Opinion
NOT TO BE PUBLISHED
San Francisco City & County Super. Ct. No. CPF-09-5099905
RUVOLO, P. J.
The instant appeal arises from a fee dispute between Latham & Watkins, LLP (Latham), a law firm, and its former client, ESS Technology, Inc. (ESS). Pursuant to the terms of the engagement agreement, the dispute proceeded to arbitration before the American Arbitration Association (AAA). By way of dispositive motion, the arbitrator found in favor of Latham.
Latham sought to confirm the award, and ESS sought to vacate it; ESS also filed a motion to change venue. The trial court denied the motion to change venue and granted the petition to confirm the arbitration award. ESS purports to appeal from both the venue ruling and the judgment confirming the arbitration award. We affirm.
I. BACKGROUND
A. Underlying Transaction
In 2007, the board of directors of ESS considered the possibility of selling the company. However, a conflict of interest arose because three ESS directors, including the company’s chief executive officer (CEO), Robert Blair (Blair), were aligned with potential buyers of ESS. To ensure that the directors negotiating on behalf of ESS were independent, ESS created a subcommittee of its board of directors, known as the “Strategic Transaction Committee” (STC), which was comprised of Peter Mok (Mok) and Al Stein (Stein).
On May 10, 2007, Stein, as acting chairman of the STC, retained Latham as STC’s legal counsel. Pursuant to the letter of engagement prepared by Latham, and executed by ESS, the billing rates would range from $345 to $925 per hour, depending on the seniority and expertise of the attorney involved. The letter of engagement expressly advised Stein: “From time to time, you may request estimates of the fees and charges that we anticipate incurring on your behalf.... [¶] The fees and charges we bill to you are your responsibility whether or not a third party has agreed to pay them.” Any dispute arising under this agreement was to be resolved in arbitration.
On June 6, 2007, by resolution, the board of directors of ESS delegated to the STC the power and authority “to ‘retain at the Company’s expense... legal counsel and to agree to such fee arrangements as are deemed appropriate’; and further provided ‘... that the Company (ESS) shall promptly pay the fees and expenses of the (STC’s) legal counsel’.... [¶] The resolution only reserved to the approval of the full Board of Directors ‘the entering into of any definite arrangement for any strategic transaction.” (Original bolding omitted.)
The actual resolution is not included in the record on appeal. Rather, we cite from the arbitration award. Neither party challenges the existence or content of the cited resolution.
Latham worked with the STC and ESS for 14 months on a very complex transaction involving the sale of ESS to Imperium Partners Group, LLP (Imperium). Invoices for Latham’s fees and costs were provided to the STC and ESS each month. Mok and Stein had anticipated a budget for legal services of $400,000 through the close of the transaction, based on the assumption that there would be minimal complications from the interested parties. However, when the deal began to go “sideways” Mok and Stein agreed to “encroach[]” on the budget.
ESS paid Latham for its work from May 2007 through January 2008. However, by the time of the June 2008 closing, Latham’s bills from February through June 2008 remained unpaid, for a total of $792,850.04. Mok and Stein, as the sole STC members, had authorized ESS to pay Latham’s billings. Unbeknownst to Mok and Stein, in January 2008, Blair started to become “concerned” that Latham “was billing ESS for excessive amounts.” Thus, when the outstanding bills came due at the time of closing, ESS refused to pay “in light of the company’s serious concerns about the reasonableness of the billings.”
In June 2008, when Mok and Stein learned that Latham’s bills had not been paid, Mok and Stein sent an email to Blair, advising that the STC had approved payment of the unpaid invoices for April, May, and June 2008, for a total of $550,000. The STC later learned that a bill “close to [$]200, 000” had been inadvertently excluded from the amount of the unpaid invoices, and that the total due to Latham was actually $750,000.
Following the closing of the sale to Imperium, the legal bills for the services rendered in negotiating the deal remained unpaid. Pursuant to the terms of the engagement letter, Latham pursued its claim for payment in arbitration.
