Judge: Michelle Williams Court, Case: 20STCV18493, Date: 2022-11-07 Tentative Ruling

Case Number: 20STCV18493    Hearing Date: November 7, 2022    Dept: 74

20STCV18493           PAUL EDWARD MARTIGNETTI vs SOUTHERN CALIFORNIA HEALTHCARE SYSTEM

(1) Plaintiff’s Petition to Confirm Contractual Arbitration Award – GRANTED

(2) Defendant’s Petition to Vacate Contractual Arbitration Award – DENIED

Background

On May 14, 2020, Plaintiff Paul Martignetti filed this employment action against Defendant Southern California Healthcare Systems. The complaint asserted five FEHA causes of action and a Tameny claim.

On August 31, 2020, the Court signed the parties’ stipulated order to send Plaintiff’s claims to arbitration.

Petitions

On June 20, 2022, Plaintiff filed his petition to confirm the June 9, 2022 arbitration award issued in his favor.

On September 8, 2022, Defendant filed its petition to vacate the June 9, 2022 arbitration award.

Opposition

Defendant did not file a separate opposition to Plaintiff’s petition.

On September 19, 2022, Plaintiff filed an opposition to Defendant’s petition noting Defendant’s failure to respond and arguing Defendant has not demonstrated a basis to vacate the arbitration award.

Reply

On October 31, 2022, Defendant filed its reply arguing it did not waive its right to challenge the arbitrator’s award and it was prejudiced by the arbitrator’s conduct.

Plaintiff’s Evidentiary Objections

Objection No. 1 is OVERRULED. Objection No. 2 is SUSTAINED.

Defendant’s Evidentiary Objections

Defendant’s objections to the Nalbandyan declaration: Objections Nos. 1-5, 7, 9-17 are SUSTAINED and Objections Nos. 6, 8 are OVERRULED.

Defendant’s objections to the Nercess declaration: Objections Nos. 1-5, 7, 9-18 are SUSTAINED and Objections Nos. 6, 8 are OVERRULED.

Judicial Notice

Plaintiff requests the Court take judicial notice of the JAMS rules. The request is GRANTED. (Evid. Code § 452(h); Goodwin v. Comerica Bank, N.A. (2021) 72 Cal.App.5th 858, 865 n.5.)

Petitions on Arbitration Awards

Standard

“Once a petition to confirm an award is filed, the superior court must select one of only four courses of action: it may confirm the award, correct and confirm it, vacate it, or dismiss the petition.” (EHM Productions, Inc. v. Starline Tours of Hollywood, Inc.¿(2018) 21 Cal.App.5th 1058, 1063.) “It is well settled that the scope of judicial review of arbitration awards is extremely narrow.” (California Faculty Assn. v. Superior Court¿(1998) 63 Cal.App.4th 935, 943.) “Neither the trial court, nor the appellate court, may ‘review the merits of the dispute, the sufficiency of the evidence, or the arbitrator's reasoning, nor may we correct or review an award because of an arbitrator's legal or factual error, even if it appears on the award's face. Instead, we restrict our review to whether the award should be vacated under the grounds listed in section 1286.2. [Citations.]’” (Ibid.)

Pursuant to Code of Civil Procedure section 1286.4, “[t]he court may not vacate an award unless:

(a) A petition or response requesting that the award be vacated has been duly served and filed; or

(b) 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; or

(2) All petitioners and respondents have been given reasonable notice that the court will be requested at the hearing to vacate the award or that the court on its own motion has determined to vacate the award and all petitioners and respondents have been given an opportunity to show why the award should not be vacated.

“[T]he court shall vacate the award if the court 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 therefor 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.

(6) An arbitrator making the award either: (A) failed to disclose within the time required for disclosure a ground for disqualification of which the arbitrator was then aware; or (B) was subject to disqualification upon grounds specified in Section 1281.91 but failed upon receipt of timely demand to disqualify himself or herself as required by that provision. However, this subdivision does not apply to arbitration proceedings conducted under a collective bargaining agreement between employers and employees or between their respective representatives.

(Code Civ. Proc. § 1286.2(a).) “[W]here parties have agreed their dispute will be resolved by binding arbitration, judicial intervention is limited to reviewing the award to see if statutory grounds for vacating or correcting the award exist.” (Corona v. Amherst (2003) 107 Cal.App.4th 701, 706.) 

