Opinion
B223868
10-18-2011
BLAINE CHANEY, Plaintiff and Respondent, v. RONALD W. GRIGG et al., Defendants and Appellants.
Buchalter Nemer, Harry W.R. Chamberlain II, Efrat M. Cogan; Dykema Gossett and L. Richard Walton for Defendants and Appellants. Yanny & Smith, Joseph A. Yanny, Kim D. Ashley, H. Michael Yuen, Carol A. Soon, Robert K. Kent, Lawrence E. Bookman; and Michael A. Lotman for Plaintiff and Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions 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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Los Angeles County Super. Ct. No. BC358695)
APPEAL from a judgment of the Superior Court of Los Angeles County. Michael L. Stern, Judge. Affirmed.
Buchalter Nemer, Harry W.R. Chamberlain II, Efrat M. Cogan; Dykema Gossett and L. Richard Walton for Defendants and Appellants.
Yanny & Smith, Joseph A. Yanny, Kim D. Ashley, H. Michael Yuen, Carol A. Soon, Robert K. Kent, Lawrence E. Bookman; and Michael A. Lotman for Plaintiff and Respondent.
Blaine Chaney sued his former attorney, Ronald Grigg, and Grigg's associate, Mary Whitman, and prevailed at arbitration. The award was confirmed by the trial court. Grigg and Whitman appeal, and we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Grigg represented Chaney in conjunction with Chaney's marital dissolution. Chaney and Grigg entered into both a contingency fee agreement and an hourly fee agreement, each of which contained arbitration clauses. In 2006, Chaney sued Grigg and Grigg's employee Whitman alleging causes of action for breach of fiduciary duty, conversion, accounting, unjust enrichment, fraud and deceit, imposition of a constructive trust, declaratory relief, legal malpractice, breach of contract, and money had and received. The trial court granted Grigg's motion to compel arbitration and stay the litigation, and appointed Judge Gregory O'Brien as the arbitrator.
Soon after the arbitrator was appointed, as a result of a non-appearance file review, the trial court issued an order stating, "As this case is in binding arbitration, it is ordered dismissed. All matters now on calendar in Department 47 are advanced to this date and are vacated."
In November 2007, the arbitrator issued an interim award addressing what he termed Phase I of the arbitration proceedings, Grigg's claim under the contingent fee agreement with Chaney. The arbitrator concluded that Grigg's fee was unconscionable, that is, "that the contingent fee is 'so exorbitant and wholly disproportionate to the services performed as to shock the conscience of those to whose attention it is called' [citation]."
Phase II of the arbitration was to address Chaney's claim for professional negligence.
Soon after the interim award, the arbitrator conducted a telephonic conference with the parties' counsel during which they discussed the trial court's dismissal of the action. The arbitrator told the parties that he would ask the trial court to vacate the dismissal and to restore the case to the active list to expedite any necessary judicial confirmation or execution on the interim award. On November 13, 2007, the arbitrator notified the parties by letter that he had spoken with the trial court and that the trial court recommended that Chaney apply ex parte to have the dismissal order vacated. The court granted Chaney's ex parte application, restoring the litigation to the civil active list but ordering it stayed due to the pending arbitration.
Grigg submitted numerous objections and attempts to disqualify the arbitrator based on the arbitrator's purported failure to disclose that he and one of the witnesses had graduated in the same class from the University of Southern California. In July 2008, the arbitrator set an order to show cause regarding dismissal of the arbitration for the parties' failure to pay the costs of the arbitration. On August 25, 2008, Grigg and Whitman withdrew from the arbitration. On August 27, 2008, the trial court ordered the case back to arbitration with instructions to the arbitrator to proceed and to enter defaults, if necessary, should the defendants refuse to proceed. Also on August 27, the arbitrator issued a notice of entry of default and setting of default prove-up hearing.
While the arbitration remained pending, on October 30, 2008, Grigg and Whitman filed a new action in superior court against Chaney.
On November 20, 2008, the arbitrator issued a final arbitration award in which he denied Grigg's and Whitman's claims and awarded Chaney $2,389,969.31.
Chaney filed a petition in superior court to confirm the arbitration award, while Grigg and Whitman filed a petition to vacate it. Chaney also demurred to the complaint in the new action filed by Grigg and Whitman. The trial court consolidated the actions; confirmed the arbitration award; denied the petition to vacate the award; sustained the demurrer to Grigg and Whitman's complaint without leave to amend; and dismissed Grigg and Whitman's newly-filed action. Grigg and Whitman appealed the dismissal, but this court dismissed the appeal on the grounds that it was premature because no judgment had been entered covering the entirety of the consolidated cases.
