Opinion
B300512 c/w B302716
01-25-2021
EASTPOINT CORPORATION et al., Plaintiffs and Respondents, v. QUALITY REIMBURSEMENT SERVICES, INC. et al. Defendants and Appellants.
Law Offices of Stephen S. Smith and Stephen S. Smith for Plaintiffs and Respondents. Grignon Law Firm, Margaret M. Grignon and Anne M. Grigon; Rutan & Tucker, Michael D. Rubin and Duke F. Wahlquist, for Defendants and Appellants.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for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(a). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115(a). (Los Angeles County Super. Ct. No. 19STCP00039) APPEAL from judgment and order of the Superior Court of Los Angeles County, Maureen Duffy-Lewis, Judge. Affirmed. Law Offices of Stephen S. Smith and Stephen S. Smith for Plaintiffs and Respondents. Grignon Law Firm, Margaret M. Grignon and Anne M. Grigon; Rutan & Tucker, Michael D. Rubin and Duke F. Wahlquist, for Defendants and Appellants.
INTRODUCTION
Quality Reimbursement Services, Inc. (QRS) and Jim Ravindran appeal from a judgment entered after the trial court denied their motion to vacate an arbitration award and granted the petition of Eastpoint Corporation (Eastpoint) and Alvaro Gancman to confirm the award. QRS contends the arbitrators exceeded their authority by: (1) irrationally construing and arbitrarily remaking an Asset Purchase Agreement (APA); (2) awarding a remedy that bears no rational relationship to the breach of any appropriate construction of the APA; (3) contravening express provisions of the APA; and (4) violating California's public policies against forfeitures and unconscionable damages. QRS also contends the arbitrators failed to determine all issues submitted to them.
The arbitrators use "QRS" to refer both to the corporation and Ravindran, and similarly use "Eastpoint" to refer to both that corporation and Gancman. Except for our introduction of the parties in the factual and procedural background below, we adopt the same convention.
The trial court concluded QRS's contentions constituted challenges to the legal and factual findings of the arbitrators, which are beyond the permissible scope of a court's review, and the damages award bore a direct, reasonable relation to the contract as interpreted by the arbitrators. It confirmed the award and awarded attorneys' fees to Eastpoint. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
The facts stated in this opinion are taken primarily from the arbitrators' "[Revised] Record of Proceedings and Final Merits Decision," which is one of three decisions that constitute the "Corrected Final Award." We have no authority to review the sufficiency of evidence supporting the arbitrator's award. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 11 (Moncharsh.) "We therefore take the arbitrator's findings as correct without examining a record of the arbitration hearings themselves. . . ." (Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 367, fn. 1 (AMD).)
1. The Parties
QRS represents hospitals seeking increased Medicare/Medicaid reimbursements for their patient services. QRS is generally compensated by a contingent commission of 20% of the increase in the hospital's recovery. Ravindran is the principal and president of QRS.
Gancman began working for QRS in 1998. QRS paid Gancman a salary and a commission of 25% of all revenues received by QRS from hospital contracts Gancman procured for QRS. In 2012, Gancman left QRS's employment and formed his own company, Eastpoint. On December 24, 2012, QRS (as the "Buyer") and Eastpoint and Gancman (as the "Seller") entered into the APA, the relevant terms of which are described below.
2. Relevant Provisions of the APA
Section 1.1 of the APA defines the assets purchased by QRS as the "Customer List and related Goodwill plus certain exclusive hospital chain contracts (listed on Exhibit A [two hospitals]) for certain accounts serviced by Eastpoint . . . as of the date of the closing of this agreement."
