Judge: Jon R. Takasugi, Case: 23STCP00848, Date: 2023-08-30 Tentative Ruling

Case Number: 23STCP00848    Hearing Date: August 30, 2023    Dept: 17

Superior Court of California

County of Los Angeles

DEPARTMENT 17

TENTATIVE RULING

Respondent NW Investment’s motion to confirm arbitration award and deny the petition to vacate is GRANTED.

Pomona Partnership’s motion to vacate the arbitration award is DENIED.

            On 3/17/2023, Petitioner Pomona Partnership (Petitioner) filed a petition against NW Investment Co., Inc. (Respondent) seeking to vacate the arbitration agreement.

            Now, Respondent NW Investment moves to confirm the arbitration award. Petitioner moves to deny the petition to vacate. For ease, the Court has consolidated its analysis into a single ruling.

Legal Standard

An arbitration award is not directly enforceable until it is confirmed by a court and judgment is entered. (Code Civ. Proc. § 1287.6; Jones v. Kvistad (1971) 19 Cal.App.3d 836, 840.) A party who is satisfied with an arbitration award should move to confirm the award.

A petition to confirm an arbitration award must include the substance of the agreement to arbitrate, the names of the arbitrators, and the opinion of the arbitrator. (Code Civ. Proc., § 1285.4. The general rule is that a court will not review “the merits of the controversy, the validity of the arbitrator’s reasoning, or the sufficiency of the evidence.” (Jordan v. DMV (2002) 100 Cal.App.4th 43; see also Dept. of Personnel Admin. v. Cal. Correctional Peace Officers Ass'n (2007) 152 Cal.App.4th 1193, 1200 [“an 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.”].) Confirmation of the award is mandatory unless a response or petition to correct or vacate the award has been timely filed. (See Code Civ. Proc. § 1286; Valsan Partners Limited Partnership v. Calcor Space Facility, Inc. (1994) 25 Cal.App.4th 809, 818)

Discussion

            Respondent argues that Petitioner cannot set forth a basis for not confirming the arbitration award.

            Petitioner sets forth the following grounds for not confirming the arbitration award: (1) Petitioner was denied the right to be represented by counsel, and the arbitration award set improper procedures for the arbitration hearing; (2) the arbitrators failed to decide all questions presented; and (3) Respondent failed to include all real parties in interest, and thus the award is ineffective.

            The Court addresses each in turn.

            As for the first point, Petitioner argues that the arbitrators set ground rules that violated CCP section 1282.4 and denied it a fair hearing inasmuch as they allegedly (i) barred counsel from participating, and (ii) allowed only a short statement by the principals at the meeting of arbitrators with no assistance, argument or participation by counsel.

            In Coopers & Lybrand v. Superior Court (1989) 212 Cal.App.3d 524, the Court stated:

We conclude agreements to arbitrate include agreements providing for valuations, appraisals and similar proceedings, including audits. A formal hearing and the taking of evidence are not essential to arbitration, which alternatively may consist of a submission of a controversy to an independent examination.

 * * *

. . . we conclude the 1961 statute erased the judicial distinction between agreements to arbitrate disputes and agreements providing for independent examinations by way of valuations, appraisals and similar proceedings, such as audits, and brought such agreements within the arbitration law. As for the requirement that there exist a controversy, it is sufficient the parties contractually have agreed to resort to a third party to resolve a particular issue. [fn.] Because the parties to an arbitration may dispense with a formal hearing and the taking of evidence, the absence of such elements does not impair the status of a proceeding as an arbitration.

            (Id. at p. 534.)

            Here, Petitioner argues that a formal hearing was mandated by Lease Section 2.A.2 which provides that: “The arbitrators . . . shall meet and hear the questions presented to them and shall . . . give to each party hereto notice of the time and place of such meeting”.) However, Respondent’s motion notes that Petitioner raised the issue of whether it was entitled to a formal hearing pursuant to CCP sections 1282.2(d) and 1282.4(a) (Rec. 1071), and the question was put to the arbitrators to determine. The 3 arbitrators, including Petitioner’s appointed arbitrator, unanimously agreed what type of proceeding met the requirements of Section 2. A. 2. of the Lease (see 5/19/2022, Stone email, Rec 1472). While later liberalized to allow Mr. Jonkman more time to speak and to allow Mr. Schack to assist him with his presentation (but not to argue the case (Rec. 1484-1485), the procedures that form the basis for Petitioner petition to vacate constituted the arbitrators’ unanimous interpretation of Section 2. A. 2.

“Generally, errors of law committed by the arbitrator, no matter how gross, are not grounds for challenging the arbitrator’s award under California law.” (Rutter Group California Practice Guide, Section 5:449.) Moreover, in Section 5:391.1 of the Rutter Group California Practice Guide, Alternative Dispute Resolution, the treatise addresses California law on what constitutes a hearing as follows:

What constitutes “hearing”: Unless the arbitration agreement provides otherwise the arbitrator is not required to hear oral presentations or live testimony or to provide opportunity for cross-examination of witnesses. All that is required is the opportunity to present one’s side of the case. Declarations and deposition testimony may be adequate for this purpose where no material facts are in dispute.

