Opinion
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of Los Angeles County, No. BC391485, Kevin C. Bazile, Judge.
Gladych & Associates, Inc. and John A. Gladych for Defendants and Appellants.
Law Offices of Nick A. Alden and Nick A. Alden for Plaintiff and Respondent.
CROSKEY, J.
Old CFI (CFI) sued Case Financial, Inc. (Case) for breach of contract. The action was sent to arbitration and a final award was given in Case’s favor. CFI moved to vacate that award, and the trial court granted the motion on the basis that the arbitrator had exceeded her powers by scheduling the arbitration hearing outside of Los Angeles, where the parties’ contract provided that arbitration was to take place. Concluding that CFI had waived its objection to the hearing location by failing to promptly object in writing, we reverse.
FACTUAL AND PROCEDURAL BACKGROUND
In March 2002, Case purchased certain assets from CFI and entered into a written Service Agreement as part of that purchase. After this asset purchase, Eric Alden was named Chief Executive Officer of CFI, and at some point before the present action was brought, Case sued Eric Alden in the Delaware Chancery Court (Delaware Action). Case has also asserted that CFI owes Case money on various promissory notes.
Eric Alden is also the son of CFI’s lawyer.
In May 2008, CFI sued Case for failure to pay the agreed-upon management fee as set forth in the Service Agreement, breach of fiduciary duties, and conspiracy to embezzle property. Case then successfully petitioned the trial court to compel binding arbitration pursuant to the arbitration clause in the Service Agreement.
That clause stated, in relevant part, that any “controversy, claim or dispute... arising out of this Agreement, or any breach of this Agreement... shall be settled... by arbitration.” The Service Agreement also provided that such arbitration shall be “in accordance with the commercial arbitration rules of Judicial Arbitration and Mediation Services, Inc. (JAMS)” and “shall be conducted in Los Angeles County, California.” In April of 2009, CFI filed a petition with JAMS for commencement of the arbitration process.
The JAMS arbitrator conducted a pre-arbitration conference call with counsel for both parties on October 7, 2009. As a result of this conference call, the arbitration hearing was scheduled to take place in San Diego. Also on October 7, 2009, the arbitrator issued Scheduling Order No. 1, which confirmed the location of the arbitration hearing.
Sometime around mid-January 2010, after a second conference call took place and after Scheduling Order No. 2 was issued, CFI objected to holding the arbitration hearing in San Diego, and requested to relocate the hearing to Los Angeles. CFI also requested to continue the hearing at this time due to a discovery dispute. Case then sent an e-mail to CFI and the arbitrator pointing out that CFI had been uncooperative during discovery and alleging that CFI brought this action solely in retaliation for Case’s suit against Eric Alden. Additionally, since Eric Alden had been identified as CFI’s expert witness in the arbitration, Case attached to its e-mail the opinion from the Delaware Action, which raised serious issues about Eric Alden’s credibility and bias. Case also attached the promissory notes reflecting obligations that CFI owed to Case.
The arbitration hearing was not continued or relocated. Instead, the arbitrator made it clear that if CFI did not appear, the arbitration hearing would be treated as an Order to Show Cause regarding why the arbitration should not be dismissed with prejudice. In Scheduling Order No. 3, the arbitrator explained that she had taken this position after reviewing the promissory notes that CFI owed to Case and the Delaware Action opinion. The arbitrator further explained that CFI had delayed the proceedings by failing to comply with her previous scheduling orders, failing to participate in a conference call, failing to review the discovery documents that Case had made available for months, and raising “hyper-technical and inappropriate complaints” about the format of Case’s discovery responses that were “irrelevant at this stage of the proceeding.”
On February 18, 2010, CFI again requested to continue the arbitration hearing, this time due to an alleged slip and fall accident CFI’s counsel had suffered six days earlier. CFI’s counsel asked for the continuance because the prescription medication he was taking after the fall made it difficult for him to concentrate. The arbitrator declined to continue the hearing, and pointed out that CFI’s counsel “indicated that he could appear at the hearing if it was in Los Angeles, ” that he had already traveled to San Diego from Beverly Hills to review discovery documents within days after his alleged fall, and that he had “also managed to file a brief in another case with the Court of Appeal in Los Angeles.” On February 21, 2010, the day before the arbitration hearing, CFI indicated that it would not appear at the hearing.
