Opinion
B228232
01-24-2012
JAINN WANG, Plaintiff and Respondent, v. MIN WANG, Defendant and Appellant.
The Thomas Law Group, Stephen J. Thomas, and Tim C. Lin for Defendant and Appellant. David L. Prince and Andrea A. Selkregg for Plaintiff and Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Los Angeles County Super. Ct. No. BS124078)
APPEAL from an order of the Superior Court of Los Angeles County, Joanne O'Donnell, Judge. Reversed with directions.
The Thomas Law Group, Stephen J. Thomas, and Tim C. Lin for Defendant and Appellant.
David L. Prince and Andrea A. Selkregg for Plaintiff and Respondent.
In this appeal from an order vacating an arbitration award, appellant Min Wang contends that because the arbitrator did not exceed his powers, the petition to vacate the award should not have been granted. Based on our determination that appellant is correct, we reverse with directions.
BACKGROUND
The parties to this appeal are appellant Min Wang and respondent Jainn Wang. Given that the parties have the same surname, we will refer to them by their first names with no disrespect intended.
In May 2007, Min purchased a partnership interest in Jainn's coffee shop. Jainn and Min signed a May 1, 2007 partnership agreement (Agreement), which contained an arbitration clause that incorporated the Commercial Arbitration Rules (Rules) of the American Arbitration Association (AAA). The arbitration clause stated that "[a]ny controversy or claim arising out of . . . this Agreement . . . shall be submitted to three arbitrators and settled by arbitration . . . in accordance with the rules then obtaining of the American Arbitration Association. Any award made by a majority of such arbitrators shall be final, binding, and conclusive on all parties hereto for all purposes, and judgment may be entered thereon in any court having jurisdiction thereof."
After a dispute arose under the Agreement, Min submitted to the AAA an online demand for arbitration (online submission form) on September 17, 2008. Of relevance to this appeal, the information provided by Min in the online submission form included the following: (1) "Claim Amount: $54,000.00"; (2) "Arbitration Clause: See uploaded document"; (3) "Contract Date: 05/01/2007"; and (4) "Number of Neutrals: 3."
In reply to Min's online submission form, the AAA provided the following instructions: "To institute proceedings, please send a copy of this form and the Arbitration Agreement to the opposing party. Your demand/submission for arbitration/mediation has been received on 08/17/2008 16:13 EST."
On September 18, 2008, the AAA sent Min and Jainn a letter and information concerning the arbitration process. In its letter, the AAA acknowledged Min's demand for arbitration of a dispute arising from a contract that contained an arbitration clause providing for administration by the AAA. The letter further stated: "We understand that a copy [of the online submission form] was sent to [Jainn]. A copy of our Commercial Rules[] may be obtained from our website at www.adr.org." The letter scheduled a telephonic conference at which the parties would discuss a number of procedural matters, including the "number of arbitrators" to be appointed.
In the online submission form, Min had specified a panel of three arbitrators. Under the AAA's Expedited Procedures, however, smaller claims are generally heard in a single day by a sole arbitrator whose rate of compensation is fixed by the AAA. (See AAA Rules, §§ E-4(a), E-8, E-10, R-1(b) ["Unless the parties or the AAA determines otherwise, the Expedited Procedures shall apply in any case in which no disclosed claim or counterclaim exceeds $75,000, exclusive of interest and arbitration fees and costs."].)
In its November 7, 2008 letter to the parties, the AAA proposed that Min's $54,000 claim be heard by a single arbitrator, Robert Klein, under the AAA's Expedited Procedures. Enclosed with the November 7 letter was a "Notice of Compensation Arrangements," which explained that under the AAA's Expedited Procedures, arbitrations are generally completed within one day and that, in this instance, Klein's compensation for the first day would be set at $1,050, after which his rate would increase to $360 per hour.
Although the submission form had specified a panel of three arbitrators, the parties agreed to Klein's appointment as the sole arbitrator under the AAA's Expedited Procedures. The parties voluntarily participated in a one-day arbitration hearing conducted by Klein on August 13, 2009. Klein issued an award in favor of Min (the award) on October 22, 2009. With regard to Klein's appointment as the sole arbitrator, the award stated in relevant part that Klein had "been designated in accordance with the arbitration agreement set out in the General Partnership Agreement ('Agreement') dated May 1, 2007, entered into by the above-named parties."
