## Facts

- DIRECTV contracted with retail dealers to market and install satellite television service under written dealership agreements.
- The agreements required arbitration in Los Angeles County under AAA rules and included a California choice-of-law clause.
- The agreements also stated arbitrators lacked power to commit “errors of law or legal reasoning” and allowed a court to vacate or correct an award for such error.
- Dealers filed a class action in Oklahoma alleging DIRECTV withheld commissions and imposed improper charges in breach of the agreements.
- DIRECTV obtained an order compelling arbitration in California, and an AAA panel was convened in Los Angeles.
- Although the arbitration clause did not expressly address class arbitration, the panel (by split decision) concluded classwide arbitration was permitted and certified a class.
- DIRECTV petitioned a California superior court to vacate the award, arguing the arbitrators exceeded their powers and committed reviewable legal error; the trial court vacated the award.
- The Court of Appeal reversed, holding the contractual provision expanding judicial review for legal error was invalid.
- The California Supreme Court granted review.

## Issues

1. Under the California Arbitration Act, may parties agree to expanded judicial review permitting a court to vacate or correct an arbitration award for errors of law or legal reasoning?
2. When an arbitration agreement is silent on class arbitration, who decides whether classwide arbitration is permitted, and under what governing law?

## Decision

- The California Supreme Court reversed the Court of Appeal in part, holding the parties may contract for judicial review of legal error under the CAA.
- The Court treated the “no errors of law” clause as a contractual limitation on arbitral power; legal error would constitute an excess of powers reviewable under Code of Civil Procedure §§ 1286.2(a)(4) and 1286.6(b).
- The Court did not finally decide whether the contract allowed class arbitration; it held that question was for the arbitrators to decide in the first instance and remanded for renewed arbitral consideration under the correct framework.
- The matter was remanded for further proceedings consistent with these rulings.

## Legal Principles

- Under the CAA, parties may limit arbitrators’ authority by contract and may provide for judicial review of specified legal errors when those errors are defined as beyond the arbitrators’ powers.
- A court may vacate or correct an award when arbitrators “exceeded their powers,” and the parties’ agreement is a source of those powers.
- Federal arbitration law does not necessarily bar expanded review when the parties’ agreement invokes California law and the dispute is governed by the CAA rather than exclusively by the FAA.
- Where a broad arbitration clause delegates disputes “arising out of or relating to” the agreement to arbitration, the availability of classwide arbitration under a silent clause is generally a procedural/scope question for arbitrators to determine under the chosen substantive law and incorporated arbitral rules.

## Conclusion

The court held that California law permits parties to obtain judicial review of arbitral legal error by expressly restricting arbitrators’ authority and treating such errors as an excess of powers, and it directed that the class-arbitration question under a silent agreement be decided by the arbitrators on remand.


Cable Connection, Inc. v. DIRECTV, Inc., 44 Cal. 4th 1334, 190 P.3d 586 (Cal. 2008)