Section III provides the purchase price payments required for QRS to acquire the assets: "3.1 On or before December 28, 2012, Buyer shall pay to Seller five percent (5%) of the value estimated by mutual agreement of Buyer and Seller of the contracts listed on Exhibit A. [¶] 3.2 Buyer shall pay to Seller the sum of twenty-five percent (25%) of all revenues received by Buyer from the contracts listed in Exhibit A, within fifteen (15) days of the receipt thereof. [¶] 3.3 Within 30 days of settlement of the Rural Flow Budget Neutrality Adjustment ("RFBNA"), Buyer shall pay Seller 50% of the amount estimated by Seller to be received by Seller under the previous contracts with Buyer (the "Estimate"), less the sum of the amounts paid prior to that date pursuant to Paragraphs 3.1 and 3.2. [¶] 3.4 Following the receipt by Buyer of the RFBNA settlement payment, Buyer shall pay Seller, within four months of the aforesaid receipt, fifteen percent (15%) of the Estimate, within eight months of the aforesaid receipt an additional 15% of the Estimate, and within 12 months of the aforesaid receipt, an additional 15% of the Estimate. [¶] 3.5 Should the RFBNA issue not be settled before the end of the Term, Buyer and Seller agree that the estimated amounts under Exhibit A, excluding the amounted [sic] estimated from the RFBNA issue, less any amounts paid by Buyer to Seller under Sections 3.1 and 3.2 (the "Adjusted Estimate"), will be paid to seller in the following manner: On December 15, 2013, 25% of the Adjusted Estimate; on December 15, 2014, 25% of the Adjusted Estimate; and on December 15, 2015, the balance of the Adjusted Estimate. [¶] 3.6 The Estimate shall be updated annually by mutual agreement of Buyer and Seller." Exhibit B to the APA contained a "handwritten indication of $6.4 million as the parties' original APA estimate referenced in section 3.6."
Section IV is titled "Year End Reconciliation of Revenues." Section 4.1 states "[a]t the end of each calendar year, commencing on 12/31/2013, a reconciliation of annual gross revenues versus estimated revenues (Exhibit B) shall be conducted within 30 days." Section 4.2 states "[s]hould actual revenues exceed estimated revenues, then Buyer shall remit the difference in payment due to Seller. Should estimated revenues exceed actual revenues, then Seller shall remit the difference in payments due to Buyer."
3. Arbitration Proceedings
Pursuant to section XVI of the APA, Eastpoint commenced arbitration proceedings against QRS for damages resulting from QRS's alleged breach of sections 3.2 through 3.5 of the APA. An evidentiary hearing was held on September 12, 2017 through September 19, 2017 before a panel of three arbitrators. As relevant here, Eastpoint argued QRS complied with section 3.1 of the APA, but the payments over the next three years, totaling more than $3,203,234, were insufficient and in breach of sections 3.2 through 3.5. QRS's principal argument was that the parties agreed to revise the $6.4 million estimate (the "Estimate") significantly downward, or, alternatively, an updated estimate and a reconciliation based on actual revenues annually were preconditions to QRS's payment obligations set forth in sections 3.2 through 3.5 of the APA. QRS thus denied it owed any money to Eastpoint, and asserted it had actually overpaid Eastpoint.
Eastpoint also claimed breach of a separate alleged contract between the parties, and QRS counterclaimed that Gancman violated section 5.1 of the APA by doing incompetent work as a consultant, and for damages based on a 2011 agreement. These issues are not relevant to this appeal.
On August 13, 2018 the arbitrators issued the "[Revised] Record of Proceedings and Final Merits Decision." Justice Nickolas J. Dibiaso (Ret.) wrote a partial dissent. To determine QRS's payment obligations under the APA, the panel provided a "detailed discussion of foundational issues" as follows.
Justice Dibiaso dissented to "parts of the Decision found principally in paragraph 77 through paragraph 146," which include the Majority's analysis of the reconciliation provisions under sections 4.1 and 4.2 of the APA, and the damages calculations based on the Majority's interpretation of the reconciliation provisions.
