Cooper v. Lavely & Singer Professional Corp. ( 2014 )

Filed 9/26/14
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FOUR
JEFFREY COOPER, B251508
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. SS023190)
v.
LAVELY & SINGER
PROFESSIONAL CORPORATION,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of Los Angeles County,
Gerald Rosenberg, Judge. Reversed and remanded with directions.
Lyle R. Mink for Plaintiff and Appellant.
Lavely & Singer Professional Corporation, Michael E. Weinsten and Paul
N. Sorrell for Defendant and Respondent.
In the underlying arbitration proceeding, the arbitrator initially issued a
“Final Award” denying a request for an award of attorney fees by respondent
Lavely & Singer Professional Corporation (L & S). The arbitrator later modified
the Final Award to include a fee award, and issued a “Revised Final Award.”
Appellant Jeffrey Cooper challenges the trial court’s confirmation of the Revised
Final Award. We conclude that the arbitrator exceeded his powers in modifying
the Final Award and in issuing the Revised Final Award. We therefore reverse the
judgment, and remand the matter with instructions to the trial court to correct the
Revised Final Award by striking the attorney fee award, and confirm the award, as
corrected.
RELEVANT FACTUAL AND PROCEDURAL
BACKGROUND
A. Prior Proceedings
In 2003, Cooper met Larry Solomon and Adam Linter, who described
certain entertainment-related projects they were pursuing through a production
company called “Hopeful Monster, Inc.” (HMI). In September 2003, Cooper
entered into a revenue sharing agreement with HMI, which obliged Cooper to
invest $250,000 in HMI.
In 2009, after coming to suspect that HMI was a sham, Cooper retained L &
S. Cooper’s legal services contract with L & S obliged him to submit all claims
arising under the contract, including malpractice claims, to “mandatory”
arbitration pursuant to the rules of JAMS or other specified arbitrators. The
contract also contained an attorney fee provision, which provided for a fee award
to the prevailing party in any such arbitration.
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On Cooper’s behalf, L & S initiated a fraud action against HMI, Solomon,
and the estate of Linter, who was then deceased. Solomon secured an order
compelling arbitration of Cooper’s claims pursuant to an arbitration clause in
Cooper’s agreement with HMI. In September 2010, the arbitrator (retired Judge
Alan Haber) concluded that Cooper had not established his claims, and issued an
award against Cooper and in favor of HMI.
B. Underlying Arbitration
1. Interim Award
In September 2011, Cooper commenced an arbitration against L & S by
filing a demand for arbitration with JAMS. Cooper asserted claims for breach of
contract, breach of fiduciary duty, and professional negligence arising out of L &
S’s representation in the proceedings against HMI, Solomon, and the estate of
Linter. The matter was submitted to arbitration before retired Judge Terry
1
Friedman. L & S represented itself in the arbitration.
On December 14, 2012, following an evidentiary hearing, the arbitrator
issued his “Interim Award.” The arbitrator concluded that Cooper had failed to
establish his claims against L & S, and that L & S was the prevailing party. In
view of those determinations, the arbitrator permitted L & S to file a motion for an
attorney fee award and a memorandum of costs, and afforded Cooper an
opportunity to respond.
1
We take judicial notice of the then-effective rules of JAMS, after having
afforded the parties an opportunity to address the propriety of judicial notice.
(Boghos v. Certain Underwriters at Lloyd’s of London (2005) 36 Cal. 4th 495, 506,
fn. 6.)
3
2. Fee Motion
On December 21, 2012, L & S submitted a motion for an award of
contractual attorney fees under Civil Code section 1717. L & S argued that
although it had represented itself in the arbitration proceeding, it was entitled to
the fee award because Lloyd’s, London and Companies (Lloyd’s), its professional
malpractice insurer, had “specifically retained” L & S to represent its own interests
in the proceeding. L & S sought fees totaling $225,677.
Supporting the motion was a declaration from Paul N. Sorrel, a partner in L
& S. Sorrel stated: “Shortly after this proceeding was filed by [Cooper], the
defense of this matter was tendered to [Lloyd’s] pursuant to the terms of [L & S’s]
professional liability policy. Pursuant to [that] policy . . . , [L & S] pays
substantial premiums in order [to have] the ability (with Lloyd’s consent) to self-
represent in certain malpractice actions . . . . After this matter was tendered to
Lloyd’s, Lloyd’s authorized and retained [L & S] to represent [L & S’s] interests
in this matter, and indicated that it would reimburse [L & S] (subject to the
applicable deductible under the policy) for fees and costs incurred in defending
this matter.”
Cooper’s opposition maintained that as a matter of law, L & S could not
recover its fees because it had represented itself in the arbitration proceeding. In
addition, Cooper contended that L & S had offered insufficient evidence of an
agreement or attorney-client relationship between L & S and Lloyd’s, arguing that
when deposed, Sorrell had testified that he had no personal knowledge of the
identity of L & S’s professional malpractice insurer. Cooper also objected to
Sorrell’s declaration statements regarding the retention of L & S by Lloyd’s on
several grounds, including that the statements constituted hearsay.
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On January 3, 2013, Sorrell e-mailed a request to the arbitrator for leave to
submit additional evidence. Sorrell stated: “Certain matters were raised in Mr.
Cooper’s opposition to the [fee] motion that could not be anticipated, and to which
[L & S] would like an opportunity to respond. Among other things, we would like
to provide a copy of the insurance policy, . . . and/or a declaration from the carrier,
as well as my declaration addressing how and when I learned the specifics of the
terms of coverage.”
