Wednesday, August 3, 2016

Not Waiting for My Man.

Panoche Energy Ctr. v. Pac. Gas & Elec. Co., No A140000 (D1d4 Jul. 1, 2016)

This is a long opinion in a complicated contract dispute over whether an Energy Producer or a Utility should bear the costs of complying with California’s AB 32 greenhouse gas standards. The dispute went to arbitration. Producer said the arbitration needed to be stayed because various issues in the AB 32 regulatory scheme were still being hashed out by the Public Utilities Commission and the Air Resources Board. They included key decisions about whether the compliance burdens should fall on producers or utilities.

According to Producer, these issues could be dispositive to the arbitration, so the decision needed to await resolution by ARB and PUC. The arbitrator didn’t agree. But after the Utility won, a superior court granted the Producer’s motion to vacate under Code of Civil Procedure § 1286.2(a)(5), which permits the vacation of an arbitral award when the arbitrator refuses to postpone the hearing after good cause to do so has been shown. The superior court thought the Producer was prejudiced by the arbitrator’s refusal to await the completion of the rule-makings.

There’s a weird threshold issue here in that the Producer framed its arguments as going to ripeness, a justiciability issue that doesn’t conceptually apply in an arbitration. Indeed, some cases say an arbitrator can decide an unripe controversy, so long as the dispute is one foreseen by the parties’ agreement. The agreement in this case, however, had a somewhat unusual provision expressing the parties’ intent to “limit the power of the arbitrator to that of a Superior Court judge enforcing California Law.” So ripeness would apply to the dispute, as a matter of contract.

But in the end, that didn’t really matter because the dispute about the interpretation of the contract was ripe. While the PUC and ARB decisions would ultimately have an impact of allocation issues, by no means would these decisions result in the interpretation of the contract being meaningless. Indeed, the rule ultimately adopted takes into account whether the parties had clearly allocated the cost in their contract, so there was no reason for the trial court to treat the resolution of the contract interpretation questions as merely some kind of unripe advisory opinion. Under those circumstances there were no reasons to justify vacating the arbitration award under §1286.2(a)(5).


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