Ovitz v. Schulman

Filed 7/25/07 Ovitz v. Schulman CA2/4

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FOUR

APPEAL from orders of the Superior Court for Los Angeles County, Ralph W. Dau, Judge. Affirmed in part and reversed in part.

Greenwald, Pauly, Foster & Miller, Jeffrey J. Lewis and Andrew S. Pauly for Plaintiffs, Appellants, and Respondents.

Nixon Peabody and Walter T. Johnson for Defendant and Respondent.

In these appeals, consolidated for the purposes of oral argument and decision, the parties appeal from two orders awarding attorney fees. In the first appeal (Case No. B192251), plaintiffs Michael S. Ovitz and six business entities[1] (collectively, the APG parties) challenge the trial courts order awarding

defendant Catherine E. Schulman $151,298.88 in attorney fees and costs incurred in her successful defense against the APG parties prior appeal from an order vacating an arbitration award. In that prior appeal (Case No. B179978), we affirmed in a published opinion the trial courts order vacating the arbitration award on the ground that the arbitrator failed to comply with California disclosure obligations for arbitrators. (See Ovitz v. Schulman (2005) 133 Cal.App.4th 830 (Ovitz I).) In the second appeal at issue here (Case No. B194311), Schulman appeals from an order awarding the APG parties $75,569.04 in attorney fees incurred in successfully defending against Schulmans motion to stay or dismiss the arbitration (Schulmans motion was filed after the APG parties sought to renew the arbitration before a different arbitrator following our decision in Ovitz I). For the reasons discussed below, we affirm the order awarding Schulman her attorney fees and costs incurred in Ovitz I and reverse the order awarding the APG parties their attorney fees incurred in opposing Schulmans motion to stay or dismiss.

BACKGROUND

As discussed in more detail in Ovitz I, disputes arose between Schulman and the APG parties in 2002. The APG parties initiated an arbitration proceeding against Schulman in September 2002, but Schulman disputed whether she was bound to arbitrate her claims against some of the APG parties. The APG parties moved to compel arbitration, and the trial court granted the motion only as to one of the APG parties. (Ovitz I, supra, 133 Cal.App.4th at p. 834.)

In April 2003, Schulman and the APG parties entered into an arbitration agreement (the Agreement), in which they agreed to arbitrate all claims arising out of or derived from Schulmans employment relationship with any of the APG parties[2] in the pending arbitration. They also agreed not to assert any such claim in any court, but acknowledged that this prohibition did not prohibit a party from bringing a civil action to confirm, collect, and/or enforce the arbitration award. Finally, the Agreement includes two provisions, including an attorney fee provision, related to the enforcement of the Agreement itself. (We discuss those provisions in more detail below.)

An arbitrator was appointed, and the arbitration went forward in late 2003 and early 2004. The arbitrator awarded the APG parties approximately $1.5 million in damages and almost $1.9 million in attorney fees and costs. (Ovitz I, supra, 133 Cal.App.4th at pp. 835-836.) The APG parties filed in superior court a petition to confirm the arbitration award, and Schulman filed a cross-petition to vacate the award. The trial court denied the APG parties petition and granted Schulmans cross-petition on the ground that the arbitrator had violated his disclosure obligations. (Id. at p. 837.) The court ordered the arbitration award vacated and, at the APG parties request, did not order a rehearing of the arbitration. The APG parties appealed, and on October 26, 2005, we affirmed the trial courts order in Ovitz I.

The day after we filed our opinion in Ovitz I, counsel for the APG parties wrote to Schulmans counsel, asking him to contact them regarding the selection of a new arbitrator. Counsel responded that discussion of another arbitration was premature. A month later, before the remittitur issued, the APG parties wrote to the American Arbitration Association (AAA), requesting the appointment of a new arbitrator. Schulman responded to the APG parties request by informing AAA that she objected to the initiation of further arbitration proceedings, on the ground that the trial court had not ordered a rehearing. Over Schulmans objection, the APG parties and AAA went forward with the process to appoint a new arbitrator.

