Opinion
NOT TO BE PUBLISHED
San Francisco City & County Super. Ct. No. CPF-08-508912.
Margulies, J.
Attorneys Mark Thierman and H. Tim Hoffman (collectively, Thierman) appeal from a judgment (1) confirming a corrected arbitration award allocating class action attorney fees between Thierman and attorney John Kelson, and (2) awarding attorney fees to Kelson as the prevailing party in the litigation over fees. We modify the judgment to strike the award of prevailing party fees and affirm the judgment in all other respects.
I. BACKGROUND
Thierman, Kelson, and other attorneys represented the plaintiffs in a series of wage and hour lawsuits against Citigroup Global Markets, Inc. aka Smith Barney. Following a tentative agreement to settle the lawsuits, the plaintiffs’ attorneys entered into an agreement among themselves about the allocation of the attorney fees on May 8, 2006 (the May 8 Agreement). Under the May 8 Agreement, Thierman and Kelson were to receive 48.05 percent of the net fees after a deduction of $3.95 million to be paid to a specified group of other law firms. The May 8 Agreement further provided that any dispute over the terms of the agreement or sharing of fees would be submitted to binding arbitration before the Judicial Arbitration and Mediation Service (JAMS).
The total net fees to be divided between Thierman and Kelson under the May 8 Agreement came to $9,417,800. Kelson claimed he was entitled to 50 percent of this figure, citing an addendum to Kelson and Thierman’s retainer agreement with lead plaintiff, Guita Bahramipour, in which Bahramipour consents to 25 percent of the fees in her case going to Thierman, 25 percent to Kelson, and to 50 percent being allocated between the two based on the relative number of hours each worked on the case. Thierman denied ever seeing the addendum to the Bahramipour retainer agreement or agreeing to the fee allocation formula described in it. At the commencement of the arbitration, the parties submitted and the arbitrator accepted a “Stipulation and Order Regarding Arbitration Proceedings” (Stipulation and Order), providing among other things that the minimum amount Kelson could be awarded in the arbitration was $1.2 million, and the minimum amount Thierman could be awarded was $4,708,000.
In the Stipulation and Order, the parties also agreed that (1) Thierman was withdrawing certain factual allegations, (2) Kelson would not be calling certain witnesses, (3) neither side would claim entitlement to interest for a delay in payment of the minimum awards, and (4) the bank holding the disputed fees could release Kelson’s and Thierman’s stipulated minimum awards to them. The Stipulation and Order included no stipulations about evidentiary facts.
Following the arbitration hearing, the JAMS arbitrator issued a “Final Award” on October 7, 2008. The arbitrator found Thierman and Kelson had agreed to split the fees in Bahramipour’s case against Smith Barney using the same formula contained in the addendum: Thierman and Kelson would each get 25 percent of the fees and the remaining 50 percent would be allocated between Thierman and Kelson based on the total number of hours each worked on the case. Based upon her review of the billing records of both sides, and weighing testimony concerning appropriate adjustments to the hours claimed, the arbitrator ruled the proper allocation of relative hours worked was 43 percent for Kelson and 57 percent for Thierman. She used these percentage figures to calculate an award as follows: First, the arbitrator determined an amount for the “remaining amount in dispute” by subtracting $5,908,900 (the sum of the minimum amounts agreed to in the Stipulation and Order) from $9,417,800 to arrive at the figure of $3,508,900. Second, she calculated Kelson’s award of $2,708,827, by adding 43 percent of $3,508,900 to Kelson’s stipulated minimum award of $1.2 million. Third, she calculated Thierman’s award of $6,708,973 in parallel fashion by adding 57 percent of $3,508,900 to Thierman’s stipulated minimum award of $4,708,900.
Kelson’s award was offset by $462,500 for funds already received.
