48 Cal.App.5th 985
Cal. Ct. App.2020Background
- VVA-TWO, LLC (VVA) and Impact Development Group, LLC (IDG) entered DCAs and LPAs governing two low-income housing projects; the DCAs include mandatory buy-sell provisions and arbitration clauses.
- The DCAs/LPA required certain third‑party consents (notably RBC) before transfers could be consummated; those third parties were not parties to the arbitration.
- IDG issued a buy-sell notice (Feb 2014); VVA elected to buy; dispute followed about which party breached and whether a closing required third‑party consents (sequence of assignment/payment and the meaning of “upon”).
- A JAMS arbitration found VVA breached, issued a May 19, 2017 partial final award deeming IDG the buyer effective May 19, 2014, and ordered VVA to pay distributable cash; the arbitrator retained jurisdiction to address implementation issues (e.g., accounting, consent contingencies).
- VVA moved to vacate the award in superior court (arguing the award was incomplete, exceeded arbitrator authority by conflicting with consent provisions, and that the arbitrator improperly refused to reopen to admit impeachment evidence); court confirmed the award and entered judgment for IDG. VVA appealed.
Issues
| Issue | Plaintiff's Argument (VVA) | Defendant's Argument (IDG) | Held |
|---|---|---|---|
| Whether the award is incomplete/uncertain for failing to address third‑party consent | Award failed to resolve an issue "necessary to determine the controversy" (third‑party consent), so vacatur required | Award resolved breach and gave IDG right to enforce buy‑sell; arbitrator retained jurisdiction to address consent contingencies — award is final as issued | Court: Award was complete as to submitted questions; any third‑party consent issue was appropriately reserved and the award was a potentially incremental but final remedy under the circumstances |
| Whether arbitrator exceeded authority by awarding relief inconsistent with contract (deeming transfer effective pre‑consent and awarding distributable cash) | Remedies conflict with DCAs/LPA (which make RBC consent a prerequisite); therefore arbitrary remedy exceeds arbitrator powers and must be vacated | Arbitrator’s interpretation (implied in award) was that buyer rights can be awarded while actual transfer may remain contingent on consent; remedy is rationally related to that contractual interpretation and not expressly prohibited | Court: Under AMD standard, arbitrator’s remedy was rationally related to his implied interpretation of the contract; no express contractual prohibition bars the awarded relief; arbitrator did not exceed authority |
| Whether arbitrator’s refusal to reopen for newly discovered impeachment evidence substantially prejudiced VVA | Denial prevented VVA from fairly presenting impeachment evidence undermining witness (Downs) credibility and thus was prejudicial | Arbitrator reasonably found the proffered evidence collateral/irrelevant; even if considered, it would not have changed credibility findings | Court: No substantial prejudice shown; arbitrator did not deny a fair opportunity to be heard and exclusion would not likely have altered outcome |
| Whether the judgment is appealable if arbitrator retained jurisdiction | If arbitrator retained jurisdiction, the award is interlocutory and appeal should be dismissed for lack of jurisdiction | The award, as issued, finally resolved all claims between the parties and is appealable; retention of jurisdiction to handle contingent implementation does not render judgment nonappealable | Court: Judgment is appealable — the award finally resolved the parties’ dispute given the record at the time; potential future issues are hypothetical and do not defeat appealability |
Key Cases Cited
- Moncharsh v. Heily & Blase, 3 Cal.4th 1 (arbitration awards are final; judicial review is narrowly limited)
- Advanced Micro Devices, Inc. v. Intel Corp., 9 Cal.4th 362 (remedy upheld if rationally drawn from arbitrator’s contractual interpretation)
- Hightower v. Superior Court, 86 Cal.App.4th 1415 (arbitrator may issue incremental/partial awards and retain jurisdiction to implement them)
- M. B. Zaninovich, Inc. v. Teamster Farmworker Local Union 946, 86 Cal.App.3d 410 (award must decide issues necessary to determine controversy)
- Gueyffier v. Ann Summers, Ltd., 43 Cal.4th 1179 (arbitrator may interpret contract and award remedies rationally related to that interpretation absent express contractual prohibition)
- Cable Connection, Inc. v. DIRECTV, Inc., 44 Cal.4th 1334 (parties accept risk of legal error in arbitration; courts defer to arbitrator’s interpretation)
- San Francisco Housing Authority v. Service Employees Int’l Union, Local 790, 182 Cal.App.4th 933 (remedy not expressly forbidden by contract can be upheld if reasonably related to arbitrator’s interpretation)
- O’Flaherty v. Belgum, 115 Cal.App.4th 1044 (distinguished: vacatur where award contradicted an express, unambiguous contractual limitation)
- Heimlich v. Shivji, 7 Cal.5th 350 (section 1286.2(a)(5) protects against denial of opportunity to be heard; courts intervene only for substantial procedural unfairness)