In March 2010, the trial court entered judgment against Grigg and Whitman consistent with the arbitration award, and soon thereafter amended the judgment to include an award of prejudgment interest. In May 2010, the trial court granted Chaney's motion for a permanent injunction to aid in the enforcement of the judgment; that injunction was corrected in June 2010. Grigg and Whitman appeal.
Chaney, relying on proceedings during the pendency of the appeal, has moved to dismiss the appeal. We do not believe the circumstances warrant the exercise of our discretion to do so and decide the matter on its merits.
DISCUSSION
I. Effect of 2007 Dismissal Order
Grigg and Whitman argue that the trial court's 2007 dismissal of the action during arbitration completely divested the trial court of jurisdiction, and so, they contend, the order vacating the dismissal was void, as were all the court proceedings after August 2007. The trial court properly vacated its dismissal because it lacked jurisdiction to dismiss the action. (Blake v. Ecker (2001) 93 Cal.App.4th 728, 738, disapproved on other grounds in Le Francois v. Goel (2005) 35 Cal.4th 1094, 1107, fn. 5.) "Once a court grants the petition to compel arbitration and stays the action at law, the action at law sits in the twilight zone of abatement with the trial court retaining merely a vestigial jurisdiction over matters submitted to arbitration. This vestigial jurisdiction over the action at law consists solely of making the determination, upon conclusion of the arbitration proceedings, of whether there was an award on the merits (in which case the action at law should be dismissed because of the res judicata effects of the arbitration award [citations]) or not (at which point the action at law may resume to determine the rights of the parties.)" [Citations.] The court also retains a separate, limited jurisdiction over the contractual arbitration which was the subject of the [Code of Civil Procedure] section 1281.2 petition: 'After a petition has been filed under this title [i.e., "title 9" ([Code Civ. Proc.,] §§ 1280-1294.2)], the court in which such petition was filed retains jurisdiction to determine any subsequent petition involving the same agreement to arbitrate and the same controversy, and any such subsequent petition shall be filed in the same proceeding.' [Citation.]" (Brock v. Kaiser Foundation Hospitals (1992) 10 Cal.App.4th 1790, 1796, italics omitted.) Because the trial court lacked jurisdiction to enter its dismissal order—an order that had no practical effect on the litigants, who were engaged at the time in the arbitration—the trial court properly vacated the order and retained jurisdiction to confirm the arbitration award, to issue an injunction to aid in its enforcement, and to issue other orders and rulings after August 2007.
Grigg and Whitman claim that the dismissal was made under the authority of Code of Civil Procedure section 581, but the order in question cites no statutory authority and none of the circumstances set forth in that statute under which the trial court may dismiss an action appear to have been met here.
II. Arbitrator's Jurisdiction
Grigg and Whitman next contend that the arbitrator exceeded his jurisdiction when he found the fee provision unconscionable. They assert that unconscionability claims are not arbitrable, but the authorities on which they rely consider only claims that the arbitration clause itself was unconscionable or that the contract as a whole was voided by fraud in the execution. (See, e.g., Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 416-417 [claims of fraud in the execution of an entire agreement are not arbitrable, because when a party's apparent assent to a written contract is negated by fraud in the inception, there is no arbitration agreement to be enforced]; Duffens v. Valenti (2008) 161 Cal.App.4th 434, 448-449 (Duffens) ["claims of fraud in the execution of the entire agreement are not arbitrable under either state or federal law" and are to be decided by the court because they affect the validity of the making of the arbitration clause itself]; Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 124, 127 [error to have compelled arbitration when the arbitration provision was "unconscionably unilateral" and the other unconscionable elements of the contract could not be cured through severance].) Rather, the law is that the trial court resolves claims that an arbitration clause is unconscionable. (Bruni v. Didion (2008) 160 Cal.App.4th 1272, 1290.) "However, provided the court concludes that the arbitration clause itself is not unconscionable, it must compel arbitration, leaving it up to the arbitrator to determine whether the contract as a whole is unconscionable." (Ibid.)
