Engel & Engel, LLP v. Delong

ENGEL & ENGEL, LLP, Plaintiff and Respondent, v. JOHN DELONG et al., Defendants and Appellants.

B279576

COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION TWO

August 29, 2018

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Los Angeles County Super. Ct. No. BS152124)

APPEAL from a judgment of the Superior Court of Los Angeles County. Michael J. Raphael, Judge. Affirmed.

Chad Biggins for Plaintiff and Respondent.

Randall S. Wair for Defendants and Appellants.

John and Judith DeLong (appellants) appeal from a judgment entered after the trial court confirmed an arbitration award arising out of binding arbitration between them and Engel & Engel, LLP, an accounting firm (respondent). The arbitrator initially awarded respondent $27,100.13 on the merits of respondent's claim, plus undetermined interest and costs. The arbitrator then awarded respondent costs and attorney fees in connection with the arbitration. The trial court granted respondent's petition to confirm the incrementally-entered arbitration award with an additional award of costs and fees incurred in the trial court. The trial court entered judgment against appellants for a total sum of $75,949.02.

Appellant argues that the arbitrator exceeded the scope of her power in making the additional fee and cost awards and that the trial court erred in awarding fees and costs in connection with the petition for confirmation. We affirm.

BACKGROUND

Petition to compel arbitration

On October 23, 2014, respondent petitioned the trial court to compel binding arbitration pursuant to a written fee agreement. The petition alleged that pursuant to the agreement, respondent provided accounting services to appellants, and appellants failed to pay for such services. Respondent alleged breach of contract, account stated, quantum meruit, and promissory fraud. In response, appellants argued that the contract was not enforceable.

The entire contract between the parties was attached to the petition to compel arbitration. The following provision relates to arbitration:

"It is hereby agreed that should any dispute, controversy or claim arise in connection with the services to be provided under this agreement, or the charges incurred thereby, same shall be decided bybinding arbitration, before the Alternative Dispute Resolution Centers in Los Angeles, California, pursuant to said associations' Rules in effect at the time the Demand for Arbitration is filed. In further consideration of this agreement, attorney Randall S. Waier agrees to accept service of any lawsuit/demand for arbitration on behalf of the client. In the event an arbitration or litigation (including but not limited to any proceeding to compel arbitration) is initiated to resolve or settle any dispute or claim between the parties, the prevailing party shall be entitled to recover from the nonprevailing party or parties its costs incurred, including but not limited to attorney's fees, expert fees, court and arbitration fees, and fees of E&E incurred in connection with the arbitration or litigation."

On March 5, 2015, the trial court ordered the parties to binding arbitration.

Arbitration and awards

The arbitration was held on May 14, 2015; June 4, 2015; September 22, 2015; and February 4, 2016. On March 15, 2016, the arbitrator issued a binding arbitration award. The arbitrator determined that the contract at issue was invalid as there was no meeting of the minds between the parties. However, the arbitrator found in favor of respondent on its claim of unjust enrichment. The arbitrator specified: "The arbitrator finds in favor of the [respondent] and against the [appellants] in the amount of $27,100.13 plus interest and costs."

Following briefing by the parties, on June 8, 2016, the arbitrator issued an order for costs. The arbitrator denied prejudgment interest as "it is not properly awardable in a quantum meruit action." Post judgment interest was granted. The arbitrator further found that the applicability of the agreement's arbitration clause was previously determined by thetrial court and that appellants waived any objection to that ruling. "Since the arbitration clause was found valid and because it provides a provision for fees and costs, [respondent's] request for arbitration fees, court reporter fees, court fees, and service of process fees" was granted.

The arbitrator awarded respondent $15,213.89 in arbitration costs.¹ Following further briefing by the parties, on August 12, 2016, the arbitrator awarded respondent $28,000 as attorney fees. The arbitrator denied the additional $26,460 in fees that respondent requested.

Confirmation

On September 28, 2016, respondent filed a motion to confirm the arbitration award and for entry of judgment. Respondent also sought attorney fees and costs incurred in connection with the motion to confirm.