On October 7, 2008, Kelson filed a document captioned “Request for Correction of Computational Error in Award Pursuant to JAMS Rule 24(j),” in which he argued the arbitrator had made a computational error by awarding him 43 percent of $3,508,900 plus the minimum award of $1.2 million set forth in the Stipulation and Order. According to Kelson, the arbitrator’s calculation was inconsistent with her findings as to the allocation formula agreed to by the parties—that the parties would split half of the fee award on a 50-50 basis and the other half based on the relative number of hours worked. That formula required Kelson’s award to be calculated by adding $2,354,450 (25 percent of the total fees of $9,417,800) to $2,024,827 (43 percent of $4,708,900), for a total of $4,379,277. Using the same formula, Thierman’s award would be calculated as the sum of $2,354,450 (25 percent of $9,417,800) plus $2,684,073 (57 percent of $4,708,900), for a total of $5,038,523. Kelson took the position the arbitrator had misinterpreted and misapplied the Stipulation and Order in calculating her award.
JAMS former rule 24(j) provides in pertinent part as follows: “Within seven (7) calendar days after issuance of the Award, any Party may serve upon the other Parties and on JAMS a request that the Arbitrator correct any computational, typographical or other similar error in an Award.... The Arbitrator may make any necessary and appropriate correction to the Award within fourteen (14) calendar days of receiving a request....”
Kelson agreed this amount would have to be offset by $462,500 for money he had already received.
Thierman opposed Kelson’s correction request, stating: “This is not a case of ‘computational error’ (JAMS Rule 24(j)). Nor is the Arbitrator authorized by statute to correct her Final Award under the limited [statutory] exception for ‘evident miscalculation.’ [Citation.] There is no arithmetic mistake here. Rather, the Arbitrator either correctly ruled as she intended or, as Kelson argues, misinterpreted his contracts including the Stipulation/Order. In either case, the law does not permit the Arbitrator to issue a corrected, supplemental, or amended order here.”
On October 13, 2008, the arbitrator issued a “Corrected Final Award” substituting the calculations and award proposed in Kelson’s request for correction for those contained in the Final Award. The Corrected Final Award stated: “[T]he Arbitrator concludes that a computational error or ‘miscalculation capable of correction without affecting the merits of the controversy’ had been made. Lope[s] v. Millsap (1992) 6 Cal.App.4th 1679, 1687 [(Lopes)]. Therefore, the Award has been corrected. (JAMS Rule 24(j)).”
Thierman timely petitioned the superior court to confirm the Final Award and vacate the Corrected Final Award. Kelson cross-petitioned the court to confirm the Corrected Final Award. The trial court granted Kelson’s petition and denied Thierman’s, holding the arbitrator correctly exercised her authority under Lopez v. Millsap to correct a computational error in the initial award. The court also awarded Kelson his attorney fees of $10,169.50, incurred in the trial court proceeding.
Thierman timely appealed from the ensuing judgment.
We grant Kelson’s August 10, 2009 motion to augment the record to include a certified transcript of oral proceedings in the trial court.
II. DISCUSSION
Thierman contends the judgment must be reversed because (1) the arbitrator exceeded her authority by revising her final award based on a reconsideration of the merits of the controversy, and (2) the trial court compounded its error in confirming the revised award by improperly awarding attorney fees to Kelson.
A. The Arbitration Award
A threshold question in this case is whether the arbitrator’s authority to correct the original award derived from JAMS rule 24(j) or from Code of Civil Procedure section 1284. As further discussed below, the wording of the rule, allowing correction of an award for “computational, typographical or other similar error” is at least arguably broader than section 1284, which in relevant part limits the arbitrator’s power to modify a final award to the correction of “an evident miscalculation of figures.” Equally important, we review the arbitrator’s interpretation of rule 24(j) with greater deference than her interpretation of section 1284.
All further statutory references are to the Code of Civil Procedure.
Section 1284 provides in relevant part as follows: “The arbitrator, upon written application of a party to the arbitration, may correct the award upon any of the grounds set forth in subdivision (a)... of Section 1286.6....” As relevant here, section 1286.6, subdivision (a), in turn authorizes the court to correct an arbitration award upon the filing of an appropriate petition if “[t]here was an evident miscalculation of figures.”
