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Arbitrator awards sales commissions; court affirms
March 31, 2006 by Ross Runkel at LawMemo

An arbitrator ruled that the parties' contract for sales commissions did not apply, and awarded the salesman a commission anyhow. The 9th Circuit upheld the award. Schoenduve Corp v. Lucent Technologies (9th Cir 03/22/2006).

Lucent and Schoenduve had a contract authorizing Schoenduve to solicit orders for Lucent's wireless communication products. Schoenduve courted Apple Computer, and two days before Lucent signed a deal with Apple, Lucent terminated its contract with Schoenduve.

Schoenduve went to arbitration, seeking commissions. Schoenduve won.

The arbitrator ruled that the Lucent-Schoenduve had been lawfully terminated because that contract expressly allowed termination. Therefore, there could be no commissions awarded under the terms of that contract. Then the arbitrator awarded commissions on the basis of "quasi-contract." ("Quasi-contract" is a non-contract legal theory that often is called restitution for unjust enrichment.)

Lucent claimed that the arbitrator's award should be vacated on the grounds that the arbitrator went outside of the submission agreement and modified the express language of the contract.

The 9th Circuit upheld the award on the following reasoning:

The arbitration clause in the contract was broad enough to cover non-contractual claims. It applied "if a dispute arises out of or relates to this Agreement."

The submission agreement was broad enough to include non-contractual claims. Schoenduve's demand for arbitration asked for damages for "breach of contract and other claims." Lucent did not object to this statement of the issues.

The 9th Circuit also made it clear that "the arbitrator's interpretation of the scope of his powers is entitled to the same level of deference as his determination on the merits."

My view: The court got it right. The parties used broad language in describing the disputes that were covered by the agreement to arbitrate. It was no stretch for the arbitrator to decide that the language included claims for commissions based on quasi-contract.

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