Jiang v. Ferreira CA2/7

Filed 6/8/22 Jiang v. Ferreira CA2/7
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
ANNIE PING JIANG et al., B302944
Plaintiffs and Respondents, (Los Angeles County
Super. Ct.
v. No. BC573979)
INIS FERREIRA et al.,
Defendants and Appellants.
APPEAL from a judgment of the Superior Court of
Los Angeles County, Gregory W. Alarcon, Judge. Affirmed.
Randall A. Spencer for Defendants and Appellants.
Law Offices of Eugene S. Alkana and Eugene S. Alkana for
Plaintiffs and Respondents Annie Ping Jiang and New Home for
Me, Inc.
Samuel and Samuel, Peter F. Samuel, and Carl R. Samuel
for Defendant, Cross-defendant, and Respondent Bibi
Mohammad.
INTRODUCTION
Annie Jiang and her company, New Home for Me, Inc., filed
this action against Inis Ferreira, also known as Tia Berg, Michael
Judah, and others for rescission of an agreement to purchase an
assisted living facility known as Wilshire Vista Manor and for
damages. Jiang alleged that Berg and Judah misrepresented
Wilshire Vista Manor’s income and expenses and that Jiang
would not have purchased the business had she known it was
unprofitable. The trial court granted a motion to compel
arbitration based on an arbitration provision in the purchase and
sale agreement, and an arbitrator issued an award in favor of
Jiang that rescinded the transaction and ordered Berg and Judah
to pay Jiang damages and attorneys’ fees. The trial court entered
a judgment confirming the arbitration award.
Berg contends the trial court erred in confirming the
arbitration award because the arbitrator (1) exceeded his powers
by amending the arbitration award to allow Jiang to sell Wilshire
Vista Manor if Berg and Judah failed to pay her the monetary
award within 30 days and (2) erred in refusing to hear evidence
in support of Berg’s cross-claims as a penalty for not paying all of
the arbitration fees. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
A. Jiang Purchases Wilshire Vista Manor
In 2014 Jiang decided to purchase an assisted living
facility. Real estate agent Bibi Mohammad introduced Jiang to
Judah, who owned Wilshire Vista Manor, a 40-bed assisted living
facility in Los Angeles, and to Berg, Judah’s girlfriend, who
2
managed the business. Judah had purchased Wilshire Vista
Manor one year earlier for $40,000.1 Although Berg represented
that she owned Wilshire Vista Manor and told Mohammad that
she and Judah were partners, Judah actually owned the
business.2 Berg told Jiang that Wilshire Vista Manor generated
a monthly net profit of $40,000. Mohammad asked Berg for a
profit and loss statement and a tax return, but Berg provided
neither.
In July 2014 Jiang agreed to purchase the business from
Judah for $1.5 million, to be paid by giving Judah title to a
commercial building Jiang owned in San Gabriel that was worth
$1 million, along with $150,000 cash and a $350,000 promissory
note. Escrow closed on August 6, 2014.
After the close of escrow, Jiang discovered Berg had
misrepresented Wilshire Vista Manor’s income and expenses.
Although Berg gave Jiang a document showing the business’s
average monthly gross income was approximately $72,000 and its
monthly profit was approximately $40,000, after the transaction
closed Jiang discovered other documents showing the average
monthly gross income for the prior nine months was $60,000,
which was $12,000 less than Berg represented. Jiang also
discovered discrepancies in the list of residents and the amounts
1 Judah testified he had paid $110,000 in cash, plus “high
end women’s clothing, including bikinis, dresses and skirts”
worth $400,000, but the arbitrator found his testimony was not
credible.
2 Although she was not the owner of Wilshire Vista Manor,
Berg signed documents on its behalf using several different
names, including her grandmother’s.
3
they paid Wilshire Vista Manor. In addition, shortly after the
close of escrow and unbeknownst to Jiang, Berg moved the
highest-paying resident from Wilshire Vista Manor to a senior
care facility Judah owned.
