Arbitration Angle: Judicial Review of Arbitration Injunctions

Arbitration Angle

When it comes to injunctions in California courts, there is generally an immediate appellate remedy.

California Code of Civil Procedure section 904.1 provides a list of certain appealable pre-trial orders. One of the categories is “order[s] granting or dissolving an injunction, or refusing to grant or dissolve an injunction.”

The statutory phrase “injunction” is interpreted broadly and can apply to a number of different types of orders. See Valley Casework, Inc. v. Comfort Const., Inc., 76 Cal.App.4th 1013, 1019 (1999) (preliminary injunctions); Nakamura v. Parker, 156 Cal.App.4th 327, 332 (2007) (temporary restraining orders); R.D. v. P.M., 202 Cal.App.4th 181, 187 (2011) (civil harassment restraining orders); North Beverly Park Homeowners Ass’n v. Bisno, 147 Cal.App.4th 762, 765 (2007) (post judgment orders granting or denying requests to modify or dissolve injunctions).

But what happens if an arbitrator, not a court, grants or denies injunctive relief? Do parties have the same immediate resort to relief? Specifically, even though the arbitration is not complete, can the aggrieved party file a motion to vacate the order in court?

A recent Court of Appeal decision said no, holding that the trial court lacked jurisdiction to rule on a petition to vacate an arbitrator’s injunction order because the remedies are governed by the California Arbitration Act (“CAA”), not Section 904.1. Kirk v. Ratner, 74 Cal.App.5th 1052, 1062 (2022).

The Court of Appeal’s decision is a good reminder that an arbitrator’s award is only reviewable if it resolves the entire controversy between the parties. And, it highlights yet another difference between litigating in court versus arbitration, and the remedies that come with each.

It is well-established that judicial review over arbitration awards is very limited. The CAA provides a number of narrow grounds that allow a court to modify, vacate, or correct an arbitrator’s award. The CAA’s purpose is to promote contractual arbitration as an expeditious means of resolving disputes. Mercury Ins. Group v. Superior Court, 19 Cal.4th 332, 342 (1998).

Consistent with the limited nature of judicial review, a trial court only has jurisdiction over an arbitrator’s “award.” See Code Civ. Proc. § 1285. “Award” is defined as “a determination of all the questions” submitted to arbitration. Code Civ. Proc. § 1283.4 (emphasis added). Courts have further defined ”award” as a ruling that “resolve[s] every part of the parties’ controversy.” Lonky v. Patel, 51 Cal. App. 5th 831, 845 (2020).

There is a limited exception, such as when the arbitrator’s ruling is necessary to provide an effective remedy consistent with the parties’ contract. Hightower v. Superior Ct., 86 Cal.App.4th 1415, 1423 (2001). In Hightower, the arbitrator issued a “Partial Final Award,” fashioning an equitable remedy in a dispute over a shareholder agreement, with certain contingencies remaining. The “partial final” award provided the arbitrator would retain jurisdiction over future disputes. The Court of Appeal held that the award “was entirely proper, even though there remained a number of potential and conditional issues that the arbitrator will have to address in a final order.” The holding rested heavily on the terms of the contract.

So why no exception for Kirk v. Ratner? In Ratner, actress Charlotte Kirk entered into a confidential settlement agreement pertaining to sexual harassment, intentional infliction of emotional distress and defamation brought against entertainment industry executives in superior court. The confidentiality provision prohibited Kirk from disclosing any information, and contained an arbitration clause. Months later, a dispute emerged regarding Kirk’s threats to disclose information, and the executives initiated arbitration. The arbitrator issued a preliminary injunction prohibiting Kirk from disclosure.

Kirk filed a superior court petition to vacate the arbitrator’s preliminary injunction, arguing that the arbitrator exceeded his powers under the CAA. The court dismissed the petition, ruling it lacked jurisdiction because the arbitrator’s issuance of a preliminary injunction was not a “final award” under the CAA.

The Court of Appeal affirmed, holding that the trial court’s order was not appealable because the trial court lacked jurisdiction to consider the petition to vacate in the first place. The appellate court rejected Kirk’s argument that the interim award should be subject to judicial review under the Hightower exception because she would have been entitled to an appeal had a trial court, instead of an arbitrator, issued the preliminary injunction.

The court clarified that the Hightower exception is only reserved for the limited scenario where a ruling (1) determines all issues necessary to the resolution of “the controversy” between the parties; and (2) only leaves unresolved “potential” or “conditional” issues.

The court also rejected the argument that it should follow analogous federal law because the Federal Arbitration Act allows for certain immediate appellate review of interlocutory or partial awards. See 9 U.S.C. § 16(a)(2) (allowing appeal for an “interlocutory order granting, continuing, or modifying an injunction against an arbitration subject to” the FAA).

Arbitration Angle

The Ratner decision serves as an important reminder of just how confining arbitration can be. Just because Kirk would be entitled to appeal an injunction issued by a district court did not mean she was similarly entitled to judicial review over the arbitrator’s issuance of an injunction. The parties bargained for arbitration, and, in turn, a different set of rules.

At the same time, there is certainly some intuitive appeal to Kirk’s argument that the Hightower exception should apply because granting injunctive relief is within the equitable power of the court, and Hightower stressed the arbitrator had broad discretion to fashion an equitable remedy as long as it drew its essence from the parties’ agreement.

Perhaps a ruling in Kirk’s favor would have opened too big of a door for parties to prematurely challenge an arbitrator’s decision on an injunction. And if that were true, other interim steps might similarly be argued appealable interim “awards.” Such piecemeal litigation is the type of outcome the arbitration laws were designed to prevent. And most of the cases that have applied Hightower involved unusual facts along with specific contract terms, keeping it a truly limited exception. See VVA-TWO, LLC v. Impact Dev. Grp., LLC, 48 Cal.App.5th 985, 1000 (affirming trial court’s confirmation of arbitrator’s award fashioning remedy of a buy-sell transaction where it was unclear if third parties would consent to transaction).

One could also argue – as Kirk did – that the CAA should follow the FAA and allow for appeal from certain interlocutory orders on injunctions. But, as Ratner noted, the CAA does not contain the same language as the FAA. Therefore the Legislature, not courts, should make that determination.

As always, parties would be well advised to carefully review their arbitration clauses before a dispute occurs. And, they should be aware that if the CAA governs, any appeal from an interim order on injunctive relief will have to wait until all the smoke has cleared and the award is truly final. Of course, by then it may well be too late.