Opinion
B207196
4-22-2009
TRAILBLAZER TECHNOLOGIES, INC., etc., et al., Plaintiffs and Respondents, v. PEOPLESUPPORT RAPIDTEXT, INC., etc., et al., Defendants and Appellants.
Burkhalter Kessler Goodman & George LLP, Daniel J. Kessler and Michael Oberbeck, for Defendants and Appellants. Nathan D. Wirtschafter, Corp. and Nathan D. Wirtschafter for Plaintiffs and Respondents.
Not to be Published in the Official Reports
Appellants PeopleSupport RapidText, Inc. (RapidText), The Transcription Company, Inc. (TTC), Jerome Woods, Jr., and Glory Johnson challenge the trial courts confirmation of an arbitration award in favor of respondents Trailblazer Technologies, Inc. (Trailblazer) and Richard J. Brownstein II. The key issues on appeal concern the arbitrators enforcement of a provision in the parties contracts for determining the value of Trailblazers interest in TTC. We affirm the confirmation of the arbitration award.
RELEVANT FACTUAL AND PROCEDURAL
BACKGROUND
A. Underlying Agreements
RapidText and Trailblazer provide transcription services to various industries. Woods and Johnson are principals of RapidText; Brownstein is Trailblazers founder and president. In May 2003, RapidText and Trailblazer merged to form TTC. RapidText owned 50.45 percent of TTCs shares, and Trailblazer owned the remaining shares. The three members of TTCs board of directors were Woods, Johnson, and Brownstein.
RapidText was originally named "RapidText, Inc.," and its name was later changed to "PeopleSupportRapidText, Inc."
In creating TTC, the parties executed several agreements, including a shareholders agreement and a contribution agreement. The shareholders agreement permitted each corporate shareholder to buy the others interest in TTC. Pertinent here is section 4.1, which governed RapidTexts "[c]all [o]ption," that is, RapidTexts right to purchase Trailblazers shares in TTC. Section 4.1.C. provided that when 18 months had elapsed after TTCs formation, RapidText was entitled to buy Trailblazers shares for one of the following three amounts: (1) $1,090,000; (2) the product of 4.5 multiplied by the "[r]ecast EBITDA," a measure of TTCs earnings before interest, taxes, depreciation, and amortization defined in the agreement; or (3) the fair market value of the shares, as determined through a multistaged appraisal process. To invoke the call option, RapidText was obliged to submit a notice to Trailblazer, and was permitted to offer to buy the shares for $1,090,000 or the multiple of recast EBITDA specified above. Once Trailblazer received the notice, it had ten days in which to elect to accept the proposed price or to demand the shares fair market value.
The process for determining the shares fair market value was set forth in section 4.1.E. of the shareholders agreement. Under that section, RapidText and Trailblazer were obliged to try to set the shares fair market value through negotiation; should negotiations on this matter fail, each party was to select an appraiser to assess the fair market value. If one of the parties failed to appoint an appraiser, the solitary appraisers valuation would be conclusive; if the valuations of the two appraisers differed by 10 percent or less, the average of the valuations would constitute the fair market value; if their valuations differed by more than 10 percent, the appraisers were to appoint another appraiser to provide a third valuation, and the average of the two valuations that differed least in amount would constitute the fair market value.
The shareholders and contribution agreements also contained an arbitration clause, which stated that "[a]ll disputes, claims, or controversies arising out of or relating to" the agreements would be "resolved exclusively by submission to final and binding arbitration before the American Arbitration Association" (AAA). The clause further provided: "The arbitrator shall have all powers of a Los Angeles County Superior Court judge (excluding the power to award equitable or provisional relief), including the power to award punitive damages." Under the clause, the prevailing party was entitled to "all fees and expenses" incurred in the arbitration.
B. Arbitration
1. Claims in Arbitration
In March 2005, Trailblazer and Brownstein filed a demand for arbitration with the AAA. They alleged claims against RapidText and TTC for breach of the merger agreements, fraud, breach of fiduciary duties, and unfair competition, and sought $2.5 million in compensatory damages plus punitive damages. RapidText and TTC asserted a counterclaim for $3 million in compensatory damages, together with punitive damages. The matter was submitted to arbitration before retired Superior Court Judge Philip M. Saeta.
