Williams v. Joseph Phelps Vineyards LLC

Full title: CRAIG WILLIAMS et al., Plaintiffs and Respondents, v. JOSEPH PHELPS…

Court: California Court of Appeals, First District, Second Division

Date published: Apr 19, 2011

No. A127708 (Cal. Ct. App. Apr. 19, 2011)

Opinion

CRAIG WILLIAMS et al., Plaintiffs and Respondents, v. JOSEPH PHELPS VINEYARDS LLC et al., Defendants and Appellants. A127708 California Court of Appeal, First District, Second Division April 19, 2011

NOT TO BE PUBLISHED

San Francisco County Super. Ct. No. CPF08508865

Richman, J.

An arbitrator, a former superior court judge with wide experience in the field, determined that Joseph Phelps Vineyards, Inc. and affiliated individuals (hereafter collectively JPV) must pay approximately $26 million in damages, interest, attorney fees, and costs for dishonoring its contract with former employees Craig Williams and Thomas Shelton. After extensive consideration, the superior court ultimately denied JPV’s petitions to have the award vacated, rejecting JPV’s fundamental contentions that the arbitrator exceeded his powers in two respects: (1) by applying equitable considerations to conclude that Williams’s and Shelton’s claim was not time barred, and (2) by making the attorney fees and costs award after expiration of the 90-day period within which the parties had contractually specified the arbitrator would to render a final decision. JPV makes the same contentions here, both of which, we conclude, are without merit.

Although JPV valiantly attempts to frame the first issue as whether the arbitrator exceeded his powers by using equitable concepts forbidden to him by the parties’ contract, the underlying issue was whether the statute of limitations barred the claims against JPV, and the parties’ agreement imposed no restrictions on how the arbitrator resolved that issue.

Regarding the second issue, the arbitrator determined prior to expiration of the 90 day period that Williams and Shelton were the prevailing parties and entitled to recover costs and attorneys’ fees in amounts to be determined after the 90-days lapsed. We conclude that JPV waived the issue by consenting to the arbitrator reserving jurisdiction beyond 90 days to fix the amount of costs and fees.

There are various ancillary issues, none of which we decide in JPV’s favor. Having comprehensively rejected JPV’s efforts to overturn the arbitrator’s award, we affirm the trial court’s judgment confirming that award, which is now worth almost $30 million.

BACKGROUND

The Nature of the Parties’ Dispute

The arbitrator was William L. Bettinelli, retired judge of the Sonoma County Superior Court, acting under the auspices of Judicial Arbitration and Mediation Services, Inc. (JAMS).¹ His 28-page award provides an informative description of the parties’ dispute. With minor editorial changes we have added for clarity, in pertinent part it reads:

1 Retired Judge Bettinelli was also the co author of a treatise on mediation and arbitration. (Knight, Chernick, Halderman & Bettinelli, Cal. Practice Guide: Alternative Dispute Resolution (The Rutter Group 2010).)

“Shelton and Williams were both employed by Joseph Phelps Vineyards LLC. Shelton had been hired in 1992 as JPV’s National Sales Manager, and later served as the winery’s Chief Executive Officer until he resigned on May 16, 2008.² During his tenure Shelton aggressively promoted the Joseph Phelps brand and substantially increased distribution networks throughout the United States and the world, substantially increasing the winery’s profits and economic value. Williams served as JPV’s winemaker since 1976 and until his resignation on May 16, 2008, producing wines that have won numerous awards, many of which wines now qualify as super premium luxury wines.”

2 Thomas Shelton died within ten weeks of his departure from JPV. His claims against JPV were prosecuted by a family trust administered by his widow.

“... Shelton was the public face of JPV over the years, and its most vocal supporter.... [B]y working collaboratively with others in the industry and focusing the company’s business strategy, Shelton transformed JPV from an under-performing, unprofitable family business into a world-class winery whose profits were over $13.4 million in 2003.

“In 1999 Joseph Phelps decided to form a limited liability company in which the active managers of the company, including Shelton and Williams, would own a combined 49 percent interest in the winery; the Phelps family would continue to hold the majority interest. Joseph Phelps’ attorney drafted an Operating Agreement and Shelton and Williams signed the Agreement in December 1999. In it, they committed that they would continue to serve the company as chief executive officer and winemaker, respectively, in exchange for an equity stake in the company. Joseph Phelps gave them the opportunity to earn a combined 40 percent of Class B shares if they remained with the company for five years. Shelton’s and Williams’s Class B shares vested effective December 31, 2003.

“Under the original Operating Agreement Shelton’s and Williams’s Class B shares were to be valued at their Fair Market Value (FMV) and were transferable. If there were a disagreement regarding the FMV of a departing member’s shares, JPV was required to conduct an appraisal upon request of the departing member.

“In April 2004, the parties executed ‘Amendment II’ to the Operating Agreement which changed the valuation of Shelton’s and Williams’s Class B shares from FMV to the value of their ‘Adjusted Capital Account Balance, ’ or so-called ‘book value, ’ effective January 1, 2004.

“From that time forward Shelton and Williams (but primarily Shelton) regularly expressed their unhappiness with Amendment II. They repeatedly underscored the conflict the amendment created between the interests of the managers and the interests of the Phelps family members. In multiple managers’ meetings, ... the conflict issue was regularly discussed but never resolved. On each occasion the issue was ignored by William Phelps, who adamantly refused to entertain an amendment. During that time William Phelps sought issuance to himself of Class B shares, but such issuance was opposed by Shelton, Williams, and David Lockwood³ on the grounds that such units were reserved for non-family management employees.

3 Lockwood was a vice-president and the chief financial officer. Officially, Williams was “Senior Vice-President and Winemaker, ” while Shelton was “President and Chief Executive Officer.”

“In spite of their unhappiness and concerns about the conflict created by Amendment II, both Shelton and Williams continued to devote their time and energies to the growth and advancement of the business and to the continuing improvement of the winery and the wines produced. In several instances they placed the interests of the business ahead of their own and advocated growth initiatives which in the short-term was contrary to their financial interests. No evidence was produced that the continuing concerns over the effect of Amendment II in any way affected negatively the work and labors of Shelton or Williams.

“Finally, in January of 2007, Shelton and Williams presented to JPV a restructuring proposal which was responded to by William Phelps in March of 2007. Following attempted mediation, this arbitration was commenced.”

The Arbitration

Mediation was only one of the dispute resolution mechanisms required by the Operating Agreement. If informal discussions and mediation failed to resolve the dispute, the parties agreed to have the dispute arbitrated by JAMS. JPV filed its demand for arbitration with JAMS in August 2007, followed by the demands of Shelton and Williams on September 20.

Disagreement immediately arose about the arbitrator’s powers. The arbitration provision in the Operating Agreement simply stated that the arbitration would be conducted “in accordance with the rules and procedures of [JAMS] then in effect with respect to commercial disputes.”⁴ But JAMS has no “commercial dispute” rules. It does have “Comprehensive” rules and “Employment” rules. The disagreement was not merely one of how the dispute was to be classified. Under the Comprehensive rules—favored by Williams and Shelton—a JAMS arbitrator is empowered to apply “the rules of law and equity, ” but under the Employment rules—favored by JPV—the arbitrator is to apply “the rules of law.”⁵ Eventually, the parties agreed that the arbitrator would use the Employment rules unless and until the arbitrator ordered otherwise—which he never did.

4 The arbitration provision, which appears as section 13.15(c) of the Operating Agreement, reads: “If the Dispute is not resolved by mediation pursuant to Section 13.15(b) above, or if the parties fail to agree upon a mediator, within ninety (90) days after the Dispute Notice, the Dispute shall be settled by arbitration conducted in St. Helena, California which shall be accordance with the rules and procedures of Judicial Arbitration and Mediation Services then in effect with respect to commercial disputes. Arbitration shall be held before one impartial arbitrator in St. Helena, California. In the event the parties cannot agree to the appointment of an arbitrator, an arbitrator shall be appointed in accordance with Section 1281.6 of the California Code of Civil Procedure. Any arbitration shall allow for production of relevant documents and depositions, and sanctions, at the discretion of the arbitrator, for failure to comply with any such discovery requests. The arbitration of such issues, including the determination of any amount of damages suffered by any party hereto by reason of the acts or omissions of any party, shall be final and binding upon all parties. Notwithstanding the foregoing, the arbitrator shall not be authorized to award punitive damages with respect to any such claim or controversy, nor shall any party seek punitive damages relative to any matter under, arising out of or relating to this Agreement in any other forum. Except as otherwise set forth in this Agreement, the cost of any arbitration hereunder, including the cost of the record or transcripts thereof, if any, administrative fees, and all other fees involved including reasonable attorneys’ fees incurred by the party determined by the arbitrator to be the prevailing party, shall be paid by the party determined by the arbitrator not to be the prevailing party, or otherwise allocated in an equitable manner as determined by the arbitrator. The parties shall instruct the arbitrator to render its decision no later than 90 days after the submission of the Dispute.”

