Woodard v. Southern Cal. Permanente Medical Group

• Decision Date: 26 August 1985
• Citation: 171 Cal.App.3d 656,217 Cal.Rptr. 514
• Court: California Court of Appeals Court of Appeals
• Parties: Perry WOODARD and Lenda Woodard, Plaintiffs and Appellants, v. SOUTHERN CALIFORNIA PERMANENTE MEDICAL GROUP aka Kaiser Foundation Hospitals; Peter B. Fischer, M.D., Defendants and Respondents. Civ. B 007109.

Page 514

217 Cal.Rptr. 514

171 Cal.App.3d 656

Perry WOODARD and Lenda Woodard, Plaintiffs and Appellants, v. SOUTHERN CALIFORNIA PERMANENTE MEDICAL GROUP aka Kaiser Foundation Hospitals; Peter B. Fischer, M.D., Defendants and Respondents.

Civ. B 007109.

Court of Appeal, Second District, Division 3, California.

Aug. 26, 1985.

[171 Cal.App.3d 658] Martin C. Handweiler, Santa Ana, for plaintiffs and appellants.

Thelen, Marrin, Johnson & Bridges and Curtis A. Cole, Los Angeles, and Mary R. Barnett, for defendants and respondents.

KLEIN, Presiding Justice.

Plaintiffs and appellants Perry Woodard and Lenda Woodard (the Woodards) appeal the judgment confirming an arbitration award following arbitration with defendants and respondents, Southern California Permanente Medical Group and Peter B. Fischer, M.D. (SCPMG).

The superior court properly refused to correct the arbitration award to add costs of suit allowed by Code of Civil Procedure section 998 and interest pursuant to Civil Code section 3291 when the court confirmed the award. Those sections do not apply to arbitration, and assuming they did, mere arbitrator error in interpreting them does not constitute an act in excess of authority so as to enable the superior court to entertain a petition to correct the award without disturbing its merits. The superior court judgment is therefore affirmed.

PROCEDURAL AND FACTUAL BACKGROUND

In February 1981, the Woodards filed an action for wrongful death and negligent infliction of emotional distress against SCPMG. As the Woodards were members of a Kaiser health plan group, the matter was ordered by the superior court in August 1981, to be arbitrated pursuant to a Kaiser Foundation Health Plan Group Medical and Hospital Service Agreement (Agreement). In March 1983, the Woodards made a statutory offer to SCPMG to compromise, pursuant to Code of Civil Procedure section 998. ¹

On June 30 and July 1, 1983, the matter was arbitrated, and the Woodards were awarded $130,000, an amount in excess of Each party was to bear one-half of the neutral arbitrator's fees and otherwise bear their respective costs. SCPMG tendered and the Woodards accepted $132,300 in satisfaction of the arbitration.

the Woodards' offer of $125,000 to compromise, together with $2,300 for funeral and burial costs on the wrongful death cause of action.

In January 1984, the Woodards filed a petition in the superior court to correct the arbitration award by adding costs of suit and interest and thereafter to confirm it. Judgment confirming the award without the requested correction was filed in March 1984, and this appeal followed.

CONTENTIONS

While the Woodards are not seeking to vacate the award, they claim they are entitled to have the award corrected by the addition of costs of suit and interest.

They also contend the Agreement itself is unenforceable as an adhesion contract, and that it is ambiguous in dealing with costs and should be construed against SCPMG. ²

DISCUSSION

This appeal has a few unusual twists, even though SCPMG maintains the issues are simple and straight forward because the arbitrators specifically decided the issue of an award of costs pursuant to section 998 and Civil Code section 3291 interest against the Woodards and therefore the superior court had no authority to redetermine that point.

The Woodards, however, put forth a rather esoteric argument, including the view that section 998 and Civil Code section 3291 clearly apply to arbitration proceedings and because they do, the arbitrators' failure to allow costs of suit and interest pursuant thereto amounted to an act in excess of their power. ³ They argue they are not seeking to vacate the award, and the superior court had the authority to correct the award pursuant to section 1286.6, subd. (b).

This appeal could be resolved with dispatch if we do not reach the applicability of section 998 and Civil Code section 3291 to arbitration. However, we are intrigued by the Woodards' discussion and find the area of law somewhat unsettled. Hence, we shall try to shed some light on the subject.

1. Scope of Appellate Review

In this process, we are not unmindful of certain general appellate propositions and recognize that the policy of the law is to favor arbitration, and every reasonable intendment is indulged to give effect to such proceedings. (6 Cal.Jur.3d, Arbitration and Award, § 1, pp. 7-8; Santa Clara-San Benito etc. Elec. Contractors' Assn. v. Local Union No. 332 (1974) 40 Cal.App.3d 431, 437, 114 Cal.Rptr. 909.)

