Cinel v. Christopher

• Decision Date: 20 January 2012
• Docket Number: No. B231679.,B231679.
• Citation: 12 Cal. Daily Op. Serv. 1986,2012 Daily Journal D.A.R. 2171,203 Cal.App.4th 759,136 Cal.Rptr.3d 763
• Court: California Court of Appeals Court of Appeals
• Parties: Washington Umberto CINEL, Plaintiff and Respondent, v. Richard CHRISTOPHER, Defendant and Appellant.

12 Cal. Daily Op. Serv. 1986
136 Cal.Rptr.3d 763
2012 Daily Journal D.A.R. 2171
203 Cal.App.4th 759

Washington Umberto CINEL, Plaintiff and Respondent,
v.
Richard CHRISTOPHER, Defendant and Appellant.

No. B231679.

Court of Appeal, Second District, Division 1, California.

Jan. 20, 2012.

[136 Cal.Rptr.3d 765]

Morgan, Franich, Fredkin & Marsh, San Jose, William Siamas, Mark B. Fredkin and Linda M. MacLeod for Defendant and Appellant.

Manatt, Phelps & Phillips, Los Angeles, Robert H. Platt, Bruce B. Kelson, Emil Petrossian and Benjamin G. Shatz for Plaintiff and Respondent.

JOHNSON, J.

[203 Cal.App.4th 762] Richard Christopher (Christopher) appeals from an order denying his petition to confirm an arbitration award. The matter went to arbitration pursuant to an underlying contract between plaintiff Washington Umberto Cinel (Cinel) and defendant Christopher and five other defendants, but several of the defendants refused to pay the arbitrator's fee, and the arbitrator terminated the arbitration. The trial court refused to confirm the arbitrator's decision, finding it was not an “award” and denied Christopher's petition. Christopher contends the trial court's refusal to confirm the arbitrator's award constituted an impermissible interference with the arbitrator's jurisdiction to decide all issues, and because no grounds existed to vacate the award, the only choice available to the trial court was to confirm the award and dismiss the proceeding. We affirm.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY 1. Arbitration Proceedings and Termination of Arbitration.

In December 2006, Cinel, a Brazilian citizen, agreed to purchase 600,000 shares

[136 Cal.Rptr.3d 766]

of preferred stock from Good News Holdings, LLC (GNH) for total consideration of $3 million, pursuant to a written “Supplemental Agreement.” [203 Cal.App.4th 763] GNH was formed to create and distribute Christian faith-based and family friendly content through traditional media. Defendants David Kirkpatrick, George Barna, Christopher Chisholm, Martha Cotton, Thom Black, and Richard Christopher (defendants) were the founding members of GNH.¹ Cinel made the first three installment payments of $750,000, but became concerned that GNH's financial condition was not as it had been represented in the Private Placement Memorandum (PPM).

On June 30, 2008, Cinel commenced this action for securities fraud and related claims against defendants, and filed his operative first amended complaint (FAC) on November 13, 2008. On March 9, 2009, Barna filed a petition to compel arbitration pursuant to an arbitration clause in the PPM, and on April 3, 2009, the trial court granted the petition to compel arbitration. The parties commenced two separate arbitrations with the AAA because although defendant had commenced arbitration, Cinel felt he should be deemed the claimant in the arbitration. The parties later stipulated to consolidate the two arbitrations.

During the period June 2009 through December 2009, the parties selected three arbitrators. On January 11, 2010, the AAA requested payment from each of the parties for the initial deposit of the arbitrators' fees. Of the six defendants, only Barna and Christopher paid their share of the fees. The AAA suggested that the paying parties could advance the fees of the nonpaying parties; some of the parties suggested that the panel be reduced to one arbitrator. However, on March 15, 2010, the AAA issued its order suspending the arbitration pending payment in full of the fee deposit.

Cinel submitted a motion to modify the order suspending the arbitration, requesting that the order be changed to provide that if the parties who compelled arbitration, Christopher and Barna, wished to continue, that they pay the fees of the nonpaying parties, and if they did not, that the panel issue an order terminating the arbitration and returning the matter to the superior court. In response, Christopher and Barna, joined by Kirkpatrick and Cotton, argued Cinel's proposal was unfair because Cinel, as a billionaire, had more assets.

On June 7, 2010, the panel rejected Cinel's proposal, and suggested the paying parties agree to pay a pro rata share of the deposits of the delinquent parties. On July 7, 2010, the Panel terminated the arbitration due to the nonpayment of fee deposits. On July 16, 2010, Christopher submitted a proposed form of written order to be signed by the panel, but the panel refused to sign it on the grounds it no longer had jurisdiction.

[203 Cal.App.4th 764] 2. Christopher's Motion to Confirm the Arbitration Award.