5 The two provisions are almost identical. We quote Rule 24(c) of JAMS’s “Employment Arbitration Rules and Procedures, ” with the differing language of Rule 24(c) of JAMS’s “Comprehensive Arbitration Rules and Procedures” bracketed in bold: “In determining the merits of the dispute the Arbitrator shall be guided by the rules of law [and equity] agreed upon by the Parties. In the absence of such agreement, the Arbitrator will [shall] be guided by the law or the rules of law [and equity] that the Arbitrator deems to be most appropriate. The Arbitrator may grant any remedy or relief that is just and equitable and within the scope of the Parties’ agreement, including but not limited to specific performance of a contract.”

The scope of the parties’ claims in the arbitration is set out in the arbitrator’s award:

“Shelton and Williams brought claims seeking to rescind Amendment II arguing that it was procured by fraud, failed for lack of consideration, was a result of JPV’s breach of fiduciary duty, was unconscionable, was signed under duress, and was unenforceable under the Corporations Code. Shelton and Williams also brought a Labor Code claim, arguing that even if Amendment II was found to be valid, the revaluation of their interest in the company from FMV to book value under Amendment II violated Labor Code section 221....

“JPV also asserted two claims. First, JPV sought a declaration that it could remove both Shelton and Williams as managers of the company for cause under the Operating Agreement on the grounds that they are guilty of willful misconduct, breach of fiduciary duty, gross negligence, material breach, and fraud against, or misrepresentation to, the company. Second, JPV also sought an order directing Shelton to pay JPV the sum of $17,424,985 and directing Williams to pay JPV $17,874,173 based on the same wrongful conduct as listed above, for a total of $35,299,158.”

Following extensive and contested discovery, and numerous case management conferences, the arbitrator’s first order of substantive business was the parties’ conflicting motions for summary disposition. In the course of his 25-page order, the arbitrator granted only Shelton’s and Williams’ “motion to summarily adjudicate their claim for violation of Labor Code section 221” and JPV’s “motion to dispose of Shelton and Williams’ Rescission claim.” Only one aspect of this decision concerns us here: the arbitrator’s decision rejecting JPV’s argument that all of Shelton’s and Williams’ claims were time-barred because they had accrued more than three years before recovery was sought.⁶

6 The parties never disputed that Williams’s and Shelton’s claims were governed by the three-year statute of limitations is from Code of Civil Procedure section 338, subdivision (a), that is, “An action upon a liability created by statute.” Williams and Shelton claimed that their Class B shares constituted “wages” for past labor within the meaning of Labor Code section 200, and therefore could not be retained by JPV under Labor Code section 221, which provides: “It shall be unlawful for any employer to collect or receive from an employee any part of wages theretofore paid by said employer to said employee.”

After discussing Wagner Construction Co. v. Pacific Mechanical Corp. (2007) 41 Cal.4th 19, Spear v. California State Auto. Assn. (1992) 2 Cal.4th 1035, and Brodke v. Alphatec Spine, Inc. (2008) 160 Cal.App.4th 1569, the arbitrator concluded: “Under this case law, it is clear that the arbitrator has authority to decide whether the statute of limitation bars [Shelton’s and Williams’s] arbitration claims, but that he must do so in accordance with the parties’ agreement to arbitrate as well as using ‘broad principles of justice and equity.’ Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 10-12.”

After quoting the arbitration provision in the Operating Agreement, the arbitrator then explained why JPV would not prevail on its argument that Shelton’s and Williams’s claims were time-barred:

“There is no absolute time period within which parties to the Agreement must bring their claims, and there is no specific agreement that the arbitrator must act in strict conformity with the statutes of limitation. See Moncharsh, supra, 3 Cal.4th at 10-11. Thus, under Spear and Wagner, a reasonable time is allowed and the arbitrator must look at the particular factual circumstances of this case to determine whether the claimants [Shelton and Williams] filed their claims within a ‘reasonable time.’

“It is undisputed that in January 2007, Shelton and Williams sent a memorandum to Mr. Damoose (Bill Phelps’ attorney). In this memorandum, Claimants state their ideas for the ‘restructuring’ of JPV, discussed at a managers meeting held December 20, 2006, and state that ‘[c]hanges in our strategic outlook and changes to the original operating agreement... have unintentionally placed the long term interests of the Phelps family at odds with the necessarily shorter term interests of minority shareholders... [and] the operating agreement no longer effectively serves its entrepreneurial mission.’ Claimants go on to suggest dissolution of the existing partnership. While this memorandum does not specifically reference Shelton and Williams’ Labor Code, contract or rescission based on fraud and duress claims, it does put JPV on notice of the dispute. The record shows that JPV refers to January 29, 2007 (the date of this memo) as ‘the date when the dispute with [Shelton and Williams] came to light.’ Further, following this memorandum, and in accord with section 13.15 of the Operating Agreement, the parties attempted to negotiate their dispute, and when that failed, had a two-day mediation in July 2007. Following this unsuccessful mediation, both sides filed their claims in arbitration.

“These circumstances show that any delay in the filing of Shelton’s and Williams’ arbitration claims beyond the statute of limitations was reasonable and did not prejudice JPV. JPV admittedly knew of the dispute with Shelton and Williams prior to the running of the statute of limitations and the parties actively worked to resolve it prior to the filing of the claims in August and September 2007.

“For the foregoing reasons, this arbitrator finds that Shelton’s and Williams’ arbitration claims were filed within a reasonable time, and will not summarily dispose of Shelton’s and Williams’ arbitration claims based on JPV’s statute of limitations argument.

“Because this arbitrator concludes that Shelton’s and Williams’ arbitration claims were filed within a reasonable time, Shelton’s and Williams’ delayed discovery claims will not be discussed.”

The arbitrator issued his interim award on August 25, 2009. The arbitrator found for Williams and Shelton, declared them to be prevailing parties for purposes of a mandatory attorneys’ fees provision (see fn. 7, post), reserved jurisdiction to decide the amount of costs and fees to be awarded, and established a briefing schedule for that issue.

The parties were given the opportunity to identify “unresolved issues” that merited further attention. Both sides did so. JPV’s letter brief to the arbitrator, dated August 29, occupied ten single-spaced pages, the maximum allowed by the arbitrator. JPV’s letter had 64 objections, the first of which was that “The 90-day period specified in Section 13.15(c) of the Operating Agreement ends September 9, 2008. Thereafter, the Arbitrator lacks jurisdiction over this case (except for the fee award). Code Civ. Proc. § 1283.8. The Interim Award, at 28:20-25, calls for briefing after September 9, 2008. JPV objects to any such extension of the Arbitrator’s mandate after the end of the 90-day period.” The arbitrator adopted four of JPV’s points, but rejected all of the others as merely urging “re-argument of matters already decided... by this arbitrator.”

The arbitrator issued his final award on September 9, 2008. He concluded that JPV was not entitled to any recovery from Shelton or Williams. They, however, were awarded a very substantial recovery. Not the $113,691,967 they claimed, but still very substantial—over $24 million.

The heart of the arbitrator’s reasoning was that the Class B shares qualified as wages within the meaning of Labor Code section 221. Damages were determined as follows:

“[The Class B] units were wages that could not be taken away from Shelton and Williams under Labor Code § 221. When JPV purported to revalue Shelton’s and Williams’ units from FMV to book value, they in effect required that Shelton and Williams’ return a portion of their wages. The amendment removed Shelton’s and Williams’ right to sell their Class B units at FMV to anyone, neither a third party nor JPV. By finding that the portion of Amendment II changing the valuation from fair market value to book value violated the Labor Code, the provision of the original Operating Agreement requiring a fair market valuation was in effect reinstated. It is this provision... that governs the measure of damages here.”

“[¶]... [¶] The violation of Labor Code section 221 is a breach of the employment agreement and subject to contract remedies. Therefore, this arbitrator finds that the measure of damages is the amount that will compensate Shelton and Williams for the change in the value of their Class B interests from FMV to their adjusted capital balances. Since under the amendment they retained their adjusted capital account balances (thus that portion of their earned compensation included in the original Operating Agreement was not ‘return[ed]’ to the employee by the amendment), I find that their damages are the differences between FMV on December 31, 2003 and their adjusted capital account balances on that same date.”

“Under the Labor Code, Shelton and Williams have a right to be paid their wages and benefits earned as employees of JPV from December 31, 2003 until their resignation on May 16, 2008. As found above, the evidence shows that both Shelton and Williams continued to be productive employees after December 31, 2003. Because they have also tendered their interest in the company, Shelton and Williams also have the right, under section 9.6 of the Operating Agreement, to be paid for their interest in the company in accord with its terms. As stated above, the damages suffered by Shelton and Williams are the difference between FMV on December 31, 2003 and their adjusted capital account balances on that same date. Any increase in book value after December 31, 2003 is a result of their labors after that date.”

“Having considered all the evaluation information presented in this arbitration, I find that the FMV of the 40 percent interest of Shelton and Williams as of December 31, 2003 was the sum of $29,000,000.... [¶] Thus, the FMV of Shelton’s interest at the time of Labor Code section 221 was $14,500,000, and the FMV of Williams’ interest was the same. On December 31, 2003, Shelton’s adjusted capital account balance was $3,319,982 and Williams’ adjusted capital account balance was $3,691,584. As stated above, the damages suffered by Shelton and Williams being the difference between the FMV on December 31, 2003, and their adjusted capital account balances on that same date, Shelton has suffered damages in the sum of $11,180,018 and Williams has suffered damages in the sum of $10,808,416.”

