Filed 5/11/17 Bergelectric Corp. v. MCB Joint Ventures CA4/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
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COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
BERGELECTRIC CORP.,
Plaintiff and Respondent,
v.
MCB JOINT VENTURES, LLC,
Defendant and Appellant.
D070658
(Super. Ct. No. 37-2016-00006375-
CU-PA-NC)
APPEAL from an order of the Superior Court of San Diego County, Timothy M.
Casserly, Judge. Affirmed.
Calvin B. Grigsby for Defendant and Appellant.
Trachtman & Trachtman, Benjamin R. Trachtman and Ryan M. Craig for Plaintiff
and Respondent.
MCB Joint Ventures, LLC (MCB) agreed to subcontract certain electrical work to
Bergelectric Corp. (Berg) in connection with a naval hospital construction project. After
Berg completed its work, the parties disputed the amount of Berg's final payment under
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their contract. They submitted the dispute to binding arbitration, and the arbitrator
rendered an award in Berg's favor, which the trial court confirmed.
On appeal, MCB asserts that the parties' contract was illegal and/or violated public
policy, that Berg waived its right to arbitrate a portion of their payment dispute, and that
the arbitrator exceeded his powers by awarding attorney fees to Berg. For reasons we
explain, the trial court did not err in confirming the arbitration award. Accordingly, we
affirm the order.
FACTUAL AND PROCEDURAL BACKGROUND
A. Events Leading to the Disputed Contract
In September 2010, Clark/McCarthy (Clark) entered into an agreement with the
United States government for the design and construction of a hospital at United States
Marine Corps Base Camp Pendleton in Oceanside, California. In February 2011, Clark
signed an agreement with Berg to subcontract electrical work for the hospital project to
Berg (the Clark-Berg Agreement). Under the Clark-Berg Agreement, Clark agreed to
pay Berg $45,880,730, less an amount carved out to ensure that some of the electrical
work would be awarded to a business that would help Clark meet its small business goals
set by the government in connection with the hospital project. To that end, the ClarkBerg
Agreement stated: "This Subcontract includes a fixed amount of . . . $26,258,000[]
that will be set-aside to be awarded to Small Business, Small Disadvantaged Business,
HUB-Zone, Veteran-Owned Business, and Service Disabled Veteran-Owned Business."
(Boldface omitted.)
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In order to meet its small business participation goals, Clark had to contract
directly with a small business subcontractor, i.e., as a "first tier subcontractor." Clark
thus entered into a subcontract with MCB in August 2012 (the Clark-MCB Agreement).
As material inducement to Clark's signing the contract, MCB warranted that its
participation in the Clark-MCB Agreement met the "small business," "small
disadvantaged business," "veteran-owned small business," and "service-disabled veteranowned
small business" categories for purposes of the federal acquisition regulations.
(Capitalization omitted.) Under the Clark-MCB Agreement, Clark agreed to pay MCB
$7,943,567 for its "low voltage" electrical work; however, MCB could not bond nearly
$8 million in electrical work. For Clark to get the small business credit, MCB had to
perform at least 20 percent of the contract value itself, or $1,624,677, and MCB could
subcontract the remaining work.
B. The Disputed MCB-Berg Subcontract
In August 2012, MCB subcontracted about $6.4 million of low voltage electrical
work it could not perform and bond itself under the Clark-MCB Agreement to Berg (the
MCB-Berg Subcontract). Under the MCB-Berg Subcontract, Berg agreed to perform
work, submit applications for payment to MCB, and receive progress payments. Section
12.11 of the MCB-Berg Subcontract describes a contract completion and final payment
process (closeout process). It states in pertinent part:
"Before issuance of the final payment, [Berg], if required, shall
submit evidence satisfactory to [MCB] that all payrolls, bills for
materials and equipment, and all known indebtedness connected
with [Berg's] Work have been satisfied. Acceptance of final
payment by [Berg] shall constitute a waiver of claims by [Berg],
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except those previously made in writing and identified by [Berg] as
unsettled at the time of final Application for Payment."
The parties agreed to mediate "any claim arising out of or related to [the MCBBerg
Subcontract] other than those waived in [the] Agreement[.]" The arbitration
provision states as follows, in part:
"7.3 Arbitration.