Regarding the Estimate, the panel noted "the parties do not dispute [$6.4 million] as the original operative estimate as part of the parties' 'purchase price.'" They further held the "APA does not present this $6.4 [million] figure as a ceiling or cap on any total payment to Eastpoint; instead, the estimate figure provides the mathematical departure point for calculating some QRS payments to Eastpoint under APA sections 3.3-3.5 for buying Mr. Gancman's interest in QRS." The panel further found "Section 3.6 requires ('shall') the parties to update the original estimate annually 'by mutual agreement,' though it does not mandate agreement itself, only that it be 'mutual.' Section 17.6 of the same APA requires any amendment to its provisions, including any updated estimate, to be reflected in a writing signed by the parties." "No update, [however], to the original $6.4 [million] estimate was ever reduced to writing and mutually signed as required by APA section 17.6. Even today, in their oral arguments and post-hearing briefs, the parties continue to dispute whether an updated estimate should have been $3.5 or 3.8 million." Accordingly, the panel concluded "that the parties, in fact, did not succeed in reaching a mutually agreeable update to the original estimate, a conclusion further supported by QRS'[s] post-hearing request that this Panel impose its own updated estimate on the parties."
Next, the panel concluded an updated estimate was not a pre-condition to QRS's payment obligations to Eastpoint for three reasons. "First, contrary to counsel's arguments, while some pre-conditions appear elsewhere in the APA . . . , no pre-condition payment language, express or implied, appears in the relevant payment sections of the APA . . . . [¶] Second, the QRS interpretation of the update in section 3.6 as a pre-condition to further payments implies that QRS could defeat all its payment obligations to Eastpoint by simply refusing to ever agree to an updated estimate. This conclusion is a logical but absurd corollary of QRS'[s] interpretation, which defeats the mutually obligatory purpose of the APA and the intentions of the parties . . . . [¶] Third, despite the parties' failure to update the original estimate, Mr. Ravindran repeatedly made numerous section III payments to Mr. Gancman . . . . In total, Mr. Ravindran paid Mr. Gancman $3,555,549 between 2012 and 2016, while simultaneously knowing of the lack of any mutually-agreed update to the original estimate. [Citation.] His repeated payments to Mr. Gancman thus refute the QRS argument about a mutually-agreed update being a necessary pre-condition to his payments to Mr. Gancman."
The panel also rejected QRS's request to impose a new dollar estimate on the parties to replace the $6.4 million estimate they failed to update, concluding: "Even if this Panel had ready access to the necessary financial data, a Panel imposition of its own estimate would defeat the negotiation and agreement rights [the parties] expressly reserved to themselves in section 3.6" and "any Panel-imposed update rewarding the parties for their non-compliance with section 3.6 violates Copeland v. Baskin Robbins, [(2002) Cal.App.4th 1251] . . . holding that a court will not make its own contract for parties who fail to do so themselves." Thus, the panel concluded "the QRS payment obligations in APA sections 3.2-3.5 remain tied to the operative estimate at its original 2012 figure of $6.4 million."
The panel next addressed QRS's counterclaim that it overpaid Eastpoint based on the alleged required reconciliation under sections 4.1-4.2 of the APA. The Majority explained the "first reconciliation should have been accomplished in January 2014. After nothing productive occurred then, in 2015 Mr. Gancman made three requests to Mr. Ravindran for QRS financial data to begin this reconciliation process. . . . [¶] Mr. Ravindran did not respond to these requests even though QRS revenue data was primarily in his possession. The parties achieved no reconciliations in 2015 or in any other year. Mr. Ravindran admits no reconciliations were ever achieved." Based on this evidence, the Majority held "[t]he propriety of QRS lately noticing this multi-million dollar offsetting counterclaim is unavailing. While AAA pleading rules are less stringent than those of traditional civil courts, these rules still retain an obligation on both parties of due process and fair notice of claims . . . ." The Majority further found that "[w]hile both parties share the failure to achieve reconciliation, the greater fault falls primarily on Mr. Ravindran's shoulders. It was his lawyers . . . who drafted the APA with the reconciliation provisions. QRS'[s] failures to provide its requested financial data for reconciliation constitute a breach of section 4.1-4.2 as well as undercutting its supposed multi-million dollar reconciliation counterclaim."
