Case Number: 21STCV43024    Hearing Date: May 2, 2023    Dept: 73

Sybil M. Flom v. Bernard A. Michlin, et al. (21STCV43024)

(1)   MOTION to Vacate arbitration award (filed 04/10/2023)

Counsel for Plaintiff/moving party:  Michael J. Jaurigue, Mark L. Share, and

                                                                Alexander E. Eisemann (pro hac vice motion hearing on 5/2/23)

Counsel for Defendant/opposing party: Henry S. David and Hayim M. Gamzo

(2)   Motion to confirm arbitration award (filed 02/02/2023)

Counsel for Defendant/moving party: Henry S. David and Hayim M. Gamzo

Counsel for Plaintiff/opposing party:  Michael J. Jaurigue, Mark L. Share, and

                                                                 Alexander E. Eisemann (pro hac vice motion hearing on 5/2/23)

TENTATIVE RULINGS

The Court DENIES Plaintiff Sybil M. Flom’s motion to vacate arbitration award.

The Court GRANTS Defendant Bernard A. Michlin’s motion to confirm arbitration award. The Court orders the defendant to file and serve a proposed order within ten (10) days of this ruling.

FACTUAL BACKGROUND

On January 31, 2020, plaintiff Sybil M. Flom (“Plaintiff”), filed this action individually and as trustee of The Sybil Flom Trust Dated October 31, 2007.

On January 14, 2022, Plaintiff filed the operative First Amended Complaint (“FAC”) against Defendants Bernard A. Michlin (“Bernard”), individually and as trustee of the Bernard A. Michlin Trust dated June 28, 2010; Bernard A. Michlin Trust Dated June 28, 2010 (the “Bernard Trust”); Myra L. Weiss (“Myra”), individually and as trustee of the David E. Weiss Family Revocable Living Trust dated March 14, 1997; (3) Maple & Vail, LLC (“Maple LLC”); and DOES 1 to 20, inclusive (collectively, “Defendants”).

The FAC alleges the following.

This action concerns real property in Los Angeles County that are collectively referred to as the “Maple Vail Properties.” (FAC, ¶ 13.) In or around November 1, 1990, Abe Michlin placed the four parcels of land compromising the Maple Vail Properties in trust for his four children: Myra, Willard Michlin, Plaintiff Sybil, and Bernard. (FAC, ¶ 14.)

In or around June 2009, Bernard and Plaintiff signed a document titled Agreement to an Agreement to Sell Undivided Interests in Real Property (“the 2009 Agreement”), in which Bernard agreed to sell his then 1/3 interest in the Maple Vail Properties to Plaintiff for a price equal to that of the amount a certified appraisal established as of the date of the death of their father, Abe Michlin. (FAC, ¶ 15.)

The sale was to take place within one year of Abe Michlin’s death, and valuation was to be made as of the date of that death. (FAC, ¶¶ 16, 17.) The Agreement further provided that from the date of Abe Michlin’s death, Bernard will collect only $1 per month of the income produced by the Maple Vail Properties. (FAC, ¶ 18.) “The Agreement further provided that ‘[t]he sale will close within 15 days following the determination of the fair market value of the Properties . . . , unless sooner agreed to by the buyer and seller, but in no event later than one year from the date of death.’” (FAC, ¶ 19.)

Abe Michlin died on November 19, 2016, but the sale of Bernard’s 1/3 interest of the Maple Vail Properties did not take place within one year of Michlin’s death as agreed under the Agreement. (FAC, ¶¶ 20, 35.) Specifically, the fair market value of the Maple Vail Properties was established by two appraisals performed after Abe Michlin’s death, which are reflected in reports dated March 10, 2017. (FAC, ¶ 21.) Plaintiff believed the appraisals were high, but Bernard did not sell his 1/3 interest to Plaintiff within 15 days of those appraisals. (FAC, ¶¶ 22, 23.) In or around April 23, 2017, Bernard and Plaintiff agreed on the fair market value of the Maple Vail Properties and, therefore, Plaintiff had her legal counsel draft an agreement by which Bernard would sell his interest in the Maple Vail Properties to Plaintiff at the agreed-upon price. (FAC, ¶¶ 24, 25.) Plaintiff presented the agreement, but Bernard refused to sign and kept trying to negotiate and increase the price. (FAC, ¶¶ 26-29.) Subsequently, Bernard commissioned another appraisal, which Plaintiff found flawed. (FAC, ¶ 33.) In 2018, Plaintiff acquiesced to a higher price of $1,080,000, to be paid at the rate of $6,000 per month for fifteen years, as Bernard insisted. (FAC, ¶ 39.) However, Bernard still did not sell his interest in the Maple Vail Properties within 15 days of that determination of the fair market value of the Property. (FAC, ¶ 40.)

In March 2019, Bernard signed another set of papers to sell his 1/3 interest to Plaintiff Sybil, through a multi-step process in which he would acquire a 1/3 membership interest in a new entity called Maple & Vail, LLC. (FAC, ¶ 41.) He actually signed those papers and grant deeds to the LLC. (FAC, ¶ 41.) But when those papers and grant deeds were accidentally destroyed, Bernard refused to replace them as required under that agreement, and eventually, managed to have an arbitrator deem the 2019 agreements void. (FAC, ¶ 41.)

When Bernard learned his signed grant deeds had been accidentally destroyed, he transferred his 1/3 interest in the Maple Vail Properties to Defendant Bernard’s Trust to prevent Plaintiff from enforcing the Agreement requiring him to sell his 1/3 interest to Plaintiff. (FAC, ¶ 42.) Therefore, Plaintiff requests the Court to order Bernard to perform his obligations under the Agreement (i.e., to sell his interest in the Maple Vail Properties to Plaintiff). (FAC, ¶ 47.)

In addition, although Bernard was supposed to receive only $1 per month rent after Abe Michlin’s death, Bernard improperly collected distributions of the Maple Vail Properties as if he were an unrestricted owner of his interest. (FAC, ¶ 48.) Therefore, Bernard was unjustly enriched by every dollar in excess of $1 per month that he received beginning on November 20, 2016, and Plaintiff is entitled to all of those distributions that Bernard accepted from that date until the present. (FAC, ¶¶ 49, 50.)

