Pеr A. Maaso, by and through his guardian ad litem, George Richard Martin, sued Stephen Signer, M.D., for medical malpractice. The case was ordered to binding contractual arbitration before a panel of three arbitrators. Two of the three arbitrators found that Maaso failed to prove causation, and an arbitration award was issued in favor of Signer. The trial court vacated the award on the ground that it was procured by “undue means,” based on ex parte contact between Signer’s party arbitrator and the neutral arbitrator while the award was pending, and ordered the case back to arbitration before a different neutral arbitrator. The second arbitration resulted in a monetary award in favor of Maaso. The award exceeded an offer to compromise pursuant to Code of Civil Procedure section 998 (section 998) made by Maaso, and rejected by Signer, prior to the first arbitration.
On appeal, Maaso contends the trial court erred in denying him costs under section 998 and prejudgment interest under Civil Code section 3291 (section 3291) as the prevailing party in the second arbitration. In his cross-appeal, Signer contends the trial court erred in vacating the original arbitration award. We affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
Factual Background
In August 2002, Maaso was admitted to Palomar Medical Center and placed on a Welfare and Institutions Code section 5150 hold with symptoms of dementia, inappropriate behavior and paranoia. He was evaluated by Signer, a psychiatrist, who ordered a number of tests, including one to rule out neurosyphilis. This test was not performed while Maaso remained at Palomar Medical Center before being discharged.
In November 2004 Maaso, by and through his guardian ad litem, filed a medical malpractice action alleging that a neurologist and various Doe defendants had delayed a diagnosis of neurosyphilis, causing Maaso to suffer irreversible brain damage. Signer was later added as a Doe defendant.
Pursuant to a “Physician-Patient Arbitration Agreement” (the agreement), the parties stipulated to submit the medical malpractice action to binding arbitration. The agreement required a panel of three arbitrators. Maaso chose Attorney Jeffrey A. Milman as his party arbitrator; Signer chose Attorney P. Theodore Hammond as his party arbitrator; and the parties’ arbitrators chose Retired Judge Alan Haber as the designated neutral arbitrator.
The First Arbitration
On January 23, 2008, prior to the first arbitration, Maaso served Signer with a section 998 offer to compromise for $500,000. The offer stated that “[acceptance shall be made by signing the attached acceptance and delivering a copy to the office of the neutral arbitrator, Alan Haber, before the commencement of the arbitration.” Signer did not aсcept the offer.
The arbitration was conducted over four days between February 4 and 7, 2008, during which each party’s counsel was limited to 30 minutes of argument and Maaso’s counsel was not allowed to present rebuttal argument. The three arbitrators held a 45-minute telephone conference on February 28, 2008, during which Haber informed the other panelists that he had decided to deny Signer’s motion for nonsuit. Haber also stated that he had not made up his mind on the issue of causation, that he would circulate a draft opinion in about a week, and that he would further consider the matter. He did not ask for any further briefing.
About five months before the first arbitration hearing, Maaso’s party arbitrator Milman had moved to a new business address. He did not formally notify the parties or panel, but at sоme point during the four-day arbitration hearing he gave Signer’s party arbitrator Hammond his business card with his new address.
On March 3, 2008, Hammond faxed a five-page letter arguing his position on the issue of causation. The letter included a “cc” to Milman, but the copy of the letter was mailed to Milman at his old address, and Milman did not see it until it was forwarded to him on March 17, 2008.
Meanwhile, on March 11, 2008, Haber faxed a signed arbitration award to Milman and Hammond. He concluded that while Signer was negligent, Maaso had failed to meet his burden of proof on causation.
Signer then filed a petition to confirm the arbitration award, and Maaso a petition to vacate the award. Maaso relied on Code of Civil Procedure section 1286.2, which vests the trial court with the power to vacate an arbitration award that has been procured by corruption, fraud or other undue means. Signer opposed Maaso’s petition to vacate.
The Second Arbitration
The party arbitrators chose Attorney Darrell A. Forgey to act as the neutral arbitrator for the second arbitration, which took place between February 2 and 5, 2010. On January 15, 2010, Signer served Maaso with a section 998 offer to compromise the action for a dismissal in exchange for a waiver of costs and a waiver of Signer’s right to sue for malicious prosecution. Maaso did not accept the offer. During the course of the arbitration proceedings Maaso’s counsel advised the panel that Maaso had previously made a section 998 offer that was rejected by Signer, without stating the amount of the offer.
On March 12, 2010, arbitrators Forgey and Milman signed an award in favor of Maaso for $594,243. The award concluded: “Costs and fees in accordance with the arbitration agreement.” Signer filed an application with the arbitrators to correct the award, and Maaso petitioned the court to confirm the award and to award section 998 costs and section 3291 prejudgment interest. Signer initially opposed confirmation on the ground the petition was filed prematurely. He then filed a supplemental opposition which did not oppose confirmation of the award, but challenged the requested monetary enhancements.