In April 2006, Trailblazer and Brownstein submitted a second amended explanation of their claims (second amended explanation), which described their original claims and asserted new claims based on RapidTexts and TTCs conduct after the filing of the demand for arbitration in March 2005. Regarding the original claims, Trailblazer and Brownstein alleged that RapidText and its principals had fraudulently induced them to execute the merger agreements by overstating the value of RapidTexts assets and making numerous promises they intended not to honor; that RapidText and its principals had breached their fiduciary duties to Brownstein by denying him access to financial information regarding TTCs operations; and that TTC denied Trailblazer and Brownstein dividends and other compensation, including certain commissions.
The second amended explanation also alleged new claims for fraud, breach of fiduciary duty, and breach of the implied covenant of good faith and fair dealing arising from RapidTexts purchase of Trailblazers TTC shares, which occurred on July 1, 2005. According to the second amended explanation, on May 23, 2005, RapidText notified Trailblazer that it proposed to buy Trailblazers shares for $1,090,000 in order to "minimize" its "further involvement" with Brownstein. Prior to June 3, 2005, the date by which Trailblazer and Brownstein were required to respond to the notice, PeopleSupport Inc. (PSI), a publicly traded corporation, began negotiating with RapidText and its principals about buying RapidText and TTC. Ignorant of the negotiations, Trailblazer and Brownstein elected to accept $1,090,000 for the TTC shares. After Trailblazer sold its TTC shares, PSI bought RapidText and TTC for $12.25 million in or before January 2006. Trailblazer and Brownstein alleged that at the time Trailblazer sold its shares, their fair market value would have been at least $900,000 more than the price that RapidText paid.
Regarding the new claims asserted in the second amended explanation, RapidText, TTC, Woods, and Johnson argued in an arbitration brief dated August 29, 2006: "Even if [Trailblazer and Brownstein] establish a right to revoke the prior election to accept $1,090,000, [their] remedy would be to be returned to the position they were in at the time they made their election under the terms of the [shareholders agreement]. If, having been returned to the status quo before their election, [Trailblazer and Brownstein] decide to return the $1,090,000 and take the `fair market value of Trailblazers 49.55% interest in TTC, the procedure for determining fair market value is set forth in [s]ection 4.1.E. of the [shareholders agreement.]"
2. Partial Final Award
The principal arbitration hearings occurred in early September 2006. In a letter to the parties dated September 25, 2006, Judge Saeta announced his conclusions on several issues. He denied any recovery to RapidText and TTC on their counterclaim. Regarding Trailblazer and Brownsteins original claims, he found that they had established only $36,824 in damages for unpaid commissions.
Regarding Trailblazer and Brownsteins claims arising from the sale of Trailblazers TTC shares, Judge Saeta stated: "[RapidText] as majority shareholder in TTC, and Woods and Johnson as directors and officers of [RapidText], owed a duty . . . to [Trailblazer] as a minority shareholder to reveal [the negotiations with PSI]. . . . In addition, [RapidText] had a duty of good faith and fair dealing under its agreements with [Trailblazer] . . . . [¶] [RapidText] was taking for itself an advantage it did not want to share with [Trailblazer]. . . . The [PSI] discussions started May 11, 2005 and a flurry of e[-]mails and meetings occurred before the deadline date on June 2, 2005 on the call. The issue is not whether at that time the deal with [PSI] would actually happen. Rather, it is whether [Trailblazer and Brownstein] should have been armed with the knowledge . . . so [they] could make their own judgment as to whether to take the call price or ask for a fair market value appraisal. [Their expert witness] was persuasive on this point that such information would have been useful to [them]."
