Heimlich v. Shivji
H042641
| Cal. Ct. App. | May 31, 2017Background
- Attorney Heimlich sued former client Shiraz Shivji in superior court for unpaid fees despite a retainer arbitration clause; Shivji later demanded AAA arbitration and the court compelled arbitration.
- Shivji served a Code of Civil Procedure § 998 offer for $30,001 (each side bears own fees) two months before arbitration.
- After a multi‑day arbitration, the AAA arbitrator awarded nothing to either side and stated each party would bear their own attorneys’ fees and costs.
- Six days after the award Shivji informed the arbitrator he sought costs under § 998; the arbitrator replied he had no jurisdiction after issuing a final award and would not take further action.
- Shivji then moved in court to confirm the award and to recover § 998 costs; the trial court confirmed the award and denied § 998 costs relying on Maaso v. Signer.
- The Court of Appeal reversed: it held Shivji timely presented his § 998 claim, the arbitrator should have addressed it (or reserved jurisdiction), and the court must partially vacate the award to permit a decision on § 998 costs by the arbitrator or, if not possible, by the court.
Issues
| Issue | Plaintiff's Argument (Shivji) | Defendant's Argument (Heimlich) | Held |
|---|---|---|---|
| Whether § 998 costs may be recovered after an arbitration that awarded nothing if the claimant raises the § 998 claim only after the award | § 998 allows post‑award cost requests; statute bars introducing offers before arbitration, so post‑award presentation is timely | Claimant should have raised § 998 to arbitrator before the award (per Maaso); failing to do so waived the claim | Held for Shivji: a § 998 request may be presented after the award; the arbitrator improperly refused to consider it and court must permit determination by arbitrator or court |
| Whether arbitrator had power to consider a post‑award § 998 request or should have reserved jurisdiction | Arbitrator could recharacterize the award as partial/interim and decide § 998 costs under AAA rules | Arbitrator lacked jurisdiction after issuing a final award; party should have sought reservation pre‑award | Held: arbitrator had authority under AAA rules to treat the award as partial/interim and decide § 998 costs; refusal to hear the matter justified partial vacatur |
| Whether trial court may award § 998 costs when arbitrator declines to decide them | If arbitrator refuses, court may decide § 998 costs under Pilimai and § 1293.2 | Court lacks authority to add costs inconsistent with the arbitration award; issues should have been submitted to arbitrator | Held: if arbitrator won’t decide (or parties won’t consent to rehearing), court must determine § 998 costs on confirmation proceedings |
| Whether arbitrator’s refusal to hear evidence of the § 998 offer warrants vacatur or correction of award | Refusal to hear material evidence prejudices party and supports vacatur/remand under § 1286.2(a)(5) | Arbitrator’s procedural decision falls within arbitral authority; judicial interference undermines finality | Held: arbitrator’s refusal to hear evidence was improper and prejudicial; partial vacatur and remand ordered so the § 998 claim can be decided |
Key Cases Cited
- Pilimai v. Farmers Ins. Exchange Co., 39 Cal.4th 133 (Cal. 2006) (section 998 applies to arbitration and authorizes post‑award costs including depositions/exhibits)
- Maaso v. Signer, 203 Cal.App.4th 362 (Cal. Ct. App. 2012) (arbitrator should be informed of § 998 offer before issuing final award; failure to request fees from arbitrator is fatal)
- DiMarco v. Chaney, 31 Cal.App.4th 1809 (Cal. Ct. App. 1995) (arbitrator is best situated to determine attorney fees and arbitration costs; court may remand to arbitrator to calculate them)
- Dickinson v. Kaiser Foundation Hospitals, 112 Cal.App.3d 952 (Cal. Ct. App. 1980) (interpreting distinction between arbitration costs and court proceedings; section 1284.2 has been read to limit arbitration cost awards)
- Burlage v. Superior Court, 178 Cal.App.4th 524 (Cal. Ct. App. 2009) (vacatur appropriate where arbitrator excluded material evidence)
- Century City Medical Plaza v. Sperling, Isaacs & Eisenberg, 86 Cal.App.4th 865 (Cal. Ct. App. 2001) (arbitrator may issue supplemental awards to correct omissions under limited conditions)
- Moore v. First Bank of San Luis Obispo, 22 Cal.4th 782 (Cal. 2000) (arbitral decisions denying fees are generally not judicially reviewable as legal error)