Having determined that Shelton and Williams were entitled to interest under Labor Code section 218.6, the arbitrator concluded that “Shelton is entitled to interest from Joseph Phelps Vineyards LLC at the rate of 10 percent per annum on the sum of $11,180,018 from September 20, 2007 to the date of this award, September 9, 2008, for a total of $1,084,309, ” and “Williams is entitled to interest from Joseph Phelps Vineyards LLC at the rate of 10 percent per annum on the sum of $10,808,416 from September 20, 2007 to the date of this award, September 9, 2008, for a total of $1,084,268.”

Finally, because the Operating Agreement had an attorneys’ fee provision, ⁷ the arbitrator concluded that “Shelton and Williams are the prevailing parties and are entitled to be reimbursed their reasonable attorneys’ fees, costs, and other expenses. Shelton and Williams may file an application for fees, costs and expenses by September 4, 2008, together with supporting evidence and argument.⁸ JPV may file opposition evidence and argument by September 11, 2008. The matter shall be submitted for final decision at that time unless any party requests an oral hearing, in writing by September 15, 2008. If requested, the oral hearing shall be conducted by telephone conference at a time set by the arbitrator. Jurisdiction is specifically reserved for this arbitrator’s determination of reasonable attorney fees and costs.”

7 Section 13.5 of the Operating Agreement reads: “In the event that any dispute between the Company and the Members or among the Members should result in litigation or arbitration, the prevailing party in such dispute shall be entitled to recover from the other party all reasonable fees, costs and expenses of enforcing any right of the prevailing party, including without limitation, reasonable attorneys’ fees and expenses.”

8 No, this is not a typographical error. As subsequently explained in the order awarding Shelton and Williams attorneys’ fees and costs, they had in fact, as expressly permitted by the interim award, already submitted their application at the time of the arbitrator’s final award.

On October 30, 2008, the arbitrator made an order purporting to “supplement” the September 9 award by determining that Shelton and Williams were entitled to recover attorneys’ fees and costs in the sum of $1,890,703.32. The arbitrator also explained the circumstances leading to this supplementary order:

“This arbitration was conducted over thirteen hearing days, the transcripts of which encompassed thirteen volumes and over 2, 200 pages. Fifteen volumes of documentary exhibits were submitted, totaling over 1, 000 individual exhibits and approximately ten thousand individual pages of documents. After the completion of testimony, and on June 11, 2008, the Phelps parties submitted 101 pages of argument while Shelton and Williams submitted 46 such pages.’

“The Operating Agreement of Joseph Phelps Vineyards LLC which forms the basis for this arbitration, provides in section 13.15(c): ‘The parties shall instruct the Arbitrator to render its decision no later than ninety days after the submission of the Dispute.’ Under that provision the arbitration award was to be rendered by September 9, 2008. On August 25, 2008, after extensive review of the transcripts, documentary exhibits, and applicable law, this arbitrator rendered an Interim Arbitration Award awarding Shelton $11,180,018 plus interest based on his claim under Labor Code Section 221, and awarding Williams $10,808,416 plus interest based on his claim under Labor Code Section 221. All other claims of Shelton and Williams were denied, as were all claims of the Phelps parties against Shelton and Williams. Shelton and Williams were determined to be the prevailing parties in the arbitration entitled to be reimbursed their reasonable attorneys’ fees, costs, and other expenses. A briefing schedule for determination of such attorneys’ fees and costs was therein established.

“As part of that Interim Award, the parties were invited to propose to the arbitrator issues of substance submitted in the arbitration that were not resolved by the Interim Award. On August 29, 2008, the Phelps parties identified 64 alleged ‘unresolved issues’ that they believed required resolution. As part of that request, the Phelps parties stated: ‘the 90 day period specified in section 13.15(c) of the Operating Agreement ends September 9, 2008. Thereafter, the Arbitrator lacks jurisdiction over this case (except for the fee award). Code Civ. Proc. Section 1283.8. The Interim Award... calls for briefing after September 9, 2008. JPV objects to any such extension of the Arbitrator’s mandate after the end of the 90 day period.’

“On September 9, 2008, this Arbitrator issued responses to the Phelps parties; requests for resolution of ‘unresolved issues, ’ finding four such issues to be well taken and the balance primarily re-arguments of matters already decided. On that date, September 9, 2008, this Arbitrator issued the Arbitration Award incorporating the ‘unresolved issues’ identified by the Phelps parties and accepted by this Arbitrator.

“In the meantime, on September 4, 2008, counsel for Shelton and Williams submitted their application for attorneys’ fees and costs with a supporting declaration and exhibits. On Friday, September 5, 2008, the Phelps parties submitted objections to that application and a motion to strike the fee application on the basis that although unredacted and redacted versions of billing statements were submitted to this Arbitrator, only redacted versions were submitted to the Phelps parties, thus prohibiting the Phelps parties from effectively defending such action.

“As a result of that unresolved objection and motion to strike, the Arbitration Award of September 9, 2008, specifically reserved jurisdiction to determine the amount of attorneys’ fees and costs to which the prevailing parties were entitled.

“On September 29, 2008, the objection and motion to strike concerning the attorney fee application were set for hearing on October 7, 2008.

“On October 1, 2008, the Phelps parties objected to this Arbitrator’s jurisdiction to enter an attorneys’ fee award based on Shelton’s and Williams’ failure to comply with Code of Civil Procedure Section 1284 as applied in Britz, Inc. v. Alfa-Laval Food & Dairy Co. (1995) 34 Cal.App.4th 1085, 1105.⁹

9 As will be seen, Code of Civil Procedure section 1284 deals with the procedure by which an arbitrator may correct an award if requested by a party. (See fn. 13 and accompanying text, post.)

“The hearing proceeded on October 7, 2008, with counsel for the Phelps parties having been granted permission to appear specially to challenge this Arbitrator’s post September 9, 2008 jurisdiction. After hearing, and on October 7, 2008, this Arbitrator determined that it is inappropriate to issue an attorneys’ fee determination and award based on evidence submitted only to the arbitrator and not presented to opposing counsel for review and argument, and the objection of the Phelps parties was sustained and the motion to strike was granted on those grounds. The sustaining of the objection and the granting of the motion to strike was made with leave to counsel for Shelton and Williams to file an amended application for attorneys’ fees and costs. An amended application was filed on October 14, 2008, and on October 20, 2008, the Phelps parties restated their objections thereto on the basis of this Arbitrator’s lack of jurisdiction. Assuming that the failure to include the amount of the attorneys’ fee and cost award was a defect in the form of the award, and that inclusion of a specific award of attorneys’ fees and costs amounts to a correction of the Arbitration Award of September 9, 2008, they argue that such correction under the provisions of CCP Section 1284 and the holding of Britz should have been made not later than October 9, 2008.

“However, by that date this Arbitrator did not have sufficient evidence upon which to calculate the amount of attorneys’ fees and costs to which Shelton and Williams were entitled. Their initial application of September 4, 2008 had been objected to along with a motion to strike such application and that objection and motion had not yet been heard or ruled on.

“Therefore, if this Arbitrator’s jurisdiction did not extend beyond October 9, 2008, in the absence of appropriate evidence supporting attorneys’ fees and costs by that time Shelton and Williams have lost the opportunity to be awarded such fees and costs. On the other hand, if under the circumstances here presented jurisdiction continues for the purpose of determining the amount of attorneys’ fees and costs to which Shelton and Williams may be entitled, their amended application is sufficient to support such a determination.”

The arbitrator concluded that it was “impossible” to make a fee award by September 9 because JPV had objected to the form Shelton’s and Williams’s fee application, and moved to strike it. “As a result, the inability to include the amount of attorneys’ fees and costs is an excusable omission and the Arbitration Award may be supplemented at this time. The inclusion of the amount of attorneys’ fees and costs at this time is not inconsistent with other findings on the merits of the controversies resolved in the arbitration and does not cause demonstrable prejudice to the legitimate interests of any party. [Citations.] [¶] The hearing on the objections and motion to strike of the Phelps was conducted and ruled on October 7, 2008. This order and Supplement to Arbitration Award is being issued within 30 days of the determination of those objections and motion.”

Concerning the details of fee and costs request of $2,152,204.13, the arbitrator noted that “The Phelps parties contest this application on procedural grounds only.” Nevertheless, the arbitrator conscientiously went through the request, rejected some of the claims, and, in a supplemental order dated October 30, 2008, awarded Shelton and Williams $1,890,702.32 in costs and attorneys’ fees.

Proceedings in the Superior Court

When the parties turned from the arbitration to the superior court, where a quick decision is the norm, things did not go smoothly or speedily. There would be six reported hearings, and three statements of decision, before a judgment was eventually entered in February 2010.

On October 1, 2008—after the arbitrator had made his September 9 final award but before he made the October 30 supplemental order adding attorneys’ fees and costs—Shelton and Williams petitioned to confirm the award. JPV not only opposed that petition, it filed its own petition to vacate the award. The common ground of both of JPV’s efforts was that the arbitrator had improperly based it on equitable considerations specifically withheld from him by the JAMS employment rules.

