Opinion
NOT TO BE PUBLISHED
San Francisco County Super. Ct. No. 06-506498
Haerle, Acting P.J.
I. INTRODUCTION
Appellant Gwire, an attorney, appeals from a judgment after arbitration entered by the San Francisco Superior Court after it denied his petition to vacate an arbitration award and granted the respondent’s request to confirm that award. He argues that the arbitrator improperly and prejudicially refused to permit him to present evidence, via a “sur-reply brief,” that would have resulted in a decision in his favor. We disagree and hence affirm.
II. FACTUAL AND PROCEDURAL BACKGROUND
In May 2000, Gwire represented a client, Stephen Weissberg, in a San Francisco Superior Court jury trial involving a real estate transaction. To assist him in that effort, he retained respondent The Roulac Group of San Rafael (hereafter TRG) to perform an economic analysis of that and related transactions. It did so, and its principal, Stephen Roulac, testified at trial. The jury returned a verdict in Weissberg’s favor in the amount of approximately $1,600,000. That amount was, however, reduced by the trial court to the sums of $949,937 in compensatory damages and $215,000 in punitive damages. After an appeal to Division One of this court, those damages were further reduced by an unpublished decision of that court to a little over $350,000, including both compensatory and punitive damages.
Weissberg paid TRG $82,000 for its work and Roulac’s trial testimony.
TRG and Roulac maintained that they were entitled to more for their services to Weissberg and Gwire pursuant to the agreement between Gwire and TRG. When those parties were unable to agree on what, if any, amount of further fees was due, on or about August 26, 2005, TRG commenced arbitration against Gwire pursuant to an arbitration clause in their agreement. That clause provided for arbitration before an American Arbitration Association (AAA) arbitrator. Arbitrator Amy Seltzer was appointed by the AAA to hear the matter.
This arbitration was commenced only after TRG’s 2004 superior court lawsuit for additional fees was dismissed when Gwire asserted in that court that, pursuant to the agreement between the parties, “arbitration was mandatory.”
The arbitration agreement between the parties––a two-page letter dated May 16, 2000, from Roulac to Gwire, which Gwire signed––provided that the “arbitration process shall involve the arbitrator reviewing the written documents submitted by each side, which documents might include correspondence, work papers, meeting notes, Internal memorandums [sic], work product and declarations. There will be no hearing or other such proceeding, and the arbitrator may interview by telephone the parties and other witnesses, as appropriate.”
Gwire requested that the arbitration proceed with live testimony, but arbitrator Seltzer denied that request and ordered that the normal opening, opposing, and reply brief sequence be followed.
TRG and Roulac submitted their opening brief and supporting evidence on January 23, 2006. It consisted of a 21-page declaration/brief of TRG plus over 200 pages of documentation regarding the work done by it, the value of the time spent by Roulac and his staff, the invoices sent to Gwire, and the expertise and credentials of both TRG and Roulac personally.
On February 5, 2006, Gwire filed a 17-page “Opposition Arbitration Brief” accompanied by an 11-page declaration and several exhibits, including a copy of the unpublished decision of Division One of this court noted above.
On February 13, 2006, TRG filed its “Reply Brief” accompanied by numerous declarations and exhibits regarding that group’s work, charges, etc., in the underlying litigation.
Two days later, on February 15, 2006, Gwire faxed a letter to the AAA Case Manager asking for leave to file a “Sur-Reply” for the arbitrator’s consideration. He argued that he believed “new matters were raised in The Roulac Group’s Reply documents that require some further discussion.”
TRG opposed this request and Gwire then submitted another letter arguing in favor of the propriety of a sur-reply. However, on March 21, 2006, the AAA Case Manager advised the parties that the arbitrator had denied Gwire’s “request to submit a sur-reply” and ordered that “no additional evidence is to be submitted” and that the “hearings [were] . . . closed as of March 20, 2006.”
