Judge: Keri G. Katz, Case: 37-2021-00046405-CU-BC-CTL, Date: 2023-12-22 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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HALL OF JUSTICE

TENTATIVE RULINGS - December 21, 2023

12/22/2023  08:30:00 AM  C-74 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Keri Katz

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Civil - Unlimited  Breach of Contract/Warranty Motion Hearing (Civil) 37-2021-00046405-CU-BC-CTL CHDS INC VS BLUE PACIFIC ENGINEERING CONSTRUCTION INC [IMAGED] CAUSAL DOCUMENT/DATE FILED:

Plaintiff/Petitioner C.H.D.S., Inc. dba Curtis Drilling Co.'s petition for order correcting arbitration award is DENIED.

Preliminarily, although Defendant/Respondent Blue Pacific Engineering Construction, Inc. raises the issue that Plaintiff's petition was prematurely filed outside of the time requirements of CCP § 1288.4, none of the authorities Blue Pacific relies on prevents the court from reaching the merits of this petition based solely on this procedural infirmary.

Plaintiff brings this petition for order correcting arbitration award pursuant to CCP § 1286.6 [Grounds for correction of award] which provides: 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 relies on subsection (b) and contends that the arbitrator exceeded his powers by awarding attorneys' fees to Blue Pacific as prevailing party on the payment bond. Specifically, Plaintiff argues that the 'bond claims' were stayed in court pending completion of the arbitration. Although Plaintiff raises this stay argument multiple times, Plaintiff fails to cite to any evidence in support of Plaintiff's arguments as to the scope of the stay. The Stipulation to Stay Action and Compel Arbitration and Order [ROA 27] includes the following pertinent language: . . . .

2. On December 30, 2021, Defendant Blue Pacific Engineering Construction, Inc. ('Blue Pacific') filed a motion to compel CHDS to arbitration pursuant to the arbitration provision included in the subcontract between Blue Pacific and CHDS and to stay the above-pending action in its entirety pending the conclusion of the arbitration.

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2994448  9 CASE NUMBER: CASE TITLE:  CHDS INC VS BLUE PACIFIC ENGINEERING CONSTRUCTION  37-2021-00046405-CU-BC-CTL 3. CHDS has agreed to voluntarily submit to arbitration with Blue Pacific, such arbitration to be administered by the American Arbitration Association, and to stay the above pending action pending the conclusion of the arbitration.

Paragraph 13 of the Subcontract Construction Agreement between Plaintiff and Blue Pacific contains the following provision: 13. Arbitration: Any controversy arising out of or relating to the performance or interpretation of this Agreement, or the work performed under this Agreement, is subject to arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association. Arbitrated disputes shall be decided in accordance with California law. Any award entered in such arbitration proceeding shall be final, and may be specifically enforced in a court of competent jurisdiction. Subcontractor shall continue construction of the Project during the pendency of any arbitration proceedings, provided that Contractor continues to make progress payments to Subcontractor on undisputed work in accordance with the terms of this Agreement.

The operative second amended complaint alleges causes of action for breach of contract against Blue Pacific; quantum meruit/reasonable value against Blue Pacific; unjust enrichment against Blue Pacific; breach of quasi-contract against Blue Pacific; recovery of stop notice release bond against Blue Pacific and Liberty Mutual Insurance Company; recovery on public works payment bond against Blue Pacific and The Ohio Casualty Insurance Company; and declaratory relief against all defendants.

Based on the allegations of the SAC, the broad language of the arbitration provision and the language of the Stipulation/Order, all of Plaintiff's claims against Blue Pacific, including Plaintiff's bond claims against Blue Pacific (recovery of stop notice release bond and recovery on public works payment bond) were subject to arbitration. The only claims not subject to arbitration were Plaintiff's bond claims against Liberty Mutual and Ohio Casualty. Such result is consistent with the claims Plaintiff pursued against Blue Pacific at arbitration. Plaintiff's Statement of Claim includes the following: . . . . Curtis also seeks to recover on the Stop Notice Release Bond issued by Ohio Casualty Insurance and on the Public Works Payment Bond issued by Liberty Mutual Insurance for the project.

[Blue Ridge Notice of Lodgment, Exhibit 4, Statement of Claim, p. 2., ll. 18-20.] Plaintiff's Amended Statement of Claim contains the same language. [Blue Ridge Notice of Lodgment, Exhibit 5, Amended Statement of Claim, p. 2, ll. 19-21.] Plaintiff's Arbitration Brief includes the following: B. RECOVERY ON PAYMENT BOND AND STOP PAYMENT NOTICE RELEASE BOND - Public Works Payment Bond Curtis is entitled to recovery on the Public Works Payment Bond ('Payment Bond'). In or about December of 2019, Blue Pacific, as principal, and Ohio Casualty, as surety, posted a public works Payment Bond No. 39K006533 in the penal sum of $2,848,000.00 ('Payment Bond'). The Payment Bond is posted for the benefit of all unpaid persons and entities that supplied labor and materials for the Project.