On November 17, 2008, the trial court conducted a hearing at which it heard extensive argument on the petitions.

On February 6, 2009, the court filed its first statement of decision. In it the court concluded that the arbitrator was required to apply the JAMS employment rules, did apply those rules, and under them was empowered to use the doctrine of equitable tolling to reason that that the Shelton-Williams damage claims were not barred. The court concluded: “[T]he decision complied with the requirement that the Arbitrator apply rules of law. Of course, the Court does not consider whether the Arbitrator’s analysis was correct, but only that undertaking the analysis was within his contractually delegated power. Even though the Arbitrator labeled his analysis as considering ‘principles of justice and equity, ’ this Court will look at the substance rather than the form. Civ. Code § 3528. Because the Arbitrator found that Shelton and Williams gave timely notice to JPV within the statutory period of the claims on which the arbitration demand was based and then formally initiated the arbitration within a reasonable time and without prejudice to JPV, the Arbitrator applied rules of law.” JPV filed a motion—which is not in the record on appeal—to vacate this statement of decision.

On February 9, 2009, Shelton and Williams filed a separate petition for confirmation of the arbitrator’s supplementary fee award. And on March 11, 2009, the trial court conducted a hearing on this petition.

On April 2, 2009, the court conducted a hearing on what it called JPV’s motion to vacate the first statement of decision.¹⁰ The court found “intriguing and disturbing” JPV’s arguments that the equitable tolling analysis used by the court was never presented to the arbitrator, and, as JPV put it, therefore “You [the court] have done exactly what on Page 2 [of the statement of decision] you said you wouldn’t do, which is review the merits of the arbitrator’s decision making process, his reasoning, and that’s the power that [Code of Civil Procedure section] 1286.6 (b) and (c) take away from Your Honor, that’s the power that [section] 1286.2 takes away from Your Honor.” The parties were given a schedule, ending May 26, 2009, to submit briefing and proposed new statements of decision. The parties were also given the opportunity for further argument.

10 This was the trial court’s characterization. As described in its moving papers JPV stated it “will move for an order that ‘the statement of decision shall be amended and corrected’ ” because it “was based on an ‘[i]ncorrect or erroneous legal basis for the decision, not consistent with or not supported by the facts’ [Code Civ. Proc. § 663(1)]. There was no ‘legal basis’ for finding that ‘the Arbitrator’s analysis... is consistent with applying the law of equitable tolling.’ ” But JPV also stated it would seek an order setting aside the judgment “if by the time of the hearing a judgment has been entered, ” which obviously had not occurred.

On July 1, 2009, the court filed its “Revised Statement of Decision After Rehearing” on the competing petitions regarding the arbitrator’s award. In it, the court altered its prior approach, now concluding: “[A]lthough the Arbitrator never specified which rules he applied, this is irrelevant to the Court’s analysis of whether to confirm or vacate the award. Regardless of which rule the Arbitrator chose to apply, pursuant to the parties’ agreement and Rule 11(a), it was for the Arbitrator to determine which rules to apply and how to interpret them. The Arbitrator interpreted those rules to allow him to consider ‘broad principles of justice and equity.’ Pursuant to Moncharsh, this Court cannot review this decision for erroneous findings of law or fact, as to the Arbitrator’s interpretation of the rules he determined applicable given the parties’ agreement that his interpretation of the Rules would be final.”

“In Wagner Construction Co. v. Pacific Mechanical Corp.[, supra, ] 41 Cal.4th 19, the California Supreme Court examined whether a court can deny a petition to compel arbitration because the statute of limitations on the underlying causes of action had run. It noted that ‘[d]elay in demanding or seeking to compel arbitration can, indeed, justify denying a motion to compel. But the rules that enforce the requirements of timely demands and petitions have nothing to do with the statutes of limitations that create affirmative defenses to the claims the parties have agreed to arbitrate.’ Id. at 29. Moreover, the Court found that it was the arbitrator’s decision to determine whether or not the underlying claims were barred by the statute of limitations.”

“It is clear that the parties agreed to submit to the Arbitrator the merits of the dispute, and JPV does not contend otherwise. Because the statute of limitations is an affirmative defense to the merits of the dispute, this does not involve an issue of arbitrability of jurisdiction. Wagner[, supra, ] 41 Cal.4th 19, 29. Accordingly, this is not an issue of jurisdiction or arbitrability that could be reviewed by the Court....”

On July 27, 2009, the court conducted a hearing to discuss with counsel additional concerns it had concerning the arbitrator’s supplemental order but which, to the court, opened the possibility that “this Court’s obligation would be to perhaps acknowledge that the arbitrator had exceeded his powers, but nonetheless correct and confirm” the supplemental award. The court ruled that “what I’m going to do is withdraw the Court’s prior order of submission... set... a date for each side to submit a supplemental brief... and proposed statement of decision taking into account where we now stand in this litigation, ” with another hearing set in September.

On September 21, 2009, the court conducted a hearing on both the award and the supplemental order, ordering that the petitions concerning them would stand submitted on October 1, 2009.

On November 19, 2009, the court filed its third statement of decision, this with respect to the arbitrator’s supplemental order awarding Shelton and Williams attorneys’ fees and costs. The court first rejected Shelton’s and Williams’s argument that the arbitrator issued his decision within the 90-day period specified in the Operating Agreement, unpersuaded by their argument that “there were two separate 90-day periods, one for the submission of the underlying dispute, and the other for the award of the attorneys’ fees.... [¶]... Shelton and Williams made this same argument to the arbitrator, which the arbitrator ultimately rejected. The arbitrator’s order stated that the failure to include the amount of attorneys’ fees in the award was an excusable omission. Moreover, the language of the Operating Agreement supports the conclusion that there was only one 90-day period to resolve the dispute.... [¶] As a result, the arbitrator was required to issue a decision, including the amount of attorneys’ fees by September 9, 2008.” “Here, the arbitrator did not issue the award for fees and costs until after the 90 day deadline for the underlying dispute.... Additionally, the arbitrator was aware that he was required to resolve the dispute because he specifically reserved jurisdiction so he could decide this issue.... [T]his was not an ‘inadvertent omission’ on the part of the arbitrator but rather a deliberate decision. Accordingly, the Supplemental Fee Award cannot be construed as a valid amendment. Moreover, the award was not issued by October 9, as required under CCP § 1284, thus the arbitrator did not correct the award in the way authorized by statute.”

The court then rejected Williams’s and Shelton’s argument that the fee award was valid as made within the period allowed by JAMS’s rules for extending an arbitrator’s authority to make a final award, because the arbitrator never invoked these rules.

Nevertheless, the court concluded that it could “correct” the award to uphold it. Citing Code of Civil Procedure sections 1286, 1286.2, and 1286.6, the court noted that it could uphold and confirm the fee award without affecting the merits:¹¹

11 The cited statutes provide in pertinent part:

“Specifying the amount of attorneys’ fees and costs would not affect the merits of the controversy because the arbitrator had already timely determined that Shelton and Williams were the prevailing parties and the Operating Agreement provided that the prevailing party shall be entitled to fees and costs. Evans v. CenterStone Development Co. (2005) 134 Cal.App.4th 151 (holding that an arbitrator’s amendment to an award to include attorneys’ fees did not affect the merits of the controversy). Given that, merely inserting the amount of fees does not affect the merits of the decision and failure to do so is in excess of the arbitrator’s jurisdiction. DiMarco v. Chaney (1995) 31 Cal.App.4th 1809 (holding that an arbitrator exceeded his powers in denying defendant’s request for attorneys’ fees and costs which defendant was entitled thereto as the prevailing party). Because the arbitrator exceeded his jurisdiction by failing to specify the amount of fees and costs, and because doing so does not affect the merits of the controversy, the Court is obligated to correct the award and confirm it....

“Remand in this instance is unnecessary. In DiMarco, the court held that the trial court should have remanded the matter to the arbitrator to determine the amount of attorneys’ fees and costs rather than making the determination at the trial level. Here, because the arbitrator has already determined the amount of fees and costs, it is not necessary to remand the issue to the arbitrator and remand would serve no purpose. Rather, the Court will correct the award by including the amount already determined by the arbitrator and confirm the award as so corrected.”

On January 14, 2010, the court conducted its final hearing, this one devoted to “the Phelps motion to set aside and vacate judgment and the Shelton and Williams motion for additional attorneys’ fees related to confirming the fee award.” The court denied the first motion and granted the second.

On February 10, 2010, the court entered a judgment confirming both the arbitrator’s award and his supplemental attorneys’ fees and costs order. Pursuant to Civil Code section 3287, subdivision (a), Shelton was awarded interest of $1,589,706.67 on the award. The corresponding figure for Williams was $1,536,867.92, and both were awarded $242,424.30 interest on the fees and costs order. Both Shelton and Williams were also awarded $228,341.52 as attorneys’ fees incurred in obtaining the court’s July 2, 2009 initial confirmation of the award, together with “prejudgment interest” of $13,950.73. They were also awarded $183,392.67 attorneys’ fees for obtaining confirmation of the arbitrator’s supplemental order, together with prejudgment interest of $4,170.30 from the court’s initial confirmation on November 19, 2009.

