Fujitsu Software Corp. v. Hinman

Filed 9/28/06 Fujitsu Software Corp. v. Hinman CA1/5

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

N THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION FIVE

Howard E. Hinman appeals from a final judgment confirming a “Partial Final Award” in an arbitration proceeding. He contends (1) the judgment is void due to lack of personal jurisdiction; (2) the court erred in confirming the arbitration award because the arbitrator exceeded his powers; (3) the court abused its discretion by confirming an award that indentured Hinman to perform free work in violation of the 13th Amendment of the United States Constitution; and (4) the arbitrator was biased against him. We will affirm.

I. FACTS AND PROCEDURAL HISTORY In 2003, Hinman and his partner, Glenn K. Dent, together doing business as zBatch, were developing software for “batch” processing. Respondent Fujitsu Software Corp. (FSW) sought to distribute the zBatch software to its customers in object code form. To this end, in October 2003 Hinman and Dent signed a “FSW/ZBATCH MASTER DISTRIBUTION AND SERVICES AGREEMENT” (Master Agreement) with FSW.

A. Master Agreement and Escrow Agreement

The Master Agreement was entered into as of September 1, 2003, by and between FSW and “zBatch, a dba for Howard E. Hinman and Glenn K. Dent.” Under section 2.1 of the Master Agreement,^[1] zBatch licensed FSW to distribute the zBatch software and/or bundle it with FSW products.

FSW provided zBatch software to its customers pursuant to license agreements that entitled customers to a year of product “maintenance.” FSW’s customers could also purchase extended maintenance coverage. In turn, the Master Agreement required zBatch to provide certain technical support and maintenance services in regard to the needs of FSW’s customers. Under section 4.5, entitled “Technical Support and Services,” FSW would provide “Level 0” and “Level 1” direct support to FSW’s customers, but Hinman and Dent would provide “Level 2” support (through FSW’s personnel) and “Level 3” support. zBatch’s support obligations under section 4.5 pertained to “all [FSW]’s customers that have a paid license and support agreement” through FSW support personnel. In addition, under section 4.1, zBatch warranted to FSW that the software would perform in accordance with specification for 12 months after delivery to the FSW customer, and zBatch agreed to either modify or correct any defective software to specification, or accept return of the product and refund the corresponding royalty.

Pursuant to section 3.1, Hinman and Dent received, as royalties, a percentage of the zBatch product license and technical support fees that FSW charged its customers.

The term of the Master Agreement was set forth in sections 6.1 and 6.2. Under those provisions, the Master Agreement had a two-year initial term unless terminated earlier by breach or insolvency. Thus, the “natural” termination date of the Master Agreement, as the parties call it, was September 1, 2005.

Certain matters were to survive termination of the Master Agreement. Section 6.3, entitled “Wind-Down,” dictated that customer licenses of zBatch software would continue in effect: “All licenses in effect upon termination or expiration and for which ZBATCH has been paid shall survive any termination or expiration of this Agreement or any of its terms.” Section 6.3 also provided that the parties would jointly instruct an escrow holder as to the termination of an escrow for source code, which we further discuss post: “As part of the Wind-Down related to the normal expiration of the agreement, the parties shall jointly instruct, [sic] DSI as to the termination of the Escrow Agreement. (Exhibit D: Section 5.1(a).)” In addition, section 6.4 set forth specific provisions of the Master Agreement surviving its termination, including, inter alia, section 4.1.

During the effective period of the Master Agreement, FSW sold the zBatch software to several customers, many of whom prepaid for continuing support and maintenance for periods extending beyond the Master Agreement’s September 1, 2005 expiration date. Hinman and Dent received over $100,000 for the zBatch product and their support and maintenance obligations.

As noted above--and critical to the parties’ dispute--section 4.6 required zBatch to deposit the source code for the zBatch software into escrow with a third-party escrow company, DSI Technology Escrow Services, Inc. (DSI), which was owned by Iron Mountain Inc. Section 4.6 read: “Source Code Escrow. Upon the execution of this Agreement ZBATCH shall place into escrow with Data Securities a fully commented copy of the source code of the ZBATCH Software and shall promptly supplement such source code escrow with any Updates and Revisions. The terms and conditions of the Escrow including the cases triggering the release of the code shall be as set forth in the Data Securities agreement attached hereto as Exhibit D. FSW will be responsible for the expenses associated with maintaining this Source Code Escrow Agreement.” (Bold in original.)

