Mikail v. Benyamini CA2/5 ( 2023 )

Filed 5/16/23 Mikail v. Benyamini CA2/5
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
RAMIN MIKAIL, B316525 (consolidated with
B320567)
Plaintiff and Respondent,
(Los Angeles County
v. Super. Ct. No.
21STCP02159)
RAMIN BENYAMINI, et al.,
Defendants and
Appellants.
APPEALS from a judgment and a postjudgment order of
the Superior Court of the County of Los Angeles, Steven J.
Kleifield, Judge. Affirmed.
Krane & Smith, Marc Smith and Kathleen Dority Fuster,
for Defendants and Appellants.
Valle Makoff, Jeffery B. Valle and Julie Roback, for
Plaintiff and Respondent.
I. INTRODUCTION
The trial court confirmed and entered judgment on an
arbitration award in favor of plaintiff Ramin Mikail and against
appellant defendants.1 On appeal, defendants challenge the
judgment’s award of attorney fees and a postjudgment charging
order. We affirm.
II. PROCEDURAL BACKGROUND
A. Shareholders’ Agreement/Arbitration Clause
In December 2012, Color OnDemand, Inc. entered into a
shareholders’ agreement with plaintiff, defendants, and the
codefendant. The agreement set forth the parties’ respective
ownership of the issued shares of the corporation and included an
arbitration clause. Specifically, paragraph 11.8, entitled “Dispute
Resolution, Attorney Fees and Costs” (arbitration clause),
provided that the parties were required to submit any disputes
arising from the agreement to binding contractual arbitration
administered by JAMS.
The arbitration clause included an attorney fees provision
that stated: “The arbitrator may, in the Award, allocate all or
part of the costs of the arbitration, including the fees of the
arbitrator and the reasonable out-of-pocket attorneys’ fees of the
prevailing party.” The clause further provided that its terms
could be enforced in the trial court and that “the party seeking
1 Defendants are Ramin Benyamini and Askhan Motamen.
Their codefendant, Arsalan Motamen (the codefendant),
prevailed in the arbitration and is not a party to this appeal.
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enforcement” would be entitled to “an award of all costs, fees and
expenses, including attorney’s fees,” to be paid by the party
against whom enforcement was ordered.
B. Interim Arbitration Award
In May 2020, plaintiff initiated a JAMS arbitration against
defendants and the codefendant for breach of fiduciary duty,
breach of the shareholder agreement, conversion, intentional
infliction of emotional distress, unjust enrichment, and an
accounting. Following a six-day hearing in February 2021,
plaintiff submitted a proposed interim award which provided,
among other things, that he was entitled to recover from
defendants damages in the amount of $110,837.50. The proposed
award also provided that defendants were “to pay [plaintiff’s]
costs, including costs of the Arbitrator and court reporter fees,
and reasonable attorneys fees.”
Defendants filed objections to the proposed award,
submitted supplemental briefing on the form of the proposed
award, and their own proposed interim award which provided,
among other things, that plaintiff was entitled to “reasonable
attorneys’ fees incurred.” Defendants did not, however, argue
that defendants were limited to recovery of fees paid out-of-
pocket.
On March 2, 2021, and March 19, 2021, the arbitrator held
hearings on the proposed order and subsequently issued a ruling
on the contested language, none of which involved the out-of-
pocket language in the fee provision. Plaintiff then submitted an
amended proposed interim award, which the arbitrator signed on
March 26, 2021. The interim award provided that plaintiff and
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the codefendant were each entitled to recover “reasonable
attorneys fees” and directed the parties to submit evidence in
support of their requests for fees.
C. Attorney Fees Applications and Final Award
On April 5, 2021, plaintiff filed a motion to set the amount
of attorney fees and costs, arguing, among other things, that his
reasonable attorney fees should be calculated using the lodestar
method—the reasonable number of hours expended, multiplied
by the reasonable hourly rate prevailing in the legal community.
In his supporting declaration, plaintiff’s counsel explained that
his firm had agreed to represent plaintiff on a hybrid reduced-
rate/contingency basis under which plaintiff would be billed at a
rate 50 percent below the firm’s usual rates and the firm would
take 20 percent of the amount recovered on plaintiff’s behalf.
