Pierotti v. Torian
| Decision Date | 31 May 2000 |
| Court | California Court of Appeals Court of Appeals |
| Parties | (Cal.App. 1 Dist. 2000) HENRY PIEROTTI et al., Plaintiffs and Respondents, v. HANK TORIAN et al., Defendants and Respondents. A086713 Filed |
Trial Judge: Hon. William McKinstry
Counsel for Appellant: David Jay Morgan, Batya F. Smernoff; DAVID JAY MORGAN, INC.
Counsel for Respondent: John J. Dacey, James M. Sitkin; Niesar & Diamond LLP
CERTIFIED FOR PUBLICATION
Hank Torian (Torian) has appealed from a portion of a superior court judgment confirming an arbitration award. In particular, he contends the arbitrator erred by finding that claimant Henry Pierotti (Pierotti)1 was the prevailing party within the meaning of an attorney fees clause, and awarding fees on the basis of that clause.
As we explain, this is precisely the type of issue our Supreme Court has said we cannot review in an appeal from an order confirming an arbitration award. We also conclude the appeal was frivolous, taken solely for the purpose of delay or harassment and that Torian's attorneys grossly violated the California Rules of Court in preparing their briefs. We therefore impose sanctions in the amount of $32,000, to be paid one-half by Torian's attorneys and one-half by Torian personally. We also grant relief on Pierotti's cross-appeal by awarding post-arbitration, pre-judgment interest.
Since Torian has not-and indeed cannot2-challenge the sufficiency of the evidence in this case, our statement of facts is based on the arbitrator's interim decision:
In the late 1980's, both Torian and Pierotti were car dealers in the City of Fremont. Torian, who owned the Honda and Toyota dealership in town, decided it would be advantageous to have all Fremont auto dealers share space in one large "auto mall." Torian met with all the Fremont auto dealers and sold them on the idea of building an auto mall for all of them to share. Pierotti, who owned several dealerships (including Nissan), was part of that group.
In 1987, Torian, acting on behalf of the incipient partnership, contacted two companies that owned large tracts of land in Fremont. Eventually, after a series of negotiating maneuvers, one of the companies (Catellus) offered to sell a large parcel of land to the dealers and also offered to pay Torian a 3% commission on the sale. Torian did not disclose to the other dealers that he was to receive a commission for the purchase of the Catellus land. Torian thereafter negotiated the purchase of approximately 75 acres from Catellus. The purchase terms were memorialized in an October 18, 1987 letter of understanding, which did not mention the 3% commission.
In May 1990 the dealers formed a formal partnership to develop the auto mall site. Section 14.6 of the 1990 Partnership Agreement provides in part that the "prevailing party [in arbitration] shall be entitled to reasonable attorneys' fees and costs . . . ."
Because of external economic pressures, Pierotti was the first dealer to construct his new dealership. He moved into his new Fremont Auto Mall site in November 1991. However, due to a slack economy and difficulty in obtaining financing, none of the other dealers followed on his heels. Pierotti's dealerships, as the lone outposts at the mall, lasted until June 1992, when he closed them. The auto mall did not become an "economic reality" until 1995.
Based on these facts, Pierotti brought two claims against Torian. First, he alleged Torian committed fraud and breach of contract by inducing Pierotti to move to the mall without himself having a present intention to move. Second, Pierotti alleged Torian breached his fiduciary duty to Pierotti by not disclosing that Catellus had offered him (Torian) a 3% commission to induce the dealers to purchase the Catellus property. Torian successfully moved to compel arbitration of both claims pursuant to an arbitration clause in the 1990 Partnership Agreement.
The arbitrator rejected the first claim. The arbitrator concluded Torian had no contractual obligation to move his dealerships to the mall in a timely fashion, and had not misrepresented his intent in this regard to Pierotti or the other partners.
However, the arbitrator found in favor of Pierotti on the second claim. In particular, the arbitrator found Torian had not informed the other dealers of the 3% commission until after the purchase was completed. The arbitrator found that "[a]lthough there was no formal partnership in existence at the time that Torian was negotiating on behalf of the dealers with Catellus, he was acting on their behalf and [they] are entitled to his secret profits." The arbitrator concluded Torian received $850,000 from the Catellus transaction, and that Pierotti was entitled to his "proportionate share," or $345,726. The arbitrator also concluded punitive damages were appropriate, and awarded Pierotti a total of $700,000 to punish Torian for fraudulently breaching his fiduciary duties.
