Douglass v. Serenivision, Inc.

• Decision Date: 08 February 2018
• Docket Number: B277574
• Citation: 229 Cal.Rptr.3d 54,20 Cal.App.5th 376
• Court: California Court of Appeals Court of Appeals
• Parties: Clayton DOUGLASS, Plaintiff and Appellant, v. SERENIVISION, INC., Defendant and Respondent.

20 Cal.App.5th 376

229 Cal.Rptr.3d 54

Clayton DOUGLASS, Plaintiff and Appellant,

v.SERENIVISION, INC., Defendant and Respondent.

B277574

Court of Appeal, Second District, Division 2, California.

Filed February 8, 2018

Hochfelsen & Kani and Steven I. Hochfelsen, Newport Beach, for Plaintiff and Appellant.

Phillips, Spallas & Angstadt and Michael R. Halvorsen, Los Angeles, for Defendant and Respondent.

HOFFSTADT, J.

There is a "strong presumption that courts should determine the jurisdiction of arbitrators." ( Sandquist v. Lebo Automotive, Inc. (2016) 1 Cal.5th 233, 249, 205 Cal.Rptr.3d 359, 376 P.3d 506 ( Sandquist ).) Parties may nevertheless agree to let an arbitrator decide his or her own jurisdiction, at least if their agreement to do so is " ‘clear [ ] and unmistakabl[e].’ " ( Howsam v. Dean Witter Reynolds, Inc. (2002) 537 U.S. 79, 83, 123 S.Ct. 588, 154 L.Ed.2d 491 ( Howsam ).) Does a party clearly and unmistakably consent to have an arbitrator decide his own jurisdiction when that party does not object to the arbitrator's jurisdiction in its answer to the arbitration petition, informs the arbitrator that it is "voluntarily" "submit[ing]" to the arbitrator's jurisdiction, appears at multiple prehearing conferences, formally asks the arbitrator to impose a bond requirement on the opposing party, and only after the arbitrator denies that request tells the arbitrator that its submission to jurisdiction was conditional on obtaining that bond? On these facts, we conclude that such conduct does constitute clear and unmistakable consent to allow the arbitrator to decide the issue of his own jurisdiction. We further conclude that the party's challenge to the arbitrator's jurisdiction is untimely and that his challenges to the arbitrator's assessment of his jurisdiction and to the ultimate arbitration award are without merit. Accordingly, we affirm.

FACTS AND PROCEDURAL BACKGROUND

I. Facts

A. The Contract

On August 19, 2009, Vivera, a company that sold diet pills and other health and beauty products online, signed an Adverting Insertion Order (Insertion Order) with Pinnacle Dream Media, a company that offered "internet advertising services."

The Insertion Order "incorporate[d] as though fully set forth herein" a Master Advertiser Agreement (Master Agreement) and provided a weblink to access the Master Agreement; a hard copy of the Master Agreement was not attached. The Master Agreement is a more comprehensive document designed to "govern the placement and delivery of advertising" set forth in Insertion Orders. Among other things, the Master Agreement provided that (1) "the Parties consent to have all disputes regarding this agreement resolved by binding arbitration," and that any "prevailing party in any Arbitration shall be entitled to an award of attorney fees and costs for such arbitration," and (2) "[a]ll payments are personally guaranteed by the individual executing the [Insertion Order] or secured by the assets of [Pinnacle Dream Media's customer]."

The Insertion Order was "Accepted" by Vivera and bears the printed name and signature of plaintiff Clayton Douglass (Douglass).

By April 2011, Vivera had an unpaid balance with Pinnacle Dream Media totaling $816,530.

B. The Arbitration Proceedings

In March 2014, defendant Serenivision, Inc. (Serenivision) filed a demand for arbitration against Vivera and Douglass seeking damages of $816,530 plus late penalties and interest. Serenivision had been doing business as Pinnacle Dream Media.

In April 2014, Douglass filed an answer in response to the demand. In his answer, Douglass admitted that he had signed the Insertion Order "as Vivera's representative," but denied any liability for Vivera's debt because he had "refused to" sign the Master Agreement and thus never "agree[d] to personally guarantee any amounts owed ... by Vivera." He also alleged that Vivera's products were "fraudulent," thereby rendering the Insertion Order unenforceable because its subject matter was unlawful.

In September 2014, Douglass appeared at a preliminary hearing before the arbitrator, at which time he reaffirmed he was "appear[ing] voluntarily and submit[ting] to the jurisdiction of this Arbitrator."

In early November 2014, Douglass wrote a letter to Serenivision's counsel. In that letter, Douglass explained that he was "voluntarily" appearing in the arbitration because he was "trying to avoid the additional time and expense" of litigating the same matter in "a federal lawsuit." Douglass then stated that he would "decline to participate in the arbitration" if Serenivision did not agree to post a bond to cover the costs of attorney's fees Douglass might collect, under the terms of the Master Agreement, as the prevailing party in the arbitration.

