Fifth District Finds One Argument Out of Three Contentions Was Not Frivolous.
In our July 15, 2008 post, we reviewed Patel v. Sagar, a case involving an appeal from a contractual arbitration award. We summarized the principles from Moncharsh v. Heily & Blase, 3 Cal.4th 1 (1992) according arbitral finality to most arbitration awards and holding that mere errors of law or fact are generally not sufficient to upset such awards. The next case reinforces the rigor with which appellate courts review arbitration awards, with the appellant barely escaping sanctions for raising one “marginally plausible” argument on appeal.
With respect to appellate sanctions imposed for a dilatory or frivolous appeal, Marriage of Flaherty, 31 Cal.3d 637, 649-650 (1982) is the seminal case enunciating the governing substantive and procedural guidelines. Sanctions may be imposed under Code of Civil Procedure section 907 and California Rules of Court, rule 8.276 when (1) the appeal was prosecuted for an improper motive such as to harass the respondent or for dilatory purposes (a prong focusing on the subjective good faith of the party and counsel), or (2) the appeal is frivolous (a prong focusing on the objective inquiry of whether any reasonable attorney would have agreed that the appeal is totally and completely meritless in nature). Because there are fair warning due process requirements, rule 8.276(a) requires a separate motion emanating from the respondent or the appellate court. A party must file the motion no later than 10 days after appellant’s reply brief is due, and the appellate court must give appellant written notice and an opportunity to oppose within 10 days after notice is sent. Usually, the sanctions motion is heard along with the argument on the merits.
In Van Dyke v. Conagra Grocery Products, Case No. F053235 (5th Dist. July 17, 2008) (unpublished), appellant was the loser under an arbitration award involving an option to purchase ranchland that was secured by a trust deed. The arbitrator ruled that the specific performance claim did not implicate the one-action rule of Code of Civil Procedure section 726 under the operative circumstances. Appellant argued that the award violated public policy under the one action rule, that arbitrator prejudicially excluded essential evidence, and that the arbitrator’s construction of an assignability provision was completely irrational.
Appellant lost all three challenges on appeal. Justice Vartabedian, writing for a 3-0 Fifth District panel, affirmed the arbitration award. They also denied respondent’s motion for appellate sanctions, but deemed it was “an extremely close matter.” The Court of Appeal found the second and third arguments were frivolous and dilatory in nature. However, with respect to the first argument, the panel found it “was at least marginally plausible,” given that the public policy exception to arbitral finality “is still a developing area of appellate law and the cases have not exhausted the list of policies that might weigh against arbitral finality.” Although also observing that appellant “did not, in fact, make a very good argument” under this exception, the appellate panel refused to find the issue was frivolous. (Slip Opn., at pp. 11-12.)
On the merits, the Fifth District determined that nothing in the policies of the security-first or one-action statutes precludes parties from electing binding arbitration.
(BLOG OBSERVATION—Rule 8.276 does require that a litigant raise the sanctions issue by motion. We have seen many published and unpublished decisions that have denied sanctions because the issue was raised in a respondent’s brief rather than through the specified motion procedure.)