BRG Sports, Inc. v. Zimmerman

• Decision Date: 18 June 2018
• Docket Number: B282161
• Court: California Court of Appeals Court of Appeals
• Parties: BRG SPORTS, INC. et al., Plaintiffs and Appellants, v. CHRIS ZIMMERMAN, Defendant and Appellant.

BRG SPORTS, INC. et al., Plaintiffs and Appellants, v. CHRIS ZIMMERMAN, Defendant and Appellant.

B282161

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

June 18, 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NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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. BS160840)

APPEAL from a judgment of the Superior Court of Los Angeles County, Ruth Kwan, Judge. Affirmed in part, reversed in part, and remanded with directions.

Seyfarth Shaw, Erik B. von Zeipel, P. Shawn Wood, and William I. Goldberg for Plaintiffs and Appellants.

Kennedy Berg, Gabriel Berg; The Matays Law Group, Charles J. Matays; Beaudoin & Krause-Leemon, and Wayne E. Beaudoin for Defendant and Appellant.

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INTRODUCTION

BRG Sports, Inc. and BRG Sports, LLC (collectively, BRG) appeal from the judgment entered on their petition to confirm a final arbitration award. BRG contends the trial court erred in denying in part its motion for entry of judgment on the petition by purporting to enter separate judgments—one in favor of Chris Zimmerman against BRG for $500,000 plus interest, and one in favor of BRG against Zimmerman for $1.26 million plus interest—rather than entering one "net" judgment in favor of BRG. Zimmerman also appeals from the judgment, urging "reversal" because of post-arbitration misconduct by BRG. Zimmerman also contends the trial court erred in denying his motion to vacate, modify, or correct the final arbitration award because the arbitrator wrongly refused to hear evidence and incorrectly determined BRG was the prevailing party for purposes of awarding attorneys' fees.

BRG is right, and Zimmerman is wrong. The trial court correctly confirmed the arbitration award, but erred in purporting to do so in separate judgments. Therefore, we reverse the judgment and remand with directions to enter a single, net judgment in favor of BRG. In all other respects, we affirm.

FACTUAL AND PROCEDURAL BACKGROUND

A. The Arbitration

In April 2014 Zimmerman submitted an arbitration demand against his former employer, BRG, alleging BRG owed him at least $1.95 million in equity-participation compensation. Under his employment agreement, Zimmerman's equity- participation compensation had two parts: a "short-term guaranteed cash incentive," or "Cash Incentive Plan," and a "longer-term equity appreciation pool," referred to as "Class B Units." Zimmerman stated in his arbitration demand: "Primarily, this dispute is focused on the 'fair market value' of [my] 6.88 million [BRG] Class B Units." Zimmerman alleged that BRG proposed, as part of his severance agreement, "all of his Class B Units were being called and were worth $0.00" and that he rejected that proposal. Alleging BRG had improperly attempted to call and undervalue his Class B Units, Zimmerman asserted claims for breach of contract, breach of the implied covenant of good faith and fair dealing, fraud, and, in the alternative, a declaratory judgment that he still owned his Class B Units.

In September 2015 the parties participated in a three-day arbitration hearing in Los Angeles. Zimmerman testified and called three other current or former BRG employees as witnesses. At the end of the second day of the arbitration, Zimmerman rested. At that time BRG stated that everyone on its witness list had already testified as part of Zimmerman's case except for James Shillito, an employee of a BRG-related company, and that BRG intended to call Shillito the following day before resting.

The following day, however, BRG rested without calling Shillito or any other witnesses. Zimmerman protested, explained he had intended to establish certain points through Shillito's testimony, and argued he had a right to call Shillito as a "rebuttal witness." In particular, Zimmerman sought to question Shillito about what Zimmerman claimed was a "key email" Shillito authored relating to the dispute. BRG stipulated to admitting the email into evidence, but informed the arbitrator Shillito was no longer in Los Angeles. Zimmerman asked the arbitrator to "draw a negative inference from [Shillito's] not being here and find that those facts [Zimmerman had intended to establish] are established."

