Nevada Supreme Court Establishes Standards Governing Common Law Review of Private Arbitration Awards

Volume 5, Issue 1
March 31, 2006

Continuing its pronouncements settling legal standards governing arbitration in Nevada, on March 30, 2006 the Supreme Court settled the nature of the review courts are permitted to undertake under two common law standards for review of private arbitration awards. In a labor arbitration matter upholding discharge of a schoolteacher for substandard performance, the Court examined the law applicable in judicial review of private arbitration awards under two common law grounds: (1) where the award is arbitrary, capricious, or unsupported by the arbitration agreement and (2) where the arbitrator manifestly disregarded the law. Recognizing the limited nature of the review permitted, in a manner the same as many other state courts, the opinion continues the Supreme Court's trend toward promotion of the finality of reasonable arbitration awards by limiting judicial review.

The first ground, as noted by the Court, "ensures that the arbitrator does not disregard the facts or the terms of the arbitration agreement." Accordingly, court review is limited to whether there was "substantial evidence in the record" before the arbitrator. The arbitrator had issued a seventeen-page award in which the factual underpinning of the award was discussed. The Court noted the arbitrator's award was supported by the "substantial evidence" laid out in the award and thus was not "arbitrary and capricious."

The second common law ground, "manifest disregard of the law," had previously been the subject of somewhat conflicting interpretations in Nevada, where some courts in the past had overturned awards based upon a particular judge's disagreement with the manner in which the arbitrator interpreted the law. To settle the law, the Supreme Court held that a court could overturn an award only when it shows the arbitrator "appreciates the significance of clearly governing legal principles but decide[s] to ignore or pay no attention to those principles." Courts cannot overturn an award where the judge believes the arbitrator did not correctly interpret the law, such as a statute. In the case at issue, the arbitrator cited the correct statute and discussed her interpretation of the statute. Accordingly, the arbitrator did not manifestly disregard the statute.

This case has applicability not just with private labor arbitration, but applies to any private arbitration proceeding. It clearly endeavors to promote the finality of arbitration, for those who have selected that means of dispute resolution, by settling the law limiting when such awards can be overturned.

Clark County Education Association v. Clark County School District, 122 Nev. Adv. Op. No. 30, ___ P.3d ___ (March 30, 2006).

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