Judge: Gail Killefer, Case: 22STCP03304, Date: 2023-03-13 Tentative Ruling
Case Number: 22STCP03304 Hearing Date: March 13, 2023 Dept: 37
HEARING DATE: March 13, 2023
CASE NUMBER: 22STCP03304
CASE NAME: Gerolyn Howard v. Consumer Action Law Group,
et al.
MOVING PARTY: Petitioner and Plaintiff, Gerolyn Howard
OPPOSING PARTIES: Respondents and Defendants, Yelena Gurevich, Consumer
Action Law Group, and Lauren Rode (“Respondents”)
TRIAL DATE: None
PROOF OF SERVICE: OK
MOTION: Petition
to Confirm Arbitration Award; Respondents’ Motion to Vacate Arbitration Award
OPPOSITION: Defendants’
Opposition to Petition—February 27, 2023
REPLY: Plaintiff’s
Opposition to Motion to Vacate—March 1, 2023
TENTATIVE: Defendants’
motion is denied. The parties are instructed to submit supplemental briefing
regarding correcting the Award.
Plaintiff is to give notice.
Background
This is a professional
negligence action arising out of Defendants Consumer Action Law Group (“CALG”),
Yelena Gurevich (“Gurevich”), and Lauren Rode’s (“Rode”) representation of Gerolyn
D. Howard (“Plaintiff”), in the underlying action against Plaintiff’s lender in
foreclosure proceedings for breach of a modification agreement (“Underlying
Action”). According to the Petition,
Defendants breached their fiduciary duty and committed legal malpractice in
their representation of Plaintiff in the Underlying Action.
As Plaintiff signed a
retainer agreement (the “Retainer”) with Defendants regarding her
representation in the Underlying Action with an arbitration provision, the
parties filed a demand for arbitration and commenced arbitration proceedings
with the American Arbitration Association (“AAA”) in the arbitration entitled Gerolyn
D. Howard v. Consumer Action Law Group, et al., Case 01-17-0004-9814 (the
“Arbitration”).
On November 4, 2021, the
parties attended arbitration before the Honorable Anita Rae Shapiro (Ret.)
(“Arbitrator Shapiro”). Arbitrator Shapiro conducted the Preliminary Hearing on
October 15, 2018, and the matter proceeded to an arbitration trial. On November
8, 2021, Plaintiff/Petitioner provided
several complaints to the AAA requesting the removal of her counsel and
Arbitrator Shapiro (“November 8 Complaint”). Arbitrator Shapiro denied the
request for the Arbitrator’s removal, but Plaintiff’s request for removal of counsel
was granted (“Shapiro Ruling”).
On November 18, 2021, AAA
removed Arbitrator Shapiro despite Defendants’ objections. (“Shapiro Removal”).
On January 19, 2022, AAA appointed arbitrator Honorable George J. Kovacevich (“Arbitrator
Kovacevich”) and all parties to the Arbitration accepted his appointment. On
February 10, 2022, AAA confirmed the appointment of Arbitrator Kovacevich. On
April 13 and 15, 2022, the parties conducted further evidentiary hearings.
Arbitrator Kovacevich made
his award on June 17, 2022 (the “Award”), which requires Defendants to pay:
“(i) $321,000.00 for the loss of her home, (ii) emotional distress damages in
the amount of $420,000.00, and (iii) attorneys' fees in the sum of $30,780.00.”
(Petition, Exh. 2.) The Award also provides in pertinent part as follows:
“Accordingly, I AWARD in favor of
Claimant's claims and DENY CALG's counterclaim as follows:
1. CONSUMER ACTION LAW GROUP,
YELENA A. GUREVICH and LAUREN RODE, are jointly and severally liable for and
shall pay to GEROLYN D. HOWARD compensatory damages in the amounts of (i)
$321,000.00 for the loss of her home, (ii) emotional distress damages in the
amount of $420,000.00, and (iii) attorneys' fees in the sum of $30,780.00.
