Judge Lynne M. Hobbs, Case Number: 24STCP01351, Date: 2024-08-29 Tentative Ruling

Judge: Lynne M. Hobbs, Case: 24STCP01351, Date: 2024-08-29 Tentative Ruling

Case Number: 24STCP01351 Hearing Date: August 29, 2024 Dept: 61

CRYSTAL PROPERTY, LP vs GEN ROWLAND HEIGHTS, LP

TENTATIVE

Respondent Gen Rowland Heights, LP’s Motion to Vacate Arbitration Award is GRANTED only as to the $12,444.50 in administrative costs awarded to Petitioner Crystal Property, LP, in excess of the $300,000.00 maximum award allowable under the parties’ arbitration agreement. The motion is otherwise DENIED.

Defendant to provide notice.

DISCUSSION

Courts may vacate an arbitration award under the following circumstances:

(1) The award was procured by corruption, fraud or other undue means.

. . .

(4) The arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted.

(Code Civ. Proc., § 1286.2, subd. (a)(1), (4).)

California public policy supports the use of private arbitration to resolve disputes. To promote this alternative means of dispute resolution, the law minimizes judicial intervention in the proceedings, in part, by the doctrine of arbitral finality. Thus, the general rule is that ‘an arbitrator's decision cannot be reviewed for errors of fact or law. Both because it vindicates the intentions of the parties that the award be final, and because an arbitrator is not ordinarily constrained to decide according to the rule of law, it is the general rule that, [t]he merits of the controversy between the parties are not subject to judicial review. More specifically, courts will not review the validity of the arbitrator's reasoning. Further, a court may not review the sufficiency of the evidence supporting an arbitrator's award.” (Jones v. Humanscale Corp. (2005) 130 Cal.App.4th 401, 407–408, internal citations, quotation marks, and alterations omitted.)

Respondent Gen Rowland Heights, LP’s (Respondent) seeks to vacate the arbitration award which Petitioner Crystal Properties, LP (Petitioner) seeks to have confirmed. That award gives Petitioner $300,000 at Respondent’s expense, as well as more than $12,000 in administrative fees associated with the arbitration, based on Petitioner’s entitlement as landlord to rent owed by Respondent, its commercial tenant. (Petition Att. 8©.)

Respondent seeks to vacate the arbitration award on two grounds. First, it argues that the arbitration agreement specifically stated that arbitration was to “be held within 12 months from the date of this Agreement,” i.e. by November 2, 2022, one year after execution of the agreement. (Petition Att. 4(b), ¶ 2.) The arbitration hearing, however, was held on February 20, 2024, after several continuances granted to the parties. (Motion at pp. 3–8.) Respondent argues that holding the arbitration in excess of this deadline constitutes an act in excess of the arbitrator’s powers. (Ibid.)

Petitioner in opposition argues that the present motion is untimely under Code of Civil Procedure § 1288, which requires a motion to vacate an arbitration award to be “filed not later than 100 days after the date of service of a signed copy of the award on the petitioner.” (Code Civ. Proc. § 1288.) By Petitioner’s reckoning, this would require Respondent to have filed the present motion by June 21, 2024. (Opposition at p. 6.) It is well for Respondent then that the present motion was filed and served on May 30, 2024, long before that deadline. The motion is timely, contrary to Petitioner’s argument.

However, Respondent’s argument as to the arbitrator’s exceeding their powers by hearing the arbitration after the agreed 12-month deadline is unpersuasive, as Respondent waived the 12-month deadline by repeated agreement to continue the date of arbitration. This argument was raised to the arbitrator, and the arbitrator found:

[Petitioner] Crystal Property filed its Demand for Arbitration on April 21, 2022, within 6 months of the Rent Dispute Agreement. On August 30, 2022, however, [Respondent] Gen BBQ agreed to commence the evidentiary hearing after the one year deadline. Specifically, before the Arbitrator was appointed, [Respondent] Gen BBQ’s counsel Mr. Kim, stated in an email to the AAA, “we agreed that arbitration will take place in April 2023. This will give us time to complete discovery and get ready.” Clarity issues aside, Gen BBQ waived the requirement. (Petition Att. 8(c).)

Respondent offers no evidence to contradict the arbitrator’s account of proceedings. And although Respondent argues, without evidence, that its agreement was specifically limited to continuing the hearing to April 2023 (Opposition at p. 3, fn. 2), it does not dispute evidence that Respondent thereafter sought further continuances to account for issues with its counsel’s health. (Opposition Exhs. 1, 2.)

Respondent argues that even if its attorney waived the deadline, such a waiver was ineffectual, because an attorney’s authority to act for a client extends only to procedural matters, not waivers of substantive rights. (Motion at pp. 5–7, citing Stewart v. Preston Pipeline Inc. (2005) 134 Cal.App.4th 1565, 1581–1582.) But this argument fails for two reasons. First, Respondent presents no evidence that its counsel acted without its consent in consenting to a hearing after the 12-month deadline.

Second, the waiver of the 12-month deadline was “procedural,” not a “substantive” act, by the authority that Respondent cites. (Motion at p. 6.) Respondent argues that its counsel’s agreement to waive the deadline was akin to an agreement to waive “a client’s essential defense,” or otherwise to agree to settle a disputed claim. (Motion at p.6, quoting Stewart, supra, 134 Cal.App.4th at p. 1582.) But counsels’ conference regarding the scheduling of trial is a fundamentally procedural issue. It could not become a substantive right, if at all, until the passage of the agreed deadline, thereby transmuting itself from a procedural agreement into a basis for dismissal. But as noted by the arbitrator, Respondent waived the deadline in August 2022, before the passage of the deadline, and while it was still merely a procedural stipulation. The arbitration was therefore timely when held, and Respondent’s argument to the contrary furnishes no basis to vacate the award.

Respondent does, however, offer a basis for more limited relief. Specifically, the arbitration agreement limited the arbitrator’s authority to make an award within specified amounts: “The arbitration award shall in no event be less than $50,000 or larger than $300,000 in favor of Lessor, and the mediator lacks authority and jurisdiction to make an award outside this range.” (petition Att. 4(b), ¶ 2.) The arbitrator, however, not only awarded Petitioner the full amount possible under the agreement — $300,000 — but also included an additional award of $12,444.50, representing the administrative costs of the arbitration (AAA expenses and arbitrator compensation) against Respondent. (Petition Att. 8(c).) This was in excess of the arbitrator’s authority, particularly given the express provision in the agreement stating that “the costs of arbitration shall be equally shared by Lessor and GEN BBQ.” (Petition Att. 8(c) ¶ 2.) Petitioner offers no argument against this objection in its opposition.

This portion of the award may be vacated, leaving the $300,000.00 principal award intact. (Code Civ. Proc. § 1286.2, subd. (a)(4) [allowing court to vacate award where “[t]he arbitrators exceed their powers, and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted”]; Code Civ. Proc. § 1286 [courts have power to “correct[] the ward and confirm[] it as corrected”].)

Accordingly, the motion is GRANTED only as to the $12,444.50 in administrative costs awarded to Petitioner Crystal Property, LP, in excess of the $300,000.00 maximum award allowable under the parties’ arbitration agreement. The motion is otherwise DENIED.