"7.3.1 Any claim subject to, but not resolved by, mediation shall
be subject to arbitration which, unless the parties mutually agree
otherwise, shall be administered by the American Arbitration
Association in accordance with its Construction Industry Arbitration
Rules [(the AAA Construction Rules)] in effect on the date of the
Agreement. A demand for arbitration shall be made in writing,
delivered to the other party to the Agreement, and filed with the
person or entity administering the arbitration. The party filing a
notice of demand for arbitration must assert in the demand all claims
then know[n] to that party on which arbitration is permitted to be
demanded. The arbitration shall be held in the county where the
Project is located unless another location is mutually agreed upon.
[¶] . . . [¶]
"7.3.6 This agreement to arbitrate and any other written
agreement to arbitrate with an additional person or persons referred
to herein shall be specifically enforceable under applicable law in
any court having jurisdiction thereof. The award rendered by the
arbitrator or arbitrators shall be final, and judgment may be entered
upon it in accordance with applicable law in any court having
jurisdiction thereof."
Finally, the parties agreed to be governed by the substantive law of California:
"15.7 Governing Law. This Agreement and all claims related to it
shall be governed and construed in accordance with the laws of the
State of California without giving effect to its choice or conflict of
law provisions."
MCB and Berg entered into two other agreements related to the MCB-Berg
Subcontract: (1) the "Bonding and Accounts Payable Agreement," in which MCB agreed
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to reimburse Berg for $155,756 in payment and performance bonds furnished by Berg's
surety for MCB's work; and (2) the "Joint Check Agreement," in which Clark agreed to
issue joint checks to MCB and Berg for progress payments requested by Berg under the
MCB-Berg Subcontract. The Bonding and Accounts Payable Agreement contained an
attorney fees provision and referenced both the MCB-Berg Subcontract as well as the
Joint Check Agreement.
C. Berg and MCB's Payment Dispute
By June 2014, Berg had completed its work under the MCB-Berg Subcontract and
was trying to collect final payment from MCB under the contract. Berg sent MCB a
demand letter showing $317,004 as the "contract balance due." Berg's collection efforts
were not successful. Subsequently, in preparation for legal action, Berg more thoroughly
reviewed its accounting and discovered it had mistakenly not billed MCB almost
$326,000. In total, Berg believed it was owed $642,999.
Berg's investigation into its accounting revealed the following. Up until about
June 2013, the parties utilized "change orders" to adjust their contract values or the
timing of performance of work, which was also the conventional way such adjustments
were made in construction contracts. In June 2013, however, MCB began adjusting a
"schedule of values" (SOV) to reflect a change in contract value, showing it completed a
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greater percentage of activities in a given billing period than Berg.1 Berg did not
approve the adjustments to the SOV and was unaware they were being made, possibly
due to a new Berg project manager's taking over at around the same time that MCB
began making the adjustments. The result of the adjustments was Berg requested less in
payment from MCB than it would have otherwise.
When Berg discovered its error, it disavowed the reductions in its contract value.
In November 2014, Berg sent documentation of the SOV errors and a revised demand for
$642,999, to MCB. MCB did not respond.
D. The Arbitration
Two months later Berg filed a concurrent request for mediation and demand for
arbitration with the American Arbitration Association (AAA). It requested $642,999 as
the unpaid contract balance, an award of attorney fees and costs, and an additional claim
of $9,499. MCB would not commit to mediation, made no objection to arbitrating the
additional claim of $9,499, presented several offset claims in its defense, and requested
an award of attorney fees.
The arbitration proceeded before arbitrator James G. Ehlers. Testimony was
received from five Berg witnesses and one MCB witness; well over 70 documentary
exhibits were reviewed. The arbitrator's final award to Berg included the following
monetary components:

1 The SOV was a detailed, multi-column document or spreadsheet that broke down
all of the various work activities to be completed by the parties and the percentage of
completion of each activity. An increase in MCB's contract value resulted in a
concomitant decrease in Berg's contract value.
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"Revised Demand of $652,498.00 less $547,342.00
$105,156.00 bond cost offset
Attorneys' fees $99,034.00
Costs $7,991.04
All fees paid by [Berg] to [AAA] $26,775.00
Total Award, excluding interest $681,142.04
The sum of $547,342.00 shall bear interest at the rate of 10% per
annum from January 22, 2015 until paid."