Nonjudicial arbitration is a matter of contract and the powers of the arbitrator derive from and are limited by the agreement to arbitrate. (Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 375 (Advanced Micro Devices).) The agreement to arbitrate in this case specified disputes would be submitted to arbitration before JAMS in the Northern District of California. The JAMS rules state, “The Parties shall be deemed to have made these Rules a part of their Arbitration agreement whenever they have provided for Arbitration by JAMS under its Comprehensive Rules or for Arbitration by JAMS without specifying any particular JAMS Rules [whenever] the disputes or claims [include a claim or counterclaim exceeding $250,000].” (JAMS rule 1(b); see rule 1(a).) It is thus clear the JAMS rules, including rule 24(j), became part of the parties’ agreement to arbitrate in this case.
By their own terms, the JAMS rules do not supersede any conflicting provisions of state law. JAMS rule 4 provides that if any of the JAMS rules “is determined to be in conflict with a provision of applicable law, the provision of law will govern.” Assuming the language of JAMS rule 24(j) is slightly more encompassing than that of section 1284 and 1286.6, subdivision (a), we must therefore determine whether the JAMS rule is in conflict with section 1284. We find no such conflict.
The parties to an arbitration agreement are free to specify an arbitration procedure that differs from statutory requirements. (Painters Dist. Council No. 33 v. Moen (1982) 128 Cal.App.3d 1032, 1037.) “Nonjudicial arbitration proceedings are generally regulated by the procedural rules established by the arbitration agency; such proceedings are not necessarily controlled by the Code of Civil Procedure unless expressly provided by that code (Code Civ. Proc., § 1280 et seq.), by the arbitration rules, by the parties’ contract, or other provisions of law regulating such nonjudicial arbitration. [Citation.]” (Paramount Unified School Dist. v. Teachers Assn. of Paramount (1994) 26 Cal.App.4th 1371, 1387.) In particular, the parties may establish rules for arbitrator correction of an award other than as specified in section 1284: “ ‘Title 9 of the Code of Civil Procedure... represents a comprehensive statutory scheme regulating private arbitration in this state. (§ 1280 et seq.).’ [Citation.] The fundamental premise of the scheme is that ‘[a] written agreement to submit [either a present or a future controversy] to arbitration... is valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract.’ (Code Civ. Proc., § 1281.) The statutes set forth procedures for the enforcement of agreements to arbitrate (id., §§ 1281.2–1281.95), establish rules for the conduct of arbitration proceedings except as the parties otherwise agree (id., §§ 1282–1284.2), describe the circumstances in which arbitrators’ awards may be judicially vacated, corrected, confirmed, and enforced (id., §§ 1285–1288.8), and specify where, when, and how court proceedings relating to arbitration matters shall occur (id., §§ 1290–1294.2).” (Vandenberg v. Superior Court (1999) 21 Cal.4th 815, 830, italics added, fn. omitted.)
We have found one out-of-state case dealing with the interplay between an earlier version of JAMS rule 24 (j) and a state statute, identical to section 1284, limiting to the power to correct a final award. In Fox Boston Seaport Land, LLC v. Mass. Bay Transp. Auth. (Mass.Super.Ct., Feb. 13, 2007, No. 06-3475-BLS2) 2007 Mass.Super. Lexis 32, the court held that the JAMS rule, as construed by the arbitrator to allow correction, prevailed over the statute.
Thus, to the extent that section 1284 and JAMS rule 24(j) allow correction of an award under different circumstances, we conclude there is no conflict between them because section 1284 by law does not supplant the parties’ agreement about the arbitrator’s power to correct an arbitration award after it is rendered. Whether the arbitrator had the power to issue the Corrected Final Award in this case must therefore be determined by reference to JAMS rule 24(j). Further, the JAMS rules provide that “disputes about the interpretation and applicability of these Rules” are to be resolved by the arbitrator and that “[t]he resolution of the issue by the Arbitrator shall be final.” (JAMS rule 11(a).) In determining whether the arbitrator exceeded her powers, we must give “substantial deference” to the arbitrator’s assessment of her own contractual authority. (Jordan v. Department of Motor Vehicles (2002) 100 Cal.App.4th 431, 443–444.) Any doubts as to the meaning or extent of an arbitration agreement are for the arbitrator, not the court to resolve. (Oakland-Alameda County Coliseum Authority v. CC Partners (2002) 101 Cal.App.4th 635, 641–642, disapproved on other grounds, Cable Connection, Inc. v. DIRECTV, Inc. (2008) 44 Cal.4th 1334, 1361.) Notwithstanding the use of the word “final” in JAMS rule 11(a), we do retain the ultimate authority to overturn awards that are beyond the arbitrator’s contractual powers to render. (Advanced Micro Devices, supra, 9 Cal.4th at p. 375.)
