Judge: Stephen P. Pfahler, Case: BC722062, Date: 2024-04-15 Tentative Ruling

Case Number: BC722062    Hearing Date: April 15, 2024    Dept: 68

Dept. 68

Date: 4-15-24

Case: BC722062

Trial Date: N/A

CONFIRM ARBITRATION

MOVING PARTY: Defendants, SBE Restaurant Group, LLC, et al.

RESPONDING PARTY: Plaintiff, Brightview Assets, LTD, a British Virgin Island Company

RELIEF REQUESTED:

Petition to Confirm Arbitration Award

SUMMARY OF ACTION

On September 17, 2018, Plaintiff Brightview Assets, LTD, a British Virgin Island Company (Brightview), file a complaint against SBE Restaurant Group, a Nevada Limited Company (SBE), KBM Holdco, LTD., a British Virgin Island Company, and KBM Operating LTD.., a Bahamas Company for Breach of Oral Contract, Breach Of Implied -In fact Contract, Breach of Written Contract, Unjust Enrichment, Money Had And Received, Accounting, and Declaratory Relief. On January 16, 201`9, the court sustained the demurrer of SBE to the fourth cause of action without leave to amend, and the granted the motion to strike the punitive damages claim with 20 days leave to amend. On February 27, 2019, SBE answered and filed a cross-complaint against Brightview for Fraud, Breach of Implied Covenant of Good Faith and Fair Dealing, Breach of Fiduciary Duty, Fraudulent Concealment, Negligent Misrepresentation, and Accounting.

On August 6, 2019, the court denied the “hearing on the motion for forum non conveniens.” On November 15, 2021, the court entered the parties’ stipulation to stay the case pending completion of binding arbitration.

RULING: Granted.

Defendants SBE Restaurant Group, a Nevada Limited Company (SBE), KBM Holdco, LTD., a British Virgin Island Company, and KBM Operating LTD.., a Bahamas Company move to confirm the arbitration award. On January 21, 2024, the arbitrator awarded as follows: “1. Claimant is to take nothing on its claims as against Respondents. 2. Respondent SBE is to take nothing on its counterclaims as against Claimant. 3. Based upon their CCP section 998 offer which was rejected, Respondents are jointly to take $91,177.24 in costs as against Claimant.” Plaintiff Brightview Assets, LTD, a British Virgin Island Company (Brightview) in response challenges the award on grounds that the arbitrator exceeded authority in awarding $91,177.24 in costs pursuant to the rejected 998 offer.

The court must confirm the award as made, unless it corrects or vacates the award, or dismisses the proceeding. (Code Civ. Proc., § 1286; Valsan Partners Limited Partnership v. Calcor Space Facility, Inc. (1994) 25 Cal.App.4th 809, 818.) The challenge to the petition was timely filed within the 100-day window following the January 21, 2024, issued final award. (Eternity Investments, Inc. v. Brown (2007) 151 Cal.App.4th 739, 745.)

A party may move to correct an arbitration award on grounds that “(b) The arbitrators exceeded their powers but the award may be corrected without affecting the merits of the decision upon the controversy submitted...” (Code Civ. Proc., § 1286.6.) “[A]rbitrators do not ‘exceed[ ] their powers” within the meaning of section 1286.2, subdivision (d) and section 1286.6, subdivision (b) merely by rendering an erroneous decision on a legal or factual issue, so long as the issue was within the scope of the controversy submitted to the arbitrators. “The arbitrator's resolution of these issues is what the parties bargained for in the arbitration agreement.’” (Moshonov v. Walsh (2000) 22 Cal.4th 771, 776 accord Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 28; Roehl v. Ritchie (2007) 147 Cal.App.4th 338, 348; Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 381-383.) “It is well settled that ‘arbitrators do not exceed their powers merely because they assign an erroneous reason for their decision.’” (Moncharsh v. Heily & Blase, supra, 3 Cal.4th at p. 28.)