The ultimate result is that JPV was liable to Shelton for damages of $13,854,033.67, to Williams for damages of $13,393,551.92, and to both for attorneys’ fees and costs of $2,562,981.80. The judgment total is $29,810,567.39.

DISCUSSION

An arbitration award may be vacated if the person or persons acting as arbitrators is determined to have “exceeded their powers.” (Code Civ. Proc., § 1286.2, subd. (a)(4).) Except for judicial or statutorily-imposed arbitration, those powers are contractual, voluntarily agreed by the parties. (Mercury Ins. Group. v. Superior Court (1998) 19 Cal.4th 332, 344; Moncharsh v. Heily & Blase, supra, 3 Cal.4th 1, 8-9 (Moncharsh).) “ ‘The powers of an arbitrator derive from, and are limited by, the agreement to arbitrate.’ ” (Gueyffier v. Ann Summers, Ltd. (2008) 43 Cal.4th 1179, 1185, quoting Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 375.) The trial court’s judgment as to whether the arbitrator exceeded his powers is an issue of law that we review de novo. (Advanced Micro Devices, Inc. v. Intel Corp., supra, at p. 376, fn. 9; San Francisco Housing Authority v. Service Employees Internat. Union, Local 790 (2010) 182 Cal.App.4th 933, 944.) Nevertheless, courts should “ ‘pay substantial deference to an arbitrator’s determination of his own authority.’ [Citation.] Any doubts about the arbitrator’s power to decide these issues must be resolved in [the arbitrator’s] favor.” (Roehl v. Ritchie (2007) 147 Cal.App.4th 338, 347-348, 350, quoting Delaney v. Dahl (2002) 99 Cal.App.4th 647, 655; see Advanced Micro Devices, Inc. v. Intel Corp., supra, at p. 376.)

It is a truism of human nature that how a question is framed often determines what answer will be received. This explains why the parties here frame the issues so differently. But first, a brief review of the law, to provide context for the contrasting contentions we must decide.

In the most important decision on judicial review of arbitration awards, our Supreme Court has stated:

“ ‘[A]rbitators, unless specifically required to act in conformity with rules of law, may base their decision upon broad principles of justice and equity, and in doing so may expressly or impliedly reject a claim that a party might successfully have asserted in a judicial action.’ [Citations.] As early as 1852, this court recognized that, ‘The arbitrators are not bound to award on principles of dry law, but may decide on principles of equity and good conscience, and make their award ex aequo et bono [according to what is good and just].’ [Citation.] ‘As a consequence, arbitration awards are generally immune from judicial review....’ [Citation.]

“Thus, both because it vindicates the intentions of the parties that the award be final, and because an arbitrator is not ordinarily constrained to decide according to the rule of law, it is the general rule that, ‘The merits of the controversy between the parties are not subject to judicial review.’ [Citations.] More specifically, courts will not review the validity of the arbitrator’s reasoning....

“Thus, it is the general rule that, with narrow exceptions, an arbitrator’s decision cannot be reviewed for errors of fact or law. In reaffirming this general principle, we recognize there is a risk that the arbitrator will make a mistake. That risk, however, is acceptable.... [because] by voluntarily submitting to arbitration, the parties have agreed to bear that risk in return for a quick, inexpensive, and conclusive resolution of their dispute....” (Moncharsh, supra, 3 Cal.4th 1, 10-12.)

As JPV sees it, the arbitrator’s award should have been vacated because he exceeded his powers. It reasons that the arbitration provision of the Operating Agreement obligated the arbitrator to apply the JAMS rules for employment disputes, which required the arbitrator to apply only the law, not equity. However, in rejecting JPV’s effort to have the arbitration terminated because the statute of limitations had expired, the arbitrator employed equity, in violation of those rules. Thus, JPV’s argument runs, the arbitrator exceeded his powers, and the trial court erred in not vacating the award. As regards the arbitrator’s supplemental award of costs and fees, it was beyond the arbitrator’s power to make because his authority to act expired on September 9. Period. The end.

Not surprisingly, Williams and Shelton see the matter differently. For them, the arbitrator did not use equity when deciding the statute of limitations issue. But even if he did, that use was not explicitly withheld from him by the arbitration provision of the Operating Agreement. The arbitrator was only construing the JAMS rules, and his construction, even if erroneous, was no more than an error committed during the course of deciding the entire dispute submitted by the parties. It was therefore not reviewable and he did not exceed his powers in resolving the entire dispute. Concerning the supplemental costs and fees order, Williams and Shelton argue that it was within the reservation of jurisdiction the arbitrator made in his interim and final awards.

We agree with how Williams and Shelton perceive the issues in whether the arbitrator’s award and his supplemental order should have been vacated or confirmed. And we conclude they were properly confirmed.

The Trial Court Did Not Err In Confirming

The Arbitrator’s Award

The heart of the matter, because it is the basis of the parties’ agreement to arbitrate—and thus the license for the scope of the arbitrator’s powers—is the arbitration provision of the Operating Agreement. That provision, which we have already quoted in full at footnote 4, is silent on the substantive principles that the arbitrator may employ. It does not explicitly state that the arbitrator conducting any arbitration shall be deprived of the ordinary equitable powers ordinarily exercised by an arbitrator. (See Moncharsh, supra, 3 Cal.4th 1, 10-11.)The only express limitation upon the arbitrator’s powers is that punitive damages cannot be awarded.

JPV is therefore driven to rely on a presumed incorporation by reference, i.e., a limitation on the arbitrator’s powers in the specification that the arbitration would be conducted in conformity “with the rules and procedures of [JAMS] then in effect with respect to commercial disputes.” (Italics added.) But it is undisputed that JAMS did not, either at the time the provision was executed or at the time the arbitration was conducted, have rules governing arbitration of “commercial disputes.”

JAMS did have “Employment Arbitration Rules and Procedures, ” which the arbitrator agreed to use. Rule 24(c) of those rules provided: “In determining the merits of the dispute the Arbitrator shall be guided by the rules of law agreed upon by the Parties. In the absence of such agreement, the Arbitrator will be guided by the law or the rules of law that the Arbitrator deems to be most appropriate. The Arbitrator may grant any remedy or relief that is just and equitable and within the scope of the parties’ agreement, including but not limited to specific performance of a contract.”

It is not out of place to observe that the text of this rule—just like the arbitration provision—does not expressly prohibit the arbitrator from employing concepts of equity. While JPV cites ad nauseum to the “rules of law” language, it studiously ignores the qualifying language “agreed upon by the Parties.” JPV’s argument that it does assumes substance only when this rule is set alongside the same rule in the JAMS “Comprehensive Arbitration Rules and Procedures.” (See fn. 5, ante.) This is not a basis for vacating the award.

As already noted, neither the parties’ Operating Agreement nor JAMS Employment Arbitration rule 24(c) expressly takes equitable considerations off the table. In fact, the language of the rule is riddled with ambiguity. It provides that the arbitrator “may grant any remedy or relief, ” without limiting it to legal “remedy or relief, ” but the far broader “remedy or relief that is just and equitable.” (Italics added.) The provision then specifies that the arbitrator may award “specific performance, ” which is an equitable remedy (Patel v. Liebermensch (2008) 45 Cal.4th 344, 349), and one appropriately ordered when the legal remedy of damages is inadequate. (13 Witkin, Summary of Cal. Law (10th ed. 2005) Equity, § 24, p. 312.)¹²

12 JPV’s position at oral argument that this provision is only about a remedy, a position that ignores language such as that of the Supreme Court in Advanced Micro Devices Inc. v. Intel Corp., supra, 9 Cal.4th 362, 390, that “[E]quitable relief is by its nature flexible, and the maxim allowing a remedy for every wrong (Civ. Code, § 3523) has been invoked to justify the invention of new methods of relief for new types of wrongs. [Citation.] In actions founded on contract, courts have available for use in appropriate cases, in addition to specific performance, equitable remedies based on reformation, excuse of conditions and rescission.”

Thus, at best, JPV is relying on a latent ambiguity, one illustrated not by the actual language of the parties’ arbitration agreement, but one resting on not one, but two, extrinsic sources. It is only with a comparison of those two sources—the differing sets of JAMS rules—that JPV’s argument gains substance. But it is not without consequence that both versions of rule 24(c) vests the arbitrator with the power to follow the reasoning “that the Arbitrator deems to be most appropriate.” And rule 11(a) of the JAMS Employment Rules states: “Once appointed, the Arbitrator shall resolve disputes about the interpretation and applicability of these Rules.... The resolution of the issue by the Arbitrator shall be final.” Moreover, rule 11(c) states that “disputes over the... interpretation or scope of the agreement under which Arbitration is sought” shall also be ruled on the arbitrator. Thus, the parties must be presumed to have delegated to the arbitrator the decisive and unreviewable voice in determining the scope of his authority under the Operating Agreement and the JAMS employment rules. (See Howsamv. Dean Witter Reynolds, Inc. (2002) 537 U.S. 79, 85 [“the applicability of the NASD time limit rule is a matter... for the arbitrator, not for the judge”]; Greenspan v. LADT, LLC (2010) 185 Cal.App.4th 1413, 1451-1453; Roehl v. Ritchie, supra, 147 Cal.App.4th 338, 347 348, 350.)

