Filed 5/26/20 Volpe Co. v. Lyle Parks, Jr. Construction CA3

NOT TO BE PUBLISHED

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

THIRD APPELLATE DISTRICT

(Sacramento)

—-

VOLPE COMPANY, INC.,

Plaintiff and Appellant,

v.

LYLE PARKS, JR. CONSTRUCTION et al.,

Defendants and Respondents.

C084295

(Super. Ct. No. 34-2014-00167718-CU-BC-GDS)

California law allows a court to vacate an arbitration award if, as relevant here, the arbitrators “exceeded their powers” or issued an award that “was procured by corruption, fraud or other undue means.” (Code Civ. Proc., § 1286.2, subd. (a)(1), (4).) Both these grounds for vacatur are narrow ones, and neither is implicated merely because an arbitrator wrongly decided a contested issue of law or fact.

Based on these principles, the court below rejected the efforts of Volpe Company, Inc. to vacate an arbitration award that, in Volpe’s view, wrongly decided several contested issues of law and fact. Volpe now asks us to reverse the trial court’s decision. But because Volpe has offered no valid reason for vacating the arbitrator’s decision, we find no error in the trial court’s judgment. We thus affirm.

BACKGROUND

Lyle Parks, Jr. Construction was the general contractor for the development of a shopping center in Sacramento. Volpe was one of Lyle Parks’ subcontractors for the project. Under the parties’ agreement, Volpe would perform demolition, grading, site preparation, and wet utilities work; and Lyle Parks, in exchange, would pay Volpe $1,158,000. Following several changes to the project, however, Lyle Parks agreed to increase the amount it would pay to $1,668,085.12—though for reasons that are unclear from the record, Lyle Parks ultimately paid Volpe a slightly different amount: $1,689,729.

Volpe, believing this amount insufficient, later filed suit against Lyle Parks and its insurer, Hartford Fire Insurance Company, in Sacramento County Superior Court. According to Volpe’s complaint, Lyle Parks should have paid it an additional $272,548.19 for “labor, materials, transportation, supplies, equipment, and services” provided for the project. In response, Lyle Parks filed a demand for arbitration based on the parties’ agreement. Per their agreement, with one exception irrelevant here, “all disputes, claims, or questions regarding the rights and obligations of [Lyle Parks] and [Volpe] under the terms of the contract documents shall be decided by arbitration.” In the demand for arbitration, Lyle Parks also sought damages of its own based on Volpe’s alleged breach of contract. The parties afterward stipulated to resolve their dispute through binding arbitration, consistent with their agreement.

Following several days of evidentiary hearings, the arbitrator issued its interim arbitration award in August 2016. The arbitrator found Volpe should have received around $30,000 more for the services it provided. But, after taking into account Lyle Parks’ competing claims for damages, the arbitrator reduced the amount Volpe was entitled to receive to $5,582.59. In awarding Volpe significantly less than it sought, the arbitrator explained that he found “serious problems with the proof offered by Volpe.” “The most significant of which,” the arbitrator explained, was “the total lack of any evidence that Volpe incurred any payroll expense for labor or equipment operators for th[e] claimed work. . . . No payroll ledger was produced. No copies of payroll checks were produced. There was no evidence presented of the payment by Volpe of any payroll taxes. There is no credible evidence that the labor costs were actually incurred.” The arbitrator also found, to the extent Volpe submitted evidence, that much of it was not credible. For example, the arbitrator found Volpe submitted an inaccurate “job cost report” and sought reimbursement for equipment allegedly provided without any supportive documentation. Because of these and other shortcomings, the arbitrator rejected the majority of Volpe’s requests for damages.

Two months later, the arbitrator issued its final arbitration award. The arbitrator awarded Lyle Parks, which he found to be the prevailing party, $125,795.50 in attorney fees and $36,423.02 in costs. According to the arbitrator, Lyle Parks was the prevailing party because it had “defeated substantially all of” Volpe’s claims and “did so in a vigorously contested arbitration.” The arbitrator also directed Volpe to cover the full amount of the arbitrator’s fees and expenses.

Lyle Parks afterward filed a petition in Sacramento County Superior Court to confirm the arbitration award. Over Volpe’s objection, the court confirmed the award.

Volpe timely appealed.

