Comerica Bank v. Howsam

• Decision Date: 20 August 2012
• Docket Number: No. B232749.,B232749.
• Citation: 12 Cal. Daily Op. Serv. 9479,208 Cal.App.4th 790,145 Cal.Rptr.3d 795,2012 Daily Journal D.A.R. 11526
• Parties: COMERICA BANK, Plaintiff and Respondent, v. Gary HOWSAM et al., Defendants and Appellants.
• Court: California Court of Appeals Court of Appeals

208 Cal.App.4th 790

145 Cal.Rptr.3d 795

12 Cal. Daily Op. Serv. 9479

2012 Daily Journal D.A.R. 11,526

COMERICA BANK, Plaintiff and Respondent,

v.Gary HOWSAM et al., Defendants and Appellants.

No. B232749.

Court of Appeal, Second District, Division 5, California.

Aug. 20, 2012.

Certified for Partial Publication.^*

See 6 Witkin, Cal. Procedure (5th ed. 2008) Proceedings Without Trial, § 569 et seq.

Randolph & Associates and Donald C. Randolph, Santa Monica, for Defendant and Appellant Gary Howsam.

Hamrick & Evans, LLP and A. Raymond Hamrick, Las Vegas, for Defendant and Appellant Greenlight Circle Films, Inc.

Costa Abrams & Coate, LLP, Charles M. Coate and Theresa E. Johnson, Santa Monica, for Defendant and Appellant Greenlight Film & Television Inc. and Charles M. Coate, in Pro. Per.

Buchalter Nemer, P.C., Peter G. Bertrand, San Francisco, Efrat M. Cogan, Robert Addison, Jr., and Cheryl M. Lott, Los Angeles, for Plaintiff and Respondent.

TURNER, P.J.

I. INTRODUCTION

This is an appeal involving an international commercial arbitration. It was conducted pursuant to title 9.3 of the Code of Civil Procedure ¹ which is entitled, “Arbitration and Conciliation of International Commercial Disputes.” (§ 1297.11 et seq.) At issue are the arbitration, not the conciliation, provisions. The arbitration provisions are found in sections 1297.11 through 1297.337.

This case involves appeals from a December 22, 2010 judgment following orders confirming three international commercial arbitration awards. The first arbitration award, issued May 3, 2010, was in favor of plaintiff, Comerica Bank, and against defendants: Greenlight Film & Television Inc.; Gary Howsam; GFT Circle Films, Inc.; Road Rage Films, Inc.; Janus Productions, Inc.; GFT Going Back Films, Inc.; GFT Heresy Films, Inc.; GFT/Redwood KOTN Films, Inc.; and GFT Redwood/Ignition Films, Inc. The second award, issued July 16, 2010, was in plaintiff's favor and against Mr. Howsam and Greenlight Film & Television Inc., and their lawyer, Charles Coate. The third award, issued July 19, 2010, and was in plaintiff's favor and against defendants and Mr. Coate. The trial court refused to vacate these three awards and confirmed them.

In the published portion of this opinion, we will discuss four issues. First, we will discuss at some length whether the arbitrator's failure to timely disclose an alleged disqualifying factor enumerated in section 1297.121 is a proper vacatur ground. Defendants assert the failure to timely disclose under sections 1297.121 and 1297.123 is a ground for vacating an internationalcommercial arbitration award. Defendants rely on section 1286.2, subdivision (a)(6); a statutory vacatur ground which requires an award be vacated when an arbitrator fails to timely disclose a potentially disqualifying circumstance. Citing section 1297.135, plaintiff argues this issue cannot even be raised on direct appeal from an order denying a vacatur motion. We agree with defendants that the issue may be raised on direct appeal after a vacatur motion is denied. But we hold the failure to timely disclose potential disqualifying circumstances, as required by sections 1297.121 and 1297.123, is not a ground for vacatur under section 1286.2, subdivision (a)(6). Our ruling in this regard is limited to international commercial arbitrations conducted under section 1297.111 et seq.

Second, we discuss whether the award was secured by corruption, fraud or other undue means. (§ 1286.2, subd. (a)(1).) Among other things, we will analyze whether the arbitrator's billing errors resulted in an award secured by corruption, fraud or other undue means. They did not. Third, we will discuss whether the award resulted from a manifest disregard of the law. It did not. Fourth, we will discuss whether the arbitrator exceeded his power when he decided alter ego issues. He did not. We affirm the orders denying the vacatur motion and confirming the award and the judgment.

