Ahdout v. Hekmatjah

In Ahdout v. Hekmatjah (2013) 213 Cal.App.4th 21, the court concluded judicial review of an arbitration award was required because, if the losing party was correct, the award would contravene the explicit legislative expression of public policy embodied in section 7031 regarding unlicensed contractors. In the underlying arbitration, the appellant sought, among other things, disgorgement of construction costs, pursuant to section 7031, which mandates disgorgement of compensation received by an unlicensed contractor. The arbitrators rejected the claim, concluding the respondents were not required to disgorge the construction costs and, essentially, that section 7031 did not apply. (Id. at p. 28.) The trial court rejected the losing party's petition to vacate the award, reasoning it did not have the power to review the arbitrators' decision for errors of fact or law. (Id. at p. 29.) The court of appeal disagreed, reasoning that because "section 7031 constitutes an explicit legislative expression of public policy regarding unlicensed contractors, the general prohibition of judicial review of arbitration awards does not apply. . . . Where a public policy is articulated explicitly by the Legislature, as with section 7031, courts are vested with the final word on whether the provision applies." (Ahdout, at pp. 38, 39.) While in Moncharsh v. Heily & Blase (1992) the court concluded nothing in the Rules of Professional Conduct suggested resolution by an arbitrator of what was "essentially an ordinary fee dispute would be inappropriate or would improperly protect the public interest," the Ahdout court indicated the contractor licensing laws are intended to protect the general public from shoddy construction work, "and thus judicial review of arbitration awards that allegedly fail to enforce the law is appropriate." (Ahdout, at p. 39; Moncharsh, at p. 33.) The court reversed the judgment and remanded to the trial court with directions to conduct a de novo review of the evidence to determine whether section 7031 was applicable. (Id. at p. 40.)