Opinion
G056386
01-13-2020
EMMA BORGES, a minor, etc., Plaintiff and Appellant, v. ADVANCED SPECIALTY CARE, LLC, et. al, Defendants and Appellants.
Law Offices of Neil M. Howard, Neil M. Howard; Esner, Chang & Boyer and Stuart. B. Esner for Plaintiff, Respondent and Appellant Emma Borges. Horvitz & Levy, Kirk C. Jenkins, Frederic D. Cohen; Manning & Kass, Ellrod, Ramirez, Trester and Louis W. Pappas for Defendant and Appellant Advanced Specialty Care, LLC. Clyde & Co, Douglas J. Collodel, Margaret M. Holm, M. Christopher Hall; Law Offices of Scott G. Nathan and Scott G. Nathan for Defendant and Appellant Tung Phoung Nguyen-Phuc.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 30-2016-00830408) OPINION Appeal from a judgment of the Superior Court of Orange County, David R. Chaffee, Judge. Affirmed. Law Offices of Neil M. Howard, Neil M. Howard; Esner, Chang & Boyer and Stuart. B. Esner for Plaintiff, Respondent and Appellant Emma Borges. Horvitz & Levy, Kirk C. Jenkins, Frederic D. Cohen; Manning & Kass, Ellrod, Ramirez, Trester and Louis W. Pappas for Defendant and Appellant Advanced Specialty Care, LLC. Clyde & Co, Douglas J. Collodel, Margaret M. Holm, M. Christopher Hall; Law Offices of Scott G. Nathan and Scott G. Nathan for Defendant and Appellant Tung Phoung Nguyen-Phuc.
Tung Phuong Nguyen-Phuc was erroneously sued as Tung Nguyen (hereafter Nguyen).
* * *
The trial court entered a judgment confirming an arbitration panel's award of over $6 million in favor of plaintiff Emma Borges, and against defendant Nguyen, and her employer, Advanced Specialty Care, LLC (ASC). The case arises out of injuries suffered by Borges due to negligent nursing care. ASC and Nguyen both appeal, with ASC arguing the trial court erred by rejecting its assertion that Borges waived her right to arbitrate, and Nguyen arguing the court erred in confirming the award against her because she never signed the arbitration agreement and was thus not bound by it. We are unpersuaded by either argument. Waiver of the right to arbitrate is generally a question of fact. Thus, to prevail on its claim, ASC would have to demonstrate the evidence established Borges's waiver as a matter of law. It has not done so. And Nguyen waived any contention that she had not agreed to arbitrate when she not only failed to raise the objection in opposition to Borges's motion to compel arbitration, but then participated fully in the arbitration without ever raising the issue.
ASC also contends the court erred by confirming the arbitration award because (1) the evidence demonstrated the neutral arbitrator relied on evidence outside the record in reaching his conclusion about Borges's life expectancy, and (2) the award included an apparent miscalculation of the costs awarded to Borges. But as the trial court pointed out, the arbitrator was not bound to accept either expert's estimate of Borges's life expectancy, and his conclusion that the best estimate was somewhere in between those two estimates was patently reasonable. The fact that the alleged "miscalculation" of the cost award was brought to the attention of the arbitration panel, which declined to correct it, fatally undermines that contention. By all appearances, the panel intended to make the cost award it did; we cannot disturb it.
Nguyen also argues the trial court erred by failing to vacate the award on the basis of (1) misconduct by the neutral arbitrator, and (2) the award's inclusion of statutorily unauthorized periodic payments. We agree with the trial court's analysis of both arguments. It might be "unseemly" for the neutral arbitrator to comment on the case in an elevator while it was pending, but there is no evidence he prejudged the merits. There is likewise no evidence the arbitrators acted unreasonably in responding to the sudden unavailability of Nguyen's expert witness, or that Nguyen might have been prejudiced by their handling of that issue. And while Code of Civil Procedure section 667.7 requires the superior court to order periodic payments of future damage awards whenever requested by a party, nothing in the statute—nor in the parties' agreement in this case—prohibits arbitrators from doing the same. Thus, we cannot conclude the arbitrators "exceeded their powers" by doing so. To the extent Nguyen contends the arbitrators erred in the substance of their periodic payment order, that contention is not reviewable.
Borges cross-appeals, arguing the award should have been vacated to the extent it provides for periodic payments of her future earnings award. She argues the award makes no sense because she will be only 10 years old at the end of the seven-year payment period, and thus it bears no relationship to the timing of her presumed future loss of earnings. However, even if we agreed with this argument, it would not provide a basis for reversal. As we have already noted, if the arbitrators have the power to make an order, any errors, factual or legal, in the substance of that order are not reviewable.
We consequently affirm the judgment.
FACTS
Borges, acting through her guardian ad litem, Kelly Sellon, filed her complaint in January 2016. The complaint essentially alleged Borges was born with congenital respiratory problems that required her to be intubated and otherwise cared for medically.
Borges alleged that on October 6, 2015, while she was a patient of Nguyen and ASC, Nguyen "negligently respond[ed] to [Borges's] medical condition, in particular the failure to timely reinsert[] a tracheotomy tube to insure that [Borges] received adequate oxygen," and that "[a]s a direct and proximate result of defendants' negligence, [Borges] suffered a severe brain injury." She sought damages to compensate for "physical pain, mental suffering, loss of enjoyment of life, physical impairment, disfigurement, inconvenience, grief, anxiety, emotional distress, medical expenses (past and future), attendant care, home care, loss of earnings capacity, loss of ability to provide household services, and rehabilitation expenses."
On April 25, 2016, four months after she filed the complaint, Borges moved to compel arbitration of the case. The motion was based on an arbitration agreement between ASC and Borges, signed on behalf of Borges by Sellon, who is her mother. The agreement states that "any dispute as the medical malpractice, that is as to whether any medical services rendered under this contract were necessary to unauthorized or were improperly, negligently, or incompletely rendered, will be determined by submission to arbitration as provided by California law; and not by a lawsuit or resort to court process except as California law provides for judicial review of arbitration proceedings." The agreement also states, "[t]he parties agree that the provisions of California law applicable to the healthcare providers shall apply to the disputes with this arbitration agreement."