Using the lodestar method and his firm’s usual rates, counsel
calculated that his firm billed 1,476.5 hours on the arbitration for
a total amount of fees incurred of $639,119.00.
On April 20, 2021, defendants filed their opposition to
plaintiff’s fee motion, conceding that the lodestar was the
traditional method for evaluating a fee application and arguing
that: plaintiff’s requested fees were unreasonable because they
were double the amount plaintiff was actually billed; the fees
were disproportionate to the result obtained; plaintiff had
unnecessarily complicated the litigation, resulting in unnecessary
fees; and, based on plaintiff’s reduced-rate agreement with his
counsel, a reasonable fee request would be no more than
$320,000, the approximate amount of fees that plaintiff actually
incurred. Defendants did not suggest, however, that plaintiff’s
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fees should be limited to the amount he actually paid out-of-
pocket.
On April 20, 2021, after reviewing the parties briefing on
the fee applications, the arbitrator issued a minute order
awarding plaintiff the entire amount of fees claimed—
$639,119.00—and awarding the codefendant the amount of his
request—$52,647.00—as the prevailing party on plaintiff’s claims
against him.
On April 23, 2021, the arbitrator issued a “Ruling on
Objections to Fees Requests,” which confirmed that he had
reviewed the parties’ oppositions and denied all objections to the
requests.
On May 17, 2021, the arbitrator confirmed his prior ruling
on the fee requests, and defendants then filed further objections
regarding the codefendant’s fees and the disparity between
plaintiff’s damage award and his fee award, but did not mention
the out-of-pocket limitation on the attorney fees award.
On May 24, 2021, the arbitrator responded to defendants’
objections regarding the codefendant’s fee award and rejecting all
of defendants’ other objections to plaintiff’s fee award. The next
day, the arbitrator issued his final award.
D. Objections to Final Award
On June 1, 2021, defendants, now represented by new
counsel, filed objections to the final award, raising for the first
time the out-of-pocket limitation on fee awards in the arbitration
clause. According to defendants, the arbitrator: misinterpreted
the arbitration clause by awarding fees beyond those paid out-of-
pocket; exceeded the contractual limitation on fee awards; and
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exceeded the power granted to him under the arbitration clause
in violation of Code of Civil Procedure section 1286.2.2 In
addition, defendants maintained that there was no evidence of
the amounts plaintiff paid out-of-pocket, the arbitrator erred by
applying the lodestar method and including the 20 percent
contingency fee in the award, and the arbitrator failed to allocate
between the derivative claims and individual claims, as well as
between claims on which defendants prevailed or on which no
fees were recoverable.
Plaintiff responded to the objections, arguing that, under
both the JAMS rules and the Code of Civil Procedure, the
arbitrator had no power to reconsider a final award; defendants
had waived their new arguments by failing to raise them before
the award became final; and the arbitrator did not exceed his
authority under the arbitration clause because his award was
based on his interpretation of the out-of-pocket language and that
language was, at best, ambiguous.
Defendants filed a reply.
On June 15, 2021, the arbitrator issued a “Final Ruling on
Objections to Attorney Fees Award,” finding that “[n]othing in
[defendants’] submission moves the arbitrator to change his
ruling on attorney fees.”
E. Petition to Confirm Award and Judgment
On July 15, 2021, plaintiff filed in the trial court a motion
to confirm the award pursuant to section 1285 et seq.
Defendants opposed the motion, arguing that the award should
2 All further statutory references are to the Code of Civil
Procedure, unless otherwise indicated.
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be vacated because the arbitrator exceeded his powers in
violation of section 1286.2, subdivision (a)(4) and JAMS rule
24(c). Plaintiff filed a reply.
On August 20, 2021, the trial court held a hearing on the
motion to confirm the award and granted it. On
September 22, 2021, the court entered an amended judgment
based on the arbitration award. The judgment included a
provision that awarded plaintiff attorney fees incurred in
bringing the confirmation motion, with the amounts to be
determined on a subsequent fee motion.