In an order dated January 4, 2013, the arbitrator granted Sorrell’s request in
part and denied it in part, ruling that L & S would be permitted to offer
documentary evidence regarding its malpractice policy, but no “further declaration
or other testimonial evidence.” Following the ruling, L & S submitted its Lloyd’s
malpractice policy, accompanied by a declaration from Susan Such, L & S’s office
administrator. Such stated: “Attached . . . [is a] copy of [L & S’s] . . . policy that
was in effect from March 31, 2011 to March 31, 2012. [L & S] tendered the claim
made against it by [Cooper] in this proceeding under this policy in February
2011.” (Italics added.)
In response to Such’s declaration, Cooper maintained that L & S’s
malpractice policy could not establish a basis for L & S’s fee request, contending
that “[n]o case holds that a lawyer can recover fees for self-representation if he has
a malpractice policy, with or without a self-representation endorsement.” Cooper
also argued: “[Such] states that L & S tendered the claim in February 2011.
Cooper did not file his claim with JAMS until September 13, 2011.”
3. Final Award
In a Final Award dated January16, 2013, the arbitrator denied L & S’s
request for an award of attorney fees. The arbitrator stated: “L & S is the
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prevailing party in this arbitration. . . . However, L & S presented no admissible
evidence that Lloyd’s retained L & S. In addition, the admissible evidence L & S
did present is inconclusive. According to Such, L & S tendered Cooper’s claim in
February 2011, yet Cooper did not file his [d]emand for [a]rbitration against L & S
until September 13, 2011. Moreover, the date of tender preceded the March 31,
2011 [to] March 31, 2012 period of the policy L & S offered to establish
coverage. . . . [¶] Had L & S offered evidence to establish that it tendered
Cooper’s claim to Lloyd’s within the period of an operative malpractice policy and
that Lloyd’s specifically retained L & S, it would be entitled to its claimed
attorney[] fees.” On January 22, 2013, the arbitrator served the Final Award on
the parties.
4. Motion for Correction, Modification, or Reconsideration
On January 28, 2013, L & S submitted a motion for “correction,
modification and/or reconsideration” of the Final Award. The motion relied on
JAMS rule 22(d), directing the arbitrator to afford the parties the opportunity to
present material and relevant evidence, and JAMs rule 24(j), which provides that
“[w]ithin seven calendar days after service of the [a]ward . . . , any party may
. . . request that the [a]rbitrator correct” any “computational, typographical or other
similar error in an [a]ward . . . .” In addition, the motion relied on “the interests of
justice,” as well as Code of Civil Procedure section 1008, which permits a party in
2
civil actions to renew a motion upon a showing of “new or different facts,
circumstances or law.”
2
All further statutory citations are to the Code of Civil Procedure, unless
otherwise indicated.
6
L & S contended that Sorrell’s declaration accompanying its fee motion
constituted admissible evidence that L & S had tendered the defense of Cooper’s
claims to Lloyd’s, and that Lloyd’s had retained L & S to represent itself. In
addition, L & S maintained that Such’s declaration contained an obvious clerical
error, arguing that her clear intent was to state that L & S tendered the defense of
Cooper’s claims to Lloyd’s in February 2012, during the effective period of the
policy that L & S submitted to the arbitrator. L & S further asserted that its failure
to make an adequate showing was attributable to the arbitrator’s ruling on
Sorrell’s January 3, 2013, request for leave to submit new evidence, stating: “Had
[L & S] been given an opportunity to present additional evidence . . . , there would
have been no question regarding its entitlement to the requested fees.”
Accompanying the motion was a declaration from Such, who stated that the
defense of Cooper’s claims had been tendered to Lloyd’s in February 2012, and a
declaration from Lloyd’s counsel, who stated that upon receipt of that tender,
Lloyd’s had retained L & S to represent itself.
Cooper opposed the motion, arguing: “[A]fter having been afforded an
opportunity to present sufficient evidence, and having failed to do so, L & S [has]
file[d] a shotgun motion for ‘correction, modification and/or reconsideration.’
This description has been used to camouflage the fact that there is no authority for
the motion, [no] matter what it’s called. To be sure, no JAMS rule permits it. And
neither does section 1008.”
In an order dated February 5, 2013, the arbitrator granted L & S’s motion.
In so ruling, the arbitrator determined that L & S did not request “correction” of
the final award under JAMS rule 24(j), but instead sought reconsideration under
section 1008, as L & S argued that it “made a typographical error” and “was not
permitted to submit certain evidence.” The arbitrator concluded that relief was
7
proper under section 1008, pointing to JAMS rule 24(c), which states, “The
[a]rbitrator may grant any remedy or relief that is just and equitable and within the
scope of the [p]arties’ agreement.” The arbitrator further found that L & S had
made a timely tender of its defense to Lloyd’s, which then retained L & S to
represent itself in the arbitration proceeding.
5 Revised Final Award
On February 20, 2013, the arbitrator issued his Revised Final Award, which
incorporated the Final Award, with the exception of the ruling denying L & S’s
fee request. In granting L & S’s request for fees totaling $225,677, the arbitrator
reiterated the findings stated in his February 5, 2013 order granting
reconsideration.
C. Proceedings Before the Trial Court
In March 2013, L & S filed a petition to confirm the Revised Final Award.
Cooper opposed the petition, and filed a petition to vacate the Revised Final
Award. Cooper argued, inter alia, that the Revised Final Award contravened
section 1284, which authorizes arbitrators to correct a final award when it contains
an “evident miscalculation of figures” or mistaken description of a person, thing,
or property, or when it is “imperfect” in form (§§ 1284, 1286.6, subds. (a), (c)).