Here, the trial court had jurisdiction to determine the enforceability of and the validity of the arbitration clause, and it decided that the matter was arbitrable. "The ruling on arbitrability does not further determine the merits of all issues about the agreements' legality . . . ." (Duffens, supra, 161 Cal.App.4th at p. 456.) The determination of the merits of the case was left to the arbitrator, who concluded that the contingency fee agreement had been unconscionably implemented so as to take advantage of a settlement that was not in Chaney's best interest and that the fee was unconscionable. This determination fell within the scope of the arbitrator's authority. "[I]n cases where the arbitration clause within a contract is valid and enforceable . . . it is up to the arbitrator to resolve a claim that the substance of the contract is unconscionable." (Cotchett, Pitre & McCarthy v. Universal Paragon Corp. (2010) 187 Cal.App.4th 1405, 1418.)
III. Claim of Fraud, Corruption, or Undue Means
Grigg and Whitman contend that the arbitration award should be vacated because the arbitrator was biased against them, as evidenced by (1) his ex parte communications with the trial court during the pendency of the arbitration; (2) his failure to disclose a relationship with a material witness; and (3) his response to Grigg and Whitman's decision to withdraw from the arbitration. We review de novo the trial court's decision whether an arbitration award should be vacated for the appearance of partiality. (Haworth v. Superior Court (2010) 50 Cal.4th 372, 383 (Haworth).)
A. Communications with the Trial Court During Arbitration
Grigg and Whitman first contend that the arbitrator "engaged in impermissible and unauthorized ex parte communications with [the trial court] on matters of material and significant interest. [Citation.] He discussed how one side (Chaney's) might overcome 'potential problems' posed by the trial court's prior dismissal." The record does not support this description. Rather, on November 12, 2007, the arbitrator included in its revised interim award this statement in a section entitled, "Procedural Notations for Counsel": "By telephonic conference today, we discussed the status o[f] the underlying action. To summarize: (1) Tomorrow I will ask Judge Munoz to vacate the dismissal and restore the case of Chaney v. Grigg to the civil calendar, so as to expedite any necessary judicial confirmation or execution upon this interim award." By letter of the following day, the arbitrator advised counsel that "Per yesterday's telephonic conference, I have spoken to Judge Munoz about the possibility of vacating the Court's previous dismissal and restoring the case to the civil docket. He understands the situation and suggests that [counsel for Chaney] make an ex parte motion, which he will consider."
Appellants have not directed us to any portion of the record that demonstrates their articulation of concerns or objections to this plan when it was discussed by telephonic conference with the arbitrator. Nor do we find any support in the record for their assertion that the arbitrator "discussed how one side (Chaney's) might overcome 'potential problems'"—no such phrase appears in the pages of the record to which Grigg and Whitman direct this court. The record shows that the parties and the arbitrator understood that the dismissal of the action while the arbitration was pending was an error by the trial court and that after discussing the plan with the parties, with no record of any objection, the arbitrator contacted the trial court to determine how to remedy the error so that there would be no legal obstacles to the effectiveness of the arbitration. We are confident that no reasonable person would view this action as demonstrating the arbitrator's partiality. (Haworth, supra, 50 Cal.4th at p. 389.) We identify no appearance of or actual bias here, nor any ground for the vacation of the award under Code of Civil Procedure section 1286.2.
B. Failure to Disclose "Relationship" with a Witness
According to Grigg and Whitman, after having stated in writing that he did not have a relationship with witness Lance Spiegel, at the arbitration the arbitrator "'reminisced' with Mr. Spiegel about the days they had been at college at USC's school of journalism," where they had graduated in the same year from a small program and had been members of the same journalism fraternity. Grigg and Whitman do not identify any evidence in the record to support their allegations that the two graduated the same year or that they were in the same fraternity.
The record reflects that at the arbitration, when Spiegel stated his name for the record at the commencement of his testimony, the arbitrator asked, "Mr. Spiegel, are we acquainted?" and Spiegel said, "No." In an off-the-record conversation that was witnessed by counsel and the parties, during a recess, the arbitrator stated that he remembered that Spiegel wrote for the college newspaper. The arbitrator later submitted a declaration detailing his college years, the course of his education, and the fact that his social class year differed from his academic class year so that although he and the witness had been in the same graduating class, they had no relationship and there was little chance that their paths had crossed. As the arbitrator wrote in his final award, "I had attended college more than 40 years ago with a Phase I witness, which fact I disclosed without any objection when I discovered it during his testimony. (The witness appeared not to recall me at all, and I only recognized his name.)" Appellants have not established anything more than name recognition on the part of the arbitrator and a common educational background with the witness, both of which the arbitrator disclosed to the parties at the arbitration when the facts were discovered: this is insufficient to meet appellants' burden to demonstrate that any disinterested objective observer could harbor a doubt about the arbitrator's impartiality. (Haworth, supra, 50 Cal.4th at pp. 389-390.)