F. Appeals
On November 12, 2021, defendants appealed from the
amended judgment, case number B316525 (first appeal).3
On February 2, 2022, plaintiff filed his request for attorney
fees incurred in connection with the confirmation motion, seeking
fees in the amount of $31,595.00. Defendants opposed the motion
on the grounds that the fees sought were excessive,
unreasonable, and not actually incurred. On February 28, 2022,
the trial court held a hearing on plaintiff’s fee request and
granted the request in its entirety.
On March 9, 2022, the trial court entered a second
amended judgment which included the amounts of fees and costs
3 As the orders we issued in this appeal are part of the record
on appeal, we deny as moot plaintiff’s request for judicial notice
of those orders. We also deny plaintiff’s request for judicial notice
of the complaint filed by defendants in a separate action against
their prior attorney as the complaint was not filed in the trial
court and is unnecessary for our resolution of this appeal.
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awarded in connection with the motion to confirm. On
May 2, 2022, defendants appealed from the second amended
judgment as to attorney fees and costs only (second appeal).
Following the original amended judgment, plaintiff
pursued postjudgment collection remedies against defendants,
including a motion for a charging order, which the trial court
granted on March 10. On May 12, 2022, defendants appealed
from the charging order (third appeal).4
III. DISCUSSION
A. Appeals from Judgment on Arbitration Fee Award
Defendants contend that the trial court erred by entering
judgment on the attorney fees portion of the arbitrator’s final
award. According to defendants, the court should have vacated
the arbitrator’s final fee award because: the arbitration clause
limited attorney fees to those that plaintiff had already paid; the
arbitrator exceeded the jurisdiction granted him under the out-of-
pocket limitation in the arbitration clause; and the fee award
contravened an explicit legislative expression of public policy.
1. Standard of Review and Legal Principles
On review of a trial court’s order confirming or vacating an
arbitration award, “‘[w]e review the trial court’s ruling de novo,
but defer to the factual and legal findings made by the arbitrator.
4 The second and third appeals were designated as case
number B320567. We granted defendants’ motion to consolidate
those appeals with the first appeal, case number B316525.
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[Citations.] “[W]e do not review the arbitrator’s findings . . . , but
take them as correct.” [Citation.]’ [Citation.] To the extent the
superior court judge made factual findings that are not
inconsistent with the arbitrators’ findings, we review them for
substantial evidence. [Citation.]” (Panoche Energy Center, LLC
v. Pacific Gas & Electric Co. (2016) 1 Cal.App.5th 68, 99.)
“‘Because the decision to arbitrate grievances evinces the
parties’ intent to bypass the judicial system and thus avoid
potential delays at the trial and appellate levels, arbitral finality
is a core component of the parties’ agreement to submit to
arbitration.’ (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 10
. . . .) Generally, courts cannot review arbitration awards for
errors of fact or law, even when those errors appear on the face of
the award or cause substantial injustice to the parties. (Id. at
pp. 6, 28.)” (Richey v. AutoNation, Inc. (2015) 60 Cal.4th 909, 916
(Richey).)
“The California Arbitration Act (Code Civ. Proc., § 1280 et
seq.) and the Federal Arbitration Act (9 U.S.C. § 10 et seq.)
provide limited grounds for judicial review of an arbitration
award. Under both statutes, courts are authorized to vacate an
award if it was (1) procured by corruption, fraud, or undue
means; (2) issued by a corrupt arbitrator; (3) affected by
prejudicial misconduct on the part of the arbitrator; or (4) in
excess of the arbitrator’s powers. (Code Civ. Proc., § 1286.2,
subd. (a); 9 U.S.C. § 10(a).) An award may be corrected for
(1) evident miscalculation or mistake; (2) issuance in excess of the
arbitrator’s powers; or (3) imperfection in the form. (Code Civ.
Proc., § 1286.6; 9 U.S.C. § 11.)” (Richey, supra, 60 Cal.4th at
p. 916.)
