Sternberg & Horner Assocs. v. Emerald International Security Group

Filed 8/7/06 Sternberg & Horner Assocs. v. Emerald International Security Group CA2/6

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SIX

Emerald International Security Group (Emerald) appeals from a judgment confirming a private arbitration award of $191,411 in favor of respondent law firm Sternberg, Horner & Associates (SHA) and denying Emerald's petition to vacate that award and its request for a trial de novo. (Code Civ. Proc.,^[1] § 1285 et seq.) The award was the result of a dispute between Emerald and SHA regarding Emerald's performance of an agreement to provide services on behalf of one of SHA's clients, and includes $138,111 in attorney fees and costs. Emerald contends the court erred in affirming the award because (1) Emerald's receipt of notice of the arbitrator's decision, modification of that decision, and SHA's notice of its petition to confirm that award did not comport with procedural due process; (2) the department of the superior court in which SHA filed its petition to confirm the arbitration award lacked jurisdiction to hear the matter; (3) the trial court erred in concluding that Emerald's response to the petition was untimely; (4) the arbitrator erred in awarding SHA attorney fees it incurred on its own behalf; (5) the arbitrator exceeded his powers in awarding damages to SHA; and (6) SHA is not the real party in interest. We affirm.

FACTS AND PROCEDURAL HISTORY

In December of 2002, the parties executed an agreement pursuant to which Emerald agreed to provide "consulting services with respect to a variety of investigative and corporate security matters currently having [a] negative impact on one of [SHA's] clients." The agreement provides, among other things, that any disputes arising out of or relating to the parties' respective rights and obligations shall be resolved through arbitration.^[2] The agreement also provided that the prevailing party in any such dispute would be entitled to recover the costs expended in pursuing the matter, including attorney fees, and that the agreement was to be governed by California and federal law "notwithstanding the fact that one or more counterparts . . . may be executed outside of the state, or one or more of the obligations of the parties . . . may be performed outside of the state or outside of the United States of America."

A dispute subsequently arose regarding Emerald's performance of its duties under the agreement. Accordingly, on March 23, 2003, SHA initiated arbitration proceedings against Emerald alleging, among other things, breach of contract and fiduciary duty. The parties thereafter selected an arbitrator from the pool of arbitrators provided by the American Arbitration Association (AAA), and hearings on the matter commenced on November 19, 2003.^[3] On January 6, 2004, while the arbitration proceedings were in recess, SHA filed a complaint in the superior court alleging 10 causes of action, all of which involved the same disputes at issue in the arbitration. On January 14, 2004, Emerald filed a petition to compel arbitration under section 1281.2. The court granted Emerald's petition, and SHA filed a request for dismissal of its complaint without prejudice on February 24, 2004.

On January 24, 2005, the arbitrator issued its award. The arbitrator found in favor of SHA on its claims for breach of contract and breach of fiduciary duty, and awarded $35,000 in damages, plus annual interest of 10 percent from October 17, 2003. The arbitrator also awarded attorney fees and costs in the amount of $138,111, with interest accruing at 10 percent per annum beginning in 30 days. Emerald was also ordered to pay administrative fees and expenses totaling $32,725, $18,300 of which was to be paid to SHA as reimbursement for its share of the deposit it had advanced to the AAA. That same date, AAA faxed a signed copy of the award to the parties through their attorneys of record.

On January 24, 2005, SHA requested that the arbitrator modify the award to correct a clerical error in its award of attorney fees and costs, and the arbitrator thereafter modified the award to correct the error. A copy of the modified award was faxed to the parties on February 10, 2005.

On February 25, 2005, SHA filed a petition to confirm the arbitrator's award. Instead of filing that petition under the case number in which Emerald had petitioned to compel the arbitration, SHA filed a new case in the east county courthouse in Simi Valley. Emerald filed and served its opposition to SHA's petition, combined with a petition to vacate the arbitrator's award and a request for a trial de novo, on March 30, 2005. After a noticed hearing that Emerald did not attend, the court granted SHA's petition to confirm the award on April 8, 2005, and the court's order confirming the award was entered on May 17, 2005.

DISCUSSION

I.