Curtis is entitled to recover the sum of $1,035,347.25 for unpaid labor, materials, services and equipment, along with prompt payment penalties, interest, and attorneys' fees and costs. Curtis is a proper claimant under and should recover against the Payment Bond for these amounts. (See Cal.Civ.

Code §§ 9554; 9564.) - Stop Payment Notice Release Bond Curtis also seeks recovery against [sic] to the Stop Payment Notice Release Bond ('Release Bond').

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2994448  9 CASE NUMBER: CASE TITLE:  CHDS INC VS BLUE PACIFIC ENGINEERING CONSTRUCTION  37-2021-00046405-CU-BC-CTL (See Civil Code §§9100; 9538; 9350.) On or about January 10, 2022, Blue Pacific, as principal, and Liberty Mutual, as surety, executed Release Bond No. 024256619 in the penal sum of $413,026.75.

Curtis has satisfied all conditions required for a proper claim against the Release Bond and, as a result, is entitled to recover the full penal sum of $413,026.75.

. . . .

Consequently, Curtis requests that this Arbitrator award it the sum of $1,035,347.25, plus interest, prompt payment penalties and attorney fees and costs against Blue Pacific under the Subcontract. Ohio Casualty under the Payment Bond and Liberty Mutual under the Release Bond. Attorney fees are recoverable by Curtis pursuant to the Subcontract (at Sections 5, 11, 14.1.2 and 16), the Payment Bond (at California Civil Code §§ 9554 and 9564), and pursuant to the Prompt Payment Act (at Public Contract Code Sections 10262.5 and 7107).

[Blue Ridge Notice of Lodgment, Exhibit 7, Arbitration Brief p. 4., ll. 12-28 and p. 7, ll. 5-6.] Although it is not entirely clear from the quoted language above if Plaintiff was pursuing the bond claims against Blue Ridge (and/or Ohio Casualty and Liberty Mutual – nonparties to the arbitration) Plaintiff's Closing Arbitration Brief confirms Plaintiff's pursuit of relief against Blue Pacific on the bond claims.

B. RECOVERY ON PAYMENT BOND AND STOP PAYMENT NOTICE RELEASE BOND - Public Works Payment Bond Curtis is entitled to recovery against Blue Pacific as the Principal on the Public Works Payment Bond ('Payment Bond') issued by Ohio Casualty Insurance, which includes the recovery of attorneys' fees and costs. (Cal.Civ. Code §§ 9554; 9564.) In or about December of 2019, Blue Pacific, as principal, and Ohio Casualty, as surety, executed and filed with Ohio Casualty, a written bond, Payment Bond No.

39K006533 in the penal sum of $2,848,000.00 [Exh. 81.] The Payment Bond provided, among other things, that surety and Blue Pacific would pay the claims of all parties who supplied labor and materials for the construction of the public work described herein as well as attorney's fees and costs.

Curtis contends that it is owed by Blue Pacific, as principal on the Payment Bond, an approximate sum of $978,478.97 for unpaid labor, materials, services and equipment, along with 10% legal interest from October 18, 2021 to date, which calculates to the sum of $154,948.18 and attorneys' fees and costs.

- Stop Payment Notice Release Bond Curtis also seeks recovery on the Stop Payment Notice Release Bond ('Release Bond') issued by Liberty Mutual Insurance. [Civil Code §§9100; 9538; 9350.] On or about January 10, 2022, Blue Pacific, as principal, and Liberty Mutual, as surety, executed Release Bond No. 024256619 in the penal sum of $413,026.75. [Exh. 17.] Curtis satisfied all conditions required to be performed as a prerequisite to recover on the Release Bond, including all statutory requirements, and is entitled to benefit from the full sum of the Release Bond's penal sum of $413,026.75 against Blue Pacific as principal.

[Blue Ridge Notice of Lodgment, Exhibit 9, Closing Arbitration Brief, p. 6. l. 12 – p. 7, l. 5.] The court is not persuaded by Plaintiff's interpretation of the arbitration provision and the language of the Stipulation/Order. Plaintiff fails to point to any language in the arbitration provision or Stipulation/Order excluding Plaintiff's bond claims against Blue Pacific from arbitration. Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, explains, 'that parties entering into commercial contracts with arbitration clauses, if they wish the arbitrator's remedial authority to be specially restricted, would be well advised to set out such limitations explicitly and unambiguously in the arbitration clause.' Advanced Micro Devices, 9 Cal.4th at 383. Plaintiff fails to cite to any such limiting language the arbitration provision or the Stipulation/Order.