C. Response to Grigg and Whitman Upon Withdrawal from Arbitration
Grigg and Whitman claim that they withdrew from the arbitration because its completion was "unreasonably delayed" far beyond the completion date specified by the trial court when the matter was sent to arbitration. They claim that they exercised their rights to withdraw from the arbitration pursuant to Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, and, while they do not explain how the arbitrator's reaction constituted corruption, fraud, or undue means, we understand their argument to be that the arbitrator displayed bias in his response to their withdrawal. According to Grigg and Whitman, the arbitrator "exclude[ed] them from the Phase 2 hearing and refus[ed] to let them [] participate."
The record does not reveal any bias on the part of the arbitrator. At an order to show cause hearing held shortly after they had withdrawn from the arbitration—at which the court was advised of the withdrawal—Grigg and Whitman could have raised with the court any issues of "unreasonable delay" that they believed justified their refusal to participate, but they did not request that the case be removed from arbitration. The trial court ordered the case back to arbitration, with instructions to enter defaults if Grigg and Whitman refused to participate. Accordingly, the arbitrator entered their default based upon Grigg and Whitman's withdrawal from the arbitration. The arbitrator wrote to Grigg and Whitman's counsel, advising that if Grigg and Whitman did want to participate in the remainder of the arbitration, they could move to set aside the default. There is no indication in the record that Grigg and Whitman attempted to do so. On these facts, appellants have not met their burden of establishing any basis upon which a reasonable person could form a belief that the arbitrator was biased against appellants. (Haworth, supra, 50 Cal.4th at p. 389.)
IV. Alleged Errors Purportedly Correctable on Appellate Review
As a general rule, an arbitrator's award may not be reviewed for errors of law or fact. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 11 (Moncharsh).) An exception to this rule applies when the parties clearly agree that legal errors are an excess of arbitral authority that is reviewable by the courts. (Cable Connection, Inc. v. DIRECTV, Inc. (2008) 44 Cal.4th 1334, 1360-1361.) Grigg and Whitman assert that they provided that the arbitrator's award would be "subject to the non-deferential standard of de novo review on appeal for legal errors," but they have failed to demonstrate how the contracts provided for de novo review or removed the power to commit legal error from the arbitrator.
We have reviewed the arbitration provisions here, and they fall short of the Cable Connection standard of unambiguous removal of the power to commit legal error from the arbitrator and provision for de novo review. The contracts provide that the matter be submitted to "binding arbitration," where that term means that "the determination of the arbitrator is a binding final decision of any claim or controversy at the trial court level, but each party shall retain a right to appeal from the judgment on the award rendered by the arbitrator through the normal California Appellate Court process." At no point did the parties deprive the arbitrator of the power to commit legal error, nor did they specifically provide for judicial review of legal error. To the contrary, they agreed that the arbitrator's determination would be "a binding final decision," and, although the parties retained the right to appeal from the ultimate judgment, they did not specify that the review be de novo, that it consider errors of law, or that it extend in any way beyond the "normal" appellate court process for reviewing an arbitrator's award. Accordingly, we do not find any indication that the parties, through specific contractual language, removed themselves from the general rule that an arbitrator's award may not be reviewed for errors of law or fact, and we therefore do not review the various legal and factual errors Grigg and Whitman claim the arbitrator committed. (Moncharsh, supra, 3 Cal.4th at p. 11.)
V. Failure to Issue a Statement of Decision
In this argument, appellants misrepresent a prior order of this court. Grigg and Whitman assert that our dismissal of their first appeal was a "remand on the prior appeal to provide a Statement of Decision." Actually, this court dismissed their appeal because it was premature: no judgment or appealable order had been entered in the consolidated action. At no time has this court ordered the trial court to issue a statement of decision, nor has the trial court failed to comply with any such order.
Although Chaney does not specifically note this misstatement of the record in his Respondent's Brief, he does argue that the Opening Brief should be stricken for misstatements and for failure to provide citations to the record. We disregard statements that do not conform to the record but decline the request to strike the brief.