Attached as exhibit D to the Master Agreement was the escrow agreement to which section 4.6 referred. The escrow agreement was effective February 6, 2004, among DSI, ZBATCH, LLC, and FSW. Pursuant to section 5.1, the escrow agreement had an initial term of one year (to February 6, 2005), and then automatically renewed from year-to-year unless, inter alia, zBatch and FSW jointly instructed DSI otherwise.

Section 4.1 of the escrow agreement set forth two particular “Release Conditions“ for the release of the source code from escrow to FSW: zBatch’s bankruptcy or inability to pay its debts, or, under certain conditions, its uncured failure to carry out “its support obligations pursuant to the [Master Agreement] or any applicable support or maintenance agreement.” Upon release to FSW, FSW could use the source code to provide support and maintenance to its customers. (Escrow agreement, § 4.5.) The ostensible purpose of the escrow, therefore, was to enable FSW to provide customer support and maintenance for the zBatch product if zBatch defaulted on its obligations under the Master Agreement to do so.

B. Hinman’s Refusal to Deposit the Source Code Into Escrow

When they signed the Master Agreement, Hinman and Dent had not yet finished developing their zBatch software and had no source code to deposit. In response to FSW’s inquiry, Hinman advised FSW on March 16, 2004, that zBatch was “planning to look into setting up the Escrow in about 30 days time as we get closer to having some production code to place into it.” In January 2005, FSW again asked Hinman and Dent whether they had deposited the source code into escrow. Dent responded that he and Hinman had never agreed to the escrow and that the escrow agreement (attached to the Master Agreement as an exhibit) was “defective” because they had not signed it.

FSW sent a notice of breach of section 4.6 in March 2005. On March 22, 2005, Dent executed the escrow agreement on behalf of Hinman and Dent. Nevertheless, they did not deposit the source code into escrow, this time claiming the escrow agreement was invalid because FSW had entered into a “side” agreement with Iron Mountain (by which FSW agreed to indemnify Iron Mountain from liability to zBatch in case the source code was accidentally disclosed).

C. Arbitration

FSW initiated arbitration proceedings before the American Arbitration Association (AAA) in San Francisco in April 2005, pursuant to section 9.4, which required binding AAA arbitration of all disputes. FSW sought to compel Hinman and Dent, “dba zBatch,” to comply with their obligation to deposit the source code into escrow. It also requested such further relief as the arbitrator might deem appropriate. Hinman and Dent, referring to themselves in their pleadings as “collectively, ‘zBatch,’” answered FSW’s demand for arbitration and asserted numerous claims of breach as counterclaims. The AAA, having received no objection to the proposed site of the arbitration from Hinman and Dent, determined that the arbitration would be conducted in San Jose. The parties stipulated to the appointment of Maurice Zilber as arbitrator.

By letter of May 6, 2005, Hinman and Dent (also referenced in their counsel’s correspondence as “collectively, ‘zBatch’”) purported to terminate the Master Agreement for FSW’s default of its material obligations. The letter did not identify the nature of the default, but apparently the primary complaint was FSW’s indemnity agreement with Iron Mountain.

On May 12, 2005, FSW amended its arbitration demand to impose individual liability on Hinman and Dent, since zBatch was not incorporated as a limited liability company (LLC) and merely operated as a “dba” of zBatch. Hinman and Dent then sought, on May 27, 2005, to incorporate zBatch as a Delaware LLC.

The arbitrator bifurcated the issues and set an initial hearing on contract interpretation for July 18, 2005. This initial hearing was to determine the merits of the escrow issue and the support and maintenance issues, including (1) whether zBatch’s support obligations extended beyond the termination date of the Master Agreement, such that the obligation to maintain an escrow of the software source code also extended to the end of the support obligations, and (2) assuming zBatch’s allegations of FSW’s breaches were true, whether those breaches would constitute grounds for termination of the Master Agreement. A second hearing to be held in September 2005 would cover all significant remaining issues.

The parties, represented by counsel, appeared at the July 18 arbitration hearing and presented extensive arguments and offers of proof to the arbitrator.

The arbitrator issued a “Partial Final Award,” dated July 31, 2005. The award determined that: (1) zBatch LLC, Hinman and Dent had continuing support obligations that survive termination of the Master Agreement and extend through the expiration of the last customer license and support agreement in effect at the time of termination; (2) zBatch LLC, Hinman, and Dent were required to deposit zBatch software source code into escrow within 10 business days from receipt of the partial final award, and (3) the determination of whether zBatch, Hinman and Dent were entitled to terminate the Master Agreement due to FSW’s breach was deferred until evidentiary hearings in September 2005. The arbitrator also deferred a determination of an award of attorney fees and costs.

