Filed 10/10/17 Dyna, LLC v. GreatCall, Inc. CA4/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

APPEAL from a judgment of the Superior Court of San Diego County, Richard E. L. Strauss, Judge. Affirmed in part, reversed in part, and remanded with directions.

Zaveri Tabb, Deval Zaveri, Jimmy Tabb; Seltzer Caplan McMahon Vitek, Michael G. Nardi and Robert M. Traylor for Plaintiff and Appellant, Dyna, LLC.

Jones Day, Randall E. Kay, Erica L. Reilley and Jane L. Froyd for Defendant and Appellant, GreatCall, Inc.

I

INTRODUCTION

Dyna, LLC (Dyna) and GreatCall, Inc. (GreatCall) separately appeal from a judgment confirming an arbitration award in GreatCall's favor, as corrected to reduce the amount of costs recoverable by GreatCall. Dyna contends we must reverse the judgment and direct the superior court to vacate the award on the ground the arbitrator exceeded his power by ignoring the res judicata effect of a prior arbitration award. GreatCall contends we must reverse the judgment and direct the court to confirm the award as made without any reduction in the amount of recoverable costs.

We conclude that, even if the arbitrator erred by ignoring the res judicata effect of a prior arbitration award or by awarding nonrecoverable costs, these are errors of law and not acts in excess of the arbitrator's power that must be vacated or corrected. We, therefore, reverse the judgment to the extent it reduced the amount of costs recoverable by GreatCall, affirm the judgment in all other respects, and remand the matter to the superior court with directions to enter a new judgment confirming the arbitration award as made.

II

BACKGROUND[1]

A

Dyna and GreatCall entered into a license agreement (agreement). The agreement provided for the arbitration of disputes and for the arbitrator's award to be final and binding. The agreement further provided, "[c]osts and fees of the arbitrator shall be borne by the parties as determined in the discretion of the arbitrator."

A few years after entering the agreement, a dispute arose between the parties over whether GreatCall was properly complying with its obligations under the agreement. The parties arbitrated the dispute (first arbitration). The arbitrator (first arbitrator) interpreted and applied various provisions of the agreement, including the agreement's definition of the term "Know-How," and found GreatCall had breached one aspect of the agreement. The first arbitrator awarded Dyna compensatory damages of $3,843,568. The first arbitrator also exercised his "discretion to apportion between the parties the costs of [the] arbitration, including Arbitrator compensation" and directed the parties to equally bear "the administrative fees totaling [$19,250], and the Arbitrator compensation totaling [$70,006.24]."

B

Nineteen months later, GreatCall terminated the agreement for convenience. A year after that, a dispute arose between the parties, which they arbitrated (second arbitration) before a different arbitrator (second arbitrator). The second arbitrator found for GreatCall on each of the parties' respective claims and awarded GreatCall costs of $547,660.41.

In reaching his decision, the second arbitrator acknowledged the first arbitrator's award was "law of the case" to the extent the award interpreted the agreement's terms and conditions and determined the parties' compliance with those terms and conditions at the time of the award. However, the second arbitrator determined certain "Know-[H]ow" the first arbitrator found to be protected by the agreement before the agreement's termination was no longer protected after the agreement's termination because the information was in the public domain.

C

GreatCall petitioned to confirm the second arbitration award. In response, Dyna moved to vacate the award or, alternatively, to correct it on the grounds "(1) [the second arbitrator] exceeded his power granted under [the agreement] in awarding all of GreatCall's costs of which $300,508.54 were expert fees specifically proscribed by statute and (2) [the second arbitrator] ignored the preclusive effect of findings in a previous arbitration between Dyna and GreatCall which was reduced to judgment and not appealed."

The court granted Dyna's motion as to Dyna's assertion the second arbitrator exceeded his power by awarding costs that included expert witness fees, finding "the costs language [in the agreement] only provides for allocation of arbitrator costs." The court ordered the award corrected to include only those costs incurred by the arbitrator, or $56,925.