On November 15, 2010, the trial court reasserted jurisdiction over the case. On January 11, 2011, Christopher moved in the trial court to confirm the award and dismiss Cinel's complaint. He argued that pursuant to section 1286.2, the trial court's power was limited to confirming, vacating or correcting the arbitrator's decision: because an arbitrator's decision was not subject to review for errors in fact or law, and there was no basis for the court to otherwise vacate or correct the award, it must be confirmed. In opposition, Cinel argued that the termination order was not an

[136 Cal.Rptr.3d 767]

“award” or “decision” subject to confirmation by the court, and an administrative termination restarted the matter in the trial court.

The trial court denied the motion, stating, “Nothing happened [at the arbitration]. It should go back. And we'll set it for trial here. If you don't want to go to arbitration, then you're going to have a trial here. [¶] ... [¶] This happens all the time. People don't want to pay fees. It comes back.... You have one person who doesn't [pay], there's no judgment, I won't confirm an arbitration award where nothing really took place because someone didn't want to pay the fees.”

DISCUSSION I. THE ORDER “DENYING” THE PETITION TO CONFIRM THE ARBITRATOR'S RULING IS APPEALABLE²

As a threshold issue, we must determine whether the trial court's order denying Christopher's petition is an appealable order. Code of Civil Procedure section 1294 ³ identifies the orders appealable after an arbitration. Section 1294 provides that an aggrieved party may appeal from an order “ dismissing a petition to confirm, correct or vacate an award.” ( § 1294, subd. (b), italics added.) Section 1294, however, does not provide for an appeal of the denial of a petition to confirm, vacate, or correct an award.

As a result, Christopher contends under section 1294, the trial court had no authority to simply deny such a motion. Rather, he contends, when confronted with a petition to confirm, correct, or vacate an award, under section 1294 the court has four options: confirm the award; vacate the award; correct and affirm the award; or dismiss the petition, and courts construe an order purporting to deny a petition to confirm as an order vacating the award, [203 Cal.App.4th 765] which is an appealable order. (See, e.g., Law Offices of David S. Karton v. Segreto (2009) 176 Cal.App.4th 1, 9, 97 Cal.Rptr.3d 329 ( Karton ).) Cinel contends, relying on Mid–Wilshire Associates v. O'Leary (1992) 7 Cal.App.4th 1450, 9 Cal.Rptr.2d 862 ( Mid–Wilshire Associates ), that it is well-settled an order denying a petition to confirm, as opposed to an order dismissing such a petition, is not appealable. We conclude that the statutory scheme dictates that we construe the court's “denial” of Christopher's petition to confirm as a “dismissal,” which renders it an appealable order.

An arbitration award is not directly enforceable; until confirmed or vacated by court proceedings, the award is no more than a contract between the parties to the arbitration. ( Loeb v. Record (2008) 162 Cal.App.4th 431, 449, 75 Cal.Rptr.3d 551.) The prevailing party in an arbitration therefore may petition the court to confirm an award; the losing party may petition to modify or vacate the award entirely. (§ 1285; see Luster v. Collins (1993) 15 Cal.App.4th 1338, 1344, 19 Cal.Rptr.2d 215.) In response to such a petition, the court must confirm, correct, or vacate the award, or dismiss the petition entirely. (§ 1286; see Karton, supra, 176 Cal.App.4th at p. 9, 97 Cal.Rptr.3d 329.) Thus, the statutory scheme contemplates that an arbitration award may either be confirmed, vacated, or corrected in the trial

[136 Cal.Rptr.3d 768]

court; in response, a party may request the court to dismiss the petition to confirm, correct, or vacate the award. (§ 1285.2.)

Consistent with this, section 1294 identifies the orders appealable after an arbitration. Section 1294 provides that an aggrieved party may appeal from an order dismissing a petition to confirm, correct or vacate an award. (§ 1294, subd. (b).) Section 1294 also provides that an aggrieved party may appeal an order “ dismissing or denying a petition to compel arbitration.” (§ 1294, subd. (a), italics added.) Other orders appealable include “an order vacating an award unless a rehearing in arbitration is ordered” (§ 1294, subd. (c)), a judgment entered after an arbitration (§ 1294, subd. (d)), or “a special order after [a] final judgment” (§ 1294, subd. (e)).

As explained in Karton, supra, 176 Cal.App.4th at p. 9, 97 Cal.Rptr.3d 329, “the failure of [section 1294] to provide for the appealability of an order denying a petition to confirm, correct or vacate an award is easily understood in the context of [section 1286]. If a trial court dismisses the petition, it results in an appealable order.... If the trial court which does not dismiss the petition also does not correct or vacate an arbitration award, it must confirm the award. Entry of judgment in conformity therewith is required [pursuant to section 1287.4], resulting in an appealable judgment under [section 1294, subdivision (d) ]. Similarly, if the nondismissing trial...