The partial final award was served by fax upon Hinman and Dent on August 1, 2005. Despite FSW’s urging, Hinman and Dent refused to comply with the arbitrator’s order to deposit the source code into escrow. Counsel for Hinman and Dent withdrew from their representation on or about August 26, 2005.

D. State Court Petition to Confirm Arbitration Award

On August 30, 2005, FSW filed a petition in San Francisco Superior Court to confirm the partial final award (Code Civ. Proc., § 1285), along with an application for a temporary restraining order (TRO).

After a hearing on August 31, 2005, Judge Warren declined to order Hinman et al. to deposit the source code into escrow, but issued a TRO requiring them to maintain zBatch source code in a form compatible with versions supplied to FSW customers and for which zBatch had been paid, and to continue to provide technical services to FSW’s customers using zBatch, pursuant to section 4.1.

On September 29, 2005, Hinman appeared in pro per in the trial court proceedings, filing an opposition to the motion to confirm the arbitration award, and a cross-motion to “modify/correct or, alternatively, vacate” the arbitration award, recuse the arbitrator, and obtain a return of fees. Dent and zBatch LLC joined Hinman’s opposition and cross-motion.

The parties appeared before Judge Warren for a hearing on the parties’ cross-motions on October 13, 2005. By order dated October 26, 2005, the judge ordered zBatch LLC, Dent, and Hinman to comply with the partial final award and deposit the zBatch source code into escrow. By order dated October 26, 2005 and filed October 31, 2005, the court confirmed the partial final award in its entirety and ordered entry of judgment. Judgment was entered on October 31, 2005. Hinman filed a notice of appeal from the judgment.

E. Hinman’s Federal Action

On the day that FSW filed its petition in state court (August 30, 2005), Hinman filed a pro se petition to vacate the award in the Northern District of California. FSW filed a cross-motion to confirm the arbitration award.

After Judge Warren issued his October 31, 2005 judgment, the federal court, in February 2006, granted FSW’s motion to stay the federal proceedings under the abstention doctrine, indicating that Hinman “appear[ed] to be avoiding an adverse ruling” by maintaining the federal proceedings.^[2]

II. DISCUSSION

As noted above, Hinman contends: (1) the judgment is void due to lack of personal jurisdiction; (2) the court erred in affirming the arbitration award because the arbitrator exceeded his powers; (3) the court abused its discretion by confirming an award that indentured Hinman to perform free work in violation of the 13th Amendment of the United States Constitution; and (4) the arbitrator was biased against him. In addition, we requested that the parties brief whether the trial court’s confirmation of a “partial” final arbitration award was appealable. We discuss this jurisdictional question first, and then proceed to Hinman’s contentions in turn.

A. Appealability

The parties have briefed whether the judgment in this matter is appealable in light of the holding in Rubin v. Western Mutual Ins. Co. (1999) 71 Cal.App.4th 1539, 1544-1549 (Rubin). Both parties contend we have jurisdiction to hear the appeal, albeit for different reasons. We conclude that Rubin is inapposite to the matter before us and the judgment in this case is appealable.

In Rubin, the plaintiff filed a complaint in superior court, alleging causes of action against her insurance company for breach of contract, breach of the implied covenant of good faith and fair dealing, fraud, and intentional infliction of emotional distress. The plaintiff alleged that the defendant insurer failed to pay her claim for damages, which her property sustained in an earthquake. (Rubin, supra, 71 Cal.App.4th at pp. 1541-1542.) The defendant insurer filed a petition to compel arbitration pursuant to a provision in the policy regarding the appraisal of damages to property. (Id. at pp. 1542-1543.) The arbitrator issued an award that determined only the dollar value of the damages to the plaintiff’s property. (Id. at p. 1543.) The trial court confirmed the arbitration award, but did not resolve the plaintiff’s four causes of action. (Id. at p. 1543.) The defendant appealed the confirmation of the arbitration award. The appellate court dismissed the appeal on the ground that the judgment confirming the arbitration award was not a final judgment for appeal purposes, since it only appraised the amount of damage to plaintiff’s residence and did not adjudicate the causes of action in the complaint. (Id. at pp. 1547, 1549.)

In the matter before us, by contrast, the parties commenced arbitration pursuant to the terms of the Master Agreement, and the arbitrator issued a “Partial Final Award.” FSW then filed a petition in the superior court, seeking nothing other than confirmation of the “Partial Final Award” and the TRO enforcing the partial final award. The trial court’s judgment confirming the award thus disposed of the entirety of the matter before the trial court. It is, therefore, a final appealable judgment.