Following a hearing, the trial court granted L & S’s motion. Judgment in favor of
3
L & S and against Cooper was entered on October 4, 2013.
We note that Cooper’s notice of appeal was premature, as it was filed prior
3
to the entry of the judgment. Neither an order confirming an arbitration award nor
an order denying a petition to vacate or correct an arbitration award is appealable;
such orders are reviewable only from a judgment on an order confirming the
award. (Cummings v. Future Nissan (2005) 128 Cal. App. 4th 321, 326
8
DISCUSSION
Cooper contends the trial court improperly confirmed the award, arguing
that the arbitrator had no power to (1) revise the Final Award to include an
attorney fee award, or (2) grant L & S’s requested attorney fees. As explained
below (see pt. C., post), because we agree that the arbitrator exceeded his powers
in issuing the Revised Final Award, we do not address Cooper’s challenges to the
fee award itself, which rely on the fact that L & S represented itself in the
arbitration proceeding.
A. Governing Law
The California Arbitration Act (CAA; § 1280 et seq.) “represents a
comprehensive statutory scheme regulating private arbitration in this state.”
(Moncharsh v. Heily & Blase (1992) 3 Cal. 4th 1, 9 (Moncharsh).) “The statutes
set forth procedures for the enforcement of agreements to arbitrate ( . . . §§ 1281.2-
1281.95), establish rules for the conduct of arbitration proceedings except as the
parties otherwise agree ( . . . §§ 1282-1284.2), describe the circumstances in which
arbitrators’ awards may be judicially vacated, corrected, confirmed, and enforced
( . . . §§ 1285-1288.8), and specify where, when, and how court proceedings
relating to arbitration matters shall occur ( . . . §§ 1290-1294.2).” (Vandenberg v.
Superior Court (1999) 21 Cal. 4th 815, 830.)
(Cummings); Mid-Wilshire Associates v. O’Leary (1992) 7 Cal. App. 4th 1450,
1453-1454.) However, because respondents have not objected to Cooper’s
premature notice of appeal, we find good cause to treat the notice as having been
filed immediately after the October 4, 2013 judgment. (Cal. Rules of Court, rule
8.104(e); Stonewall Ins. Co v. City of Palos Verdes Estates (1996) 46 Cal. App. 4th
1810, 1827-1828; see Baldwin Co. v. Rainey Construction Co. (1991) 229
Cal. App. 3d 1053, 1057, fn. 2.)
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As our Supreme Court has explained, “it is the general rule that parties to a
private arbitration impliedly agree that the arbitrator’s decision will be both
binding and final.” (Moncharsh, supra, 3 Cal.4th at p. 9.) To enforce the finality
of arbitration, the CAA minimizes judicial intervention. (Id. at p. 10.) Once a
petition to confirm an award is filed, the superior court has only four courses of
conduct: to confirm the award, to correct and confirm it, to vacate it, or to dismiss
the petition. (Law Offices of David S. Karton v. Segreto (2009) 176 Cal. App. 4th
1, 8 (Law Offices).) The trial court is empowered to correct or vacate the award,
or dismiss the petition, upon the grounds set out in the pertinent statutes;
“[o]therwise courts may not interfere with arbitration awards.” (Santa Clara-San
Benito etc. Elec. Contractors’ Assn. v. Local Union No. 332 (1974) 40 Cal. App. 3d
431, 437; see also Moncharsh, supra, at pp. 10-13.)
Under the CAA, if an award that exceeds the arbitrator’s powers cannot be
corrected without “affecting the merits of the decision upon the controversy
submitted,” the trial court must vacate the award (§ 1286.2, subd. (a)(4)); in
contrast, if the award exceeds the arbitrator’s powers but is subject to suitable
correction, the court must correct it, unless vacation is otherwise required
(§ 1286.6, subd. (b)). Here, Cooper’s petition to vacate asked the trial court to
“vacate the [Revised Final A]ward in its entirety, or, in the alternative, . . . vacate
the award of attorney fees in its entirety.” He contended, inter alia, that section
1284 prohibited the revision of the Final Award, and that neither law nor contract
authorized the award of attorney fees. Because Cooper’s petition asserted that the
attorney fee award could be vacated without affecting the other determinations in
the Revised Final Award, the petition effectively offered as a potential remedy the
confirmation of the Final Award, as an alternative to the vacation of the Revised
Final Award. (Severtson v. Williams Construction Co. (1985) 173 Cal. App. 3d 86,
10
91-96 (Severtson) [when arbitrator exceeded his powers in revising final award to
include supplemental award of attorney fees, trial court properly confirmed
original final award lacking supplemental award].)
We subject the trial court’s rulings and the underlying award to different
standards of review. To the extent the trial court made findings of fact in
confirming the award, we affirm the findings if they are supported by substantial
evidence. (Turner v. Cox (1961) 196 Cal. App. 2d 596, 603.) To the extent the trial
court resolved questions of law on undisputed facts, we review the trial court’s
rulings de novo. (Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal. 4th
362, 376, fn. 9 (Advanced Micro Devices).)
We apply a highly deferential standard of review to the award itself, insofar
as our inquiry encompasses the arbitrator’s resolution of questions of law or fact.