Applicable Law

As a threshold matter, Emerald argues for the first time on appeal that the procedural aspects of the case are governed by the Federal Arbitration Act (FAA) (9 U.S.C. § 1 et seq.). We reject this contention for several reasons. First, Emerald waived this argument by failing to raise it below. (Ochoa v. Pacific Gas & Electric Co. (1998) 61 Cal.App.4th 1480, 1488, fn. 3.) Even if the issue was preserved for appeal, Emerald waived it by failing to cite any authority supporting its contention that federal law applies in this context. (Cal. Rules of Court, rule 14(a)(1)(B); Associated Builders & Contractors, Inc. v. San Francisco Airports Com. (1999) 21 Cal.4th 352, 366, fn. 2.) Emerald also acquiesced in the application of California law to the procedural aspects of this case by asserting it in seeking to compel arbitration (§ 1281.2) and in subsequently seeking to vacate the arbitrator's award (§ 1285 et seq.). (Sperber v. Robinson (1994) 26 Cal.App.4th 736, 742-743.) Moreover, Emerald does not assert, much less establish, that the parties' agreement involved interstate commerce, which is a prerequisite for the application of the FAA to the dispute. (9 U.S.C. § 2; Woolls v. Superior Court (2005) 127 Cal.App.4th 197, 211-214.)

II.

Due Process

Emerald also contends that the AAA's service of the arbitrator's award and the modified award did not comport with due process because the form of service, facsimile transmission, is not one of the methods of service authorized by section 1283.6. We disagree. Section 1283.6 provides that service of the signed award must be effected "personally or by registered or certified mail or as provided in the agreement" that contains the arbitration clause. (§ 1283.6, italics added.) Emerald acknowledges in its opening brief that the arbitration was governed by AAA procedural rules. Pursuant to those rules, Emerald agreed to accept "electronic service of the award." (American Arbitration Association Commercial Arbitration Rules, rule R-45.) Emerald's reliance on rule 1615(b) of the California Rules of Court on this point is unavailing because, as Emerald acknowledges, that rule applies only to judicial arbitrations. Emerald also argues that service of the award should have been accompanied by a proof of service, yet it offers no authority for that proposition. In any event, there is no dispute that Emerald actually received the arbitrator's award and modified award on the dates they were transmitted. Under the circumstances, Emerald's claim that it was deprived of procedural due process in this regard is specious.

The record also belies Emerald's contention that it was not served with SHA's petition to confirm the arbitration award. SHA filed its petition on February 25, 2005, and subsequently filed a proof of service demonstrating that the petition was personally served on Emerald on February 28, 2005. Emerald cites McAvoy v. Harvey L. Lerer, Inc. (1995) 35 Cal.App.4th 1128, 1130, for the proposition that SHA was required to include a "notice of motion" with its petition to confirm the award, but that case says no such thing. Moreover, Emerald again overlooks the fact that it received actual notice of SHA's petition, as evidenced by its filing of an opposition.^[4]

III.

Venue

Emerald also contends that the east county courthouse was the "improper forum" for SHA to file its petition to confirm the arbitration award because Emerald had filed its petition to compel arbitration in a different proceeding that originated in department 47 in Ventura, where Judge Bysshe sits. Emerald argues that "Department 47 had sole jurisdiction in this matter" pursuant to section 1292.6, which provides that "[a]fter a petition [to compel arbitration] has been filed . . . , the court in which such petition was filed retains jurisdiction to determine any subsequent petition involving the same agreement to arbitrate and the same controversy, and any such subsequent petition shall be filed in the same proceeding." According to Emerald, SHA filed its petition to confirm the arbitration award in a different courthouse "for the sole purpose of avoiding Judge Bysshe's court."

Emerald has confused concepts of jurisdiction and forum with venue. It has long been settled that "[t]he jurisdiction of causes is vested by the constitution in the court, not in any particular judge or department thereof." (White v. Superior Court (1895) 110 Cal. 60, 67.) Although Emerald correctly notes that SHA should have filed its petition to confirm the arbitration award in the same proceeding in which Emerald's petition to compel the arbitration had been litigated (§ 1292.6), its failure to do so did to effect the court's jurisdiction to hear and decide the matter. If Emerald wanted to prevent SHA from pursuing a separate proceeding, its remedy was to demur to the new proceeding by a plea of abatement. (Colvig v. RKO General, Inc. (1965) 232 Cal.App.2d 56, 70.) Having failed to avail itself of that remedy, Emerald cannot be heard to complain that SHA's petition to confirm the arbitration award was not filed in the same proceeding as Emerald's petition to compel arbitration.

IV.

