## Facts

- Howard Siegel sued his employer, The Prudential Insurance Company of America, and supervisor James Dinges over employment-related claims, including wrongful termination and defamation.
- The parties’ employment contract required arbitration of disputes before the National Association of Securities Dealers (NASD).
- The superior court compelled NASD arbitration and stayed the civil action.
- During the NASD hearing, one arbitrator withdrew and was replaced; defendants asked to restart the arbitration, but the panel declined and continued with the new arbitrator.
- The NASD panel awarded Siegel compensatory and punitive damages.
- Defendants argued the punitive damages award lacked evidentiary support and exceeded the arbitrators’ authority.

## Issues

1. Whether the Federal Arbitration Act (FAA), including 9 U.S.C. § 10, preempts California’s rule limiting judicial review of arbitration awards, requiring state courts to review the award for “manifest disregard of the law.”
2. Whether any ground for vacatur existed under California Code of Civil Procedure § 1286.2, including alleged excess of powers (punitive damages) or procedural unfairness from the mid-hearing arbitrator replacement.

## Decision

- The Court of Appeal affirmed the judgment confirming the arbitration award and denying vacatur.
- The FAA did not preempt California’s limited judicial review standard for arbitration awards in state court.
- “Manifest disregard of the law” did not authorize merits review of the award beyond the statutory vacatur grounds.
- Defendants failed to establish any statutory basis to vacate the award under Code of Civil Procedure § 1286.2, including regarding punitive damages or the arbitrator substitution.

## Legal Principles

- Under California arbitration law, courts do not review the merits of an arbitration award; review is confined to the statutory vacatur grounds in Code of Civil Procedure § 1286.2.
- Alleged legal error or insufficient evidence supporting an award ordinarily does not constitute “excess of powers” and does not permit a court to reweigh evidence or reassess the arbitrators’ legal determinations.
- The FAA’s vacatur provision (9 U.S.C. § 10) does not require state courts to apply broader merits review or displace California’s restrictive limits on judicial review in state-court confirmation/vacatur proceedings.
- A procedural irregularity in arbitration warrants vacatur only if it fits a statutory ground (e.g., misconduct or refusal to hear material evidence) and results in an unfair hearing within the meaning of § 1286.2.

## Conclusion

The court held that California’s narrow statutory scheme for vacating arbitration awards governed confirmation of the NASD award and was not preempted by the FAA; because defendants showed no § 1286.2 ground for vacatur, the award, including punitive damages, was confirmed.


Siegel v. Prudential Ins. Co. of Am., 67 Cal. App. 4th 1270, 79 Cal. Rptr. 2d 726 (Ct. App. 1998)