The FAC asserts causes of action for:

1.      Breach of Contract (against Bernard)

2.      Quiet Title (against Defendants)

3.      To Set Aside Fraudulent Conveyance (against Bernard and the Bernard Trust)

4.      Specific Performance (against Bernard and the Bernard Trust)

5.      Unjust Enrichment (against Bernard and the Bernard Trust)

PROCEDURAL BACKGROUND

On January 12, 2022, the Court found that this case (21STCV43024) and another case, 20STCV33044 are related within the meaning of California Rules of Court, rule 3.300(a), and that 20STCV33044 is the lead case. (Minute Order dated January 12, 2022, p. 1.)

On January 14, 2022, Plaintiff filed the FAC.

On March 1, 2022, the Court entered an order pursuant to the parties’ Stipulation and Compelling Arbitration and Staying Action (the “Arbitration Stipulation”) between Plaintiff, and Defendants Bernard, Weis, and Maple & Vail, LLC. Pursuant to the Arbitration Stipulation, the Court ordered, among other things, that “[Plaintiff] Sybil and Bernard shall arbitrate the disputes as between them in this action, in accordance with the arbitration clause in the ‘Agreement to Sell Undivided Interests in Real Property,’ dated June 2009, except insofar as Sybil and Bernard may otherwise agree in writing.” (Order, dated March 1, 2022, p. 2:10-12.)

On February 2, 2023, Bernard filed a motion to confirm arbitration award and for entry of judgment.

On March 6, 2023, Bernard filed an amended motion to confirm arbitration award and entry of judgment (the “Motion to Confirm Award”), informing the Court that on January 29, 2023, the arbitrator issued her final award and that Plaintiff’s counsel refused to stipulate to confirmation of the award. (Motion to Confirm Award, p. 2:19-26.)

On April 10, 2023, Plaintiff filed a Motion to Vacate Arbitration Award and in Opposition to Motion to Confirm Arbitration Award (“Motion to Vacate Award”).

On April 19, 2023, Bernard filed his Opposition to Plaintiff’s Motion to Vacate Arbitration Award; and Reply in Support of his Motion to Confirm Arbitration Award (“Opposition to Motion to Vacate Award”).

On April 26, 2023, Plaintiff filed a Reply in Further Support of Motion to Vacate Award (the “Reply ISO Motion to Vacate Award”).

DISCUSSION

A.     Motion to Confirm Award

On March 6, 2023, Bernard filed a Motion to Confirm Award, arguing:

·         Pursuant to stipulation, this Court ordered the dispute between Plaintiff Sybil and Bernard to arbitration (which Bernard terms the “Second Arbitration,” but does not state whether there was a “first arbitration”).

·         On January 29, 2023, the arbitrator (the “Second Arbitrator”) presiding over the Second Arbitration issued her award (the “Final Award”) in favor of Bernard.

o   Plaintiff refused to stipulate to confirm the Final Arbitration Award.

o   On February 6 or 7, 2023, Plaintiff filed a motion in the Second Arbitration, asking the Second Arbitrator to correct or vacate the Final Award.

o   On March 3, 2023, the Second Arbitrator issued her ruling denying Plaintiff’s motion to correct or vacate the Final Award.

·         Plaintiff stated that she will move this Court for an order to vacate the Final Award.

o   Bernard does not know what Plaintiff’s basis for moving to vacate the Final Award will be.

o   Therefore, the defendant will address Plaintiff’s arguments in his opposition to Plaintiff’s motion to vacate the Final Award.

o   However, the bases available to Plaintiff to successfully vacate the Final Award are extremely narrow as public policy supports the use of private arbitration to resolve disputes, and it is well settled that the scope of judicial review of arbitration awards is extremely narrow.

·         For those reasons, Bernard asks the Court to confirm the Final Award and enter judgment.

B.      Motion to Vacate Award

On April 10, 2023, Plaintiff filed her Motion to Vacate Award, that also serves as her opposition to Bernard’s Motion to Confirm Award, arguing:

·         Plaintiff and Bernard were involved in another arbitration (the “First Arbitration”) prior to the Second Arbitration.

o   The First Arbitration was limited to a dispute over a set of agreements the parties signed in March 2019 (the “2019 Agreements”).

§  Under the 2019 Agreements, Bernard transferred his 1/3 ownership in the Maple Vail Properties. Bernard performed everything required of him but refused to re-execute the two grant deeds, which Plaintiff’s on, Noah Flom had accidentally destroyed. Therefore, the only issue for the arbitrator (the “First Arbitrator”) was whether Bernard was required to re-execute those deeds.

§  As the Court will recall from the first round of confirmation/vacating applications, the First Arbitrator ruled that Bernard did not have to re-execute the deed, and the Court confirmed the award a few months later.

o    The Second Arbitration concerned two prior agreements that had also been signed by Bernard and Plaintiff.

§  The first agreement was a contract executed in 2009 (the “2009 Agreement”) in which Bernard agreed to sell to Plaintiff his interest in the Maple and Vail Properties.

§  The second was an agreement the parties signed in 2017 structured (the “2017 Agreement”), in which they agreed on the fair market value of the Maple and Vail Properties and set out some additional terms concerning how Plaintiff’s payment to Bernard would be structured (the “2017 Agreement”).

·         In issuing the Final Award, the Second Arbitrator rejected Bernard’s defenses on the merits but based on unsworn representation by Bernard’s counsel during the post-hearing oral argument, said Plaintiff impermissibly split her causes of action by failing to arbitrate the 2009 and 2017 agreements in the First Arbitration.

·         However, Plaintiff did not impermissible split her causes of action.

o   All parties to the First Arbitration signed an Agreement as to Scope of Submission of Dispute to Arbitration (the “First Scope Agreement”), that limited the disputes that would be put before the First Arbitrator in the First Arbitration.

o   In order to arbitrate the disputes arising under the Operating Agreement for Maple & Vail, LLC, the First Scope Agreement stated, the First Arbitrator will consider and likely resolve issues regarding “other documents.” Those “other documents” did not include the 2009 Agreement or 2017 Agreement. 