On May 27, 2010, the court granted Maaso’s petition to confirm the arbitration award. On the issue of additional costs, the court deemed Signer’s opposition to the petition as a motion to tax costs, and set the matter for hearing. To stop the further accrual of interest, on June 3, 2010, Signer paid Maaso $595,545.48, which consisted of the arbitration award of $594,243, plus daily interest of $162.81 from the date of the judgment.
A hearing on the costs issue was held, after which the court issued a 13-page written order granting Signer’s motion to tax costs. The court determined that all costs associated with the arbitration, including section 998 costs, were within the sole purview of the arbitrators and not the court. The court granted Maaso leave to file an amended cost memorandum limited to costs associated with the court proceedings. Maaso filed a revised cost memorandum. Signer paid Maaso $25,681.56 in court-related costs and additional interest, which was incorporated into the final judgment. Maaso filed an acknowledgment of full satisfaction of judgment in the amount of $621,227.04. These appeals followed.
DISCUSSION
Maaso contends the trial court erred in refusing to award him section 998 costs and section 3291 prejudgment interest as the prevailing party in the second arbitration. In his cross-appeal, Signer contends the trial court erred in vacating the first arbitration award, arguing there never should have been a second arbitration award resulting in the current judgment. Because Maaso’s appeal becomes moot if Signer is correct that a second arbitration should not have taken place, we address Signer’s cross-appeal first.
A. No Forfeiture of Issue
As an initial matter, Maaso argues that Signer has forfeited any challenge to the trial court’s order vacating the first arbitration award because Signer failed to move to vacate the second arbitration award and failed to oppose its confirmаtion.
Maaso points to Code of Civil Procedure section 1288, which provides that “[a] petition to vacate an award or to correct an award shall be served and filed not later than 100 days after the date of the service of a signed copy of the award on the petitioner.” He relies on Knass v. Blue Cross of California (1991)
Knass is distinguishable. There, the appellant contended that he was substantially prejudiced by an error of law appearing on the face of the arbitration award. (Knass v. Blue Cross of California, supra,
Likewise, Signer opposed Maaso’s petitiоn to vacate the first arbitration award on the same grounds he raises on appeal. He also sought relief from the trial court’s order vacating the award by petitioning this court for a writ of mandate (Signer v. Superior Court (Aug. 5, 2008, B209446)), and later by petitioning the Supreme Court for review of our order denying his writ petition (Signer v. Superior Court (Sept. 17, 2008, S165812)). Having lost those challenges, he was forced to participate in the second arbitration.
We agree with Signer that had he brought a motion to vacate the second arbitration hearing on the same grounds he had asserted two years earlier
Accordingly, we are satisfied that Signer did not forfeit his challenge to the trial court’s order vacating the first arbitration award.
B. No Error in Vacating First Arbitration Award
“[Code of Civil Procedure] Section 1286.2 sets forth the exclusive grounds for vacating an arbitration award. Except on these grounds, arbitration awards are immune from judicial review in proceedings to confirm or challenge the award.” (AM. Classic Construction, Inc. v. Tri-Build Development Co. (1999)
“On appeal from an order vacating an arbitration award, we review the trial court’s order (not the arbitration award) under a de novo standard. [Citation.] To the extent that the trial court’s ruling rests upon a determination of disputed factual issues, we apply the substantial evidence test to those issues.” (Malek v. Blue Cross of California (2004)
Code of Civil Procedure section 1286.2 does not define “undue means.” Analyzing the statutory language “corruption, fraud or other undue means,” the court in Pour Le Bebe, Inc. v. Guess? Inc. (2003)
The court in Pour Le Bebe discussed several cases, including Pacific Crown Distributors v. Brotherhood of Teamsters (1986)
While Signer argued below that Hammond’s postarbitration letter brief to the neutral arbitrator did not constitute ex parte contact, he seems to concede on appeal that it did. Nevertheless, he argues that the letter brief does not constitute undue means because Maaso was not prevented from presenting evidence at the arbitration hearing. While it may be true that Maaso had an opportunity to present all of his evidence during the arbitration hearing, Maаso was prevented from presenting all of his arguments to the neutral arbitrator. As the plaintiff with the burden of proof on the issue of causation, Maaso did not have the last word because he did not have an opportunity to rebut the arguments made in Hammond’s ex parte letter brief. In his declaration, Milman stated that had he been aware of Hammond’s postarbitration letter brief, he would have “immediately” responded to “each and every point argued.”