The Majority further held reconciliation was not a pre-condition to payments under sections 3.2-3.5, an argument "QRS belatedly assert[ed]" in "its closing briefs." The Majority interpreted the APA as not requiring a reconciliation before QRS's payment obligations based on the following observations. "First, no such conditional payment language appears in the relevant 4.1 or 4.2 sections or indeed anywhere else in the APA payment provisions. Nor can an implied pre-condition requirement be read into those sections or, indeed, elsewhere in the APA. The word 'shall' in section 3.6 does not suggest a pre-condition." Second, "to argue, as does QRS, that reconciliation is a prerequisite to any further QRS payments to Mr. Gancman implies an unconscionable incentive to Mr. Ravindran to simply avoid the reconciliation process in order to escape his payment obligations." Third, "Mr. Ravindran made repeated payments to Mr. Gancman in 2013, 2014, and 2105 . . . knowing full well no reconciliation had been achieved, showing that he himself did not consider reconciliation a pre-condition for his payments but, instead, considered his payment obligations as independent of any reconciliation." "Finally, if reconciliation were a prerequisite for any section 3.2-3.5 payments to Mr. Gancman, no need would arise for the parties to update their $6.4 million estimate because the reconciliations would do that work for them."
Justice Dibiaso disagreed with his colleagues on the reconciliation issue. He explained that, because no reconciliation had been achieved, in his view Eastpoint was "not entitled to any affirmative recovery on [its] APA claim because [it] failed to prove and argue damages under that claim consistent with [Civil Code] [s]ection 3358." Civil Code section 3358 states: "Except as expressly provided by statute, no person can recover a greater amount in damages for the breach of an obligation, than he could have gained by the full performance thereof on both sides."
Moreover, the Majority declined QRS's request for the panel to review the parties' financial records and do their own reconciliation based on "four thousand lines of incomplete" Excel entries. The Majority noted the parties waived their reconciliation rights, and "apart from the waiver obstacle" the panel could not "achieve accurate annual reconciliation because, even with the thousands of Ex. B Excel line entries, plus additional exhibits, [it had] no way to know all QRS'[s] 'actual' contrasted to 'estimated' revenues." It further held "it is not the Panel's role to impose a reconciliation on parties who gave that right exclusively to themselves by contract and ignored it."
Based on its interpretation of the APA detailed above, and applying $6.4 million for the Estimate, the Majority calculated the money owed under sections 3.2-3.5. For every payment obligation set forth in sections 3.2-3.5, the Majority calculated the amount of money due, compared it to the money QRS had paid, and awarded Eastpoint the difference.
The Majority issued a final award of $7,441,659.50, which includes interest through the date of the Award. It also awarded Eastpoint's fees and costs in the arbitration.
The award includes $696,848.13 for breach of the parties "December 20, 2011 Letter Agreement." On appeal, QRS makes no argument regarding this portion of the award.
4. Trial Court Proceedings
Eastpoint petitioned the superior court to confirm the award (Code Civ. Proc., § 1285 et seq.); QRS petitioned for the award to be vacated (§ 1286.2). QRS argued the arbitrators exceeded their powers by arbitrarily remaking the contract. The trial court disagreed, holding the "award of damages bears a direct, reasonable relation to the contract as interpreted by the arbitrators and to the breaches found by the arbitrators." The trial court confirmed the award and ordered QRS to pay Eastpoint's attorneys' fees and costs incurred in the trial court proceedings. QRS appealed from the judgment and the attorneys' fee order. We consolidated the appeals for purposes of oral argument and decision.
