Judge: James L. Crandall, Case: 19-1103402, Date: 2022-12-22 Tentative Ruling

1.    Petition to Confirm Arbitration Award

2.    Motion to Set Aside/Vacate

Motion 1

Plaintiff Krystyna Marczak’s (Plaintiff) Petition to Confirm Contractual Arbitration Award (Petition), filed 8-31-22 under ROA No. 64 is GRANTED.

The court GRANTS Defendants Arash Eslamdoust and Disaster Clean-Up Cnstruction Inc. dba Restotech Water & Fire Damage Restoration Company’s Request for Judicial Notice in Support of Opposition pursuant to Evidence Code section 452(d).

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.  (Code Civ. Proc., § 1286.)  

The court may vacate an arbitration award only on the grounds set forth in Code of Civil Procedure section 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.

(Code Civ. Proc., § 1286.2, subd. (a).)  

Code of Civil Procedure section 1286.6 provides the following standard for correcting an arbitration award:

Subject 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.

Plaintiff petitions to confirm the Amended Final Arbitration Award rendered on 8-30-22 (Award) by the Honorable Franz Miller (Ret) (Arbitrator) in the arbitration between herself and Defendants Arash Eslamdoust a/k/a Tony Esla (“Esla”), as well as his company, Disaster Clean-up Construction Inc. dba Restotech Water & Fire Damage Restoration Company (“Restotech, and collectively with Esla, the “Defendants”)

Defendants’ Opposition argues that the Award should be corrected or vacated for the following reasons: (1) the Arbitrator exceeded his powers by disregarding the family court’s exclusive jurisdiction concerning the sale and transfer of Plaintiff’s ex-husband’s interest in 3611 Willow Lane, Costa Mesa, CA (Property), (2) the Arbitrator exceeded his powers by fashioning remedies and ruling on issues not submitted by the parties in their briefs, (3) the Arbitrator refused to rule on claims against Restotech, (4) the Arbitrator’s award disregarded facts that the parties stipulated to, (5) the Arbitrator is biased, and there exists a business relationship between the Arbitrator’s employer, JAMS, and Plaintiff’s counsel.

Whether Arbitrator is Within Scope of Powers

Defendants argue that the Award exceeded the scope of the Arbitrator’s powers because: “the Arbitrator did not have the power to arbitrate a right that was not called upon under the JVA, especially since that right vested and existed before the agreement to arbitrate even existed and was identified as a “separate transaction” that was separate and apart from the JVA as a condition precedent.” (Opposition, 21:21-24.) Defendants argue that the Arbitrator also exceeded the scope of his powers by fashioning remedies that Esla never sought and ruling on claims of mutual mistake and quiet title that Plaintiff never brought. (Opposition, 21-23.)

Defendants Defendants cite to Navarro v. Perron (2004) 122 Cal.App.4th 797 (Navarro) for the argument that the Award exceeded the Arbitrator’s powers in the remedy it fashioned for Esla. Defendants also cite to O'Flaherty v. Belgum (2004) 115 Cal. App. 4th 1044 for this argument.

The court finds that Navarro is not applicable as it does not discuss arbitration.

O’Flaherty states: “An arbitrator exceeds his powers when he acts without subject matter jurisdiction ... fashions a remedy that is not relatively related to the contract ... or selects a remedy not authorized by law.... In other words, an arbitrator exceeds his powers when he acts in a manner not authorized by the contract or by law.”  [citation]… By providing a remedy inconsistent with the provisions of the partnership agreement and specifically in contradiction to the partnership agreement provision that the arbitrator has no power to order a remedy prohibited by the agreement or not available in a court of law, the arbitrator in effect awarded “a remedy expressly forbidden by the arbitration agreement.” [citation] (Id. at 1061.) The arbitration provision at issue in this case stated: ““Power and Authority of Arbitrator. The arbitrator shall not have any power to alter, amend, modify or change any terms of this Agreement nor to grant any remedy which is either prohibited by the terms of this Agreement, nor to grant any remedy which is either prohibited by the terms of this Agreement, or not available in a court of law.” (Id. at 1057.)

