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LEGAL UPDATES Appellate Court Holds That a Contractual Arbitration Award Should Be Vacated Where Material Evidence Substantially Prejudicing a Party Was Excluded by Shannon B. Jones - November 30, 2009 In Burlage v. Superior Court, an Appellate Court affirmed a decision by a trial Court to set aside an arbitration award where the arbitrator excluded material evidence substantially prejudicing a party. In Burlage v. Superior Court, plaintiffs purchased a home from defendant, Martha Spencer. After the sale, plaintiffs alleged that Spencer intentionally and fraudulently failed to disclose that certain improvements on the property encroached on land owned by a nearby country club. The matter was arbitrated before the Judicial Arbitration and Mediation Services (“JAMS”). In the meantime, the title company paid the country club approximately $11,000 in exchange for a lot-line adjustment to give plaintiffs title to the encroaching land. Nevertheless, plaintiffs sought damages for the diminution in value of their property and for the cost of moving the real property improvements. The arbitrator granted the motion in limine excluding evidence of the lot-line adjustment and concluded that damages should be measured from the date of the close of escrow. The arbitrator rejected the seller’s argument that the later circumstances should be taken into account in measuring the plaintiffs’ damages.After the hearing, the arbitrator concluded that the seller knew and failed to disclose the encroachment and that it materially affected the property’s value. The arbitrator awarded plaintiffs $552,750 in damages, $250,000 in punitive damages and $732,570 in attorney’s fees and costs. Plaintiffs moved to confirm the award and the seller moved to vacate the award alleging that the party’s rights were substantially prejudiced by the arbitrator’s refusal to hear evidence material to the controversy. The trial court vacated the award vacated the award ruling that the arbitrator’s refusal to admit evidence of the lot-line adjustment substantially prejudiced the seller’s “ability to dispute the amount of damage suffered by” the plaintiffs. Plaintiffs petitioned for review before the Appellate Court. The Appellate Court denied the petition holding that the arbitrator’s ruling substantially prejudiced the seller by preventing her from presenting material evidence. -Shannon B. Jones, Partner, sbj@sbj-law.com |
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