The agreement requires the arbitrator adhere to substantive California law and JAMS Comprehensive Rules: “The substantive law of California and either the California Arbitration Act or the Federal Arbitration Act together with the JAMS Comprehensive Rules shall apply in this proceeding unless the parties otherwise agree in writing. Should an issue arise as to whether the CAA or the FAA applies, the parties will brief the issue and the Arbitrator will rule thereon.” [Declaration of John K. Ly, Ex. B.] While California law provides for cost recovery against a party rejecting a 998 offer, Brightview contends JAMS rules contain no such provision. Brightview improperly cites unpublished United States District Court opinion in support of the standard, which the court cannot rely upon in any ruling. (Blade Room Group, LLC v. Emerson Electric Co. (N.D. Cal., Dec. 11, 2019, No. 5:15-CV-01370-EJD) 2019 WL 13036321; Zamani v. Carnes (N.D. Cal., Aug. 25, 2009, No. C-03-00852-RMW) 2009 WL 2710108.) (Cal. Rules of Court, rule 8.1115(a); see Rittiman v. Public Utilities Com. (2022) 80 Cal.App.5th 1018, 1043 (footnote 18).)

The arbitration award itself provides the following in support of the cost award: “In their closing briefing, Respondents sought ‘costs.’ Subsequent to the initial issuance of this Award Respondents sought specific costs based on a CCP section 998 offer they had made prior to the Hearing. The Arbitrator had the parties brief the issue and, by memo dated January 20, 2024, found that Respondents were entitled to costs in the amount of 91,177.24.”

Brightview strenuously emphasizes the lack of any fee allocation rule within the JAMS Comprehensive Rules. Defendants in reply specifically rebut this argument by citation to JAMS Comprehensive Arbitration Rules & Procedures rule 24, subdivision (f): “The Award of the Arbitrator may allocate Arbitration fees and Arbitrator compensation and expenses, unless such an allocation is expressly prohibited by the Parties’ Agreement. (Such a prohibition may not limit the power of the Arbitrator to allocate Arbitration fees and Arbitrator compensation and expenses pursuant to Rule 31(c).)” [Declaration of Diyari Vazquez, Ex. C.]

While Brightview omits acknowledgment of this rule, Brightview instead seeks to challenge the impact of the rule by specifically challenging the lack of any specific to Code of Civil Procedure 998 recovery provisions within the contractual agreement itself. The argument relies on a presumption that the omitted provision renders the parties jointly responsible for their individual costs. Rule 24 specifically references Rule 31(c), which Defendants include for reference, and identified as JAMS Employment Arbitration Rules & Procedures • Effective June 1, 2021. The rule states in its entirety:

“Except as provided in paragraph (c) below, unless the Parties have agreed to a different allocation, each Party shall pay its pro rata share of JAMS fees and expenses as set forth in the JAMS fee schedule in effect at the time of the commencement of the Arbitration. To the extent possible, the allocation of such fees and expenses shall not be disclosed to the Arbitrator. JAMS’ agreement to render services is jointly with the Party and the attorney or other representative of the Party in the Arbitration. The non-payment of fees may result in an administrative suspension of the case in accordance with Rule 6(c).

(b) JAMS requires that the Parties deposit the fees and expenses for the Arbitration from time to time during the course of the proceedings and prior to the Hearing. The Arbitrator may preclude a Party that has failed to deposit its pro rata or agreed-upon share of the fees and expenses from offering evidence of any affirmative claim at the Hearing.

(c) If an Arbitration is based on a clause or agreement that is required as a condition of employment, the only fee that an Employee may be required to pay is the initial JAMS Case Management Fee. JAMS does not preclude an Employee from contributing to administrative and Arbitrator fees and expenses. If an Arbitration is not based on a clause or agreement that is required as a condition of employment, the Parties are jointly and severally liable for the payment of JAMS Arbitration fees and Arbitrator compensation and expenses. In the event that one Party has paid more than its share of such fees, compensation and expenses, the Arbitrator may award against any other Party any such fees, compensation and expenses that such Party owes with respect to the Arbitration.” [Vazquez Decl., Ex. H.]