On April 3, 2006, the arbitrator issued a one-page award ordering Gwire to pay TRG an additional $66,619 by way of fees and $35,678.54 by way of pre-judgment interest. She declined to award any attorney fees or costs, but did order Gwire to pay the AAA administrative expenses and her fees and expenses.
On July 11, 2006, Gwire filed a petition in San Francisco Superior Court seeking to vacate the arbitration award. TRG opposed the petition and, instead, asked the trial court to confirm it. After a hearing held on August 23, 2006, on October 13, 2006, the superior court entered its order denying Gwire’s petition and confirming the arbitration award. Judgment was entered in favor of TRG on May 24, 2007, in the amount ordered by the arbitrator plus additional pre-judgment interest, for a total of $113,297.04. Notice of entry of that judgment was not, however, entered or served until June 28, 2007, thus making Gwire’s August 1, 2007, notice of appeal timely.
III. DISCUSSION
The first issue for discussion, an issue on which the parties take quite different positions, is our standard of review. Gwire contends we should apply a de novo standard of review to the judgment confirming the arbitrator’s decision. Without citing any authority on the issue, TRG contends our standard of review is whether the trial court abused its discretion.
A few basic principles enunciated by some of our sister courts will be helpful regarding this issue. Thus: “Where a judgment confirming an arbitration award is on review pursuant to [Code of Civil Procedure] section 1294, an appellate court will not review the merits of the dispute or the arbitrator’s reasoning.” (Valley Casework, Inc. v. Comfort Construction, Inc. (1999) 76 Cal.App.4th 1013, 1020.) And: “As a general rule, the merits of an arbitrator’s decision are not subject to judicial review.” (SWAB Financial, LLC v. E*Trade Securities, LLC (2007) 150 Cal.App.4th 1181, 1195 (SWAB).)
All subsequent statutory references are to the Code of Civil Procedure, unless otherwise noted.
As Division Three of this court has explained recently: “In Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1 (Moncharsh), our Supreme Court made it clear that the grounds for judicial review of a contractual arbitration award are extremely limited. Under Moncharsh, we cannot review the merits of the underlying controversy, the arbitrator’s reasoning, or the sufficiency of the evidence supporting the award. (Id. at p. 11.) Even ‘an error of law apparent on the face of the award that causes substantial injustice does not provide grounds for judicial review.’ (Id. at p. 33.) Code of Civil Procedure sections 1286.2 and 1286.6 provide the only grounds for challenging an arbitration award. [Citation.] [¶] Moreover, in reviewing a judgment confirming an arbitration award, we must accept the trial court’s findings of fact if substantial evidence supports them, and we must draw every reasonable inference to support the award. [Citation.] On issues concerning whether the arbitrator exceeded his powers, we review the trial court’s decision de novo, but we must give substantial deference to the arbitrator’s own assessment of his contractual authority. [Citations.]” (Alexander v. Blue Cross of California (2001) 88 Cal.App.4th 1082, 1087, fn. omitted (Alexander); see also, Pierotti v. Torian (2000) 81 Cal.App.4th 17, 24.)
In summary, a substantial evidence standard of review applies only to the extent the trial court made findings of fact in support of its decision to confirm the award. That court made no such findings here, as a review of both the brief transcript of its August 23, 2006, hearing and its six-sentence order of October 13, 2006, make clear. Thus, the substantial evidence standard of review is inapplicable here. Next, although neither TRG nor we have found any authority holding that an abuse of discretion standard of review is applicable to an appeal such as this, common sense suggests that on a purely procedural issue such as that involved here––the filing of a supplemental brief––it should. Finally, as the foregoing authorities make clear, the only thing subject to de novo review by this court is whether or not the arbitrator exceeded his or her powers.
In his concurring opinion in SWAB, Justice Mosk of Division Five of the Second District suggested that “a standard of review closer to abuse of discretion” might be appropriate in a case where the arbitrator denied a request by one of the parties to postpone the arbitration hearing. (See SWAB, supra, 150 Cal.App.4th at p. 1204 (conc. opn. of Mosk, J.).)