In the meantime, the remittitur issued on December 28, 2005, and directed that Schulman was to recover her costs on appeal. Schulman filed a motion in the trial court for her attorney fees and costs on appeal. A month later, after AAA appointed a new arbitrator and scheduled a management conference before the new arbitrator, Schulman filed a motion in the trial court to stay or dismiss the arbitration.

Schulmans two motions were heard together. On March 27, 2006, the trial court denied the motion to stay or dismiss the arbitration,[3] and ruled that Schulman was entitled to her attorney fees and costs. The court, however, ordered Schulman to file a supplemental declaration providing further details regarding the fees she incurred. After further briefing, the court on June 26, 2006 ordered that Schulman be awarded attorney fees in the amount of $147,315.00 and costs in the amount of $3,983.88, for a total of $151,298.88. The APG parties filed notices of appeal from the March 27 and the June 26 orders.[4]

On May 30, 2006, the APG parties filed a motion for attorney fees incurred in opposing Schulmans motion to stay or dismiss the arbitration. The trial court granted the motion on August 9, 2006, and awarded them $75,569.04 in attorney fees. Schulman timely filed a notice of appeal from the order awarding fees. On May 10, 2007, we ordered the APG parties appeal and Schulmans appeal consolidated for the purposes of oral argument and decision.

DISCUSSION

A. The APG Parties Appeal (Case No. B192251)

The APG parties challenge the award of attorney fees to Schulman on two grounds. First, they contend that Schulmans entitlement to fees arising from the APG parties appeal from the order vacating the arbitration award should have been submitted to arbitration under the terms of the Agreement. Second, they contend that the attorney fee provision in the Agreement does not apply to an appeal from an order vacating the arbitration award. Neither contention is correct.

1. Proper Forum to Determine Entitlement to Attorney Fees

The APG parties argue that the Agreement requires that the issue of attorney fees be determined by the arbitrator when that issue arises before the arbitration award is confirmed.[5] Paragraph 8 of the Agreement provides that [a]ny disputes between and/or among the parties relating to or in any way arising out of this Agreement including, without limitation, the negotiation, interpretation, breach, and/or enforcement thereof, that arise prior to any courts confirmation of the arbitration award, shall be made a part of, and resolved in, the pending arbitration. According to the APG parties, because the trial court vacated the award rather than confirming it, the issue of Schulmans entitlement to attorney fees must be resolved in arbitration. We disagree.

Division Seven of this court recently addressed this same issue in Acosta v. Kerrigan (2007) 150 Cal.App.4th 1124 (Acosta). In that case, the agreement between the parties required that [a]ny dispute regarding any aspect of the agreement be submitted to arbitration. (Id. at p. 1129.) The agreement also included an attorney fee provision that applied to any legal action or administrative proceeding instituted by any method other than arbitration. (Ibid.) The plaintiff filed a civil action, and defendant responded with a petition to compel arbitration. The trial court denied defendants petition, but that order was reversed on appeal. On remand, the trial court ordered the matter to arbitration, reserving jurisdiction to rule on the defendants request for costs on appeal, including the defendants planned motion for attorney fees. The defendant subsequently filed a motion for attorney fees, and plaintiff petitioned to compel arbitration of the defendants fee request. The court denied the plaintiffs petition and granted the defendants motion for attorney fees. (Id. at pp. 1126-1128.)