As a result, the arbitrator requested that both parties submit briefs regarding whether the arbitration should be dismissed and whether sanctions should be imposed on CFI’s directors, officers, and/or legal counsel. The arbitrator’s final award dismissed the arbitration with prejudice and awarded costs to Case. In her final award, the arbitrator found that CFI was a “resurrected empty shell of a defunct company” that was revitalized solely to bring this action and “annoy, harass, and inflict financial harm on [Case], ” either in retaliation for Case’s suit against Eric Alden, to gain an economic advantage in that suit, or otherwise. The arbitrator also found that CFI “had no intention of participating in the arbitration hearing, ” CFI’s counsel had played “fast and loose” with the truth throughout the arbitration proceedings, and CFI’s pleadings were replete with “glaring factual omissions, wild accusations and absurd theories.”
CFI filed a motion to vacate the award. The trial court granted the motion to vacate solely on the basis that the arbitrator exceeded her powers by scheduling the arbitration hearing outside of Los Angeles County.
Judgment was entered accordingly. Case filed a timely notice of appeal.
CONTENTIONS ON APPEAL
Case argues that the trial court erred in granting CFI’s motion to vacate the arbitration award because: (1) the arbitrator did not exceed her powers since both parties agreed to the JAMS rules and the arbitrator never exceeded her powers under these rules; and (2) the arbitrator did not abuse her discretion by declining to continue the arbitration hearing.
CFI contends in response that the arbitration award was properly vacated because: (1) the arbitrator exceed her powers by scheduling the hearing outside of Los Angeles, by refusing to hear CFI’s evidence, and by adjudicating issues not submitted to her; and (2) the arbitrator abused her discretion by not continuing the hearing. We conclude that: (1) the arbitrator did not exceed her powers because she did not refuse to hear CFI’s evidence, she did not adjudicate issues not submitted to her, and although the arbitrator did schedule the hearing outside of Los Angeles, CFI waived its objection to the hearing location by failing to promptly object in writing; and (2) the arbitrator did not abuse her discretion by declining to continue the hearing. Thus, we will reverse the vacation of the arbitration award.
DISCUSSION
1. Standard of Review
“As a general rule, the merits of an arbitrator’s decision are not subject to judicial review.... ‘More specifically, courts will not review the validity of the arbitrator’s reasoning. [Citations.] Further, a court may not review the sufficiency of the evidence supporting an arbitrator’s award. [Citations.] [¶] Thus, it is the general rule that, with narrow exceptions, an arbitrator’s decision cannot be reviewed for errors of fact or law.’ [Citations.]” (SWAB Financial, LLC v. E*Trade Securities, LLC (2007) 150 Cal.App.4th 1181, 1195 1196 (SWAB).)
Code of Civil Procedure section 1286.2 (section 1286.2), subdivision (a), sets forth the exclusive grounds for vacating an arbitration award. (SWAB, supra, 150 Cal.App.4th at p. 1201.) Here, the two relevant grounds for vacation are: (1) “[t]he arbitrator[] exceeded [her] powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted, ” and (2) “[t]he rights of the party were substantially prejudiced by the refusal... to postpone the hearing upon sufficient cause being shown.” (Ibid.)
“In determining whether an arbitrator exceeded [her] powers, we review the trial court’s decision de novo, but we must give substantial deference to the arbitrator’s own assessment of [her] contractual authority. [Citations.]” (Kelly Sutherlin McLeod Architecture, Inc. v. Schneickert (2011) 194 Cal.App.4th 519, 528 (Schneickert).) In other words, “we review de novo the [trial] court’s order, but not the arbitrator’s award. [Citations.]” (San Francisco Housing Authority v. Service Employees Internat. Union, Local 790 (2010) 182 Cal.App.4th 933, 944 (SEIU).)
Similarly, because “the decision whether to grant a continuance lies in the first instance with the arbitrator... the trial court must [first] determine whether the arbitrator abused his or her discretion by refusing to postpone the hearing upon sufficient cause being shown, ” and second “determine whether the moving party suffered substantial prejudice as a result.” (SWAB, supra, 150 Cal.App.4th at pp. 1196 1198.) Thus, our review of the trial court’s order is de novo, and “we must consider whether the arbitrator[] abused [her] discretion and there was substantial prejudice in denying plaintiff’s continuance.” (SWAB, supra, 150 Cal.App.4th at p. 1198.)
