## Facts

- Advanced Micro Devices, Inc. (AMD) and Intel Corporation (Intel), competitors in microprocessors, entered a 1982 technology exchange agreement involving cross-licensing, manufacturing backup obligations, and contractual arbitration.
- Disputes arose about Intel’s performance, including obligations to provide technical information and to serve as a backup manufacturer.
- The parties submitted the dispute to arbitration under the agreement’s arbitration clause.
- The arbitrator found Intel breached the agreement and the implied covenant of good faith and fair dealing.
- As part of the remedy, the arbitrator awarded AMD rights to use certain Intel intellectual property.
- The superior court confirmed the arbitration award.
- The Court of Appeal concluded the arbitrator exceeded his powers by granting AMD intellectual-property rights not expressly specified in the agreement and ordered those portions removed.
- The California Supreme Court granted review to determine when a contractual arbitrator exceeds arbitral powers in fashioning a remedy for breach of contract.

## Issues

1. Under California’s arbitration statutes, when does a contractual arbitrator “exceed[] [his or her] powers” by the remedy awarded for breach of contract?
2. Did the arbitrator exceed his powers by awarding AMD rights to Intel intellectual property as relief for Intel’s breach and related breach of the implied covenant of good faith and fair dealing?

## Decision

- The California Supreme Court reversed the Court of Appeal.
- The Court held that, absent specific contractual or procedural restrictions, an arbitrator’s remedy does not exceed arbitral powers if it bears a rational relationship to the underlying contract (as the arbitrator interpreted it) and to the breach found (as the arbitrator found it).
- Applying that standard, the Court held the intellectual-property remedy fell within the arbitrator’s authority because it was rationally related to the agreement’s subject matter and the breaches found.
- The decision reinstated the award as confirmed by the superior court.

## Legal Principles

- Courts may vacate or correct a contractual arbitration award only on narrow statutory grounds, including that “the arbitrators exceeded their powers” under Cal. Civ. Proc. Code §§ 1286.2(d) and 1286.6(b).
- An arbitrator does not exceed arbitral powers merely by making legal or factual errors; merits review is highly limited in contractual arbitration.
- In the absence of more specific limits in the arbitration agreement, the submission, or arbitration rules, a remedy is within the arbitrator’s powers if it bears a rational relationship to:
  - the contract as interpreted (expressly or impliedly) by the arbitrator, and
  - the breach as found (expressly or impliedly) by the arbitrator.
- A remedy need not be expressly listed in the contract to be permissible in arbitration, so long as it remains rationally connected to the contract and the breach found and is not barred by explicit limits the parties imposed.

## Conclusion

The court held that judicial review of contractual arbitration remedies is limited: unless the parties specifically restrict remedies, an arbitrator may craft broad relief—including intellectual-property-related relief—so long as it is rationally related to the contract (as the arbitrator interpreted it) and the breach found, and the award may not be corrected merely because a court would have selected a different remedy.


Advanced Micro Devices, Inc. v. Intel Corp., 885 P.2d 994 (Cal. 1994)