With respect to attorney's fees, the arbitrator found that Pierotti and the other claimants (see footnote 1) were the "prevailing parties" within the meaning of section 14.6 of the Partnership Agreement between the parties. The attorney fees clause provides that "[t]he prevailing party shall be entitled to reasonable attorneys' fees and costs associated with the enforcement of their rights through arbitration . . . ." The arbitrator found that, "as prevailing parties, Claimants are entitled to recover the allowable costs incurred by them with respect to such claim, together with their attorney's fees . . . ." The arbitrator awarded the claimants a total of $363,512.92 for attorney fees.
Pierotti petitioned the superior court to have the award confirmed and Torian filed a petition to correct the award on the ground the arbitrator "exceeded his jurisdiction" in awarding attorney fees. The court denied the petition to correct the award and confirmed the arbitration award of $1,437,808.08 to Pierotti. However, the court did not award "post-arbitration pre-judgment" interest.
Torian has appealed from this judgment to the extent it awarded attorney fees to Pierotti. Pierotti has filed a cross-appeal challenging the denial of pre-judgment, post-arbitration interest.
In Moncharsh v. Heily & Blas, supra, 3 Cal.4th 1 (Moncharsh), our Supreme Court made it clear that the grounds for judicial review of a contractual arbitration award are extremely limited. Under Moncharsh, we cannot review the merits of the controversy, the arbitrator's reasoning, or the sufficiency of the evidence supporting the award. (Id. at p. 11.) Even "an error of law apparent on the face of the award that causes substantial injustice does not provide grounds for judicial review." (Id. at p. 33.) Code of Civil Procedure sections 1286.2 and 1286.6 provide the only grounds for challenging an arbitration award. (Ibid.)
In reviewing a judgment confirming an arbitration award, we must accept the trial court's findings of fact if substantial evidence supports them, and we must draw every reasonable inference to support the award. (Luster v. Collins (1993) 15 Cal.App.4th 1338, 1344-1345; Ikerd v. Warren T. Merrill & Sons (1992) 9 Cal.App.4th 1833, 1841.)
Reduced to its essence, Torian's claim on appeal is that the arbitrator erred by finding Pierotti was the prevailing party under the Partnership Agreement's attorney fees clause. However, this is nothing more than an attack on the "arbitrator's reasoning" or, at best, an assertion of "an error of law apparent on the face of the award."3 (Creative Plastering, Inc. v. Hedley Builders, Inc. (1993) 19 Cal.App.4th 1662, 1665-1667.)
Although Torian attempts to characterize the arbitrator's actions as in excess of his "powers,"4 he is simply wrong on this point. There is no question the arbitrator had the "power" to award attorney fees, since the Partnership Agreement (which also contained the arbitration clause) expressly granted him that power. The only question here is whether he exercised that power correctly.
In Creative Plastering, supra, Division Five of this District considered facts that are extremely similar to those in this case. There, two contractors entered a contract with an attorney fees clause. The arbitrator awarded one of the parties his attorney fees. Following arbitration, the losing party appealed, arguing that the arbitrator exceed his powers because the party to whom he awarded attorney fees "could not legally and factually be the 'prevailing party' in the underlying action." (19 Cal.App.4th at p. 1665.) Although the trial court agreed with this argument, the Court of Appeal reversed. The reviewing court stated that "the lower court erred because it lacked the authority to reverse or modify the arbitrator's prevailing party finding, which constituted a ruling on an issue the arbitrator was authorized to decide." (Id. at p. 1666.)
In Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362 (Advanced Micro Devices) the Supreme Court delineated "the standard for measuring the scope of the arbitrators' authority." (Id. at p. 366.) There the high court held "the deference due an arbitrator's decision on the merits of the controversy requires a court to refrain from substituting its judgment for the arbitrator's in determining the contractual scope of those powers." (Id. at p. 372.) However, courts retain the authority to overturn arbitration awards "as beyond the arbitrator's powers, whether for an unauthorized remedy or [a] decision on an unsubmitted issue." (Id. at p. 375; see also Board of Education v. Round Valley Teachers Assn. (1996) 13 Cal.4th 269, 275.)
There is absolutely no evidence the award of attorney fees was an "unauthorized remedy" or that the arbitrator decided "an unsubmitted issue." Indeed it seems to us extremely disingenuous...
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