Before filing her motion to compel arbitration, Borges had filed a motion for statutory preference in trial setting and also moved to take Nguyen's deposition. She also served a request for admissions on Nguyen, to which Nguyen responded. Borges additionally served discovery on ASC.
Both ASC and Nguyen opposed Borges's motion to arbitrate, arguing only that Borges waived her right to arbitrate by failing to demand arbitration in a timely manner.
The trial court granted Borges's motion, stayed further proceedings in the trial court, and ordered the case to be arbitrated in accordance with the agreement between ASC and Borges. The court observed that "[a] party who argues waiver 'bears a heavy burden . . . and any doubts regarding a waiver allegation should be resolved in favor of arbitration.'" (Citing Saint Agnes Medical Center v. PacifiCare of California (2003) 31 Cal.4th 1187, 1195 (St. Agnes).) Moreover, the court observed that "'While engaging in litigation of the matter may be inconsistent with an intent to invoke arbitration, "the party who seeks to establish waiver must show that some prejudice has resulted from the other party's delay in seeking arbitration."'"
In concluding Borges had not waived her right to arbitrate, the trial court relied on the facts that she had "waited only about 4 months before filing her petition to compel arbitration, so the amount of time that passed was not significant," that discovery was in "an early stage" and that no discovery motions had been ruled upon and no trial date had been set.
The parties engaged in discovery (and disputes related to discovery) after the case was ordered into arbitration. The arbitration commenced in September 2017 before a panel of three arbitrators who heard from numerous witnesses. Of particular significance was the fact that Borges's expert witness estimated her life expectancy to be approximately 35 years, while ASC and Nguyen's expert witness estimated it to be two years or less.
At the conclusion of the arbitration, the panel agreed unanimously on the issue of liability but disagreed on damages. The arbitrator selected by Borges estimated Borges's life expectancy would be approximately 20 more years, and thus concluded her damage award should be "in the $14 million dollar range." The arbitrator selected by ASC and Nguyen, on the other hand, adopted the two-year life expectancy estimate offered by their expert witness, and thus concluded the damage award should be "approximately $2 million." Consequently, the decision was left to the neutral arbitrator, who determined, "[a]fter much reflection and soul searching," that Borges had "an additional life expectancy of 5 to 7 years.
Based on that estimate, the panel majority—consisting of the neutral arbitrator and the arbitrator selected by Borges—agreed to award Borges $5,942, 284, which included (a) noneconomic damages of $250,000, (b) past medical expenses of $668,742, (c) future medical expenses of $4,000,000, and (d) future lost wages of $1,023,542. The arbitrator selected by ASC and Nguyen dissented from the proposed damage award because he believed the neutral arbitrator had improperly based his estimate of Borges's life expectancy on "reflection and soul searching," rather than on the evidence provided by the experts. In the dissenting arbitrator's view, if the panel members agreed that the life expectancy estimate of Borges's expert was "far too optimistic," they were obligated to "discard [that expert's] testimony and evidence put forth therein" and to "use the testimony of [ASC and Nguyen's expert] as the only other pediatric neurologist who testified."
After the panel issued its statement of decision, Borges moved for an award of interest pursuant to Code of Civil Procedure section 998, for an award of costs, and both Borges and ASC sought an order for periodic payments of the damages representing future losses.
Nguyen initially joined in the request for periodic payments, but later withdrew her request, arguing that the issue of periodic payments should be decided in the trial court, after the arbitration award is confirmed, based on new evidence presented at a hearing before the court.
The panel declined to award interest, with the majority concluding that the "[998] offers are defective and unreasonable." It did award Borges costs in the amount of $126,855.72, over the dissent of the arbitrator selected by ASC and Nguyen, who concluded that costs should be "very nominal." The panel unanimously concluded the request for periodic payments was appropriate, although the arbitrator selected by Borges believed it was appropriate to order periodic payments only for future medical expenses, not for future lost wages.
ASC objected to the panel's cost award, asserting that because the panel majority had concluded Borges's section 998 offers were defective and unreasonable, it could not have intended to include her expert witness fees within her cost award. ASC pointed out that when the expert witness fee component of Borges's cost bill (a total of $108,429.99) is excluded from the total costs she sought ($175,643.72), the remainder of the costs added up to significantly less than the $126,855.72 total awarded to her. ASC noted that neither the inclusion or exclusion of the expert witness costs could account for the difference between the cost amount sought by Borges and the amount awarded by the panel, and also that it had not been "able to come up with any combination of the remaining expenses included in the plaintiff's Memorandum of Costs" that would account for the difference. Consequently, ASC concluded in the letter "that there must have been some type of mathematical error(s) in the calculation of the award of costs." Nguyen endorsed ASC's argument. Both parties took pains to make clear they were not seeking reconsideration of the cost award, only pointing out the possibility of a mathematical error.
Borges objected to the panel's inclusion of her future lost income in its periodic payment order, noting that Borges would only be ten years old at the end of the seven-year periodic payment term, so the payments bore no relationship to the period of time in which her lost future earnings might have been expected to accrue.
The panel declined to alter either the cost award or the periodic payment order. The final arbitration award to Borges therefore totaled $6,069,139.72, consisting of (a) noneconomic damages of $250,000, (b) past medical expenses of $668,742, (c) future medical expenses of $4,000,000 payable over seven years in accordance with an attached schedule, (d) future lost wages of $1,023,542, also payable over seven years in accordance with the attached schedule, and (e) a cost award of $126,855.72.
Returning to the trial court, Borges filed a petition asking the trial court to "correct" the award by eliminating the provision specifying that her damages for lost wages were to be paid over a seven-year period, or alternatively for an order confirming the award. ASC and Nguyen filed motions to vacate the award. ASC argued that (1) the neutral arbitrator's analysis of life expectancy was not based on the evidence presented at the hearing, (2) the panel's award of costs was the product of mathematical error, and (3) the arbitration was not handled in a fundamentally fair manner. Nguyen argued (1) she did not consent to arbitration, (2) the award was procured by corruption or fraud and her rights were prejudiced by the conduct of the neutral arbitrator, and (3) the panel erred in formulating the periodic payments.