Because the finality of arbitration awards is rooted in the parties’ agreement to
bypass the judicial system, ordinarily “‘[t]he merits of the controversy between the
parties are not subject to judicial review.’ [Citations.]” (Moncharsh, supra,
3 Cal.4th at pp. 10-11.)
Under this rule, courts will not review the arbitrator’s reasoning or the
sufficiency of the evidence supporting the award. (Moncharsh, supra, 3 Cal.4th at
pp. 10-11.) Moreover, absent “narrow exceptions” discussed further below (see
pt. C., post), “an arbitrator’s decision cannot be reviewed for errors of fact or law.”
(Id. at p. 11.) These exceptions do not encompass all errors that are apparent on
the face of the award and cause substantial injustice. (Id. at p. 32.) Circumstances
justifying judicial review arise when the arbitrator imposes a remedy not
authorized by the arbitration agreement. (Advanced Micro Devices, supra,
9 Cal.4th at p. 375; see also Cotchett, Pitre & McCarthy v. Universal Paragon
Corp. (2010) 187 Cal. App. 4th 1405, 1416-1417 & fn. 1.)
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B. Section 1284
Our focus is on section 1284, which specifies the powers of an arbitrator to
correct a final award, that is, an award that resolves all the issues submitted to the
arbitrator. (Elliot & Ten Eyck Partnership v. City of Long Beach (1997)
57 Cal. App. 4th 495, 501-502 (Elliot & Ten Eyck Partnership); see Hightower v.
Superior Court (2001) 86 Cal. App. 4th 1415, 1433 & fn. 29.) Generally, under the
CAA, arbitrators must issue awards that “include a determination of all the
questions submitted.” (§ 1283.4.) To discharge that obligation, they may use “a
multiple incremental or successive award process as a means, in an appropriate
case, of finally deciding all submitted issues.” (Hightower v. Superior Court,
supra, at p. 1434, italics omitted.) Nonetheless, after the arbitrator has issued an
award (or multiple incremental awards) resolving all submitted issues, section
1284 narrowly circumscribes the arbitrator’s power to correct the stated resolution
of those issues. (Elliot & Ten Eyck Partnership, supra, at pp. 501-502.)
Under section 1284, the 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.” Section 1286.6. provides that the trial
4
Section 1284 states: “The arbitrators, upon written application of a party to
4
the arbitration, may correct the award upon any of the grounds set forth in
subdivisions (a) and (c) of Section 1286.6 not later than 30 days after service of a
signed copy of the award on the applicant. [¶] Application for such correction
shall be made not later than 10 days after service of a signed copy of the award on
the applicant. Upon or before making such application, the applicant shall deliver
or mail a copy of the application to all of the other parties to the arbitration. [¶]
Any party to the arbitration may make written objection to such application. The
objection shall be made not later than 10 days after the application is delivered or
mailed to the objector. Upon or before making such objection, the objector shall
deliver or mail a copy of the objection to the applicant and all the other parties to
12
court may correct an award if it determines that “(a) There was an evident
miscalculation of figures or an evident mistake in the description of any person,
thing or property referred to in the award; [¶] (b) The arbitrators exceeded their
powers but the award may be corrected without affecting the merits of the decision
upon the controversy submitted; or [¶] (c) The award is imperfect in a matter of
form, not affecting the merits of the controversy.” Section 1284 thus provides an
arbitrator fewer grounds to correct an award than section 1286.6 accords the trial
court, as section 1284 does not permit the arbitrator to correct a final award that
exceeded his or her powers. (Law Offices, supra, 176 Cal.App.4th at p. 5, fn. 6;
Trabuco Highlands Community Assn. v. Head (2002) 96 Cal. App. 4th 1183, 1192
(Trabuco Highlands Community Assn.); Century City Medical Plaza v. Sperling,
Isaacs & Eisenberg (2001) 86 Cal. App. 4th 865, 875 (Century City Medical
Plaza).)
As explained in Elliot & Ten Eyck Partnership: “It is, apparently, an
ancient rule that ‘when arbitrators have published their award by delivering it to
the parties as the award, that it is not the subject of revision or correction by them,
and that any alteration without the consent of the parties will vitiate it.’ (Porter v.
Scott (1857) 7 Cal. 312, 316.) The briefing in the Porter case cited precedent back
to a Yearbook of Henry VI, as well as other venerable authority. (See also
Krautner v. Johnson (1961) 189 Cal. App. 2d 717, 718 [‘A change in substance
the arbitration. [¶] The arbitrators shall either deny the application or correct the
award. The denial of the application or the correction of the award shall be in
writing and signed by the arbitrators concurring therein, and the neutral arbitrator
shall serve a signed copy of such denial or correction on each party to the
arbitration personally or by registered or certified mail or as provided in the
agreement. If no denial of the application or correction of the award is served
within the 30-day period provided in this section, the application for correction
shall be deemed denied on the last day thereof.”
13
would require vacation of the award . . . if it resulted in prejudice to either
party . . . .’].) [¶] . . . Section 1284 codifies the rule against changes in the award.
Some amelioration from the stringency of the rule is provided in [the] referenced
provision of section 1286.6, which allows correction of an award, but in very
narrow terms.” (Elliot & Ten Eyck Partnership, supra, 57 Cal.App.4th at pp. 501-
502, fn. omitted.)
Under the statutory grounds for correction recognized in section 1284,
“[t]he arbitrator may not reconsider the merits of the original award and make a
new award under the guise of correcting the award.” (Landis v. Pinkertons, Inc.
