GREENSPAN v. LADT LLC.

• Citation: 185 Cal.App.4th 1413,111 Cal.Rptr.3d 468
• Decision Date: 25 June 2010
• Docket Number: No. B213866.,B213866.
• Court: California Court of Appeals Court of Appeals
• Parties: Arnold GREENSPAN, as Trustee, etc., Plaintiff and Respondent, v. LADT, LLC, et al., Defendants and Appellants.

185 Cal.App.4th 1413

111 Cal.Rptr.3d 468

Arnold GREENSPAN, as Trustee, etc., Plaintiff and Respondent,

v.LADT, LLC, et al., Defendants and Appellants.

No. B213866.

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

June 25, 2010.

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Leonard, Dicker & Schreiber, James P. Schreiber, Richard C. Leonard, Beverly Hills, and Steven C. Schuman for Defendants and Appellants.

Bingham McCutchen, Daniel Alberstone, Peter F. Smith, Rena L. Scott, Santa Monica; Greines, Martin, Stein & Richland, Robin Meadow and Jeffrey E. Raskin, Los Angeles, for Plaintiff and Respondent.

MALLANO, P.J.

A trust filed this action alleging breach of contract and other claims against two affiliated companies, only one of which was a party to the contract. The trust also named as a defendant the individual who controlled the companies. Defendants petitioned the trial court to compel arbitration of the claims. The trial court granted the petition.

The parties selected an arbitrator associated with Judicial Arbitration and Mediation Services, Inc. (JAMS). Previously, some of the parties, including the trust and the individual defendant, had chosen JAMS and the same arbitrator to hear a separate dispute. Before the arbitrator heard this case, he rendered an award in the other matter, finding the individual defendant liable to the trust. The individual responded by filing a civil suit against the arbitrator, alleging the award was untimely.

Thereafter, in this case, defendants requested that the arbitrator recuse himself in light of the civil suit. The arbitrator declined. JAMS also denied the request, providing a written explanation. Defendants sought relief in the trial court without success.

The arbitration hearing went forward. After the presentation of evidence, the parties submitted briefs. Twenty-eight days later, the arbitrator rendered an interim award, finding in favor of the trust on the contract claim and awarding approximately $6.34 million against the company that was a party to the contract. Defendants otherwise prevailed. The interim award also reserved certain issues for resolution in the final award, including attorney fees and the liability, if any, of the noncontracting company. As to those issues, the arbitrator requested additional briefs and declarations, and established a timetable for the remaining proceedings. In the final award, which reiterated the terms of the interim award, the arbitrator awarded attorney fees to the trust and concluded that the two companies should be jointly and severally liable for breach of contract.

The trust returned to the trial court and filed a petition to confirm the award. The companies petitioned to vacate it. The trial court confirmed the award and entered judgment accordingly.

On appeal, the companies argue the award should be vacated because: (1) the Trust did not plead joint and several liability on the breach of contract claim and thus the issue was not arbitrable; (2) the arbitrator's finding of joint and several liability was not rationally related to the parties' contract; (3) the final award was not timely under JAMS rules; and (4) the arbitrator should have been disqualified based on the civil suit brought against him by the individual defendant.

We affirm for several reasons. First, as provided by JAMS rules, the arbitrator, not a court, determines what issues are arbitrable, and consequently we defer to the arbitrator's determination that the issue of joint and several liability was arbitrable. Second, the arbitrator's finding of joint and several liability was rationally related to the parties' contract. Third, as to the timeliness of the final award under JAMS rules, the arbitrator's interpretation and application of the rules cannot be judicially reviewed on the merits. Last, although we do not defer to the arbitrator or JAMS on the merits of the disqualification issue, we independently conclude the suit against the arbitrator was barred by arbitral immunity and would not have caused a reasonable person to doubt the arbitrator's impartiality.

I BACKGROUND

The allegations and facts in this case are taken from the complaint, the petition to compel arbitration, and the respective petitions to confirm and vacate the arbitration award.

A. Parties' Contract

In 1998, LADT, LLC (LADT), purchased the Higgins Building in downtown Los Angeles. LADT converted the dilapidated structure, built in 1910, from an office building into apartments. In 2003, Barry Shy, who managed LADT, proposed to convert the Higgins Building into loft-style residential condominiums, with commercial units on the ground floor. At the time, Shy held a 50 percent interest in LADT through a company he controlled, LABAR, LLC. The Andrew Meieran Family Trust held the other 50 percent. Arnold Greenspan was the trustee of the Trust. (For convenience, we refer to the Andrew Meieran Family Trust as Trust, to Andrew Meieran as Meieran, and to Arnold Greenspan as Greenspan.)