All further undesignated statutory references are to the Code of Civil Procedure. --------
DISCUSSION
1. Legal Principles and Standard of Review
"We review de novo the trial court's order confirming the arbitration award. [Citation.]" (Greenspan v. LADT, LLC (2010) 185 Cal.App.4th 1413, 1435.) "The scope of judicial review of arbitration awards is extremely narrow because of the strong public policy in favor of arbitration and according finality to arbitration awards. [Citation.]" (Ahdout v. Hekmatjah (2013) 213 Cal.App.4th 21, 33 (Ahdout).) Thus, "an arbitrator's decision is not generally reviewable for errors of fact or law, whether or not such error appears on the face of the award and causes substantial injustice to the parties." (Moncharsh, supra, 3 Cal.4th at p. 6.) "However, Code of Civil Procedure section 1286.2 provides limited exceptions to this general rule[.]" (Ahdout, supra, 213 Cal.App.4th at p. 33.)
QRS relies on section 1286.2, subdivision (4) as the sole statutory basis for challenging the award. That section allows a court to vacate an award when "[t]he arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted." (§ 1286.2, subd. (a)(4).)
"[W]here the record shows that an issue has been submitted to an arbitrator and that he totally failed to consider it, such failure may constitute 'other conduct of the arbitrators contrary to the provisions of this title' justifying vacation of the award under section 1286.2 subdivision (e). [Citations.]" (Rodrigues v. Keller (1980) 113 Cal.App.3d 838, 841 (Rodrigues).) When an arbitration award is challenged on this basis, "it is presumed that all issues submitted for decision have been passed on and resolved, and the burden of proving otherwise is upon the party challenging the award. [Citations.]" (Id. at p. 842.) In addition, "it is for the arbitrators to determine what issues are 'necessary' to the ultimate decision." (AMD, supra, 9 Cal.4th at p. 372; see also Rosenquist v. Haralambides (1987) 192 Cal.App.3d 62, 68 ["The determination of which issues are actually necessary to the ultimate decision is a question of fact to be resolved by the arbitrator. [Citation.]"].)
2. The Trial Court Properly Denied QRS's Motion to Vacate the Arbitration Award
A. The Majority's Interpretation of the APA
QRS contends the Majority exceeded its powers by its irrational construction and arbitrary remaking of the APA. Before turning to the merits of QRS's contention, we first address whether an arbitrator's interpretation of a contract is subject to review for "irrationality" or "arbitrariness." In AMD, our Supreme Court explained that in Southern Cal. Rapid Transit Dist. v. United Transportation Union (1992) 5 Cal.App.4th 416, the court combined two formulas from previous Court of Appeal decisions into a single formula to determine whether an arbitrator's award exceeded his or her powers: "'Generally a decision exceeds the arbitrator's powers only if it is so utterly irrational that it amounts to an arbitrary remaking of the contract between the parties.'" (AMD, supra, 9 Cal.4th at p. 377.) Contrary to QRS's contention, however, our Supreme Court in AMD did not "approve[] this . . . standard of review," but rather expressed skepticism regarding its viability post-Moncharsh: "We need not decide here whether an arbitrator's interpretation of a contract is subject to review for 'irrationality' or 'arbitrariness.' The present case involves an arbitrator's choice of remedies, rather than interpretation of the agreement. We reiterate, however, that an award generally may not be vacated or corrected, under California law, for errors of fact or law. For this reason one Court of Appeal has referred to the 'completely irrational' standard as 'a questionable pre-Moncharsh statement of the law.' (Hall v. Superior Court [(1993)] 18 Cal.App.4th [427, 434]." (AMD, supra, 9 Cal.4th at p. 377, fn. 10.)