§  Granted, the First Scope Agreement states that the First Arbitrator will arbitrate any and all disputes, controversies, or claims between and among the Parties as to whether (among other things) “Bernard sold, transferred, forfeited, contributed, or is obligated to sell, transfer, forfeit or contribute, his interest in The Maple Vail Properties and/or Maple & Vail ….” (Motion to Vacate, pp. 7:18-8:1 [footnote omitted].)

§  When read in isolation, that provision arguably covers the 2009 Agreement or 2017 Agreement.

§  However, “in context,” it is “clear” that it concerns any obligation of Bernard under the 2019 agreements, and not those 2009 and 2017 agreements.  

o   The First Scope Agreement further stated that no party would waive its rights by entering into it.

o   In addition, after the First Arbitrator issued his award, Bernard and Plaintiff entered into a second scope agreement on February 22, 2022 (the “Second Scope Agreement”), in which they agreed to arbitrate claims under 2009 Agreement and 2017 Agreement.

·         In addition, the Second Arbitrator was not authorized to consider or to provide relief upon any kind of defense of impermissible claim splitting with respect to the 2009 Agreement, because submission of that type of defense was not encompassed in the parties Second Scope Agreement.

o   Arbitration is an agreement by the parties as to what should be submitted to the arbitrator.

o   Here, Bernard acknowledged that issues arising from the 2009 Agreement could not be submitted in the First Arbitration.

o   Indeed, the parties agreed that the 2009 Agreement could and would not be part of the First Arbitration.

o   Therefore, since the parties never agreed to have the Second Arbitrator consider any defenses regarding claim or issue preclusion, or impermissible splitting of causes of action, the Second Arbitrator exceeded her authority by considering and providing relief upon any defense of claim splitting with respect to the 2009 Agreement.

·         Also, the Arbitrator told counsel she would advise them about what issues needed to be addressed in responsive briefs, but failed to follow through with that promise on the eventually outcome-determinative issue of impermissible claim splitting.

o   On December 6, 2022, both sides filed their initial post-hearing briefs.

o   “Using his best judgment,” Plaintiff’s counsel wrote about the issues “he believed warranted briefing.” (Motion to Vacate, p. 21:9-11.)

o   “He deliberately did not brief on the issue of issue or claim preclusion because the arbitrator had already said during the hearing that she believed those issues were meritless.” (Motion to Vacate, p. 21:11-13.)

o   In her comments, the Second Arbitrator said nothing about claim or issue preclusion, topics that Plaintiff expressly decided not to address in her opening brief based on the Arbitrator’s stated position during the hearing about the lack of any legal effect of the First Arbitration.

§  On the other hand, Plaintiff had not addressed the statute of limitations issue, but the Arbitrator noted that and asked Sybil to address it, which she did in her responsive brief.

§  “Had the Arbitrator said the same thing about the claim and issue preclusion arguments in Bernard’s brief, Sybil would have responded similarly, with the arguments set forth in this motion.” (Motion to Vacate, p. 25:5-7.)

o    Therefore, “[b]y promising to tell Sybil what issues needed addressing and then not doing that, the arbitrator unwittingly helped counsel from Bernard in his deceptive effort to win on a smokescreen and unauthorized offense of claim preclusion.” (Motion to Vacate, p. 25:7-10.)

·         Therefore, the Final Award was procured by corruption, fraud, or other undue means because if it were not for the false statements by Bernard’s counsel, the Second Arbitrator would never have been misled to deny Plaintiff relief based on a defense that Plaintiff never agreed to have the arbitrator consider.

·         Plaintiff’s rights were substantially prejudiced by the misconduct of the neutral arbitrator. Therefore, Plaintiff asks this Court to recognize the Second Arbitrator’s mistake and not leave the Final Award undisturbed.

o   The California Arbitration Act’s Code of Civil Procedure section 1286.2, subdivision (3), which stated that the Court shall vacate the award if the Court determines that the rights of the party were substantially prejudiced by the misconduct of a neutral arbitrator, applies here.

o   The Federal Arbitration Act, which also applies, also contains language that would cover that issue.

·         Since the Second Arbitrator exceeded her powers and Final Award cannot be corrected without affecting the merits of the decision upon the controversy submitted, the Court should vacate the Final Award.  

C.      Opposition to Motion to Vacate Award

On April 19, 2023, Bernard filed his Opposition to Motion to Vacate Award, arguing the following (among other things):

·         Plaintiff does not provide any basis for declaring that the Federal Arbitration Act covers this dispute.

·         Plaintiff claims that Bernard’s counsel (Mr. David) lied during closing argument, which both parties agreed will not be recorded and therefore there is no transcript.

o   Mr. David did not lie, and Plaintiff provides no evidence that he did.

o   Plaintiff’s counsel (Mr. Eisemann) claims that Mr. David said that Bernard’s “decision-making would have been different if he had known during the first arbitration that Sybil planned to seek relief on the 2009 Agreement or the 2017 Agreement if she lost that first proceeding.” (Opposition to Motion to Vacate Award, p. 5:1-4.)

o   However, Mr. David actually argued that if Bernard had known Plaintiff’s plan to file a second proceeding on the other agreements earlier, Bernard would have taken a different approach in the First Arbitration.

o   Contrary to Mr. Eisemann’s testimony that the argument “did not come from a witness,” Bernard testified that if he had known Plaintiff’s plan to file a second proceeding based on the 2009 Agreement or the 2017 Agreement, he would have chosen to default in the First Arbitration, which would have resulted in him being paid $1.38 million, rather than risking being paid only almost $667,000 for his interest in the Maple Vail Properties, and paying substantial fees.

o   If Mr. Eisemann did not want to raise claims under the pre-2019 agreements, Bernard and Mr. David would/did not object.

o   It was not incumbent on Mr. David to save Plaintiff from any of her counsel’s missteps.

