Judge: Eddie C. Sturgeon, Case: 37-2023-00024668-CU-PA-CTL, Date: 2023-12-15 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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HALL OF JUSTICE

TENTATIVE RULINGS - December 14, 2023

12/15/2023  09:00:00 AM  C-67 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Eddie C Sturgeon

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Civil - Unlimited  Petition re: Arbitration Award Motion Hearing (Civil) 37-2023-00024668-CU-PA-CTL SENSORMETRIX INC VS DZINE UNLIMITED INC [IMAGED] CAUSAL DOCUMENT/DATE FILED: Petition - Other, 05/15/2023

Petitioner and Respondent SensorMetrix's ('Petitioner') Petition for Order Confirming Arbitration Award is GRANTED. Petitioners and Respondents Dzine Unlimited, Inc.'s Petition to Vacate is DENIED.

As an initial matter, SensorMetrix's Objection Nos. 2, 4-32 are sustained to the declaration Mr. Darren Shurig based on hearsay and improper legal conclusions.

'Any party to an arbitration in which an award has been made may petition the court to confirm . . . the award.' (Code Civ. Proc., § 1285.) '[A]s a general rule courts will indulge every reasonable intendment to give effect to arbitration proceedings.' (Marsch v. Williams (1994) 23 Cal.App.4th 238, 243.) '[A]n arbitrator's decision is not generally reviewable for errors of fact or law, whether or not such error appears on the face of the award and causes substantial injustice to the parties.' (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 6.) Absent specific statutory grounds to correct or vacate an arbitration award, the court is generally required to confirm the award if the petition is 'duly served and filed.' (Code Civ.

Proc. § 1286.) In other words, an arbitration award 'is not subject to judicial review except on the grounds set forth in sections 1286.2 (to vacate) and 1286.6 (for correction).' Dzine's petition to vacate argues that the arbitrator exceeded their power by (1) considering extrinsic evidence despite the underlying contract's integration clause; (2) awarding damages and fees to SensorMetrix based on a breach of oral contract that was not pled in any counterclaim; and (3) allowing hearsay evidence to be presented. Dzine also attempts to extensively argue the various merits of its positions in the underlying matter but those arguments are beyond the scope of this court's review. The only considerations are whether the arbitrator exceeded their powers, not whether this court agrees with the arbitrator's reasoning or ultimate findings.

First, the arbitrator did not exceed his authority by considering extrinsic evidence. Courts and arbitrators regularly consider extrinsic evidence when engaging in contract interpretation, even where the contract includes an integration clause. (See Morey v. Vannucci (1998) 64 Cal.App.4th 904, 912, n. 4 [courts 'have long recognized that even when a contract is integrated-that is, intended to constitute the parties' final and complete understanding of the terms of the agreement-the meaning of the terms of the contract still must be ascertained.'].) In support of its argument, Dzine points to Bonshire v. Thompson (1997) 52 Cal.App.4th 803, where an arbitration award was vacated when the arbitrator considered extrinsic evidence in violation of the underlying contract. There, the parties had included a clause in the arbitration agreement that stated, 'no extrinsic evidence whatsoever may be introduced in any judicial or arbitration proceeding, if any, Calendar No.: Event ID:  TENTATIVE RULINGS

2996255  6 CASE NUMBER: CASE TITLE:  SENSORMETRIX INC VS DZINE UNLIMITED INC [IMAGED]  37-2023-00024668-CU-PA-CTL involving this agreement.' (Id. at 806.) The court based its ruling on this 'unusual prohibition against extrinsic evidence' and concluded that 'when the arbitration clause of a contract specifically prohibits the arbitrator from considering extrinsic evidence, the arbitrator acts in excess of his or her powers in receiving such evidence, over objection, and using it as a basis for the ensuing award.' (Id. at 805-806.) In contrast, the agreement here contains only a standard integration clause, separate from the arbitration clause, that does not purport to expressly limit the arbitrator's powers. (See ROA 5, Cole Decl., Ex. B, §§ 12, 15.) As such, the arbitrator was well within their power to consider any extrinsic evidence in determining the intent of the parties with respect to the contract at issue. This court may not second guess the conclusions reached by the arbitrator.

Second, the arbitrator based its award on written contracts, not any oral contract. Dzine argues that the arbitrator impermissibly awarded damages and fees to SensorMetrix based on a breach of oral contract that was not pled in SensorMetrix's counterclaims and without requiring SensorMetrix to seek leave to amend. The arbitrator expressly found that 'Mr. Shurig acknowledged to Dr. Tatiana Starr in a March 10, 2021 email that there were only two contracts, both written – the original NCHS subcontract and the Alignment and Calibration contract' and '[t]hus, the work Dzine performed after completion of [the first two modifications] were not work different from that contemplated in the written NCHS subcontract, but were services specifically called for under subsequent modules of that contract.' (ROA 5, Cole Decl., Ex. A [Award], p. 12.) Accordingly, the arbitrator's award was based on the written contracts and not any subsequent oral agreement, regardless of Dzine's theory of the case. Even if this court were to disagree with that finding, it would be an insufficient ground for vacating the award.

Third, whether the arbitrator permitted hearsay is irrelevant for this court's analysis. Hearsay may be permitted in AAA arbitration at the discretion of the arbitrator (AAA Commercial Arb. Rules R-34 ['[c]onformity to the legal rules of evidence shall not be necessary']) and, in any case, the parties have not provided any actual record of what hearsay testimony or rulings occurred during the arbitration other than Mr. Shurig's hearsay declaration.

Because the court finds no grounds to vacate the arbitration award and the petition to confirm is procedurally sound, the award is confirmed.

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