The neutral arbitrator filed a declaration in opposition to Nguyen's claim of misconduct.
The court considered the three petitions together and confirmed the arbitration award in its entirety. The court concluded that Nguyen had waived her lack of consent to the arbitration when she failed to raise it in her opposition to Borges's motion to compel arbitration. The court also explained that its power to review arbitration awards is limited and does not include the power to review alleged errors of law committed by the arbitrators. It rejected the assertion that the neutral arbitrator had based his determination of life expectancy on information not presented at the hearing, noting that he could properly use the substance of the experts' testimony to reach a conclusion that Borges's life expectancy fell somewhere between their widely divergent estimates.
The court rejected the assertion that the neutral arbitrator had engaged in misconduct, observing that while it might have been "unseemly" that the arbitrator was overheard speaking about the case in an elevator, there was no evidence the arbitrator had prejudged the case. Nor was there evidence that the panel had excluded Nguyen's expert, or that Nguyen had been prejudiced by the delay in hearing her expert's testimony.
As to the cost award, the court seemed to agree the amount was erroneous, but rejected the argument that the panel must have made a mathematical error in calculating the total because that suggestion had been made directly to the panel itself, which then declined to alter the award. Thus, the court concluded the panel's error would have to be one of fact or law, which were not reviewable.
Finally, the court rejected Nguyen's assertion that the arbitrators exceeded their authority in ordering periodic payments of the future damages. The court noted there were no cases holding that arbitrators lacked such authority, and then reasoned that because such awards are required to be based on the evidence adduced at trial, it is the arbitrators—who presided over the trial in the arbitral forum—rather than the trial court in a subsequent hearing—who are best positioned to determine the propriety of such an order.
DISCUSSION
1. Challenges to the Order Compelling Arbitration
A. ASC's Claim that Borges Waived Her Right to Arbitrate
ASC first contends that the trial court erred when it ordered the case into arbitration because Borges waived her right to arbitrate by delaying more than three months after she filed her complaint and commenced discovery before she filed her motion to compel arbitration.
The public policy favoring arbitration means a claim of waiver is entitled to "close judicial scrutiny" and the "party seeking to establish a waiver bears a heavy burden." (St. Agnes, supra, 31 Cal.4th 1187, 1195.) Moreover, because '"[t]he question of waiver is one of fact"' (Berman v. Health Net (2000) 80 Cal.App.4th 1359, 1363), we review the court's determination that no waiver has occurred under the substantial evidence test. As this court has explained, that means "[t]he trial court's 'determination of this factual issue, "'if supported by substantial evidence, is binding on an appellate court.'"" (Lewis v. Fletcher Jones Motor Cars, Inc. (2012) 205 Cal.App.4th 436, 443.)
In St. Agnes, our Supreme Court set forth the factors to be considered in assessing whether a contractual right to arbitrate has been waived: "'In determining waiver [of the right to arbitration], a court can consider "(1) whether the party's actions are inconsistent with the right to arbitrate; (2) whether 'the litigation machinery has been substantially invoked' and the parties 'were well into preparation of a lawsuit' before the party notified the opposing party of an intent to arbitrate; (3) whether a party either requested arbitration enforcement close to the trial date or delayed for a long period before seeking a stay; (4) whether a defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings; (5) 'whether important intervening steps, [e.g., taking advantage of judicial discovery procedures not available in arbitration] had taken place'; and (6) whether the delay 'affected, misled, or prejudiced' the opposing party.'"" (St. Agnes, supra, 31 Cal.4th at p. 1196.)
As the Supreme Court made clear, it is not enough for the party opposing arbitration to show that one or more of those factors is present. Instead, a determination of "prejudice . . . is critical in waiver determinations" (St. Agnes, supra, 31 Cal.4th at p. 1203), a point which ASC concedes. Because the trial court ruled against ASC on this issue, we can reverse only if we conclude that ASC has demonstrated as a matter of law that it was prejudiced by Borges's delay in seeking arbitration.
ASC contends that the evidence satisfied the first of the waiver factors listed in St. Agnes, i.e., that "Borges engaged in litigation conduct inconsistent with an intent to arbitrate." Specifically, ASC argues that "[i]n the weeks after Borges filed her complaint, this matter was actively litigated." Given the passage of only "weeks," however, and considering the complexity of this case, we cannot agree the parties were well into their preparation for trial when Borges filed her petition to arbitrate.
ASC nonetheless argues it was prejudiced by Borges's nascent effort to litigate in court because "Borges filed a motion for calendar preference," which meant that for several weeks "ASC and Nguyen faced the prospect of having to go to trial quickly in this complex case, and they had to prepare accordingly" and also because they "engaged in a series of discovery disputes."
We reject the contention because "merely participating in litigation, by itself, does not result in a waiver, [and] courts will not find prejudice where the party opposing arbitration shows only that it incurred court costs and legal expenses." (St. Agnes, supra, 31 Cal.4th at p. 1203.) Rather, "[p]rejudice typically is found only where the petitioning party's conduct has substantially undermined this important public policy or substantially impaired the other side's ability to take advantage of the benefits and efficiencies of arbitration. [¶] For example, courts have found prejudice where the petitioning party used the judicial discovery processes to gain information about the other side's case that could not have been gained in arbitration [citations]; where a party unduly delayed and waited until the eve of trial to seek arbitration [citation]; or where the lengthy nature of the delays associated with the petitioning party's attempts to litigate resulted in lost evidence [citation]." (St. Agnes, supra, 31 Cal.4th at p. 1204, italics added.) No such prejudice is asserted here. Nor could it be given the facts before us. This was nothing like an "eve of trial" request to arbitrate.