Further, only a limited form of judicial review of arbitration awards is provided by statute. ( §§ 1285-1288; Lehto v. Underground Constr. Co. (1977) 69 Cal.App.3d 933, 939, 138 Cal.Rptr. 419.) Every presumption favors the award, and therefore the merits of the award, either on questions of law or fact, are generally not subject to review. (Lehto v. Underground Constr. Co., supra, at p. 939, 138 Cal.Rptr. 419; citing Recommendation and Study Relating to Arbitration (Dec. 1960) 3 Cal.Law In ruling on a petition to correct and confirm an arbitration award as is the case here, the superior court must not consider the merits of the award (see, e.g. Lindholm v. Galvin (1979) 95 Cal.App.3d 443, 450, 157 Cal.Rptr. 167), and the award may not be corrected unless a ministerial error occurred or the superior court determines pursuant to 1286.6, subd. (b) that "[t]he arbitrators exceeded their powers but the award may be corrected without affecting the merits of the decision...."

Revision Com.Rep. (1961) pp. G25-27, G53-54; Rodrigues v. Keller (1980) 113 Cal.App.3d 838, 170 Cal.Rptr. 349.)

2. Arbitrators' ruling that section 998 and Civil Code section 3291 did not apply to arbitration proceedings not an act in excess of their authority.

The Woodards attempted to utilize section 1286.6, subd. (b) to allow the superior court to correct the award. However, as indicated, the superior court may not make a correction even where the merits of the award are not affected unless it finds the arbitrators "exceeded their powers." ( § 1286.6, subd. (b).)

The problem with the Woodards' argument that the arbitrators exceeded their authority in their disputed ruling is that it is based on the erroneous premise that arbitrators are required to follow California law. Based on that false proposition, they claim a decision which is in "direct contravention to statutory authority applicable to arbitration proceedings would be an excess of their powers."

Assuming arguendo the Woodards' position that the disputed sections apply to arbitration, arbitrators are not required to follow the law; hence, the general rule that the merits of the award on questions of law are not reviewable. (Lehto v. Underground Constr. Co., supra, 69 Cal.App.3d 933, 939, 138 Cal.Rptr. 419.) Further, an erroneous ruling of law does not equate with excess of power. (Lindholm v. Galvin, supra, 95 Cal.App.3d at pp. 450-451, 157 Cal.Rptr. 167.)

It has been held that not even an " 'eggregious error of law' " is sufficient to set aside an award. (State Farm Mut. Auto Ins. Co. v. Guleserian (1972) 28 Cal.App.3d 397, 402, 104 Cal.Rptr. 683.) It is now the accepted principle that " '[i]n California the applicable rule is that an arbitrator may make a binding award which a court is required to enforce, even though the award conflicts with substantive law, ...' " (Lindholm v. Galvin, supra, 95 Cal.App.3d at p. 451, 157 Cal.Rptr. 167.)

Nor would the Woodards' contention fare any better under a lesser standard for their purposes set out in Lesser Towers, Inc. v. Roscoe-Ajax Constr. Co. (1969) 271 Cal.App.2d 675, 77 Cal.Rptr. 100. That case involved lengthy arbitration of a contract dispute. In rejecting appellant's contention that an erroneous construction of a contract, rather than statutory misinterpretation as the Woodards here allege, was an act exceeding the powers of the arbitrators, the Lesser court stated: " '[A]rbitrators may be said to have [exceeded their powers] only if they gave a completely irrational construction to the provisions in dispute....' " (Id., at p. 701, 77 Cal.Rptr. 100; italics added.)

Here, the arbitrators' ruling did not fall into the Lindholm category or within the Lesser case, and albeit an irrelevant observation for the sake of this argument, was in fact, a legally correct one.

Therefore, the superior court could not redetermine the arbitrators' ruling on the petition to correct and confirm the award. Likewise, even if we were to find that the disputed sections apply to arbitration, this court would be bound to uphold the superior court. (Lindholm v. Galvin, supra, 95 Cal.App.3d at pp. 450-451, 157 Cal.Rptr. 167.)

3. Costs allowable on arbitration.

This case presents a vehicle to discuss the applicability of section 998 and Civil Code section 3291 to arbitration. The issue was raised by the Woodards before the arbitrators and they ruled 2 to 1

against the Woodards' position. Both sides briefed and argued the question before this court. Generally, reviewing courts do not decide matters unnecessary to the decision. But when the issue is one of public importance or will lead to future controversies, it may be deemed desirable to decide the case on several alternative grounds. (6 Witkin, Cal.Procedure (2d 1971) Appeals, § 225, p. 4214; see e.g. People v. Gould (1976) 56 Cal.App.3d 909, 921, 128 Cal.Rptr. 743; City & Co. of S.F. v. County of San Mateo (1950) 36 Cal.2d 196, 198, 222 P.2d 860.)

a. Historical overview.

In 1961, comprehensive arbitration legislation was enacted dealing with the conduct of arbitration proceedings ( § 1282, et seq.), and the enforcement of awards ( §§ 1285-1288). Section 1284.2 deals specifically with arbitration expenses. ⁴

Prior to this legislation, section 1032 alone was available for guidance in the allowance of costs in arbitration. Section 1032, which has been on the books in its present form since 1957, provides: "In the superior court, ... costs...