The court in Pacific Gas & Electric Co. v. Superior Court (1993) 15 Cal.App.4th 576 (PG&E) recognized a standard permitting judicial review of an arbitrator's interpretation of a contract to determine whether it is "completely irrational" may conflict with Moncharsh's statement that "an arbitrator's decision is not generally reviewable for errors of fact or law, whether or not such error appears on the face of the award and causes substantial injustice to the parties" (Moncharsh, supra, 3 Cal.4th at p. 6) if not properly applied. (PG&E, supra, 15 Cal.App.4th at pp. 587, 591.) It thus explained an arbitrator's award may be vacated on the ground it is "completely irrational" only in the rarest of circumstances: "Although the narrow exception we recognize will permit some disgruntled arbitrants to seek judicial review, the standard is so strict that it should discourage all but the most serious claims of abuse. We hasten to note the obvious, that success in vacating an arbitration award under this standard requires more than a mere conviction that another construction of the contract is plainly correct. As Moncharsh repeatedly says, arbitrators do not exceed their powers merely by reaching an erroneous decision. Nor does the standard we recognize permit a court to usurp the power of the arbitrator by declaring the award's determination an abuse of discretion in the sense under which an appellate court may in some contexts intervene to overturn a mistaken position of a trial court as to which reasonable judges could differ. [Citation.] The test is one of arbitrariness, not correctness." (PG&E, supra, 15 Cal.App.4th at p. 594.) The court in PG&E concluded "none of [the party's] claims passes this exacting standard of review" because "[w]here, as here, the arbitrator's reading and application of the contract is clearly within the range of ambiguity, i.e., within the ordinary bounds of semantic permissibility, there can be no tenable claim that the contract has been arbitrarily remade." (Ibid.)
Here, QRS contends the Majority irrationally and arbitrarily remade the APA by: (1) remaking the purchase price; (2) remaking the adjusted Estimate provision in the APA; and (3) remaking the reconciliation provisions. For the reasons discussed below, even assuming the arbitrators' interpretation of the APA is subject to judicial review for "irrationality" or "arbitrariness," we conclude the Majority's interpretation did not exceed the "bounds of semantic permissibility." (PG&E, supra, 15 Cal.App.4th at p. 594.)
First, QRS argues the purchase price of the assets "was the sum of the future commissions Gancman would earn from the contracts he sold to QRS" and section III "does not set forth a purchase price for the future assets." The Majority rejected this contention based on the plain language of the APA: "the APA's language in section 15.1 . . . says 'the purchase price to be paid [Gancman] . . . [is] "described in section III," which itself opens by stating that "The price for the assets shall be paid as follows . . . . ," followed by explicit payment commands in section 3.2-3.5 that the Buyer 'shall pay Seller as follows . . . . '" Section 15.1 also states that 'this agreement shall remain in force until all revenues from the contracts listed in Ex. A have been collected by Buyer and the Purchase Price described in Section III has been paid in full.' (Emphasis added.) This repeated 'purchase price' language is an unlikely drafting error." Thus, there was a "purchase price" for the assets stated in section 3.1-3.5 of the APA, which was "binding without needing a further agreement, even if the original [$6.4 Million] estimate [was] not updated." Justice Dibiaso disagreed, writing in his dissent that "Section 15.1's broad reference is an obvious drafting error, one of many in the APA, as neither the contract read as a whole nor the evidence supports the proposition that the parties intended that all the payments required by Section III - that is, the firm percentage of Section 3.2, as well as the estimates of the other subdivisions of Section III - were to constitute consideration due Gancman for the sale of his assets. Such a construction would read out of the APA Section IV in its entirety." Simply because Justice Dibiaso disagrees with the Majority's interpretation of the contract, however, does not make the Majority's interpretation "arbitrary." (PG&E, supra, 15 Cal.App.4th at p. 594 ["The test is one of arbitrariness, not correctness."].) A contrary rule "would permit the exception to swallow the rule of limited judicial review[.]" (Moncharsh, supra, 3 Cal.4th at 28.)