Arbitration Award

On June 9, 2022, Laura Abrahamson, an arbitrator with JAMS, issued a final arbitration award directing Defendant to pay $3,451,219.88 to Plaintiff. The award includes discussion of a February 2, 2022 privilege hearing.

The Facts Stated in Plaintiff’s Petition are Deemed True

Pursuant to Code of Civil Procedure section 1290, “[a] proceeding under this title in the courts of this State is commenced by filing a petition. Any person named as a respondent in a petition may file a response thereto. The allegations of a petition are deemed to be admitted by a respondent duly served therewith unless a response is duly served and filed. The allegations of a response are deemed controverted or avoided.” “A response shall be served and filed within 10 days after service of the petition except that if the petition is served in the manner provided in paragraph (2) of subdivision (b) of Section 1290.4, the response shall be served and filed within 30 days after service of the petition.” (Code Civ. Proc. § 1290.6.) Defendant did not file a timely response to Plaintiff’s petition.

“[U]nder the plain language of section 1290, the allegations ‘deemed admitted,’ when a petition to vacate is not timely opposed, are only the factual allegations of the petition, not the legal conclusions pleaded. The admission of factual allegations does not require courts to grant an unopposed petition. Rather, courts still have the power and duty to draw their own legal conclusions and confirm, correct, or vacate the award, or dismiss the petition, as appropriate (§ 1286).” (Taheri Law Group, A.P.C. v. Sorokurs (2009) 176 Cal.App.4th 956, 962.) While Plaintiff contends “the Court should disregard Defendant’s unsubstantiated version of the facts presented in their petition” as a result of its failure to respond, (Opp. at 9:15-17), Plaintiff’s petition does not include facts relevant to the issues raised by Defendant.

Defendant’s Supporting Memorandum is Over-Sized

In a footnote, Plaintiff notes the 20-page memorandum filed in support of Defendant’s petition exceeds the fifteen-page limit imposed by California Rules of Court, rule 3.113(d). (Opp. at 8 n.1.) In reply and also in a footnote, Defendant contends there is no rule governing the length of memoranda filed in connection with a petition to vacate. (Reply at 11 n.3.)

The Court does not find Defendant’s argument persuasive. California Rules of Court, rule 3.1103 defines “law and motion” as including  . . . “a petition to compel arbitration, and enforcement of an award by arbitration.” California Rules of Court, rule 3.1114(a) enumerates the “Civil motions, applications, and petitions filed on Judicial Council forms that do not require a memorandum,” which does not include a petition related to arbitration. The rule further provides “[n]otwithstanding (a), if it would further the interests of justice, a party may submit, or the court may order the submission of, a memorandum in support of any motion, application, or petition. The memorandum must comply with rule 3.1113.” (Cal. R. Ct., rule 3.1114(b).) Accordingly, Defendant’s memorandum was required to comply with the limitations in Rule 3.1113 and its memorandum is oversized. (Cal. R. Ct., rule 3.1113(g) (“A memorandum that exceeds the page limits of these rules must be filed and considered in the same manner as a late-filed paper.”); Id., rule 3.1300(d) (“No paper may be rejected for filing on the ground that it was untimely submitted for filing. If the court, in its discretion, refuses to consider a late filed paper, the minutes or order must so indicate.”).) However, Plaintiff was not prejudiced and the Court shall consider the entire memorandum.

Arbitrator’s Review of Documents In Camera

Defendant contends the arbitration award must be vacated due to an unlawful, ex parte, in camera inspection of privileged documents. (Def. Memo. at 17:9-24:27.) Defendant relies upon three statutory grounds to vacate the award: “First, the arbitrator exceeded her powers in ordering the ex parte, in camera review of privileged material, necessitating vacateur under Code Civ. Proc. § 1286.2(a)(4). Second, the arbitrator made inaccurate representations regarding her review of the privileged material in the final award, tainting it with ‘corruption, fraud, or other undue means’, and necessitating vacateur under Code Civ. Proc. § 1286.2(a)([1]). Third, the arbitrator ‘substantially prejudiced’ Defendant, necessitating vacateur under Code Civ. Proc. § 1286.2(a)(3).” (Def. Memo. at 7:3-10.)