This was precisely what the arbitrator concluded by stating “there is no specific agreement [by the parties in the arbitration provision of the Operating Agreement] that the arbitrator must act in strict conformity with the statutes of limitation.” We must defer to the arbitrator’s determination of his own authority, particularly when considering that the extent of that authority is, at best, ambiguous, and in any event not contrary to the language of the arbitration provision. (Advanced Micro Devices, Inc. v. Intel Corp., supra, 9 Cal.4th 368, 373; Roehl v. Ritchie, supra, 147 Cal.App.4th 338, 347 348; Delaney v.Dahl, supra, 99 Cal.App.4th 647, 655.) Because there was no express and unambiguous contractual limitation on his powers, the arbitrator was empowered to employ equitable concepts in his reasoning. (Gueyffier v. Ann Summers, Ltd., supra, 43 Cal.4th 1179, 1182, 1185-1186; Moncharsh, supra, 3 Cal.4th 1, 10-11.) Whether the statute of limitations, for whatever reason, would not be applied to bar the claims of Williams and Shelton was part of the entire dispute submitted to the arbitrator for his decision. The parties agreed that his decision would be final, thereby assuming the risk that he might err in the course of that decision. (Moncharsh, supra, at p. 11.) Therefore, the arbitrator’s decision on that particular issue could not be in excess of his powers and, as the trial court recognized in the corrected statement of decision, could not be judicially reviewed—and could not constitute a basis for refusing to confirm his award. (See Wagner Construction Co. v. Pacific Mechanical Corp., supra, 41 Cal.4th 19, 23 [“Where, as here, the parties have agreed to arbitrate any dispute arising out of their contract, the affirmative defense that the statute of limitations has run is for the arbitrator rather than the court to decide.”]; Greenspan v. LADT, LLC, supra, 185 Cal.App.4th 1413, 1452 [arbitrator, not court, should decide issues of “ ‘ “ ‘delay, or a like defense’ ” ’ ” as well as “ ‘ “ ‘prerequisites such as time limits, ... laches, estoppel’ ” ’ ”].)

JPV’s Arguments For Exempting This Award From The General Rule of Non-Reviewability Are Not Persuasive

Hoping to avoid the general rule of non-reviewability of the merits of an arbitration award, JPV presents a number of brief arguments as to why the award against them should be exempted, and be given special scrutiny.

First, JPV claims the arbitrator did not comply with rule 24(h) of the JAMS Employment Rules, which, as relevant here, states: “The Award will consist of a written statement signed by the Arbitrator regarding the disposition of each claim and the relief, if any, as to each claim. The Award shall also contain a concise written statement of the reasons for the Award, stating the essential findings and conclusions on which the award is based.” Specifically, JPV contends that: (1) “The Arbitrator Made No Finding Regarding the Non-Wage Amounts Received by Shelton and Williams, ” and (2) “The Arbitrator Made No Finding Regarding the Nature of Shelton’s and Williams’s Class B Interests.”

At first glance, JPV has some nerve in arguing that the arbitrator’s comprehensive 28-page award fails to comply with the requirement that the arbitrator provide “a concise written statement of the reasons for the Award.” (Italics added.) Obviously, concision is in the eyes of the beholder.

As already mentioned, the arbitrator rejected all but four of JPV’s 64 requests to modify the interim award on the ground that they were merely “re-argument of matters already decided by this arbitrator.” Both of the arguments JPV now advances deal with dollars and cents, and are therefore subsumed in the issue of the amount of compensation to which the arbitrator found Williams and Shelton entitled. How an arbitrator calculates—or miscalculates— damages is treated as either an error of law, an error of fact, or a mixed error of law and fact. (E.g., Christensen v. Smith (2009) 171 Cal.App.4th 931, 935-936; Landis v. Pinkertons, Inc. (2004) 122 Cal.App.4th 985, 992; U.S. Plywood Corp. v. Hudson Lumber Co. (1954) 124 Cal.App.2d 527, 531-532; cf. Sapp v. Barenfeld (1949) 34 Cal.2d 515, 522-523 [omission of specific items of claimed damage from award treated as “ ‘a disallowance of those items’ ”].) Both of JPV’s arguments are thus not judicially reviewable because “courts will not review the validity of the arbitrator’s reasoning.” (Moncharsh, supra, 3 Cal.4th 1, 11.)

JPV’s second argument is “Because this arbitration involved an unwaivable statutory claim under the Labor Code, ” under Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83 (Armendariz) “the arbitration agreement must be interpreted... to require that the arbitration be governed by the rules of law.” Armendariz involved the state’s Fair Employment and Housing Act (FEHA). (Gov. Code, § 12900 et seq.) JPV is not invoking that act, but the Beverly Killea Limited Liability Company Act (Corp. Code, § 17000 et seq.). JPV reasons: “The award in this case, by subjecting amendments to LLC operating agreements to unpredictable after the fact scrutiny of whether an amendment decreased the value of a member’s shares, seriously undermines important and well-defined public policies enshrined in the LLC Act. The award undermines the public policy embodied in the LLC Act in two related ways, ” first, by undermining the LLC’s Act’s “strong policy in favor of giving LLC members broad flexibility in structuring the LLC” and, second, by undermining the LLC Act’s provision that termination of the interest of a member in a limited liability corporation “shall be enforceable in accordance with its terms, unless the member seeking to invalidate the provision establishes that the provision was unreasonable under the circumstances existing at the time the agreement was made.” (Corp. Code, § 17100, subd. (c).) This argument is not persuasive.

This is how the Supreme Court explained its holding in Armendariz: “In this case, we consider a number of issues related to the validity of a mandatory employment arbitration agreement, i.e., an agreement by an employee to arbitrate wrongful termination or employment discrimination claims rather than filing suit in court, which an employer imposes on a prospective or current employee as a condition of employment. The employees in this case claim that employees may not be compelled to arbitrate antidiscrimination claims brought under the California Fair Employment and Housing Act (FEHA) (Gov. Code, § 12900 et seq.) We conclude that such claims are in fact arbitrable if the arbitration permits an employee to vindicate his or her statutory rights. As explained, in order for such vindication to occur, the arbitration must meet certain minimum requirements, including neutrality of the arbitrator, the provision of adequate discovery, a written decision that will permit a limited form of judicial review, and limitations on the costs of arbitration.” (Armendariz, supra, 24 Cal.4th 83, 90-91.)

JPV makes no attempt to argue that it did not have a neutral arbitrator, was deprived of adequate discovery, or that the arbitration was overly costly. JPV fixes solely on the requirement that there be judicial review, conveniently overlooking that Armendariz accepted that it can be “limited”: “All we hold today is that in order for such judicial review to be successfully accomplished, an arbitrator in a FEHA case must issue a written arbitration decision that will reveal, however briefly, essential findings and conclusion on which the award is based.” (Armendariz, supra, 24 Cal.4th 83, 107.) However, the court noted, “We are not faced in this case with a petition to confirm an arbitration award, and therefore have no occasion to articulate precisely what standard of judicial review is ‘sufficient to ensure that arbitrators comply with the requirements of [a] statute.’ [Citation]” (Ibid.)

Our Supreme Court came to that reserved problem in Pearson Dental Supplies, Inc. v. Superior Court (2010) 48 Cal.4th 665, where an arbitrator erroneously held that an employee’s discrimination claim under FEHA was time-barred. “Here, as a result of the arbitrator’s clear legal error, plaintiff’s claim was incorrectly determined to be time barred. Indeed, the legal error misconstrued the procedural framework under which the parties agreed the arbitration was to be conducted, rather than misinterpreting the law governing the claim itself. It is difficult to imagine a more paradigmatic example of when ‘granting finality to an arbitrator’s decision would be inconsistent with the protection of a party’s statutory rights’ (Moncharsh, supra, 3 Cal.4th at p. 32) than the present case, in which, as a result of allowing the procedural error to stand, and through no fault of the employee or his attorney, the employee will be unable to receive a hearing on the merits of his FEHA claims in any forum.... [¶] We therefore hold that when, as here, an employee subject to a mandatory employment arbitration agreement is unable to obtain a hearing on the merits of his FEHA claims, or claims based on other unwaivable statutory rights, because of an arbitration award based on legal error, the trial court does not err in vacating the award. Stated in other terms, construing the [California Arbitration Act] in light of the Legislature’s intent that employees be able to enforce their right to be free of unlawful discrimination under FEHA, an arbitrator whose legal error has barred an employee subject to a mandatory arbitration agreement from obtaining a hearing on the merits of a claim based on such right has exceeded his or her powers within the meaning of Code of Civil Procedure section 1286.2, subdivision (a)(4), and the arbitrator’s award may properly be vacated.” (Pearson Dental Supplies, Inc. v. Superior Court, supra, at pp. 679-680, fn. omitted.)

JPV stands in a situation we cannot believe the Supreme Court had in mind in either Armendariz or Pearson. JPV is not an employee protesting against an arbitration provision forced on it by an employer with far superior bargaining strength. While it is hard to picture Williams or Shelton as unsophisticates made the victims of a contract of adhesion, it is simply impossible to put JPV in that role. We are also not dealing here with an arbitrator who “misconstrued the procedural framework under which... the arbitration was to be conducted, ” thereby depriving the employee of “a hearing on the merits of his... claims.” Nor are we addressing a demonstrable error of law regarding the statute of limitations committed by the arbitrator.