B. Jiang and New Home for Me File This Action for
Rescission and Other Relief
On February 27, 2015 Jiang and her company, New Home
for Me, filed this action against Berg, Judah, and Judah’s
company, Doctors Best Hospice, alleging causes of action for
rescission, cancellation of the purchase and sale agreement, and
an injunction prohibiting the sale of the San Gabriel property.
Berg, Judah, and Doctors Best Hospice filed a cross-complaint
alleging Jiang fraudulently misrepresented the value of the San
Gabriel property and made only one of the 36 payments required
under the promissory note.3 On October 28, 2016 the trial court
granted a motion to compel arbitration of the action and the
cross-action based on arbitration provisions in the purchase and
sale agreement.
C. The Arbitration Results in an Award for Jiang
The arbitration took place over 11 days between April 2017
and November 2018. By November 2018 Berg and Judah were
3 Jiang (in her complaint) and Berg, Judah, and Doctors Best
Hospice (in their cross-complaint) also asserted claims against
Mohammad and Christopher Ugochukwu Ajagu, the real estate
agents involved in the transaction. The claims against Ajagu
were dismissed in June 2016. The arbitrator later dismissed the
claims against Mohammad and ordered Berg, Judah, and Doctors
Best to pay Mohammad’s attorneys’ fees and costs.
4
four months behind in paying arbitration fees. Jiang brought a
motion under one of the arbitration rules of the dispute
resolution provider organization to prevent Berg and Judah from
introducing evidence in support of their claims for affirmative
relief. The rule stated: “If a party has failed to deposit its pro-
rata or agreed-upon share of the fees and expenses, that party
will be precluded from offering evidence in support of any
affirmative relief at the hearing.” The arbitrator granted the
motion and precluded Berg and Judah from seeking affirmative
relief on their cross-complaint.
The arbitrator issued an initial award on February 21,
2019 and an amended award on July 8, 2019. The arbitrator
found that Judah had purchased Wilshire Vista Manor for
$40,000 in August 2013 and that “the $1,500,000 he sold Wilshire
Vista for [to Jiang] represents an almost unheard of profit.” The
arbitrator found Berg and Judah were not credible,
characterizing their testimony as including “feigned
forgetfulness,” “mischaracterization of events,” “outright denials
of indisputable facts,” and “misrepresentation[s].” The arbitrator
found Jiang “was a more credible witness than either Mr. Judah
or Ms. Berg.” The arbitrator ruled “the material
misrepresentations made to Annie Jiang, some of which were oral
as the matter proceeded, entitle her to the rescission relief
requested.” He further ruled Berg and Judah “failed to produce
sufficient admissible evidence to support any award of
affirmative relief.” The arbitrator observed that Jiang had been
current on taxes and loan payments for the San Gabriel property,
but that Judah had not paid property taxes or made loan
payments, even though he was collecting rent from tenants. The
arbitrator, among other things, (1) ordered Judah to (re)convey
5
title to the San Gabriel property to Jiang, (2) ordered Jiang to
(re)convey title to Wilshire Vista Manor to Judah, (3) awarded
Jiang $438,407, which included amounts for tax liability and
unpaid loan payments, and (4) awarded Jiang $206,071 in
attorneys’ fees and $56,575 in costs.
On July 24, 2019 counsel for Jiang wrote a letter to the
arbitrator, with a copy to Berg, Judah, and their attorneys,
asking the arbitrator to amend the award to add the following
language: “In the event that [Berg, Judah, and Doctors Best
Hospice] fail to pay to [Jiang and New Home for Me] the sum of
$701,053.06 within 30 days after the Final Award is confirmed by
the Superior Court, [Jiang and New Home for Me] are authorized
to sell the business known as Wilshire Vista Manor and to apply
the proceeds first to the amount awarded to [Jiang], up to
$701,053.06.” Counsel for Jiang asked the arbitrator to make the
change “as soon as possible because there is a critical issue
concerning unpaid property taxes. The property tax deficit is so
substantial that there will be a tax sale at the end of
October, 2019.” One day later, the arbitrator issued a second
amended award adding the language counsel for Jiang requested.