·         The Second Arbitrator did not engage in misconduct by providing counsel a list of issues to address in their reply post-hearing briefs.

o   Even after reading all the briefs, hearing Closing Argument, conducting her own research, reviewing the record, and thinking about the matter, the Second Arbitrator ultimately based her ruling on defenses that Bernard expressly pled and briefed.

o   Mr. Eisemann admits that he considered the arguments, but knowingly elected not to brief.

·         The Second Arbitrator did not exceed her powers when she ruled on a defense that Bernard expressly pled, and the parties expressly agreed that Bernard could plead any and all defenses to the subject agreements.

o   Plaintiff argues that because the parties allegedly agreed that Plaintiff could split her cause of action (which Bernard disputes), the Second Arbitrator could not rule on that affirmative defense.

o   However, in the Stipulation re Agreements in Dispute, the parties expressly agreed after Bernard alleged his splitting of a single cause of action defense, that Bernard shall assert “any and all defenses “ that he may have against enforcement of the agreements.

o   If Bernard could assert his defenses, the Second Arbitrator could rule on them.

·         Lastly, the Second Arbitrator did not base her decision on the issue of preclusion.            

o   Instead, she ruled for Bernard on his disjunctive defenses of “splitting cause of action” and estoppel.

o   Therefore, even assuming that the Second Arbitrator’s ruling on the “spilling cause of action” defense were basis to vacate the Final Award, the Final Award must still stand because the Second Arbitrator had valid, independent basis for issuing the Final Award.

·         If the Court vacates the Final Award, Bernard requests a rehearing before a new arbitrator.

D.     Reply ISO Motion to Vacate Award

On April 26, 2023, Plaintiff filed her Reply ISO Motion to Vacate Award, arguing (among other things):

·         Bernard’s opposition to Plaintiff’s arguments reflects a cynical approach as to how the legal system should work.

o   He does not contest the sown accusation by Plaintiff’s counsel that defense counsel (Mr. David) lied to the Second Arbitrator.

o   Instead, he argues that Plaintiff’s lawyer should have been more on his toes.

o   He label’s Plaintiff’s counsel’s failure to watch defense counsel’s truthfulness as malpractice.

o   However, assuming your adversary (an officer of the court with a duty of candor to tribunals), is not lying, is not malpractice.

·          It is irrelevant or immaterial when Bernard was “surprised” to learn during the first proceeding that Plaintiff would be pursuing the 2009 Agreement in another proceeding.

o   The point is that Bernard knew, but falsely claimed to the Second Arbitrator, that he did not know that Plaintiff contended the 2009 Agreement was not arbitrable in the First Arbitration.

o   Bernard also disputes Plaintiff’s claim that the sole evidence that Bernard would have made different choices was the unsworn representation of counsel for Bernard during oral argument.

§  Bernard counsel states that “in essence,” Bernard would have chosen to be defaulted in the First Arbitration, which would have resulted in him being paid $1.38 million, rather than risking being paid close to $667,000.

§  “If he's asking me if I had known if I won the first arbitration, I would now have to be fighting a second arbitration for half the amount, I would have told him to please do something about it or give me a remedy to -- to avoid all of this.” (Reply ISO Motion to Vacate Award, p. 4:6-8 [emphasis and citation removed].)

§  When one examines that testimony closely, Bernard did not say anything about what choices he would have made.

·          If the Court concludes it cannot make the findings Plaintiff has requested it to make, it must hold an evidentiary hearing and ask that the parties’ counsel, and if necessary, the  Arbitrator to testify.

·         The Second Arbitrator’s failure to follow through as promised is a basis to vacate the Final Award, alone, or in combination with the misconduct of Bernard’s Counsel.

o   Given the Second Arbitrator’s commitment to alert him to issues that needed to be addressed in the second round of briefs, he relied on that commitment to his detriment.

o   Plaintiff believes that inadvertent sandbagging warrants another opportunity to brief the claim-preclusion issue properly to the Second Arbitrator, which will eliminate the procedural error that Plaintiff has described.

·         The Second Arbitrator did not distinguish between estoppel, laches and claim preclusion but, rather, considered them as flip sides of the same coin, all pegged to the supposed failure of Sybil to bring her claims about the 2009 Agreement in a timely manner.

·         The fact that the Second Arbitrator would not allow Plaintiff to try to counter the false statements of Bernard’s counsel with the evidence that would refute it, is not a point in Bernard’s favor but an indictment of a process in which Plaintiff was denied the right to prove the lack of merit of the claim-preclusion and estoppel arguments with incontrovertible evidence.

·         Plaintiff urges the Court to use the discretion it has to push the process back in the direction of transparency and fairness, and not to reward the cynical cheating that went on by taking the far easier step of confirming the award Bernard’s counsel gained through it regardless of his odious conduct.

EVIDENTIARY OBJECTIONS

The Court rules on Bernard’s objections to the declaration of Mr. Eisemann (Plaintiff’s counsel) as follows.

Objection Nos. 1, 2, 3: Sustained.

Objection Nos. 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, and 16: Overruled.

ANALYSIS

A.     Applicable Law

Plaintiff states in her motion that the California Arbitration Act (“CAA”) applies to this case, but then also states the Federal Arbitration Act (“FAA”) applies. (Motion to Vacate Award, pp. 28:19-21 [arguing that Code of Civil Procedure section 1286.2(a)(3), which is under the CAA, “covers what happened here”]; 29:4-9 [stating that Section 10(a) of the FAA also “applies …”].)

However, as Bernard points out, the FAA governs all agreements to arbitrate in contracts “involving interstate commerce.” (9 U.S.C. § 2, et seq.; Higgins v. Superior Court (2006) 140 Cal.App.4th 1238, 1247.)

“The party seeking to enforce the arbitration agreement also bears the burden of establishing the FAA applies and preempts otherwise governing provisions of state law or the parties’ agreement.” (Nixon v. AmeriHome Mortgage Company, LLC (2021) 67 Cal.App.5th 934, 946.)