Putting all this together means that our review is limited to whether the trial court should have vacated the arbitration award for one of the specific reasons articulated in either section 1286.2 or section 1286.6 and whether it abused its discretion by not allowing Gwire to file a sur-reply brief.
With these principles in mind, we shall proceed to examine Gwire’s complaint about the arbitrator’s award and the trial court’s confirmation of that award. That complaint is that, by denying him the right to file a sur-reply to TRG’s final brief and supporting documents, the arbitrator violated section 1286.2, subdivision (a)(5) (hereafter section 1286.2(a)(5)). That section provides: “Subject to Section 1286.4, the court shall vacate the award if the court determines any of the following: . . . (5) The rights of the party were substantially prejudiced . . . by the refusal of the arbitrators to hear evidence material to the controversy . . . .”
In support of his argument that this provision required the superior court to vacate the arbitrator’s award, Gwire relies principally upon another decision of Division Three of this court, Hall v. Superior Court (1993) 18 Cal.App.4th 427 (Hall). As did the lower court, we find this reliance rather curious because both the express holding and reasoning in that case is contrary to Gwire’s contention here. In Hall, a unanimous Division Three, in an opinion authored by Justice Chin, ordered the issuance of a writ of mandate reversing a superior court decision which had vacated an arbitrator’s award for two reasons, one of which was that “the arbitrator denied a request to reopen to present additional evidence.” (Id. at p. 430.)
Justice Chin commenced that decision with this sentence regarding the controlling authority on such matters: “In Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, the California Supreme Court stated in no uncertain terms that, with limited exceptions, an arbitrator’s decision is not reviewable for errors of fact or law.” (Hall, supra, 18 Cal.App.4th at p. 430.) He then noted one reason for that rule: “Practical difficulties arise when superior courts or appellate courts review arbitral proceedings, which are not designed for full judicial review.” (Ibid.) Nevertheless, the court briefly outlined the substance and nature of the arbitration; in so doing, it noted that, after the parties to the arbitration had submitted the matter for decision by the arbitrator, one of those parties belatedly retained an attorney, who (1) requested an extension of time to file a brief on behalf of his client and (2) asked the arbitrator “to reopen the hearing for presentation of evidence on” the issue of whether his client had, in fact, been a partner of another party to the arbitration. The arbitrator granted the extension of time, but “denied the request to reopen.” (Id. at p. 431.) The trial court granted that party’s petition to vacate the arbitrator’s award as to him on both a substantive ground and, also, on the ground that “the arbitrator’s refusal to reopen the arbitration to permit presentation of evidence against the partnership theory compounded this excess of jurisdiction.” (Id. at p. 432.) The appellate court then quoted extensively from Moncharsh and from section 1286.2, which sets forth the bases––indeed, the only bases––on which a trial court may vacate an arbitration award. It then ruled that, on the substantive ground relied on by the trial court for vacation of the award, that court had “overstepped its authority.” (Hall, supra, 18 Cal.App.4th at p. 436.)
Moving then to the procedural point (which, we agree with Gwire, is very similar to that presented here), the court again quoted from Moncharsh that “‘it is the general rule that, with narrow exceptions, an arbitrator’s decision cannot be reviewed for errors of fact or law.’” (Hall, supra, 18 Cal.App.4th at p. 438, quoting Moncharsh, supra, 3 Cal.4th at p. 11.) It then held that the usual “two-step” review process of considering the exclusion of evidence, i.e., first evaluating materiality and then prejudice, should not apply as and when a superior court reviews an arbitrator’s ruling under the limited circumstances authorized by section 1286.2(a)(5). Rather, the superior court may review such a ruling by an arbitrator for “substantial prejudice.” (Hall, supra, 18 Cal.App.4th at pp. 438-439.)