B. Personal Jurisdiction

Hinman contends the trial court lacked personal jurisdiction in this matter, because he is an Indiana resident without property or business interests in California, and zBatch was originally an Indiana business, is now a Delaware entity, and never maintained any office in California and has no customers in California. For a number of reasons, Hinman’s contention is without merit.

First, to the extent Hinman argues that he had insufficient contacts with California to be subject to personal jurisdiction here, Hinman ignores the obvious: he, along with Dent doing business as zBatch, entered into the Master Agreement with FSW, a California corporation. The state court proceedings to confirm the partial final award therefore arose out of Hinman’s alleged failure to perform his contract with a California entity.

Second, by agreeing to arbitration in California, Hinman consented to personal jurisdiction in California courts for the purpose of confirming the arbitration award. In the course of discussing the proposed schedule for the arbitration required under section 9.4, zBatch represented to the AAA that “zBatch [the dba for Hinman and Dent] has agreed on San Francisco AAA offices as the venue for the hearing.” Code of Civil Procedure section 1293 provides: “The making of an agreement in this State providing for arbitration to be had within this State shall be deemed a consent of the parties thereto to the jurisdiction of the courts of this State to enforce such agreement by the making of any orders provided for in this title and by entering of judgment on an award under the agreement.”

At any rate, Hinman waived any objection to personal jurisdiction by appearing in the action. (Roy v. Superior Court (2005) 127 Cal.App.4th 337, 341.) Named as one of the respondents in the state court proceeding, Hinman appeared at the August 31 hearing on FSW’s TRO application. On September 29, he filed an opposition to FSW’s petition to confirm the arbitration award, along with a “cross-motion” to “modify/correct or, alternatively, vacate” the arbitration award, recuse the arbitrator, and obtain a return of fees. He also personally appeared at the hearing on the parties’ cross-motions on October 13, 2005. He did not purport to appear specially, and purposefully availed himself of the forum. Thus, whether by consent, waiver, or his contacts with California, the trial court plainly acquired personal jurisdiction over Hinman.^[3]

C. Confirmation of Arbitration Award

The California Supreme Court determined the standard for judicial review of arbitration awards in Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1 (Moncharsh). The court noted that private arbitration is intended to be a “‘speedy and relatively inexpensive means of dispute resolution.’” (Id. at p. 9.) Particularly where, as here, the parties have agreed that disputes would be submitted to binding arbitration, the expectation is also that an arbitrator’s award will be final. (Ibid.) Because of these principles, the court concluded, “an arbitrator’s decision is not generally reviewable for errors of fact or law, whether or not such error appears on the face of the award and causes substantial injustice to the parties.” (Id. at p. 6.) Indeed, the merits of the controversy, the validity of the arbitrator’s reasoning, and the sufficiency of the evidence are not subject to judicial review. (Id. at p. 11.) Rather, review is strictly limited to instances in which there is “a statutory ground to vacate or correct the award.” (Id. at p. 28.)

Six statutory grounds for vacating an arbitration award are set forth in Code of Civil Procedure section 1286.2. Of these, Hinman relies on Code of Civil Procedure

section 1286.2, subdivision (a)(4), which provides that an arbitration award shall be vacated if “[t]he arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted.” (Italics added.)

The court in Jordan v. Department of Motor Vehicles (2002) 100 Cal.App.4th 431 (Jordan) explained Code of Civil Procedure section 1286.2, subdivision (a)(4) in this manner: “An arbitrator exceeds his powers when he acts without subject matter jurisdiction [citation], decides an issue that was not submitted to arbitration [citations], arbitrarily remakes the contract [citation], upholds an illegal contract [citation], issues an award that violates a well-defined public policy [citation], issues an award that violates a statutory right [citation], fashions a remedy that is not rationally related to the contract [citation], or selects a remedy not authorized by law [citations]. In other words, an arbitrator exceeds his powers when he acts in a manner not authorized by the contract or by law.” (Jordan, supra, at p. 443.) None of Hinman’s grounds for vacating the arbitration award falls within Code of Civil Procedure section 1286.2, subdivision (a)(4).

1. Arbitrator’s Acceptance of FSW’s List of Rebuttal Authorities

In setting a briefing schedule for the July 18, 2005 arbitration hearing, the arbitrator stated that “[n]o replies to the briefs will be entertained.” Hinman complains that the arbitrator nevertheless accepted a “reply brief” from FSW.