In discussing potential remedies, Judge Saeta noted several difficulties in assessing Trailblazers and Brownsteins damages from this misconduct; in addition, he rejected appellants contention that Trailblazer and Brownstein had waived their right to the fair market value of their shares by failing to elect that option in June 2005, reasoning that appellants "[could] not on the one hand deny [Trailblazer and Brownstein] their right to material information in order to make an informed choice and on the other hand bind [them] to that choice." Judge Saeta concluded: "[A]s I am persuaded that the better course is to follow the procedures the parties bargained for in 2003, I will enforce the contract." He further stated: "[Trailblazer] shall have 10 days from the date a partial final award based on this reasoning becomes final to elect fair market value of its 49.55 % share of TTC as of May 30, 2005. Failing such election, the call transaction will be affirmed. If the election to obtain fair market value is made, the parties shall follow the appraisal provisions of the Shareholder Agreement Section 4.1.E.[,] including the negotiation period. The parties are at liberty to agree to changes in those appraisal procedures. Any disputes about the appraisal shall be presented by motion to the arbitrator."
On October 6, 2006, Trailblazer and Brownstein elected to seek the fair market value for their shares. On November 28, 2006, Judge Saeta established rules for the appraisal that limited the appraisers to records and other materials "in existence prior to August 1, 2005, i[.]e[.], the same materials that they would have had access to if the option had been exercised in 2005." He explained that the rules were necessary "[a]s it [was] the intent of the September 25, 2006 letter to put the parties back in the position they were in as of May 30, 2005 when the option to obtain fair market value for Trailblazer[s] shares could have been exercised."
On December 2, 2006, Judge Saeta issued a "Partial Final Award" that accorded Brownstein $36,824 in damages for unpaid commissions and reiterated his ruling in the September 25, 2006 letter regarding the appraisal process. Judge Saeta reserved the authority to adjust his final award, if necessary, in light of the results of the appraisal process.
3. Appraisal Proceedings
Trailblazer and RapidText each appointed an appraiser. Trailblazers appraiser estimated that the shares fair market value as of May 30, 2005, was $1,536,050, whereas RapidTexts appraiser estimated that their value at that time was $946,405. Because the estimates differed by more than 10 percent, the two appraisers selected a third appraiser, a firm known as "Stout/Risius/Ross" (SRR), which opined that the value of the shares as of May 30, 2005, was $1,152,000.
In a letter to Judge Saeta dated February 15, 2007 RapidText and TTC contended that the fair market value of the shares, as determined under Section 4.1.E. of the shareholders agreement, was $1,049,202.50, that is, the average of RapidTexts appraisal and SRRs appraisal, which differed the least in value. As RapidText had paid $1,090,000 for the shares, RapidText and TTC asserted that they were entitled to an offset of $40,797.50 against the $36,824 award of damages to Brownstein, resulting in a net recovery to them of $3,973.50. RapidText and TTC further argued that this net recovery was relevant to the determination of a contract-based award of attorney fees, which Judge Saeta had deferred to the completion of the appraisal process.
On February 21, 2007, Trailblazer and Brownstein filed a motion to strike SRRs appraisal and remove SRR as the third appraiser, contending that RapidText and TTC had contravened Judge Saetas orders by providing SRR with material not accessible in May 2005, including information from Wade Hansen, the PSI employee who negotiated the purchase of RapidText and TTC. Following a hearing on March 19, 2007, Judge Saeta determined that SRR had, in fact, relied on information from Hansen that was not available prior to August 1, 2005, and that its appraisal suffered from other flaws. He set aside SRRs appraisal and ordered the parties appraisers to select a new third appraiser. RapidText and TTC filed a motion to reinstate SRRs appraisal, arguing that Judge Saeta lacked the authority to strike it. Judge Saeta denied the motion, and again directed the parties appraisers to select a new third appraiser.
Judge Saeta later denied Trailblazers and Brownsteins request for sanctions against appellants and SRR, reasoning that his orders regarding the third appraisal had not expressly proscribed contacts with Hansen, and thus were not "explicit enough to charge anyone with a violation."