Finally, FEHA and the LLC Act do not stand on an equal footing. “The basic, underlying purpose of FEHA is to safeguard the rights of Californians to seek, obtain, and hold employment without experiencing discrimination on account of race, religious creed, color, national origin, ancestry, physical disability, medical disability, medical condition, marital status, sex, age, or sexual orientation.” (Flannery v. Prentice (2001) 26 Cal.4th 572, 582-583.) FEHA establishes that the protections against employment related discrimination are civil rights and a matter of public policy. (Gov. Code, §§ 12920, 12921.)

It is no disparagement of the utility of the Beverly-Killea Act to conclude that its regulation of a limited class of economic entity is not what we believe the Supreme Court had in mind in Armendariz, where—as it repeatedly emphasized—it was considering a mandatory arbitration provision that was “imposed on employees as a condition of employment and there was no opportunity to negotiate” and which was found to be procedurally and substantively unconscionable. (Armendariz, supra, 24 Cal.4th 83, 90 91, 114-115.) Williams and Shelton were not entry-level employees when the Operating Agreement was executed, but, on the contrary, were deemed key employees; indeed, the whole point of the Operating Agreement seems to have been to secure their continued employment with enhanced compensation. There was never a hint of coercion or an absence of arms-length negotiation between knowledgeable parties. Unlike the employees in Armendariz, Williams and Shelton never sought to challenge the Operating Agreement—which had the arbitration provision—only the dilution of their rights under that agreement they claimed was accomplished by Amendment II.

The Trial Court Did Not Err In Confirming

The Arbitrator’s Fee Award

JPV contends the arbitrator’s costs and fee award must be vacated because it was made after the arbitrator’s authority expired on September 9, 2008, and thus, “as the superior court recognized, it exceeded the arbitrator’s powers.”

JPV is obviously treating the language of the arbitration provision that “The parties shall instruct the arbitrator to render its decision no later than 90 days after the submission of the Dispute” as tantamount to a jurisdictional deadline. This seems to be the obvious import of the provision, and Williams and Shelton do not argue otherwise. And Code of Civil Procedure section 1283.8 does provide that “The award shall be made within the time fixed therefor by the agreement [of the parties]....”

But the 90-day period is not set in stone. It can be extended for up to 30 days if the arbitrator is asked by a party to the arbitration to correct his award pursuant to Code of Civil Procedure section 1284.¹³ The arbitrator can also amend the award, again if requested by a party, with a split of authority as to whether the amendment must be done within the 30-day period or any time prior to confirmation of the award. (Delaney v. Dahl, supra, 99 Cal.App.4th 647, 658-659.)¹⁴ And, of course, the parties may waive the deadline. (Code Civ. Proc., § 1283.8 [“The parties to the arbitration may extend the time either before or after the expiration thereof.”].)

13 “The arbitrators, 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 Section 1286.6 not later than 30 days after service of a signed copy of the award on the applicant.

14 “Amending” an award is a broader power than “correcting” it. While an amendment cannot involve “an entire issue [that was] inadvertently omitted from the award, ” it can encompass a matter that is “consistent with other findings on the merits and [do] not prejudice the legitimate interests of the parties.” (Delaney v. Dahl, supra, 99 Cal.App.4th 647, 658.) One Court of Appeal would allow amendment to address an entire issue if that issue was already submitted to the arbitrator. (Landis v. Pinkertons, Inc., supra, 122 Cal.App.4th 985, 992.)

We—and we trust the parties too—appreciate the considerable time and labor the trial court devoted to deciding whether the arbitrator’s cost and fee award should stand. The trial court determined that “the arbitrator did not comply with the time limitations in the Operating Agreement and the inclusion of fees and costs cannot be construed as a valid amendment or correction” of the final award. Although one might expect the logical conclusion to be that the arbitrator exceeded his powers and therefore the award would be vacated, the trial court made only the first conclusion. The court then went on to determine that “inclusion of fees and costs” could be accomplished as a judicial correction that would allow the award to be confirmed. We see no need to explore the soundness of this reasoning, because we think there is a simpler and more direct path to the trial court’s ultimate conclusion to confirm the costs and fee award.

As previously mentioned, the arbitrator invited the parties to identify any issues they believed were “unresolved” in the interim award. In its response, dated August 29, 2008, the first matter JPV mentioned was Code Civ. Proc. § 1283.8 and other scheduling matters.” JPV then stated: “The 90-day period specified in Section 13.15(c) of the Operating Agreement ends September 9, 2008. Thereafter, the Arbitrator lacks jurisdiction over this case (except for the fee award). Code Civ. Proc. § 1283.8. The Interim Award, at 28:20-25, calls for briefing after September 9, 2008. JPV objects to any such extension of the Arbitrator’s mandate after the end of the 90-day period.” (Italics added.)

This language is deeply ambiguous. On one hand, JPV clearly states it objects to the arbitrator exercising jurisdiction beyond September 9 “except for the fee award.” But on the other hand it objects to the briefing schedule the arbitrator proposed to resolve that very issue. JPV appears to be arguing that it conceded the arbitrator could go beyond the 90 days to determine the costs and attorneys’ fees Williams and Shelton would receive, while at the same time denying the arbitrator the input from the parties needed to make that determination. On closer inspection, the ambiguity only deepens because JPV was not actually proposing to deny the arbitrator from getting any input because Williams and Shelton presumably would file their applications for costs and fees by September 4. Thus, however illogical or self-defeating, JPV’s communication can be read as denying itself the opportunity to respond to Williams’s and Shelton’s fee application, leaving the matter of costs and fees to be decided solely on the basis of their application alone.

It is apparent that the issue of costs and fees did not simply slip the arbitrator’s mind, his “excusable omission” characterization notwithstanding. The arbitrator was clearly aware of the costs and attorneys’ fees provision in the Operating Agreement because he quoted it in the interim award. The arbitrator complied with the provision by designating Williams and Shelton as the prevailing parties, and setting a schedule for determining the costs and fees JPV would be assessed that were clearly intended to be included in the final award. The only omission was in believing that determination could be made by September 9.

None of the reported decisions upholding an amendment—or, for that matter, a correction—have a contractual time limit like the one here. But none of them has the distinguishing feature of this arbitration, namely the arbitrator’s reservation of jurisdiction to decide this last issue. The significance of this feature was comprehensively explored by our colleagues of Division Three in 1987 in Rosenquist v. Haralambides (1987) 192 Cal.App.3d 62 (Rosenquist), a decision we find particularly persuasive.

Rosenquist and Haralambides agreed to arbitrate their dispute about the quality of Haralambides’s architectural services to Rosenquist. Once the arbitration had commenced, Rosenquist and Haralambides agreed to extend the time for issuing the award to October 5. On October 2, the arbitrator determined that Haralambides would recover damages of more than $14,000 and attorney fees. The arbitrator reserved jurisdiction to determine the amount of fees beyond October 5, and set a schedule for the parties to submit information and arguments on that issue. Rosenquist objected to this procedure on the basis that the arbitrator lacked jurisdiction to act after October 5. On November 2, the arbitrator issued a “corrected” award in which he restated the substance of the October 2 award and directed Rosenquist to pay attorneys’ fees of approximately $3,000. The trial court denied Rosenquist’s petition to vacate the award and granted Haralambides’s petition to confirm it. (Rosenquist, supra, 192 Cal.App.3d 62, 65-66.) Division Three affirmed, finding the arbitrator’s actions entirely proper:

“Rosenquist has not met his burden of establishing that the arbitrator erred by issuing the November 2... award. The substance of the dispute between the parties was Haralambides’s right to recover payment for architectural services provided and Rosenquist’s unauthorized use of his architectural drawings. In addition, the question of the entitlement to attorney fees had been submitted to the arbitrator by both parties by virtue of their posthearing briefs. Yet, the record of the arbitration proceedings establishes that neither the briefs nor hearing testimony provided the arbitrator with evidence upon which he could base an award of attorney fees. Implicit in this procedure is the fact that the parties agreed that the amount of attorney fees would be determined subsequent to the arbitrator’s decision on the merits of the controversy. In light of these facts, it was both necessary and proper for the arbitrator to extend the time for the purpose of fixing an amount in attorney fees to be paid by Rosenquist.

“The procedure for determining the amount in fees to be paid ordinarily follows the decision as to who is the prevailing party. To do otherwise would require both sides to file all their documentation in support of attorney fees prior to the decision of the arbitrator on the merits of the dispute. It is clear that this was not the intention of the parties. The record in this case establishes that the parties contemplated the award of attorney fees would follow a determination on the merits of the dispute, ” particularly as “the issue of entitlement to attorney fees had [already] been submitted by the parties and decided by the arbitrator.” (Rosenquist, supra, 192 Cal.App.3d 62, 67, 68.)