On appeal from the order granting the defendants attorney fee motion, the majority in Acosta held that, although it was a close case given the parties agreement to arbitrate any dispute involving any aspect of their agreement, the broad arbitration provision does not oust the trial court from jurisdiction to adjudicate [the defendants] request for fees as to the proceeding occurring before that judge. Given the trial court is responsible for deciding a petition to compel arbitration, the trial court also should be responsible for resolving a claim for attorney fees made in connection with that petition to compel arbitration. The contract expressly contemplates such a petition might be required and, if so, it necessarily would be heard by a judge not an arbitrator. Although not an express term of the contract, it appears a reasonable but admittedly not inevitable interpretation that the forum authorized by the contract to decide a given issue is also authorized to determine any fee award associated with its hearing and decision of that issue. In a sense, the determination of whether and how much should be awarded the prevailing party is part and parcel of the proceeding on the petition to compel arbitration. (Acosta, supra, 150 Cal.App.4th at p. 1130; see also id. at p. 1131 [Thus, despite the breadth of the contractual language allocating all issues to decision by an arbitrator, this particular fee award issue appears to fall within the only exception mentioned in the contracta resort to the courts in order to resist the other partys attempt to avoid the arbitration clause. To this court it appears both consistent with the contract language and preferable as a matter of practical policy to allow the trial judge rather than an arbitrator to decide the fee award issue which is essentially a part of the proceeding on the petition to compel arbitration decided by that trial judge], fn. omitted.)

In this case, as in Acosta, the parties agreed to submit [a]ny disputes . . . arising out of [the Agreement] to arbitration. But the Agreement expressly allows a party to bring a civil action in court to confirm the arbitration award. The APG parties brought such an action, which Schulman opposed by filing a cross-petition in that action to vacate the arbitration award. The determination of entitlement to attorney fees incurred by the party prevailing on those petitions is part and parcel of the court proceedings on those petitions, and is most appropriately made by the trial court rather than an arbitrator.

2. Entitlement to Attorney Fees

The Agreement provides in relevant part: If any party to this Agreement institutes any action, suit, counterclaim, appeal, arbitration or mediation for any relief against another party, declaratory or otherwise (collectively, an action), to enforce the terms of this Agreement or to declare rights under this agreement, or to recover damages for the breach of this agreement, then the prevailing party in such action, whether by arbitration or final judgment, shall be entitled to have and recover of and from the other party all of its costs and expenses incurred with such action including, without limitation, its actual attorneys fees and costs incurred in bringing and prosecuting such action and/or enforcing any judgment, order, ruling, or award granted therein. The APG parties argue that Schulman is not entitled to her attorney fees because a court proceeding to confirm or vacate an arbitration award is not an action under the Agreement and because the claim upon which Schulman prevailed in the Ovitz I appeal was not a claim to enforce, declare rights under, or obtain damages from the breach of the Agreement. We disagree.

The Agreement defines an action as any action, suit, counterclaim, appeal, arbitration or mediation for any relief. Relying upon Code of Civil Procedure sections 21 through 23 and Airfloor Co. of California, Inc. v. Regents of University of California. (1978) 84 Cal.App.3d 1004, however, the APG parties argue that the proceeding in this case does not come within this definition because proceedings to confirm arbitration awards are special proceedings rather than actions or suits. Their reliance is misplaced because the statutory distinction between an action and a special proceeding is irrelevant here.

First, the Agreements definition of action includes proceedings that are beyond the scope of the statutory definition. Second, the Agreement itself, in paragraph 7, refers to the court proceeding to confirm the arbitration award as a civil action. Thus, the reference to an action in the attorney fee provision two paragraphs later must be read to include a proceeding to confirm the award. Finally, the definition in the attorney fee provision includes an appeal in its definition of action. Given that Schulman was awarded her attorney fees incurred in an appeal taken from an order arising from a court proceeding to confirm the arbitration award, there is no doubt that the proceeding at issue was an action as defined in the Agreement.