The parties appraisers were unable to agree on a new third appraiser. To resolve the impasse, Judge Saeta adopted a procedure based on Code of Civil Procedure section 1281.6, which provides that when the contract-based method for selecting an arbitrator fails, the trial court shall select nominees from lists of candidates submitted by the parties; if the parties do not agree on a nominee, the trial court is authorized to select an arbitrator. Judge Saeta stated: "The remedy I have chosen here is not an ultimate remedy in an award, but a procedural remedy that is as closely related to the appraisal provisions of the parties contract as possible . . . ."
After both sides nominated candidates, they failed to agree on an appraiser. On June 29, 2007, Judge Saeta selected Todd Moody of Ernst and Young, and directed the parties to provide him with the documents and other materials available to the other appraisers. RapidText, TTC, Woods, and Johnson refused to participate further in the appraisal process, contending that Judge Saeta had exceeded his authority as an arbitrator by departing from the procedure described in section 4.1.E. of the shareholders agreement. They again argued that Judge Saeta was obliged to recognize and rely upon the SRR appraisal.
On July 12, 2007, Judge Saeta ruled that RapidText, TTC, Woods, and Johnson had waived their right to participate in the appraisal process, but concluded that relying on a "unilateral third appraisal" would be "unfair." He stated: "In this state of affairs, with no reasonable possibility of going forward with a new third appraiser, I plan to exercise my arbitrators powers to conclude this arbitration as expeditiously as possible. . . . [¶] . . . There being no prospect of a new appraisal and no reinstatement of the SRR appraisal, I will use what has been provided by the original appraisers." Judge Saeta ruled that the average of the original appraisals constituted the fair market value of shares on May 30, 2005, resulting in an additional award of $150,727.50 in damages to Trailblazer and Brownstein.
On September 7, 2007, Judge Saeta issued his final award, which affirmed the damages stated in the partial final award, and added the damages determined through the appraisal process. In addition, he awarded Trailblazer and Brownstein a total of $786,298 in attorney fees and costs as the prevailing parties in the arbitration.
C. Petitions to Confirm and Vacate
On September 20, 2007, Trailblazer and Brownstein filed a petition to confirm the award, and RapidText, TTC, Woods, and Johnson filed petitions to vacate the award. Following a hearing, the trial court confirmed the award. The trial court found that Judge Saeta had the authority as arbitrator to strike the SRR appraisal; that appellants refusal to participate in the appraisal process following Moodys appointment made it impossible to obtain a third appraisal; and that Judge Saeta had the authority as arbitrator to determine the shares fair market value by reference to the original two appraisals. The trial court observed: "[W]hen a party chooses to refuse to obey an order of an arbitrator, . . . making it impossible for the arbitrator to follow the terms of the contract, that party is engaging in a very foolish and very risky behavior, and to come to this court and to ask for relief in light of that conduct, it is very much not to be encouraged." Judgment was entered February 7, 2008. This appeal followed.
DISCUSSION
Appellants contend that the trial court improperly confirmed the award. We disagree.
A. Governing Principles
To enforce the finality of arbitration, the statutes governing nonjudicial arbitration awards minimize judicial intervention. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 10 (Moncharsh).) Once a petition to confirm an award is filed, the superior court has only four courses of conduct: to confirm the award, to correct and confirm it, to vacate it, or to dismiss the petition. (United Brotherhood of Carpenters etc., Local 642 v. DeMello (1972) 22 Cal.App.3d 838, 840; 6 Witkin, Cal. Procedure (5th ed. 2008) Proceedings Without Trial, § 566, pp. 1071-1073.) The trial court is empowered to correct or vacate the award, or dismiss the petition, upon the grounds set out in the pertinent statutes; "[o]therwise courts may not interfere with arbitration awards." (Santa Clara-San Benito Etc. Elec. Contractors Assn. v. Local Union No. 332 (1974) 40 Cal.App.3d 431, 437; see also Moncharsh, supra, 3 Cal.4th at pp. 10-13.)