2. The Arbitrator Did Not Exceed Her Powers
CFI sought to vacate the arbitration award on the basis that the arbitrator exceeded her powers by scheduling the hearing outside of Los Angeles County, by refusing to hear CFI’s evidence, and by adjudicating issues not submitted to her. The trial court was then required to determine, using a deferential review, whether “[t]he arbitrator[] exceeded [her] powers and the award [could not] be corrected without affecting the merits of the decision upon the controversy submitted.” (See SEIU, supra, 182 Cal.App.4th at p. 943.) The trial court addressed only one of CFI’s arguments, and found that the arbitrator exceeded her powers by scheduling the arbitration hearing outside of Los Angeles County.
“ ‘The powers of an arbitrator derive from, and are limited by, the agreement to arbitrate. [Citation.] Awards in excess of those powers may... be corrected or vacated by the court.’ [Citation.]” (Gueyffier v. Ann Summers, Ltd. (2008) 43 Cal.4th 1179, 1185.)
An arbitrator “ ‘[does] not exceed [her] powers merely because [she] assign[s] an erroneous reason for [her] decision.’ ” (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 28.) “An arbitrator exceeds [her] powers where [she] acts without statutory or contractual authority.” (Hoso Foods, Inc. v. Columbus Club, Inc. (2010) 190 Cal.App.4th 881, 890.) An arbitrator acts without contractual or statutory authority when she “ ‘stray[s] beyond the scope of the parties’ agreement by resolving issues the parties did not agree to arbitrate [citation], order[s] an unauthorized remedy [citation], or resolve[s] nonarbitral issues [citation].” (City of Richmond v. Service Employees Internat. Union, Local 1021 (2010) 189 Cal.App.4th 663, 669-670.)
Issues submitted to arbitration “ ‘ “ ‘ “usually construed as broadly as possible in order that differences between the parties may be resolved quickly and economically. Under the [principle] of broad construction an arbitrator is authorized to determine all questions which [she] needs to determine in order to resolve the controversy submitted to [her], and the arbitrator [herself] decides which questions need to be determined.” ’ ” ’ ” (Schneickert, supra, 194 Cal.App.4th at p. 529.)
Here, Case argues that the arbitrator did not exceed her powers. Case emphasizes that the parties agreed to follow JAMS rules and nothing that the arbitrator did exceeded the bounds of those rules. Case relies specifically on Rule 19 of the JAMS Rules, which provides that the arbitrator “shall determine the date, time and location of the Hearing.”
CFI urges that the award was properly vacated because the arbitrator exceeded her powers in the following ways: (1) she scheduled the arbitration hearing in San Diego even though the Service Agreement provided that arbitration shall take place in Los Angeles County; (2) she denied CFI due process by refusing to hear CFI’s evidence; and (3) she adjudicated issues not submitted to her by reviewing the promissory notes and the opinion from the Delaware Action when making her award. We reject CFI’s arguments as to each of these points.
With respect to the location of the arbitration hearing, the Service Agreement clearly provided that the arbitration hearing was to take place in Los Angeles County. However, CFI did not object to the arbitrator’s setting of the hearing in San Diego until three months after that location was set. On October 7, 2009, the arbitrator held a conference call and issued Scheduling Order No. 1 to the parties, which stated that the hearing would take place in San Diego. It was not until mid-January, after additional arbitration proceedings had taken place, that CFI objected to the hearing location. JAMS Rule 27 states that “If a Party becomes aware of a violation of or failure to comply with these Rules and fails to promptly object in writing, the objection will be deemed waived.” Allowing three months and multiple arbitration proceedings to pass before objecting does not qualify as “prompt.” Thus, Rule 27 applies and we conclude that CFI waived any objection to the hearing location when it failed to promptly object in writing.
CFI next argues that the arbitrator exceeded her powers because she refused to hear CFI’s evidence. In support of this argument, CFI asserts that the arbitrator did not ask CFI to respond to the promissory notes or the Delaware Action opinion that led her to decline CFI’s continuance request and ultimately make negative findings about CFI. CFI then asserts that the arbitrator made false statements, was solely motivated by greed, and intentionally hurt CFI because CFI requested to postpone the arbitration hearing. CFI also proffers excuses allegedly explaining its behavior about which the arbitrator made negative findings.