The award stated in relevant part: "For the reasons stated above claimant Min Wang is entitled to recover his total investment of $54,200 plus interest at 10% per annum beginning May 30, 2007 until paid. [¶] In light of the findings above, and considering the nature of the respondent's acts, and the amount of compensatory damages, punitive damages in the amount of $10,000 are awarded claimant which will bear interest at the rate of 7% per annum beginning on November 1, 2009 until paid. [¶] The administrative fees and expenses of the American Arbitration Association totaling $1,450 shall be borne by respondent, and the compensation and expenses of the arbitrator totaling $1050 shall be borne by respondent. [¶] This award is in full settlement of all claims submitted in this arbitration. All claims not expressly granted herein are denied."
On December 15, 2009, Jainn petitioned the superior court to vacate the arbitration award under Code of Civil Procedure section 1286.2, subdivision (a)(4), which applies where "[t]he arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted." Jainn argued, for the first time, that Klein had exceeded his powers by issuing an award in violation of Jainn's contractual right to a panel of three arbitrators.
In support of his petition, Jainn submitted the declaration of his attorney, David L. Prince, who attested that "[w]hen [Min] served [Jainn] with a copy of the Online Filing Demand for Arbitration, it did not include the 'uploaded document' allegedly containing the arbitration clause." Based solely on Prince's declaration that the "copy of the Online Filing Demand for Arbitration . . . did not include the 'uploaded document' allegedly containing the arbitration clause," Jainn claimed that he did not waive his contractual right to a three-arbitrator panel, stating: "Waiver of a contractual right is generally described as an intentional relinquishment of a known right. [Citation.] As stated previously, [Jainn] was not correctly served with a copy of the Arbitration Agreement before it was summarily assigned a single arbitrator. [Jainn] was not aware of his right to a three arbitrator panel until after arbitration had already begun. In fact, the only party with knowledge [of] the language of the Arbitration Agreement at the time the parties were assigned a single arbitrator was [Min]. As such, [Jainn] never knowingly or intentionally waived any right to have the matter heard before a three arbitrator panel."
In response to Jainn's petition to vacate, Min requested that the superior court confirm the award and enter judgment in accordance with the award. (Code Civ. Proc., § 1285.2 ["A response to a petition under this chapter may request the court to dismiss the petition or to confirm, correct or vacate the award."].)
Min argued that Jainn's petition to vacate the award should be denied on the grounds of "waiver, estoppel and laches." Min contended that Jainn had been aware of his contractual rights at the time of the hearing and had participated without objection, which constituted a forfeiture of any contractual right to a panel of three arbitrators. Min pointed out that even if Jainn's copy of the online submission form did not include the "uploaded document" containing the arbitration clause, Jainn was a signatory to the Agreement and was aware of its terms: "Given this knowledge, [Jainn] effectively waived his rights to a three-member arbitration panel when he agreed and submitted to arbitration on August 12, 2009. Prior to the Petition for Order Vacating Arbitration Award, [Jainn] was aware that only one arbitrator had been appointed and made no objections until after an award in [Min's] favor was rendered. [Jainn] is precluded from the relief he has requested under affirmative defenses of waiver, estoppel and laches."
At the July 16, 2010 hearing on the parties' competing requests to vacate and confirm the award, the trial court ruled in favor of Jainn and directed his attorney to prepare a proposed order. In its tentative ruling, the trial court cited Parker v. McCaw (2005) 125 Cal.App.4th 1494, 1506 (Parker), and Szuts v. Dean Witter Reynolds, Inc. (1991) 931 F.2d 830, 831 (Szuts), for the proposition that the right to a three-arbitrator panel is a substantial contractual right. Based on that right, the trial court stated that "[Min's] waiver argument has no merit. Although [Jainn], as a signatory to the contract, should ordinarily be charged with knowledge of his right to a three-arbitrator panel, the facts weigh against such a finding in this case. First, [Min] did not follow the proper procedure for instituting the arbitration proceeding in that he failed to serve [Jainn] with a copy of the Arbitration Agreement when he served the Online Filing demand for Arbitration. [Internal record reference omitted.] It would be unfair to charge [Jainn] with knowledge of the term when [Min] arguably tried to hide it from him. In any event, [Min] provides no legal authority for the proposition that the 'substantial contractual right' to a three-arbitrator panel recognized in Parker can be waived simply by submitting to arbitration with a sole arbitrator."