Defendant contends the arbitrator stopped a January 27, 2022 hearing and “went off the record and called counsel for both parties into the hallway. There, the Arbitrator demanded to know what certain attorney-client privileged emails referenced by Ms. Jones were, and why they had not been produced as exhibits.” (Schwettmann Decl. ¶ 16.) Defendant’s counsel contends he told the arbitrator “that these documents had not been produced because they were attorney-client privileged and/or work product. Despite this explicit objection, the Arbitrator demanded that the documents be provided to her immediately. I went into the JAMS computer room and printed two copies of each document at issue.” (Ibid.) After the hearing concluded, Defendant’s counsel states the arbitrator “called [him] separately into an empty conference room. I placed the documents on the conference room table, and personally observed the Arbitrator reviewing them closely. The Arbitrator then commented that she did not believe that the documents were privileged, and should be produced. . . . In response, [Defendant’s counsel] again asserted that the documents were subject to attorney-client privilege.” (Id. ¶ 17.)

While Schwettmann acknowledges “counsel for both parties” were called into the hallway where the arbitrator’s alleged order or demand occurred, (Schwettmann Decl. ¶  16), counsel for Plaintiff both attest no such demand or order was made at that time. (Nercess Decl. ¶¶ 41-44, 46; Nalbandyan Decl. ¶¶ 22-24, 26.)

At the February 2, 2022 hearing addressing privilege issues, the arbitrator stated “[w]hat I have not done, and I'm going to be clear about this, is I have not gone back and I have not reviewed the actual documents that are listed on the privileged jog.” (Schwettmann Decl. Ex. N at 1024:5-8.).) Later in the hearing, Schwettmann responded stating “these documents were briefly reviewed Thursday. And I appreciate the fact you didn't go back and review them again. I think that's important, but they were definitely reviewed.” (Id. at 1047:7-10.) The arbitrator responded “[t]hey weren’t read. We're looking to make sure, Mr. Schwettman, to make sure the record is clear, we were looking to see who is -- you

know, who they were between, and then -- and then you showed me the one template that had yes/no questions or had a template that legal prepared to tell me that that was, you know, clearly privileged,” to which Schwettmann responded “Right. So the template document prepared by legal is specifically identified as attorney-client privilege legal summary. (Id. at 1047:11-20.)  

The arbitrator later asked “if either party has any objection to the way the hearing has been conducted through this morning?” (Id. at 1084:9-11.) Schwettmann responded “I just I think that the Thursday afternoon documents was a little dicey how that all came about, but otherwise I think, you know, the record -- record speaks for itself about how whatever transpired. But that was the only -- to the extent there was any issue that kind of getting those documents on the fly and looking at them to see what they were and what we were doing was a little dicey, for lack of a better word again. I mean, I think technically Evidence Code 915 provides how that's supposed to be handled.” (Id. at 1084:17-1085:1.) The arbitrator stated “Evidence Code 915 doesn’t really apply in the arbitration, . . . It’s on the JAMS arbitration rules. . . . The substance of the privilege, that was in terms of the rules of evidence, the determination of privilege that we follow the rules of evidence for the substantive determination of privilege.” (Id. at 1085:2-15.) Schwettmann responded “understood.” (Id. at 1085:16.)

In the final award, the arbitrator discussed the January 27, 2022 and February 2, 2022 hearings, stating:

During the testimony of Ms. Jones on January 27, 2022 it became clear that there were additional relevant emails between Ms. Yoshida and Ms. Jones, and between Ms. Yoshida, Ms. Jones and Ms. Dickerson which had not been produced  and which had not been listed on any privilege log. Several breaks were taken to allow Respondent’s counsel, Mr. Schwettmann, to obtain and review the emails. Mr. Schwettmann showed the Arbitrator in camera several different email threads and argued that because the emails were ultimately to obtain legal approval, and several included an attached template prepared by Respondent’s legal department, all of the emails were protected from disclosure by the attorney-client privilege and/or the work product doctrine. . . . Although Mr. Schwettmann provided the Arbitrator with copies of the emails and attachments, the Arbitrator put them away and did not review the emails. . . . After considering the written and oral submissions of the Parties, and the prior testimony of Ms. Jones, the Arbitrator found that there were two processes – the required HR approval of the termination and the preparation of a privileged document for the Respondent’s Legal Department to approve the termination. The Arbitrator found that the drafts of the document based on the required legal template were protected from disclosure, but that the emails solely between HR representatives relating to or documenting the required HR approvals were not privileged.

(Award at 4-5.)