(2004) 122 Cal. App. 4th 985, 992 (Landis).) The statutory grounds authorize the
arbitrator to correct an award after it has been issued to the parties only regarding
“evident miscalculations of figures or descriptions of persons, things or property
[citation] and nonsubstantive matters of form that do not affect the merits of the
controversy. [Citation.]” (Century City Medical Plaza, supra, 86 Cal.App.4th at
p. 877, italics omitted.) The statutory grounds, however, do not permit the
arbitrator to make substantive changes to the award’s determinations of fact and
law. (Law Offices, supra, 176 Cal.App.4th at pp. 10-11; Landis, supra,
122 Cal.App.4th at pp. 992-993).
Section 1284 prohibits substantive amendments to final awards to include
new awards of attorney fees. In Severtson, the arbitrator issued a final award that
included a contractual attorney fee award. After the prevailing parties requested
correction of the fee award, the arbitrator considered new evidence and revised the
final award to include additional fees. (Severtson, supra, 173 Cal.App.3d at
pp. 95-96.) When the prevailing parties sought confirmation of the revised final
award, the trial court denied that request and confirmed the original final award.
(Id. at p. 96.) Affirming the trial court’s ruling, the appellate court concluded that
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under section 1284, the original final award “could not . . . be ‘corrected’ to reflect
the attorney[] fees . . . actually incurred because the arbitrator’s estimate, whether
mistaken or not, was conclusive.” (Ibid.)
In addition to the statutory grounds for correction stated in section 1284,
California courts have permitted arbitrators to amend a purported final award to
include rulings on an omitted issue. In A.M. Classic Construction, Inc. v. Tri-
Build Development Co. (1999) 70 Cal. App. 4th 1470, 1472-1473 (A.M. Classic
Construction), a subcontractor working on a public elementary school fell into a
contract dispute with the contractor and the city employing the contractor. After
the subcontractor sued the contractor and the city for damages, the matter was
submitted to an arbitrator, whose decision awarded the subcontractor damages
against the contractor, but did not resolve the dispute between the subcontractor
and the city. (Ibid.) Prior to the award’s confirmation, the subcontractor asked the
arbitrator to amend the award to address the unresolved dispute. (Ibid.) The
arbitrator issued an amended award, which contained a ruling in the
subcontractor’s favor against the city. (Id. at p. 1473.) After the trial court
confirmed the amended award, the appellate court affirmed, concluding:
“California’s contractual arbitration law permits arbitrators to issue an amended
award to resolve an issue omitted from the original award through the mistake,
inadvertence, or excusable neglect of the arbitrator if the amendment is made
before judicial confirmation of the original award, is not inconsistent with other
findings on the merits of the controversy, and does not cause demonstrable
prejudice to the legitimate interests of any party.” (Id. at p. 1478.)
Following A.M. Classic Construction, other courts have recognized the
existence of a nonstatutory amendment doctrine regarding omitted issues.
(Century City Medical Plaza, supra, 86 Cal.App.4th at pp. 881-882 [when final
15
award fails to address prejudgment interest, costs, and attorney fees due to
arbitrator’s mistake, inadvertence, or excusable neglect, arbitrator may amend
award to include rulings on those issues]; Delaney v. Dahl (2002) 99 Cal. App. 4th
647, 658-660 [arbitrator properly amended award to include party’s name in
certain rulings].)
C. Revised Final Award
We turn to whether the arbitrator exceeded his powers by revising the Final
Award denying attorney fees to include the attorney fee award. At the outset, we
observe that the arbitrator’s revisions fall outside the nonstatutory amendment
doctrine and the grounds for correction in section 1284. As explained below, the
Final Award was final for purposes of that provision. In denying an award of
attorney fees in the Final Award, the arbitrator found that L & S had offered
insufficient evidence to demonstrate either (1) that it made a timely tender of its
defense to Lloyd’s under an operative policy, or (2) that Lloyd’s retained L & S to
represent itself. After issuing the Final Award, the arbitrator concluded that the
JAMS rules permitted him to consider new evidence under section 1008, rework
the findings in the original award, and issue a Revised Final Award granting the
requested attorney fees. The Revised Final Award falls outside the nonstatutory
amendment doctrine, as it did not address an omitted issue and, in large measure,
reflected the arbitrator’s response to a typographical error by L & S, rather than an
error by the arbitrator. Furthermore, because the Revised Final Award purported
to eliminate substantive errors in the Final Award, the arbitrator’s revisions did not
constitute a “correction” within the meaning of section 1284. (Severtson, supra,
173 Cal.App.3d at pp. 95-96.)
16
The key issue before us is whether the parties, by agreeing to be governed
by JAMS rules, expanded the scope of the arbitrator’s ability to modify a final
5
award beyond that granted by section 1284. Arbitrators ordinarily derive their
powers from the parties’ agreements related to arbitration, the selected rules of
arbitration, and the CAA. (Century City Medical Plaza, supra, 86 Cal.App.4th at
p. 874.) Here, Cooper’s representation contract with L & S provided that any
arbitration would be subject to the rules of JAMS or other specified arbitration
rules, without expressly purporting to displace section 1284. Accordingly, the
focus of our inquiry is on whether the parties’ acceptance of the JAMS rules
amounted to an agreement to enlarge the limited grounds for correction in section
1284. As explained below, the JAMS rules do not purport to effectuate any such
6
modification to section 1284.
L & S suggests that Cooper forfeited his challenge to the arbitrator’s
5
reconsideration of the Final Award because he did not expressly refer to section
1284 in opposing L & S’s motion for reconsideration. We disagree. Generally, a
party may forfeit a contention that the arbitrator exceeded his or her powers by
“‘deliberately standing by without making an objection of which he is aware and
thereby permitting the proceedings to go to a conclusion which he may acquiesce
in, if favorable, and which he may avoid, if not.’” (Porter v. Golden Eagle Ins.