Here, appellants sought to vacate the award on the ground that Judge Saeta "exceeded [his] powers" in making the award (Code Civ. Proc, § 1286.2, subd. (a)(4)). They argued that Judge Saeta lacked the authority to depart from the appraisal procedure set forth in section 4.1.E. of the shareholder agreement. As this contention presents a question of law on essentially undisputed facts, we do not defer to the trial court, and independently examine the underlying award. (Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 376, fn. 9 (Advanced Micro Devices).)
Generally, we apply a highly deferential standard of review to an arbitration award, insofar as our inquiry encompasses the arbitrators resolution of questions of law or fact. Absent exceptional circumstances, we will not examine an award for errors of fact or law. As our Supreme Court explained in Moncharsh, supra, 3 Cal.4th at page 10, the finality of arbitration awards is rooted in the parties agreement to bypass the judicial system. Accordingly, "it is the general rule that, `The merits of the controversy between the parties are not subject to judicial review. [Citations.] More specifically, courts will not review the validity of the arbitrators reasoning. [Citations.] Further, a court may not review the sufficiency of the evidence supporting an arbitrators award. [Citations.] [¶] Thus, . . . with narrow exceptions, an arbitrators decision cannot be reviewed for errors of fact or law." (Id. at p. 11.) Such an exception may arise when the arbitrator imposes a remedy not authorized by the arbitration agreement (Advanced Micro Devices, supra, 9 Cal.4th at p. 375).
Appellants invoke this exception, contending that Judge Saeta contravened the express limits on his powers in the arbitration clause. They argue that Judge Saeta was obliged to enforce the appraisal procedure set forth in section 4.1.E., and that the arbitration clause denied him the authority to depart from the procedure on equitable grounds. According to appellants, Judge Saeta exceeded his authority by (1) striking the SRR appraisal, (2) appointing a new third appraiser, and (3) averaging the two initial appraisals to fix the value of the shares when appellants refused to cooperate with the new third appraiser.
Appellants also contend in their reply brief that Judge Saeta improperly struck the SRR appraisal on excessively flimsy evidence. As this contention was not raised in their opening brief, they have forfeited it. (Horowitz v. Noble (1978) 79 Cal.App.3d 120, 138-139; 9 Witkin, Cal. Procedure (5th ed. 2008) Appeal, § 701, pp. 769-771.) Moreover, the contention would fail on its merits, as we do not review Judge Saetas findings.
Our view of this contention follows established principles. "[A]lthough an arbitrator generally enjoys substantial discretion to determine the scope of his or her contractual authority, courts are bound to uphold the parties express agreement to restrict or limit that authority." (California Faculty Assn. v. Superior Court (1998) 63 Cal.App.4th 935, 944.) We therefore conduct "a de novo review, independent of the trial court," into whether Judge Saeta exceeded his powers as arbitrator. (Id. at p. 945.) "In undertaking our review, however, `we must draw every reasonable inference to support the award." (Ajida Technologies, Inc. v. Roos Instruments, Inc. (2001) 87 Cal.App.4th 534, 541, quoting Pierotti v. Torian (2000) 81 Cal.App.4th 17, 24.)
B. Analysis
The crux of appellants contention is that Judge Saeta, in departing from the appraisal procedure set forth in section 4.1.E. of the shareholder agreement (section 4.1.E.), imposed an equitable remedy in excess of his authority, as the arbitration clause in the merger agreements denied him "the power to award equitable relief or provisional relief." As explained below, appellants are mistaken. By proposing the application of the appraisal procedure, appellants sought an equitable remedy — namely, specific enforcement of section 4.1.E. — and thereby accorded Judge Saeta the authority necessary to implement the remedy.