On August 11, 2010, the trial court entered a written order granting Jainn's petition to vacate the award and denying Min's request to confirm the award. The August 11 order stated that "[t]he arbitrator who rendered the Award exceeded his power in that the agreement providing for arbitration requires that any arbitration be held before a three arbitrator panel and that any award be rendered by a majority of said arbitration panel. The Court finds that the right to a three arbitrator panel is a substantial contractual right and that [Jainn] did not waive that substantial contractual right by submitting to the arbitration before a sole arbitrator. [¶] The Court therefore vacates the Award and by vacating the Award does not confirm the Award as requested by [Min] in the Response, and thus, the relief requested by [Min] in the Response is denied."
On August 26, 2010, Min moved for reconsideration under Code of Civil Procedure section 1008 and, alternatively, relief under Code of Civil Procedure section 473. After the trial court denied Min's motion, this timely appeal followed.
DISCUSSION
I. The Petition to Vacate the Award
"On appeal from an order vacating an arbitration award, we review the trial court's order (not the arbitration award) under a de novo standard. (Reed v. Mutual Service Corp. (2003) 106 Cal.App.4th 1359, 1364-1365 [disapproved on another ground in Haworth v. Superior Court (2010) 50 Cal.4th 372, 382, fn. 6].) To the extent that the trial court's ruling rests upon a determination of disputed factual issues, we apply the substantial evidence test to those issues. (Id. at p. 1365; see also Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 376, fn. 9.)" (Malek v. Blue Cross of California (2004) 121 Cal.App.4th 44, 55-56.)
In this case, the trial court vacated the award under Code of Civil Procedure section 1286.2, subdivision (a)(4), which applies where "[t]he arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted." The trial court offered three explanations for its determination that Klein had exceeded his powers: (1) the Agreement provided for arbitration before a panel of three arbitrators, which is a substantial contractual right; (2) "[i]t would be unfair to charge [Jainn] with knowledge of the term when [Min] arguably tried to hide it from him"; and (3) Jainn did not waive this contractual right by voluntarily participating in the arbitration hearing before a single arbitrator. Because we conclude that the trial court's latter determinations are not supported by the record, we reverse the order vacating the award.
"'"[A]n arbitrator exceeds his powers when he acts in a manner not authorized by the contract or by law." . . . "In determining whether an arbitrator exceeded his powers, we review the trial court's decision de novo, but we must give substantial deference to the arbitrator's own assessment of his contractual authority."' (O'FIaherty v. Belgum [(2004)] 115 Cal.App.4th [1044,] 1056, citations omitted; accord, Advanced Micro Devices, Inc. v. Intel Corp., supra, 9 Cal.4th at pp. 372-373.)" (Greenspan v. LADT, LLC (2010) 185 Cal.App.4th 1413, 1437 (Greenspan))
In this case, the arbitrator found that he had "been designated in accordance with the arbitration agreement set out in the General Partnership Agreement ('Agreement') dated May 1, 2007, entered into by the above-named parties . . . ." In reviewing this assessment of his contractual authority, we are not limited solely to the parties' agreement, but may also look at the submission agreement and the AAA's Rules. (See Greenspan, supra, 185 Cal.App.4th at pp. 1437-1438.)
Given that Jainn was a signatory to the Agreement and presumably knew its terms, and given that Min's online submission form had requested the appointment of three arbitrators, the record does not reasonably support an inference that Min was trying to hide Jainn's contractual right to a three-person panel of arbitrators. The record strongly suggests that the parties' decision to use only one arbitrator was driven by the AAA's Rules, which the parties had incorporated into their Agreement. The Agreement specified that the parties' dispute would be submitted to a panel of three arbitrators under the Rules of the AAA. The AAA's Expedited Procedures provided that, unless the parties or the AAA determined otherwise, smaller claims would be heard by one arbitrator whose rate of compensation would be fixed by the AAA.
