County of Solano v. Lionsgate Corp.

• Decision Date: 08 February 2005
• Docket Number: No. A105131.,No. A103269.,A103269.,A105131.
• Court: California Court of Appeals Court of Appeals
• Parties: COUNTY OF SOLANO, Plaintiff and Respondent, v. LIONSGATE CORPORATION, Defendant and Appellant. County of Solano, Plaintiff and Respondent, v. Lionsgate Corporation, et al., Defendants and Appellants.

24 Cal.Rptr.3d 362

126 Cal.App.4th 741

COUNTY OF SOLANO, Plaintiff and Respondent, v. LIONSGATE CORPORATION, Defendant and Appellant.

County of Solano, Plaintiff and Respondent, v. Lionsgate Corporation, et al., Defendants and Appellants.

No. A103269.

No. A105131.

Court of Appeal, First District, Division 3.

February 8, 2005.

Rehearing Denied March 1, 2005.

Review Denied May 18, 2005. Certified for Partial Publication.^*

Charles O. Morgan, Jr., Beverly Hills, for Appellant.

David W. Ginn, Walnut Creek, Wendy Getty, Fairfield, County of Solano, for Respondent.

PARRILLI, J.

These consolidated appeals arise from an arbitrator's decision, confirmed by the trial court, assessing civil penalties, costs, and attorney fees against Lionsgate Corporation (Lionsgate) and in favor of Solano County. In case number A103269, Lionsgate contends the arbitrator lacked the authority to rule on charges made by the County under the False Claims Act (Gov. Code, § 12650 et seq.), improperly awarded the County prejudgment interest and attorney fees, and misinterpreted certain conduct by Lionsgate as amounting to false claims. In case number A105131, Lionsgate Development Corporation, Kenneth Barker, and Lois Barker challenge an order amending the judgment to include them as judgment debtors.

In the published portion of our opinion, we hold that the arbitrator properly considered the County's False Claims Act charges, but that the County was not entitled to prejudgment interest until after entry of the final arbitration award. Otherwise, we affirm.

BACKGROUND

The parties' dispute concerned Lionsgate's performance of a contract to replace a bridge in Solano County. The contract incorporated Caltrans Standard Specifications, including the following arbitration clause:

"Claims (demands for monetary compensation or damages) arising under or related to performance of the contract shall be resolved by arbitration unless the Department[¹] and the Contractor agree in writing, after the claim has arisen, to waive arbitration and to have the claim litigated in a court of competent jurisdiction. Arbitration shall be pursuant to Public Contract Code Sections 10240-10240.13, inclusive, and applicable regulations (see Subchapter 3 [Sections 301-382, inclusive] of Chapter 2 of Title 1 of the California Code of Regulations). [²] The arbitration decision shall be decided under and in accordance with the law of this State, supported by substantial evidence and, in writing, contain the basis for the decision, findings of fact, and conclusions of law."

The County filed a complaint in arbitration, charging Lionsgate with breach of the covenant of good faith and fair dealing, fraud, and numerous False Claims Act violations. The complaint sought a total of $531,783.46 in damages and penalties. Lionsgate objected to the arbitration, contending the contract did not authorize arbitration of False Claims Act causes of action. The arbitrator overruled the objection, relying on Crown Homes, Inc. v. Landes (1994) 22 Cal.App.4th 1273, 27 Cal. Rptr.2d 827 for the proposition that statutory claims may be arbitrated.

After a lengthy series of hearings, the arbitrator issued detailed findings of fact and conclusions of law. He found that Lionsgate's false claims in connection with the bridge contract had caused the County to incur substantial investigative and administrative costs. However, the arbitrator concluded those expenses were not recoverable as damages. He limited the County's recovery to civil penalties under the False Claims Act. The arbitrator found that Lionsgate had breached the covenant of good faith and fair dealing, but with no resulting damages, and that Lionsgate had not committed fraud due to the absence of detrimental reliance on the County's part: "Solano was ably represented throughout the performance of the Contract by competent officials and employees, who protected its interests and avoided any losses."

After hearing and overruling the parties' objections to his findings, the arbitrator entered a final award. The County recovered $210,000 in False Claims Act penalties, offset by a $2,000 award to Lionsgate on its cross-complaint. The County then submitted a petition for $690,247.15 in attorney fees and $32,094.55 in costs. Lionsgate did not dispute the costs request. The arbitrator awarded the County $500,000 in attorney fees and $32,094.55 in costs under Public Contract Code section 10240.13. He also awarded the County prejudgment interest on its $208,000 recovery, running from November 13, 2001, the date the findings and conclusions were filed.

The trial court granted the County's petition to confirm the arbitration award, and denied Lionsgate's petition to vacate the award. Lionsgate unsuccessfully moved for a new trial before filing this appeal.