Second, QRS argues the Majority erred in concluding the original Estimate remained in effect throughout the APA's term because the APA "says the opposite ('shall be updated annually')." But, as discussed above, the panel interpreted the word "shall" in section 3.6 as requiring "the parties to update the original estimate annually 'by mutual agreement,' though it does not mandate agreement itself, only that it be 'mutual.'" Again, this interpretation, even if incorrect, does not "present such an egregious mistake that it amounts to an arbitrary remaking of the contract between the parties." (PG&E, supra, 15 Cal.App.4th at pp. 592-593.)
Finally, we reject QRS's contention that the Majority "simply erased the crucial reconciliation provisions from the contract" and its conclusion that these provisions "could simply be ignored, was completely irrational." As discussed above, the Majority concluded no reconciliation was ever achieved, the greater fault fell primarily on QRS, and a reconciliation was not a pre-condition to payments under sections 3.2-3.5 of the APA. Justice Dibaso opined that, because Eastpoint had no evidence of the reconciliation numbers, it had not met its burden to prove damages in accord with Civil Code section 3358. Even if we agree with Justice Dibiaso, however, the Majority's "interpretation could amount, at most, to an error of law on a submitted issue" and is not reviewable. (Moshonov v. Walsh (2000) 22 Cal.4th 771, 778-779.)
Accordingly, we conclude QRS is simply disputing the Majority's legal construction of the APA, which is beyond the scope of our review. (Moncharsh, supra, 3 Cal.4th at p. 6.) We therefore will not disturb its interpretation.
B. Relationship Between the Breach and the Remedy
An arbitrator does not exceed his or her powers so long as the chosen remedy bears a rational relationship to the underlying contract as interpreted, and to the breach of contract found by the arbitrator, and is not prohibited by that contract. (AMD, supra, 9 Cal.4th at p. 367.) "Judicial review of remedies . . . looks not to whether the arbitrator correctly interpreted the agreement, but to whether the award is drawn from the agreement as the arbitrator interpreted it or derives from some extrinsic source." (Id. at p. 378.) Guided by these principles, we conclude the remedy awarded by the Majority did not exceed its powers. The Majority interpreted the contract to require the payments set forth in section III of the APA. After concluding QRS breached sections 3.2 through 3.5 of the APA, and rejecting QRS's defenses, the Majority proceeded section by section to state the payment obligations set forth in each section, whether QRS paid the amount required, and whether an amount was still outstanding. The Majority awarded Eastpoint the difference between the amount due and the amount QRS had paid Eastpoint. The remedy was therefore drawn from the APA as analyzed by the Majority.
C. Contravention of Express Provisions of the APA
QRS contends the Majority exceeded its powers by contravening express provisions of the APA. It argues the award contravened: (1) the APA's anti-waiver provision (section 17.4) by finding the parties impliedly waived the reconciliation provisions; (2) the APA's provision precluding construction of the APA against either party (section 12.3) by construing it against QRS as the drafter; and (3) the APA's provision prohibiting modification or amendment of the APA by deleting the reconciliation provisions. These arguments do not warrant vacation of the award for the reasons discussed below.
First, in response to QRS's request that the panel do its own reconciliations, the Majority noted the parties waived their reconciliation rights, and "apart from the waiver obstacle" the panel could not "achieve accurate annual reconciliation because, even with the thousands of Ex. B Excel line entries, plus additional exhibits, [it had] no way to know all QRS'[s] 'actual' contrasted to 'estimated' revenues." It further held "it is not the Panel's role to impose a reconciliation on parties who gave that right exclusively to themselves by contract and ignored it." Thus, even if we agreed with QRS that the Majority's waiver finding violated the terms of the APA, it was only one reason among "multiple, independent reasons" that the Majority declined to impose its own reconciliations.