Nor is there any doubt that the action at issue was brought to enforce the terms of the Agreement. The parties agreed to binding arbitration. The Agreement contemplates that the arbitration award would be subject to confirmation in a court proceeding, and limits judicial review of the award to that provided under Code of Civil Procedure section 1286.2 (section 1286.2) (setting forth the grounds for vacating an award) and other applicable law. By bringing a petition to confirm the arbitration award, the APG parties sought to enforce Schulmans agreement to be bound by the arbitrators decision. (See, e.g., San Luis Obispo Bay Properties, Inc. v. Pacific Gas & Elec. Co. (1972) 28 Cal.App.3d 556, 573 [a proceeding to confirm an arbitration award . . . is in a sense an action to compel a party to perform his promise to accept the arbitrators decision]; accord, Stermer v. Modiano Constr. Co. (1975) 44 Cal.App.3d 264, 272.) Schulmans cross-petition to vacate the award sought to enforce the parties agreement that confirmation of the award would be limited by section 1286.2. On appeal, Schulman argued, and we held, that section 1286.2 required the vacating of the arbitration award. (Ovitz I, supra, 133 Cal.App.4th at pp. 844-845.) Thus, contrary to the APG parties assertion, Schulman prevailed on her claim to enforce the Agreement, and therefore was entitled to recover her attorney fees on appeal.

B. Schulmans Appeal (Case No. B194311)

In her appeal from the order awarding attorney fees to the APG parties as the prevailing parties on Schulmans motion to stay or dismiss the arbitration, Schulman argues that the order was improper because (1) her motion was not an action under the Agreement, and (2) there was no final determination and therefore no prevailing party entitled to fees. Schulman is correct that there was no final determination entitling the APG parties to attorney fees.

The APG parties make two arguments in response to Schulmans assertion that there can be no prevailing party until there is a judgment or some other final determination of the rights of the parties. First, they argue that no judgment is required because the parties contemplated that the result giving rise to prevailing party fees was not limited to a final judgment. Such a fee award was authorized in the case of a ruling, order, or award as well. They also argue that there has been a final order in their favor because the trial court granted them all of the relief they requested and Schulman has no right of appeal from the order.

The APG parties first argument is based upon a misreading of the Agreement. The attorney fee provision of the Agreement states that, if a party institutes an action (as defined therein), the prevailing party in such action, whether by arbitration or final judgment, shall be entitled to have and recover of and from the other party all of its costs and expenses incurred with such action including, without limitation, its actual attorneys fees and costs incurred in bringing and prosecuting such action and/or enforcing any judgment, order, ruling, or award granted therein. (Italics added.) Contrary to the APG parties assertion, the reference to order, ruling, or award does not authorize attorney fees for the party who prevails on an order, ruling, or award regardless of whether there has been a final judgment in the action. Rather, the attorney fee provision allows the recovery of attorney fees incurred in enforcing an order, ruling, or award once there is a prevailing party in the action, as determined by arbitration or final judgment.

The APG parties second argument is based upon a misunderstanding of the law. They are correct that Schulman had no right to appeal from the order denying her motion to stay or dismiss the arbitration. That order had the effect of compelling arbitration, and it is well established that an order compelling arbitration is not an appealable order. (See, e.g., Muao v. Grosvenor Properties, Ltd. (2002) 99 Cal.App.4th 1085, 1088; La Pietra v. Freed (1978) 87 Cal.App.3d 1025, 1030; see also Long Beach Iron Works, Inc. v. International Molders etc. of North America, Local 374 (1972) 26 Cal.App.3d 657, 659 [It is quite obvious that the Legislatures philosophy and intent in drafting [Code Civ. Proc.] section 1294 was that there should be no appellate consideration of intermediate rulings in arbitration disputes if the superior court was of the view that there should be initial or further proceedings in arbitration].) But the APG parties assertion that the order is final because it is not appealable and therefore can never be challenged is contrary to the law. An order that directs arbitration is subject to review on appeal from the final judgment -- that is, the judgment entered on confirmation of the arbitration award. (Abramson v. Juniper Networks, Inc. (2004) 115 Cal.App.4th 638, 648; Muao v. Grosvenor Properties, Ltd., supra, 99 Cal.App.4th at pp. 1088-1089; La Pietra v. Freed, supra, 87 Cal.App.3d at p. 1031.) Thus, [a]n award of attorney fees would be proper only if the order compelling arbitration were upheld when reviewed on appeal from the confirmation of an arbitration award. (La Pietra v. Freed, supra, 87 Cal.App.3d at p. 1031.)

