Judge Alison Mackenzie, Case Number: 23STCV10235, Date: 2025-02-21 Tentative Ruling

Judge: Alison Mackenzie, Case: 23STCV10235, Date: 2025-02-21 Tentative Ruling

Case Number: 23STCV10235 Hearing Date: February 21, 2025 Dept: 55

NATURE OF PROCEEDINGS: Hearing on Defendants’ Petition to Confirm Arbitration Award

Defendants’ Petition to Confirm Arbitration Award is granted.

BACKGROUND

Plaintiff Omyomy LLC filed this action against Apartments on 8th, I, II, III LLC, Apartments on 8th, I LLC, Apartments on 8th, II LLC, Apartments on 8th, III LLC, Apartments on 8th LLC, and Adam Peterson (Defendants), alleging Defendants misrepresented the number of persons living at the property that was the subject of their real estate transaction.

On August 4, 2023, the Court signed the parties’ Stipulation for Arbitration and Stay.

On January 2, 2025, the Arbitrator issued a final award in favor of Defendants.

On January 16, 2025, Defendants filed a Petition to Confirm Arbitration Award. On January 23, 2025, Plaintiff filed a Cross-Petition to Vacate the Arbitration Award. Defendants oppose Plaintiff’s Cross-Petition.

LEGAL STANDARD

“On a petition to confirm, correct, or vacate an arbitrator’s award, the 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.” Hall v. Superior Court (1993) 18 Cal.App.4th 427, 433 (citing Code Civ. Proc., § 1286). “The exclusive grounds for vacating an arbitration award are those listed in [Code of Civil Procedure] section 1286.2.” (Paramount Unified School Dist. v. Teachers Assn. of Paramount (1994) 26 Cal.App.4th 1371, 1381 (Paramount). “Absent proof of one of the [six] grounds contained in section 1286.2, a court may not vacate an award for legal or factual error even if the error clearly appears on the face of the award and it causes substantial injustice.” Paramount, supra, 26 Cal.App.4th at p. 1381 (citing Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 27-28.) “‘Every reasonable intendment must be indulged in favor of the award.’” Ibid (quoting Luster v. Collins (1993) 15 Cal.App.4th 1338, 1344-1345) (citations omitted) (internal quotation marks omitted). “The party seeking to vacate an arbitration award bears the burden of establishing that one of the six grounds listed in section 1286.2 applies and that the party was prejudiced by the arbitrator’s error.” Royal Alliance Associates, Inc. v. Liebhaber (2016) 2 Cal.App.5th 1092, 1106.

ANALYSIS

Plaintiff argues that the court must vacate the award because the arbitrator refused to hear material evidence.

Code of Civil Procedure section 1286.2, subd. (a), provides in part, “the court shall vacate the award if the court determines…the rights of the party were substantially prejudiced by the refusal of the arbitrators to postpone the hearing upon sufficient cause being shown therefor or by the refusal of the arbitrators to hear evidence material to the controversy or by other conduct of the arbitrators contrary to the provisions of this title….

“ An arbitration award must be vacated if the rights of a party were substantially prejudiced by the arbitrator’s ‘refusal . . . to hear evidence material to the controversy.’” Schlessinger v. Rosenfeld, Meyer & Susman (1995) 40 Cal.App.4th 1096, 1104 (quoting Code Civ. Proc., §1286.2, subd. (e)) (emphasis omitted).

“The exceptions to the limits on review of awards protect against error that is so egregious as to constitute misconduct or so profound as to render the process unfair…It follows that vacation of an award for ‘refusal … to hear evidence material to the controversy’ must rest on more than a simple error in applying the rules of evidence.” Heimlich v. Shivji (2019) 7 Cal.5th 350, 368 (Heimlich) (citing Code Civ. Proc., § 1286.2, subd. (a)(5)) (fn. omitted). “The provision is not ‘a back door … through which parties may routinely test the validity of legal theories of arbitrators.’” Ibid. (quoting Hall, supra, 18 Cal.App.4th at pp. 438–439). “Instead, it was designed as a ‘safety valve in private arbitration that permits a court to intercede when an arbitrator has prevented a party from fairly presenting its case.’” Ibid (quoting Hall, supra, 18 Cal.App.4th at p 439).

“Where … a party complains of excluded material evidence, the reviewing court should generally focus first on prejudice, not materiality. To find substantial prejudice the court must accept, for purposes of analysis, the arbitrator’s legal theory and conclude that the arbitrator might well have made a different award had the evidence been allowed.” Hall, supra, 18 Cal.App.4th at p 439.

Plaintiff argues that it was prejudiced by the Arbitrator’s limitation on the presentation of videos and photographs “showing that there were in fact 8-12 different individuals living in the property along with their beds and clothing.” Opp. at p. 6:16-18. Similarly, Plaintiff argues that it was prejudiced by the Arbitrator, permitting only one of Plaintiff’s witnesses to testify that “there has been 8-12 people living in the subject property for at least the last 7 or so years.” Opp. at p. 7:16-17. Additionally, the Arbitrator refused to permit Plaintiff to question that witness, and instead, the Arbitrator asked the witness the questions. Id. at p. 7:24-26.

In essence, Plaintiff argues that if it had been permitted to introduce evidence that Defendants lied about the number of tenants living at the property, the Arbitrator may have made a different award. Opp. at p. 8:11-14, 22-26. On the contrary, the Arbitrator’s analysis shows this is not the case. The Arbitrator concluded, “Since The Property would be delivered to Respondent ‘as-is’ with ‘leases in place,’ Claimants had a duty to provide the leases, which they did, and it was incumbent upon the Respondent [(Plaintiff)] to inspect the two units and determine for itself if others were in possession.” Final Award, Analysis p. 23.

Additionally, the Arbitrator found:

The evidence shows that Respondent did not conduct an inspection of The Property nor did it do any investigation of the tenants/occupants in possession of The Property. Mr. Diner admitted that these were not important because he intended to demolish the property. Though he did testify at the Arbitration that he was concerned about tenants or occupants and the amount of time needed to remove them from The Property. If he was concerned, then he should have done an inspection early on and he would have discovered what is shown in his photographs and videos captured on October 8, 2024. (Exhibits 110 and 111)

Final Award, Analysis p. 25.

Moreover, the Arbitrator noted the testimony of Flor Munoz that nine people live on the property. Final Award, Findings of Fact ¶ 58(f). The award is not predicated on a lack of evidence of how many tenants lived on the property, but on the Arbitrator’s determination that Plaintiff was obligated to investigate the matter for itself. Under the Arbitrator’s legal theory, no amount of evidence concerning the number of tenants at the property, or Defendants’ knowledge thereof, would have changed the result. Because the Court finds that the Arbitrator’s exclusion of evidence did not substantially prejudice Plaintiff, it need not consider whether the evidence was material. Accordingly, Plaintiff’s Cross-Petition to Vacate the Award is denied, and Defendant’s Petition to Confirm the Arbitration Award is granted.

CONCLUSION

Defendants’ Petition is granted. The Arbitration Award is confirmed.