The language of Rule 24 references employment arbitration, and the court therefore assumes the “JAMS Employment Arbitration Rules & Procedures • Effective June 1, 2021” in fact references the subject rule. The reference to the rule however fails to establish applicability to the subject commercial non-employment dispute. Fee shifting statutes in employment contexts adhere to differing standards in order to protect the rights of the employee against the employer. The court finds no public policy argument in support of such considerations for the subject dispute. In addition to the lack of acknowledgment of rule 24 cited above, Brightview otherwise dismisses the agreed upon arbitration rules regarding substantive California law.

“‘Absent an express and unambiguous limitation in the contract or the submission to arbitration, an arbitrator has the authority to find the facts, interpret the contract, and award any relief rationally related to his or her factual findings and contractual interpretation.’ (Citation.) This principle extends specifically to costs: If the parties’ agreement does ‘not limit the issues to be resolved through arbitration, the issue of [a party's] entitlement to ... costs, as requested in his complaint, [is] subject to determination in arbitration proceedings.’” (Heimlich v. Shivji (2019) 7 Cal.5th 350, 358; Pilimai v. Farmers Ins. Exchange Co. (2006) 39 Cal.4th 133, 150; Cohen v. TNP 2008 Participating Notes Program, LLC (2019) 31 Cal.App.5th 840, 873 [“‘[a]n exception to the general rule assigning broad powers to the arbitrator[ ] arises when the parties have, in either the contract or an agreed submission to arbitration, explicitly and unambiguously limited those powers’”]; Storm v. Standard Fire Insurance Company (2020) 52 Cal.App.5th 636, 645-646.) The determination of the right to recovery of costs lies within the discretion of the arbitrator pursuant to the language of the arbitration agreement. (Heimlich v. Shivji, supra, 7 Cal.5th at p. 358.)

Nothing in the response establishes wrongful reliance on substantive California law, including section 998, as provided in the contract for arbitration, thereby constituting a basis for establishing an excess exercise of authority. Assuming the arbitrator was also aware of Rule 31(c), as referenced in Rule 24, again, the court finds no basis of support for consideration of the public policy implications behind rule 31. Thus, even if the employment arbitration rule 31 applies, the court finds the arbitrator properly relied on the contractual terms allowing for the substantive adoption of California substantive law and JAMS Rule 24. Both provisions specifically allow the arbitrator to impose and allocate costs. Brightview presents no basis for the disregard of this contractual provision and rule.

The court further finds a lack of support for the argument that a specifically omitted reference to section 998 precludes recovery notwithstanding the clear basis for allocation of fees and costs under the acknowledged JAMS governing rules, as well as adoption of substantive California law. Again, even considering the argument, the United States Supreme Court only specifically found no explicit class action provisions barred arbitration. (Stolt-Nielsen S.A. v. AnimalFeeds International Corp. (2010) 559 U.S. 662, 673-674, 684-686.) Later cases expanded the ruling to ambiguous provisions. Brightview raises no substantive argument for ambiguity. (Lamps Plus, Inc. v. Varela (2019) 587 U.S. 176, 185; Storm v. Standard Fire Insurance Company, supra, 52 Cal.App.5th at pp. 645-646.) Again, cost allocation remains a specifically incorporated item in the parties’ agreement through rule 24 and California substantive law (e.g. section 998).

Finally, the argument challenging Brightview as not entitled to any costs, as a non-prevailing party, and the amount of costs recovered, clearly challenges the factual findings of the arbitrator. As discussed above in the undisputed standard governing challenges to arbitration awards, the court remains barred from considering the factual foundation of the award.

Thus, in summary, the award remains legally available under JAMS and California law. The arbitrator’s conclusion regarding the determination of a prevailing party and amount based on date of accrual naturally arises from this finding. The court therefore grants the petition to confirm the arbitration award. The court rejects the counter-request for correction of the award.

Defendants/Petitioners to submit a proposed judgment within 15 calendar days from the date of this order.

Defendants/Petitioners to provide notice.