In opposition, Plaintiff contends “the Arbitrator sought to only review the facts regarding who communication was between within these documents, not the actual contents of the communications in order to determine whether it is privileged.” (Opp. at 11:17-12:15.) However, the arbitrator admitted she reviewed the contents of one of the documents at issue. (Schwettmann Decl. Ex. N. at 1047:15-17 (“you showed me the one template that had yes/no questions or had a template that legal prepared to tell me that that was, you know, clearly privileged.”).)

Defendant Did Not Waive its Argument Regarding the In Camera Review

Plaintiff contends “all volumes of the transcript of proceedings and Defendant’s various briefs to the Arbitrator reflect that Defendant never objected to the Arbitrator’s review of documents” and therefore Defendant waived its right to raise it as a basis to vacate the award. (Opp. at 15:7-8.) As noted above, Defendant noted the documents were privileged and raised Evidence Code section 915 and the privilege issue with the arbitrator. (Schwettmann Decl. Ex. N at 1084:17-1085:1.) While Defendant should probably have been more direct with its objections, under the circumstances, the Court finds Defendant did not waive this issue.

Defendant Has Not Demonstrated Grounds to Vacate the Award

Rule 22(d) of the JAMS arbitration rules provides “[s]trict conformity with the rules of evidence is not required, except that the Arbitrator shall apply applicable law relating to privileges and work product.” (Schwettmann Decl. ¶ 4, Ex. B.)

Defendant contends the arbitrator exceeded her powers by conducting the in camera review of the allegedly privileged documents. (Def. Memo. at 17:9-20:25.) The Court does not find Defendant’s argument persuasive. A claim that the arbitrator misapplied the law does not support a request to vacate the arbitration award. “Even where application of a particular law or body of law is required by the parties' arbitration agreement, an arbitrator's failure to apply such a law is not in excess of an arbitrator's powers.” (Marsch v. Williams (1994) 23 Cal.App.4th 238, 244. See also Baize v. Eastridge Companies, LLC (2006) 142 Cal.App.4th 293, 301–302 (“There is no suggestion in the record that the arbitrator purported to apply any law other than that of California. It is simply claimed that he did not do so correctly.”).)

Defendant contends “[a]n Arbitrator exceeds her powers when she issues an award that is ‘incompatible with the protection of a statutory right’ or contravenes ‘an explicit legislative expression of public policy.’” (Def. Memo. at 19:8-10.) However, the final award issued by the arbitrator does neither and the cases cited by Defendant do not demonstrate the monetary award to Plaintiff should be vacated here. Defendant cites City of Palo Alto v. Service Employees Internat. Union (1999) 77 Cal.App.4th 327, which discussed whether an arbitrator’s final award reinstating an employee wo threated to shoot another employee and members of his family violated public policy. The Court of Appeal found the reinstatement would violate a court ordered injunction and therefore should be vacated. (Id. at  339–340 (“the arbitration award of unconditional reinstatement was irreconcilable with the public policy requiring obedience to court orders, especially an injunction issued pursuant to Code of Civil Procedure section 527.8.”).) Defendant also cites Evans Products Co. v. Millmen's Union No. 550 (1984) 159 Cal.App.3d 815, 819, which addressed an arbitration award that compelled an employer to hire a minor, in contravention of the child labor provisions of the FSLA.  Defendant has not demonstrated the arbitrator exceeded her powers within the meaning of Code of Civil Procedure section 1286.2(a)(4).)

Plaintiff also contends that any disclosure of privileged information was voluntary and therefore the privilege was waived, (Opp. at 12:16-28), and Defendant contends it was required by the arbitrator. (Reply at 12:11-13:9; Schwettmann Decl. ¶ 16; Schwettmann Reply Decl. ¶ 2.) The ultimate resolution of this factual dispute is immaterial to the resolution of the parties’ petitions. The Court does not review the arbitrator’s decisions for errors of law and Defendant’s purported privilege waiver is not dispositive as to any of the statutory grounds upon which the Court can vacate an arbitration award. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 11 (“it is the general rule that, with narrow exceptions, an arbitrator's decision cannot be reviewed for errors of fact or law.”).)

