Merits of Ruling Could Not Be Scutinized.
Hospitality Marketing Consultants, LLC v. Case, Case No. G046283 (4th Dist., Div. 3 Nov. 30, 2012) (unpublished) demonstrates why clients and attorneys need to balance expediency of arbitration against the limited review of arbitrator decision-making before agreeing to an arbitration clause or stipulating to consensual arbitration.
In this one, an arbitrator awarded one side over $317,000 in compensatory and punitive damages and then told both sides that they could submit a motion for fees and costs. The winner requested $84,610 in costs and $492,306.94 in fees under the Purchase Agreement’s fee provision, while the opponents sought $269,739.28 in fees and costs based on an Operating Agreement’s fee provision. The arbitrator eventually awarded winner $478,000 in fees and costs against the losers, jointly and severally.
Unfair, said losers. The Purchase Agreement was not at issue in any of the arbitration claims and one of the losers was not even a party to the Agreement with the fees clause.
The trial court refused to strike the fee/costs award, a determination affirmed by our local Santa Ana Court of Appeal, in a 3-0 decision authored by Justice Aronson.
The problem here is that the fee issue was submitted for determination by the arbitrator, and the merits of the ruling could not be overturned by the trial judge or appellate tribunal under the Moncharsh-Moore-Moshonov line of cases. Even if incorrect, the decision stood and was affirmed. Shows just how harsh arbitrations can be, with very limited review once the arbitration award is put in front of judges for examination.