Co. (1996) 43 Cal. App. 4th 1282, 1291, quoting Lindsay–Strathmore I. Dist. v.
Superior Ct. (1920) 182 Cal. 315, 338 (conc. opn. of Onley, J.).) In our view, no
such forfeiture occurred here, as Cooper opposed L & S’s motion on broad
grounds sufficient to encompass section 1284, arguing that “there is no authority
for the motion, [no] matter what it’s called.” (Italics added.) (See Pacific Crown
Distributors v. Brotherhood of Teamsters (1986) 183 Cal. App. 3d 1138, 1144-
1146 [party did not forfeit challenge to arbitrator’s belated decision to address
issue not raised at evidentiary hearing, notwithstanding party’s failure to assert
express objection, because party manifestly did not agree to submit the issue to the
arbitrator].)
6
We recognize that although many provisions of the CAA are subject to
modification by the parties, certain provisions establish nonmodifiable structural
17
Generally, an arbitrator’s determinations are subject to a highly deferential
standard of review. When, as here, the arbitrator is empowered to grant any
remedy that is “just and equitable,” the arbitrator ordinarily “enjoy[s] the authority
to fashion relief [he or she] consider[s] just and fair . . . , so long as the remedy
may be rationally derived from the contract and the breach.” (Advanced Micro
Devices, supra, 9 Cal.4th at p. 383; Greenspan v. LADT, LLC (2010)
185 Cal. App. 4th 1413, 1448 (Greenspan).) Nonetheless, that deferential standard
of review is applicable only “in the absence of more specific restrictions in the
arbitration agreement, the submission or the rules of arbitration.” (Advanced
Micro Devices, supra, at p. 367, italics added; California Faculty Assn. v.
Superior Court (1998) 63 Cal. App. 4th 935, 953. )
aspects of the arbitration process. (Azteca Construction, Inc. v. ADR Consulting,
Inc. (2004) 121 Cal. App. 4th 1156, 1166-1167.) The CAA contains procedural
provisions specifying the appointment of the arbitrator (§ 1281.6), the manner in
which panels of arbitrators may make decisions (§ 1282), the conduct of the
arbitration proceedings (1282.2), and the timing of the final award (§ 1283.8).
Each provision states that the pertinent procedures may be established or modified
by the parties’ agreement. In view of those provisions, parties have considerable
latitude to devise their own arbitration procedures (Schlessinger v. Rosenfeld,
Meyer & Susman (1995) 40 Cal. App. 4th 1096, 1106-1107), and may, for example,
provide for a second level of review within the arbitration of an aribtrator’s
“initial” award (see Cummings, supra, 128 Cal.App.4th at pp. 326-332 & fns. 9 &
10). In contrast, the binding nature of arbitration awards subject to confirmation
and the requirement of arbitrator neutrality are nonmodifiable structural aspects of
the CAA. (Trabuco Highlands Community Assn., supra, 96 Cal.App.4th at
p. 1190; Azteca Construction v. ADR Consulting, Inc., supra, at p. 1168.) In
concluding that the parties, in agreeing to arbitration under the JAMS rules, did
not attempt to modify section 1284 to permit substantive revisions of an award
that was final for purposes of that statute, we do not address whether section 1284
is potentially subject to modification.
18
Here, the JAMS rules contain a specific restriction precluding
reconsideration and revision of a final award. JAMS rule 4 states in pertinent part:
“If any of these Rules . . . is determined to be in conflict with a provision of
applicable law, the provision of law will govern over the Rule in conflict . . . .”
(Italics added.) Because JAMS rule 4 gives precedence to laws “applicable” to
arbitration in cases of conflict, it manifests a clear intent to confine the operation
of the JAMS rules within the limits set by the governing arbitration laws. In view
of JAMS rule 4, we conclude the JAMS rules do not authorize arbitrators to make
rulings that contravene section 1284. (See California Faculty Assn. v. Superior
Court, supra, 63 Cal.App.4th at p. 953 [arbitrator exceeded his powers by
disregarding specific restrictions on those powers in the parties’ agreement].)
L & S suggests that because JAMS rule 24(c) empowered the arbitrator to
render relief on the basis of principles of justice and equity, the arbitrator
necessarily had the authority to reconsider and revise the Final Award and to
incorporate section 1008, notwithstanding section 1284. We disagree. In our
view, JAMS rule 24(c), by itself, is insufficient to render the arbitrator’s decision
to revise the Final Award “rationally derived from the contract.” (Advanced Micro
Devices, supra, 9 Cal.4th at p. 383.) As our Supreme Court has observed,
historically, arbitrators have been routinely empowered to render decisions on the
basis of principles of equity and justice. (Moncharsh, supra, 3 Cal.4th at p. 14;
Advanced Micro Devices, Inc., supra, 9 Cal.4th at pp. 374-375.) To hold that
arbitrators so empowered may disregard section 1284 whenever they believe it
equitable and just to do so would amount to abrogating that provision in the
typical arbitration. We decline to conclude that the Legislature enacted section
1284 with the intent that it would be a nullity.
19
L & S’s reliance on Glass, Molders, Pottery, Plastics & Allied Workers
Int’l. Union v. Excelsior Foundry Co. (7th Cir. 1995) 56 F.3d 844 and T. Co
Metals, LLC v. Dempsey Pipe & Supply, Inc. (2d Cir. 2010) 592 F.3d 329, is
7
misplaced, as those decisions addressed statutory schemes other than the CAA. In
the first case, the federal court concluded that the governing statutory scheme
permitted the arbitrator to resolve an issue not clearly decided in the original final
award. (Glass, Molders, Pottery, Plastics & Allied Workers Int’l. Union v.