The Arbitrator's Award of Damages and Attorney Fees

Our review of arbitration awards is "extremely narrow." (Ajida Technologies, Inc. v. Roos Instruments, Inc. (2001) 87 Cal.App.4th 534, 541.) We cannot review the merits of the dispute, the validity of the arbitrator's reasoning, or the sufficiency of the evidence supporting the award. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 33.) The only grounds for vacating an arbitration award are listed in section 1286.2, and the party seeking to vacate the award bears the burden of proof. (Marsch v. Williams (1994) 23 Cal.App.4th 238, 244-245.)

Emerald contends that the trial court erred in rejecting its claim that the arbitrator had "exceeded his powers" as contemplated by subdivision (a)(4) of section 1286.2 by (1) awarding SHA the attorney fees it incurred on its own behalf, and (2) awarding damages. Neither contention has merit.

"In determining whether private arbitrators have exceeded their powers, the courts must accord 'substantial deference to the arbitrators' own assessments of their contractual authority . . . .' [Citation.] Nevertheless, except where 'the parties "have conferred upon the arbiter the unusual power of determining his own jurisdiction" [citation], the courts retain the ultimate authority to overturn awards as beyond the arbitrator's powers, whether for an unauthorized remedy or decision on an unsubmitted issue.' [Citation.] 'Guided by these standards, this court conducts a de novo review, independently of the trial court, of the question whether the arbitrator exceeded the authority granted him by the parties' agreement to arbitrate. [Citations.]' [Citations.] In undertaking our review, however, 'we must draw every reasonable inference to support the award. [Citations.]'" (Ajida Technologies, Inc. v. Roos Instruments, Inc., supra, 87 Cal.App.4th at p. 541.)

Emerald fails to demonstrate that the arbitrator exceeded his powers in awarding SHA the attorney fees it incurred on its own behalf, or in awarding damages. Rather, Emerald merely asserts that the arbitrator committed errors of fact and law, which are not subject to our review. (Moncharsh v. Heily & Blase, supra, 3 Cal.4th at p. 33.) Indeed, even "the existence of an error of law apparent on the face of the award that causes substantial injustice does not provide grounds for judicial review." (Ibid.)

Emerald also contends that SHA could not "maintain an action" against Emerald because it is not the real party in interest. This claim is premised on the fact that Emerald contracted with SHA to provide services on behalf of one of its clients. Aside from Emerald's failure to demonstrate that this claim was presented to the arbitrator or that the arbitrator's findings in this regard are subject to our review, the undisputed fact that SHA was the only party to the contract renders specious any claim that it lacked the authority to pursue redress for its breach.

The judgment is affirmed. SHA shall recover its costs on appeal.

NOT TO BE PUBLISHED.

PERREN, J.

We concur:

GILBERT, P.J.

COFFEE, J.

Thomas J. Hutchins, Judge

Superior Court County of Ventura

______________________________

Richard Hamlish for Appellant.

Horner & Associates, Brenton L. Horner and Lisa A. Gallo for Respondent.

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Analysis and review provided by Vista Real Estate Attorney.

^[1] Statutory references are to the Code of Civil Procedure, unless otherwise noted.

^[2] Paragraph 18 of the agreement, entitled "Arbitration," provides: "We each agree that any and all disputes or claims arising out of this engagement, and the terms and conditions relating thereto, or arising under or relating to any document or instrument delivered pursuant hereto, including but not limited to claims for rescission of this agreement or that this agreement is void and ineffective ab initio, actions to interpret or construe this agreement, or any actions to determine the rights and obligations of any party to this agreement or to enforce any such rights or obligations, shall be submitted to arbitration in accordance with the rules of the American Arbitration Association. [¶] Each of us expressly agrees and acknowledges that any award rendered in such arbitration shall be final, binding and conclusive, and judgment may be entered in any court of competent jurisdiction upon any such award. Such arbitration shall be held in Ventura County, California. Any such arbitration shall include reasonable time for discovery."

^[3] We grant SHA's request for judicial notice of the reporter's transcript of the arbitration proceedings and the applicable AAA rules.

^[4] Emerald also argues that the trial court erred in deeming its opposition untimely, but that argument is based on the faulty premise that no proof of service of SHA's petition had been filed. In any event, the court's ruling on the timeliness issue is irrelevant to the appeal because the court stated that it was considering the arguments raised in the opposition even though it was untimely.