2. Interest shall accrue on these
sums at the California post-judgment statutory rate from the date of this Award
until paid in full.
3. CONSUMER ACTION LAW GROUP
shall take nothing on its counterclaim.
4. The administrative fees of the
American Arbitration Association totaling $2,200.00 and the arbitrator
compensation totaling $8,750.00 shall be borne as incurred.
5. The above sums are to be paid
on or before thirty days from the date of this Award.
6. This Award is in full
settlement of all claims submitted in this Arbitration. All claims not expressly
granted herein, are hereby denied.”
(Petition,
Exhibit 2, p. 16.)
Plaintiff now petitions to
confirm the Award. Defendant now moves to vacate the Award. The parties oppose
the countering motions. As the arguments and analysis regarding both motions are
identical, the court now hears both motions concurrently.
Discussion
I.
Procedural
Requirements
CCP § 1285 provides: “Any
party to an arbitration in which an award has been made may petition the court
to confirm, correct or vacate the award. The petition shall name as
respondents all parties to the arbitration and may name as respondents any
other persons bound by the arbitration award.” Defendants filed their Petition
on October 13, 2021, and named Plaintiff as a respondent. This
is sufficient to comply with the requirements of section 1285. (See CCP §
1285.)
The petition must: “(a) Set forth the substance of or have
attached a copy of the agreement to arbitrate unless the petitioner denies the
existence of such an agreement. (b) Set forth the names of the
arbitrators. (c) Set forth or have attached a copy of the award and the
written opinion of the arbitrators, if any.” (CCP § 1285.4.)
Plaintiff’s
Petition names Arbitrators Shapiro and Koracevich. (Petition, 2-3.) Plaintiff attaches a copy of the Retainer Agreement
for Legal Services as Exhibit 1 to the Petition, and a copy of the Award as
Exhibit 2 to the Petition. Plaintiff’s Petition complies with the requirements
of CCP § 1285.4.
The Petition may
not be served and filed until at least 10 days after service of the signed copy
of the award upon the Petitioner. (CCP § 1288.4.) The Award was served
on all parties on June 17, 2022. (Petition, 3.) Plaintiff’s
Petition was filed on September 7, 2022. The Petition complies with the
requirements of CCP § 1288.4.
II.
Legal Standard
California law favors the resolution of disputes in
arbitration “as a speedy and relatively inexpensive means of dispute
resolution.” (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9 (Moncharsh),
internal quotations omitted.) As a consequence, the grounds for
challenging an arbitration aware are limited: “[I]t is the general rule that,
with narrow exceptions, an arbitrator’s decision cannot be reviewed for errors
of fact or law.” (Id. at p. 11.) The court must
confirm the award as made unless, in accordance with the Code of Civil
Procedures, it corrects the award and confirms it as corrected, vacates the
award, or dismisses the proceeding. (CCP § 1286.)
The court may vacate an arbitration award only on the
grounds set forth in CCP § 1286.2. (Moncharsh, supra, 3
Cal.4th at pp. 12-13.) Section 1286.2 provides that the court
shall vacate the award if it determines any of the following:
1.
The award was procured by corruption,
fraud, or other undue means;
2.
There was corruption in any of the
arbitrators;
3.
The rights of the party were
substantially prejudiced by misconduct of a neutral arbitrator;
4.
The arbitrators exceeded their powers
and the award cannot be corrected without affecting the merits of the decision
upon the controversy submitted;
5.
The rights of the party were
substantially prejudiced by the refusal of the arbitrators to postpone the
hearing upon sufficient cause being shown therefore 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; or
6.
An arbitrator making the award either
failed to disclose a ground for disqualification or was subject to
disqualification but failed upon receipt of timely demand to disqualify himself
or herself.
(CCP § 1286.2(a).)
III.
Analysis
Plaintiff
contends that the Award must be confirmed because none of the circumstances
permitting the court to vacate the Award exists and the Petition conforms to
all of the statutory requirements. (Plaintiff’s Notice of Hearing and
Memorandum of Points and Authorities in Support of Petition (“P. Motion”), 4-7.)