E. Superior Court Proceedings
Berg filed a petition to confirm the arbitration award in San Diego County
Superior Court. MCB responded with a petition to vacate the award. The parties filed
briefs and declarations in support of their respective petitions. A declaration from MCB's
counsel attached a few of the arbitration exhibits but provided no transcript of the
witnesses' testimony. After reviewing the papers and considering the arguments of
counsel, the trial court granted Berg's petition to confirm the arbitration award and denied
MCB's petition to vacate.
MCB filed a timely notice of appeal.2

2 MCB's request for judicial notice of executive acts in unrelated matters, filed
March 21, 2017, is denied as irrelevant.
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DISCUSSION
A. Applicable Legal Principles3
We review de novo a trial court's ruling regarding a petition to confirm or vacate
an arbitration award. (Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362,
376, fn. 9.)
"[I]t is the general rule that, with narrow exceptions, an arbitrator's decision cannot
be reviewed [by a court] for errors of fact or law." (Moncharsh v. Heily & Blase (1992) 3
Cal.4th 1, 11 (Moncharsh).) "Ensuring arbitral finality . . . requires that judicial
intervention in the arbitration process be minimized. [Citations.] Because the decision to
arbitrate grievances evinces the parties' intent to bypass the judicial system and thus
avoid potential delays at the trial and appellate levels, arbitral finality is a core
component of the parties' agreement to submit to arbitration. Thus, an arbitration
decision is final and conclusive because the parties have agreed that it be so. By ensuring
that an arbitrator's decision is final and binding, courts simply assure that the parties
receive the benefit of their bargain." (Id. at p. 10, italics omitted.)
"[T]he Legislature has reduced the risk to the parties of [an erroneous] decision
[by an arbitrator] by providing for judicial review in circumstances involving serious

3 The MCB-Berg Subcontract allowed enforcement and confirmation proceedings to
be brought in either state or federal court. Because the parties proceeded in state court
under the California Arbitration Act (Code Civ. Proc., § 1280 et seq.), judicial review of
the award is governed by state law, regardless of whether the arbitration proceedings are
governed by federal procedural law and AAA rules under the terms of the contract.
(Cable Connection, Inc. v. DIRECTV, Inc. (2008) 44 Cal.4th 1334, 1340, fn. 2, 1350,
fn. 12.)
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problems with the award itself, or with the fairness of the arbitration process."
(Moncharsh, supra, 3 Cal.4th at p. 12.) For example, Code of Civil Procedure4 section
1286.2 sets forth certain grounds for vacating an arbitrator's award:
"(a) [T]he court shall vacate the award if the court determines any of
the following: [¶] (1) The award was procured by corruption, fraud
or other undue means. [¶] (2) There was corruption in any of the
arbitrators. [¶] (3) The rights of the party were substantially
prejudiced by misconduct of a neutral arbitrator. [¶] (4) The
arbitrators exceeded their powers and the award cannot be corrected
without affecting the merits of the decision upon the controversy
submitted. [¶] (5) The rights of the party were substantially
prejudiced by the refusal of the arbitrators to postpone the hearing
upon sufficient cause being shown therefor or by the refusal of the
arbitrators to hear evidence material to the controversy or by other
conduct of the arbitrators contrary to the provisions of this title. [¶]
(6) An arbitrator making the award either: (A) failed to disclose
within the time required for disclosure a ground for disqualification
of which the arbitrator was then aware; or (B) was subject to
disqualification upon grounds specified in Section 1281.91 but failed
upon receipt of timely demand to disqualify himself or herself as
required by that provision. However, this subdivision does not apply
to arbitration proceedings conducted under a collective bargaining
agreement between employers and employees or between their
respective representatives."5
Unless vacated or corrected, a trial court "shall confirm" the arbitration award "as
made[.]" (§ 1286.) "In light of these statutory provisions, the residual risk to the parties
of an arbitrator's erroneous decision represents an acceptable cost—obtaining the

4 Further unspecified statutory references are to the Code of Civil Procedure.
5 In addition, section 1286.6 provides limited grounds for the correction of an
arbitration award. MCB does not contend on appeal that the award should have been
corrected.