On February 18, 2015, just 19 days before the matter was set for an evidentiary hearing before the arbitrator, Douglass wrote a letter to the arbitrator: (1) relaying his prior statements to Serenivision that he would voluntarily participate in the arbitration only if Serenivision posted a bond; (2) informing the arbitrator that Serenivision had refused to post a bond; and (3) stating that "[a] bond is necessary for this action to proceed or for this tribunal to exercise jurisdiction." The arbitrator construed the letter as an expedited request for an order requiring Serenivision to post a bond, and denied that motion a week later.

On March 2, 2015, Douglass wrote the arbitrator a letter "terminat[ing] his voluntary appearance" before the arbitrator. Douglass explained that he had been "willing to participate in this arbitration" because it would be "more cost-efficient" than litigating "before a court"; indicated that his "voluntary appearance" had been "conditioned ... on the posting of a bond by [Serenivision]"; and declared that he would "no longer" participate because the arbitrator had not required a bond to be posted. Douglass proclaimed he would make no further appearances in the arbitration proceedings.

True to his word, Douglass did not appear at the evidentiary hearing a week later. The arbitrator allowed Serenivision to present its case, and Serenivision called witnesses and introduced documentary evidence.

On May 22, 2015, the arbitrator issued a written order. The arbitrator ruled that Douglass had consented to having the arbitrator decide the question of his own jurisdiction by participating in the arbitration proceeding for months as a way "to avoid defending a federal court lawsuit"; that the arbitrator had jurisdiction over Serenivision's claim because Douglass signed the Insertion Order, which incorporated the Master Agreement (and its arbitration clause) by reference; and that Douglass, under the terms of the Master Agreement, was liable as the guarantor of Vivera's debt to Serenivision, which with penalties, interest, attorney's fees, and costs came to a total of $1,755,050.34, with additional interest accruing at a rate of 10 percent as of March 10, 2015.

Douglass's counsel was served with this order on May 30, 2015.

II. Procedural Background

On October 2, 2015, 125 days after he was served with the arbitrator's order, Douglass filed a lawsuit against Serenivision (1) to vacate the arbitration award, (2) for declaratory relief, and (3) for $1 million in compensatory damages and for punitive damages on the ground that the Insertion Order and Master Agreement were illegal and hence subject to rescission.

On January 5, 2016, and again on April 7, 2016, Serenivision filed a petition to confirm the arbitrator's award.

Douglass filed a response to Serenivision's first petition on February 2, 2016. Contrary to what he pled in his answer to the arbitration demand, Douglass in his response claimed that (1) he never signed the Insertion Order, and offered testimony from a handwriting expert that the signature on the Insertion Order was not his; (2) he had no interest in Vivera whatsoever and just had a "partial interest in a company that processed payments to Vivera"; and (3) he had told the arbitrator from the outset that his participation in the arbitration was conditioned on Serenivision posting a bond.

In a 17-page minute order, the trial court granted Serenivision's petition to confirm the arbitration award and denied Douglass's competing claim to vacate it.¹ As an initial matter, the court ruled that Douglass's petition was untimely because it was filed more than 100 days after he was served with the arbitration award, but agreed to address Douglass's challenge to the arbitrator's jurisdiction in light of language contained in National Union Fire Ins. Co. v. Stites Prof. Law Corp. (1991) 235 Cal.App.3d 1718, 1723-1724, 1 Cal.Rptr.2d 570 ( National Union ) stating that "[s]ubject matter jurisdiction, in this case meaning the arbitrators' authority or power to adjudicate a certain type of fee dispute, cannot be conferred by consent, waiver, or estoppel." The court then found that Douglass had "agreed to have the arbitrator decide the jurisdiction question" because he "expressed a willingness to participate in [the] arbitration" and "only attempted to withdraw months later" when "the arbitrator ruled against imposing a bond." "Simply put," the court reasoned, "one cannot agree to arbitration, with the proviso that the arbitrator rule in your favor on certain preliminary issues." The court went on to conclude that the arbitrator had jurisdiction over the dispute and that the arbitrator's finding that Douglass was liable for Vivera's debt was not in excess of the arbitrator's powers.

Douglass filed this timely appeal.

DISCUSSION

Douglass argues that the trial court erred in confirming the arbitrator's award. Serenivision asserts that we need not reach Douglass's challenge because his challenge to the award was untimely. We address the timeliness issue first.

I. Timeliness of Douglass's Challenge

"Any party to an arbitration in which an award has been made may petition the court to ... vacate [the arbitrator's] award" ( Code Civ. Proc., § 1285 ),² but any such...