DISCUSSION

I

Background on Judicial Review of Arbitration Awards

California law favors arbitral finality and, for that reason, strictly limits judicial review over arbitration awards. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9 (Moncharsh).) As the California Supreme Court has explained, two considerations in particular guide this conclusion. First, those who agree to arbitrate their differences expect that an arbitrator’s decision would mark “the end, not the beginning, of the dispute.” (Id. at p. 10; see also ibid. [“the decision to arbitrate grievances evinces the parties’ intent to bypass the judicial system and thus avoid potential delays at the trial and appellate levels”].) Second, courts are often ill-equipped to review arbitration decisions, as arbitrators may decide matters on different criteria than judges. (See Sapp v. Barenfeld (1949) 34 Cal.2d 515, 523 [“Arbitrators, unless specifically required to act in conformity with rules of law, may base their decision upon broad principles of justice and equity, and in doing so may expressly or impliedly reject a claim that a party might successfully have asserted in a judicial action.”].) “Thus, both because it vindicates the intentions of the parties that the award be final, and because an arbitrator is not ordinarily constrained to decide according to the rule of law, it is the general rule that, ‘[t]he merits of the controversy between the parties are not subject to judicial review.’ [Citations.]” (Moncharsh, at p. 11.) And that generally remains true even when the arbitrator’s decision includes clear errors of fact or law. (Id. at pp. 11-12; see also Richey v. AutoNation, Inc. (2015) 60 Cal.4th 909, 916 [“Generally, courts cannot review arbitration awards for errors of fact or law, even when those errors appear on the face of the award or cause substantial injustice to the parties.”].)

The California Arbitration Act (§ 1280 et seq.), however, provides limited grounds for judicial review of arbitration awards. Relevant here, section 1286.2 authorizes courts to vacate an arbitration award if (1) the “award was procured by corruption, fraud or other undue means” (§ 1286.2, subd. (a)(1)), or (2) the “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)).

Both these exceptions are narrow ones. (See Moshonov v. Walsh (2000) 22 Cal.4th 771, 773 [exception allowing judicial review when arbitrators “exceed[] their powers” is a “narrow” one].) As the California Supreme Court has explained, courts will not find an arbitrator exceeded his or her powers “merely because the arbitrator reached an erroneous decision.” (Moncharsh, supra, 3 Cal.4th at p. 28; see also Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 366 (Advanced Micro Devices) [“[i]n Moncharsh . . . , we held arbitrators do not exceed their powers merely by erroneously deciding a contested issue of law or fact”].) Instead, something more is required. Under the court’s precedent to date, arbitrators “exceed[] their powers” when rendering a decision that (1) “violates a party’s unwaivable statutory rights” (Richey v. AutoNation, Inc., supra, 60 Cal.4th at p. 916); (2) “contravenes an explicit legislative expression of public policy”—for example, when arbitrators enforce an illegal contract (ibid.; Loving & Evans v. Blick (1949) 33 Cal.2d 603, 610); (3) violates an “explicit[] and unambiguous[]” limitation that the parties had imposed on the arbitrators’ authority (Gueyffier v. Ann Summers, Ltd. (2008) 43 Cal.4th 1179, 1185); (4) includes a remedy bearing no “rational relationship” to the arbitrators’ own interpretation of the underlying contract (Advanced Micro Devices, at p. 367); or (5) exceeds “the scope of the controversy submitted to the arbitrators” (Moshonov, at p. 775).

With these principles in mind, we turn to Volpe’s several arguments.

II

The Arbitrator’s Finding that Lyle Parks was the “Prevailing Party”

Volpe first contends the arbitrator wrongly concluded that Lyle Parks was the “prevailing party” in the arbitration. According to Volpe, the arbitrator should instead have found Volpe to be the prevailing party. That is so, Volpe reasons, because the arbitrator found Lyle Parks owed Volpe money and Civil Code section 1717—which concerns attorney fees in contract disputes—provides that “the party prevailing on the contract shall be the party who recovered a greater relief in the action on the contract.” (Civ. Code, § 1717, subd. (b)(1).) In Volpe’s view, “[b]ecause this patent error by [the arbitrator] in applying California law appears on the face of the arbitration award, and has clearly caused substantial prejudice to Volpe,” we must vacate the arbitration decision. We disagree.