JAMS rule 24(j) allows the arbitrator to correct “computational, typographical or other similar error” in an award. In our view, this language is broad enough to encompass the type of error made in the arbitrator’s Final Award in this case, especially in view of the substantial deference we must give to the arbitrator’s own interpretation of the rule. Here, the parties in effect modified their arbitration agreement on the eve of the arbitration hearing to require the arbitrator to apply a special method of computation to her findings in order to arrive at the award amounts. That method called for the application of one of two possible award computation methods, depending on the arbitrator’s findings: If the arbitrator found the parties had agreed to a fee allocation formula resulting in one party receiving less than the minimum amount specified in the Stipulation and Order, then she would have been constrained to award that party the specified minimum, and award the balance of the $9,417,800 to the other party. Conversely, if the fee allocation formula the arbitrator found the parties had agreed to resulted in neither party receiving less than the minimum specified in the Stipulation and Order—as turned out to be the case here—then she was supposed to apply the agreed formula without further consideration of the minimums specified in the Stipulation and Order.
The error made by the arbitrator in her first award was in applying an incorrect method of computing the award, one that was outside the parties’ arbitration agreement. While it may be true the arbitrator applied her chosen computation method without arithmetic error, it is nonetheless still a “computational... or other similar error” to apply the wrong method of computation. No other label fits the situation. The error did not spring from the erroneous resolution of any factual or legal issue, disputed or undisputed. The proper use or interpretation of the Stipulation and Order was not a disputed issue in the arbitration, nor was any evidence or argument presented concerning its intent. The Stipulation and Order also was a not a stipulation to any evidentiary fact. As reflected in its full title, it was a stipulation “regarding arbitration proceedings,” and, in particular, a stipulation about the outcome of the arbitration. The arbitrator’s interpretation of JAMS rule 24(j)—that it allowed her to issue the Corrected Final Award—was reasonable. The trial court therefore properly refused to vacate that award or to confirm the earlier award.
Even assuming for the sake of analysis the arbitrator’s power to modify the award must be determined by reference to section 1284, rather than JAMS rule 24(j), we would still conclude the arbitrator did not exceed her authority. In Lopes, supra, 6 Cal.App.4th 1679, the parties agreed to sell a parcel of real property and divide the net proceeds as determined by an arbitrator. (Id. at pp. 1682–1683.) The arbitrator awarded the appellant $93,199.24 and the respondents $25,056.05 from the sale proceeds. (Id. at p. 1683.) The respondents wrote to the arbitrator, questioning the calculation of the award. (Ibid.) The arbitrator notified the parties that upon review of the award he “ ‘discovered the award did not accurately reflect the division of the sale proceeds’ ” that he “ ‘intended.’ ” (Id. at p. 1684.) He filed an amended award granting the appellant $70,224.51 and the respondents $48,031.08. (Ibid.) The arbitrator explained that he neglected to take into account a lien on the property created by a loan to the appellant, for which the respondents were entitled to reimbursement out of the appellant’s share. (Id. at p. 1684, fn. 1.) The arbitrator noted the respondents’ entitlement to this reimbursement was not in dispute between the parties. (Ibid.)
