Heimlich v. Shivji, 12 Cal. App. 5th 152

Background

Attorney sued Client for unpaid fees despite a retainer requiring AAA or JAMS arbitration; Client answered and later demanded arbitration under the retainer.
Client served a Code of Civil Procedure § 998 offer (defendant’s offer) for $30,001 before arbitration; the offer was not accepted.
AAA arbitration proceeded; after six days of hearing the arbitrator awarded Attorney nothing and awarded Client $0, allocating arbitration/admin fees to be borne as incurred and stating each side to bear their own attorneys’ fees and costs.
Six days after the award, Client asked the arbitrator to award § 998 costs; the arbitrator replied he no longer had jurisdiction and would not consider it.
Client moved in superior court to confirm the arbitration award and obtain § 998 costs; the trial court confirmed the award and denied the § 998 request, relying on Maaso v. Signer.
On appeal the court concluded the arbitrator should have entertained the post-award § 998 claim (or recharacterized the award as partial/interim) and partially vacated the award to permit an arbitral or judicial determination of § 998 costs.

Issues

Issue	Plaintiff's Argument (Shivji)	Defendant's Argument (Heimlich)	Held
Whether § 998 costs are recoverable after an arbitration award that denied all relief and where the arbitrator did not award § 998 costs	§ 998 applies to contractual arbitration; post-award § 998 requests may be presented after an award and courts may award § 998 costs if arbitrator refuses or cannot decide	Arbitrator had final jurisdiction over arbitration costs; plaintiff should have timely presented § 998 claim to arbitrator before award (per Maaso); court lacks authority to add costs inconsistent with the award	§ 998 applies; because § 998 forbids introducing an unaccepted offer before or during arbitration, a § 998 claim typically must be brought after the award; arbitrator should have considered the post-award § 998 request (or recharacterized his award as interim) and his refusal to hear evidence warranted partial vacatur and remand for determination by arbitrator or court if arbitrator declines
Whether a trial court may correct or vacate an arbitration award where the arbitrator refused to hear evidence material to a § 998 claim	Where arbitrator refused to hear the post-award § 998 claim, judicial correction/vacatur is proper under CCP § 1286.2(a)(5) and the court may remand the § 998 issue to the arbitrator or decide it if remand is unavailable	Judicial intervention is improper because the arbitrator had plenary authority over arbitration costs and parties should have presented § 998 to the panel	Held that refusal to hear evidence material to the § 998 request justified partial vacatur under § 1286.2(a)(5); court directed partial vacatur and either remand to arbitrator (with consent) or court determination if arbitrator again refuses

Key Cases Cited

Pilimai v. Farmers Ins. Exchange Co., 39 Cal.4th 133 (2006) (California Supreme Court: § 998 applies to arbitration and authorizes recovery of costs enumerated in § 1033.5, including deposition/exhibit costs; § 998 is an exception to cost-sharing rules)
Maaso v. Signer, 203 Cal.App.4th 362 (2012) (Cal. Ct. App.: court held party should timely present § 998 claim to arbitrator; failure to seek award before arbitrator foreclosed judicial award)
DiMarco v. Chaney, 31 Cal.App.4th 1809 (1995) (Cal. Ct. App.: arbitrator is generally the proper forum to decide fees/costs incurred in the arbitration; courts may later award costs for judicial proceedings)
Corona v. Amherst Partners, 107 Cal.App.4th 701 (2003) (Cal. Ct. App.: emphasizes limited judicial review of arbitration awards and policy favoring submission of issues to arbitrators; courts may award costs of judicial proceedings)
Burlage v. Superior Court, 178 Cal.App.4th 524 (2009) (Cal. Ct. App.: vacatur warranted where arbitrator excluded material evidence, because refusal to hear material evidence can substantially prejudice a party and justify vacating the award)