We have reviewed the record and find no error. On January 2, 2009, Grigg and Whitman filed their petition to vacate the arbitration award, and on the same day, they submitted a request in both actions that a statement of decision be issued "in ruling upon any petition to confirm or vacate an arbitration award in these proceedings." At the March 2009 hearing at which the trial court confirmed the arbitration award and denied the petition to vacate the arbitration award, the trial court acknowledged that a statement of decision had been requested and stated that it would prepare and issue one.
On May 21, 2009, the trial court ordered Grigg and Whitman to prepare a proposed statement of decision and to lodge it with the court by June 8, 2009. The following day, Grigg and Whitman filed a notice of appeal of both the arbitration award and the post-demurrer dismissal of their newly-filed action. They subsequently appear to have filed a proposed statement of decision on June 8, 2009. By that time, however, Grigg and Whitman had deprived the trial court of jurisdiction by filing the notice of appeal.
The copy of the proposed statement of decision bears no court stamp, only the typed notation, "Filed June 8, 2009.
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In August 2009, Chaney filed a motion requesting entry of judgment and issuance of a statement of decision. Because the court no longer had jurisdiction over the matter, however, the trial court refused to issue a statement of decision: On September 23, 2009, at a hearing on Chaney's motion, the court refused to take any action "because the case is on appeal."
On September 24, 2009, this court dismissed Grigg and Whitman's appeal because it was premature, and the trial court regained jurisdiction over the matter. Chaney promptly asked the court to reconsider its prior denial of his motion to enter judgment and issue a statement of decision, and applied ex parte for an order shortening time on the motion to reconsider. Grigg and Whitman opposed the application for an order shortening time, and also opposed the underlying motion to enter judgment and issue a statement of decision. Grigg and Whitman subsequently submitted to the trial court a document entitled, "Memorandum Submitted for Consideration by the Court in Conjunction with the Court's Exercise of its Discretion to Convene, or Not Convene, a Hearing on the Statement of Decision," but we cannot locate in the voluminous record any request for a statement of decision filed once the court regained jurisdiction of the matter, nor have they directed this court's attention to any renewed request for a statement of decision after the trial court had properly refused to issue one due to the pending appeal. Because Grigg and Whitman deprived the court of jurisdiction to enter the statement of decision they requested, failed to seek a statement of decision once the court regained jurisdiction, and objected to Chaney's motion, we identify no instance in which the trial court improperly failed to issue a statement of decision in response to a request by appellants. (Code Civ. Proc., §§ 1291, 632 [statements of decision required only upon request].)
Even if we were to consider the earlier request for a statement of decision to have been revived after jurisdiction was restored to the trial court such that there was some error here, the trial court's failure to issue a statement of decision establishes no basis for reversal. Grigg and Whitman make clear in their reply brief that the consequence that they claim should follow from the failure to issue a statement of decision is that this court should give the trial court's ruling no deference in the course of appellate review. As has been made clear above, however, nowhere in the course of our review have we given any deference to the findings of the trial court. Part I of the Discussion, concerning the effect of the erroneous dismissal order, reviews an issue of law. In Part II, we address appellants' argument that the arbitrator exceeded his authority. Resolution of this issue requires no deference to the court's ruling on the petitions to confirm and vacate the petition; and a claim that the arbitrator exceeded his or her powers is subject to de novo review. (Haworth, supra, 50 Cal.4th at p. 383.) Part III of our Discussion, our review of appellants' contentions that the arbitration award should have been vacated for the appearance of partiality, necessitates a de novo review and therefore no deference to the court's ruling would be appropriate regardless of whether a statement of decision had been entered. (Haworth, at p. 383.) The final issue on appeal, whether the parties contracted to remove the power to commit legal errors from the scope of the arbitrator's authority, is an issue of law involving an examination of the contracts' arbitration provisions. Accordingly, in this situation, even if the trial court erred in failing to issue a statement of decision, the appeal presents no circumstances in which we have given or would give deference to the trial court's ruling or implied findings. Grigg and Whitman have already received the "remedy" they seek with this argument on appeal as a matter of ordinary appellate review. Moreover, even if there were error, because the existence of a statement of decision is irrelevant to the specific issues raised on appeal here, remanding for the sole purpose of preparing a statement of decision would be an idle act. (See Espinoza v. Calva (2008) 169 Cal.App.4th 1393, 1398.)
DISPOSITION
The judgment is affirmed. Respondent shall recover his costs on appeal.
ZELON, J.
We concur:
WOODS, Acting P. J.
JACKSON, J.