Here, Plaintiff has not explained or produced evidence showing why the FAA applies in this case.

Accordingly, the Court will proceed to rule the motions under the CAA.

B.      Legal Standard for Confirming and Vacating Arbitration Awards

Under the CAA, “[a]ny party to an arbitration in which an award has been made may petition the court to confirm, correct or vacate the award.” (Code Civ. Proc., § 1285.) “A response to [the] petition … may request the court to dismiss the petition or to confirm, correct or vacate the award.” (Code Civ. Proc., § 1285.2.)

“A petition to correct or vacate an award, or a response requesting such relief, shall set forth the grounds on which the request for such relief is based.” (Code Civ. Proc., § 1285.8.)

The court “shall vacate the award if” it 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 … 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 … a ground for disqualification …; or (B) was subject to disqualification … but failed upon receipt of timely demand to disqualify himself or herself ….

(Code Civ. Proc., § 1286.2.)

Those grounds for vacating an arbitration award are exclusive. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 19 (“Moncharsh”) [“[A]n arbitrator’s award cannot be ‘impeached’ merely because it contained an error of law, and that even if it could, section 386 of the Civil Practice Act (then codified verbatim in former section 1287) set forth the exclusive grounds to vacate an award”].)

“If the award is vacated, the court may order a rehearing before new arbitrators.” (Code Civ. Proc., § 1287 [emphasis added].)

“If the award is vacated on the grounds set forth in paragraph (4) [arbitrators exceeded their powers] or (5) [arbitrators did not hear material evidence or engaged in other conduct contrary to the CAA] of subdivision (a) of Section 1286.2, the court with the consent of the parties to the court proceeding may order a rehearing before the original arbitrators.” (Code Civ. Proc., § 1287 [emphasis added].)

“If an award is confirmed, judgment shall be entered in conformity therewith. The judgment so entered has the same force and effect as, and is subject to all the provisions of law relating to, a judgment in a civil action of the same jurisdictional classification; and it may be enforced like any other judgment of the court in which it is entered, in an action of the same jurisdictional classification.” (Code Civ. Proc., § 1287.4.)

C.      Motion to Vacate Award

“‘As the courts of this state have repeatedly emphasized, the merits of a controversy that has been submitted to arbitration are not subject to judicial review. This means that we may not review the validity of the arbitrator’s reasoning, the sufficiency of the evidence supporting the award, or any errors of fact or law that may be included in the award. [Moncharsh, supra, 3 Cal.4th at p. 11.] Judicial review is severely limited because that result “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....” (Ibid.)’ [Citation.]” (Pour Le Bebe, Inc. v. Guess? Inc. (2003) 112 Cal.App.4th 810, 825.)

Here, Plaintiff moves to vacate the Final Award based on three grounds under the CAA. (Motion to Vacate, p. 27:9-10.)

First, she argues that counsel’s representations at the Second Arbitration amounted to fraud, and the fraud influenced the Second Arbitrator’s decision. (Motion to Vacate Award, p. 27:9-13 [referring to Code Civ. Proc., § 1286.2, subd. (a)(1)].)

Second, she argues that the Second Arbitrator’s promise to provide feedback after reading the initial briefs but then not doing as promised, amounted to misconduct. (Motion to Vacate Award, p. 27:9-13 [referring to Code Civ. Proc., § 1286.2, subd. (a)(3)].)

Third, she argues that the Second Arbitrator exceeded her powers by ruling on Bernard’s claim splitting defense when the parties had agreed that the 2009 Agreement and 2017 Agreement could not be arbitrated in the First Arbitration. (Motion to Vacate Award, p. 27:9-13 [referring to Code Civ. Proc., § 1286.2, subd. (a)(4)].)

1.      Whether the Final Award was Procured Through Fraud

“Fraud, as that term is used in section 1286.2, subdivision (a)(1), is that perpetrated by the arbitrator or a party.” (Comerica Bank v. Howsam (2012) 208 Cal.App.4th 790, 825 (“Comerica”).) The moving party has the burden of showing (1) the error and (2) that they were prejudiced by the fraud. (Ibid.)

“Only extrinsic fraud which denies a party a fair hearing may serve as a basis for vacating an award.” (Comerica, supra, 208 Cal.App.4th at p. 825.) For example, “[i]mproper ex parte communications between an arbitrator and a litigant can serve as a basis for a corruption, fraud or other undue means finding.” (Ibid.)

Here, there is no evidence that Plaintiff was denied a fair hearing.

“‘The courts seem to agree that a fundamentally fair hearing requires ... notice, opportunity to be heard and to present relevant and material evidence and argument before the decision makers....’ [Citations.]” (Maaso v. Signer (2012) 203 Cal.App.4th 362, 372 (“Maaso”) [italics in original].) “‘The arbitrator ... must give each of the parties to the dispute an adequate opportunity to present its evidence and arguments.’ [Citation.]” (Id. at p. 373.)

Here, Bernard has produced evidence showing that Plaintiff was given notice, opportunity to be heard and to present evidence, regarding whether her claims were precluded by her failure to bring them in the First Arbitration. (Declaration of Henry David ISO Opposition to Motion to Vacate Award, filed on April 19, 2023 (“David April 19 Decl.”), Exhibit 15 – Bernard’s Pre-Hearing Brief, pp. 14:16-16:2.)

Defense counsel testifies that the Second Arbitrator set a briefing schedule for the pre and post evidentiary hearing briefs in the Second Arbitration. (David April 19 Decl., ¶ 33.) According to that briefing schedule, the deadline to submit pre-hearing briefs was September 2, 2022, post-hearing briefs – December 6, 2022, and closing post-hearing briefs – December 23, 2022. (David April 19 Decl., ¶ 33.)