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2994448  9 CASE NUMBER: CASE TITLE:  CHDS INC VS BLUE PACIFIC ENGINEERING CONSTRUCTION  37-2021-00046405-CU-BC-CTL Nor is the court persuaded by Plaintiff's reliance in reply on Plaintiff's Demand for Arbitration and the absence of any reference to Plaintiff's bond claims therein. Given that Plaintiff's subsequent submissions to the arbitrator include Plaintiff's bond claims, and considering the thorough discussion of this issue by the arbitrator in the Final Award, Plaintiff's Demand for Arbitration is not dispositive on the issue of the scope of the arbitration. Similarly, Plaintiff's argument that the arbitrator's powers were limited to the contractual issues between Plaintiff and Blue Pacific is contrary to the arbitration provision, Stipulation/Order and Plaintiff's submissions to the arbitrator.

Plaintiff argues that the arbitrator's authority was limited to the parties who agreed to arbitrate – Plaintiff and Blue Ridge. However, the Final Arbitration Award does not adjudicate Plaintiff's claims against any party other than Blue Ridge. Plaintiff's claims against Ohio Casualty and Liberty Mutual remain pending, albeit stayed, before this court. Plaintiff also argues that the Final Arbitration Award deprives Plaintiff of a statutory right under CC § 9564 and must be corrected for this reason. However, nothing in the Final Arbitration Award affects Plaintiff's claims against sureties Ohio Casualty and Liberty Mutual.

To the extent that Plaintiff contests the arbitrator's determination against Plaintiff on Plaintiff's bond claims based on the absence of indispensable parties, such determination is not subject to correction.

Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1 explains, 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. (See That Way Production Co. v. Directors Guild of America, Inc. (1979) 96 Cal.App.3d 960, 965 [158 Cal.Rptr. 475] [hereafter That Way].) As one commentator explains, 'the parties to an arbitral agreement knowingly take the risks of error of fact or law committed by the arbitrators and that this is a worthy 'trade-off' in order to obtain speedy decisions by experts in the field whose practical experience and worldly reasoning will be accepted as correct by other experts.' (Sweeney, Judicial Review of Arbitral Proceedings (1981-1982) 5 Fordham Int'l L.J. 253, 254.) 'In other words, it is within the power of the arbitrator to make a mistake either legally or factually. When parties opt for the forum of arbitration they agree to be bound by the decision of that forum knowing that arbitrators, like judges, are fallible.' (That Way, supra, at p. 965.) . . . .

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. As stated ante, private arbitration proceedings are governed by title 9 of the Code of Civil Procedure, sections 1280-1294.2. Section 1286.2 sets forth the grounds for vacation of an arbitrator's award. . . .

In addition, section 1286.6 provides grounds for correction of an arbitration award. . . .

The Legislature has thus substantially reduced the possibility of certain forms of error infecting the arbitration process itself (§ 1286.2, subds. (a), (b), (c)), of an arbitrator exceeding the scope of his or her arbitral powers (§§ 1286.2, subd. (d), 1286.6, subd. (b)), of some obvious and easily correctable mistake in the award (§ 1286.6, subd. (a)), of one party being unfairly deprived of a fair opportunity to present his or her side of the dispute (§ 1286.2, subd. (e)), or of some other technical problem with the award (§ 1286.6, subd. (c)). In light of these statutory provisions, the residual risk to the parties of an arbitrator's erroneous decision represents an acceptable cost-obtaining the expedience and financial savings that the arbitration process provides-as compared to the judicial process.

Moncharsh, 3 Cal.4th at 11–13.

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2994448  9 CASE NUMBER: CASE TITLE:  CHDS INC VS BLUE PACIFIC ENGINEERING CONSTRUCTION  37-2021-00046405-CU-BC-CTL The same analysis applies with respect to the arbitrator's award of attorneys' fees to Blue Ridge and all of the legal and merits-based arguments Plaintiff raises.

Plaintiff also seeks entry of judgment in favor of Plaintiff and against Blue Ridge and Ohio Casualty on the payment bond. Entry of judgment against Blue Ridge is contrary to the merits decision within the Final Arbitration Award and thereby improper. The 'correction' Plaintiff seeks would necessarily affect 'the merits of the decision upon the controversy submitted' in contravention of the express requirement of CCP §1286.6(b) and in contravention of the general rules applicable to court review of arbitration awards. Moncharsh, 3 Cal.4th at 11. A court may not substitute its judgment for that of the arbitrator.

Morris v. Zuckerman (1968) 69 Cal.2d 686, 691. Separately, Plaintiff also fails to establish grounds for entry of judgment against Ohio Casualty as Ohio Casualty was not a party to the arbitration. Plaintiff's arguments for entry of judgment in favor of Plaintiff and against Blue Ridge and Liberty Mutual on the release bond fail for the same reasons. Plaintiff fails to provide any authority allowing for the entry of judgment against either Ohio Casualty or Liberty Mutual on this petition for order correcting arbitration award.

In light of this ruling, Plaintiff fails to establish grounds for the award of attorney's fees as prevailing party on the payment bond.

If this tentative ruling is confirmed the Minute Order will be the final order of the court and the parties shall not submit any further order on this motion.

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