“The courts seem to agree that a fundamentally fair hearing requires . . . notice, opportunity to be heard and to present relevant and material evidence and argument before the decision makers . . . .” (Bowles Financial
Signer argues that the trial court found undue means “without a finding of culpability that even bordered on egregious wrongful conduct.” He relies on A.G. Edwards & Sons, Inc. v. McCollough (9th Cir. 1992)
But ex parte communication between a party’s representative (whether counsel or party arbitrator) and a neutral arbitrator is not part and parcel of the business of litigation. Indeed, courts have vacated awards on such basis. (See Pacific & Arctic Railway & Navigation Co. v. United Transportation Union (9th Cir. 1991)
Signer points out that Milman also submitted a postarbitration letter brief to Haber, suggesting there was no difference in the actions of the party arbitrators. But the situations are not the same. Milman submitted his letter brief in response to receiving the unanticipatеd signed arbitration award, instead of the promised draft. The evidence shows that during the panel’s last deliberation together, arbitrator Haber stated that he was undecided on the issue of causation, he would circulate a draft opinion about a week later, and he would further consider the issue. But instead of issuing a draft opinion, he issued a signed award. Milman responded to the award, asking Haber to reconsider, and copied Hammond at the same time.
Moreover, contrary to Signer’s assertion, the trial court did not find Hammond’s conduct to be purely innocent. At the hearing on the parties’ cross-petitions, Maaso’s attorney accused Hammond of acting “intentionally, that it wasn’t an oversight” that Hammond did not fax his postarbitration letter brief to Milman. The court resрonded, “that’s part of my finding,” indicating it had found Hammond’s conduct in not faxing a copy of his letter to Milman was intentional. The court also stated: “The fact that one arbitrator chose to use facsimile for the neutral and mail to the other and sent it to the wrong address, maybe it was a mistake. But it’s very, very suspicious in the context of what took place, and I’m just going to say it stinks. It goes to the integrity of the decision-making process in the context of this case.” The court further stated: “. . . I’ve had several petitions to confirm arbitration awards. They have always been approved. . . . This is the first time in my judicial experience that I have entertained a motion to vacate and not confirm an arbitration award. And I’ve thought a lot about the case, and I’m very troubled about it. . . . The problem that I have is that the way the decision came about, it’s more than just troubling, to me it goes to the very essence of the way legal affairs should be conducted. I think it was an ex parte communication. ... I’ve never seen anything quite like it. ... I think the process is extremely troubling.”
Signer also argues that even assuming there was undue means, Maaso failed to demonstrate that any alleged undue means caused the award to issue. (See Pour Le Bebe, supra,
In the absence of such evidenсe, the trial court could reasonably infer that Hammond’s ex parte letter on the key issue of the case that was still undecided caused the award to issue in favor of Signer. (See Good v. Kaiser Foundation Hospital (1984)
We are satisfied the trial court correctly vacated the first arbitration award. We therefore turn to the merits of Maaso’s appeal.
II. Maaso’s Appeal
Maaso contends the trial court erred in refusing to award him section 998 costs, including expert witness and arbitrator fees, and section 3291 prejudgment interest. We disagree.
Section 3291 provides in relevant part: “In any action brought to recover damages for personal injury sustained by any person resulting from or occasioned by the tort of any other person, ... it is lawful for the plaintiff in the complaint to claim interest on the damages alleged as provided in this section, [f] If the plaintiff makes an offer pursuant to Section 998 of the Code of Civil Procedure which the defendant does not accept prior to trial or within 30 days, whichever occurs first, and the plaintiff obtains a more favorable judgment, the judgment shall bear interest at the legal rate of 10 percent per annum calculated from the date of the plaintiff’s first offer pursuant to Section 998 of the Code of Civil Procedure which is exceeded by the judgment, and interest shall accrue until the satisfaction of judgment.”
As an initial matter, Signer argues that the trial court could not rely on Maaso’s section 998 offer as a basis for awarding costs and interest because the offer was made and rejected prior to the first arbitration in 2008 and a second offer was never made prior to the second arbitration in 2010. To support his position, Signer focuses exclusively on the terms of the offer, which was captioned with the name of the neutral arbitrator in the first arbitration, and stated that it could be accepted only by delivering a copy of the signed acceptance to that arbitrator. Signer complains that once a new neutral arbitrator was appointed, Signer could no longer accept the offer pursuant to its terms. It is true that Signer could not accept the offer before the second arbitration. But this is not because a different arbitrator was presiding, but because the offer had not been accepted prior to arbitration and was deemed withdrawn pursuant to section 998, subdivision (b)(2). As Maaso points out, the offer was not open for years, waiting for Signer to realize it
On the other hand, Maaso refers us to Deocampo v. Ahn (2002)
We nevertheless conclude that Maaso was not entitled to these costs and interest because he never requested these enhancements from the arbitrators. While Maaso put the panel on notice that a section 998 offer had been made, it is undisputed that he did not state the amount or seek to present evidence on the issue. With knowledge of the rejected offer and that Maaso was the prevailing party, the arbitrators made no award of section 998 costs or section 3291 interest when issuing their final binding arbitration award. Instead, the award was for “[c]osts and fees in accordance with the arbitrаtion agreement,” which provided that each party would pay its “pro rata share of the expenses and fees of the neutral arbitrator, together with other expenses of the arbitration incurred or approved by the neutral arbitrator, not including counsel fees or witness fees, or other expenses incurred by a party for such party’s own benefit.”