The record, viewed in the light most favorable to Jainn, establishes that even if Jainn was unaware of his contractual right to three arbitrators when Klein's appointment was made, Jainn was aware of his contractual right by the time of the arbitration hearing. According to Jainn's petition to vacate, he "was not aware of his right to a three arbitrator panel until after arbitration had already begun." This statement, in our view, constitutes a concession that Jainn was aware of his contractual rights during the arbitration. On this record, we are compelled to conclude that the objection raised for the first time in the motion to vacate the award was untimely as a matter of law.
Our conclusion that the objection was untimely is supported by J.C. Gury Co. v. Nippon Carbide Industries (USA) Inc. (2007) 152 Cal.App.4th 1300. In that case, the arbitrator's award concluded that a contractual provision was unconscionable and unenforceable, and awarded damages to the respondent on that basis. After the superior court confirmed the award and entered judgment for the respondent, the appellant argued that the arbitrator's power to find the clause unconscionable or unenforceable was limited by the arbitration clause. The appellate court rejected this argument, stating that "[a] party cannot wait until after an award is made to claim that an issue expressly presented to the arbitrator for decision is beyond his authority." (Id. at p. 1302.) It further explained: "In short, the record supports only one conclusion: that both parties unequivocally submitted the issue of unconscionability to arbitration. Having done so, Nippon Carbide may not now complain that the arbitrator exceeded his authority. (Porter v. Golden Eagle Ins. Co. (1996) 43 Cal.App.4th 1282, 1291, fn. 7 ['a party may not fully argue the merits of an issue and present its desired outcome thereon, then claim on review that this was merely its way of telling the arbitrator he could not consider the issue'].) As stated in an early decision, 'It would seem . . . intolerable to permit a party to play fast and loose with the administration of justice by deliberately standing by without making an objection of which he is aware and thereby permitting the proceedings to go to a conclusion which he may acquiesce in, if favorable, and which he may avoid, if not.' (Lindsay-Strathmore I. Dist. v. Superior Ct. (1920) 182 Cal. 315, 338.)" (J.C. Gury Co., supra, at p. 1306.)
Similarly, in this case, we conclude that a party cannot wait until after an award is made to claim that the arbitrator, who was appointed under the AAA's Expedited Procedures without objection by either party, was not authorized to issue the award because the contract provided for a panel of three arbitrators. The decisions relied upon by the trial court (Parker, supra, 125 Cal.App.4th 1494; Szuts, supra, 931 F.2d 830) do not compel a different result. Both cases are distinguishable because neither involved an untimely objection to the number of arbitrators. In Parker, an objection was timely raised at the motion to compel arbitration, and it was the trial judge who compelled the parties to proceed before a single arbitrator. (Parker, supra, at p. 1502.) Likewise, in Szuts, an objection was timely raised immediately following the disqualification and removal of one of three arbitrators during the arbitration. (Szuts, supra, at p. 830.) Neither case stands for the proposition that a party may wait until after an award is entered to claim that the arbitrator, whose appointment under the AAA's Expedited Procedures was voluntarily agreed upon by both parties, was not authorized to issue the award because the contract provided for a panel of three arbitrators.
II. The Request to Confirm the Award
Min contends that the trial court erroneously denied his request to confirm the award and asks that we "enter an order confirming the arbitration award, or in the alternative, remand this matter to the trial court." Jainn does not address this issue in his respondent's brief.
In light of our determination that the petition to vacate the award should have been denied, it appears that the request to confirm the award should have been granted. "Under [Code of Civil Procedure] section 1286, the superior court has only four options when a petition to confirm or vacate an arbitration award is filed. The superior court may (1) confirm the award as made; (2) correct the award and confirm it as corrected; (3) vacate the award; or (4) dismiss the proceeding." (Kelly Sutherlin McLeod Architecture, Inc. v. Schneickert (2011) 194 Cal.App.4th 519, 527-528.) Jainn does not argue that, in the event of a reversal, the award should not be confirmed, or the award requires correction, or the proceeding should be dismissed. As it appears that confirmation of the award is the only applicable alternative, we remand with directions to grant appellant's request to confirm the award.
DISPOSITION
The August 11, 2010 order granting respondent Jainn Wang's petition to vacate the arbitration award and denying appellant Min Wang's request to confirm the award is reversed. The matter is remanded with directions to enter a new order granting appellant Min Wang's request to confirm the award. Appellant is awarded his costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
SUZUKAWA, J. We concur:
WILLHITE, Acting P. J.
MANELLA, J.