Second, in analyzing QRS's reconciliation counterclaim, the Majority found that "[w]hile both parties share the failure to achieve reconciliation, the greater fault falls primarily on Mr. Ravindran's shoulders. It was his lawyers . . . who drafted the APA with the reconciliation provisions. QRS'[s] failures to provide its requested financial data for reconciliation constitute a breach of section 4.1-4.2 as well as undercutting its supposed multi-million dollar reconciliation counterclaim." Thus, although section 12.3 of the APA states that "both Buyer and Seller shall be deemed to be equally responsible for the drafting of this Agreement," the testimony at the hearing demonstrated it was QRS's attorney who drafted the reconciliation provisions of the APA. In any event, this finding (like the waiver finding discussed above) was one reason among many for the Majority's conclusion that QRS was not entitled to a reconciliation: "QRS did not raise the supposed multi-million dollar reconciliation offset as a timely issue on both evidentiary and due process grounds, and . . . Mr. Ravindran, in particular breached his obligation under sections 4.1-4.2 by failing to provide Mr. Gancman this data upon his three requests . . . and . . . Mr. Gancman was denied a timely opportunity to confront and attack this supposed reconciliation offset . . . ."
Third, QRS's argument that the Majority contravened the APA's provision prohibiting modification or amendment of the APA by deleting the reconciliation provisions is simply a variation of its argument discussed above in in section 2.A of this opinion. QRS again contends the Estimate was required to be updated annually per section 3.6, and annual reconciliations of the actual revenues versus the estimated revenues were required as provided in sections 4.1 and 4.2 of the APA. But, as discussed above, the Majority concluded neither an updated estimate nor a reconciliation was a pre-condition to QRS's payment obligations under Section III. The Majority's interpretation is not a "modification or amendment" of the APA.
D. Public Policy Against Forfeiture and Unconscionable Damages
Next, QRS argues "the Majority's determination to write the APA's reconciliation provisions out of the contract also violated California's well-established public policies against forfeitures and unconscionable and grossly oppressive damages." Again, this is a variation of QRS's argument that the remedy does not bear a rational relationship to the underlying contract. We reject this contention for the same reasons we concluded the damages calculations were drawn directly from the APA. Based on the Majority's interpretation of the APA, which we cannot disturb, the Majority analyzed the payment obligations set forth in each subsection of section III ("Payment of Purchase Price"), the amount QRS paid under each subsection, and the amount still outstanding. The Majority awarded Eastpoint the difference between the amount due and the amount QRS had paid Eastpoint. An award based on the parties' agreement, as interpreted by the Majority, is not unconscionable and does not constitute a forfeiture. Rather, QRS's contention directly targets an alleged error of law and/or fact (i.e., that the Majority allegedly misinterpreted the APA)—taking it beyond the scope of our review.
E. Determination of All Issues Submitted to the Panel
Finally, we reject QRS's contention that the arbitrators failed to determine all issues submitted to them by not adjusting the Estimate and declining to impose their own reconciliation. "[W]here the record shows that an issue has been submitted to an arbitrator and that he totally failed to consider it, such failure may constitute 'other conduct of the arbitrators contrary to the provisions of this title' justifying vacation of the award under section 1286.2. subdivision (e) [Citations.]" (Rodrigues, supra, 113 Cal.App.3d at p. 841.) Here, however, the Majority considered QRS's requests, but decided it did not have the authority to impose an Estimate or reconciliation on the parties under the APA. That is not the same as "totally fail[ing] to consider" the issues submitted to them. (Ibid.; see also AMD, supra, 9 Cal.4th at p. 372 ["it is for the arbitrators to determine what issues are 'necessary' to the ultimate decision."].)
3. Attorneys' Fee Order
After the trial court confirmed the arbitration award, it awarded Eastpoint its attorneys' fees incurred in the trial court. QRS argues the attorneys' fee award should be reversed "[b]ecause the judgment confirming the arbitration award should be reversed." Because we affirm the judgment, and QRS makes no argument for reversing the attorneys' fee award other than reliance on reversal of the judgment, we also affirm the attorneys' fee order.
DISPOSITION
The judgment and order are affirmed. Eastpoint and Gancman are awarded their costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
CURREY, J.
We concur:
MANELLA, P.J.
COLLINS, J.