Damages and specific enforcement are alternative remedies for a breach of contract. (Rogers v. Davis (1994) 28 Cal.App.4th 1215, 1218, fn. 2. (Rogers).) As an equitable remedy, specific performance is appropriately ordered when the legal remedy of damages is not adequate. (13 Witkin, Summary of Cal. Law (2005) Equity, § 24, pp. 312-314.) Among the factors determining the inadequacy of a legal remedy is "the difficulty of proving damages with reasonable certainty." (Rest.2d Contracts, § 360, subd. (a); see Rest. Contracts, § 361.) California courts have recognized that specific performance is an appropriate remedy for the breach of an agreement that permits a party to buy an interest in a business at a price set through an appraisal. Thus, in De Anza Enterprises v. Johnson (2002) 104 Cal.App.4th 1307, 1314-1323, the appellate court affirmed a judgment directing specific performance of an appraisal procedure under the "buy out" provisions of a joint venture agreement. Again, in Polinsky v. Vaughan (1968) 268 Cal.App.2d 183, 188-195, the appellate court reversed a judgment denying specific performance of a contract that entitled the plaintiff to buy shares at an appraised price.
Although a decree of specific performance "should as nearly as possible require performance in accordance with [the] terms" of the pertinent contract (Ellis v. Mihelis (1963) 60 Cal.2d 206, 219), the decree may be adjusted to accommodate circumstances that make exact compliance impossible (Rogers, supra, 28 Cal.App.4th at pp. 1221-1222). "[S]ection 359, subdivision (2) of the Restatement of Contracts (First) provides . . . that a `decree [of specific performance] need not be absolute in form, and the performance that it requires need not be identical with that promised in the contract; it may be so drawn as best to effectuate the purposes for which the contract was made, and it may be granted on such terms and conditions as justice requires. Comments c and d to section 359, subdivision (2) state, in relevant part: `The exact performance that is promised in a contract may be, in part or in whole, very difficult of enforcement, it may have become impossible or unlawful, and it may be such that exact enforcement would work unreasonable hardship. The court may nevertheless be able to achieve substantially the same result without undue difficulty, without hardship to the defendant, and without violation of law or of the rights of third persons. In such cases the decree may be so drawn as best to achieve this result. It may command a performance by the defendant that is not identical with that which he promised to perform; . . . (Rest. (1st) Contracts, § 359, subd. (2), coms. c, d, pp. 639-640; see also Rest.2d Contracts, § 358 and coms. thereto, pp. 166-168.)" (Rogers, supra, 28 Cal.App.4th at pp. 1221-1222, italics omitted.)
An instructive application of these principles is found in Armstrong v. Sacramento V.R. Co. (1921) 52 Cal.App. 110. There, the shareholders in two corporations fell into a dispute over the value of land that one of the corporations had sold to the other. (Id. at p. 112.) To resolve the dispute, the parties entered into a settlement agreement that entitled one side to an amount of land to be determined through an appraisal procedure: each side was to nominate 15 appraisers, from which three appraisers would be selected. (Id. at p. 113.) After the sides submitted their nominees and chose three appraisers, one of the appraisers refused to act. (Ibid.) When one side declined to participate further because the settlement agreement did not provide for a recalcitrant appraiser, the other side obtained a decree of specific performance. (Id. at pp. 112-113.) In affirming the decree, the appellate court rejected the contention that the noncompliant appraiser voided the settlement agreement, reasoning that "the trial court, sitting as a court of equity," was entitled "to take the matter in hand and itself fix the values." (Id. at pp. 116-117.)
Judge Saeta concluded that appellants, in failing to disclose PSIs interest in TTC in May 2005, breached their fiduciary duties and the implied covenant of good faith in the merger agreements. After noting the difficulties in assessing Trailblazers and Brownsteins losses from this misconduct, he adopted the remedy that appellants had proposed, namely, to "return[] [Trailblazer and Brownstein] to the position they were in at the time they made their election" and apply the appraisal procedure set forth in section 4.1.E. As Judge Saeta put the matter, he decided to "enforce the contract." He thus ordered the parties to follow the appraisal procedure, adjusted to limit the appraisers domain of information to that available prior to August 1, 2005.
Under the circumstances, the remedy that appellants proposed was equitable in nature. Although Trailblazer had sold its shares in 2005, Trailblazer and Brownsteins legal remedies for appellants misconduct were inadequate, as their legal damages were difficult to assess. As a remedy, appellants proposed that the parties engage — albeit, belatedly — in the appraisal procedure in section 4.1.E. In our view, this must be regarded as a request for specific performance of the shareholders agreement. (See De Anza Enterprises v. Johnson, supra, 104 Cal.App.4th at pp. 1314-1319 [judgment ordering implementation of contract-based appraisal procedure after date for initiating procedure specified in the contract is for specific performance].)
