Heimlich v. Shivji
247 Cal. Rptr. 3d 603
| Cal. | 2019Background
- Shivji hired Heimlich for patent and IP work; fee dispute led Heimlich to sue for unpaid fees and Shivji to later demand arbitration per their agreement.
- Shivji made two Code of Civil Procedure § 998 settlement offers during litigation that were rejected (one for $30,001 and one for $65,001).
- The parties submitted fee-refund and unpaid-fees claims to arbitration; the arbitrator issued a final award granting $0 to both sides and stating each party would bear its own fees and costs.
- Six days after the final award, Shivji notified the arbitrator of his earlier § 998 offers and sought § 998 costs; the arbitrator declined, saying he lacked jurisdiction after issuing the award.
- Shivji moved in superior court to confirm the award but add § 998 costs; the trial court confirmed the award and denied costs. The Court of Appeal reversed, but the California Supreme Court granted review.
Issues
| Issue | Plaintiff's Argument (Heimlich) | Defendant's Argument (Shivji) | Held |
|---|---|---|---|
| Whether a § 998 request for costs in arbitration is timely if made after a final award | § 998 offers must be presented to arbitrator before award because arbitrator loses jurisdiction once award issued | A § 998 cost request may be filed with the arbitrator within 15 days after a final award, analogous to postjudgment filing in court | Timely if filed with arbitrator within 15 days of final award; arbitrator may consider and amend award to grant costs |
| Whether evidence of a rejected § 998 offer is admissible before an arbitrator issues a final award | Pre-award disclosure should be required; otherwise arbitrator can't act | § 998(b)(2) does not categorically bar disclosure pre- or post-award; White permits admission for non-liability purposes; policy favors postaward disclosure to avoid prejudicing merits | A § 998 offer may be presented before or after the award; postaward presentation within 15 days is permitted and often preferable to protect parity with litigation |
| Whether arbitrator’s refusal to consider a timely postaward § 998 request permits vacatur of the award under § 1286.2(a)(5) for refusal to hear material evidence | Arbitrator’s refusal to hear the § 998 evidence was a refusal to hear material evidence and warrants vacatur | The arbitrator’s legal conclusion about jurisdiction was erroneous but not misconduct; refusal to hear as legal error is not vacatur-worthy under Moncharsh limits | Denial of costs by arbitrator is not a basis for vacating the award absent egregious misconduct; court affirmed confirmation and denial of vacatur |
| Whether Maaso v. Signer requires preaward submission of § 998 offers to arbitrators | Maaso compels resolving § 998 in arbitration and suggests offer must be presented before award | Maaso holds arbitrators decide § 998 but does not mandate preaward timing; postaward submissions within the statutory postjudgment window are allowed | Maaso does not require preaward presentation; it confirms arbitrator-first rule but not a preaward timing requirement |
Key Cases Cited
- Martinez v. Brownco Construction Co., 56 Cal.4th 1014 (2013) (§ 998 creates costs-shifting incentive to encourage settlement)
- Pilimai v. Farmers Ins. Exchange Co., 39 Cal.4th 133 (2006) (Legislature extended § 998 to private arbitrations)
- White v. Western Title Ins. Co., 40 Cal.3d 870 (1985) (§ 998(b)(2) inadmissibility should be read in light of Evidence Code policies; offers may be admissible for non-liability purposes)
- Moncharsh v. Heily & Blase, 3 Cal.4th 1 (1992) (judicial review of arbitration awards is narrowly circumscribed; parties accept risk of unreviewable legal error)
- Maaso v. Signer, 203 Cal.App.4th 362 (2012) (§ 998 claims must be presented to arbitrator in the first instance; courts generally cannot add costs inconsistent with panel’s award)