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expedience and financial savings that the arbitration process provides—as compared to
the judicial process." (Moncharsh, supra, 3 Cal.4th at p. 13.)6
"When parties contract to resolve their disputes by private arbitration, their
agreement ordinarily contemplates that the arbitrator will have the power to decide any
question of contract interpretation, historical fact or general law necessary, in the
arbitrator's understanding of the case, to reach a decision. [Citations.] Inherent in that
power is the possibility the arbitrator may err in deciding some aspect of the case.
Arbitrators do not ordinarily exceed their contractually created powers simply by
reaching an erroneous conclusion on a contested issue of law or fact, and arbitral awards
may not ordinarily be vacated because of such error, for ' "[t]he arbitrator's resolution of
these issues is what the parties bargained for in the arbitration agreement." ' " (Gueyffier
v. Ann Summers, Ltd. (2008) 43 Cal.4th 1179, 1184.)
B. The Trial Court Did Not Err in Confirming the Arbitration Award
MCB makes several arguments challenging the arbitration award, none of which
implicate the fairness of the arbitration process or properly fit within the grounds for
vacating an award under section 1286.2, subdivision (a). For instance, MCB contends
the disputed subcontract should not be enforced on public policy grounds. Further,
although MCB asserts the arbitrator exceeded his powers in various respects, a closer
review of MCB's arguments reveals it is merely unsatisfied with how the arbitrator
resolved the merits of the parties' dispute. And even if we could review the merits, the

6 The Federal Arbitration Act provides similarly limited grounds for vacating an
arbitration award. (See 9 U.S.C. §§ 9, 10.)
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appellate record contains neither a transcript of the arbitration hearing nor most of the
documentary exhibits introduced during the arbitration. MCB's arguments are untenable
in light of the limited record and limited grounds that would justify vacating an
arbitration award.
1. MCB failed to show the MCB-Berg Subcontract was illegal or violated
public policy.
MCB first argues the MCB-Berg Subcontract was illegal and/or violated public
policy, rendering the arbitration award void. MCB asserts Clark and Berg were engaged
in a scheme to deceive the federal government (i.e., to get Clark more small business
credit than it was otherwise entitled to) and the MCB-Berg Subcontract was a
"complete[] sham."
We accept for purposes of analysis the general proposition that " 'a claim arising
out of an illegal transaction is not a proper subject matter for submission to arbitration,
and that an award springing out of an illegal contract, which no court can enforce, cannot
stand on any higher ground than the contract itself.' " (Loving & Evans v. Blick (1949) 33
Cal.2d 603, 610 [unlicensed contractors could not enforce an arbitration award for their
work].) But on this record MCB has not shown the MCB-Berg Subcontract was illegal or
violated public policy. There is insufficient evidence to support a finding that Clark and
Berg perpetrated a fraud on government contracting officers—the agreements themselves
do not establish such a conspiracy or scheme. (Cf. Loving & Evans, at p. 606 [court had
the affidavit of respondent's counsel admitting that the respondent was unlicensed].) In
fact, the contracts arguably show the opposite—Clark was lawfully endeavoring to meet
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its small business project goals. For example, attached to the Clark-MCB Agreement
were numerous disclosure forms Clark required MCB to complete and submit to the
federal government.
Additionally, assuming witness testimony or documentary exhibits supported
MCB's claim of illegality, MCB failed to provide an adequate record of the arbitration
proceedings. The arbitrator found the MCB-Berg Subcontract was a legitimate contract,
under which Berg performed low voltage electrical work that MCB could not perform
and bond itself. We have no basis to conclude otherwise. MCB has failed to establish
the MCB-Berg Subcontract was illegal or violated public policy.
2. The parties' entire dispute was properly subject to arbitration, and
there is no basis to conclude Berg waived its right to arbitration.
MCB next argues that only a portion of Berg's claim was properly subject to
arbitration because Berg waived its right to claim any amount over $317,004 pursuant to
the closeout provision of their MCB-Berg Subcontract. MCB asserts that during the
closeout process Berg identified the total unsettled payments it was owed as $317,004
and sent MCB a Civil Code section 8132 "Conditional Waiver and Release on Progress
Payment" letter.
