Safari Assocs. v. Superior Court of San Diego Cnty.
| Decision Date | 02 December 2014 |
| Docket Number | D065684 |
| Citation | 231 Cal.App.4th 1400,182 Cal.Rptr.3d 190 |
| Court | California Court of Appeals Court of Appeals |
| Parties | SAFARI ASSOCIATES, Petitioner, v. The SUPERIOR COURT of San Diego County, Respondent; Alan Tarlov, Real Party in Interest. |
Solomon Ward Seidenwurm & Smith, San Diego, Edward J. McIntyre, Norman L. Smith, Tanya M. Schierling and Leah S. Strickland for Petitioner.
Seltzer Caplan McMahon Vitek, San Diego, Michael A. Leone and Andrea N. Myers for Real Party in Interest.
No appearance for Respondent.
Petitioner Safari Associates (Safari) and real party in interest Alan Tarlov arbitrated a dispute pursuant to a written agreement. The arbitrator awarded Safari damages, attorney fees, and costs. Safari petitioned to confirm the arbitration award in the trial court. In response, Tarlov filed a motion to modify or correct the award on the ground that the arbitrator acted in excess of his powers in awarding Safari attorney fees. Specifically, Tarlov contended that the arbitrator exceeded his powers by “void[ing]” the definition of prevailing party provided in the parties' agreement, and instead applying the definition of prevailing party specified in Civil Code section 1717, subdivision (b)(1) .1
In opposition, Safari argued that the arbitrator had not exceeded his powers under the agreement, and that the arbitrator's application of section 1717 was, at most, a nonreviewable legal error. In the alternative, Safari maintained that the arbitrator had correctly applied the definition of prevailing party contained in section 1717 in awarding attorney fees because the agreement provided that it would be governed by California law, and California law is clear that the statutory definition is “ ‘mandatory ... and contractual provisions conflicting with it are void.’ ” (Quoting Wong v. Thrifty Corp. (2002) 97 Cal.App.4th 261, 264, 118 Cal.Rptr.2d 276.)
The trial court ruled that the arbitrator's decision to apply section 1717 was subject to judicial review, and concluded that the arbitrator had erred in failing to apply the definition of “prevailing party” contained in the parties' agreement. The trial court corrected the award by ruling that the definition of prevailing party contained in the parties' agreement applied and remanding the matter to the arbitrator for further proceedings to apply the agreement's definition of prevailing party in determining whether to award attorney fees.
Safari filed a petition for writ of mandate requesting that this court direct the trial court to vacate its order correcting the arbitrator's award. In its petition, Safari reiterates its argument that the arbitrator acted within the scope of his powers in awarding attorney fees, and that the trial court did not have the authority to review the propriety of the arbitrator's prevailing party determination.
California law is clear that “arbitrators do not ‘exceed[ ] their powers' ... merely by rendering an erroneous decision on a legal or factual issue, so long as the issue was within the scope of the controversy submitted to the arbitrators.” (Moshonov v. Walsh (2000) 22 Cal.4th 771, 775–776, 94 Cal.Rptr.2d 597, 996 P.2d 699 (Moshonov ).) In this case, the potential applicability of the definition of prevailing party contained in section 1717, subdivision (b)(1) was plainly within the scope of the controversy submitted to the arbitrator. In fact, the record unambiguously demonstrates that Safari and Tarlov extensively briefed this very issue in the arbitration. In addition, there is no provision in the parties' arbitration agreement that “explicitly and unambiguously limited” the arbitrator's power to determine the applicability of section 1717 in awarding attorney fees. (Gueyffier v. Ann Summers, Ltd. (2008) 43 Cal.4th 1179, 1185, 77 Cal.Rptr.3d 613, 184 P.3d 739 (Gueyffier ).) Under these circumstances, the arbitrator acted within the scope of his powers in applying the definition of prevailing party found in section 1717, subdivision (b)(1) in awarding Safari attorney fees. Further, any error that the arbitrator may have committed would constitute legal error, which is not subject to correction in the trial court.