B. Ensuing Arbitration
Pursuant to the “Commercial Arbitration Rules” of the AAA (AAA rules), the matter was assigned to arbitrator J. Clinton Peterson, a retired justice of the Court of Appeal. On February 17, 2009, following a preliminary hearing, the arbitrator issued an order setting forth the applicable discovery deadlines. After a prolonged period of discovery, and a further preliminary hearing, the arbitrator issued a second order on June 4, 2009, which advanced various discovery deadlines. The June 4, 2009 order also permitted Latham “to file and serve its proposed motion, ” pursuant to AAA Rule 30(b), the “decision on which, if favorable, is contended to be dispositive of all or some portion of this case.”
Latham filed its dispositive motion, ESS opposed, and the parties presented various supporting evidence, including deposition transcripts and declarations. The central issue to be decided was whether the STC had exclusive authority to review and approve Latham’s billings. Latham submitted evidence establishing that the STC was created to ensure that the directors negotiating the sale on behalf of ESS were independent, and that the STC was granted authority to “ ‘retain at [ESS’s] expense... legal counsel and to agree to such fee arrangement as are deemed appropriate’....”
In opposition, ESS submitted, among other things, a declaration from Blair who averred that it was his “understanding... that review of the billings and authorization of payments was done by myself and the Chief Financial Officer, and not the members of the [STC].”
After considering this evidence, as well as additional briefing by the parties, the arbitrator granted Latham’s motion, ruling as follows: “The STC was legally created to exercise all the powers of the Board of Directors of ESS [(Corp. Code, § 311)] for purposes of participation in a strategic transaction, excepting only a final decision on whether a strategic transaction proposed would be accepted. Among those powers granted exclusively to [the] STC were the hiring of its legal counsel and contracting for payment of their fees and expenses to be ‘promptly paid’ by [ESS]. Blair as CEO of ESS could not usurp or frustrate the sole authority the Board of Directors vested in the STC to authorize payment of those fees and expenses, by refusing or vetoing payment on the basis of his own opinion they were excessive; the STC, not Blair, had the sole authority to approve such fees and Blair simply had the ministerial duty to pay them for ESS when thus approved. At the time the STC was created, Blair was barred from appointment thereto by the ESS Board because of his potential or actual conflict of interest in considering continued employment by ESS under the ownership of a new purchaser, a position he in fact ultimately received. He may not now assert a power never granted to him by the Board of ESS to reject or foil the STC authorization to pay Latham’s unpaid fees, or the obligation of ESS to pay them pursuant to that authorization.”
Pursuant to Corporations Code section 311, “[t]he board may, by resolution adopted by a majority of the authorized number of directors, designate one or more committees, each consisting of two or more directors, to serve at the pleasure of the board.... Any such committee, to the extent provided in the resolution of the board or in the bylaws, shall have all the authority of the board, ” except in limited circumstances not applicable here.
The arbitrator then ordered ESS to pay Latham $792,850.04, plus statutory interest.
C. Proceedings in the Trial Court
In November 2009, Latham filed a petition in San Francisco superior court to confirm the arbitration award. In response, ESS filed a special motion to quash, which the trial court later denied. The trial court ordered ESS to file its response to the petition by December 28, 2009. Rather than file a response, ESS instead filed a motion to change venue, which was to be heard on January 22, 2010. The trial court set the hearing on Latham’s petition to confirm for the same date.
Although ESS initially filed a petition to vacate the arbitration award in San Mateo superior court, it later subsequently filed an opposition to Latham’s petition to confirm in San Francisco superior court, and requested judicial notice of its San Mateo County filing.
On January 22, 2010, the San Francisco superior court denied ESS’s motion to change venue, and then went on to address Latham’s petition to confirm. The trial court granted ESS’s request to take judicial notice of its petition to vacate filed in San Mateo County. After taking a brief recess, the trial court determined that ESS’s petition to vacate lacked merit and confirmed the arbitration award.
The trial court entered judgment on March 1, 2010, ordering ESS to pay Latham $792,850.04, plus interest in the amount of $125,552.68, for a total judgment of $918,402.72.
The instant appeal followed.