The court denied the motion as to Dyna's assertion the second arbitrator exceeded his power by ignoring the preclusive effect of the first arbitration award. The court found Dyna "has not established the [first] arbitration award is res judicata as to the instant proceedings. Specifically, [Dyna] has not presented evidence that the claims and issues are identical to the issues previously litigated. While it is clear that the parties are the same and the dispute arose out of the same underlying agreement, [Dyna] has not established that the use of the specific Know-How at issue in the [first] arbitration is the same use of Know-How in [the second arbitration]. Although [the first arbitrator] found the Know-How as defined in the agreement was to be given a broad definition, this finding does not establish the breach alleged here is the same breach of the agreement. Further, simply because [Dyna] disagrees with the result does not equate to [the second arbitrator] exceeding the scope of his powers." The court then confirmed the arbitration award as corrected.

III

DISCUSSION

Code of Civil Procedure,[2] section 1286.2 sets forth the grounds upon which a court must, if properly requested, vacate an arbitration award. These grounds include when "the court determines … [¶] [t]he arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted." (§ 1286.2, subd. (a)(4).)

Section 1286.6 similarly sets forth the grounds upon which a court must, if properly requested, correct an award and confirm it as corrected. These grounds include when "the court determines … [¶] [t]he arbitrators exceeded their powers but the award may be corrected without affecting the merits of the decision upon the controversy submitted." (§ 1286.6, subd. (b).)

We independently review whether an arbitration award exceeds an arbitrator's powers. (Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 376, fn. 9; Safari Associates v. Superior Court (2014) 231 Cal.App.4th 1400, 1408.) In so doing, "we may not review the validity of the arbitrator's reasoning, the sufficiency of the evidence supporting the award, or any errors of fact or law that may be included in the award." (Harris v. Sandro (2002) 96 Cal.App.4th 1310, 1313, citing Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 11.)

"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, citing Moshonov v. Walsh (2000) 22 Cal.4th 771, 775–777; Advanced Micro Devices, Inc. v. Intel Corp., supra, 9 Cal.4th at pp. 372–375; Moncharsh v. Heily & Blase, supra, 3 Cal.4th at p. 28; accord, Richey v. AutoNation, Inc. (2015) 60 Cal.4th 909, 916–917.)

The first aspect of the arbitrator's award at issue in this appeal, the res judicata effect of the first arbitration award, was a question of law for the second arbitrator to decide. Even if the second arbitrator erred in deciding this question, the error would not be an act exceeding the second arbitrator's power. "It is for the tribunal in which a claim of res judicata is made to pass on the validity of such a contention, including a determination of the effect of the prior judgment. [Citations.] It follows that, though erroneous, the arbitrator's determination that the findings of fact in the [prior] action were not res judicata, was within, and not in excess of, his powers." (Interinsurance Exchange of Auto. Club v. Bailes (1963) 219 Cal.App.2d 830, 836; cf. Durand v. Wilshire Ins. Co. (1969) 270 Cal.App.2d 58, 60, 63 [when an issue of collateral estoppel is properly before an arbitrator, the arbitrator's decision on the issue, even if erroneous, is not subject to judicial review].)

The second aspect of the arbitrator's award at issue in this appeal, the types of costs recoverable under the parties' agreement, was also a question of law for the second arbitrator to decide. The parties' agreement gave the second arbitrator the power to decide the allocation of costs. The allocation of costs was one of the contested issues of law and fact submitted to the second arbitrator for decision. Having submitted the issue to arbitration, Dyna cannot maintain the second arbitrator exceeded his power by deciding it, even if he decided it incorrectly. (Moore v. First Bank of San Luis Obispo (2000) 22 Cal.4th 782, 787; Advanced Micro Devices, Inc. v. Intel Corp., supra, 9 Cal.4th at p. 372 [" '[A]ny doubts as to the meaning or extent of an arbitration agreement are for the arbitrators and not the court to resolve.' "]; Moshonov v. Walsh, supra, 22 Cal.4th at p. 775 ["arbitrators do not 'exceed[] their powers' ... merely by rendering an erroneous decision on a legal or factual issue, so long as the issue was within the scope of the controversy submitted to the arbitrators"].)

IV

DISPOSITION

The judgment is reversed to the extent it reduced the amount of costs recoverable by GreatCall, affirmed in all other respects, and remanded to the superior court with directions to enter a new judgment confirming the arbitration award as made. GreatCall is awarded its appeal costs.

McCONNELL, P. J.

WE CONCUR:

HALLER, J.

O'ROURKE, J.