Accordingly, we grant Safari's petition and direct the trial court to vacate its order correcting the arbitration award, and to conduct further proceedings, consistent with this opinion, on Safari's petition to confirm the award.
Tarlov is the former managing general partner of Safari. Safari and Tarlov entered into a release agreement (Agreement) to resolve certain claims relating to Tarlov's management of Safari.
The Agreement specified that Safari's claims for “reimbursement of monies paid by [Safari] for the personal expenses of [Tarlov] or Tarlov's family” were not subject to the release, and that the parties would make a good faith effort to resolve these personal expense claims. The Agreement further provided that the parties would submit any unresolved disputes concerning the personal expenses to binding arbitration pursuant to the following arbitration provision:
Another provision of the Agreement provided that the Agreement “shall be governed by the laws of the State of California.”
The parties were unable to resolve all of their disputes concerning the personal expense claims. Thus, pursuant to the Agreement, they submitted those claims to arbitration. In its arbitration brief, Safari argued that Tarlov was required to pay, at a minimum, $768,228, to reimburse Safari for Tarlov's personal expenses that Safari had paid. The arbitrator conducted an arbitration hearing, and issued an interim award determining that Tarlov was required to pay $152,611.48 to Safari.
Both Safari and Tarlov filed a motion for attorney fees, each arguing that it was the prevailing party. In its brief, Safari explained that section 1717, subdivision (b)(1) provides that “the party prevailing on the contract shall be the party who recovered a greater relief in the action on the contract,” while the Agreement states that “ ‘prevailing party’ means the party, if any, that obtains substantially the relief sought in the arbitration.” (Italics added.) Safari argued that “[Section 1717 ]—not the ‘prevailing party’ provision of the [Agreement]—must control,” because under well-established case law, “any definition of ‘prevailing party,’ inconsistent with the definition contained in section 1717 is void.” Safari further contended that it was the prevailing party because the arbitrator found “that ... Tarlov must repay more than $192,000—less an offset for money admittedly wrongly taken,” and thus, Safari was the “party who recovered a greater relief in the action on the contract.” (Quoting § 1717, subd. (b)(1) .)
In his brief, Tarlov argued that the arbitrator was required to apply the definition of prevailing party specified in paragraph 5.4 of the Agreement. Tarlov further argued that, applying this definition, he was the prevailing party because he obtained “ ‘substantially’ the relief sought in the arbitration.” In support of this argument, Tarlov contended that Safari had obtained only a small percentage of the damages that it had sought in the arbitration.
After further briefing, the arbitrator issued a final award in favor of Safari in the amount of $401,455.53. The final award included the $152,611.48 in damages, as well as $211,620 in attorney fees and $37,224.05 in costs. In the award, the arbitrator determined that section 1717 “is applicable to the action between [Safari] and [Tarlov].” The arbitrator further concluded, Finally, the arbitrator found that Safari “ ‘recovered a greater relief on the contract,’ ” and that Safari was therefore the “ ‘prevailing party.’ ”
Safari filed a petition in the trial court to confirm and enter judgment on the arbitration award.
In response, Tarlov filed a motion to modify or correct the arbitration award pursuant to Code of Civil Procedure section 1286.6, subdivision (b) , on the ground that the arbitrator had “exceeded [his] powers” (ibid .) in awarding Safari attorney fees. Specifically, Tarlov argued that the arbitrator exceeded his powers in awarding attorney fees by applying the definition of “prevailing party” in Civil Code section 1717, subdivision (b)(1), rather than the definition of prevailing party provided in the Agreement. Tarlov contended that an arbitrator's power is “confined by the express limitations of the arbitration agreement,” and that when an “arbitrator acts in disregard of such an express provision, he or she acts in excess of his or her powers.” Tarlov maintained that the arbitrator in this case had acted in excess of his powers through...
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