As appellants requested an equitable remedy, Judge Saeta did not exceed his authority by applying equitable principles in implementing the remedy. Generally, "the parties [to an arbitration] may submit for decision issues they were not contractually compelled to submit to arbitration. In such an event, courts look both to the contract and to the scope of the submissions to determine the arbitrators authority." (J.C. Gury Co. v. Nippon Carbide Industries (USA) Inc. (2007) 152 Cal.App.4th 1300, 1305; Porter v. Golden Eagle Ins. Co. (1996) 43 Cal.App.4th 1282, 1292.) Here, Judge Saeta adopted appellants proposed remedy, and imposed limitations on the appraisers domain of information necessary for its implementation. Having sought an equitable remedy, appellants cannot complain that Judge Saeta exceeded his authority by striking the SRR appraisal to enforce the limits on the information available to the appraisers, and by adjusting the procedure "as justice require[d]" after appellants refused to participate in it (Rest. Contracts, § 359, subd. (2).) We agree with the trial court that appellants, in choosing to disobey Judge Saetas orders, acted at their own peril.
Appellants suggest that they did not, in fact, request the equitable relief that Judge Saeta adopted, noting that they asserted only that the appraisal procedure provided the appropriate remedy if Trailblazer and Brownstein returned the $1,090,000 that they had received for the shares, which Judge Saeta did not require them to do. This contention fails, as the precise remedy that appellants proposed was equitable in nature. As explained above, having submitted an equitable remedy to Judge Saeta, appellants accorded him the authority to adjust the remedy by permitting Trailblazer and Brownstein to retain the $1,090,000, pending an offset following the completion of the appraisal process. (See Ellis v. Mihelis, supra, 60 Cal.2d at p. 220 [monetary offsets may be granted, if necessary, in connection with specific performance].)
Appellants contend that Judge Saeta was obliged to determine the value of the shares on the basis of the SRR appraisal because section 4.1.E. contained no provision for striking it. They are mistaken. In proposing as a remedy that Judge Saeta return Trailblazer and Brownstein "to the position they were in at the time they made their election," appellants authorized Judge Saeta to conduct the appraisal procedure under conditions that reasonably replicated those in existence in mid-2005. Judge Saeta thus properly limited the information upon which the appraisers were to base their valuations. Appellants raised no objection to Judge Saetas orders until he struck the SRR appraisal, which violated the rules he had adopted. Having asked Judge Saeta to return the parties to their positions in mid-2005, appellants cannot reasonably assert that he lacked the authority to enforce rules essential to the remedy they proposed. Judge Saeta therefore properly struck the SRR appraisal.
Appellants reliance on Advanced Micro Devices, supra, 9 Cal.4th 362, Jordan v. Department of Motor Vehicles (2002) 100 Cal.App.4th 431, California Faculty Assn. v. Superior Court, supra, 63 Cal.App.4th 935, and Bonshire v. Thompson (1997) 52 Cal.App.4th 803 is misplaced. These cases stand for the proposition that arbitrators may not ignore express contractual limitations on their powers, but none addresses the principle applicable here, namely, that a party enlarges an arbitrators authority by submitting matters for decision beyond the contractual limits. (Advanced Micro Devices, supra, 9 Cal.4th at p. 383; Jordan v. Department of Motor Vehicles, supra, 100 Cal.App.4th at p. 444; California Faculty Assn. v. Superior Court, supra, 63 Cal.App.4th at pp. 952-953; Bonshire v. Thompson, supra, 52 Cal.App.4th at p. 811.) In sum, the trial court properly confirmed the arbitration award.
DISPOSITION
The judgment is affirmed. Respondents are awarded their costs on appeal.
We concur:
EPSTEIN, P. J.
SUZUKAWA, J.