II. FIRST AMENDED COMPLAINT FILED SEPTEMBER 7, 2004

The original complaint was filed on June 1, 2004. According to the first amended complaint, on November 27, 1999, plaintiff made loans totaling $37 million to Mr. Howsam and seven Ontario, Canada corporations controlled by him. Mr. Howsam is alleged to be a Toronto, Ontario resident. The loans were to fund the production of seven different films. The loans were paid to all of the foregoing corporate defendants except Greenlight Film & Television Inc. The loans were secured by the proceeds of the seven films. The primary “collateral” were foreign distributors' minimum licensing fees. The collateral was in the form of guaranteed minimum license fees funded by foreign distributors. The first amended complaint alleges that certain documents that were necessary pursuant to the loan agreements were forged. The forged documents consisted of license agreements and notices and acknowledgments of assignments (assignment notices). The forged assignment notices required the foreign distributors to directly pay plaintiff rather than defendants. The forged documents induced plaintiff to make the loans. The first amended complaint contains extensive alter ego allegations.² Plaintiff never recovered the full amount of the loans and the security was worthless.

Plaintiff was owed in excess of $20 million. The causes of action were for: contract breach; fraud; conspiracy to defraud; fraudulent inducement; an accounting; money had and received; account stated; and open book account. Plaintiff sought: compensatory damages not less than $20 million; interest; punitive damages; an accounting; imposition of a constructive trust; injunctive relief; attorney fees; and costs.

III. PROCEDURAL HISTORY

A. Overview

This appeal from a judgment after confirmation of three international commercial arbitration awards involves an extraordinarily complex series of events. The defaulted loans described in the first amended complaint resulted in federal bank fraud indictments against Mr. Howsam and Harel Goldstein. Mr. Goldstein was arrested by Federal Bureau of Investigation special agents. Mr. Goldstein pled guilty and then participated in a federal bank fraud investigation which targeted Mr. Howsam. Mr. Howsam was then indicted. Later, the indictment was dismissed against Mr. Howsam. The indictment against Mr. Howsam was returned after the first amended complaint was filed and the arbitration had commenced. A lengthy stay in the arbitral proceedings ensued until the indictment was dismissed. Proceedings resumed but later defendants withdrew from the arbitration and the arbitrator entered their default. An uncontested award was entered.

The difficulty in reciting the procedural scenario after Mr. Howsam's indictment was dismissed is that proceedings were sometimes simultaneously pending in: the arbitral forum; before both the arbitrator and the arbitration administrator; the trial court; before us and the California Supreme Court; or in the federal courts. It is difficult to recite the somewhat confusing events simultaneously transpiring in different forums. But for purposes of clarity, we will set forth the events in strict chronological order. (Remarks of Sen. Ted Stevens on the death of Steven Ambrose, 107th Cong., 2d Sess. (2002) p. 20215 [“abandon chronology at your peril ...”].)

B. Events Occurring After The First Amended Complaint Was Filed And Before The Stay Was Entered.

On October 25, 2004, seven defendants, except for Mr. Howsam and Greenlight Film & Television Inc., made a written demand to arbitrate the claims alleged in the first amended complaint. The basis of the seven defendants' motion to compel arbitration were the agreements to arbitrate contained in the assignment notices. On October 27, 2004, defendants, other than Mr. Howsam and Greenlight Film & Television Inc., filed a motion to compel arbitration. On October 27, 2004, Mr. Howsam and Greenlight Film & Television Inc., filed a motion to quash on absence of jurisdiction grounds. On December 15, 2004, the motion to quash of Mr. Howsam and Greenlight Film & Television Inc. was denied. On December 28, 2004, the motion to compel arbitration filed by defendants, other than Mr. Howsam and Greenlight Film & Television Inc., was denied. The mandate and review petitions challenging the December 15, 2004 order denying the motion to quash filed by Mr. Howsam and Greenlight Film & Television Inc. were denied. ( Greenlight Film & Television Inc. v. Superior Court (Jul. 13, 2005, S133354) [nonpub. order]; Greenlight Film & Television Inc. v. Superior Court (April 14, 2005, B180285) [nonpub. order].) On September 15, 2005, in an unpublished opinion, we reversed the December 28, 2004 order denying the motion to compel arbitration. ( Comerica Bank v. GFT Circle Films, Inc. (Sep. 15, 2005, B180622, 2005 WL 2234239) [nonpub. opn.].) Mr. Howsam and Greenlight Film & Television Inc. had filed a certiorari petition in the United States Supreme Court challenging the December 15, 2004 order denying their motion to quash. On November 7, 2005, the certiorari petition of Mr. Howsam and Greenlight Film & Television Inc. was denied by the United States Supreme Court. ( Howsam v. Superior Court (2005) 546 U.S. 1003, 126 S.Ct. 623, 163 L.Ed.2d 505.)

After the jurisdictional issue and appellate litigation involving them concluded, on November 22, 2005, Mr. Howsam and Greenlight Film & Television Inc. moved to compel arbitration. Mr. Howsam and Greenlight Film & Television Inc. reasoned they were entitled to compel arbitration under the assignment notices. On February 7, 2006, defendants, other than Mr. Howsam and Greenlight Film & Television Inc., joined in the motion to compel arbitration. On February 14, 2006, the motion of Mr. Howsam and Greenlight Film & Television Inc. to compel arbitration and stay the action was granted. On April 10, 2006, the written order granting the motion to compel arbitration and completely staying the action was filed. Trial on plaintiff's...