Here, counsel for both parties were allowed to (and did) file briefs critiquing the other side’s appraisal and promoting their side’s appraisal, as well as briefs replying to the other’s initial briefs. The principals of the parties were allowed thereafter to make half hour presentations to the arbitrators assisted by their counsel (Mr. Jonkman chose to do so, and Mr. Beard chose not to do so). The Court finds that the arbitrators were empowered to interpret what was meant by “shall meet to hear and decide the questions submitted to them” in Section 2. A. 2. of the lease, and the Court may not substitute its judgment for the arbitrators. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 11.) Petitioner did not cite any case law wherein the Court vacated an arbitration award on the ground of improper procedure based on analogous facts, or where it was concluded that this hearing format constituted a denial of the right to be represented by counsel.

            As to the second point, Petitioner argues that the arbitrators failed to decide all questions presented and Section 2.A.2 of the Lease requires that “[t]he arbitrators, as soon as possible after their selection, shall meet to hear and decide the questions submitted to them ….” (Schack Decl., Ex A. at p. 2.)

            However, Arbitrators are required to decide all questions submitted that are “necessary” to determine the controversy. (Cal. Code Civ. Proc., § 1283.4, emphasis added.) Petitioner has not persuasively shown that any of the questions which went unanswered were material to the ruling, nor would it be proper for this Court to substitute its judgment for what was material to their ruling. “It is for the arbitrators to determine which issues were actually “necessary” to the ultimate decision.” (Morris v. Zuckerman (1968) 69 Cal.2d 686, 690.)

Moreover, as noted by Respondent:

Several forms of the award were circulated among the 3 arbitrators before the wording was finalized (Rec. 1600-1616), and TPP’s party appointed arbitrator undoubtedly shared the drafts with Mr. Schack, yet there are no emails objecting that any of the fourteen questions and issues were not being considered during the drafting process. Moreover, TPP had the option of making an application to the arbitrators to correct the award to address its imperfections within 10 ten days after service of the award pursuant to CCP section 1284, but TPP chose not to do so. This is telling, because arbitrators may resolve an issue omitted from the original award through the arbitrator's mistake, inadvertence or excusable neglect within the time allowed for correction of an award.

            (Motion, 18:28-19:8.)

            As for the third contention, Petitioner argues that the arbitration award is invalid because it did not include alleged real parties in interest. More specifically, Petitioner contends that Respondents take the position that individuals John L. Jonkman, Daniel K. Miller, and Lona D. Gray are personally liable as lessees for performance of the Lease and payment of revised rental amounts, and thus are interested parties impacted by the judgment which must be brought in as real parties in interest.

            However, in their motion, Respondent clarifies that:

TPP claims in its motion and proposed First Amended Petition that NWI took the position in a communication on April 27, 2023 (RJN, Exh. 4) that the 3 individuals were liable “as lessees” for performance of the Lease (RJN, Exh. 3, Proposed First Am. Pet., ¶¶ 27 & 51). The April 27, 2023 communication (attached as Exhibit C to Mr. Schack’s declaration in support of the proposed amendment), never asserts that the 3 individuals are liable “as lessees”. They are not parties to the Lease. The only parties to the Lease are NWI and TPP. They have agreed (in the 2005 Assumption and Assignment Agreement) to remain fully liable for any breaches of the Lease. That does not make them parties to the Lease, nor does that make them necessary parties in an arbitration under Section 2. A. 2. to determine the 2017 revised rental. TPP evidently did not think they were necessary parties to the arbitration, because TPP made no effort to make them parties to the arbitration. Moreover, they were not parties to the arbitration for the revised rental effective 2012 between TPP and NWI’s predecessor. (Rubin Decl. ¶ 25.)

            (Motion, 19:14-25.)

            As such, the Court finds an insufficient basis to conclude that these individuals were necessary parties, given that they were not parties to the lease, and are not necessary for the determination of the revised rental (i..e, the subject of the arbitration proceeding.)

            In sum, the Court finds an insufficient basis to vacate the arbitration award on any of the grounds advanced by Petitioner.

            Based on the foregoing, Respondent’s motion to confirm arbitration award and deny the petition to vacate is granted.

It is so ordered.

Dated:  August    , 2023

   Hon. Jon R. Takasugi
   Judge of the Superior Court

Parties who intend to submit on this tentative must send an email to the court at smcdept17@lacourt.org by 4 p.m. the day prior as directed by the instructions provided on the court website at www.lacourt.org.  If a party submits on the tentative, the party’s email must include the case number and must identify the party submitting on the tentative.  If all parties to a motion submit, the court will adopt this tentative as the final order.  If the department does not receive an email indicating the parties are submitting on the tentative and there are no appearances at the hearing, the motion may be placed off calendar.  For more information, please contact the court clerk at (213) 633-0517.