In conclusion on the procedural issue involved, Division Three made clear how limited the scope of the present section 1286.2(a)(5) is by holding: “We do not accept the suggestion, implied by these challenges, that section 1286.2, subdivision (e), provides a back door to Moncharsh through which parties may routinely test the validity of legal theories of arbitrators. Instead, we interpret section 1286.2, subdivision (e), as a safety valve in private arbitration that permits a court to intercede when an arbitrator has prevented a party from fairly presenting its case.” (Hall, supra, 18 Cal.App.4th at pp. 438-439, emphasis added.)
What was section 1286.2, subdivision (e) when Hall was published is now section 1286.2(a)(5). (See Historical and Statutory Notes, 19A West’s Ann. Code of Civil Procedure (2007 ed.) foll. § 1286.2, p. 579.)
Division Three’s decision in Hall was cited and relied upon in another appellate decision not cited by either party, Schlessinger v. Rosenfeld, Meyer & Susman (1995) 40 Cal.App.4th 1096, 1110-1111. In that case, the appellate court affirmed a trial court’s refusal to vacate an arbitration award in favor of a law firm involved in a financial dispute with a former attorney in that firm. Among other things, the claimant-attorney argued that his rights had been substantially prejudiced “‘by the refusal of the arbitrator [] to hear evidence material to the controversy.’” (Id. at p. 1103.) The Court of Appeal rejected this contention, stating: “Schlessinger’s second contention—that the arbitrator did not permit him to offer material evidence—could be made in virtually every case where the arbitrator has excluded some evidence or placed limitations on discovery. Further, such a challenge would be available regardless of how the case was decided—by motion or trial. Plainly, this type of attack on the arbitrator’s decision, if not properly limited, could swallow the rule that arbitration awards are generally not reviewable on the merits.” (Id. at p. 1110.)
Going back to the critical language in Hall, we find nothing in this record to sustain the contention that the arbitrator’s ruling precluding Gwire, the respondent in the fee arbitration, from filing a sur-reply, prevented him from “fairly presenting his case.” He presented that case quite thoroughly via his February 5, 2006, opposition to TRG’s claim for additional fees which, as noted, consisted of a 17-page “Opposition Arbitration Brief,” an 11-page, 32-paragraph, declaration (to which were attached 28 pages of exhibits), and an eight-page declaration by his client, Weissberg.
For the reasons discussed above, we are verydisinclined to delve into the merits of the “sur-reply dispute,” or even the substance of the issues presented by the parties to the arbitrator. Fortunately, we don’t need to do that, because on page two of Gwire’s February 5, 2006, “Opposition Arbitration Brief,” he summarizes his six arguments to the arbitrator as to why Roulac and TRG “should be denied any additional money from Gwire.” He then states: “Each of these reasons is discussed in detail below,” and proceeds to do exactly that over the ensuing 14 pages of his brief.
Condensing the six reasons listed on page two of that brief and discussed in detail thereafter, they are: (1) the four-year statute of limitations barred TRG’s claim; (2) Roulac gave Gwire and his client, Weissberg, a $40,000 budget estimate, but exceeded that substantially by billing them over $149,000; (3) Roulac failed to keep Gwire and Weissberg “apprised of his work and his billings,” (4) Roulac later misled Gwire and Weissberg again by, just before trial, telling them that his fees would be $50,000, in addition to the $32,000 he had already been paid, but then billed much more than this; (5) Roulac “badly managed the work and personnel on the case, allowing the fees to get out of control,” and (6) his “services proved to be valueless” because of the decision of our Division One which, Gwire asserts, “found both of the Roulac damage theories . . . too speculative and uncertain.”
After TRG and Roulac had filed their final brief and supporting papers with the AAA arbitrator, Gwire came back a few days later with his request to file a sur-reply brief. But that request was quite brief; via a fax letter to the AAA Case Manager, he stated: “I have received the Reply documents of The Roulac Group. We wish to make a formal request to the Arbitrator to allow a Sur-Reply. We believe that new matters were raised in The Roulac Group’s Reply documents that require some further discussion. [¶] We would like to have one week from when we are given formal approval to provide the Sur-Reply.”