In their opposition and motion to vacate, Defendants
contend that the Award must be vacated for the following reasons: (1) the AAA
allegedly committed misconduct in removing Arbitrator Shapiro in violation of
their Consumer Rules; (2) Arbitrator Koracevich exceeded his powers by issuing
the Award and refusing to hear Defendants’ material evidence; (3) Arbitrator
Koracevich failed to rule on Defendants’ motion to enforce the Shapiro Ruling,
which is still pending. (Opp., 10-11.)
In opposition to Defendants’ motion to vacate, Plaintiff
contends AAA made the administrative decision to remove Arbitrator Shapiro,
duly appointed Arbitrator Koracevich with no objections from any party to the
case, AAA’s decision did not prejudice Defendants, and no grounds exist to
vacate the Award. (P. Opp., 4-9.)
A. Whether AAA Violated AAA Rules 14, 19(a) and 19(b)
The
parties do not dispute that AAA’s consumer arbitration rules apply to the
arbitration. AAA Rule 19 (“Disqualification of Arbitrator”) provides as
follows:
(a) Any
arbitrator shall be impartial and independent and shall perform his or her
duties carefully and in good faith. The AAA may disqualify an arbitrator who
shows
a. (1)
partiality or lack of independence;
b. (2)
inability or refusal to perform his or her duties with diligence and in good
faith; or
c. (3)
any grounds for disqualification provided by applicable law.
(b) If a
party objects to the continued service of an arbitrator, or if the AAA should
so decide to raise the issue of whether the arbitrator should continue on the
case, the AAA will decide if the arbitrator should be disqualified. After
gathering the opinions of the parties, the AAA will decide and that decision
shall be final and conclusive.
(Defendants’
Exhibits in Support of Opposition, Exh. 4, p. 19)
AAA
Rule 14 (“Jurisdiction”) provides as follows:
“(a) The
arbitrator shall have the power to rule on his or her own jurisdiction,
including any objections with respect to the existence, scope, or validity of
the arbitration agreement or to the arbitrability of any claim or counterclaim.
(b) The arbitrator shall have the
power to determine the existence or validity of a contract of which an
arbitration clause forms a part. Such an arbitration clause shall be treated as
an agreement independent of the other terms of the contract. A decision by the
arbitrator that the contract is null and void shall not for that reason alone
render invalid the arbitration clause.
(c) A party must object to the
jurisdiction of the arbitrator or to the arbitrability of a claim or
counterclaim no later than the filing of the answering statement to the claim
or counterclaim that gives rise to the objection. The arbitrator may rule on
such objections as a preliminary matter or as part of the final award.”
(Exhibit 4, p. 17.)
According to Defendants,
AAA violated Rule 14 and 19 because Howard did not object to Arbitrator
Shapiro’s appointment to the matter until the third day of trial, Arbitrator
Shapiro had issued the Ruling following the November 8 Complaint after the AAA
had requested comments following the November 8 Complaint. (Opp., 11-12.) “Arbitrator
Shapiro gave full weight and consideration to Howard’s argument and properly
exercised her power to remain on the case with the granting of additional time
for Howard to seek new counsel prior to the 3rd and final day of the nearly
completed arbitration trial.” (Opp., 12.) Additionally, Defendants assert that
none of the requirements were met under 19(a) to justify Arbitrator Shapiro’s
removal. (Opp., 13-14.) “Arbitrators should avoid being overly cautious about
being perceived as partial and, at the slightest provocation, resign without a
basis for doing so. Even in such circumstances, the decision to resign is that
of the arbitrator.” (Id.) In support, Defendants attach AAA’s November
18, 2021 letter to show a violation of 19(a) and 19(b) as no reason was provided
for removal and the opinions of the parties were not gathered before the
removal. (Id.; Exh. 9-10.) The attached letter states the AAA “has
reviewed [the parties’] respective contentions and inasmuch as the objection
was unopposed, Hon. Anita Rae Shapiro will be removed as arbitrator...” (Id.)