In his pre-hearing brief, Bernard expressly made the claim preclusion, splitting claims argument. Bernard stated that claim preclusion prevents relitigating of entire claims and the doctrine precludes piecemeal litigation by splitting a single cause of action, or relitigating of the same cause of action on a different legal theory or for different relief. (David April 19 Decl., Exhibit 15 – Bernard’s Pre-Hearing Brief, p. 15:12-13, 22-24.) He then argued: “Here, there is a single (alleged) wrong: Sybil seeks to enforce her right under the June 2009 Agreement to compel Bernard to sell her his interest in the Maple and Vail Properties—whether directly or through agreements that effectuate/implement the June 2009 Agreement, such as the 2017 Deal Outline and the March 2019 Agreements. Because Sybil took one bite at that apple, and lost, in the First Arbitration, she cannot take a second bite here.” (Bernard’s Pre-Hearing Brief, pp. 15:25-16:2.) Defense counsel testifies that he submitted the brief on the day of the deadline, September 2, 2022. (David April 19 Decl., p. 8:1-3 (¶ 34(A)).)

            On December 6, 2022, Bernard submitted his post-hearing brief to the Second Arbitrator. (David April 19 Decl., p. 8:4-6 (¶ 34(B)).) In his post-hearing brief, Bernard again made the claim preclusion, splitting claims argument. (David April 19 Decl., Exhibit 16 – Bernard’s Post-Hearing Brief, pp. 38:22-41:10.) This time, Bernard added: “The Arbitrator has asked the parties to brief the issue, in essence, of whether the fact that the Final Arbitration Award in the First Arbitration was an arbitral award leads to a different result, that is, whether an arbitration award and the resultant judgment confirming that award are entitled to different/less preclusive effect than a court judgment. Bernard discusses issues preclusion below, in Section III.B.4.a, in connection with his unclean hands defense. In this Section, the question is whether the confirmed Final Arbitration Award is entitled to claim preclusion—and it is.” (Bernard’s Post-Hearing Brief, p. 39:3-9.)

            On December 23, 2022, Bernard submitted his closing post-hearing brief to the Second Arbitrator. (David April 19 Decl., p. 8:7-9 (¶ 34(C)).) In the closing brief, Bernard again argued that “Sybil’s loss in the First Arbitration precludes her claims in this Arbitration …,” and that Plaintiff had “ignored the [Second] Arbitrator’s directive to brief the preclusive effect of the Final Arbitration Award in the First Arbitration [footnote omitted] and the admissibility of Mr. Beck’s statements against Sybil.” (David April 19 Decl., Exhibit 16, pp. 5:15-16; 25:4-6.)

Plaintiff has not disputed those facts or argued that she never received copies of Bernard’s pre-hearing, post-hearing, and closing briefs. She has also not argued that she was not given the opportunity to submit her own pre-hearing, post-hearing, and closing briefs.

On the other hand, Bernard’s counsel testifies: “During the course of the Second Arbitration, the Second Arbitrator never questioned to [him] that she could decide that issue—and Sybil/Mr. Eisemann never suggested that she could not.” (David April 19 Decl., p. 8:11-13 (¶ 35) [emphasis removed].)

Therefore, there is evidence suggesting that Plaintiff had a fair hearing (i.e., notice and opportunity to present evidence) regarding Bernard’s claim preclusion, splitting claims argument in the Second Arbitration.

“In order to challenge an award in court, a litigant must have raised the point before the arbitrator,” or otherwise forfeit the issue. (Comerica, supra, 208 Cal.App.4th at p. 829.)

Here, there is evidence that Plaintiff forfeited the issues.

Plaintiff’s counsel (Mr. Eisenmann) has copied and pasted excerpts of transcripts from the arbitration hearing in his declaration, testifying that they contain those excerpts consist of “all the transcript references in the [Second Arbitration] hearing that Sybil … found regarding claim splitting ….” (See declaration of Alexander E. Eisemann, filed on April 11, 2023, (“Eisemann April 11 Decl.”), ¶ 37 [emphasis added].)

According to those transcripts, the Second Arbitrator was discussing with Bernard’s counsel (Mr. David) the claim preclusion argument. Bernard’s counsel stated that Bernard has “two affirmative defenses …,” and that one of those defenses is that “the [First Arbitration] award is entitled to issue preclusion ….” (Eisemann April 11 Decl., p. 9:15-17.) Although the arbitrator and Bernard’s counsel appeared to have a difference in opinion with regards to the issue preclusion defense, the Second Arbitrator stated: “Well, that’s one of the things I’m looking forward very much to having in your brief, yes.” (Eisemann April 11 Decl., p. 9:17:21.) That hearing took place on November 6, 2022, after Plaintiff would have received Bernard’s pre-hearing brief. (See David April 19 Decl., Exhibit 14 – Transcript of Remote Proceedings Before the Honorable Melinda Johnson (Ret.) Sunday, November 6, 2022 [containing the portions copied and pasted in Plaintiff’s counsel’s declaration].)

“‘“[I]t is well settled that a party may not sit idle through an arbitration proceeding and then collaterally attack that procedure on grounds not raised before the arbitrators when the result turns out to be adverse.”’ [Citation.]” (Mossman v. City of Oakdale (2009) 170 Cal.App.4th 83, 93.)

Here, there is no evidence that Plaintiff acted diligently in arguing “her side” of the claim preclusion, splitting claims dispute. Indeed, the conversation between the Second Arbitrator and Bernard’s counsel Plaintiff has cited, was not an ex parte communication; Plaintiff’s counsel was present at this discussion. However, rather than argue Plaintiff’s view on the issue, Plaintiff’s counsel admits that he relied on the Second Arbitrator’s “stated position” during the hearing, that the First Arbitration had no legal effect, and decided not to address the issues in Plaintiff’s opening brief. (Eisemann April 11 Decl., ¶ 41.) However, that argument is unpersuasive because according to the excerpts of the transcripts that counsel has produced, the Second Arbitrator stated that she was “looking forward” to seeing that issue being brought up in Bernard’s post-hearing brief. (Eisemann April 11 Decl., p. 9:17:21.) In addition, that issue was raised in Bernard’s pre-hearing brief. There is no reason as to why Plaintiff chose to forego to challenge Bernard’s claim splitting claims.