A short time later, TRG’s counsel wrote a one-paragraph letter to the AAA case manager, attaching a declaration from Roulac personally asserting that “[n]o new matters were raised in the Roulac Group’s reply documents.” That precipitated a March 3, 2006, page-and-a-half letter from Gwire to the AAA Case Manager, in which he purported to “point out just a few examples of new matters that were raised for the first time in [TRG’s] Reply.” (AA 399.) The five alleged “new matters” noted in that letter related to (1) the statute of limitations issue, (2) whether there had been any objections by Gwire to TRG’s billings, (3) conversations between Gwire and Roulac following the latter’s testimony in which Gwire allegedly praised the latter’s work, and (4) Roulac’s effort, in his reply brief to the arbitrator, “to absolve himself of any responsibility in the reversal on appeal,” and (5) the substance of a declaration by a TRG employee regarding certain discussions she had had with Weissberg.
Gwire’s letter then ended with this rather significant sentence: “While I respectfully renew my request to file a Sur-Reply brief, I understand that the arbitrator has read the Reply of Mr. Roulac and can assess for herself if new matters were raised that justify or warrant further elucidation.” (Emphasis added.)
In his briefs to the trial court and to us, Gwire greatly expands on the alleged “new matters” contained in TRG’s reply to the arbitrator. Indeed, what was summarized in five brief paragraphs in his March 3, 2006, letter to the AAA Case Manager became hundreds of pages of briefs and supporting material submitted to the trial court and, now, many pages of argument in his briefs to us concerning the “new matter” that was allegedly presented to the arbitrator by TRG’s reply brief.
We reject Gwire’s appeal from the trial court’s denial of his petition to vacate the arbitration award and confirmation of that award for two principal reasons.
First of all, and as stated in Alexander, we review de novo only the question of whether“the arbitrator exceeded his [or her] powers.” (Alexander, supra, 88 Cal.App.4th at 1087.) Other than that, we do not review the merits of the underlying controversy or the “validity of the arbitrator’s reasoning.” (Moncharsh, supra, 3 Cal.4th at p. 11; Alexander, supra, 88 Cal.App.4th at p. 1087.) As to whether the arbitrator exceeded her powers in this instance, we find she clearly did not. Section 1286.2 (a)(5) was not violated by the arbitrator’s denial of Gwire’s request to file a sur-reply because that denial in no way prevented him from “fairly presenting [his] case.” (Hall, supra, 18 Cal.App.4th at p. 439.)
Second, although we find no published decision (and apparently TRG has not either) holding that an abuse of discretion standard of review is applicable here, as pointed out in our footnote 3 above, one of our colleagues in a sister court has suggested that such may well be the proper standard in assessing whether an arbitrator violates section 1286.2(a)(5) by a purely procedural decision such as declining to postpone a hearing. (See SWAB, supra, 150 Cal.App.4th at p. 1204 (conc. opn. of Mosk J.).) We agree that such is appropriate in this limited circumstance, i.e., an arbitrator’s denial of leave to reopen briefing to allow the filing of a sur-reply brief. Indeed, this seems to have been the implicit premise of appellant Gwire himself when he wrote to the AAA Case Manager that: “I understand that the arbitrator has read the Reply of Mr. Roulac and can assess for herself if new matters were raised that justify or warrant further elucidation.”
We agree with that “understanding” of Gwire. In so doing, we also note that the arbitration process which Gwire now finds so objectionable (1) did not include a hearing per the specific terms of the written agreement he signed and (2) was the consequence of his successful motion in San Francisco Superior Court to dismiss TRG’s 2004 lawsuit on the ground that “arbitration was mandatory.” (See cites in fn. 1.)
IV. DISPOSITION
The judgment is affirmed.
We concur: Lambden, J., Richman, J.