However,
Plaintiff’s opposition also includes as Exhibit D, a December 7, 2021 letter
from AAA which provides further context regarding the removal:
“This will acknowledge receipt by the
American Arbitration Association (AAA) of the enclosed correspondence dated
December 6, 2021 from Mr. Hirota and Mr. Panzarella. Mr. Panzarella's email was
directed to Harold Coleman, Senior Vice President of AAA Mediation. Mr. Coleman
provided this correspondence to the Consumer Management Team, who referred it
to me for response. Please be advised that pursuant to the enclosed AAA-ICDR
Standards of Conduct for Parties and Representatives, all case-related
communications are to be directed to me as I am your Case Administrator.
The AAA is aware that the arbitrator
ruled on the objection; however, the Claimant's objection was directed to the
AAA's attention as well. As a result, the AAA followed the process outlined in
Consumer Rule R-19(b) by requesting the comments of the Respondent and making a
determination in accordance with the Rules, which was provided in our November
18, 2021 letter. We understand the Respondent's position; however, the AAA has
removed the arbitrator and anticipates proceeding with administration.
Furthermore, the AAA will not move a case backward in administration unless
there is party agreement to do so.
As of now, the AAA is working on
inviting an arbitrator to serve on this case. If the Parties want to discuss a
timeframe for the setting of a hearing, we can use that information to help
with the administrative appointment of an arbitrator. Furthermore, please note
that the arbitrator compensation deposit will be assessed according to the
applicable November 1, 2020 Consumer Costs of Arbitration. The parties will be
notified of the appointed arbitrator and informed of the opportunity for an
objection.” (P. Opp. Exh. D.)
Defendants
further contend that as AAA allegedly violated its own rules, Arbitrator
Koracevich had no authority to rule on the matter at hand. (Opp., 15-19.)
In
response, Plaintiff’s opposition contends no grounds still exist, even under a
consideration of AAA rules 14, 19(a-b), to deny confirmation of the award as
questions of sufficiency are not in the court’s purview. (P. Opp., 5-7; Moncharsh, supra, 3
Cal.4th at 9.)
The
court finds that the AAA and Arbitrator Koracevich did not exceed their
authority in deciding to remove Arbitrator Shapiro and issuing the Award as a
ruling on the instant matter. The court finds Defendants have failed to show a
violation of rules 19(a) or 19(b) as the AAA’s extensive correspondence has
shown the opinions of the parties were collected and considered, and the
parties did not object to the appointment of Arbitrator Koracevich before the
final Award was issued. The court is not persuaded by Defendants’ arguments, as
the court finds Defendants fail to show how the appointment of another
arbitrator, and further time to present their evidence, operate as prejudice
against Defendants which would justify vacating the Award.
B. CCP § 1286.2 (a)(5): Prejudice
Defendants
further contend that the Award must be vacated because the Arbitrator
erroneously decided to exclude portions of Defendants’ material evidence
regarding Plaintiff’s damages and their cross-claims during the hearings before
Arbitrator Koracevich. (Opp., 22-24.) According to Defendants, such actions by
the Arbitrator substantially prejudiced their rights because Defendants were
not able to “to present their evidence pertinent and material to this
controversy, which severely undermines the fundamental fairness of this
proceeding.” (Id.) Defendants cite to cases, including Heimlich
v. Shivji, (2019) 7 Cal. 5th 350, 367
(Heimlich), in support of this argument.