In St. Agnes, the Supreme Court found the undisputed evidence demonstrated, as a matter of law, that there was no prejudice from a delay in seeking arbitration where the parties had already bickered about procedural issues in the trial court before the demand for arbitration was made. As the Supreme Court observed, the record in St. Agnes contained no evidence "that the parties have litigated the merits or the substance of Saint Agnes's arbitrable claims, or that any discovery of those claims has occurred. Nor is there any indication that PacifiCare used the Los Angeles and Fresno actions to gain information about Saint Agnes's case that otherwise would be unavailable in arbitration. Finally, there appears no claim that PacifiCare's actions have impaired Saint Agnes's ability to have the arbitrable disputes in this action resolved fairly through arbitration." (St. Agnes, supra, 31 Cal.4th at p. 1204.)
The record here is distinguishable from St. Agnes only to the extent that some discovery was conducted in this case. But our record does not disclose the substance of that discovery, and as we have already noted, ASC makes no attempt to demonstrate how that discovery might have given Borges an advantage as compared to what she would have been able to discover by pursuing arbitration immediately. In the absence of any showing that Borges's three-month delay in seeking arbitration was prejudicial to ASC, we cannot conclude the trial court erred by denying ASC's assertion that Borges waived her right to arbitrate. We therefore reject the claim.
B. Nguyen's Claim that She Was Not Bound by the Arbitration Agreement
Nguyen argues the court erred by confirming the arbitration award against her because she was not a signatory to the arbitration agreement, and thus could not be compelled to arbitrate. However, as the trial court explained, Nguyen waived that claim by failing to raise it in opposition to the petition to arbitrate and by then participating fully in the arbitration without ever objecting on that basis.
In Douglass v. Serenivision, Inc. (2018) 20 Cal.App.5th 376, the court explained that a party's consent to arbitration may be manifested by means other than executing a pre-dispute binding agreement, explaining that "parties may enter into an implied in fact agreement to arbitrate through their conduct (which may additionally be deemed to estop them from denying such an agreement)." (Id. at p. 387.) Thus, a party's "appearance at the arbitration hearing and participation therein without raising any objection to the jurisdiction of the arbitrator estops them from challenging it afterwards." (Cabrera v. Plager (1987) 195 Cal.App.3d 606, 613, fn. 8.)
As explained in University of San Francisco Faculty Assn. v. University of San Francisco (1983) 142 Cal.App.3d 942, 954, "[a] claimant may not voluntarily submit his claim to arbitration, await the outcome, and if the decision is unfavorable, challenge the authority of the arbitrator to act." To condone such conduct would promote "'gamesmanship'" as it would allow a party "'both to have his cake and eat it too.'" (Caro v. Smith (1997) 59 Cal.App.4th 725, 731.) The need to discourage such tactics is particularly acute in the context of arbitration, which is specifically intended to operate as a quicker and less expensive alternative to litigation in court. Hence, "we cannot permit a party to sit on his rights, content in the knowledge that should he suffer an adverse decision, he could then raise the illegality issue in a motion to vacate the arbitrator's award. . . . Such a waste of arbitral and judicial time and resources should not be permitted." (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 30 (Moncharsh).)
In this case, Nguyen only opposed Borges's petition to arbitrate on grounds of waiver. Nguyen never objected to arbitration on the basis that the arbitrators would have no jurisdiction over her, or suggested she might want to assert her defenses in court even if ASC were compelled into arbitration. Instead, when the court rejected the claim that Borges had waived her right to enforce the arbitration agreement, Nguyen proceeded to arbitration, and participated fully therein, without ever questioning the authority of the arbitration panel to rule. It was only after the arbitrators ruled against her that Nguyen challenged their jurisdiction. That was too late.
Nguyen points out that when she opposed Borges's ex parte application to return the case to arbitration, after it was briefly ordered back into court following sluggish discovery proceedings in the arbitral forum, her counsel stated, "she was not a party to the arbitration agreement entered into between plaintiff and Advance Specialty Care." That is correct. What counsel did not do, however, is raise any objection to the arbitral forum on that basis. Instead, Nguyen's opposition to returning the case to arbitration was based solely on the assertion the arbitration proceedings were moving too slowly. Thus, the reference establishes only that by April 2017 at the latest, Nguyen was expressly aware of her status as a non-signatory to the agreement, but nonetheless declined to make an issue of it until nearly a year later, when she petitioned to vacate the arbitration award.
In Cummins v. Future Nissan (2005) 128 Cal.App.4th 321, the court rejected the assertion that a party whose participation in arbitration was court-ordered could not be found to have impliedly waived any unstated objections to the proceeding: "The 'bright line' for application of forfeiture does not lie between those who voluntarily invoke the arbitration process and those who are dragged to the table against their will. The forfeiture rule exists to avoid the waste of scarce dispute resolution resources, and to thwart game-playing litigants who would conceal an ace up their sleeves for use in the event of an adverse outcome. The proper criterion for dividing the sheep from the goats (Matthew 25:32) is a litigant's knowledge of a defense to the jurisdiction of the arbitrator. Those who are aware of a basis for finding the arbitration process invalid must raise it at the outset or as soon as they learn of it so that prompt judicial resolution may take place before wasting the time of the adjudicator(s) and the parties. If a trial court compels arbitration nonetheless, the party resisting arbitration may seek review of the ruling on appeal from an order that confirms the award. [Citation.] If the arbitration process is found to be invalid, the responsibility for a waste of resources would then lie with the trial court, not the litigant, and there has not been any hidden trump card. On the other side of the line, a party who knowingly participates in the arbitration process without disclosing a ground for declaring it invalid is properly cast into the outer darkness of forfeiture." (Id. at pp. 328-329, fns. omitted.)
Nguyen also relies on United Firefighters of Los Angeles v. City of Los Angeles (1991) 231 Cal.App.3d. 1576 (United Firefighters), in support of her contention that a party's contention that he or she is not bound by an arbitration provision is not waivable. The case is inapposite.
In United Firefighters, it was the party opposing arbitration which contended that the party who had petitioned for arbitration was not covered by the arbitration provision he sought to enforce, and thus that he lacked standing to bring the petition. (United Firefighters, supra, 231 Cal.App.3d at p. 1582.) The opposing party raised that issue in opposition to the petition and again in opposition to the petition to confirm the arbitration award. But the party failed to file a separate petition to vacate the arbitration award. The prevailing party argued that it was the failure to file a separate petition to vacate the award, rather than the failure to reassert the issue within it, which precluded the appellate court from considering the point. The court disagreed, explaining why a separate petition to vacate was not required under the circumstances. (Id. at pp. 1581-1582.)