II. DISCUSSION
A. Venue Ruling
“A party aggrieved by an order granting or denying a motion to change the place of trial may petition this court for a writ of mandate requiring trial of the matter in the proper court. (Code Civ. Proc., § 400 ; Calhoun v. Vallejo City Unified School Dist. (1993) 20 Cal.App.4th 39, 41... [Calhoun)].) An appellate court reviews such an order under the abuse of discretion standard. (Ford Motor Credit Co. v. Superior Court (1996) 50 Cal.App.4th 306, 308....) A trial court abuses its discretion when venue is mandatory in a county other than the county where the action has been brought. (See id. at pp. 309-310.)” (State Bd. of Equalization v. Superior Court (2006) 138 Cal.App.4th 951, 954, fn. omitted.)
Relying on Calhoun, supra, 20 Cal.App.4th 39, Latham argues that the ESS’s motion to change venue is not properly before this court because ESS did not petition for writ of mandate. In Calhoun, the appellant appealed from an order denying his venue motion. (Id. at p. 41.) The Calhoun court held that the ruling was nonappealable, and could only be reviewed by a petition for writ of mandate. (Ibid.) In so ruling, the court explained that the appellant had not “shown exigent reasons why review of a venue ruling should not, as is usual, await the rendition of a final judgment, so as to avoid multiple piecemeal appellate dispositions. [Citation.]” (Id. at p. 42.)
Here, in contrast to Calhoun, ESS is seeking review of the venue ruling along with review of the final judgment. An order granting or denying a motion for change of venue, though reviewable by immediate writ petition, is also reviewable on appeal from the final judgment in the action. (Code Civ. Proc., § 906; see also Calhoun, supra, 20 Cal.App.4th at p. 42; Eisenberg et al., Cal. Practice Guide: Civil Appeals and Writs (The Rutter Group 2010) ¶ 15.104.1, pp. 15-51 to 15-52 (rev. #1 2009).)
Nevertheless, Latham contends that even if the venue ruling is subject to appeal, it is not reviewable because ESS failed to file a separate appeal from this ruling. Here, the notice of appeal specifies only the judgment filed on March 1, 2010, and merely refers to “all orders that are separately appealable.” Although it is true that “ ‘[o]ur jurisdiction on appeal is limited in scope to the notice of appeal and the judgment or order appealed from’ ” (Soldate v. Fidelity National Financial, Inc. (1998) 62 Cal.App.4th 1069, 1073), this rule is not inflexible (see ibid.; Cal. Rules of Court, rule 8.100(a)(2)).
In any event, even applying a rule of liberality to the notice of appeal, ESS’s appeal of the venue ruling fails on the merits. Inasmuch as all of the arbitration proceedings occurred in San Francisco, Latham filed its petition to confirm the arbitration in San Francisco superior court, pursuant to Code of Civil Procedure section 1292.2, which provides that “[e]xcept as otherwise provided in this article, any petition made after the commencement or completion of arbitration shall be filed in a court having jurisdiction in the county where the arbitration is being held or has been held[.]” Accordingly, there was no abuse of discretion in denying ESS’s motion, as venue was clearly appropriate in San Francisco County.
Even assuming for the sake of argument that the trial court did err in denying ESS’s motion to change venue (a position we do not take), ESS has failed to establish any prejudicial error, in that it has failed to demonstrate a reasonable probability that it would have received a more favorable outcome had the proceedings occurred in San Mateo superior court. (See Cassim v. Allstate Ins. Co. (2004) 33 Cal.4th 780, 800-802.) Indeed, the trial court in San Francisco took judicial notice of ESS’s San Mateo County filings.
Although ESS makes much of the fact that the trial court took only a four-minute recess to decide the merits of its case, it fails to demonstrate that it would have received a more favorable result in San Mateo County.
Thus, having reviewed ESS’s claim of error in light of the entire record, we conclude that any such error would be harmless. (See Cassim v. Allstate Ins. Co., supra, 33 Cal.4th at pp. 800-802.)
B. Confirmation of Arbitration Award
1. Arbitrator’s Duty to “Hear” Evidence
An arbitration award must be vacated if the rights of a party were substantially prejudiced by the arbitrator’s “refusal... to hear evidence material to the controversy[.]” (Code Civ. Proc., § 1286.2, subd. (a)(5).) ESS contends that the arbitrator “cut the proceedings short when there were clearly triable issues of fact material to the outcome.” This, according to ESS, constituted a refusal to “hear” evidence material to the controversy.