After hearing further argument on the issue and noting that, as a practical matter, Shillito was not there,¹ the arbitrator asked counsel for Zimmerman, "Okay, so other than this negative inference concept that you mentioned [and admitting the email into evidence], what else do you think ought to be done about it?" Counsel for Zimmerman responded, "If I can designate a paragraph in my post-trial brief to the negative inference in particular that I want drawn, and either you do or you don't, that's fine, that satisfies me. That takes care of the issue as far as I'm concerned." The arbitrator concluded discussion of the issue by admitting the email into evidence and directing that "[b]oth sides may, in their respective post-hearing briefs, address the issue as to whether or not it's appropriate to draw a negative inference from the fact that Mr. Shillito did not testify and if so, what that negative inference ought to be, and that concludes that."

The arbitrator asked counsel for Zimmerman, "So other than this subject about Shillito that we just covered, has the claimant been afforded full opportunity to present whatever evidence you determined was appropriate to present?" Counsel for Zimmerman answered, "Yes." After asking counsel for BRG the same question and receiving the same answer, the arbitrator announced the time for presentation of evidence was closed. Counsel for Zimmerman did not ask the arbitrator for a continuance of the arbitration to allow Shillito to return to Los Angeles to testify, for permission to question Shillito by telephone from his current location, or for any other remedy.

The parties submitted their post-hearing briefs, and in October 2015 the arbitrator issued an interim award. The arbitrator ruled against Zimmerman on his claims for breach of the implied covenant of good faith and fair dealing, fraud, and a declaration that he still owned his Class B Units.² The arbitrator also ruled against Zimmerman on his breach of contract claim to the extent it concerned his Class B Units. Finding Zimmerman's breach of contract claim included a claim for unpaid benefits under the Cash Incentive Plan,³ however, the arbitrator awarded Zimmerman $250,000 on that portion of the claim and declared Zimmerman was entitled to receive any other payments that might become due to other participants in that Plan. The arbitrator requested briefing from the parties regarding which side was the prevailing party for purposes of awarding attorneys' fees and costs.

The parties briefed the attorneys' fees issue, and the arbitrator issued a second interim award finding BRG was the prevailing party under Hsu v. Abbara (1995) 9 Cal.4th 863. (See id. at p. 876 [in determining the prevailing party, "the trial court is to compare the relief awarded on the contract claim or claims with the parties' demands on those same claims and their litigation objectives as disclosed by the pleadings, trial briefs, opening statements, and similar sources," and the court must make the determination "only by 'a comparison of the extent to which each party ha[s] succeeded and failed to succeed in its contentions'"].) Among other observations in support of his ruling, the arbitrator noted: "It is undeniable that [Zimmerman's] main litigation objective was centered on the value of his Class B Units which he initially alleged to have a value of approximately $1,500,000 and that the monetary relief he obtained in the Interim Award represented approximately only 12.5% of the compensatory damages he alleged on his contract claims. Moreover, it cannot be overlooked that [Zimmerman] could have obtained all of the monetary and declaratory relief he obtained in the Interim Award under the proposed severance agreement he was offered by [BRG] but chose to reject, so as to pursue his claims relating to the Class B Units on which he was entirely unsuccessful." In his final award the arbitrator awarded Zimmerman $250,000 plus prejudgment interest, declared he was entitled to receive any other payments that became payable to participants in the Cash Incentive Plan, and awarded BRG $1,234,695 in attorneys' fees and costs.

B. The Petition To Confirm the Arbitration Award

In March 2016 BRG filed a petition to confirm the final arbitration award, which Zimmerman opposed by filing a motion to vacate, modify, or correct the award. Zimmerman argued, among other things, the trial court should vacate the award because the arbitrator improperly "refused to hear evidence" from Shillito, the arbitrator exceeded his authority in finding BRG the prevailing party, and, if confirmed, the award would "chill arbitration" in violation of public policy. The trial court denied Zimmerman's motion.

Several days later, Zimmerman filed a motion for reconsideration, arguing the court's decision in Royal Alliance Associates, Inc. v. Liebhaber (2016) 2 Cal.App.5th 1092 (Royal Alliance), issued the day after the trial court denied Zimmerman's motion to vacate, modify, or correct the arbitration award, required the trial court to vacate the award. The trial court denied the motion for reconsideration. The court concluded it lacked jurisdiction to reconsider its decision under Code of Civil Procedure section 1008 because the Royal Alliance decision did not alter applicable case authority and thus was not "new law." The court also ruled that, even assuming it did have jurisdiction, Royal Alliance was distinguishable and did not require vacatur of the arbitration award in this case.

The...