One Court of Appeal characterized Rosenquist’s reasoning as “amount[ing] to no more than a recognition of the commonsense proposition that when an arbitrator has actually made an award as to a prevailing party’s right to fees, a supplemental hearing and award which determines the amount thereof is not improper.” (Century City Medical Plaza v. Sperling, Isaacs & Eisenberg (2001) 86 Cal.App.4th 865, 879, fn. 22.)

Rosenquist is not directly on point, because it did not involve a contractual deadline. There are other opinions upholding an arbitrator’s reservation of jurisdiction, although the deadline, if one existed, was not contractual but rather imposed by the arbitration association’s rules. (See Evans v. CenterStone Development Co., supra, 134 Cal.App.4th 151, 159-160 [JAMS Streamlined Rules allowed arbitrator to reserve jurisdiction for interest, costs, and attorneys’ fees beyond 30-day rule for final decision after hearing closed]; Magness Petroleum Co. v. Warren Resources of Cal., Inc. (2002) 103 Cal.App.4th 901, 905 [JAMS arbitrator reserved jurisdiction as to measures needed to “implement” final award]; Hightower v. Superior Court (2001) 86 Cal.App.4th 1415, 1427-1428, 1433-1434 [arbitrator following American Arbitration Association rules reserved jurisdiction “to determine additional issues as may rise” between “partial final” award and final award, including a “supplemental award” of attorneys’ fees].)

Rosenquist’s similarities to the arbitration here are striking. Both involved a deadline set by the parties, here by contractual provision, in Rosenquist by the terms of a mutual extension of time. Both saw the arbitrator decide the merits of the dispute and which party was entitled to receive contractual attorneys’ fees prior to expiration of the deadline. Most pertinently, here, like in Rosenquist, before the allotted time expired the arbitrator did not have the information needed to fix the amount of fees that would be owed. The arbitration provision did not expressly and unambiguously deny this power to the arbitrator.

We conclude that the reservation of jurisdiction, when merged with JPV’s failure to make an unambiguous objection to the arbitrator’s announced intention to make an award of mandatory costs and attorneys’ fees, was an ample basis for the arbitrator to make the supplemental order. As suggested earlier, the 90-day period does indeed seem a logical construction of the provision’s language. It may even be conceded as the most logical construction. But it is not the only construction. The actual existence of the period is predicated on the parties complying with the directive that they “instruct the arbitrator to render its decision no later than 90 days after the submission of the Dispute.” As this court has held, “ ‘Arbitrators are not obliged to read contracts literally....’ ” (San Francisco Housing Authority v. Service Employees Internat. Union, Local 790, supra, 182 Cal.App.4th 933, 945, quoting Advanced Micro Devices, Inc. v. Intel Corp., supra, 9 Cal.4th 362, 381.) The arbitrator had the authority to construe the parties’ contract as not precluding the “commonsense” and ordinary practice approach he did adopt. (See Century City Medical Plaza v. Sperling, Isaacs & Eisenberg, supra, 86 Cal.App.4th 865, 879, fn. 22; Rosenquist, supra, 192 Cal.App.3d 62, 67.)

In addition, there is JPV’s ambiguous August 29, 2008 letter to the arbitrator, a subject JPV does not address. Specifically, JPV does not take up the difficulty inherent in its own “except for the fee award” proviso, ¹⁵ and chooses to view the problem as pretty much a bed of Williams’s and Shelton’s own making. As JPV sees it, “it is the prevailing parties’ own conduct—in failing to timely submit a[] sufficient application for attorney’s fees—that prevented the timely award of attorneys’ fees. By failing to timely submit a fee application on which an award could be entered, Shelton and Williams failed to timely pursue an arbitral resolution of the fee issue.”

15 Indeed, we find it somewhat disturbing that nowhere in its 91 pages of briefing does JPV even mention this language in its August 29, 2008 letter, not even in its reply brief, despite that Williams and Shelton expressly cite to it in their respondents’ brief.

This argument verges on the disingenuous. The comment about Williams and Shelton failing to submit a “sufficient application” is fair comment, given that the arbitrator did believe that it deprived JPV of that to which it was entitled. But faulting Williams and Shelton for failing to submit a “timely” application seems harsh, when they were only following the arbitrator’s schedule. And JPV ignores the rest of the arbitrator’s schedule for handling the application. As previously shown, it was the rest of the schedule beyond September 9 to which JPV unambiguously objected. As already noted, the logic of this approach is that JPV presumably would have had no objection to the arbitrator deciding the issue of costs and attorneys’ fees solely on the basis of the application Williams and Shelton submitted, had it been “sufficient.” We are skeptical whether JPV intended to paint itself into this corner. Moreover, taking advantage of the arbitrator’s willingness to entertain JPV’s motion to strike that application, smacks of opportunistic gamesmanship.

We believe the arbitrator sensibly reserved jurisdiction for the issue of the costs and attorneys’ fees he would award to Williams and Shelton. And it was clear that he did intend to make such an award, unless it is assumed that his designation in the interim award of Williams and Shelton as the prevailing parties was an idle act.¹⁶ This is not to say that we would recognize abuse of that reservation by unduly extending the period for bringing the arbitration to a conclusion. But the arbitrator cannot be accused of that. The revised schedule he imposed after striking the initial application of Williams and Shelton was expeditious, and the parties had no problem complying with it. In this sense we agree with the trial court that there was no prejudice to JPV, particularly as JPV did not attack the merits of the application.

16 JPV states in its reply brief that “the fee provision applicable to arbitrations under the [Operating] Agreement did not require the award of fees to the prevailing party, but rather gave the arbitrator discretion. Section 13.15(c) of the Operating Agreement provides that fees ‘shall be paid by the party determined by the arbitrator not to be the prevailing party, or otherwise allocated in an equitable manner.’ ” Although the arbitrator might have had the discretion not to declare either side the prevailing party (Moore v. First Bank of San Luis Obispo (2000) 22 Cal.4th 782, 788-789), once Williams and Shelton were declared the prevailing parties, the arbitrator had no discretion not to award them costs and fees. (DiMarco v. Chaney (1995) 31 Cal.App.4th 1809, 1815.)

We think Rosenquist went to the heart of the matter with its common sense approach. We have several of the arbitrator’s case management orders in the record, but nothing which suggests he contemplated the costs and fee issue being determined at the same time as the merits. It therefore follows, as it did in Rosenquist, that “[i]mplicit in this procedure is... that the parties agreed that the amount of attorney fees would be determined subsequent to the arbitrator’s decision on the merits of the controversy.”¹⁷ (Rosenquist, supra, 192 Cal.App.3d 62, 67.) The wisdom of this approach is patent. Any other approach would require both sides to prepare and submit costs and fee requests in advance of knowing which side prevailed. This is not only wasteful of time and expense for the party that is not found to be the prevailing one, it also might entail the actual prevailing party being shortchanged because any anticipation or estimation of costs and attorneys’ fees that might reasonably be incurred thereafter would be entirely speculative and vulnerable to challenge for that reason.

17 Both of these statements may be inferentially confirmed by consulting the parties’ briefs to the arbitrator. In the course of attempting to systematically demolish every possible damage claim of Williams and Shelton in its 101-page “post-trial brief, ” there is not a single mention about the arbitrator finding that JPV was the prevailing party and therefore entitled to costs and attorneys’ fees. In the 46-page brief of Williams and Shelton, there is a single reference to the subject: “Altogether, Shelton and Williams should be awarded $113,691,967 in damages for the earned wages wrongfully withheld in 2004, wages earned under Amendment II, plus attorneys’ fees and costs.”

We thus conclude that the arbitrator did not exceed his powers in making the supplemental order for costs and fees. Although we therefore do not agree with all of the trial court’s reasoning with respect to this order, we do agree with its ultimate conclusion, and conclude that JPV’s petition to vacate was properly denied.

DISPOSITION

The judgment is affirmed.

We concur: Lambden, Acting P.J., Marchiano, J.^*

* Presiding Justice, Court of Appeal, First Appellate District, Division One, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.

“If a petition or response under this chapter is duly served and filed, the court shall confirm the award as made, ... unless in accordance with this chapter it corrects the award and confirms it as corrected....” (Code Civ. Proc., § 1286.)

“... the court shall vacate the award if the court determines.... [¶]... The arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted.” (Code Civ. Proc., § 1286.2, subd. (a)(4).)

“... the court, unless it vacates the award pursuant to Section 1286.2, shall correct the award and confirm it as corrected if the court determines that: [¶]... The arbitrators exceeded their powers but the award may be corrected without affecting the merits of the decision upon the controversy submitted....” (Code Civ. Proc., § 1286.6, subd. (b).)

“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 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.” (Code Civ. Proc., § 1284.)

The referenced provisions of Code of Civil Procedure section 1286.6 concern correction of “an evident miscalculation of figures or an evident mistake in the description of any person, thing, or property referred to in the award” or “a matter of form[] not affecting the merits of the controversy.”

Moreover, rule 24(j) of the JAMS Employment Rulers and Procedures allows a party to request the arbitrator to “correct any computational, typographical or other similar error in an Award” within seven days of the issuance of the award. The same rule provides that “the Arbitrator may sua sponte propose to correct such errors in an Award.” The limited timeframe of this rule disqualifies it as a justification for the supplemental order under consideration here.