However, the court also noted that "even if the statutory scheme of the arbitration law [required a petition to vacate], this appeal would still be properly before us" because the petitioner's "standing to seek arbitration" is an issue that "'relates to subject matter jurisdiction which may be raised initially on appeal.'" (United Firefighters, supra, 231 Cal.App.3d at p. 1582; see Color-Vue, Inc. v. Abrams (1996) 44 Cal.App.4th 1599, 1604 ['"[S]tanding"' refers to a plaintiff's '"right to relief [which] goes to the existence of a cause of action"'].)
In this case, no issue of standing has been presented. It is Borges, rather than Nguyen—the party whose connection to the arbitration agreement is questioned— who petitioned for arbitration. Borges's right to enforce the arbitration agreement has never been questioned, and thus there is no dispute over subject matter jurisdiction.
2. Challenges to the Arbitration Award
ASC and Nguyen also challenge the substance of the arbitration award, arguing it must be vacated or corrected for various reasons. However, "a contractual [arbitration award] is not subject to judicial review except on the grounds set forth in sections 1286.2 (to vacate) and 1286.6 (for correction)." (Moncharsh, supra, 3 Cal.4th at p. 33.)
An award may be set aside entirely if the court finds 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, subd. (a).)
All statutory references are to the Code of Civil Procedure unless otherwise indicated.
An award may be corrected if the court finds "(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." (§ 1286.6.)
An arbitration award may not be vacated or corrected on the basis that the arbitrators made errors of fact or law. "Arbitrators, unless specifically restricted by the agreement to following legal rules, '"may base their decision upon broad principles of justice and equity . . . ." [Citations.] As early as 1852, [the Supreme Court] recognized that, "The arbitrators are not bound to award on principles of dry law, but may decide on principles of equity and good conscience, and make their award ex aequo et bono [according to what is just and good].'" (Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 374-375; See also Moncharsh, supra, 3 Cal.4th at p. 11 ["an arbitrator is not ordinarily constrained to decide according to the rule of law"].)
With these principles in mind, we consider the parties' contentions.
A. ASC's Claim that the Neutral Arbitrator Relied on Information Outside of the Record
ASC asserts the trial court erred by refusing to vacate the arbitration award pursuant to section 1286.2, subdivision (a)(3), because the neutral arbitrator engaged in misconduct when he failed to disclose in advance that he intended to "base [his] award upon information not obtained at the hearing."
According to ASC, the information improperly relied upon by the neutral arbitrator was the "reflection and soul searching" he engaged in before concluding that Borges had an additional life expectancy of five to seven years—a range both significantly lower than the one proposed by Borges's expert, and significantly higher than the one proposed by ASC and Nguyen's expert.
As ASC admits, it got the idea that an arbitrator's "reflection and soul searching" would qualify as "information not obtained at the hearing" from the dissent penned by its party arbitrator. In that dissent, the arbitrator stated it was improper for the neutral arbitrator to reach a conclusion "based upon reflection and soul searching" rather than one "based on the evidence of life expectancy." As indicated during oral argument in this matter, we find this idea absurd.
The neutral arbitrator did not say he based his finding on reflection and soul searching. Instead, he said he made the finding "[a]fter much reflection and soul searching." (Emphasis added.) In this context, it is clear that "reflection and soul searching" is the equivalent of thoughtful consideration. The neutral arbitrator was explaining that he thought about the two widely disparate expert opinions on Borges's life expectancy before reaching his conclusion that the best estimate fell somewhere in between those opinions. We believe that is exactly what parties to an arbitration should hope for.
In an effort to make "thinking" seem like a violation of due process, ASC suggests the neutral arbitrator "must have been reflecting on facts he believed supported his conclusion that Borges had a life expectancy that differed from the opinion of either sides' experts, but he gave neither the opportunity to question or disprove whatever those purported facts might have been." In making that point, ASC appears to be suggesting that arbitrators—and presumably judges and juries as well—should be obligated to engage in deliberations out loud, in full view of the parties, to ensure their decisions are properly subjected to real-time cross-examination. This is nonsense and we categorically reject the suggestion.
The neutral arbitrator applied critical thinking skills to analyze the persuasive effect of two conflicting expert opinions. And then he made his decision. In other words, he did exactly what the law required of him.
Contrary to the apparent belief of the dissenting arbitrator and ASC, the neutral arbitrator was not obligated to blindly adopt the life-expectancy opinion of one expert or the other. This was not a so-called "baseball arbitration." (See California Trout, Inc. v. Superior Court (1990) 218 Cal.App.3d 187, 211 [describing a baseball arbitration as one in which the arbitrator is "constrained . . . to choose one or the other of the contending proposals for judgment"].) Instead, the neutral arbitrator's job as a factfinder was to reach his own conclusion based on the information provided by all the witnesses. (See Abbott v. Taz Express (1998) 67 Cal.App.4th 853, 855 ["We refuse to transform the [factfinder's] inherently subjective task of calculating damages into a mechanical exercise of voting to accept or reject the testimony of any witness in toto"].)
B. ASC's Claim that the Arbitrators Engaged in an Evident Miscalculation of the Cost Award
ASC also contends the court erred by refusing to correct the award based on the arbitrators' "evident miscalculation" of the cost award. (§ 1286.6, subd. (a).) ASC explains that Borges requested a total of $175,643.72 in costs, which included $108,429.99 in expert fees pursuant to section 998 and $67,213.73 in other costs. However, in denying Borges's request for an award of interest, the majority stated that Borges's 998 offers had been "defective and unreasonable," and thus ASC claims they could not have intended to award her any expert witness fees either.