In response, Berg argues MCB never paid the $317,004 to trigger any possible
waiver, Berg's claim for breach of contract was explicitly excepted from being waived on
the "Conditional Waiver" letter and, if any waiver occurred, it was due to MCB's fraud or
Berg's mistake, which were issues for the arbitrator to decide. We agree with Berg.
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The parties agreed to arbitrate "any claim arising out of or related to [the]
Agreement other than those waived in [the] Agreement." (MCB-Berg Subcontract,
§ 7.1.1.) The parties thus agreed to arbitrate a claim for breach of contract, unless the
claim was waived under the terms of the agreement. Further, whether a waiver occurred
under the agreement's terms was itself a dispute "related to [the] Agreement" and
accordingly, properly subject to arbitration. (See Greenspan v. Ladt, LLC (2010) 185
Cal.App.4th 1413, 1442 (Greenspan) [when parties explicitly incorporate rules that
empower an arbitrator to decide issues of arbitrability, the incorporation serves as clear
and unmistakable evidence of the parties' intent to delegate such issues to an arbitrator].)
The parties agreed to abide by the AAA Construction Rules, which permits the
arbitrator to decide the scope of arbitrable issues. (AAA Construction Rules, R-9(a);7
see also Sandquist v. Lebo Automotive, Inc. (2016) 1 Cal.5th 233, 243 [the question of
" 'who decides' " arbitrability of claims is a matter of party agreement].) MCB
acknowledges Berg could arbitrate a claim of $317,004 because Berg previously

7 All references to the AAA Construction Rules are to the version in effect between
October 2009 and June 2015. Rule 9 of the AAA Construction Rules stated as follows:
"R-9. Jurisdiction
(a) The arbitrator shall have the power to rule on his or her own jurisdiction, including
any objections with respect to the existence, scope or validity of the arbitration
agreement. [¶] (b) The arbitrator shall have the power to determine the existence or
validity of a contract of which an arbitration clause forms a part. Such an arbitration
clause shall be treated as an agreement independent of the other terms of the contract. A
decision by the arbitrator that the contract is null and void shall not for that reason alone
render invalid the arbitration clause. [¶] (c) A party must object to the jurisdiction of the
arbitrator or to the arbitrability of a claim or counterclaim no later than the filing of the
answering statement to the claim or counterclaim that gives rise to the objection. The
arbitrator may rule on such objections as a preliminary matter or as part of the final
award."
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identified that amount as "unsettled." After reviewing the evidence, the arbitrator
rejected MCB's assertion of waiver by finding that Berg merely erred in its billing and
had submitted a revised demand for $642,999 once it discovered the error. Berg also did
not accept final payment from MCB to trigger any arguable waiver. The arbitrator's
decision was not "wholly groundless." (Greenspan, supra, 185 Cal.App.4th at p. 1444.)
Additionally, we are not privy to what transpired during the evidentiary hearings
before the arbitrator, and MCB has not provided a sufficient record of the proceedings.
Whether there has been a waiver is usually regarded as a question of fact to be
determined by a fact finder. (Old Republic Ins. Co. v. Fsr Brokerage, Inc. (2000) 80
Cal.App.4th 666, 678 [the pivotal issue in a claim of waiver is the intention of the party
who allegedly relinquished the known legal right].) On this record, MCB failed to
establish Berg's waiver of its right to claim an amount in excess of $317,004.
MCB also argues (1) the arbitrator's award violated Civil Code section 8132; and
(2) the arbitrator erred in ruling on MCB's contract defenses, including novation, accord,
and satisfaction. As above, MCB's arguments are based on Berg's conduct during the
closeout process of identifying only $317,004 in unsettled payments between the parties,
which allegedly precluded Berg from claiming any additional amounts. The arbitrator
found it was MCB's "intentional manipulation" and "deceit" with respect to the SOV that
contributed to Berg's "oversight." In short, the arbitrator found Berg did not agree to
accept only $317,004 in satisfaction of its outstanding receivable, but rather that Berg had
made a mistake in billing due to MCB's deceptive conduct. MCB has not asserted a valid
ground to vacate the arbitrator's award.
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3. MCB failed to establish the arbitrator exceeded his powers by
awarding attorney fees.