All further undesignated statutory references are to the Code of Civil Procedure.
ESS argues that it presented evidence showing that the STC had no role in the bill approval process, and that, as such, “the arbitrator’s order granting the dispositive motion” without “live testimony at a full evidentiary hearing” constituted “a blatant denial of ESS’s ability to present its side of the dispute....”
The court in Schlessinger v. Rosenfeld, Meyer & Susman (1995) 40 Cal.App.4th 1096, 1105 (Schlessinger) refused to adopt a similar argument. There, the losing party at arbitration argued that the arbitrator refused to hear any evidence because he disposed of the principal issues by way of summary adjudication motions without ever hearing oral testimony. (Id. at pp. 1104-1105.) In rejecting the appellant’s argument, the court explained that “[u]nder section 1286.2, subdivision (e), the arbitrator’s obligation ‘to hear evidence’ does not mean that the evidence must be orally presented or that live testimony is required. ‘Legally speaking the admission of evidence is to hear it.’ [Citation.] An arbitrator ‘hears’ evidence by providing a ‘legal hearing, ’ that is, by affording an ‘opportunity to... present one’s side of a case.’ (Webster’s Third New Internat. Dict. (1981) p. 1044, col. 2 [defining ‘hear’ and ‘hearing’].) An arbitrator also ‘hears’ a matter by ‘consider[ing] a motion upon presentation thereof by counsel.’ (Ballentine’s Law Dict. (3d ed. 1969) p. 552, col. 2.) Thus, a ‘hearing’ does not necessarily include ‘an opportunity to present live testimony or be subject to cross examination.’ [Citation.] ‘Unless required by the express language, or the context of the particular rule, the use of the word “hearing” does not necessarily contemplate either a personal appearance or an oral presentation to the court.’ [Citation.]” (Schlessinger, supra, 40 Cal.App.4th at p. 1105.)
The Schlessinger court “decline[d] to read section 1286.2, subdivision (e), as requiring that an arbitrator always resolve disputes through the oral presentation of evidence or the taking of live testimony. To do otherwise would lead to anomalous results. The purpose of arbitration... is to provide a ‘speedy and relatively inexpensive means of dispute resolution.’ (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9... [Moncharsh].) Having chosen arbitration over civil litigation, a party should ‘reap the advantages that flow from the use of that nontechnical, summary procedure.’ (Id. at p. 11, italics added.)” (Schlessinger, supra, 40 Cal.App.4th at p. 1105.)
We agree with this interpretation of the statute and reject ESS’s claims to the contrary. The arbitrator did not refuse to “hear” evidence by resolving the case by way of the dispositive motion. Rather, the arbitrator provided ESS with ample opportunity to present its case, through extensive discovery, and full briefing prior to the hearing on Latham’s dispositive motion, and supplemental briefing after such hearing. Moreover, the arbitrator specifically offered both sides the opportunity to present live evidence at the hearing. Indeed, procedural order number four expressly provided that “ESS shall have the reciprocal right to present oral evidence in opposition to Latham’s motion.” ESS, however, declined the invitation and apparently did not present any witnesses at the hearing.
To the extent that ESS argues that the parties’ arbitration agreement did not authorize summary procedures, this contention is without merit. The arbitration agreement expressly states that arbitration would be conducted in accordance with AAA rules. It is well-recognized that Rule 30(b) of the AAA rules authorizes dispositive motions like the one Latham filed. (See Schlessinger, supra, 40 Cal.App.4th at pp. 1105-1109 and cases cited therein.)
2. Judicial Review of the Arbitrator’s Decision
Having concluded that the arbitrator did not fail to “hear” the evidence, and otherwise properly considered the dispositive motion, we next decide whether the arbitration award should have been vacated based on the substance of his rulings.