D. The Court Confirms the Arbitration Award and
Enters Judgment
Jiang filed a petition to confirm the arbitration award, and
Berg filed a petition to vacate it. Berg asked the trial court to
vacate the award because (1) the arbitrator improperly dismissed
the cross-complaint and refused to consider evidence on
affirmative relief for failure by Berg and Judah to pay arbitration
fees, (2) the arbitrator exceeded his powers when he amended the
award to allow Jiang to sell Wilshire Vista Manor if Berg and
6
Judah failed to pay her within 30 days after the trial court
confirmed the award, and (3) Berg was not a party to the
arbitration agreement.
On October 11, 2019 the trial court granted the motion to
confirm the arbitration award and denied the motion to vacate it.
The court ruled it “was within the arbitrator’s discretion to
exclude affirmative relief sought and is akin to a sanction” for
“non-payment of fees for over four months.” The court further
ruled the “amended award only clarifies the prior award and does
not add parties or impose future sanctions.” Finally, the court
denied Berg’s request to dismiss her from the case because she
participated in the arbitration. Berg timely appealed from the
judgment confirming the arbitration award.4
4 Doctors Best Choice, Inc. also appealed from the judgment.
It was a suspended corporation, but no longer. (See Rev. & Tax.
Code, § 23301; Newport Harbor Ventures, LLC v. Morris Cerullo
World Evangelism (2016) 6 Cal.App.5th 1207, 1215
[because a formerly suspended corporation “is now a corporation
in good standing, it may defend and participate in this action”];
Cadle Company v. World Wide Hospitality Furniture (2007)
144 Cal.App.4th 504, 512 [“The suspension statutes are not
intended to be punitive. Once the statutory goals underlying
suspension are met, no purpose is served by imposing additional
penalties. [Citations.] Leniency permits a delinquent
corporation to secure a revivor, even at the time of the hearing, at
the request of the corporation or on the trial court’s own
motion.”].) Therefore, the motion to dismiss its appeal is denied.
We previously dismissed Judah’s appeal.
7
DISCUSSION
Berg argues the trial court erred in denying her motion to
vacate the arbitration award for two reasons. First, she argues
the arbitrator exceeded his powers under Code of Civil Procedure
section 1286.2, subdivision (a)(4), by “making provisions in the
award for its enforcement.”5 Second, she argues the arbitrator
erred in refusing to hear evidence in support of her cross-claims
as a penalty for not paying arbitration fees. Neither argument
has merit.
A. Applicable Law and Standard of Review
“California law favors alternative dispute resolution as a
viable means of resolving legal conflicts. ‘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.’ [Citation.]
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.” (Richey v.
AutoNation, Inc. (2015) 60 Cal.4th 909, 916; see Cohen v. TNP
2008 Participating Notes Program, LLC (2019) 31 Cal.App.5th
840, 868 (Cohen).) Judicial review of an arbitration award is
limited to “circumstances involving serious problems with the
award itself, or with the fairness of the arbitration process.”
5 Statutory references are to the Code of Civil Procedure.
8
(Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 12; see Heimlich
v. Shivji (2019) 7 Cal.5th 350, 367 (Heimlich).)
Under section 1286.2 a court must vacate an arbitration
award if, among other circumstances, it determines that the
“arbitrators exceeded their powers” or that the “rights of the
party were substantially prejudiced by the refusal of the
arbitrators to postpone the hearing upon sufficient cause being
shown therefor or by the refusal of the arbitrators to hear
evidence material to the controversy . . . .” (§ 1286.2, subd. (a)(4)
& (5).) We review an order denying a petition to vacate an
arbitration award de novo. (Richey v. AutoNation, Inc., supra,
60 Cal.4th at p. 918, fn. 1; Bacall v. Shumway (2021)
61 Cal.App.5th 950, 957.) “‘“‘In determining whether an
arbitrator exceeded his [or her] powers, we review the trial
court’s decision de novo, but we must give substantial deference
to the arbitrator’s own assessment of his [or her] contractual
authority.’”’” (Cohen, supra, 31 Cal.App.5th at p. 869.)