DISCUSSION

1. The False Claims Act Issues Were Subject to Arbitration

Lionsgate challenges the propriety of the arbitrator's ruling that the contract authorized arbitration of the County's False Claims Act charges. We review the trial court's determination on this point de novo, but we give substantial deference to the arbitrator's own assessment of his contractual authority. (Alexander v. Blue Cross of California (2001) 88 Cal.App.4th 1082, 1087, 106 Cal.Rptr.2d 431; O'Flaherty v. Belgum (2004) 115 Cal.App.4th 1044, 1056, 9 Cal.Rptr.3d 286.) We cannot say the arbitrator erred in this instance.

Lionsgate first contends we should give controlling effect to our decision in Greenlining Institute v. Public Utilities Com. (2002) 103 Cal.App.4th 1324, 127 Cal. Rptr.2d 736. We disagree. Greenlining did not involve arbitration; it addressed the Public Utilities Commission's jurisdiction to conduct administrative hearings. Here, we are concerned not with the jurisdiction of an administrative tribunal, but with a contractual arbitration clause incorporating statutory provisions that expressly authorize arbitration of public contract disputes. Greenlining is simply inapposite.

Lionsgate's primary argument centers on the False Claims Act's references to "a civil action" to recover penalties and damages, and to assessments and findings by "the court." (Gov.Code, § 12651; see also id., § 12652.) However it is settled that statutory claims are not inarbitrable merely because the statute in question includes such provisions. Business and Professions Code section 17204 declares that "[a]ctions for relief pursuant to this chapter shall be prosecuted exclusively in a court of competent jurisdiction...." Nevertheless, our Supreme Court has held that claims for restitution and disgorgement under Business and Professions Code section 17200 et seq. are arbitrable. (Cruz v. PacifiCare Health Systems, Inc. (2003) 30 Cal.4th 303, 317-320, 133 Cal.Rptr.2d 58, 66 P.3d 1157; compare Greenlining Institute v. Public Utilities Com., supra, 103 Cal.App.4th at p. 1328-1329, 127 Cal.Rptr.2d 736.) Similarly, although Civil Code section 1780, subdivision (c) formerly specified that actions under the Consumers Legal Remedies Act (CLRA) must be filed in "any court ... having jurisdiction of the subject matter," the high court ruled that actions for damages under that version of the CLRA could be arbitrated. (Broughton v. Cigna Healthplans (1999) 21 Cal.4th 1066, 1082, 1085, 90 Cal.Rptr.2d 334, 988 P.2d 67.) It has also been established that antitrust claims under the Cartwright Act (Bus. & Prof.Code, § 16700 et seq.) are subject to arbitration, despite language in Business and Professions Code section 16750, subdivision (a) contemplating civil actions "in any court having jurisdiction...." (Crown Homes, Inc. v. Landes, supra, 22 Cal.App.4th 1273, 1283, 27 Cal. Rptr.2d 827.)

Lionsgate attempts to distinguish Crown Homes, Inc. v. Landes, supra, the case on which the arbitrator relied in rejecting Lionsgate's objection to the arbitration. Lionsgate argues that, unlike the arbitration clause at issue in Crown Homes, which included a number of exceptions but none that excluded Cartwright Act claims (see Crown Homes, Inc. v. Landes, supra, 22 Cal.App.4th at p. 1282, 27 Cal.Rptr.2d 827), the contract before us "could exclude False Claims Act charges," which are not "contract claims." However, the County's allegations under the False Claims Act were at least in part "[c]laims (demands for monetary compensation or damages) arising under or related to performance of the contract," under the operative terms of the arbitration clause in the parties' contract. In its petition to vacate the arbitration award, Lionsgate argued that its claims for adjustment of amounts due, which gave rise to the County's False Claims Act charges, were presented "pursuant to the Standard Specifications" incorporated in the contract. Clearly, Lionsgate could reasonably expect to arbitrate the County's responsive False Claims Act causes of action for contract-related "compensation or damages."

In its reply brief, Lionsgate asserts it never agreed to arbitrate claims for civil penalties under the False Claims Act. This argument was also presented in Lionsgate's objection to the arbitration. However, Lionsgate never requested a severance of the penalty claims. When there are "arbitrable and inarbitrable remedies derived from the same statutory claim," "the arbitrable claims should be severed from those that are inarbitrable and sent to arbitration." (Broughton v. Cigna Healthplans, supra, 21 Cal.4th at p. 1088, 90 Cal.Rptr.2d 334, 988 P.2d 67; see also Cruz v. PacifiCare Health Systems, Inc., supra, 30 Cal.4th at p. 320, 133 Cal. Rptr.2d 58, 66 P.3d 1157.) Moreover, the arbitrator's findings and conclusions clearly indicate the award was designed not simply to penalize Lionsgate, but rather to compensate the County for administrative expenses the arbitrator believed were not recoverable as "damages."³

The imposition of penalties as a form of compensation was well within the arbitrator's authority. "[A]rbitrators, unless expressly restricted by...