Opinion
H045959
10-16-2019
BLUM PLAZA, LLC, Plaintiff and Appellant, v. GLOBAL CANCER RESEARCH INSTITUTE, INC., et al. Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Santa Clara County Super. Ct. No. 18-CV-322691)
Blum Plaza, LLC challenges the denial of its petition to vacate, correct, and partly confirm an arbitration award. Finding no basis for granting the petition, we will affirm the judgment.
I. BACKGROUND
Global Cancer Research Institute, Inc. (GCRI) entered into a seven-year commercial lease with Blum Plaza, LLC (Blum) which included an agreement to mediate or arbitrate any disputes using JAMS Mediation, Arbitration and ADR Services. Four years into the lease, Blum submitted a demand for binding arbitration to JAMS, together with a complaint against GCRI and its president Lynne A. Bui, M.D., alleging breach of the lease agreement, breach of the implied covenant of good faith and fair dealing, breach of a personal guaranty of the lease, and promissory fraud. In an amended complaint, Blum sought over $34,000 in damages. GCRI counterclaimed for damages, restitution, injunctive and declaratory relief, and rescission.
Several witnesses testified and exhibits were received at a three-day arbitration hearing. Four weeks after the hearing concluded, the arbitrator ordered the parties to further brief two issues: whether a May 2014 payment for a December 2013 late charge that had been waived could offset an outstanding late charge accrued in November 2014, and whether Blum may recover liquidated damages for insurance coverage-related breaches in the absence of actual damages. The arbitrator denied Blum's motions to reopen the hearing to submit evidence countering the premise that it had waived the December 2013 late payment and to sanction GCRI for submitting hearing transcripts to the arbitrator without notice to opposing counsel. GCRI's cross motion to sanction Blum for sending a hostile letter to a witness who testified at the hearing was also denied.
The arbitrator issued a 15-page final arbitration award denying all claims and counterclaims, and ordering the parties to bear their own attorney's fees and costs. Blum's request to correct purported computational errors in the award was denied. The arbitration cost nearly $70,000, JAMS invoiced each side just under $35,000, and it rejected Blum's protest that costs should be allocated one-third each to Blum, GCRI, and Bui.
Blum petitioned the trial court to vacate, correct, and confirm in part the final arbitration award. In a written ruling denying the petition after a hearing, the trial court noted that it had admitted 34 exhibits in evidence, the parties had thoroughly argued their positions, and Blum "did not present any evidence to establish any requirement that would allow a court to vacate the binding award." The trial court denied Blum's motions to correct and reallocate the arbitration fees and costs, and to tax court costs to GCRI. Judgment was entered in favor of GCRI and Bui.
II. DISCUSSION
The merits of a controversy resolved by arbitration are generally not subject to judicial review. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 11 (Moncharsh).) With narrow exceptions provided by the Legislature, an arbitrator's decision is not reviewable for errors of fact or law. (Ibid.) Arbitral finality is a core component of an agreement to submit to arbitration. (Id. at p. 10.) By voluntarily agreeing to binding arbitration, parties accept the risk that the arbitrator will make a mistake, in return for an expedient, inexpensive, and conclusive resolution. (Id. at p. 11.) The risk of error is tempered by the availability of judicial review to address serious problems with the award and the fairness of the process. (Id. at p. 12.)
The Legislature has limited a court's authority to vacate a private arbitration award to circumstances in which: "(1) The award was procured by corruption, fraud or other undue means. [¶] (2) There was corruption in any of the arbitrators. [¶] (3) The rights of the party were substantially prejudiced by misconduct of a neutral arbitrator. [¶] (4) The arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted. [¶] (5) 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 or by other conduct of the arbitrators contrary to the provisions of this title." (Code Civ. Proc., § 1286.2, subd. (a)(1)-(5).) A sixth circumstance relates to arbitral disqualification. (Id., subd. (a)(6).) A court may correct an award in limited circumstances, including when there is an "evident miscalculation of figures" and when arbitral power is exceeded. (Code Civ. Proc., § 1286.6, subds. (a), (b).)
An arbitrator has authority to resolve the merits of the submitted controversy in its entirety, including all contested issues of law and fact, and an arbitrator does not exceed those powers by reaching an erroneous decision. (Moncharsh, supra, 3 Cal.4th at p. 28.) Even "the existence of an error of law apparent on the face of the award that causes substantial injustice does not provide grounds for judicial review." (Id. at p. 33.)
We review a trial court's denial of a petition to vacate or correct an arbitration award de novo. (Ajida Technologies, Inc. v. Roos Instruments, Inc. (2001) 87 Cal.App.4th 534, 541.) But the award itself is entitled to deferential review, and every reasonable inference must be drawn to support the award. (Ibid.) We will defer to "the arbitrator's own rational assessment of his or her contractual powers ... and any other factual or legal determination made by the arbitrator." (Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 376.) "[U]nless 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." (Ibid.) Judicial review of arbitration awards is correspondingly narrow and deferential. (Ibid.)
A. LATE RENT CHARGES
The arbitrator found that Blum had waived five claimed late rent charges and that a sixth unpaid late charge (for November 2014) was not waived but was offset by a late charge paid for a month that had been waived (December 2013). Blum argues the arbitrator misapplied waiver, mistake, and setoff doctrines, and exceeded the authority of Code of Civil Procedure section 1286.2, subdivision (a)(4) by doing so. That argument has been rejected by Moncharsh, in which our Supreme Court held that an arbitrator does not exceed its authority by rendering a decision containing an error of law or erroneous reasoning. (Moncharsh, supra, 3 Cal.4th at p. 28.)