Plaintiff argues that defense counsel lied that had he (defense counsel) known Plaintiff planned to pursue claims concerning the 2009 and 2017 Agreements, he would have chosen a different strategy, specifically default on the First Arbitration (and gain $1.3 million from Plaintiff), instead of risking the Second Arbitration (which would only net him approximately $670,000). (Motion to Vacate, pp. 2:23-3:4.) Plaintiff argues those statements were lies because, among other things, defense counsel knew that the 2009 Agreement could not have been arbitrated in the First Arbitration. Plaintiff concludes that defense counsel’s “unsworn and false assertions during oral argument … carried the day for his client, as the arbitrator ruled that Sybi had engaged in impermissible claim splitting for failing to arbitrate in the first proceeding …” (Motion to Vacate Award, p. 3:13-17.)

However, as stated above, “[o]nly extrinsic fraud which denies a party a fair hearing may serve as a basis for vacating an award.” (Comerica, supra, 208 Cal.App.4th at p. 825.)

            Here, there is no evidence of extrinsic fraud. Rather there is evidence suggesting that Plaintiff had a fair hearing on the issues of claim preclusion and splitting claims, but chose to forfeit issues for reasons this Court finds unpersuasive.

For those reasons, the Court denies Plaintiff’s request to vacate the Final Award on the ground that it was procured through fraud.

2.      Whether the Second Arbitrator Engaged in Misconduct by Promising, but then Failing to Inform Plaintiff’s Counsel that the Arbitrator Will Consider Bernard’s Claim Splitting Defense in Rendering the Final Award

“‘The remedy for arbitrator misconduct lies in vacation of the award under [Code of Civil Procedure] section 1286.2.’ [Citations.]” (Lambert v. Carneghi (2008) 158 Cal.App.4th 1120, 1136.)

Here, Plaintiff argues that the Second Arbitrator “specifically informed counsel for Bernard and Sybil that she would provide feedback after receiving their initial post-hearing briefs, [in order to] … guide them in preparing their responsive/reply briefs,” but relegated on that promise because she did not tell defense counsel to address those issues. (Motion to Vacate, pp. 19:22-25, 21:2-6.)

Specifically, Plaintiff states that the Second Arbitrator promised to give the parties “specific comments … to help craft the reply brief.” (Motion to Vacate, p. 20:4-5 [emphasis removed].) Later, when asked if she will ask the parties questions, the arbitrator stated that: “By that time, you’ll have had my comments on what I wanted you to respond to ….” (Motion to Vacate, p. 20:23-24 [emphasis removed].)

However, there is no evidence of misconduct here. The above quotes from the proceeding show that the arbitrator’s comments were only meant to “help” the parties craft their reply briefs. There is no evidence that the Second Arbitrator required the parties to use her comments to limit the scope of the parties’ briefs. There is also no evidence of governing arbitration procedural rules produced, requiring the Second Arbitrator to outline for the parties which issues they may or may not discuss in their briefs. In other words, there is no evidence that the Second Arbitrator violated any public policy, laws, or arbitration procedural rules.

For those reasons, the Court denies Plaintiff’s request to vacate the Final Award on the ground that the arbitrator engaged in misconduct.

3.      Whether the Second Arbitrator Exceeded her Powers by Ruling on Bernard’s Claim Splitting Defense

Plaintiff argues that the Second Arbitrator exceeded her powers because Plaintiff and Bernard never agreed to submit their procedural defense of claim preclusion based on the First Arbitration. (Motion to Vacate Award, pp. 31:18-32:4.)

Code of Civil Procedure section 1282.6, subdivision (a)(4), allows the Court to vacate the Final Award if it finds that Second Arbitrator exceeded her powers, and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted.

“In determining whether private arbitrators have exceeded their powers, the courts must accord ‘substantial deference to the arbitrators' own assessments of their contractual authority....’ [Citation.]” (Ajida Technologies, Inc. v. Roos Instruments, Inc. (2001) 87 Cal.App.4th 534, 541 (“Ajida”).)

“Nevertheless, except where ‘the parties “have conferred upon the arbiter the unusual power of determining his own jurisdiction” [citation], the courts retain the ultimate authority to overturn awards as beyond the arbitrator’s powers, whether for an unauthorized remedy or decision on an unsubmitted issue.’ [Citation.]” (Ajida, supra, 87 Cal.App.4th at p. 541.)

Here, the arbitration agreement at issue (located in the Second Scope Agreement) declared that “[t]he arbitrator hearing the Second Arbitration shall have the authority and jurisdiction to determine the scope of arbitration under, and in accordance with, this Agreement.” (Motion to Vacate, p. 14:9-11, quoting the Second Scope Agreement which is attached to the Eisemann April 11 Decl. as Exhibit W.)

Therefore, there is no reason for the Court to determine whether the Second Arbitrator exceeded her powers.

However, even if the Court were to decide that issue, there is no evidence that the Second Scope Agreement prevented or prohibited the arbitrator from considering on Bernard’s claim preclusion, splitting claims defense.

“[A] party cannot be compelled to arbitrate without its consent. It is beyond cavil that ‘arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.’ [Citations.]” (Ajida, supra, 87 Cal.App.4th at p. 542.)

The Court analyzes the issue of consent “against the backdrop of California’s ‘“strong public policy in favor of arbitration as a speedy and relatively inexpensive means of dispute resolution. [Citations.]’ [Citation.]” (Ajida, supra, 87 Cal.App.4th at p. 542.) “To further the policy favoring arbitration, courts indulge every reasonable intendment giving effect to such proceedings.” (Ibid.) “For the same reason, ‘ambiguities in the scope of arbitration are resolved in favor of coverage. [Citations.]’ [Citation.]” ([emphasis added].)

The assessment begins with looking to the parties’ arbitration agreement to see whether it placed any limitations on the arbitrator’s authority. (Ajida, supra, 87 Cal.App.4th at p. 543 [“Our assessment of appellant’s claim begins with this fundamental proposition: ‘The powers of an arbitrator derive from, and are limited by, the agreement to arbitrate.’ [Citations.] Thus, in determining whether the arbitrators exceeded the scope of their powers here, we first look to the parties’ agreement to see whether it placed any limitations on the arbitrators’ authority”].)