In reply, Plaintiff argues “Defendants’ primary argument that the arbitrator somehow “exceeded his powers” is frivolous, and should be summarily rejected. This contention fails for three separate reasons, any one of which is sufficient to defeat the Petition to Vacate. Defendants’ excess of powers argument is: (a) contrary to the express language of the parties’ expansive arbitration agreement (which afforded power to resolve all disputes arising out of the JV Agreement and the parties’ relationship); (b) contrary to the actual facts, claims, and evidence introduced at arbitration (wherein Marczak sought rescission and specifically demanded sole title to the Property as a remedy); and (c) also directly contrary to California law (which provides for expansive arbitral scope as a matter of law, discussed in detail below).” (Reply, 7:18-26.)

Plaintiff cites to Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 6-13 (Moncharsh) for the argument that the court is required to respect the finality of a contractual arbitration award.

Moncharsh states: “it is the general rule that, “The merits of the controversy between the parties are not subject to judicial review.” [citation] More specifically, courts will not review the validity of the arbitrator's reasoning. [citation]Further, a court may not review the sufficiency of the evidence supporting an arbitrator's award…Thus, it is the general rule that, with narrow exceptions, an arbitrator's decision cannot be reviewed for errors of fact or law. In reaffirming this general rule, we recognize there is a risk that the arbitrator will make a mistake. That risk, however, is acceptable for two reasons. First, by voluntarily submitting to arbitration, the parties have agreed to bear that risk in return for a quick, inexpensive, and conclusive resolution to their dispute…. A second reason why we tolerate the risk of an erroneous decision is because the Legislature has reduced the risk to the parties of such a decision by providing for judicial review in circumstances involving serious problems with the award itself, or with the fairness of the arbitration process.” (Id. at 11-13.)

Plaintiff also asserts that if there are doubts regarding the scope of the arbitrator’s powers, it must be resolved in favor of the arbitrator’s own determination re same. Plaintiff cites to cases, including Taylor v. Crane (1979) 24 Cal.3d 442, 450 (Taylor) for this argument. Taylor states: “As a rule, courts defer to arbitrators in determining the extent and meaning of arbitration agreements. [citation] Although an award may be vacated if the arbitrator has exceeded his powers [citation], ambiguities in the scope of arbitration are resolved in favor of coverage.”

Additionally, Plaintiff points to the language of the JVA’s Arbitration clause for the argument that the Arbitrator’s powers are expansive. The JV Agreement’s arbitration clause states:

“Arbitration. Should any controversy arise between the parties to this Agreement concerning this joint venture, construction of the JV-Property, sale of the JV Property, or the rights and duties of either party under this Agreement, the controversy shall be settled by arbitration in the following manner…The decision in writing of … the arbitrators6 so appointed shall be binding and conclusive as to both parties to this Agreement.”

(Petition to Confirm Arbitration Award [ROA 66], Attachment 4b.)

Further, Plaintiff asserts that the Family Law judgment awards possession of the Property to Plaintiff before the JV Agreement pursuant to paragraph 5.5, which states:

“Upon payment of the $50,000.00 from Respondent to Petitioner. Respondent shall be awarded all right. title and interest in and to WILLO, including, but not limited to, any and insurance proceeds payable from the claim related to the March 9, 2016, fire, and subject to an encumbrances thereon.”

(Exhibits in Support of Opposition [ROA 93], Exhibit 14.)

The Family Law Judgment also provides in pertinent part:

“The parties stipulate and recognize that there is no possible way that they cover every contingency and potential issue regarding the buy-out of WILLO as set forth here· (meaning no list can ever be exhaustive enough to cover every potential issue), but they are hereby acknowledging and stipulating that they shall both cooperate in all aspects regarding the buy-out, transfer and settlement of the pending insurance claims related thereto. As such, the Court shall retain the broadest jurisdiction over all issues concerning the sale of the subject property.”

(Exhibits in Support of Opposition [ROA 93], Exhibit 14, p. 11.)