The majority awarded Borges costs of $126,855.72, however, which as ASC concedes "necessarily had to include at least some of Borges's expert witness fees." In response to that award, ASC wrote to the arbitrators, pointing out that Borges's "defective and unreasonable" 998 offer would not have supported an award of expert witness fees, and suggesting the arbitrators must therefore have committed a mathematical error in calculating the cost award. The arbitrators declined to correct the award.
Noting the arbitrators' refusal to correct the award, the trial court was unpersuaded by ASC's attempt to portray the discrepancy as a "miscalculation." We agree. There is nothing to suggest the arbitrators intended to award Borges some other amount of costs. Even if we were inclined to find a miscalculation, we note that ASC itself is at a loss to identify exactly what that miscalculation might have been. Instead, ASC supposes there must have been one because it assumes the arbitrators could not have intended to award Borges any portion of her expert witness fees.
Such supposition is fatal to a claim of "evident" miscalculation. (See, William B. Logan & Associates v. Monogram Precision Industries (1960) 184 Cal.App.2d 12, 17 ["The cited code section is not operative where a miscalculation is suppositional rather than evident"].) An "evident miscalculation" is one that is "'manifest,'" meaning "'something which is apparent by an examination of the [document], needing no evidence to make it more clear. That which is open, palpable . . . incontrovertible. It is synonymous with evident, visible, plain, obvious to the understanding from an examination of the . . . document; or, at the most, only requiring a mathematical calculation to demonstrate it."' (Severtson v. Williams Construction Co. (1985) 173 Cal.App.3d 86, 93.) A manifest miscalculation does not include one that must be proven through extrinsic evidence. (Ibid.)
In this case, there is no obvious error in the arbitrators' award of costs; it is just a figure, presented without explanation. The award sheds no light on how the arbitrators calculated the amount. As such, there is no basis for concluding it contains any miscalculation. (See William B. Logan & Associates v. Monogram Precision Industries, supra, 184 Cal.App.2d at p. 17 ["There is no way to determine how or why the arbitrator arrived at the particular amount"].) The award does not specify that Borges's request for expert witness fees was denied. Indeed, the award itself says nothing about expert witness fees.
It is only when we examine the underlying evidence that we can discern the fact that Borges's cost memorandum included a request for expert witness fees, and then infer that the costs awarded must also have included at least a portion of those fees. And it is only when we extrapolate from the arbitrators' reasoning for declining to award interest to Borges that we might suspect they also intended to deny her expert witness fees. But none of that information is contained in the award itself. Such discernment and extrapolation does not support a claim of "evident miscalculation."
On the other hand, as ASC concedes, "there was no possible combination of the items on plaintiff's cost bill which could possibly add up to $126,855.72 without including at least some of the expert fees."
In arguing there was a correctible miscalculation in the cost award, ASC relies on Lopes v. Millsap (1992) 6 Cal.App.4th 1679 (Lopes), which it characterizes as "ar[ising] from circumstances quite similar to this case." We disagree. In Lopes, the parties failed to agree on how to split the net proceeds from the sale of their father's property, and decided to submit that issue to arbitration. However, the amounts the arbitrator awarded to each side added up to less than the total net proceeds, and thus the respondents suggested to both the appellant and the arbitrator that there must have been an error in the arbitrator's "'mathematical calculations of the award.'" (Id. at p. 1683.) The arbitrator agreed, and adjusted his calculations to account for the entire net proceeds of the sale. (Id. at p. 1684.)
The trial court later granted a motion to "correct the 'clerical error' in the initial arbitration award," and the corrected award was confirmed as the judgment. (Lopes, supra, 6 Cal.App.4th at p. 1684.) On appeal, the court concluded the correction was appropriate because "[t]he amendment did not require reinterpretation of the evidence or revision in the substance of the award as rendered." (Id. at p. 1687.)
This case is distinguishable from Lopes in several ways. First, the arbitrators here did not agree there was any miscalculation in the initial award. Second, in contrast to the straightforward A + B ? C problem presented in Lopes, we can only guess what miscalculation might have occurred here. Such guesswork does not establish an "evident miscalculation."
We consequently find no error in the trial court's refusal to "correct" the arbitrators' award of costs.
C. Nguyen's Claim of Misconduct by the Neutral Arbitrator
Nguyen contends the trial court erred in refusing to vacate the arbitration award based on the alleged misconduct of the neutral arbitrator, which substantially prejudiced her. (§ 1286.2, subd. (a)(3).)
Nguyen cites several examples of allegedly unfair rulings, including (1) the arbitrators' denial of defendants' motion in limine to exclude one of Borges's expert witnesses on the ground that his testimony was cumulative and lacked foundation; (2) the arbitrators' denial of a motion to continue the hearing to accommodate the illness of Nguyen's nursing expert; (3) the neutral arbitrator denied a motion for mistrial after it became clear that Nguyen's nursing expert was too sick to testify as scheduled; (4) the neutral arbitrator refused to recuse himself at Nguyen's request due to his handling of the nursing expert's testimony; and (5) the neutral arbitrator ultimately agreed to reopen the evidence to hear the testimony of Nguyen's nursing expert only after the arbitrators "had prematurely begun their deliberations of the case and possibly circulated a draft decision and award."
Nguyen also cites several incidents which she contends suggest the neutral arbitrator had prejudged the matter, including (1) that in the context of the initial ruling denying the continuance, the neutral arbitrator asked Nguyen's attorney whether she "really needed" the nursing expert—thus suggesting he had formed conclusions before hearing all the evidence, (2) the neutral arbitrator "telegraphed his feeling that there may be an award for [Borges] and that it could exceed the two insurance policies" when he mentioned something about Nguyen's policy "possibly having been 'popped,'" (3) the neutral arbitrator was overheard commenting on the case in an elevator while the matter was pending, characterizing it as "tragic" and "an $8 million case," (4) the neutral arbitrator suggested the parties give closing arguments before reviewing the testimony of Nguyen's nursing expert, and (5) the neutral arbitrator acknowledged he had '"skimmed through"' the deposition testimony of Nguyen's nursing expert, which had been intended to replace the expert's testimony at the hearing, rather than reading it carefully.