The document FSW submitted was actually just a “list of rebuttal authority,” comprised of a cover sheet, a listing of cases and the legal proposition they purportedly supported, and copies of the cases. Hinman also claims FSW submitted additional exhibits to the arbitrator, but in any event the document contained no written argument or textual response to Hinman’s legal arguments. Moreover, Hinman does not establish that the arbitrator lacked the discretion to determine that FSW’s submission was not a “repl[y] to the briefs,” or that the arbitrator’s acceptance of FSW’s submission exceeded his powers. Nothing in the Master Agreement, AAA arbitration rules, or statute precluded the arbitrator’s act.

2. Arbitrator’s Preclusion of Discovery

In June 2005, zBatch’s attorney requested a discovery process and schedule. FSW objected, and the arbitrator ruled on June 17, 2005, that all discovery issues would be addressed at the July 18, 2005 hearing. Hinman complains that zBatch was precluded from obtaining discovery before the arbitration hearing.

The arbitrator did not exceed his powers in this regard. A party to arbitration is not entitled to discovery unless, unlike here, the arbitration concerns wrongful death or personal injury or the parties’ agreement specifically provides for discovery (Code Civ. Proc., § 1283.1), or in limited circumstances where discovery is necessary to preserve statutory rights. (See Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 104-106.) The Master Agreement’s arbitration provision did not state that any discovery would be allowed. Furthermore, under AAA rules, the arbitrator has discretion to decide whether or not to order discovery. Given this discretion to preclude discovery, the arbitrator did not act in excess of his powers in precluding discovery.

Furthermore, Hinman has not established that the absence of discovery before the July arbitration hearing was prejudicial. He contends that he needed the discovery to confirm FSW’s royalty payments for the zBatch software, but FSW’s alleged royalty underpayment was not at issue at the July 18 hearing. Moreover, at the July hearing Hinman did not ask for discovery, and his counsel asserted that evidence was unnecessary. For this reason as well, Hinman establishes no basis for reversing the judgment confirming the partial final award. (See Code Civ. Proc., § 475 [requiring prejudice to reverse judgment].)

3. Arbitrator’s Refusal to Dismiss the Arbitration as Untimely

Section 9.4 provided that “[a]ny claim must be brought within eighteen (18) months of when the claim first arose or it shall be deemed waived.” Arguing that the effective date of the Master Agreement was September 1, 2003, and asserting (contrary to the evidence) that he refused to submit the source code into escrow from the beginning, Hinman contends that FSW’s demand for arbitration on April 11, 2005, was more than 18 months after FSW’s claim first arose. Thus, he urges, FSW waived its claims against zBatch (at least as to the deposit of source code), and the arbitrator exceeded his powers by failing to dismiss the arbitration in its entirety or in part.

Hinman’s contention is meritless. In the first place, he did not request dismissal of the arbitration on this ground, so it cannot be said that the arbitrator exceeded his powers in failing to dismiss the case. Moreover, while the effective date of the Master Agreement was September 1, 2003, the Master Agreement was not fully executed until October 27, 2003. No claim for failing to deposit the source code under the Master Agreement could have arisen before the Master Agreement--which contained the requirement to deposit the code--was signed. FSW’s demand for arbitration, submitted on April 4, 2005, occurred less than 18 months after October 27, 2003, and was timely.

4. Arbitrator’s Refusal to Dismiss the Arbitration Upon zBatch’s Termination of the Master Agreement.

On May 6, 2005, zBatch purported to terminate the Master Agreement due to FSW’s alleged material breach of its provisions. In particular, Hinman contended that FSW had breached the Master Agreement and escrow agreement by entering into a side agreement to indemnify Iron Mountain for any liability to zBatch if Iron Mountain accidentally disclosed the source code to FSW. Hinman claims that the arbitration process should have “ceased at th[e] moment” the termination letter was sent on May 6, 2005.

Hinman’s argument is specious. His termination of the Master Agreement would not render moot FSW’s claims in arbitration that Hinman’s obligation to deposit the source code into escrow survived termination of the Master Agreement. Furthermore, part of the purpose of the arbitration was to determine if Hinman’s claim of FSW’s breach had any merit--that is, whether Hinman had grounds to terminate the Master Agreement due to FSW’s indemnity agreement with Iron Mountain. It would be nonsensical to dismiss an arbitration that was designed to adjudicate whether the Master Agreement was terminated, on the ground that the Master Agreement was terminated, without determining that threshold issue. The arbitrator’s refusal to dismiss the arbitration proceeding did not exceed his powers.