In Heimlich,
the California Supreme Court stated that ““by voluntarily submitting to
arbitration, the parties have agreed to bear the risk [of uncorrectable legal
or factual error] in return for a quick, inexpensive, and conclusive resolution
to their dispute.”” [citation omitted] (Id. at 367.) The arbitrator in
this action refused to consider a party’s request for costs on the grounds that
he lacked jurisdiction to consider the request. (Id.) Although the
California Supreme Court held that the arbitrator’s conclusion about
jurisdiction was incorrect, the Heimlich court also noted that “ordinary
errors in ruling on costs are not subject to correction, nor do they serve as a
basis for vacating an award.” (Id.) Additionally, the Heimlich
court expressly rejected an argument that the award must be vacated because
arbitrators “have the power to amend their decisions to add cost and fee
awards.” (Id.) According to the Heimlich court, “if an arbitrator
elects not to amend a decision in order to add costs or fees,
these cases do not hold that a court may overrule that refusal.” (Id. at
368.)
In reply, Plaintiff
contends that Defendants’ rights were not prejudiced by Arbitrator Koracevich’s
evidentiary determinations. (P. Opp. 7-8.) According to Plaintiff, the
Arbitrator’s decision did not refusal to hear material evidence but was rather
a determination by counsel during trial. (Id.) The court notes, sua
sponte, that an Arbitrator’s decision to ignore certain evidence he finds
irrelevant does not constitute grounds to vacate the award under CCP § 1286.2(a)(5).
“Here, CALG makes conclusive
statements about the evidence that it failed to present. Nowhere does CALG cite
a decision by the Arbitrator to exclude evidence. These were choices made by
counsel during trial. Further, the Arbitrator was willing to go extra days and
allowed briefing after trial to submit additional evidence. But without CALG
citing the specific evidence and how they were impacted, they fail to meet
their burden in this motion.” (Id.)
The court is
persuaded by the Heimlich court’s ruling and agrees that the
Arbitrator’s decision to exclude or not consider certain evidence does not
substantially prejudice Defendants. While Defendants may
believe that the Arbitrator’s decision is incorrect, this does not constitute a
basis for the court to vacate the Award. Further, the court finds Defendants
fail to explain how the Arbitrator’s failure to rule on a pending motion
regarding Arbitrator Shapiro’s removal has substantially prejudiced Defendants
as well. (Opp., 24-25.)
Lastly,
Defendants contend the Award is “legally flawed” as it granted emotional
distress damages on claims for loss of property, in contravention of California
caselaw. (Opp., 19-22; citing Camenisch v. Superior Court, (1996)
44 Cal. App. 4th 1689, 1694; Smith v. Superior Court, (1992) 10 Cal.
App. 4th 1033, 1036.) Defendants contend the court should vacate the Award as a
result of this “clear legal error.” (Id.) However, in support,
Defendants only cite caselaw before the Moncharsh, and even concede that
the Moncharsh ruling “stated that ‘legal error on face of the award’ is
not grounds to vacate an arbitration award.” (Id.) Defendants therefore
ask this court to overturn Moncharsh without sufficient support, and
fail to justify why this court should make such undertaking.
While this court
refuses to overturn binding precedent, the court recognizes Defendants are
correct in their assertion that the Award incorrectly provides for emotional
distress damages for claims which authorities have provided should not receive
emotional distress damages.
CCP § 1286.6 provides “[s]ubject to Section 1286.8,
the court, unless it vacates the award pursuant to Section 1286.2, shall
correct the award and confirm it as corrected if the court determines that: (a)
There was an evident miscalculation of figures or an evident mistake in the
description of any person, thing or property referred to in the award; (b) The
arbitrators exceeded their powers but the award may be corrected without
affecting the merits of the decision upon the controversy submitted; or (c) The
award is imperfect in a matter of form, not affecting the merits of the
controversy.”
“The court may not correct
an award unless: (a) A petition or response requesting that the award be
corrected has been duly served and filed . . . and: (1) All petitioners and
respondents are before the court.” (CCP § 1286.8.)
Therefore, the court
instructs the parties to submit supplemental briefing regarding the correcting
of the Award only to strike emotional distress damages.
Because
the court finds that no basis to vacate the Award exists, Defendants’ motion to
vacate the Award is denied.
Conclusion
Defendants’
motion is denied. The parties are instructed to submit supplemental briefing
regarding correcting the Award. Plaintiff
is to give notice.