It may seem incongruous that the APG parties must wait until confirmation of the arbitration award before recovering their attorney fees while Schulman is entitled to her fees immediately. But the order giving rise to Schulmans entitlement to fees was, unlike the order on the motion to stay or dismiss the arbitration, a final order that was affirmed on appeal. (Marcus & Millichap Real Estate Investment Brokerage Co. v. Woodman Investment Group (2005) 129 Cal.App.4th 508, 514-515 [Code Civ. Proc.,  1294, subd. (c) expressly provides that an order vacating an arbitration award is appealable unless a rehearing in arbitration is ordered. Thus, while an order vacating an arbitration award and ordering rehearing is an intermediate ruling, a similar order vacating an award without ordering rehearing is, of necessity, final]; Griset v. Fair Political Practices Com. (2001) 25 Cal.4th 688, 701 [An unqualified affirmance ordinarily sustains the judgment and ends the litigation].) Hence, unlike the APG parties, Schulman was the prevailing party in a final judgment.

There also is a practical reason for treating the two orders differently with regard to attorney fees. An order awarding attorney fees is immediately appealable. (Lachkar v. Lachkar (1986) 182 Cal.App.3d 641, 645, fn. 1.) Therefore, the party aggrieved must file an appeal from the order even if the underlying litigation continues, or forever lose the right to challenge the award. In the case of the award of attorney fees to Schulman, we are able on appeal to determine whether Schulman is entitled to her attorney fees as the prevailing party because we have already determined in Ovitz I that the trial court properly ordered the arbitration award vacated. But in the case of the fee award to the APG parties, we have yet to determine whether the trial courts ruling on Schulmans motion was correct. Nevertheless we would be required to determine whether the trial court correctly ruled that the APG parties were entitled to their attorney fees as prevailing parties on a motion we have yet to review.[6]

DISPOSITION

The order in Case No. B192251 awarding attorney fees to Schulman is affirmed. The order in Case No. B194311 awarding attorney fees to the APG parties is reversed. Schulman shall recover her costs and attorney fees on appeal in both cases.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

WILLHITE, Acting P. J.

We concur:

MANELLA, J. SUZUKAWA, J.

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[1] Those business entities are: Artists Production Group, LLC; Artists Production Group, Inc.; StudioCanal/APG Venture; APG StudioCanal LLC; StudioCanal (U.S.); and StudioCanal, SA.

[2] Throughout this opinion, we will omit capitalization when quoting from the Agreement.

[3] We summarily denied Schulmans subsequent writ petition challenging that denial.

[4] On April 3, 2007, we dismissed the appeal from the March 27, 2006 order on the ground that it was taken from a non-appealable order. The parties stipulated that the briefs they filed in the appeal from the March 27 order would be deemed to be the briefs in the appeal from the June 26 order, and that the total amount of the attorney fees and cost award would be $145,000.

[5] We note that despite their position on this issue in this appeal, the APG parties successfully moved in the trial court for their attorney fees on Schulmans arbitration motion.

[6] This fact distinguishes this case from Acosta, supra, 150 Cal.App.4th 1124, in which the appellate court affirmed an award of attorney fees to the prevailing party on a motion to compel arbitration. In that case, the trial court had denied the motion to compel and the appellate court reversed that order. (Id. at p. 1126.) On remand, the trial court ordered the matter to arbitration and awarded the moving party his attorney fees. (Id. at pp. 1126-1127.) Thus, unlike in the present case, the appellate court in that case had already determined that the losing party was required to arbitrate his disputes.