5. 10-Day Deadline for Placement of Source Code into Escrow

Hinman next claims that the arbitrator exceeded his power and displayed bias when he gave zBatch 10 business days to place its zBatch program source code into escrow. This was erroneous, he contends, because Code of Civil Procedure section 1288.4 precluded zBatch from challenging the partial final award for 10 days, so zBatch was forced to choose between complying with the partial final award and challenging it.

Hinman is incorrect. Code of Civil Procedure section 1288.4 prevented Hinman from moving to vacate the partial final award in state court for 10 calendar days from receipt of the award. The arbitrator, however, gave Hinman 10 business days to deposit the source code into escrow. Therefore, Hinman could have filed a petition in state court within the compliance period of Code of Civil Procedure section 1288.4. He also could have challenged the award in federal court, without regard to Code of Civil Procedure section 1288.4. In any event, his claim that the arbitrator’s ruling forced him to either comply or challenge the award within 10 days rings hollow, since he never complied with the order and he never moved any court to vacate the award until 30 days after receiving it.

6. Remaking the Master Agreement as to the Source Code Escrow

Hinman protests the arbitrator’s finding that zBatch continued to have support obligations past the Master Agreement’s natural termination date (September 1, 2005), while ordering zBatch to place the source code into escrow. He contends, as he did in the trial court, that the arbitrator’s order was ambiguous, because it did not expressly state that the source code agreement extended past the termination of the Master Agreement. Moreover, he argues, if the arbitrator’s ruling means that the source code must remain in escrow past the Master Agreement’s termination (as the trial court found), it runs counter to section 6.3. Hinman contends the arbitrator thereby exceeded his power in “remaking” the parties’ contract, and the trial court’s order confirming the arbitration award was thus erroneous.

While Hinman claims that the arbitrator “remade” the Master Agreement--in a strained effort to align his arguments with the language of Jordan, supra--in reality he is simply disputing the arbitrator’s legal construction of the contract. As the court in Jordan advised, Code of Civil Procedure section 1286.2, subdivision (a)(4), permits an arbitration award to be vacated if the arbitrator “arbitrarily remakes the contract.” (Jordan, supra, 100 Cal.App.4th at p. 443, italics added.) This does not mean that the award can be set aside merely because the arbitrator made an error in contractual interpretation. (See Monscharsh, supra, 3 Cal.4th at p. 33.) Rather, the arbitrator’s construction must be “so utterly irrational” that it would amount to an arbitrary remaking of the contract. (Paramount Unified School Dist. v. Teachers Assn. of Paramount (1994) 26 Cal.App.4th 1371, 1381 [“‘a decision exceeds the arbitrator’s powers only if it is so utterly irrational that it amounts to an arbitrary remaking of the contract’”]; Pacific Gas & Electric Co. v. Superior Court (1993) 15 Cal.App.4th 576, 591-592 [arbitration award may be reviewed where arbitrator engaged in contract interpretation that was “so bizarre as to be unforeseeable” and arbitrarily remade the contract].)

While the parties debate whether the arbitrator was correct on the source code issue, it was certainly not “irrational” for the arbitrator to conclude that Hinman’s escrow obligations did not terminate automatically with the termination of the Master Agreement.

In the first place, although Hinman argues that “[i]t is irrefutable that the source code escrow was to terminate when the [Master Agreement] terminated” based on the Wind-Down provision of section 6.3, that section actually suggests the opposite. The portion of section 6.3 on which Hinman relies reads as follows: “As part of the Wind-Down related to the normal expiration of the [Master Agreement], the parties shall jointly instruct[] DSI as to the termination of the Escrow Agreement. (Exhibit D: Section 5.1(a)).” If, as Hinman insists, his obligation to deposit the source code into escrow automatically ended upon termination of the Master Agreement, there would be little need for the Wind-Down provision requiring “joint” instructions to the escrow agent “as to the termination of the Escrow Agreement.” Hinman’s construction of this portion of section 6.3 is dubious at best.