Appellants objected to the motion to confirm, and on October 14, 2016, petitioned for an order vacating the arbitration award. Appellants argued that the arbitrator exceeded her power in making the award. In particular, appellants took the position that the fee and cost awards were predicated on contract provisions that the arbitrator deemed invalid, thus were in excess of the arbitrator's power. Appellants contended that neither the trial court nor the arbitrator could make or confirm a binding arbitration award since the contract as a whole wasunenforceable. Further, appellants argued that the quantum meruit award in favor of respondent was tantamount to an improper remaking of the retention agreement.

On October 27, 2016, the trial court granted respondent's motion to confirm the arbitration award. The court concluded that the motion was timely. The merits of the arbitration award were not challenged. In response to appellants' arguments, the court explained that "the validity of the arbitration award was determined separately from that of the contract as a whole, and was determined by the Court as a threshold matter, on March 5, 2015." At that time, the court pointed out, appellants did not challenge the validity of the arbitration clause. The court reasoned that appellants' present challenge to the validity of the arbitration clause was "an improper motion for reconsideration." Under the same rationale, the trial court found the fee award to be valid, since it was "premised on the fee provision in the arbitration clause, which was found valid by this Court."

The trial court awarded respondent additional costs and fees in connection with the motion to confirm, for a total judgment of $75,949.02.

Judgment was entered on October 27, 2016, and on December 15, 2016, appellants filed their notice of appeal.

DISCUSSION

I. Standard of review

"'On appeal from an order confirming an arbitration award, we review the trial court's order (not the arbitration award) under a de novo standard. [Citations.] To the extent that the trial court's ruling rests upon a determination of disputed factual issues, we apply the substantial evidence test to those issues.'" [Citation.] (Toal v. Tardif (2009) 178 Cal.App.4th 1208, 1217.)

We keep in mind the standards governing confirmation of an arbitration award. A party may petition the trial court to"confirm, correct or vacate" an arbitration award. (Code Civ. Proc., § 1285.)² "[I]t is the general rule that, with narrow exceptions, an arbitrator's decision cannot be reviewed for errors of fact or law." (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 11 (Moncharsh).) Under section 1286.2, the trial court may vacate the award only under "'very limited circumstances."' (Roehl v. Ritchie (2007) 147 Cal.App.4th 338, 347 (Roehl).) Neither the trial court, nor the appellate court, may "review the merits of the dispute, the sufficiency of the evidence, or the arbitrator's reasoning, nor may we correct or review an award because of an arbitrator's legal or factual error, even if it appears on the award's face. Instead, we restrict our review to whether the award should be vacated under the grounds listed in section 1286.2 [Citations.]"³ (Ibid.)

II. The trial court did not err in confirming the entire arbitration award

A. The arbitrator did not exceed her power by awarding fees and costs

1. Appellants did not contest the trial court's initial determination that the arbitration provision was enforceable

Appellants first argue that the arbitrator exceeded her powers in "supplementing" her original award to include monetary awards of attorney fees, costs, and arbitral expenses to respondent. Appellants' argument is based on their position that because the contract was largely declared invalid, the Arbitration Resolution Centers Arbitration Rules (ARC Rules) applied. Under ARC Rule 22, arbitrants shall pay their own attorney fees, costs, and arbitral expenses unless there is a valid contractual provision to the contrary.

The trial court addressed this argument in its ruling, citing Hayes Children Leasing Co. v. NCR Corp. (1995) 37 Cal.App.4th 775, 782 (Hayes) for the proposition that an attack on "the contract as a whole do[es] not raise the issue that the agreement to arbitrate, although contained in that contract, is invalid. [Citation.]" The court held that the validity of the arbitration agreement, including the fee-shifting provision, was determined as a threshold matter by the trial court prior to arbitration. Appellants did not oppose the petition to compel arbitration atthe time, therefore they forfeited any argument that the arbitration clause was unenforceable.

We find no error in the trial court's ruling. The trial court properly determined the validity of the arbitration clause when it ordered the matter to arbitration on March 5, 2015. (Hayes, su...