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“Arbitration ‘is . . . a matter of contract between the parties’
[citation], and, as such, whether particular disputes are subject to
arbitration ‘“is strictly ‘a matter of [the parties’] consent’”’
[citations]. [Citations.]” (Douglass v. Serenivision, Inc. (2018) 20
Cal.App.5th 376, 386 (Douglass).) “‘When deciding whether the
parties agreed to arbitrate a certain matter (including
arbitrability [itself]), courts generally . . . should apply ordinary
state-law principles that govern the formation of contracts.’
[Citation.] Under California’s law of contracts, a contract may be
express (that is, either written or oral) or implied in fact (that is,
one whose ‘existence and terms . . . are manifested by conduct’).
[Citations.]” (Id. at p. 387.)
Thus, in addition to expressly agreeing to arbitrate an
issue, “parties may enter into an implied in fact agreement to
arbitrate [an issue] through their conduct (which may
additionally be deemed to estop them from denying such an
agreement). [Citation.] On the one hand, consent to arbitration
(or to the arbitrator’s power to decide arbitrability) will not be
inferred solely from a party’s conduct of appearing in the arbitral
forum to object to the arbitrator’s exercise of jurisdiction, at least
if the party makes that objection ‘prior to participat[ing]’ in the
arbitration. [Citations.] On the other hand, consent to
arbitration (or to the arbitrator’s power to decide arbitrability)
will be inferred from a party’s conduct of litigating an issue up to
the point of submitting it for decision in the arbitral forum, at
least if the party does so without objection. [Citations.]”
(Douglass, supra, 20 Cal.App.5th at pp. 387–388.)
It is well established that a party “‘may not voluntarily
submit his claim to arbitration, await the outcome, and if the
decision is unfavorable, challenge the authority of the arbitrator
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to act.’ [Citations.] Such conduct constitutes ‘“gamesmanship”’
insofar as it allows a party ‘“both to have his cake and eat it too.”’
[Citations.] Courts are disinclined, and rightly so, to reward such
‘inequitable’ conduct. [Citation.]” (Douglass, supra, 20
Cal.App.5th at p. 389.)
2. Interpretation of Attorney Fees Provision
Defendants devote the majority of their briefs on appeal to
arguing that the arbitrator erred when he interpreted the
attorney fees provision of the arbitration clause. We reject
defendants’ challenges to the arbitrator’s interpretation of the
arbitration clause because, as we discuss above, an arbitration
award cannot be vacated for any such asserted errors of law or
fact. (Richey, supra, 60 Cal.4th at p. 916.)
3. Excess of Jurisdiction
We next consider defendants’ contention that the arbitrator
exceeded his jurisdiction in awarding attorney fees that were not
“out of pocket,” that is, fees plaintiff had not yet paid. Even
assuming that the arbitrator’s award of reasonable attorney fees
could be construed as a form of recovery that was not agreed to
by the parties, we would still conclude that defendants
voluntarily submitted to the arbitrator plaintiff’s entitlement to
reasonable attorney fees and the amount of such fees. Indeed, at
no time prior to entry of the final arbitration award, did
defendants contest plaintiff’s assertion that the amount of fees
should be calculated using the traditional lodestar method, which
focused on the amount of fees incurred, rather than on the
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amount actually paid. Instead, they acquiesced in plaintiff’s
request that fees be calculated using that method, without
objection or proffering an alternative methodology. In addition,
once the arbitrator announced his fee ruling, defendants raised
multiple challenges to the ruling’s proposed language, but did not
protest the use of the lodestar methodology or object to the
amount of the award based on the out-of-pocket limitation.
Accordingly, defendants’ conduct, in voluntarily submitting the
award of reasonable attorney fees to the arbitrator; acquiescing
in his application of the lodestar method to calculate the amount
of such fees; and failing to object to his authority to award any
amounts beyond those actually paid by plaintiff, constituted an
implied-in-fact agreement to allow the arbitrator broad discretion
in determining the ultimate amount of the award. Having
impliedly consented to the arbitrator’s jurisdiction to adjudicate
the issue, defendants could not thereafter challenge the award on
that ground in the trial court. (See Fidelity & Casualty Co. v.
Dennis (1964) 229 Cal.App.2d 541, 544.)