The balance of section 6.3 supports the arbitrator’s conclusion that Hinman’s escrow obligations did extend beyond the Master Agreement’s termination. Section 6.3 states that licenses for which zBatch was paid survive the termination of the Master Agreement. Those license agreements provided customers with a year of support and maintenance, and many customers paid for additional support and maintenance for periods extending beyond September 1, 2005. Thus, some of FSW’s customers were entitled to support for their zBatch software after the Master Agreement ended. The purpose of the deposit of source code into escrow was to assure that FSW could provide this service to customers if Hinman and Dent breached their obligation to provide support and maintenance (which, as discussed in the next section of this opinion, extended to the end of the customers’ support agreements). It is logical to conclude, therefore, that the escrow would continue past the termination of the Master Agreement, for at least the duration of the existing customers’ support agreements.

Furthermore, the term of the escrow agreement supports the conclusion that Hinman’s escrow obligations survive termination of the Master Agreement. While the Master Agreement had a natural termination date of September 1, 2005, the escrow agreement has an effective date of February 6, 2004, and renews automatically from year to year under section 5.1 unless the parties jointly instruct the escrow agent otherwise. Nothing in the escrow agreement suggests that it ends automatically with the Master Agreement’s termination.

The arbitrator did not exceed his powers in his ruling as to the source code escrow.

7. “Remaking” the Master Agreement as to zBatch’s Technical Support Obligation

The arbitrator also ruled that zBatch’s support obligations remain in effect after the termination of the Master Agreement and until the end of the term of customers’ support agreements with FSW. Hinman argues this ruling was incorrect, contending that section 4.1, though it survives the Master Agreement pursuant to section 6.4, is a warranty clause and does not refer to support agreements; on the other hand, section 4.5, which does deal with technical support, is not listed in section 6.4 as a provision that survives termination of the Master Agreement. Therefore, Hinman maintains, the arbitrator remade the Master Agreement and the trial court erred in confirming the award.

Again, the question is not whether the arbitrator made the correct ruling, but whether his ruling was so irrational that we must conclude he arbitrarily remade the Master Agreement. Hinman has not met this standard.

As set forth ante, section 4.5 requires Hinman to provide “technical support” and certain “problem fixes” for “all [FSW] customers that have a paid license and support agreement.” Under section 6.3, “[a]ll licenses in effect upon termination or expiration and for which ZBATCH has been paid shall survive any termination or expiration of this Agreement or any of its terms.” Because these licenses survive the termination of the Master Agreement, and the licenses included at least a year of maintenance, it is not irrational to conclude that zBatch’s obligations under section 4.5 survive termination as well, whether or not section 4.5 is expressly listed in section 6.4 as a surviving provision. Indeed, Hinman was paid thousands of dollars in regard to support and maintenance agreements extending beyond the September 2005 termination of the Master Agreement, and it is quite reasonable to conclude that he must provide services in regard to those prepaid agreements.

Hinman asserts that only “maintenance” under section 4.1 survives the Master Agreement’s termination due to the survival clause of section 6.4, but not “support” under section 4.5. FSW counters that “support” and “maintenance” are not distinct terms under the Master Agreement, but are instead used interchangeably, as shown by the fact that: (1) section 4.1 does not use the word “maintenance”; (2) section 4.1(a) refers to Himan’s failure to honor either his support or maintenance obligations; and (3) in discussing “support,” section 4.5 refers to exhibit C to the Master Agreement, which in turn mentions both “support” and “maintenance.” Further, FSW notes, the arbitrator was presented with drafts of the Master Agreement, in which Hinman acknowledged that support and maintenance for prepaying customers would continue after the Master Agreement’s September 1, 2005 termination date. In the final analysis, the arbitrator did not exceed his power in concluding that zBatch’s technical support obligations survived the Master Agreement and lasted until the end of the customers’ support agreements.

8. Naming Hinman as a Responsible Person in the Award

The arbitrator ruled that Hinman and Dent, as well as “zBatch LLC,” have continuing support obligations and must deposit the source code into escrow. By identifying Hinman and Dent as persons responsible for these obligations, Hinman contends, the arbitrator remade the Master Agreement, which stated that the contract was between FSW and “zBatch, a dba for Howard E. Hinman and Glenn K. Dent.”

Hinman is incorrect. When the parties entered into the Master Agreement, and when FSW filed its arbitration demand and Hinman filed his counterclaims in April 2005, Hinman and Dent were doing business under the fictitious name of zBatch. zBatch was not a separate legal entity. Persons behind a “dba” are personally liable for any claim against it, as use of a fictitious business name does not create a separate legal entity or insulate the individuals from personal liability. (Pinkerton’s, Inc. v. Superior Court (1997) 49 Cal.App.4th 1342, 1348.)