Moreover, the Family Law Judgment includes certain handwritten corrections, as follows:

5.4 Respondent shall buy-out Petitioner’s interest in Willo for $50,000.00 (Lump Sum) contingent upon an agreement being reached with the parties and a third party investor (hereinafter “TE”). If an agreement is recorded between the parties and “TE,” the $50k shall be deposited into an escrow account on 6/27/16 (or as otherwise modified by the parties and “TE”) and shall be paid to Petitioner as soon as practicable…The court reserves jurisdiction to rule on any and all issues governing the buyout with an alternative investor by ex parte application without the need to show irreparable injury.”

(Exhibit 14, p. 19.)

The court finds that the Arbitrator has not exceeded the scope of his powers in rendering the Award. Pursuant to the JVA, the Arbitrator was empowered to rule on “any controversy” regarding the “joint venture, construction of the JV Property, sale of the JV Property, or rights and duties of either party.” Plaintiff’s claims against Defendants fall within this broad description. The arbitration clause also states that the arbitrator’s decision “shall be binding and conclusive” on both parties.

Unlike the cases cited by Defendants, such as O’Flaherty, the arbitration agreement here does not contain a limitation on the arbitrator’s powers. Therefore, Defendants’ arguments that only certain issues and not other issues were raised for decision are irrelevant, as the arbitration clause allows the arbitrator to decide any and all issues pertaining to the JV Agreement and the Property.

Moreover, the court finds that the Family Law Judgment does not operate to limit the Arbitrator’s powers regarding the Property. Defendants appear to be arguing the following: (1) Section 5.11 of the Family law judgment grants family court continuing jurisdiction over the sale of the Property and (2) because Esla’s interest arose before the JV Agreement, the JV Agreement cannot govern its arbitrability.

However, Pursuant to the Family Law Judgment, sections 5.4, 5.5 and 5.11, the family law court retained jurisdiction only over any issues governing sale of the Property discussed in the judgment by ex parte application. The family law judgment does not operate to grant the family court jurisdiction over all issues regarding the Property’s sale or disposition if no parties brought an ex parte application regarding same. Further, section 5.5 of the family law judgment stands for the proposition that Plaintiff would obtain title to the Property upon payment of $50,000 to her ex-husband. No party contends that this failed to occur.

Whether Arbitrator is Biased

Defendants contend that the Award should be vacate because “Between JAMS’ significant financial contributions to the OCTLA (an organization which Mr. Vanderpool is the president of), sponsorship of Mr. Vanderpool’s swearing in event with the OCTLA for the various positions he held with the organization, the Vanderpool Firm’s bi-annual sponsorship of valet parking along with coffee and snacks for attendees including the Arbitrator who attended OCTLA events that celebrated Mr. Vanderpool’s success with the OCTLA, and communications during the pendency of this Arbitration through an emotionally-charged 45-minute speech which included Mr. Vanderpool asking the audience including the Arbitrator to “be generous with your money” and that “We’re going to make some money this year, right,” the foregoing demonstrates facts that go beyond the words “might” or “possible” bias….The close affiliation between JAMS and the Arbitrator with Mr. Vanderpool and the Vanderpool Firm was even on display through the communications that were made by Mr. Vanderpool to the Arbitrator about his invitation to an OCTLA social event just prior to the April 27, 2022 hearing.” (Opposition, 28:14-22; 30:14-17)

Defendants do not submit any evidence that the Arbitrator was aware of JAMS’ “significant financial contributions” to OCTLA during the pendency of the arbitration, or that the Arbitrator himself made any such contributions. Additionally, Defendants do not submit any evidence that the Arbitrator attended any events or otherwise benefitted from Plaintiff’s counsel’s sponsorship of OCTLA events during the pendency of the arbitration.

