial court did not err in allowing the employee to add an additional defendant because that additional defendant was an alter ego of his employer’s corporations.
Facts
The Eastridge Companies, LLC (“Eastridge”) hired Jeffrey Baize to work on some of its established projects and also develop new projects. The employment contract between Eastridge and Baize provided that Baize would obtain an ownership interest in any new entities created for projects that he developed. Baize brought a lawsuit against Eastridge, and three other entities that he alleged were alter egos of Eastridge, after his employment was terminated. Baize sought the compensation that he was denied by Eastridge’s failure to grant him ownership interest in a corporation created for one of his projects.
The parties agreed to submit all Baize’s claims against Eastridge to binding contractual arbitration. The arbitration agreement provided that the arbitrator would apply California law. The arbitrator found in favor of Baize, awarded him $894,479, and concluded that all related Eastridge entities were liable. Baize petitioned the trial court to confirm the arbitration award. Eastridge moved to vacate the arbitrator’s award on the ground that the arbitrator exceeded his authority by failing to correctly apply California law. The trial court confirmed the award. Baize then sought to amend the judgment to add an additional entity as a defendant. The trial court allowed Baize to amend the judgment on the ground that the additional entity was an alter ego of Eastridge.
Decision
The Court of Appeal held that the arbitrator’s decision is not reviewable for claimed errors of law. Generally, an arbitrator’s decision is not reviewable for errors of fact or law. The arbitrator does not exceed his power merely by misstating the law. Even if an arbitration agreement provides for the application of a particular law or body of law, “an arbitrator’s failure to apply such law is not in excess of an arbitrator’s powers.”
The Court further found that the trial court did not err in adding the additional defendant because it is an alter ego of Eastridge. Eastridge and that entity have common ownership, officers, and directors; share employees, offices, and attorneys; and accounting entries were made to freely shift revenues and profits between the entities.
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