Judge: Douglas W. Stern, Case: 20STCV19615, Date: 2023-08-17 Tentative Ruling

Case Number: 20STCV19615    Hearing Date: August 17, 2023    Dept: 68

Jordan Fishman, et al. vs. Advisors, LLP, et al., 20STCV19615

Motion to Vacate Arbitration Award

Moving Parties: Defendants Advisors, LLP, Leigh Morris, and Robert Plotkowski

Background

            Defendants Advisors, LLP, Leigh Morris, and Robert Plotkowski (Defendants) filed this motion to vacate arbitration award because they disagree with the decision of the arbitrator to award attorney’s fees to Plaintiff David Joe (Plaintiff). The arbitrator awarded attorney’s fees in the amount of $220,817.00 to Plaintiff.

            The motion is based on the grounds that: (1) the Arbitrator and the arbitration provider, JAMS, exceeded their authority under the law, the rules that the parties agreed would apply, and this Court’s order of January 13, 2021 by requiring Defendants to pay for the all of the Arbitrator’s fees; (2) the Arbitrator exceeded her authority by awarding Joe relief to which he was not entitled; (3) the Arbitrator exceeded her authority by conducting proceedings and awarding Joe attorney’s fees after the parties had agreed to a settlement whereby their claims were to be dismissed with prejudice; (4) the Arbitration was conducted in a fundamentally unfair and seriously prejudicial manner when JAMS refused to consolidate the Arbitration with a related arbitration that was also pending before JAMS and that involved the same issues based on an erroneous conclusion that the arbitration rules prevented consolidation; (5) the Arbitrator conducted the proceeding that led to the Award in a fundamentally unfair and seriously prejudicial manner by conducting the proceeding without affording Defendants a hearing; (6) in awarding attorneys’ fees to Joe, the Arbitrator knowingly and clearly disregarded and failed to apply the applicable law, including the test applicable to a determination of which party is a “prevailing party”; (7) the Arbitrator exceeded her authority by awarding Joe attorneys’ fees based on time incurred by his counsel in other cases; (8) the Arbitrator failed to resolve all material matters, including a motion filed by two of the Defendants, Morris and Plotkowski, for an award of attorneys’ fees; and (9) the Award purports to enter “judgment” against Morris and Plotkowski even though Joe agreed to dismiss his claims against them with prejudice without receiving anything from them.

            Plaintiff opposes the motion on the basis that JAMS did not exceed its authority by applying the minimum standards; JAMS did not exceed its authority by refusing to consolidate; the arbitrator did not exceed her authority by awarding fees and costs pursuant to an accepted offer under CCP § 998; the arbitrator did not need to hear oral argument in deciding motions; the arbitrator did not exceed her authority by awarded fees to Plaintiff; the arbitrator resolved Morris and Plotkowski’s motion for fees and costs; and the amount of fees that the arbitrator awarded is not reviewable.

            Defendants’ reply mainly reiterates the points from their motion and addresses some of the arguments made by Defendant.

Analysis

            CCP § 1286.2(a) provides that a court shall vacate an arbitration award if: “(1) [t]he award was procured by corruption, fraud or other undue means… (3) [t]he rights of the party [seeking to vacate the award] were substantially prejudiced by misconduct of a neutral arbitrator…[or] [t]he arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy.” This section of the CCP is the primary basis for Defendants’ motion. While Defendants list several reasons for why the arbitration award should be vacated, the main reason is that Defendants disagree with the arbitrator’s decision.

            Defendants required Plaintiff to arbitrate disputes, and now that Plaintiff has prevailed in the dispute, Defendants wish to change the outcome. Outside of CCP 1286.2(a), courts have very little authority to review the decisions of arbitrators. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 13.) The Court in Moncharsh even found that the existence of an error of law apparent on the face of the award that substantial injustice does not provide grounds for judicial review. (Id. at 33.)

            Therefore, the Court shall put aside any argument that Defendants made that the arbitration award was the result of an error of law and focus on their arguments under CCP § 1286.2.

            First then is the argument that the award was procured by corruption, fraud, or other undue means. There is no evidence that there was any corruption or fraud. As for undue means, that should be interpreted by reference to the other terms in the statute, i.e., corruption or fraud. (Pour Le Bebe, Inc. v. Guess? Inc. (2003) 112 Cal.App.4th 810, 826.) Any alleged legal error or overstep of authority would not fall under the category of “undue means.”

            Next is the argument that the arbitrator exceeded her powers. Defendants argue that the arbitrator exceeded her powers by applying JAMS Minimum Standards. The JAMS Minimum Standards were applied because the arbitration agreement as drafted was found to be unconscionable because it required Plaintiff to pay for his arbitrator fees, despite the fact that he was an employee. (Opposition at p. 11.) Even if the decision to use the Minimum Standards was reviewable, which it may not be considering that it was a legal determination, the arbitrator did not exceed her power in applying these standards. The arbitrator found the terms in the agreement to be unconscionable. That is reason enough to apply the Minimum Standards.

            The decision whether or not to consolidate the multiple cases was a decision of law. This Court will not review.

            As for whether the arbitrator exceed her authority by awarding fees and costs pursuant to an accepted offer under CCP § 998, this is likely not reviewable by the Court as it was a decision of law. However, if the Court were to review this action, the Court would find that the arbitrator did not exceed her authority. Despite Defendants’ arguments that there should not have been any post-settlement proceedings, CCP § 998(b)(1) states that “If the offer is accepted…[i]n the case of arbitration, the offer with proof of acceptance shall be filed with the arbitrator…who shall promptly render an award accordingly.” The rendering of the award would be a post-settlement proceeding. Even when a 998 offer is silent as to fees and costs, a party may apply to recover his costs and fees, where applicable. (See, e.g., On-Line Power, Inc. v. Mazur (2007) 149 Cal.App.4th 1079, 1084; Engle v. Copenbarger & Copenbarger, LLP (2007) 157 Cal.App.4th 165, 168; DeSaulles v. Comm. Hosp. of Monterey Peninsula (2016) 62 Cal.4th 1140, 1154.)

            Next, as to whether the arbitrator needed to hear oral arguments on the costs and fees motion, that is not required with that type of motion. Furthermore, courts have held that an arbitrator does not need to receive oral argument to adjudicate a motion: “an arbitrator … ‘hears’ a matter by considering a motion upon presentation thereof by counsel. (Schlessinger v. Rosenfeld, Meyer & Susman (1995) 40 Cal.App.4th 1096, 1105.)

            Defendants also argue that the arbitrator exceed her authority by awarding fees to Plaintiff because the arbitrator misapplied what Labor Code § 218.5 allows in an arbitration. Defendants argue that the part of the section allowing a party to recover attorney’s fees only applies in actions, not arbitrations. However, delineating what may be recoverable in a court action versus what is recoverable in an arbitration would go against the principle in the JAMS Minimum Standards that states in part that “All remedies that would be available under the applicable law in a court proceeding, including attorney’s fees…must remain available in the arbitration.” On the chance that the arbitrator misapplied the law and should not have awarded fees, that decision would not be reviewable by this Court.

            Finally, Defendants appear to argue that the amount of fees awarded by the arbitrator should be reviewable. Whatever factual or legal findings led the arbitrator to award the amount that she did would not be reviewable, either.

            The Court denies Defendants’ motion to vacate the arbitration award on the foregoing basis.

Order

            Defendants’ motion to vacate the arbitration award is DENIED.