In response to the arbitrator's supplemental briefing order, Blum moved to reopen the hearing to augment the record with additional evidence regarding waiver of the December 2013 late rent charge. The motion was accompanied by a letter in which Blum's attorney notified the arbitrator of personal commitments before and after the supplemental briefing due date. Counsel suggested that the arbitrator rule on the motion to reopen before engaging in the post-hearing briefing because in counsel's view the additional evidence would resolve the waiver issue in Blum's favor, and he asked the arbitrator to "[p]lease advise."
Blum argues that the arbitrator's failure to respond to the continuance request and the denial of the request to reopen the hearing to consider new evidence provide grounds to vacate under Code of Civil Procedure section 1286.2, subdivision (a)(5). We do not read the letter as requesting a continuance or compelling a response from the arbitrator, nor is any prejudice shown on this record. A briefing schedule remained in place with sufficient time for Blum to respond. Blum's request to reopen the case was premised on what it considered to be a mistaken determination regarding waiver, a view rejected by the arbitrator. Blum has elected to proceed on an appellate record that does not include the reporter's transcript of the arbitration proceeding and all evidence received and considered by the arbitrator relevant to the waiver issue. On this select record, Blum has not shown that the arbitrator refused to hear evidence material to the controversy or that Blum's rights were substantially prejudiced by the denial of the motion to reopen.
B. INSURANCE COVERAGE
The arbitrator found that GCRI failed to provide proof of insurance for 35 days in 2015 and failed to name Blum as an additional insured for 79 days in 2016, as required under the lease. The arbitrator found two boilerplate liquidated damages provisions applicable to GCRI's noncompliance—a provision requiring a 10 percent increase in base monthly rent for failing to comply with the insurance provisions (section 8.9) and an inducement recapture provision for any breach of the lease (section 13.3). However, the arbitrator found those provisions unenforceable, as they bore no reasonable relationship to the range of actual damages the parties could anticipate flowing from a breach and did not reflect a reasoned estimate of fair compensation for possible losses. There being no actual damages, Blum's breach of contract claim failed.
Blum argues that the arbitrator exceeded his authority by misapplying the law to the facts to conclude the liquidated damages provisions were unreasonable penalties. But that argument is foreclosed by Moncharsh. An arbitrator's decision on a contested issue is not reviewable under Code of Civil Procedure section 1286.2, subdivision (a)(4). "A contrary holding would permit the exception to swallow the rule of limited judicial review; a litigant could always contend the arbitrator erred and thus exceeded [his or her] powers." (Moncharsh, supra, 3 Cal.4th at p. 28.)
C. BREACH OF PERSONAL GUARANTEE
Blum argues that the arbitrator misapplied the terms of the lease by not invoking the personal guarantee clause (section 52) which required Bui to personally guarantee repayment of Blum's brokerage commission ($21,636) in the event of a material default under the lease. In Blum's view material defaults arose regardless of whether any actual damages were realized. Blum also argues the arbitrator did not resolve all issues in the cause of action against Bui for breach of the personal guarantee clause. The arbitrator's implicit conclusion that actual damages were required in order for a default or breach to be material (and trigger the personal guarantee clause) did not exceed the authority to resolve the dispute. (Moncharsh, supra, 3 Cal.4th at p. 28.) In the absence of any damages, no unresolved claims remain as to that cause of action.
D. REMEDIES
Blum argues that the arbitrator exceeded his authority by ordering post-hearing briefing which raised defenses not affirmatively pleaded, citing the arbitrator's scheduling orders and governing rules. The scheduling orders provide that "the substantive law of California and the California Arbitration Act together with the JAMS Comprehensive Rules [] shall apply in this proceeding." The JAMS rules do not constrain the arbitrator's authority to consider remedies or order supplemental briefing. Rule 9(a) gives the arbitrator discretion to consider affirmative defenses without written notice, provided no party is unfairly prejudiced by the lack of formal notice. But here the parties were given notice and an opportunity to brief the issues, and no prejudice is otherwise shown on the record before us.
E. ALLEGED MISCONDUCT OF ARBITRATOR
Blum argues that the arbitrator committed misconduct under Code of Civil Procedure section 1286.2, subdivision (a)(3) by exhibiting bias in favor of GCRI in his rulings and orders; in his comment in the final award that "a different result would occur in the California Superior Court" applying the Code of Civil Procedure on the issue of prevailing party; and in rejecting the breach and fraud claims against Bui. Our review of the record shows no bias in the arbitration proceeding and resolution of Blum's claims, and Blum is incorrect in claiming it would have "[p]revail[ed] in this action" under the Code of Civil Procedure. Under Code of Civil Procedure section 1032, subdivision (a)(4), costs would have been apportioned consistent with each side prevailing against the other's claims.
Blum's remaining complaints regarding the arbitrator's denial of the request for correction, his consideration of the hearing transcripts in rendering the final award, and JAMS's 50/50 fee allocation provide no basis for vacating or correcting the final award.
III. DISPOSITION
The judgment is affirmed. Costs on appeal are awarded to respondents.
/s/_________
Grover, J.
WE CONCUR:
/s/_________
Mihara, Acting, P. J. /s/_________
Danner, J.