BACKGROUND 

  This case arises from a breach of a licensing agreement.  Petitioner GW Montebello, Inc. (“GWM”) is a cannabis company in California.  Respondent Inde Can LLC is a start up cannabis-infused beer company.   

In 2001, GWM decided to exit the California market.  It entered into a confidential licensing agreement (“CLA”) with Inde.  The purpose of the CLA was to allow Inde to prepare the business to be operational once Inde took over GWM, by using GWM’s licenses, equipment, personnel and facilities.   

Inde defaulted on its payment obligations under the CLA.  As part of its efforts to raise capital to pay GWM, Inde sold GWM’s equipment.  There had been some discussion about selling equipment to cover part of the fees Inde owed, but GWM was not aware that Inde was actually selling the equipment on Craig’s list.   

The parties then negotiated and executed a confidential settlement and release agreement (“SAR”), in which a modified payment plan was instituted and the parties released their claims against each other.  Under the SAR, Inde received the benefit of lower payments only if it signed a stock purchase agreement (“SPA”), whereby Inde would purchase all of GWM’s stock and essentially become GWM. 

Inde never signed the SPA.  Instead, it purported to rescind the SAR based on GWM’s alleged fraudulent inducement of the SAR.  Specifically, Inde claimed GWM failed to disclose that it had no intention of renewing its lease at its facility, that GWM did not own the equipment, inventory and packaging located at the facility, that GWM had not obtained the approval of key decisionmakers, and that GWM had no intention of negotiating in good faith and entering into an SPA.   

The CLA contained an arbitration provision which mandates that any controversy or claim arising out of the CLA or the breach thereof, the construction, validity, enforceability or interpretation of the CLA to be resolved by arbitration administered by JAMs.  GWM submitted a demand for arbitration, alleging claims for breach of contract, anticipatory breach of contract, and declaratory relief.  Inde counterclaimed for violation of Bus. & Prof. Code § 17200, fraudulent concealment, fraud and conversion and added Groundworks Holding, LLC (GWM’s parent) as a cross-respondent. 

The arbitrator bifurcated the hearing with Phase I consisting of GWM’s claims and Phase II consisting of Inde’s claim.  After the conclusion of the Phase I hearing, the arbitrator ruled in favor of GWM, awarding $445,668 in damages for breach of contract, $83,000 in damages for conversion of the facility equipment, prejudgment interest, and attorneys fees and costs of $589,910, for a total of $1,219,331.79 (the “Award”).  The Phase II hearing is currently on administrative stay because Inde failed to post its hearing fees. 

This hearing is on GWM’s petition to confirm the Award pursuant to Code Civ. Proc. § 1285 et seq.  GWM argues that the Award represents the final resolution of the arbitration and is a final and confirmable arbitration award under California law.  There was no opposition filed as of the posting of this tentative ruling.   

LEGAL STANDARD 

“Regardless of the particular relief granted, any arbitrator's award is enforceable only when confirmed as a judgment of the superior court.”¿ (O'Hare v. Municipal Resource Consultants¿(2003) 107 Cal.App.4th 267, 278.)¿ “Once a petition to confirm an award is filed, the superior court must select one of only four courses of action: it may confirm the award, correct and confirm it, vacate it, or dismiss the petition.”¿ (EHM Productions, Inc. v. Starline Tours of Hollywood, Inc.¿(2018) 21 Cal.App.5th 1058, 1063.)¿  

“It is well settled that the scope of judicial review of arbitration awards is extremely narrow.”¿ (California Faculty Assn. v. Superior Court¿(1998) 63 Cal.App.4th 935, 943.)¿ “Neither the trial court, nor the appellate court, may ‘review the merits of the dispute, the sufficiency of the evidence, or the arbitrator’s reasoning, nor may we correct or review an award because of an arbitrator’s legal or factual error, even if it appears on the award’s face.¿ Instead, we restrict our review to whether the award should be vacated under the grounds listed in section 1286.2.¿ [Citations.]’”¿ (Id.)¿   

Code Civ. Proc. § 1286.2, subdivision (a), states, in pertinent part:¿¿¿¿¿¿ 

“Subject to Section 1286.4, the court shall vacate the award if the court determines any of the following:¿¿¿ 

¿¿¿ 

(6) An arbitrator making the award¿ . . . (B) was subject to disqualification upon grounds specified in Section 1281.91 but failed upon receipt of timely demand to disqualify himself or herself as required by that provision. . . .”¿¿¿ 

¿¿ 

Limiting grounds for judicial review effectuates the parties’ agreement that the award be¿final. It also reflects that arbitrators ordinarily¿need not follow the law¿and may base their decisions on “broad principles of justice and equity,” “paths neither marked nor traceable by judicial review.” (Moncharsh v. Heily & Blase¿(1992) 3 Cal.4th 1, 11;¿Nogueiro v. Kaiser Found. Hospitals¿(1988) 203 Cal.App.3d 1192, 1195.) 

Only where both (1) the arbitrator abused his or her discretion and (2) there was resulting prejudice, can a trial court properly vacate an arbitration award.¿ (SWAB Financial, LLC v. E*Trade Securities, LLC (2007) 150 Cal.App.4th 1181, 1198.)¿¿¿ 

DISCUSSION 

The Award fails to satisfy the requirements of Code Civ. Proc. §1283.4 because while it is in writing and signed by the Arbitrator, it does not include a determination of all the questions submitted to the arbitrator.  Indeed, the arbitrator has characterized its orders as an “interim award.”  (Award at p. 9.)  Inde’s counterclaims are still pending before the Arbitrator.  The proper course is for GWM to move to dismiss those counterclaims based on Inde’s failure to post hearing fees.  Once those counterclaims are dismissed, then the Court can properly consider GWM’s petition.     

CONCLUSION 

  For the foregoing reasons, the Court DENIES the petition to confirm the arbitration.     

DATED:  March 18, 2025 ___________________________ 

Edward B. Moreton, Jr.