Fourth District, Division Three Determined that Arbitrator’s Award Was Governed By Arbitration, Not Reference, Principles.
In our July 15, 2008 post on Patel v. Sagar, we discussed a situation where the Second District affirmed an arbitrator’s fee award based on the notion that the arbitrator has considerable leeway to apply “equitable principles” in awarding fees even where there was not a clear basis for fee entitlement. In the next case from our local Santa Ana appellate court, there was a clear basis for fee entitlement and the arbitrator did award substantial fees to the winning party. Not surprisingly, after determining that arbitration rather than reference rules applied, the arbitration fee award was affirmed on appeal.
Bitetto v. Felix, Case No. G039890 (4th Dist., Div. 3 Dec. 17, 2008) (unpublished) involved a co-ownership dispute between two couples over a boat. The co-ownership agreement contained a provision requiring that “any controversy or claim arising out of or relating to this Agreement, or the breach thereof” should be settled by American Arbitration Association arbitration. The matter did proceed to arbitration, with the winning party requesting an award of attorney’s fees and costs based upon a clear fee entitlement basis. The arbitrator punted this issue to the trial court which, in turn, bounced the matter back to the arbitrator. The arbitrator then awarded winning litigants a total of $52,078,91 in fees and costs, which award was confirmed as a judgment by the trial court.
Losing litigants were unhappy to say the least, appealing the adverse determination.
In a colorfully written opinion, Justice Bedsworth—for a 3-0 panel of the Fourth District, Division Three—affirmed the fee award. The Court of Appeal determined that the arbitrator had the authority to award fees under the broadly worded arbitration clause (which we quoted in pertinent part already). The trial court’s “bounce back” of the matter was not a reference, but simply recognizing that the arbitrator had the contractual power to decide a fees/cost award.
Once this was decided, the matter became relatively simple to resolve. Based on Moncharsh v. Heily & Blase, 3 Cal.4th 1, 11 (1992), it is prohibited territory for the appellate court to review the merits of the arbitrated controversy. The arbitrator was allowed to use “equity” in fashioning an award. “An arbitrator’s exercise of discretion is part of his reasoning process, and cannot serve as the basis for reversing his award.” (Slip Opn., at p. 11.)
BLOG FAVORITE QUOTE IN THE OPINION—There was some dispute about a documentary exhibit attached to an arbitration brief. Losing party claimed a different document being an exhibit than the document attached to winning party’s copy of the arbitration brief—with the winning party’s version of the arbitration brief being part of the record on appeal. Winning party picked up on the discrepancy and tried to play up on it. Justice Bedsworth’s wit handled the matter this way: “We will commend [respondents] for their sharp eyes, and leave it at that.”
WIT, n. The salt with which the American humorist spoils his intellectual cookery by leaving it out. (Ambrose Bierce, Devil's Dictionary, 1911).