MCB argues the arbitrator exceeded his powers by awarding attorney fees because
the MCB-Berg Subcontract did not contain an attorney fee provision and the fee
provision contained in the parties' other related contract—the Bonding and Accounts
Payable Agreement—did not apply. MCB neglects to inform this court that it requested
the arbitrator to make an award of attorney fees and it provided evidence of its counsel's
incurred fees.8 We conclude that the arbitrator did not exceed his powers.
The arbitrator reasoned he could award attorney fees based on the interrelated
nature of the parties' three contracts and the existence of an attorney fee provision in their
Bonding and Accounts Payable Agreement. If the arbitrator erred in his analysis, he
committed a legal and/or factual error not subject to judicial review, rather than an act
exceeding his powers. (Moshonov v. Walsh (2000) 22 Cal.4th 771, 776 [where parties
submitted the issue of attorney fees to the arbitrator and both prayed for fees, the
arbitrator's decision was not subject to judicial review for error].)
Moreover, as an independent and alternative ground for awarding attorney fees,
the arbitrator interpreted the parties' requests for attorney fees as independent
authorization for him to award attorney fees and/or a modification of the MCB-Berg
Subcontract. MCB's conduct "evinc[ed] an intention to confer upon the arbitrator the
power to award attorney's fees." (Thompson v. Jespersen (1990) 222 Cal.App.3d 964,

8 We gleaned this information from Berg's brief and our own review of the record
notwithstanding that it is the appellant's duty to summarize the significant facts in its
opening brief. (Cal. Rules of Court, rule 8.204(a)(2)(C).)
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968; see also AAA Construction Rules, R-45(d)(ii) [arbitrator may make an award of
attorney fees "if all parties have requested such an award"].) The MCB-Berg Subcontract
did not preclude the arbitrator from making an award of attorney fees, and the parties
agreed to abide by the AAA Construction Rules, which permitted the arbitrator to award
attorney fees under the circumstances. The arbitrator did not exceed his powers.
4. The trial court's order contained a harmless typographical error.
Finally, MCB argues the trial court relied on an inapplicable statutory provision in
confirming the arbitration award—section 1286.2, subdivision (b). The court correctly
set forth the relevant text of section 1286.2, subdivision (a), on the first and second pages
of its order, and went on to discuss that MCB had not established a proper basis to vacate
the arbitration award. Read in context, the trial court's order contained an obvious and
harmless typographical error on the second page of its order where it referenced
subdivision (b) rather than subdivision (a) of section 1286.2. The trial court did not rely
on an inapplicable statutory provision.
MOTION FOR SANCTIONS
After the conclusion of briefing on appeal, Berg filed a motion for sanctions
against MCB, arguing that MCB's briefs violated rules of court and the appeal was
objectively frivolous. MCB filed an opposition. We decline to impose sanctions.
Our Supreme Court has cautioned that sanctions should be awarded "most
sparingly to deter only the most egregious conduct." (In re Marriage of Flaherty (1982)
31 Cal.3d 637, 651.) "Counsel and their clients have a right to present issues that are
arguably correct, even if it is extremely unlikely that they will win on appeal." (Id. at
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p. 650.) "Thus, an appeal should be held to be frivolous only when it is prosecuted for an
improper motive—to harass the respondent or delay the effect of an adverse judgment—
or when it indisputably has no merit—when any reasonable attorney would agree that the
appeal is totally and completely without merit." (Ibid.)
Here, although MCB's appeal is not meritorious, neither party raised case law that
squarely addressed the appellate issues in a similar factual scenario. Thus, we cannot say
the appeal was "prosecuted for an improper motive" or that "any reasonable attorney
would agree that the appeal is totally and completely without merit." (In re Marriage of
Flaherty, supra, 31 Cal.3d at p. 650.) In addition, we do not find MCB's rule violations
to be as egregious as those discussed in Pierotti v. Torian (2000) 81 Cal.App.4th 17, 29.
However, we remind MCB and its counsel of an appellant's duty to provide an adequate
record, present arguments supported by appropriate legal and record citations, and
include a summary of significant facts in an opening brief. (Cal. Rules of Court, rule
8.204.)
DISPOSITION
The order is affirmed. Berg's motion for sanctions is denied. Berg is awarded its
costs on appeal.
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DATO, J.
WE CONCUR:
McCONNELL, P. J.
NARES, J.