Hinman attempted to establish zBatch as an LLC in May 2005, after the arbitration had commenced but before the partial final award was issued. It is ostensibly for this reason, along with the fact that “zBatch LLC” was named as the contracting party in the escrow agreement, that the arbitrator referred to “zBatch LLC” as one of the responsible parties in the partial final award. This reference, however, does not compel the conclusion that Hinman should be insulated from personal responsibility for the obligations he undertook in the Master Agreement. Although the Master Agreement provided that, if zBatch were subsequently incorporated the contract “shall be amended to be with whatever entity is the ultimate limited liability entity chosen by them,” there is no indication that there was such an amendment. Indeed, Hinman had already purported to terminate the Master Agreement before attempting to incorporate zBatch.

Moreover, an arbitrator has broad discretion to assess the scope of his contractual authority and fashion an appropriate remedy under the circumstances. (Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 373.) As our Supreme Court has explained: “Arbitrators are not obliged to read contracts literally, and an award may not be vacated merely because the court is unable to find the relief granted was authorized by a specific term of the contract.” (Id. at p. 381.) In particular, the court added: “[A]rbitrators, unless expressly restricted by the agreement of the parties, enjoy the authority to fashion relief they consider just and fair under the circumstances existing at the time of arbitration, so long as the remedy may be rationally derived from the contract and the breach.” (Id. at p. 383.)

Here, Hinman was at least one of the persons who agreed to perform, and could and would perform, zBatch’s obligations under the Master Agreement. Even if incorporated, zBatch could not perform those obligations except through individuals such as Hinman. Furthermore, Hinman participated in the arbitration with the understanding that he was alleged to be personally liable for zBatch’s obligations. On the record before us, Hinman has failed to establish that the arbitrator’s naming of Hinman as one of the persons responsible for fulfilling the obligations he undertook in the Master Agreement, bears no rational relationship to the Master Agreement.

D. Involuntary Servitude (13th Amendment)

Hinman contends that the trial court violated the 13th Amendment of the United States Constitution in confirming the arbitration award, because the award “clearly ordered zBatch [LLC], [Hinman] and [Dent] to provide technical support services to FSW’s customers for free past the termination of the contract and in direct contradiction of the terms of the contract.” This argument is frivolous.

The 13th Amendment provides that “[n]either slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction.” (U.S. Const., 13th Amend., § 1.) Enacted in 1865, this Reconstruction Amendment ended slavery after the conclusion of the Civil War. By no means did the trial court in this case order Hinman into slavery or involuntary servitude. It merely construed the Master Agreement to impose a contractual duty upon Hinman and others to provide support and maintenance services and deposit source code into escrow. Thus, albeit at the risk of incurring civil liability, he remains “free” to refuse to provide the required services, and most certainly has not become anyone’s slave or indentured servant.

E. Arbitrator Bias

Hinman claims that the arbitrator was biased because the arbitrator contradicted prior orders, deferred Hinman’s requests for discovery and a ruling on whether zBatch had cause to terminate the Master Agreement, remade the contract in FSW’s favor (a proposition we reject ante), and issued an award for FSW. In essence, he insists that the arbitrator must have been biased against him, because the arbitrator determined (as we do here) that there was no merit to the positions Hinman took.

Other than the fact that the arbitrator ruled against him--upon a reasonable basis, as we have concluded ante--Hinman presents not one shred of evidence of corruption, fraud, misconduct or other bias on the part of the arbitrator, or any motive the arbitrator might have had for favoring FSW other than the fact that FSW’s legal positions were correct. While it may be more palatable for a litigant to conclude that an arbitrator was biased than to acknowledge that one’s positions have been legitimately rejected, there is no support for Hinman’s reckless assertion of arbitrator bias.

Hinman has failed to demonstrate that the trial court erred in confirming the partial final award.

III. DISPOSITION

The judgment is affirmed.

BRUINIERS, J.^*

We concur.

SIMONS, Acting P. J.

GEMELLO, J.

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^[1] Unless otherwise indicated, all further section references are to the Master Agreement.

^[2] FSW has requested that we take judicial notice of subsequent determinations of the arbitrator in a March 2, 2006 partial final award No. 2 and an April 10, 2006 final award. We deny the request because this material (1) was not before the trial court and (2) is not relevant to the disposition of this appeal.

^[3] In their arguments on personal jurisdiction, the parties at times confuse the topic with principles of subject matter jurisdiction, such as diversity jurisdiction in federal court. There is no question that the trial court had subject matter jurisdiction over the controversy. (Code Civ. Proc., § 1285 et seq.)

^* Judge of the Superior Court of Contra Costa County, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.