None of these arguments is persuasive. The arbitrator did review CFI’s response to the promissory notes and the Delaware Chancery Court opinion. Indeed, Scheduling Order No. 4 plainly says “[t]he arbitrator has read and reviewed [CFI’s] response.” CFI argues that the refusal to hear material evidence can prejudice a party in arbitration, but CFI has not identified any evidence it had presented that the arbitrator allegedly refused to hear. Most importantly, though, we are not permitted to decide whether the arbitrator made the correct findings. As we noted above, “courts will not review the validity of the arbitrator’s reasoning... [nor] the sufficiency of the evidence supporting an arbitrator’s award.” (SWAB, supra, 150 Cal.App.4th at p. 1196.) Finally, CFI’s accusations about the arbitrator’s alleged harmful intentions and greedy motivations are unsupported and irrelevant to whether the arbitrator exceeded her powers.
Finally, CFI argues that the arbitrator exceeded her powers because she adjudicated issues not submitted to her by reviewing the promissory notes and the Delaware Action opinion when making her award. CFI argues that the promissory notes and the Delaware Action opinion should not have been considered because they are from a different lawsuit. Again, we disagree.
The arbitrator did not resolve any issue not presented to her. In her final award, the arbitrator dismissed CFI’s cause of action for breach of contract, and awarded costs to Case, which she was permitted to do. She did not determine how the promissory notes or the Delaware Action were to be resolved. The specific evidence that an arbitrator looks at is not an enumerated ground for vacation under section 1286.2, and further, we do not consider if an arbitrator looked at the “correct” evidence when making her decision. Again, “a court may not review the sufficiency of the evidence supporting an arbitrator’s award.” (SWAB, supra, 150 Cal.App.4th at p. 1196.) Additionally, “ ‘ “ ‘ “an arbitrator is authorized to determine all questions which [she] needs to determine in order to resolve the controversy submitted to [her], and the arbitrator [herself] decides which questions need to be determined.” ’ ” ’ ” (Schneickert, supra, 194 Cal.App.4th at p. 529.) The arbitrator did not exceed her powers by considering evidence from a separate case when making her decision. It is up to the arbitrator to choose what evidence she considers relevant.
3. The Arbitrator Did Not Abuse Her Discretion in Denying a Continuance
CFI also sought to vacate the arbitration award on the basis that the arbitrator abused her discretion by not continuing the arbitration hearing. The trial court did not address this issue, but because our review is de novo, we can determine, as a matter of law, whether the arbitrator’s decision not to continue the hearing was an abuse of her discretion. We conclude that it was not.
“[W]hen, as here, an arbitrator exercises discretion in denying a continuance request, there are two issues to be resolved.... First, the trial court must determine whether the arbitrator abused his or her discretion by refusing to postpone the hearing upon sufficient cause being shown. Second, if there was an abuse of discretion, the trial court must determine whether the moving party suffered substantial prejudice as a result.” (SWAB, supra, 150 Cal.App.4th at p. 1198.) “Only if the arbitrators abused their discretion and there was resulting prejudice could the trial court properly vacate the arbitration award.” (Ibid.)
CFI’s abuse of discretion argument rests upon the arbitrator’s refusal to postpone the hearing even though CFI’s counsel had taken a fall ten days before. CFI does not elaborate on how or why this was an abuse of discretion, but simply states that the arbitrator declined to continue the hearing and that, in and of itself, constituted an abuse of discretion. We disagree.
In light of the repeated Scheduling Orders from the arbitrator reiterating that the arbitration hearing would not be postponed (even before CFI made its final continuance request), and the negative inferences that the arbitrator had already drawn against CFI with respect to its delaying tactics, the arbitrator did not abuse her discretion by declining to postpone the hearing. Also supporting the arbitrator’s decision were the facts that CFI’s counsel (1) had “indicated that he could appear at the hearing if it was in Los Angeles, ” (2) had already traveled to San Diego from Beverly Hills to review discovery documents within days after his alleged fall, and (3) had “also managed to file a brief in another case with the Court of Appeal in Los Angeles.”
DISPOSITION
The order vacating the arbitration award is reversed. Case shall recover its costs on appeal.
We Concur: KLEIN, P. J., ALDRICH, J.