The Trust's goal was to develop and operate historic bars, not just real estate. For that reason, the Trust decided to sell its interest in LADT and to acquire commercial space on the ground floor of the Higgins Building, where it would later build the Edison Bar.

On August 20, 2004, the Trust sold its 50 percent interest in LADT to a new company controlled by Shy-LA ABC, LLC (LA ABC)-for $7.75 million, payable in two installments, and title to six commercial units in the Higgins Building valued at $3.5 million altogether. The “Purchase Agreement” recited that it was “entered into ... by and between Arnold Greenspan, Trustee of the Andrew Meieran Family Trust u/a/d 12/19/03 ... (the ‘Seller’), and LA ABC, a California limited liability company (the ‘Purchaser’).”

Section 6 of the Purchase Agreement addressed the duties of LADT, stating: “LADT hereby consents to the terms of this Agreement, including, without limitation, the provisions of ... Section 4. LADT shall cooperate with the parties hereto and take all actions and execute any agreements and other documents necessary to effectuate the transactions contemplated by this Agreement, including, without limitation, the transactions set forth in ... Section 4, as necessary. In addition, Barry Shy, individually, agrees to guarantee all the obligations of Purchaser pursuant to Section 4 hereof, and Andrew Meieran, individually, agrees to guarantee all of the obligations of Seller hereunder.” Section 4 stated that LA ABC would indemnify the Trust for any breach of the Purchase Agreement by LA ABC and that the Trust would indemnify LA ABC with respect to any breach by the Trust.

The Purchase Agreement was signed by Greenspan as trustee of the “Seller”-the Trust-and by Shy as manager of the “Purchaser”-LA ABC. For its part, LADT “acknowledged and agreed ... to Section 6” of the Purchase Agreement, with Shy signing twice, first as manager of LADT and then individually; Meieran signed as a member of LADT. The Purchase Agreement did not have an arbitration provision. It contained an integration clause stating: “This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, negotiations and discussions, both written and oral, among such parties with respect to such subject matter. This Agreement may not be amended or modified in any way, except by a written instrument executed by all of the parties hereto.”

On February 17, 2005, LA ABC transferred six commercial units to the Trust. During the construction phase of the project, Shy and Meieran had a number of disagreements. They argued about walls that had been moved, trash areas, parking spaces, and storage spaces. LA ABC failed to make the second of the two installment payments due under the Purchase Agreement.

B. Mediation

In an attempt to settle their disputes, Shy and Meieran participated in a mediation on September 26, 2005. The mediation resulted in a handwritten document drafted by the mediator, which Shy and Meieran signed. The document contained a list of 10 items to be provided or completed by LA ABC, including “[p]ay for 50% to upgrade electrical power,” “3 parking spaces for free for 5 years,” and “[f]inish existing bathroom in unit 107.” The document concluded: “This is the agreement between the parties with regard to the purchase of LADT by LA ABC [from] Andrew Meieran Living Trust.... The parties hereby agree that LA ABC will do or perform or pay these items in exchange for release from the Trust with respect to this purchase (... the Higgins Building), and as full satisfaction of the obligation of LA ABC with regard to the tenant improvements. [¶] Any dispute as to the interpretation of this agreement shall be submitted to mediation, failing which, shall be submitted to binding arbitration.” (For clarity, we will refer to the handwritten document as the Arbitration Agreement.)

C. Complaint

On August 10, 2006, Greenspan, as trustee of the Trust, filed this action against LADT, LA ABC, and Shy. The complaint alleged as follows.

LA ABC failed to pay more than $4.2 million of the purchase price for the Trust's interest in LADT. LA ABC did not obtain the certificate of occupancy required by the Purchase Agreement, preventing the Trust from using the commercial units in the Higgins Building. LA ABC also interfered with the Trust's use of parking spaces and storage space in the building.

The complaint asserted seven causes of action: (1) rescission of the Purchase Agreement, against LA ABC and LADT; (2) breach of the Purchase Agreement, against LA ABC; (3) breach of guaranty, against Shy; (4) breach of fiduciary duty, against Shy; (5) accounting, against all defendants; (6) conversion,...