2008-00017051-CU-FR

Jacquelynn Namle Bird vs. Joel B. Shamitoff

Nature of Proceeding: Petition to Confirm Arbitration Award

Filed By: Dunbar, William L.

Plaintiff’s Motion to Confirm Arbitration Award is granted.

Defendant’s Motion to Correct or Vacate Award is denied.

Defendant’s Request for Judicial Notice is granted.

Plaintiffs’ Complaint in this matter was filed herein July 25, 2008, and Plaintiffs’ First
Amended Complaint was filed herein on August 28, 2008. On May 18, 2009, over
Plaintiffs’ objections, this Court granted Defendants’ Petition to Compel Arbitration of
Plaintiffs’ claims before the American Arbitration Association, hereinafter referred to as
“AAA”. The remainder of Plaintiffs’ in Case No.34-2008-00017051 was stayed,
pending the outcome of the AAA Arbitration. The AAA Arbitration was initiated as AAA
Case No. 73 148 Y 03235 09 GLO. The AAA Arbitration proceedings before AAA
Arbitrator Robert W. Brown were finally concluded in January, 2014, and final papers
were submitted by the parties to the Arbitrator on or about February 3, 2014. During
the course of the arbitration, defendants unsuccessfully sought several times to
interfere with the arbitration and to remove the case from arbitration.

The Arbitrator has awarded plaintiff the sum of Three Hundred Eighty Thousand
Dollars ($380,000) plus pre-judgment interest from December 1, 2007 to January 31,
2014, at the rate of 7% per annum, in the amount of One Hundred Sixty-four Thousand
Two Hundred Eighty Dollars…($164,280). The Arbitrator further ruled that
“Claimant’ (Plaintiffs herein) shall be awarded and entitled to recover Attorneys’ fees
and costs from Defendants, jointly and severally, in the sum of Two Hundred Twenty- five Thousand Dollars ($225,000) arising from the terms of the attorney’s fee
provisions contained in the Rescission and Release agreement “which was not
enforceable due to failure of consideration”. Finally, the Award also held that the fees,
expenses and compensation of AAA and the AAA Arbitrator, over and above that
previously paid by Plaintiffs, were to be borne by Defendants.

Defendants argue that the arbitrator correctly ruled on the plaintiffs’ fraud claims but
erroneously concluded that defendants breached the Retail Development Agreements
and erroneously ordered defendants (respondents) to pay $380,000 in rescission
damages and $225,000 in attorneys fees. Defendant’s contend that arbitrator
“exceeded his powers” in making rulings adverse to defendants, such as imposing
contract liability on a party who was a non-party to the RDAs and awarding contract
damages to Bird even though the Lucero-Bird Partnership was the only party with legal
standing to assert claims. Defendants also contend that the arbitrator violated
defendants’ due process rights due to Shamitoff’s “life-threatening medical condition”
and was biased because he was informed that he would not be compensated unless
he ruled in plaintiff’s favor. Alternatively, defendants contend that the award should be
modified to correct an evident miscalculation in the contract damages and interest.

In Advanced Micro Devices , the California Supreme Court explained “the standard for
measuring the scope of the arbitrators’ authority.” (Advanced Micro Devices, (1994) 9
Cal.4th 362, 366.) The high court held “the deference due an arbitrator’s decision on
the merits of the controversy requires a court to refrain from substituting its judgment
for the arbitrator’s in determining the contractual scope of those powers.” (Id. at 372.)

“The extremely limited scope of review of arbitration decisions is now firmly
established.” (Pierotti v. Torian (2000), 81 Cal.App.4th 17, 31.) “[J]judicial review of
private, binding arbitration awards is generally limited to the statutory grounds for
vacating (§ 1286.2) or correcting (§ 1286.6) an award; we rejected the view that a
court may vacate or correct the award because of the arbitrator’s legal or factual error,
even an error appearing on the face of the award.” (Moshonov v. Walsh (2000) 22
Cal.4th 771, 775-776 (citing Moncharsh v. Heily & Blasé (1992) 3 Cal.4th 1, 8-28.) “[A]
rbitrators do not ‘exceed[] their powers’ within the meaning of section 1286.2,
subdivision (d) and section 1286.6, subdivision (b) 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. ‘The arbitrator’s resolution of these issues is
what the parties bargained for in the arbitration agreement.’” (Id. (citing Moncharsh,
supra, 3 Cal.4th at 28).) The arbitrator’s decision is final and cannot be judicially
reviewed for error as to those “contested issues of law and fact submitted to the
arbitrator for decision.” (Id. (citing Moncharsh, supra, 3 Cal. 4th at 28).)

Thus, the Court cannot here substitute its judgment for that of the arbitrator. Code of
Civil Procedure section 1286.6 provides for correction of an arbitration award if
“[t]he arbitrators exceeded their powers but the award may be corrected without
affecting the merits of the decision upon the controversy submitted.” (Code Civ. Proc,
§ 1286.6, subd. (b); see also Code Civ. Proc, § 1286.2 [vacating awards].) However,
“The deference due an arbitrator’s decision on the merits of the controversy requires a
court to refrain from substituting its judgment for the
arbitrator’s in determining the contractual scope of those powers.” (Advanced. Micro
Devices, Inc., supra, at p. 372.) In particular, 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.” (Moshonov v. Walsh , supra, at p. 775; Taylor v. Van Catlin Construction (2005) 139 Cal. App. 4th
1061, 1066. All of the allegedly erroneous rulings of the arbitrator were within the
scope of his authority.

Accordingly, “arbitrators, unless expressly restricted by the agreement of the parties,
enjoy the authority to fashion relief they consider just and fair under the circumstances
existing at the time of arbitration, so long as the remedy may be rationally derived from
the contract and the breach. The rights and obligations of the parties under the
contract as it was to be performed are not an unfailing guide to the remedies available
when the contract has been breached. It follows that
parties entering into commercial contracts with arbitration clauses, if they wish the
arbitrator’s remedial authority to be specially restricted, would be well advised to set
out such limitations explicitly and unambiguously in the arbitration clause.” (AMD,
supra, 9 Cal.4th at p. 383, italics added.) Taylor v. Van Catlin Construction (2005) 139
Cal. App. 4″‘ 1061, 1067.

The Court rejects defendants’ argument that the damages were miscalculated based
on defendants’ version of the facts submitted at arbitration. Defendant’s due process
argument is also rejected. Shamitoff had years to prepare his case. Further, Shamitoff
finally testified in January 2014, after the arbitration had been continued from August
of 2013 to allow him to later testify. The court also rejects claim of bias based on the
Birds purported failure to pay fees. Rather, the defendants failed to pay their fees in
arbitration and this was the subject of the Birds’ motion in this court to compel
defendants to pay their arbitration costs, which motion was denied.

At its core, the claim of bias implicates impartiality. “Impartiality” entails the “absence of
bias or prejudice in favor of, or against, particular parties or classes of parties, as well
as maintenance of an open mind.” (ABA Model Code Jud. Conduct (2007),
Terminology, p. 4.) No reasonable person would have suspected bias on the part of
the arbitrator, based on the facts presented here.

The Court will sign the proposed order submitted by plaintiffs.