B. The Arbitrator Did Not Exceed His Powers in
Authorizing Jiang To Sell Wilshire Vista Manor If
Berg and Judah Did Not Pay the Monetary Award
Berg contends the arbitrator exceeded his authority by
amending the arbitration award to provide that, if Berg and
Judah did not pay the approximately $701,000 monetary award
within 30 days after the court confirmed the award, Jiang could
sell Wilshire Vista Manor and apply the proceeds, up to $701,000,
to satisfy the monetary award. Berg argues that this part of the
award was an unauthorized remedy because the arbitrator
“attempted to enforce a judgment” and that “the power to enforce
9
a judgment is specifically reserved for the trial court.” The law
does not support Berg’s argument.
Unless “expressly restricted by the agreement or the
submission to arbitration,” arbitrators “have substantial
discretion to determine the scope of their contractual authority to
fashion remedies,” and “judicial review of their awards must be
correspondingly narrow and deferential.” (Advanced Micro
Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 376 (Advanced
Micro Devices).) A choice of remedy “may at times call on any
decisionmaker’s flexibility, creativity and sense of fairness. In
private arbitrations, the parties have bargained for the relatively
free exercise of those faculties. Arbitrators, unless specifically
restricted by the agreement to following legal rules, ‘“may base
their decision upon broad principles of justice and equity.”’”
(Id. at pp. 374-375; see Emerald Aero, LLC v. Kaplan (2017)
9 Cal.App.5th 1125, 1139 [“‘Were courts to reevaluate
independently the merits of a particular remedy, the parties’
contractual expectations . . . would be defeated.’”].) The “remedy
an arbitrator fashions does not exceed his or her powers if it
bears a rational relationship to the underlying contract as
interpreted, expressly or impliedly, by the arbitrator and to the
breach of contract found, expressly or impliedly, by the
arbitrator.” (Advanced Micro Devices, at p. 367; see VVA-TWO,
LLC v. Impact Development Group, LLC (2020) 48 Cal.App.5th
985, 1003 [“in reviewing an arbitration award, a court may
review only to assure the arbitrator’s interpretation provides the
basis for the remedy awarded,” and in “‘close cases the
arbitrator’s decision must stand’”].) Courts “‘will uphold awards
of specific performance by arbitrators in instances in which the
equitable remedy would not have been available if the dispute
10
had originally been litigated in court’” because an “‘arbitration
panel may grant equitable relief that a Court could not.’”
(Advanced Micro Devices, at p. 389; see Kelly Sutherlin McLeod
Architecture, Inc. v. Schneickert (2011) 194 Cal.App.4th 519, 529-
530 [“Although a California court arguably may not have the
power to compel a party to retract defamatory statements, the
parties may allow an arbitrator to do so.”].)
Nothing in the contractual arbitration provisions or the
rules governing the arbitration indicates the parties intended to
restrict the arbitrator’s power to fashion a remedy. (See
Advanced Micro Devices, supra, 9 Cal.4th at p. 384; Cohen, supra,
31 Cal.App.5th at pp. 871-872.) The dispute resolution provider
organization’s arbitration rules provided: “The arbitrator may
grant any remedy or relief that the arbitrator deems just and
equitable and within the scope of the agreement of the
parties . . . .” The Supreme Court has described this rule as “‘a
broad grant of authority to fashion remedies’ [citation], and as
giving the arbitrator ‘broad scope’ in choice of relief.” (Advanced
Micro Devices, at pp. 383-384; see Cohen, at p. 871.)
The arbitrator ordered rescission of the transaction and
made a monetary award. Both remedies were legally authorized.
“Rescission is intended to restore the parties as nearly as possible
to their former positions and ‘“to bring about substantial justice
by adjusting the equities between the parties” despite the fact
that “the status quo cannot be exactly reproduced.”’”