Defendants counter that they did not forfeit their challenge
to the arbitration award because they challenged the awarding of
any fees that were not actually paid in their objections to the
final award and in their opposition to the motion to confirm the
award in the trial court. We disagree.
“An arbitrator, ‘upon written application of a party to the
arbitration, may correct the award upon any of the grounds set
forth in subdivisions (a) and (c) of [s]ection 1286.6 not later than
30 days after service of a signed copy of the award on the
applicant.’ (§ 1284.) Thus, ‘an arbitrator’s “power . . . to correct
an award after it has been issued to the parties is limited to
evident miscalculations of figures or descriptions of persons,
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things or property (§ 1286.6, subd. (a)) and nonsubstantive
matters of form that do not affect the merits of the controversy.
(§ 1286.6, subd. (c).)”’ [Citation.]” (Taska v. The RealReal, Inc.
(2022) 85 Cal.App.5th 1, 8, fn. omitted.) “An arbitrator may also
‘issue an amended or supplemental award if he or she
inadvertently omitted a ruling on a submitted issue in the
original award.’ [Citation.]” (Ibid., fn. 2.)
Here, in their objections to the arbitrator’s final award,
defendants did not seek to correct a miscalculation of figures or
other nonsubstantive matters of form. Nor were they attempting
to obtain a ruling on a submitted issue that had been
inadvertently omitted from the final award. They were instead
trying to change the substance of the arbitrator’s ruling on the
amount of reasonable fee by using a different methodology to
calculate the fee award. Thus, their objections were untimely
and could not operate to withdraw their consent to the
arbitrator’s adjudication of the reasonable fee issue.
4. Public Policy
Defendants also suggest that the award must be vacated
because it falls within the limited public policy exception to the
rule of finality. According to defendants, the final award
“contravenes an explicit expression of public policy and conflicts
with the statutory scheme” codified in section 1021 and Civil
Code section 1717 with respect to attorney fees.
“Arbitrators may exceed their powers by issuing an award
that violates a party’s unwaivable statutory rights or that
contravenes an explicit legislative expression of public policy.
[Citations.] However, ‘“[a]rbitrators do not ordinarily exceed
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their contractually created powers simply by reaching an
erroneous conclusion on a contested issue of law or fact, and
arbitral awards may not ordinarily be vacated because of such
error . . . .”’ [Citation.]” (Richey, supra, 60 Cal.4th [at pp.] 916–
917.) “Arbitral finality is the general rule, and the public policy
exception permitting courts to vacate an arbitration award arises
in only limited and exceptional circumstances. [Citations.]” (City
of Richmond v. Service Employees Internat. Union, Local 1021
(2010) 189 Cal.App.4th 663, 666.)
Defendants’ argument is based on the premise that the
amount of fees awarded was not authorized by the parties’
contract. But, as we discuss above, defendants impliedly
consented to the arbitrator’s contractual authority to award such
amounts. In any event, the arbitrator here calculated the award
under the traditional lodestar method, which has been deemed
presumably reasonable for use in calculating contractual attorney
fees under Civil Code section 1717. (PLCM Group, Inc. v. Drexler
(2000) 22 Cal.4th 1084, 1097; Glaviano v. Sacramento City
Unified School Dist. (2018) 22 Cal.App.5th 744, 753.) Defendants
do not cite to any decision in which an arbitrator’s fee award
calculated under the lodestar method has been deemed violative
of public policy or contrary to a specific statutory scheme. The
arbitrator’s award therefore did not fall within the limited public
policy exception to the rule of finality.
B. Appeals from Award of Confirmation Fees and Charging
Order
Defendant’s appeal from the trial court’s fee award on the
confirmation motion appears to be predicated solely on their
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requested reversal of the arbitrator’s underlying fee award. And,
defendants concede that their challenge to the charging order is
premised on their requested reversal of the underlying fee award.
Because we affirm the judgment on the arbitrator’s fee award, we
also affirm the court’s award of fees incurred on the confirmation
motion and the charging order.
IV. DISPOSITION
The judgment and charging order are affirmed. Plaintiff is
awarded costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
KIM, J.
We concur:
RUBIN, P. J.
MOOR, J.
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