The Court of Appeal held the amended award was permissible under section 1286.6, as the correction of an “ ‘evident miscalculation of figures.’ ” (Lopes, supra, 6 Cal.App.4th at p. 1687 & fn. 6.) The court stated: “The amendment did not require consideration of new evidence or the resolution of an issue not previously presented. Rather, the arbitrator merely acted to remedy an error in calculations so as to accurately effectuate the intended distribution of proceeds.... [¶]... The evidence presented to the trial court demonstrated that the initial award was an ‘evident miscalculation,’ capable of correction without affecting the merits of the controversy. The amendment did not require reinterpretation of the evidence or revision in the substance of the award as rendered.” (Id. at pp. 1686–1687, fn. omitted.)
In Lopes, as in this case, the arbitrator’s error was not a simple arithmetical mistake in carrying out a computation, but a failure to calculate the award using the right method of computation, i.e., the one to which the parties to the arbitration had expressly or impliedly agreed. The cases upon which Thierman chiefly relies are unpersuasive. In DeMello v. Souza (1973) 36 Cal.App.3d 79, another panel of this court stated, in dicta, that section 1284 did not authorize an arbitrator to correct an award to make it consistent with an evidentiary fact to which the parties had stipulated—the total of the death benefits due under a pension. (DeMello, at pp. 82, 87.) The court in that case was applying the rule that an arbitrator’s mistake of fact cannot be corrected under section 1284. (DeMello, at pp. 86–87.) The stipulation at issue in this case was a stipulation to a method of computing the awards, not a stipulation of fact. In Severtson v. Williams Construction Co. (1985) 173 Cal.App.3d 86, the mistake in issue was the arbitrator’s misinterpretation of testimony given at the arbitration hearing. (Id. at pp. 91–95.) DeMello and Severtson both involved errors in interpreting the evidence, not errors in carrying out a computation required by the parties’ arbitration agreement.
The trial court did not err in confirming the Corrected Final Award.
B. Attorney Fee Award
The trial court awarded Kelson attorney fees under section 1293.2, which allows fees as to be awarded as costs to the extent permitted under section 1021 et seq. Section 1033.5 permits attorney fees to be awarded as costs when authorized by contract, statute, or law. (§ 1033.5, subd. (a)(10).) The award of costs under section 1293.2, including attorney fees, is mandatory when authorized by contract. (Marcus & Millichap Real Estate Investment Brokerage Co. v. Woodman Investment Group (2005) 129 Cal.App.4th 508, 513.)
The May 8 Agreement, which established the net fees to be divided between Thierman and Kelson, and provided for submission of any dispute over fees to JAMS, contained no attorney fee clause. Kelson relies instead on the retainer agreement and addendum between Bahramipour and the joint venture of Thierman and Kelson, which provided that “[t]he prevailing party in any action or proceeding to enforce any provision of this agreement will be awarded reasonable attorney’s fees and costs incurred in that action or proceeding or in efforts to negotiate the matter.” In the addendum to the retainer agreement, Bahramipour acknowledges and consents to Thierman and Kelson’s agreement with each other about the division of attorney fees. According to Kelson, the retainer agreement and addendum authorize an award of attorney fees to the prevailing party in this litigation because they constitute the “principal contract at issue in this case.”
We are not persuaded. The retainer agreement was between Bahramipour and the joint venturers, Kelson and Thierman. It was not a contract between Kelson and Thierman and it did not bind Kelson or Thierman to pay attorney fees to the other in the event of a fee dispute between them. The arbitrator merely found the agreement between Kelson and Thierman was consistent with the terms stated in the addendum signed by Bahramipour. She made no finding the addendum constituted an agreement between Kelson and Thierman, and she did not award any amount to Kelson for fees incurred in the arbitration. In fact, the arbitrator rejected Kelson’s request for attorney fees in the Corrected Final Award because the agreement between Kelson and Thierman, the May 8 Agreement, “is silent on the question of fees and costs.” We agree the retainer agreement and addendum cannot support an award of fees to Kelson.
Accordingly, Kelson was entitled to costs in the trial court as permitted by sections 1293.2 and 1032, subdivision (b), but the judgment must be modified to eliminate the award of attorney fees.
III. DISPOSITION
The judgment is modified to strike the attorney fee award of $10,169.50 to respondent. As so modified, the judgment is affirmed. Costs on appeal are awarded to respondent.
We concur: Marchiano, P.J. Banke, J.