Nguyen asserts the neutral arbitrator "did not deny" making the alleged comments in the elevator, but that is not correct. In his declaration, the arbitrator admitted referencing the case in the elevator, recalling that he had characterized the case as "significant" and "sad." However, he denied any recollection of assigning it a dollar value.
Nguyen argues that when all of those instances are considered together, they demonstrate the neutral arbitrator denied her a fair hearing and deprived her of the opportunity to present her evidence before open-minded decision makers. We cannot agree.
Nguyen's primary complaint involves the protracted controversy surrounding the testimony of her nursing expert. Although we agree the issue was not handled in an ideal manner, that is not the applicable standard for deciding whether to vacate an arbitration award. The issue is whether Nguyen's rights were "substantially prejudiced by the refusal of the arbitrators to postpone the hearing," or their "refusal . . . to hear evidence." (§ 1286.2, subd. (a)(5).) Nguyen has not made that showing.
The problem arose because Nguyen's nursing expert fell ill—apparently as a result of being bitten by a spider—on the day she was scheduled to testify. She did appear at the hearing, and attempted to give her testimony, but was excused until the next day when the arbitrators noted her obvious illness. When Nguyen's counsel reported to the arbitrators the next day that her expert was still too ill to testify, they replied that if she was still too sick to testify, either in person or via Skype, on the following day—a Friday, and the final scheduled day of the hearing—then they would rely on her videotaped deposition testimony instead. They refused Nguyen's request to continue the hearing until the following Monday to see whether the expert might be well enough to testify by then.
When the expert proved unable to testify the next day, Nguyen moved for a mistrial, citing her expert's unavailability, as well as unspecified professional misconduct by Borges's counsel. Nguyen's party arbitrator stated the motion was well-founded, while Borges's party arbitrator voted to deny it, leaving the neutral arbitrator as the tie-breaking vote to deny the motion. At the conclusion of that day's testimony, the neutral arbitrator invited the parties to commence closing arguments, apparently intending to review the expert's deposition at a later point. After Nguyen's counsel objected to giving a closing argument before the panel had considered her expert's testimony, and again moved for a mistrial, the panel reconsidered and agreed to review the deposition testimony before arguments. However, the panel spent only one hour reviewing the six-hour deposition, prompting Nguyen to object they had not given it appropriate consideration. The neutral arbitrator responded that they had "skimmed through" the deposition.
After the parties gave their closing arguments, Nguyen made a formal request for the neutral arbitrator to recuse himself, and ASC moved to reopen the evidence to allow Nguyen's expert to testify before the panel. The neutral arbitrator granted ASC's motion to reopen the evidence but denied Nguyen's recusal motion. Consequently, the hearing was later reconvened, allowing Nguyen's expert to testify. The panel issued its statement of decision approximately three weeks later.
In order to prevail on a motion to vacate based on arbitrator misconduct, Nguyen must show not only that the arbitrator's actions amounted to misconduct, but also that she was substantially prejudiced as a consequence of such misconduct. Given the remarkably thin record available in this case—which includes neither the evidence, nor the arguments presented to the arbitrators—Nguyen has demonstrated neither.
In the absence of a complete record of the proceedings—or even a record of the circumstances surrounding the specific challenged rulings—we cannot determine whether any of the rulings Nguyen complains of was incorrect, let alone that any of those rulings rose to the level of arbitrator misconduct. Indeed, the assertion that the neutral arbitrator's rulings were so egregious as to constitute misconduct is difficult to sustain in the absence of any evidence that either of the other arbitrators shared that concern. Not only was there no evidence to support this position, but according to Nguyen's own telling, all of the rulings she cites, save for one, was rendered unanimously by the panel. The split decision was the panel's denial of Nguyen's motion for a mistrial, which she made after it became clear her nursing expert would not be able to testify. But there is no suggestion in the record that the dissenting panel member questioned the good faith or fairness of the other panel members as to this ruling.
Nor is there any evidence of substantial prejudice. "To find substantial prejudice the court must . . . conclude that the arbitrator might well have made a different award" in the absence of the misconduct. (Hall v. Superior Court (1993) 18 Cal.App.4th 427, 439.) Nguyen contends that even though her expert did finally testify, she was prejudiced by the arbitrators' initial refusal to postpone the hearing and allow her expert to testify in the normal course. In support of that assertion, Nguyen suggests that by the time the arbitrators finally heard her expert's testimony, they had "prematurely begun their deliberations of the case and possibly circulated a draft decision and award," thus unfairly minimizing the potential impact of the expert's testimony. But there is no evidence to support that suggestion. We will not make a finding of substantial prejudice based on nothing more than conjecture.
Moreover, because we have no record of the evidence admitted in the arbitration hearing, we have no information about the substance of the expert's testimony or how it related to the other evidence submitted—let alone any basis to conclude the testimony might have impacted the arbitrators' view of the merits differently if it had been heard earlier. The only hint we have about the content of the evidence is found in the arbitrators' own statement of decision, which reflects that "it was the conclusion of all three arbitrators that [Nguyen's] testimony was less than adequate. She admitted 'failures' in several particulars regarding her care of [Borges] during this emergent situation." The arbitrators also noted that the police officers who arrived in response to the 911 call testified that Nguyen "seemed to have 'panicked' under the circumstances and they took over the care of [Borges] as did the paramedics." Finally, the arbitrators' ruling against Nguyen on liability was unanimous. All of that suggests the issue was not a close one, and that it was Nguyen's own testimony which was most persuasive in demonstrating her negligence. On this remarkably thin record, we do not find that Nguyen was prejudiced by the timing of her nursing expert's testimony.
The only other evidentiary ruling Nguyen complains of is the decision allowing Borges to have two experts testify about the standard of care, over Nguyen's objection that it was "cumulative." For the reasons we have just explained—our record includes neither the motion nor the evidence—we cannot conclude that ruling was prejudicial or that it involved misconduct.
As for the incidents that purportedly reveal the neutral arbitrator's prejudgment of the case, we note again the absence of context, which precludes us from assessing the potential significance of the claims. As the neutral arbitrator noted in his deposition, it is common that "impressions are drawn," over the course of a lengthy hearing, but that does not constitute "'prejudging' the case."