Excelsior Foundry Co., supra, at pp. 846-849 [under Illinois arbitration law,
arbitrator was permitted to resolve issue not definitively addressed in final
award].) In the second case, the federal court determined that under the governing
statutory scheme, the parties had, in fact, empowered the arbitrator to make
substantive revisions in a final award. (T. Co Metals, LLC v. Dempsey Pipe &
Supply, Inc., supra, at pp. 342-347 [within context of the Federal Arbitration Act
(9 U.S.C. § 1 et seq.), parties had structured their arbitration proceeding to allow
arbitrator to revise final award].) As explained above, those circumstances are not
present here: the Revised Final Award did not resolve an omitted issue, and the
JAMS rules do not purport to enlarge the grounds for correction stated in section
1284.
L & S further contends that the Final Award was not a final award for
purposes of section 1284. JAMS rule 24(j) provides that “[w]ithin
seven . . . calendar days after service of [the] [a]ward . . . , any [p]arty may
. . . request that the [a]rbitrator correct any computational, typographical or other
7
L & S also relies on a treatise (Knight et al., Cal. Practice Guide:
Alternative Dispute Resolution (Rutter Group 2013) [¶] 5:416.7, pp. 5-285-286).
However, as the cited portions of the treatise merely describe cases we examine
below, they offer no independent support for L & S’s contentions.
20
similar error in an [a]ward . . . .” JAMS rule 24(k) further provides that an award
“is considered final[] for purposes of . . . a judicial proceeding to enforce, modify
or vacate the [a]ward . . . fourteen . . . calendar days after service is deemed
effective if no request for a correction is made, or as of the effective date of
service of a corrected [a]ward.” In view of those rules, L & S argues that the Final
Award “was not final under [the] JAMS rules prior to [the] request for
reconsideration.”
We reject L & S’s contention, as it conflates the finality of an award for
purposes of correction by the arbitrator under section 1284 with the finality of an
award for purposes of confirmation, correction, or vacation by a court. Under the
CAA, when a final award is issued, the arbitrator retains jurisdiction to correct it
under section 1284 for a 30-day period (Britz, Inc. v. Alfa-Laval Food & Dairy Co.
(1995) 34 Cal. App. 4th 1085, 1105); after that period, the trial court acquires
jurisdiction over the award to confirm, correct, or vacate it (Landis, supra,
122 Cal.App.4th at p. 991). Nothing in the JAMS rules or the record suggests that
the Final Award was not final for purposes of correction under section 1284. The
JAMS rules specify only the date upon which the award becomes final for
purposes of proceedings in the trial court. Furthermore, the arbitrator expressly
identified the Final Award as his “Final Award”; it was in writing and was served
on the parties; it resolved all the issues reserved in the Interim Award, including
the questions related to attorney fees and costs; and it included determinations on
all the issues submitted in the arbitration. Not even in ruling that the Final Award
was subject to reconsideration did the arbitrator suggest that it was merely an
Interim Award. The Final Award was therefore subject to section 1284. (Allstate
Ins. Co. v. Superior Court (2006) 142 Cal. App. 4th 356, 362; §§ 1283.4, 1283.6.)
21
L & S also maintains that in accepting arbitration governed by the JAMS
rules, Cooper waived his right to judicial review of the arbitrator’s determination
that the Final Award was subject to reconsideration and revision. L & S relies on
JAMS Rule 11(a), which provides: “Once appointed, the [a]rbitrator shall resolve
disputes about the interpretation and applicability of these [r]ules and [the]
conduct of the [a]rbitration [h]earing. The resolution of the [dispute] by the
[a]rbitrator shall be final.” We disagree that Cooper’s acceptance of the JAMS
rules constituted such a waiver.
Although parties may waive their rights to judicial review of an arbitration
award, any such waiver must be “clear and express.” (Reisman v. Shahverdian
(1984) 153 Cal. App. 3d 1074, 1088-1089 (Reisman); see Pratt v. Gursey,
Schneider & Co. (2000) 80 Cal. App. 4th 1105, 1108 [“A party may expressly
waive the right to appeal from any judgment.”].) In Reisman, supra,
153 Cal.App.3d at page 1082, an attorney and his former clients fell into a dispute
regarding the attorney’s fees. To resolve the dispute, they elected binding
arbitration and completed a form agreement that stated: “‘[Y]ou . . . may agree to
make the arbitration binding, which means that once the arbitrators have rendered
an award, no appeal or further proceeding will be possible.’” (Id. at p. 1082,
second italics added.) The arbitrators rendered an award in favor of the attorney,
which was confirmed. (Id. at pp. 1083-1084.) After the clients noticed an appeal
from the judgment and related rulings, the attorney contended that the waiver
provision of the arbitration agreement mandated dismissal of the appeal. (Id. at
p. 1088.) In rejecting that contention, the appellate court concluded that the
waiver provision was insufficient to alert the parties that “waiving ‘appeal’
. . . included review of judicial action regarding an award as distinguished from
the actions of the arbitrators.” (Id. at pp. 1088-1089.)