(Sharabianlou v. Karp (2010) 181 Cal.App.4th 1133, 1144.) In
addition, “‘concurrent with the award of rescission, the trial court
may award money damages or order such other relief as justice
may require.’” (Runyan v. Pacific Air Industries, Inc. (1970)
2 Cal.3d 304, 316; see Wong v. Stoler (2015) 237 Cal.App.4th
111375, 1386 [“If the court finds that the contract was rescinded,
‘“[t]he aggrieved party shall be awarded complete relief, including
restitution of benefits, if any, conferred by him as a result of the
transaction and any consequential damages to which he is
entitled.”’”].)
The arbitrator’s award was also rationally related to the
goal of restoring the parties to their positions before the
transaction, a goal that required the award to address the unpaid
loan payments for, and delinquent property taxes on, the San
Gabriel property. As the arbitrator stated: “As nearly as
possible, this award attempts to put the parties into the positions
they were in prior to entering into this purchase and sale
agreement. In order to put claimant back to the position she was
in prior to being defrauded. She had been current on the taxes on
the San Gabriel property and on the loan payments for that
property. Once the deal had gone through in 2014, [Berg and
Judah] failed to make the loan payments even though they were
collecting rent, and they failed to pay the property taxes since
2014.” In his July 24, 2019 letter asking the arbitrator to amend
the award, counsel for Jiang explained the tax issue was so
“critical” and the deficiency so “substantial” that the property
might be sold within a few months to pay the back taxes. The
monetary award to Jiang was designed to compensate her for the
overdue property taxes and loan payments she would have to
pay, plus the money she had spent to keep the unprofitable
Wilshire Vista Manor afloat. If Berg reconveyed the encumbered
San Gabriel property to Jiang but failed to pay the monetary
award, Jiang may not have been able to pay the past due
property taxes and loan payments, and she may have lost the
12
property. Such a series of events would have prevented the
arbitration award from restoring the pre-transaction status quo.
Berg provides no authority for her assertion the arbitration
award was improper because it attempted to enforce a judgment.
Berg cites Hall, Goodhue, Haisley & Barker, Inc. v. Marconi Conf.
Center Bd. (1996) 41 Cal.App.4th 1551, 1555 for the proposition
that arbitration awards “have been vacated on the basis of
arbitrators exceeding their powers when arbitrators
have . . . attempted to enforce a judgment which is specifically
reserved for the trial court,” but Hall did not involve an
arbitrator attempting to enforce a judgment. In that case the
trial court denied the motion to add a judgment debtor as an alter
ego “on the ground that the court had no jurisdiction over any
person or corporate entity other than” the judgment debtor.
(Id. at p. 1554.) The court in Hall reversed, holding the trial
court should have considered the merits of the motion to amend
the judgment. The court stated that, because “‘an arbitrator has
no power to determine the rights and obligations of one who is
not a party to the . . . arbitration proceedings,’” only “the superior
court has jurisdiction to amend the award to add an alter ego.”
(Id. at p. 1555.) Not really relevant to the issue here.6
6 Berg cites Jordan-Lyon Productions, Ltd. v. Cineplex Odeon
Corp. (1994) 29 Cal.App.4th 1459 for the proposition that an
arbitrator lacks authority to impose a judgment lien (which the
arbitrator did not do here). What this court actually held in that
case, however, was that a court cannot create an attachment lien
in a pending arbitration because an arbitration is not an action or
proceeding within the meaning of the statutes governing
attachments. (Id. at pp. 1467-1468.)
13
Berg cites two cases, both decided before the Supreme
Court’s decision in Advanced Micro Devices, supra, 9 Cal.4th 362,
where courts vacated arbitration awards because the arbitrators
exceeded their authority in imposing remedies. Neither case
helps Berg. In Marsch v. Williams (1994) 23 Cal.App.4th 238 the
court held an arbitration panel exceeded its authority when it
appointed a receiver without statutory authority. (Id. at p. 248.)
The arbitrator did no such thing here.
In Luster v. Collins (1993) 15 Cal.App.4th 1338, which
involved a dispute between neighbors over an easement, the
arbitrator ordered the defendant to remove 24 trees and some
“threatening signs” that were in the easement. (Id. at p. 1343.)