“In general, ‘... courts may not interfere with arbitration awards. Courts may not examine the merits of the controversy, the sufficiency of the evidence supporting the award, or the reasoning supporting the decision.... A court may not set aside an arbitration award even if the arbitrator made an error in law or fact....” (Santa Clara-San Benito etc. Elec. Contractors’ Assn. v. Local Union No. 332 (1974) 40 Cal.App.3d 431, 437....) As explained... by our Supreme Court: ‘[I]t 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 rule, we recognize there is a risk that the arbitrator will make a mistake. That risk, however, is acceptable for two reasons. First, 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.... [¶]... [¶] A second reason why we tolerate the risk of an erroneous decision is because the Legislature has reduced the risk to the parties of such a decision by providing for judicial review in circumstances involving serious problems with the award itself, or with the fairness of the arbitration process.’ (Moncharsh[, ] supra, 3 Cal.4th at pp. 11-12....)
“Moncharsh’s reference to the narrow, statutory exceptions permitting judicial review of arbitration awards brings us back to section 1286.2, subdivision (e). As our earlier discussion indicates, the arbitrator did not ‘refuse to hear evidence’... merely because he entertained [a dispostive motion]. However, our conclusion that the arbitrator had the authority to rule on [this] motion[] does not end the inquiry. Section 1286.2, subdivision (e), ensures that a party is not ‘unfairly deprived of a fair opportunity to present his or her side of the dispute.’ (Moncharsh, supra, 3 Cal.4th at p. 13.)” (Schlessinger, supra, 40 Cal.App.4th at pp. 1109-1110.) Here, ESS argues that the arbitrator precluded ESS from offering certain material evidence in opposition to the motion, and he erroneously calculated the amount of the award.
As to the first alleged error, ESS claims that the arbitrator erroneously refused to allow ESS discovery into “the complete billing records (redacted of any attorney-client or work-product information) of the attorneys that worked on the ESS transaction, ” including the billing records for clients other than ESS for the year.
Contrary to ESS’s belated claim in its reply brief, there is nothing to suggest that the arbitrator refused to hear live testimony from either Stein or Mok. Indeed, as mentioned, the record reflects that ESS was given the chance to present witnesses at the hearing on the dispositive motion, and it failed to do so.
“[A] challenge to an arbitrator’s evidentiary rulings or limitations on discovery should not provide a basis for vacating an award unless the error substantially prejudiced a party’s ability to present material evidence in support of its case.” (Schlessinger, supra, 40 Cal.App.4th at p. 1110, italics omitted.) “To find substantial prejudice the court must accept, for purposes of analysis, the arbitrator’s legal theory and conclude that the arbitrator might well have made a different award had the evidence been allowed.” (Hall v. Superior Court (1993) 18 Cal.App.4th 427, 439.)
In this case, we have no trouble concluding that the excluded evidence cited by ESS would not have changed the outcome of the arbitration. There is no showing that the Latham’s hourly rates had anything to do with the authority of the STC to authorize payment of the legal fees it incurred in negotiating the sale to Imperium. Thus, the rates are not relevant to this dispute. Likewise, Latham’s billing records for clients other than ESS are similarly not relevant. What mattered was the STC’s authority to pay ESS’s legal fees, not the rate of the billing units Latham charged ESS, or any other client.
As to the second alleged error, ESS argues that there “was clearly no evidence” to support an award for $792,850. According to ESS, the evidence only showed that the STC had approved payment of $550,000. As such, ESS claims that the arbitration is subject to correction under section 1286.6, subdivision (a), which provides for the correction of an arbitration award where “ ‘[t]here was an evident miscalculation of figures or an evident mistake in the description of any person, thing or property referred to in the award[.]’ ” This contention is without merit.
California law is clear that “a court may not review the sufficiency of the evidence supporting an arbitrator’s award. [Citations.]” (Moncharsh, supra, 3 Cal.4th at p. 11.) Yet, by its argument, this is exactly what ESS would have this court do. We reject this attempt to circumvent Moncharsh. Moreover, there is nothing in the record to suggest that there was any “evident miscalculation” in the award, amenable to correction under section 1286.6, subdivision (a).
III. DISPOSITION
The judgment confirming Latham’s arbitration award is affirmed. The order denying ESS’s venue motion is also affirmed. Latham is entitled to recover its costs on appeal.
We concur: REARDON, J.SEPULVEDA, J.