Volpe’s position is based on several older decisions that found a trial court could vacate an arbitration award “ ‘where [an] error appears on the face of the award and causes substantial injustice.’ [Citations.]” (Lopes v. Millsap (1992) 6 Cal.App.4th 1679, 1685.) But the California Supreme Court has since expressly rejected that view, finding it untethered to the exclusive statutory grounds for vacating arbitration awards. (Moncharsh, supra, 3 Cal.4th at p. 28.) As the court explained in Moncharsh, “[t]hose decisions permitting review of an award where an error of law appears on the face of the award causing substantial injustice have perpetuated a point of view that is inconsistent with the modern view of private arbitration and are therefore disapproved.” (Ibid.) Because Volpe’s position relies on these discredited decisions, we reject it.

Volpe also briefly invokes one of the statutory grounds for vacating an arbitration award. At the start of its argument, Volpe notes that an arbitrator’s award may be vacated “when the arbitrator exceeds his power in making the award and the award cannot be corrected without affecting the merits of the decision.” (§ 1286.2, subd. (a)(4).) But Volpe never clearly explains why this exception applies here, other than to say that the arbitrator’s decision was wrong. That, however, is not enough. As the California Supreme Court has explained, “arbitrators do not exceed their powers merely by erroneously deciding a contested issue of law or fact.” (Advanced Micro Devices, supra, 9 Cal.4th at p. 366; see also Moncharsh, supra, 3 Cal.4th at p. 12 [“ ‘it is within the power of the arbitrator to make a mistake either legally or factually’ ”].) For that reason, the high court recently explained, “[a]n arbitrator’s legal or factual error in determining which party prevailed may not be reversed.” (Heimlich v. Shivji (2019) 7 Cal.5th 350, 367.) Based on this precedent, we reject Volpe’s effort to reverse the arbitrator’s finding that Lyle Parks was the prevailing party.

III

The Arbitrator’s Award of Costs

Volpe next claims the arbitrator wrongly awarded Lyle Parks its arbitration costs, contending that neither California law nor the parties’ arbitration agreement authorized an award of costs. Although Volpe never specifies the particular statutory ground for vacatur here, it appears to rely on the theory that the arbitrator “exceeded [his] powers.” (§ 1286.2, subd. (a)(4).) We reject the claim.

The arbitrator awarded costs to Lyle Parks based on two different authorities: section 1032—which allows courts to award costs to the “prevailing party” in civil litigation—and the parties’ agreement—which provides that the prevailing party in arbitration “shall be entitled to recover, in addition to all other appropriate relief, its attorney’s fees.” For purposes of section 1032, the “prevailing party” includes, as relevant here, “the party with a net monetary recovery.” (§ 1032, subd. (a)(4).) Because Lyle Parks was not “the party with a net monetary recovery,” Volpe contends the arbitrator wrongly required Volpe to pay Lyle Parks’ costs based on section 1032. And because, in Volpe’s view, the parties’ agreement “awards the prevailing party on the contract ‘its attorney’s fees’ only,” Volpe further contends the arbitrator wrongly required Volpe to pay Lyle Parks’ costs based on the parties’ agreement. (Italics added.)

To start, to the extent the arbitrator misapplied section 1032, that is not reason enough to justify vacatur. Again, mere errors of law are not enough to warrant judicial review of arbitration awards. (Moncharsh, supra, 3 Cal.4th at p. 28 [“To the extent Moncharsh argues [the arbitrator exceeded his powers] merely because the arbitrator reached an erroneous decision, we reject the point.”]; see also Heimlich v. Shivji, supra, 7 Cal.5th at p. 367 [“[a]n arbitrator’s legal or factual error in determining which party prevailed may not be reversed”].) In any event, Volpe is wrong to contend the parties’ agreement “awards the prevailing party on the contract ‘its attorney’s fees’ only.” The agreement broadly provided that “the prevailing party shall be entitled to recover” attorney fees and “all other appropriate relief.” And we fail to see how the arbitrator exceeded his powers in finding that “all . . . appropriate relief” includes costs.