The assertion that the neutral arbitrator had "telegraphed his feeling" about an award in favor of Borges near the conclusion of the hearing, by saying "something about Nurse Nguyen's policy [being] 'popped'" in some unexplained context, is too vague and insubstantial to evaluate. If anything, it might cause us to question the propriety of Nguyen's party arbitrator divulging that comment to her counsel during the pendency of the hearing. The neutral arbitrator denied being concerned about insurance coverage.
We agree the trial court's elevator assessment is "unseemly," but it does not evidence any improper prejudgment of the case. The comment was apparently made on the final day of the lengthy hearing. As the trial court explained, the neutral arbitrator acknowledged that by that point he had begun to form impressions of the case from the evidence presented. Liability seemed fairly certain based on Nguyen's own testimony. And no one, whatever their views of the merits, could dispute that the case was tragic. Moreover, even if we assume the neutral arbitrator also expressed a view that the case was worth $8 million, we note he ultimately awarded significantly less—roughly $6 million—which suggests he continued to evaluate the evidence and had not prejudged the case.
Regarding the final two assertions of prejudgment, we cannot conclude that the neutral arbitrator's question about whether Nguyen "really needed" the testimony of her nursing expert suggested prejudgment of the case. Without a transcript to assess context, there is no basis to infer misconduct from a facially neutral inquiry. As for the claim that the neutral arbitrator "skimmed through" the nursing expert's videotaped testimony, we note that depositions are often less focused than trial testimony, and are sometimes liberally salted with counsel's objections and arguments. As a consequence, we do not presume that an acknowledgment of "skimming" a deposition reflects a disinterest in its substance. Moreover, considering Nguyen's description of the circumstances under which the arbitrators reviewed the deposition, it appears that all three arbitrators were in agreement as to the amount of time needed to review its substantive content.
In light of the forgoing, we reject Nguyen's contention that the trial court erred by denying her motion to vacate the arbitration award on the basis of arbitrator misconduct.
D. Nguyen's Claim the Arbitrators Exceeded Their Power by Ordering Periodic Payments
Nguyen also contends, in fairly cursory fashion, that the trial court erred by failing to vacate the arbitrators' order for periodic payments of the future damages. According to Nguyen, the court erred because Code of Civil Procedure section 667.7, which requires the superior court to order periodic payments of future damage awards in a medical negligence case when requested by a party, does not expressly authorize arbitrators to do the same thing. The argument misconstrues the burden imposed on a party seeking to vacate an arbitration award.
Section 667.7, subdivision (a), states in pertinent part: "In any action for injury or damages against a provider of health care services, a superior court shall, at the request of either party, enter a judgment ordering that money damages or its equivalent for future damages of the judgment creditor be paid in whole or in part by periodic payments rather than by a lump-sum payment if the award equals or exceeds fifty thousand dollars ($50,000) in future damages. In entering a judgment ordering the payment of future damages by periodic payments, the court shall make a specific finding as to the dollar amount of periodic payments which will compensate the judgment creditor for such future damages."
As the Supreme Court explained in Salgado v. County of Los Angeles (1998) 19 Cal.4th 629, 639, "[i]f requested by a party, periodic payments are mandatory. '[T]he legislative history of section 667.7 leaves little doubt that here the Legislature intended to impose a mandatory duty on the trial court to enter a periodic payment judgment in cases falling within the four corners of the section.'"
In order to justify an order vacating an arbitration award, Nguyen must affirmatively prove one of the grounds stated in section 1286.2. She apparently relies on subdivision (a)(4) of the statute, which specifies that an award can be vacated when the arbitrators "exceed their powers."
But in order to demonstrate the arbitrators exceeded their powers, Nguyen must point to something that prohibits the arbitrators from ordering periodic payments. As we have already explained, in the absence of some restriction in the agreement under which they are authorized to decide a particular case, arbitrators "'"may base their decision upon broad principles of justice and equity."'" (Advanced Micro Devices, Inc. v. Intel Corp., supra, 9 Cal.4th at p. 374.) Thus, arbitrators generally have greater freedom than judges do to fashion appropriate remedies in a case.
Here, there is nothing in the parties' agreement that prohibits the arbitrators from ordering periodic payments. To the contrary, the agreement states "that the provisions of California law applicable to the healthcare providers shall apply to the disputes with this arbitration agreement." The agreement therefore strongly suggests an intention to preserve the parties' statutory rights that would otherwise be available in a medical negligence case that was tried in court.
Because the arbitrators were not restricted by the agreement in their choice of remedies, it was incumbent on Nguyen to demonstrate some other reason why the arbitrators would be affirmatively prohibited from ordering periodic payments. She has failed to do so. We therefore reject her claim of error.
3. Borges's Cross-Appeal
Borges cross-appeals, arguing the trial court erred by failing to correct the award to eliminate the provision for periodic payments of her future earnings award. She argues the award makes no sense because she will only be 10 years old at the end of the seven-year payment period, and thus the payment schedule bears no relationship to the timing of her presumed future loss of earnings.
Borges portrays this provision as "an error in the form of the award only," and therefore believes it is susceptible to correction under section 1286.6, subdivision (c), but she provides no support for that assertion. To the contrary, the record demonstrates the arbitrators actively debated whether the periodic payment order should apply to the future earnings award. The arbitrator appointed by Borges argued it should not. The other two arbitrators disagreed. The panel therefore concluded, in a split decision, that the periodic payments should be applied to both elements of future damages. Hence, it is clear this was a considered ruling, not an imperfection in the form of the award.
Because it is a substantive ruling, it makes no difference that it might be legally incorrect. As we have already explained, we do not have the power to review an arbitration award based on errors of fact or law, in the manner we would if the judgment had resulted from a trial in the superior court. We consequently find no error in the trial court's refusal to correct the award in the manner Borges requested.
DISPOSITION
The judgment is affirmed. Borges is to recover her costs on appeal.
GOETHALS, J. WE CONCUR: FYBEL, ACTING P. J. IKOLA, J.