Judge Randolph M. Hammock, Case 22STCP03248 2022-10-20 Tentative Ruling

Judge: Randolph M. Hammock, Case: 22STCP03248, Date: 2022-10-20 Tentative Ruling

On February 22 through 24, 2022, Petitioner Mahesh Joysar, dba White Lotus Impex (“White Lotus”) and Respondent Derco Associates, Inc., dba Derco Foods (“Derco”), participated in binding arbitration before Arbitrator Judge Ann Kough (Ret.). The Arbitrator ordered that White Lotus pay Derco $720,952.90 in damages, attorney fees, and costs.

Pursuant to Respondent’s request, the court takes judicial notice of Exhibit 1, JAMS Streamlined Arbitration Rules & Procedures effective June 1, 2021. (See Cooper v. Lavely & Singer Pro. Corp. (2014) 230 Cal. App. 4th 1 [taking judicial notice of JAMS rules].)

As summarized by the Arbitrator, Judge Ann Kough (Ret.), Respondent Derco is a nut exporter located in California. Petitioner White Lotus is an almond importer located in India. The parties had a series of contracts for the purchase of almonds. Between the time the contracts were executed and the time the containers were shipped, the global price for almonds decreased substantially. Petitioner signaled to Respondent that it would not pay for the almond containers; they remained stuck at the port in India. After Respondent’s demand for payment was unsuccessful, Respondent determined its only option was to find a new purchaser for the almonds. To do this, however, Respondent needed Petitioner’s cooperation to obtain a “No Objection Certificate” before Customs would allow Respondent to take possession of the containers. Petitioner refused to issue the Certificate unless Respondent signed a release of liability. Seeing no other option, Respondent signed the release. Respondent then initiated arbitration.

The Arbitrator determined that Petitioner had breached the contracts for four containers of almonds and that Petitioner could not establish any excuses for nonperformance. The Arbitrator also found that Petitioner had committed an anticipatory breach as to six other containers. Finally, the Arbitrator determined that the Release executed by the parties was unenforceable because it was procured through duress and lacked consideration. Accordingly, the Arbitrator awarded $355,287 in damages to Respondent, plus prejudgment interest of $60,334. The Arbitrator also awarded $300,000 in attorneys fees plus $5,331.90 in costs.

Petitioner White Lotus now moves to vacate or correct the arbitration award entered following the binding arbitration. First, Petitioner argues the arbitration award must be vacated because the Arbitrator exceeded her authority by finding the parties agreed to arbitrate their dispute. Second, Petitioner argues that even if the award is not vacated, the portion awarding attorney’s fees must be corrected because the arbitrator awarded Derco attorney’s fees that were covered by an insurance provider.

Under CCP section 1286.2(a)(4), the court must vacate an arbitration award if the court determines that the arbitrator(s) “exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted.”

Here, Petitioner first argues that the award should be vacated because the Arbitrator had no authority to conduct the arbitration. Throughout their dealings, it appears the parties had a series of releases and invoices. The invoices had an arbitration clause; the releases did not. (See Attachment 10(b)(2) and 10(c)(2)). Petitioner contends that the question of which documents governed—and thus, whether an agreement to arbitrate existed in the first place—should not have been determined by the Arbitrator.

Respondents argued that JAMS and the Arbitrator had no jurisdiction since the release executed by the parties did not contain an arbitration clause. The Arbitrator finds that the claim brought by Derco is based upon the various contracts between the parties, which do contain arbitration clauses, rather than the release. Therefore, JAMS and this Arbitrator have jurisdiction over the dispute.

Notably, Petitioner has not cited the language of the release. Likewise, neither has petitioner cited the language of the invoices containing the arbitration clause. Although a trial court may “vacate an arbitrator’s determination that he or she has the jurisdiction to resolve an issue when this issue is outside the scope of an arbitration agreement,” Petitioner has not shown that to be the case here. (National Union Fire Ins. Co. v. Stites Prof. Law Corp. (1991) 235 Cal. App. 3d 1718, 1725.)

To the extent that Petitioner argues the Arbitrator incorrectly determined that the Release was entered into under duress or coercion, Petitioner has cited no authority vacating an award on this ground. Even so, this court finds nothing to suggest that the Arbitrator’s decision was erroneous, much less that she “exceeded [her] powers” under 1286.2(a)(4) by making such a finding.

The court must correct an award 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.”

Petitioner argues that the award should be corrected to reduce the attorney’s fees awarded to Derco’s counsel, Lewis Brisbois, because an insurance carrier apparently covered the fees. Respondent was represented by two law firms in the arbitration and related matters. Respondent sought $214,676.90 in fees for the firm of Knapp, Petersen & Clarke and $185,483.50 for the firm of Lewis Brisbois Bisgaard & Smith.

The Arbitrator awarded a total of $300,000 in reasonable fees. In making this determination, the Arbitrator recognized that “[t]he Lewis Brisbois firm was retained by Claimant’s insurance company…[and] the firm also performed some services” in the arbitration. (Attachment 8(c), Award, p. 8.) She also noted that she had “carefully reviewed the material and argument proffered by the parties on the issues of fees and costs.” (Id.)

Respondent relies on the case of Bramalea California, Inc. v. Reliable Interiors, Inc. (2004) 119 Cal.App.4th 468, to argue that Petitioner cannot recover fees for Lewis Brisbois. The case is inapposite. First, that case did not involve arbitration. Rather, it involved a counterclaim for indemnity and breach of contract where a real estate developer sought to recover attorney’s fees in the underlying litigation that had been covered by an insurer. The trial court rejected the developer’s attempt to recover fees not paid out of its own pocket. On appeal, the Court affirmed, noting that the developer was “not seeking to recover its attorney fees as a prevailing party in litigation.” Rather, it sought fees for breach of contract and indemnity. (Id. at 472.) In the present arbitration, however, the Arbitrator awarded Respondent fees because it was the prevailing party. (Attachment 8(c), Award, p. 8.) Bramalea did not purport to modify the CCP section 1033.5, subdivision (c)(1) rule that a prevailing party’s “[c]osts are allowable if incurred, whether or not paid.”

Moreover, even assuming this argument had merit, Respondent cites no authority suggesting the Arbitrator’s error would constitute “an evident miscalculation of figures or an evident mistake in the description of any person, thing or property referred to in the award.” (§ 1286.6(a) [emphasis added].) Petitioner does not reveal a miscalculation of figures of mistake in description; at most, it challenges the legal basis for the award. This is “outside the scope of a statutorily permitted correction.” (L. Offs. of David S. Karton v. Segreto (2009) 176 Cal. App. 4th 1, 10.) Accordingly, Petitioner has not demonstrated grounds to correct the award.

Because this court has not found grounds to modify or vacate the award, the court must confirm the award as made. “A party to an arbitration may seek to vacate or correct the award or to have it confirmed. [Citation.] Upon a petition seeking any of those results, the court must confirm the award, unless it either vacates or corrects it. [Citation.]” (L. Offs. of David S. Karton, supra, 176 Cal. App. 4th at 8 [emphasis in original].)

Any party may submit on the tentative ruling by contacting the courtroom via email at Smcdept49@lacourt.org by no later than 4:00 p.m. the day before the hearing. All interested parties must be copied on the email. It should be noted that if you submit on a tentative ruling the court will still conduct a hearing if any party appears. By submitting on the tentative you have, in essence, waived your right to be present at the hearing, and you should be aware that the court may not adopt the tentative, and may issue an order which modifies the tentative ruling in whole or in part.