The arbitrator also ordered the defendant to pay $50 per tree for
each day the defendant failed to remove trees and $50 for each
day he failed to remove the signs. (Id. at p. 1347.) The court held
that the $50 daily award was a monetary sanction for future
violations of the orders and that neither the California
Arbitration Act nor the arbitration agreement gave the arbitrator
authority to impose such monetary sanctions. (Id. at p. 1350.)
The court in Luster stated that, because the plaintiff contended
the defendant’s failure to cut down the trees and signs caused
him “to suffer a total of $3,500 in damages, there is no principled
basis which will support a determination that the $1,200 per day
award was intended to represent compensation for future losses.”
(Id. at p. 1348) But while the $50 daily sanction in Luster was an
arbitrary, unprincipled amount that had no relation to the
defendant’s actual or potential loss, the arbitration award here
was eminently principled: It allowed Jiang to sell Wilshire Vista
Manor and keep the proceeds up to $701,000, the amount
14
required to avoid losing the San Gabriel property Jiang was
receiving in rescission.
Berg contends the arbitrator acted improperly by failing to
hear evidence of the value of the business, set a minimum sales
price, and require Jiang to advertise the business for sale to
“increase[ ] the probability that a maximum sales price for the
business would be obtained.” But Jiang had an incentive to sell
Wilshire Vista Manor for as much as possible, at least up to
$701,000, and Berg presented no credible evidence the business
was worth more than $701,000. In fact, the evidence in the
record suggests the value of Wilshire Vista Manor was
considerably less than $701,000. Although Jiang paid
$1.5 million for Wilshire Vista Manor in 2014, that was based on
fraudulent information provided by Berg, and the arbitrator
found Judah paid only $40,000 for Wilshire Vista Manor in 2013.7
Berg also contends the arbitrator did not have the
authority to amend the award to include the provision allowing
Jiang to sell Wilshire Vista Manor because he did so “within
24 hours of an extrajudicial communication without any notice,
formal hearing, briefing, or opportunity for objection.” But when
counsel for Jiang sent his letter to the arbitrator asking him to
7 Berg and Judah’s expert witness testified “he values a
business such as Wilshire Vista Manor on the number of beds it
has, and uses $20,000 as a guide” (which would have valued the
40-bed facility at $800,000), but the arbitrator found that the
witness’s expertise was “questionable” and that his testimony
was “unbelievable and unreliable,” in part because of the
witness’s practice of “making his own objections and laughing
during testimony.”
15
amend the award to add the provision allowing Jiang to sell
Wilshire Vista Manor if necessary, counsel sent copies of the
letter to the arbitrator’s case manager (in accordance with the
arbitration rules) and to all parties. Counsel for Berg did not
object to the request in the arbitration, either before or after the
arbitrator issued the amended award. Berg may not have had
enough time to object before the arbitrator amended the award,
but she had plenty of time after to object or ask the arbitrator to
amend the award again. (See A.M. Classic Const., Inc. v. Tri-
Build Development Co. (1999) 70 Cal.App.4th 1470, 1476
[arbitrator did not exceed his authority in issuing an amended
award in response to an ex parte communication from one side’s
lawyer about a cause of action the arbitrator had inadvertently
failed to resolve].)8
8 Emerald Aero, LLC v. Kaplan, supra, 9 Cal.App.5th 1125,
cited by Berg, is distinguishable. In that case, the plaintiffs
added a $30 million punitive damages claim by sending a copy of
their arbitration brief by email the day before the arbitration
hearing to the defendant, who was unrepresented, awaiting
criminal sentencing, and did not appear at the arbitration
hearing. (Id. at pp. 1141-1142.) The punitive damages claim was
more than 30 times the initial arbitration claim, a fact not
mentioned in the email or emphasized in the brief. (Id. at
p. 1142.) The court in Emerald Aero concluded the notice did not
satisfy the dispute resolution provider organization’s arbitration
notice rules or principles of fundamental fairness and reversed
the judgment confirming the arbitration award. (Id. at p. 1141.)