Here, the order the Court entered compelling the parties to the Second Arbitration, was based on the parties Stipulation for Entry of Order Compelling Arbitration and Staying Action (the “Stipulation to Arbitrate”). (Order dated March 1, 2022, p. 2:1-7.)

According to the Stipulation to Arbitrate, the parties agreed that “Bernard asserts the right to arbitrate Sybil’s claims against Bernard,” and also agreed “to entry of an order compelling Sybil to arbitrate her claims against Bernard and staying this action as against the other Parties pending resolution of that arbitration.” (Stipulation to Arbitrate, filed March 1, 2022, p. 2 – Recitals, ¶ 4.)

            Plaintiff argues, and Bernard does not dispute, that the Second Scope Agreement is contains the arbitration provision underlying the Stipulation to Arbitrate. (Motion to Vacate, p. 12:15-19 [“After the first arbitrator issued his award, Bernard and Sybil entered into a second scope agreement on February 22, 2022, in which they agreed to arbitrate the claim they had agreed could not be arbitrated in the first arbitration (the 2009 Agreement) and the claim that could not be arbitrated except by agreement of the parties (the 2017 Agreement, which did not contain an arbitration clause)”].)

            According to the Second Scope Agreement, the parties agreed to the following arbitration terms. “[D]isputes have arisen between Sybil and Bernard about Bernard’s obligation to sell, and Sybil’s obligation to purchase, Bernard’s interest in the Real Property under the 2009 Agreement and other agreements (collectively, the ‘Buy/Sell Disputes’) ….” (Motion to Vacate Award, p. 13:10-12.) “Sybil and Bernard have agreed to arbitrate the Buy/Sell Disputes between them other than the Buy/Sell Disputes arising under the March 2019 Agreements (which they already have arbitrated and which already have been decided) ….” (Motion to Vacate Award, p. 13:23-25.) Therefore, “[t]he Parties agree that the Buy/Sell Disputes … shall be adjudicated in a single, consolidated arbitration (the ‘Second Arbitration’) conducted pursuant to and in accordance with the terms of the 2009 Arbitration Clause; provided, however, that [among other things] … the arbitrator hearing the Second Arbitration (A) does not have jurisdiction or authority over any Buy/Sell Disputes under the March 2019 Agreements and (B) may not vacate or modify the arbitration award(s) in the First Arbitration.” (Motion to Vacate Award, p. 14:5-7.)

The Court has not found any clause in the Second Scope Agreement suggesting that the Second Arbitrator did not have the power to decide Bernard’s claim preclusion, splitting claims defense. Indeed, Plaintiff has not pointed to any clause that shows the arbitrator exceeded her powers. Plaintiff argues that the issues arising from the 2009 Agreement could and would not have been part of the First Arbitration agreement because the parties only focused on other agreements. However, it can be both true (as it appears to be in this case), that Bernard agreed to resolve dispute concerning other agreements in the First Arbitration, while preserving its defenses against Plaintiff with regards to the 2009 Agreement. In short, there has been no evidence that the parties intended to exclude Bernard’s defenses.

“‘“When parties agree to leave their dispute to an arbitrator, they are presumed to know that his award will be final and conclusive....” [Citation.]’” (Moncharsh, supra, 3 Cal.4th at p. 10.) “This expectation of finality strongly informs the parties’ choice of an arbitral forum over a judicial one.” (Ibid.) “Ensuring arbitral finality thus requires that judicial intervention in the arbitration process be minimized.” (Ibid.)

Here, Plaintiff’s failure to anticipate and address Bernard’s defenses even after being given notice of such defenses during the arbitration proceeding, is not grounds for vacating the Final Award.

Accordingly, the Court denies Plaintiff’s request to vacate the Final Award on the ground that the arbitrator exceeded her powers.

4.      Conclusion – Motion to Vacate Award

For those foregoing reasons, Plaintiff Sybil M. Flom’s motion to vacate the award is Denied.

D.     Motion to Confirm Award

“A petition [to confirm an arbitration award]… shall: ¶ (a) Set forth the substance of or have attached a copy of the agreement to arbitrate unless the petitioner denies the existence of such an agreement. ¶ (b) Set forth names of the arbitrators. ¶ (c) Set forth or have attached a copy of the award and the written opinion of the arbitrators, if any.” (Code Civ. Proc., § 1285.4.) If the petition does not, the response shall set forth those things. (Code Civ. Proc., § 1285.6.)

Here, the parties have complied with the statutes above, by setting forth the substance of the agreement to arbitrate, attaching copies of the agreement to arbitrate, setting forth the names of the arbitrator, and attaching a copy of the award and the written opinion of the arbitrator.

The Final Award is attached as Exhibit 1 to the declaration of Henry S. David filed on March 6, 2023, in support of the Motion to Confirm Award. According to the Final Award, the Second Arbitrator made the following rulings:

(1)   Plaintiff Sybil’s claims are denied and her request for specific performance is not granted.

(2)   Bernard’s request for declaratory relief is granted. He is entitled to the ownership of his 1/3 interest in Maple & Vail LLC and the distributions that are due him since the date of Abe Michlin’s death with credit for all distributions already made. He has no further obligation to sell his interest to Sybil or any other person or entity. His request for punitive damages is denied.

(3)    No re-allocation of arbitration fees is ordered.

In light of the Court’s ruling above, denying Plaintiff’s motion to vacate the award and finding no other reason to deny Bernard’s motion , the Court grants the request to confirm the Final Award and enter judgment accordingly.

For those reasons, the court GRANTS Bernard’s motion to confirm the Final Award.

ORDERS

The Court DENIES Plaintiff Sybil M. Flom’s motion to vacate arbitration award.

The Court GRANTS Defendant Bernard A. Michlin’s motion to confirm arbitration award. The Court orders the defendant to file and serve a proposed order within ten (10) days of this ruling.