22
We too find no “clear and express” waiver by Cooper of judicial review
(Reisman, supra, 153 Cal.App.3d at p. 1088). As explained above, JAMS rule 4
manifests a clear intent to confine the operation of the JAMS rules within the
boundaries set forth in the governing arbitration laws. Furthermore, because
JAMS rule 4 provides for “determinations” regarding conflicts between the rules
and the CAA, it is reasonably understood to permit courts, as well as arbitrators, to
make those determinations. Accordingly, viewed in context, JAMS rule 11(a) did
not alert Cooper that by accepting arbitration under the JAMS rules, he would be
waiving his right to challenge the arbitrator’s determination that the Final Award
was subject to reconsideration and revision.
Greenspan, supra, 185 Cal. App. 4th 1413, upon which L & S relies, is
distinguishable, as that decision addressed an arbitrator’s application of the JAMS
rules implicating no provision of the CAA. There, the arbitrator determined that
under the JAMS rules, he was permitted to issue a final award more than 30 days
after issuing an Interim Award. (Id. at pp. 1449-1456.) Pointing to JAMS rule
11(a), the appellate court concluded that the arbitrator’s application of the JAMS
rules was binding on the parties, and thus beyond judicial review. (Id. at p. 1455.)
The appellate court nonetheless recognized the limited reach of JAMS rule 11(a),
as it afforded no such deference to another determination by the arbitrator under
the JAMS rules that implicated a key provision of the CAA, namely, that he was
8
not subject to disqualification for want of neutrality. (Id. at pp. 1456-1461.)
8
In a supplemental brief invited by this court, L & S contends the arbitrator
was required to reconsider the denial of its request for an award of attorney fees.
L & S relies on subdivision (a)(5) of section 1286.2, which states that the trial
court shall vacate an arbitration award if it determines that “[t]he rights of the
party were substantially prejudiced . . . by the refusal of the arbitrator[] to hear
evidence material to the controversy.” In view of that provision, L & S argues that
23
Pointing to DiMarco v. Chaney (1995) 31 Cal. App. 4th 1809 (DiMarco),
L & S suggests that even if the arbitrator lacked the authority to revise the Final
Award to include an attorney fee award, the denial of the fee award in the Final
Award itself exceeded the arbitrator’s powers, and thus required correction by the
trial court, as the arbitrator found that L & S was the prevailing party. As
explained below, we disagree.
In DiMarco, an individual entered into an agreement to purchase real
property from its owner. (DiMarco, supra, 31 Cal.App.4th at p. 1812.) The
agreement contained an arbitration clause, and also provided that in case of a
dispute, the prevailing party was entitled to recover attorney fees. (Id. at pp. 1812,
1815.) After the purchaser sought to rescind the agreement, an arbitrator found
the property owner to be the prevailing party, but declined to award her attorney
fees, stating only that he had the discretion to do so. (Id. at p. 1812.) The trial
court subsequently corrected the arbitration award to include the property owner’s
attorney fees. (Id. at p. 1813.) In affirming that ruling, the appellate court
concluded that the arbitrator had exceeded his authority under the agreement,
which mandated a fee award. (Id. at p. 1815.)
Following DiMarco, our Supreme Court clarified the circumstances in
which an arbitrator may deny the prevailing party a contractual fee award without
exceeding his authority. In Moshonov v. Walsh (2000) 22 Cal. 4th 771, 774-775,
the arbitrator denied the prevailing parties’ fee requests, concluding that the
“had the [a]rbitrator failed to allow [L & S] to present evidence to correct the
errors in its initial submission and present evidence on the issue of its retainer by
Lloyd’s, [L & S] would have grounds to vacate the [Final Award].” We disagree.
As our Supreme Court has explained, subdivision (a)(5) of section 1286.2 does not
oblige the arbitrator to “reopen” the presentation of evidence to consider new
evidence. (Grunwald-Marx, Inc. v. L. A. Joint Board (1959) 52 Cal. 2d 568, 587.)
24
contractual fee provision was insufficiently broad to encompass their claims,
which sounded in tort. Noting that arbitrators do not exceed their powers “merely
by rendering an erroneous decision on a legal or factual issue” submitted in the
arbitration, the Supreme Court concluded that the arbitrator’s ruling did not
exceed his powers, as it was based on his interpretation of the scope of the fee
provision. (Id. at p. 775.) The court distinguished DiMarco, noting that in that
case, the appellate court “found no interpretation of the fees clause, express or
implied in the arbitrator’s decision,” that purported to support the denial of the fee
award. (Id. at p. 779.)
Here, the arbitrator’s denial of a fee award in the Final Award falls under
Moshonov, not DiMarco, as it was predicated on substantive determinations of law
and fact regarding issues submitted in the arbitration. The arbitrator determined
(1) that even though L & S had represented itself in the arbitration, it was entitled
to a fee award upon a demonstration of certain facts, and (2) that L & S had failed
to produce evidence to establish those facts. As explained in Moshonov, those
determinations of law and fact, erroneous or not, do not exceed the arbitrator’s
powers. In sum, the trial court erred in denying Cooper’s petition to vacate the fee
9
award contained in the Revised Final Award.
DISPOSITION
The judgment is reversed, and the matter is remanded with directions to the
trial court to vacate the judgment confirming the Revised Final Award, and enter a
As we find the arbitrator’s original determination of L & S’s entitlement to
9
attorney fees in the Final Award was not subject to modification, we do not
address the correctness of the revised determination.
25
new judgment confirming the Final Award dated January16, 2013. Cooper is
awarded his costs on appeal.
CERTIFIED FOR PUBLICATION.
MANELLA, J.
We concur:
EPSTEIN, P. J.
WILLHITE, J.
26