14 Cal. App. 5th 523
Cal. Ct. App. 5th2017Background
- Global (sign manufacturer) sued FFC for unpaid invoices (~$114,824). Nineteen days before trial the parties agreed to arbitrate; the Affiliates were not parties to that arbitration agreement.
- Over several years Global performed site surveys, maintenance and one Baldwin Park remodel; FFC paid some invoices but disputes remained. Global later sought reimbursement for survey/drawing/permit work and, at arbitration, pursued a far larger lost-profits claim for an alleged 66-store "reimaging" contract.
- The arbitrator (Judge Perez) ultimately awarded Global roughly $1.15M in lost profits, ~$24k for unpaid invoices, ~$702k prejudgment interest, and ~$1.14M in fees/costs, and added four Affiliates as joint and several obligors.
- FFC and the Affiliates petitioned the superior court to vacate; Global petitioned to confirm. The trial court confirmed the award as to FFC but vacated as to the Affiliates; it denied post-arbitration fee motions but said the arbitrator could award such fees.
- On appeal the court held the arbitration agreement plainly allowed judicial review for legal error, and after applying that standard reversed the award against FFC: (1) no substantial evidence supported a contract to reimage 66 stores and any such multi-year agreement was barred by the statute of frauds; (2) the arbitrator exceeded his authority by deciding a lost-profits claim outside the pleaded dispute; and (3) the arbitrator properly was found to have exceeded his authority when he added the Affiliates (trial court decision affirmed as to Affiliates).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standard of review of arbitrator's decision | Global: arbitrator's factual/legal findings are largely unreviewable for error | FFC: arbitration clause required arbitrator to apply California law and prepare findings and thus judicial review for legal error is permitted | Court: parties agreed to expanded review; trial court erred in applying only narrow review — legal conclusions reviewed de novo, factual findings for substantial evidence |
| Statute of Frauds / existence of 66-store reimaging contract | Global: course of emails, surveys, pricing grids and conduct show an oral agreement covering 66 stores | FFC: no mutual assent for anything beyond one Baldwin Park test store; no FFC writing signed that satisfies statute of frauds | Held: insufficient substantial evidence and no writing satisfying statute of frauds — award vacated on this ground |
| Scope of arbitration / arbitrator exceeded authority by awarding lost profits | Global: arbitration allowed all disputes "relating to this agreement" and JAMS rules permit arbitrator to decide arbitrability; lost profits are a contract remedy related to pleading | FFC: complaint sought unpaid invoices (past services); lost-profits claim was a new, unpleaded future-performance claim and thus outside agreed arbitration scope | Held: arbitrator exceeded authority — lost-profits claim was beyond the pleaded dispute and FFC was prejudiced; award for lost profits (and related fees/costs) reversed |
| Addition of Affiliates as judgment debtors | Global: arbitrator can add necessary parties; Affiliates were Doe defendants and FFC acted as their agent | Affiliates: parties stipulated to set aside arbitrator's joinder order and reserved right to seek joinder from a court | Held: trial court properly vacated award as to Affiliates — arbitrator exceeded authority because stipulation required joinder to be determined by a court |
| Post-arbitration attorney fees | Global: arbitration agreement allowed arbitrator to award fees in any proportion, so post-arbitration fees should be recoverable | FFC/Affiliates: fee clause applies only to arbitration fees; no contractual/statutory vehicle for post-arbitration fees here | Held: appeals from the fee denials treated as writs; because the arbitration award is reversed as to FFC and AFFIRMED vacatur as to Affiliates, Global is not a prevailing party and is not entitled to post-arbitration fees; trial court instructed to deny motions |
Key Cases Cited
- Moncharsh v. Heily & Blase, 3 Cal.4th 1 (Cal. 1992) (arbitrator decisions generally not reviewable for legal error absent parties' agreement otherwise)
- Cable Connection, Inc. v. DIRECTV, Inc., 44 Cal.4th 1334 (Cal. 2008) (parties may contract for judicial review of arbitrator's legal errors; enforce parties' expanded-review agreement)
- AT&T Technologies, Inc. v. Communications Workers, 475 U.S. 643 (U.S. 1986) (arbitrability may be decided by arbitrator only where parties clearly and unmistakably agreed)
- Litton Financial Printing Division v. NLRB, 501 U.S. 190 (U.S. 1991) (generally courts determine arbitrability unless parties clearly provide otherwise)
- Sterling v. Taylor, 40 Cal.4th 757 (Cal. 2007) (writing satisfying statute of frauds need only identify subject and essential terms with reasonable certainty)