Here, the change in the award was relatively minor, and there is
no dispute Berg received notice of the amended award and could
have objected to it.
16
C. The Arbitrator Did Not Substantially Prejudice Berg’s
Rights by Precluding Her from Seeking Affirmative
Relief
Berg contends the trial court should have vacated the
award under section 1286.2, subdivision (a)(5), because the
arbitrator substantially prejudiced her rights by refusing to hear
evidence of affirmative relief. As discussed, the arbitrator
precluded Berg and Judah from pursuing their cross-claims as a
penalty for failing to pay arbitration fees.9
Section 1286.2, subdivision (a)(5), provides that the court
must vacate an arbitration award where the “rights of the party
were substantially prejudiced . . . by the refusal of the arbitrators
to hear evidence material to the controversy.” This provision
“was designed as a ‘safety valve in private arbitration that
permits a court to intercede when an arbitrator has prevented a
party from fairly presenting its case.’ [Citation.] It comes into
play, for example, when an arbitrator, without justification,
permits only one side to present evidence on a disputed material
issue.” (Heimlich, supra, 7 Cal.5th at p. 368.)
The Supreme Court in Heimlich described the
circumstances in Royal Alliance Associates, Inc. v. Liebhaber
(2016) 2 Cal.App.5th 1092 as the “paradigmatic example of when
a refusal to hear evidence will justify vacation of an award.”
(Heimlich, supra, 7 Cal.5th at p. 369.) In Royal Alliance a
9 In her cross-complaint Berg sought $370,000 from Jiang for
payments owed on the promissory note and $150,000 from real
estate broker Mohammad for her commission. Jiang argues Berg
lacks standing to assert a claim on the promissory note because it
was payable to Judah, not Berg, an issue we do not reach.
17
securities brokerage firm sought to expunge an allegation of
misconduct from one of its employee’s records. (Royal Alliance, at
p. 1096.) The arbitration panel allowed the broker to testify, but
denied the client’s request to speak or cross-examine the broker.
When one arbitrator suggested she would like to hear from the
client, the presiding arbitrator responded, “‘Well, how can we
make sure we’re not going to be here for another two hours?
That’s the problem.’” (Id. at p. 1099.) The court in Royal Alliance
held the trial court properly vacated the arbitration award
because the arbitrators gave the brokerage firm “an unfettered
opportunity to bolster the written record but denied [the client]
even a limited chance to do the same.” (Id. at p. 1110.)
The arbitrator in this case heard extensive testimony from
all parties, including Berg and Judah. It was not until the
eleventh and last day of the arbitration hearing that the
arbitrator ruled on Jiang’s motion to preclude Berg and Judah
“from putting on any evidence as to affirmative relief for
nonpayment of arbitration fees.” Berg and Judah were four
months behind in paying arbitration fees, and the arbitrator
granted the motion under the applicable rule of the dispute
resolution provider organization’s arbitration rules. When
counsel for Berg asked for clarification of the ruling, the
arbitrator stated, “Well, to the extent that they laid out their
claims in the cross-complaint, that’s where I’m making the
decision. Seeking affirmative relief, they cannot do that now.”
The arbitrator had already heard 11 days of testimony, including
from Berg and Judah, and his ruling only excluded evidence
relating to their cross-claims, not evidence relating to Jiang’s
claims or their affirmative defenses.
18
Berg does not dispute the arbitration rules authorized the
arbitrator to exclude her evidence in support of her affirmative
cross-claims. Instead, she asserts the arbitrator imposed the
sanction even though she was “one week behind payment on the
latest invoice.” The record shows, however, that when the
arbitrator ruled on Jiang’s motion in November 2018, Berg had
not made a payment since July, while Jiang had made payments
in August, September, and October. According to the arbitrator,
the case manager “sent out several notices after July, please pay,
please pay, and nothing happened.”