As to the alleged discussion before the April 27, 2022 hearing, Defense counsel Kiarash Jafari attests: “The close affiliation between JAMS and the Arbitrator with Mr. Vanderpool and the Vanderpool Firm was even on display through the communications that were made by Mr. Vanderpool to the Arbitrator about his invitation to an OCTLA social event just prior to the April 27, 2022 hearing. reporter Claudia Garcia, the Arbitrator, along with Messrs. Vanderpool and Fairchild of the Vanderpool firm. It appeared that the Arbitrator and Mr. Vanderpool were engaged in discussions before we were brought into this room, as I observed Mr. Vanderpool and the Arbitrator to be engaged in the middle of a conversation that concerned what I heard to be some sort of event that was held on the prior day. The conversation ended shortly after we were transferred into this room.” (Jafari Decl., ¶ 55.)

In opposition, Plaintiff argues that Defendants have already known since June 8, 2022 that Plaintiff’s counsel never invited the Arbitrator to any social events during the pendency of the arbitration. (Opposition, 20-21.)

The court takes judicial notice of the Declaration of Douglas B. Vanderpool in support of Plaintiff’s Response and Objection to Challenge to Continued Service of Arbitrator (Fairchild Declaration, Exhibit 1, pg. 15.) Mr. Vanderpool attests in support of Plaintiff’s response: “At the Zoom meeting in question, I was briefly discussing the Constitutional Rights Foundation (CRF) annual awards ceremony, which had occurred the night before. [¶]I never “invited” Judge Miller to that event, nor did I even know that Judge Miller might be there…” (Vanderpool Declaration, ¶¶ 12-13.)

Plaintiff also cites to Rivera v. Shivers (2020), 54 Cal.App.5th 82 for the argument that the Arbitrator cannot be disqualified because the alleged disqualifying events occurred after he made his disclosures. 

In Shivers, a landlord filed an unlawful detainer case against tenants, alleging they had not paid rent. (Shivers, supra, 54 Cal.App.5th at 86-87.) The matter was subsequently ordered to arbitration conducted by Dennis Choate (arbitrator). (Id. at 87.) The arbitration proceeded to an award and opposing petitions to confirm and motion to dismiss. (Id. at 88.) The opposition argued that the arbitrator had failed to disclose a professional mentoring relationship with the tenants’ counsel’s father and was therefore biased. (Id. at 88-89.) The Court of Appeal found that the parties had stipulated to binding arbitration. (Id. at 91.) Additionally, the Court of Appeal found that evidence of bias was insufficient, because the only evidence submitted was an attorney declaration “in which she averred that Judge Choate told counsel after a brief break during the arbitration that the Shivers's counsel's father had been a mentor to him as a young prosecutor in Los Angeles.” (Id. at 94.) There was no evidence that the arbitrator was aware that counsel was his mentor’s son. (Id.)

Based on the foregoing, the court finds that Defendants have not demonstrated that the Arbitrator was biased against Defendants due to any financial connection with Plaintiff. As with Shivers, the court finds Defense counsel Jafari’s statement about overhearing a conversation about an event prior to a hearing insufficient to demonstrate that the arbitrator attended any social events with Plaintiff’s counsel or otherwise had ex parte communications with Plaintiff’s counsel.

Defendants have not demonstrated that any of the grounds under Code of Civil Procedure section 1286.2 or 1286.6 for correcting or vacating the Award applies. For these reasons, Plaintiff’s Petition is GRANTED.

In summary, Plaintiff Krystyna Marczak’s (Plaintiff) Petition to Confirm Contractual Arbitration Award (Petition), filed 8-31-22 under ROA No. 64 is GRANTED. The Amended Arbitration Award of 8-30-22 is CONFIRMED.

Plaintiff is to give notice.

Motion 2

Defendants Arash Eslamdoust and Disaster Clean-Up Construction Inc. dba Restotech Water & Fire Damage Restoration Company’s (Defendants) Petition to Correct or Vacate Arbitration Award, filed 10-6-22 under ROA No. 87 is DENIED.

Having granted Plaintiff’s Petition to Confirm Arbitration Award, the court DENIES Defendants’ Petition to Correct or Vacate Arbitration Award for the same reasons that Plaintiff’s Petition was granted.

Plaintiff is to give notice.