IV

The Arbitrator’s Apportionment of Expenses

Volpe, for similar reasons, also asserts the arbitrator wrongly required it alone to cover the arbitrator’s fees and expenses, reasoning that “these arbitration expenses were not addressed in the” parties’ agreement and, per section 1284.2, these expenses should have been borne equally by the parties. (See § 1284.2 [“[u]nless the arbitration agreement otherwise provides or the parties to the arbitration otherwise agree,” parties to the arbitration must pay their pro rata share of the arbitrator’s fees and expenses].) We disagree here too.

Again, even if the arbitrator erred in this regard, mere errors of law are not enough to show an arbitrator exceeded his or her powers. (Moncharsh, supra, 3 Cal.4th at p. 28.) At any rate, two provisions in the parties’ agreement undermine Volpe’s claim of error. First, as discussed, the agreement broadly provided that “the prevailing party shall be entitled to recover” attorney fees and “all other appropriate relief.” More importantly, the agreement also provided that “[t]he arbitration shall be conducted in accordance with the construction industry arbitration rules of the American Arbitration Association then in force”—and one of those rules explained that “[t]he arbitrator may apportion” assessed fees and expenses “in such amounts as the arbitrator determines is appropriate.” Because the arbitrator here thus had express authority to apportion assessed fees and expenses “in such amounts as the arbitrator determine[d] [wa]s appropriate,” we fail to see how the arbitrator exceeded his powers in doing just that.

V

The Arbitrator’s Damages Award

Finally, for two reasons, Volpe contends the arbitrator’s award must be vacated because it awarded Volpe too little in damages. Volpe first asserts the arbitrator wrongly failed to award it $16,560.45 that Lyle Parks admitted it owed Volpe. Volpe next alleges the arbitrator also wrongly failed to award it $161,330.38 that, Volpe asserts, it was entitled to receive for hauling dirt and debris. For both arguments, Volpe appears to rely on the following two statutory grounds for vacatur: (1) the arbitrator “exceeded [his] powers” (§ 1286.2, subd. (a)(4)), and (2) the arbitrator’s “award was procured by corruption, fraud or other undue means” (§ 1286.2, subd. (a)(1)). We disagree with both contentions.

We address first Volpe’s suggestion that the arbitrator’s “award was procured by corruption, fraud or other undue means.” (§ 1286.2, subd. (a)(1).) In seeking vacatur, Volpe claims the arbitrator’s award was the “product of prejudice and bias,” the arbitrator “engaged in misconduct,” and the arbitrator “demonstrated his prejudice and bias against Volpe.” To support these claims, however, it notes only that the arbitrator should have, based on the submitted evidence, awarded Volpe more in damages. Perhaps that is true. But claims that an arbitrator wrongly decided a factual or legal issue, without more, is not ground for finding an arbitration “award was procured by corruption, fraud or other undue means.” The words “corruption,” “fraud,” and “other undue means,” as used in section 1286.2, all “ ‘clearly connote[] behavior that is immoral if not illegal.’ ” (Comerica Bank v. Howsam (2012) 208 Cal.App.4th 790, 825.) But mere errors in interpreting the facts do not, without more, rise to that level.

We next address Volpe’s suggestion that the arbitrator “exceeded [his] powers.” (§ 1286.2, subd. (a)(4).) Volpe bases this argument on the arbitrator’s alleged failure to find the facts warranted a higher damages award. Specifically, Volpe faults the arbitrator for failing to award $16,560.45 that Lyle Parks admitted it owed. And Volpe further faults the arbitrator for failing to award an additional $161,330.38 that, in Volpe’s view, it was entitled to receive for having to haul more dirt and debris than was contemplated in the parties’ agreement. But again, arbitrators do not exceed their powers merely by committing a factual or legal error. (Moncharsh, supra, 3 Cal.4th at p. 28 [“To the extent Moncharsh argues [the arbitrator exceeded his powers] merely because the arbitrator reached an erroneous decision, we reject the point.”]; see also id. at p. 11 [“a court may not review the sufficiency of the evidence supporting an arbitrator’s award”].) Because Volpe alleges nothing more here, we reject its claims.

DISPOSITION

The judgment is affirmed. Lyle Parks and Hartford Fire Insurance Company are entitled to recover their costs on appeal. (Cal. Rules of Court, rule 8.278(a).)

/s/

BLEASE, Acting P. J.

We concur:

/s/

MAURO, J.

/s/

RENNER, J.