Defendant also contends the arbitrator’s review of the documents demonstrates the final award was procured by “undue means” within the meaning of Code of Civil Procedure section 1286.2(a)(1). (Def. Memo. at 20:26-22:14.) Defendant notes court’s “s have generally applied it to address instances of arbitrator misconduct including ex parte communications.” (Id. at 21:1-4.) “Defendants must show they were prejudiced by the alleged corruption, fraud or undue means.” (Comerica Bank v. Howsam (2012) 208 Cal.App.4th 790, 826.) Unlike the cases cited by Defendant, Defendant was a part of the alleged ex parte, in camera review, and therefore had a full opportunity to address the issues raised thereby. In the cases cited by Defendant, the court either found the alleged ex parte communication was not a basis to vacate the award, (Id. at 827 (“The ex parte communication was not a basis for vacatur.”), or prevented a party from addressing an issue. (Maaso v. Signer (2012) 203 Cal.App.4th 362, 372 (“Maaso did not have the last word because he did not have an opportunity to rebut the arguments made in Hammond's ex parte letter brief.”); Baker Marquart LLP v. Kantor (2018) 22 Cal.App.5th 729, 742 (“specifically Kantor's submission of, and the majority's reliance on, an ex parte confidential brief that raised issues not known to Baker Marquart—was fundamentally unfair such that the award was procured by ‘undue means.’”).)

In A.M. Classic Const., Inc. v. Tri-Build Development Co. (1999) 70 Cal.App.4th 1470, another case involving an alleged ex parte communication as a ground to vacate an award, the Court of Appeal found “[t]he record here does not establish that the amended arbitration award was procured by corruption, undue means, or misconduct of the arbitrator. . . . the record does not reveal that the arbitrator considered information outside the arbitration proceeding in ruling upon the claim. Nor does the record reveal any improper intent or attempt to influence the arbitrator on the part of opposing counsel. . . . In the absence of a showing that the arbitrator was improperly influenced or actually considered evidence outside the original arbitration proceedings such that appellants needed a further opportunity to be heard on the stop notice claim, appellants cannot demonstrate that the amended award was procured by corruption, fraud, undue means, or misconduct of the arbitrator.” (Id. at 1475-1476.) The same is true here. Defendant notes the arbitrator made contradictory statements regarding review of the documents, but fails to cite any applicable authority demonstrating this is a basis for vacating an arbitration award. Absent relevant authority, the Court declines to expand the definition of undue means to the apply facts presented herein.

Defendant contends it was substantially prejudiced and denied a fair hearing by the arbitrator’s misconduct under Code of Civil Procedure section 1286.2(a)(3). (Def. Memo. at 22:15-23:16.) As to the privilege issues, an asserted error of law does not constitute misconduct under Section 1286.2(a)(3). (See Taheri Law Group, A.P.C. v. Sorokurs (2009) 176 Cal.App.4th 956, 963.)

Finally, Defendant argues other conduct that is either misconduct under Section 1286.2(a)(3) or warrants vacatur pursuant to Section 1286.2(a)(5), which requires the Court to vacate an award where “[t]he rights of the party were substantially prejudiced by the refusal of the arbitrators to postpone the hearing upon sufficient cause being shown therefor 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.” (Def. Memo. at 23:25-24:21.) Specifically, Defendant contends the arbitrator “allow[ed] testimony from two previously-undisclosed fact witnesses (Ms. Yip and Ms. Eastman) and an expert witness (Mr. Robbins) that Plaintiff had improperly withheld from deposition until after the expert discovery cutoff, as well as admitt[ed] previously undisclosed evidence (the EEOC and DFEH guidelines and an expert’s Powerpoint presentation).” (Id. at 23:27-24:3.)

Defendant does not cite any portion of the record where it asked to postpone a hearing or where the arbitrator refused to hear evidence as required to demonstrate a violation of Section 1286.2(a)(5). JAMS Rule 17 grants the arbitrator the authority to consider previously unidentified witnesses. (Schwettmann Decl. Ex. A.) Defendant was aware of Robbins and failed to depose him, even after the arbitrator suggested it do so. (Nercess Decl. ¶¶ 15-25.) To the extent Defendant suffered prejudice, it was from its own conduct, not that of the arbitrator or plaintiff. Defendant also failed to object in the arbitration to the EEOC and DFEH guidelines as well as the Powerpoint presentation. (Nercess Decl. Ex. R at 359:12-24, 504:19-24.) Defendant cannot vacate an arbitration award based upon objections it did not raise with the arbitrator. (See Moncharsh, supra, 3 Cal.4th at 30.)

The Court finds Defendant has not demonstrated a basis to vacate the award. Accordingly, the award is confirmed. (Code Civ. Proc. § 1286.)