Berg also argues it was not her fault she ran out of money
to pay the arbitration fees. First, she contends the parties
estimated the arbitration would last three days, but it actually
took 11 days because “the arbitrator failed to exercise proper
control over the proceedings” and “90% of the arbitration
consisted of [Jiang’s] case in chief.”10 Second, Berg complains the
arbitrator identified a potential conflict on the first day of the
arbitration hearing that required Judah and Berg to hire
separate counsel at substantially greater expense.11 Berg cites no
10 The parties disagree on why the arbitration lasted 11 days.
In his award, the arbitrator said Judah spent the second day of
the hearing attempting to recant his entire testimony on the first
day of the hearing. And although the arbitration rules required
the parties to pay in advance for three hearing days, nothing in
the record suggests the parties were promised the hearing was
limited to three days.
11 According to the declaration of Neal Salisian, counsel for
Berg and Judah on the first day of the arbitration hearing, after
Judah’s testimony raised a possibility Salisian might have a
19
evidence the arbitrator’s lack of control over the hearing or his
identification of a potential conflict was error, much less a ground
for vacating the award. (See Cohen, supra, 31 Cal.App.5th at
p. 868 [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’”].)
It is not clear from the record whether the arbitrator made
a finding Berg was able to afford the $5,482 she owed in
arbitration fees.12 But if Berg was truly unable to pay, she could
have sought relief from the trial court. When “a party who has
engaged in arbitration in good faith is unable to afford to
continue in such a forum, that party may seek relief from the
superior court. If sufficient evidence is presented on these issues,
and the court concludes the party’s financial status is not a result
of the party’s intentional attempt to avoid arbitration, the court
may issue an order specifying: (1) the arbitration shall continue
so long as the other party to the arbitration agrees to pay, or the
arbitrator orders it to pay, all fees and costs of the arbitration;
conflict representing Judah and Berg, the arbitrator recessed the
hearing and ordered Salisian to research the potential conflict.
Salisian subsequently concluded Judah’s testimony created an
unwaivable conflict, which required him to withdraw from
representing Judah or Berg.
12 Jiang asserts the arbitrator found Berg and Judah were
able to pay because they were collecting approximately $5,000 in
monthly rent from the San Gabriel property, but were not
making loan payments or paying the property taxes. The
arbitration award, however, does not contain a finding on Berg’s
or Judah’s ability to pay.
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and (2) if neither of those occur, the arbitration shall be deemed
‘had’ and the case may proceed in the superior court.” (Weiler v.
Marcus & Millichap Real Estate Investment Services, Inc. (2018)
22 Cal.App.5th 970, 981; see Aronow v. Superior Court of San
Francisco County (2022) 76 Cal.App.5th 865, 874; Roldan v.
Callahan & Blaine (2013) 219 Cal.App.4th 87, 90.) Nothing in
the record indicates Berg made any effort to present evidence to
the arbitrator or the trial court that she could not afford the
$5,482 she owed.13
13 Berg also argues in passing that the arbitrator’s refusal to
consider evidence supporting her cross-claims was misconduct
and that the award was procured by undue means. (See § 1286.2,
subd. (a)(1) & (3) [a court shall vacate an award if the “rights of
the party were substantially prejudiced by misconduct of a
neutral arbitrator” or the award “was procured by corruption,
fraud or other undue means”].) As discussed, these arguments
are also meritless. (See Comerica Bank v. Howsam (2012)
208 Cal.App.4th 790, 827 [arbitration award was not procured by
corruption, fraud, or other undue means where the arbitrator
entered a party’s default for failing to pay fees in advance; the
arbitration rules allowed the arbitrator to “dismiss a claim or
counterclaim, without prejudice, if a party fails to timely provide
the full amount”].)
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DISPOSITION
The judgment is affirmed. The motion to dismiss the
appeal by Doctors Best Choice, Inc. is denied. Jiang, New Home
for Me, and Mohammad are to recover their costs on appeal.
SEGAL, J.
We concur:
PERLUSS, P. J.
WISE, J.*
* Judge of the Alameda Superior Court, assigned by the
Chief Justice pursuant to article VI, section 6 of the California
Constitution.
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