Moreover, the parties stipulated that “the claims and controversies alleged in this action” were submitted to “binding, contractual arbitration.” The medical malpractice complaint sought “damages according to proof, costs and all proper relief.” Because the submission was not limited, it included the issue of costs and interest and, where available, attorney fees. (See Corona v. Amherst Partners (2003)
In Corona the prеvailing party in a contractual arbitration sought attorney fees and costs incurred in the arbitration from the superior court without having first sought them from the arbitrator. In affirming the trial court’s denial of such costs, the reviewing court noted that because the parties’ stipulation did not limit the issues to be resolved through arbitration, the issue of entitlement to attorney fees and costs was subject to determination in the arbitration proceedings. (Corona v. Amherst Partners, supra,
Although Maaso styled his petition as one to “confirm” the award, he essentially sought “correction” of the award by asking the court to add costs and interest not awarded by the panel, and which were in fact inconsistent with the panel’s award. Code of Civil Procedure section 1286.6 sets forth the exclusive grounds for correction of an award “if the court determines that: [][] (a) There was an evident miscalculation of figures or an evident mistake in the description of any person, thing or property referred to in the award; []]] (b) The arbitrators exceeded their powers but the award may be corrected without affeсting the merits of the decision upon the controversy submitted; or [f] (c) The award is imperfect in a matter of form, not affecting the merits of the controversy.” None of these three statutory grounds exist here. Thus, adding such interest is not a “ ‘mere recalculation, but a revision in substance, adding an element of damages not covered ... in the award as rendered.’ ” (Severtson v. Williams Construction Co. (1985)
Maaso argues that because section 998 uses the language “the court or arbitrator,” either the court or the arbitrator may award section 998 cost enhancements following an arbitration. But that was not the Legislature’s intent in amending section 998. “[S]ection 998 was amended to extend its provisions to actions resolved by arbitration”; the amendment was “ ‘simply to extend existing provisions [of section 998] to include costs incurred in
Additionally, it makes sense that only the arbitrator decides section 998 costs incurred in arbitration because an award of expert witness costs, and the amount, is discretionary under section 998. “[N]ot only is the determination as to the amount [of attorney fees and costs] properly within the purview of the arbitrator, but we observe it is the arbitrator, not the trial court, which is best situated to determine the amount of reasonable attorney fees and costs to be awarded for the conduct of the arbitration proceeding.” (DiMarco v. Chaney (1995)
The cases on which Maaso relies do not assist him. In Pilimai v. Farmers Ins. Exchange Co. (2006)
In Weinberg v. Safeco Ins. Co. of America (2004)
Caro v. Smith (1997)
Finally, in Cobler v. Stanley, Barber, Southard, Brown & Associates (1990)
DISPOSITION
The judgment is affirmed. The parties to bear their own costs on appeal.
Ashmann-Gerst, J., and Chavez, J., concurred.
A petition for a rеhearing was denied March 1, 2012, and the opinion was modified to read as printed above. The petition of plaintiffs and appellants for review by the Supreme Court was denied May 16, 2012, S200945.
Notes
This language is nearly identical to Code of Civil Procedure section 1284.2, which reads: “Unless the arbitration agreement otherwise provides or the parties to the arbitration otherwise agree, each party to the arbitration shall pay his pro rata share of the expenses and fees of the neutral arbitrator, together with other expenses of the arbitration incurred or approved by the neutral arbitrator, not including counsel fees or witness fees or other expenses incurred by a party for his own benefit.”
The parties each submitted the declarations of their рarty arbitrators, and Signer also submitted a declaration by the neutral arbitrator. The trial court overruled Signer’s “blanket objections” to Milman’s declaration; sustained Maaso’s “relevancy” objections to portions of Hammond’s declaration; and sustained Maaso’s objections to portions of Haber’s declaration as inadmissible under Evidence Code section 703.5, discussed post.
Signer’s petitions for writ and Supreme Court review were both denied. The order vacating the arbitration award was not appealable because it directed that a new arbitration proceeding be conducted. (Haworth v. Superior Court (2010)
Because the federal statute on vacating arbitration awards is similar to Code of Civil Procedure section 1286.2, we may consider persuasive federal authоrity. (SWAB Financial, LLC v. E*Trade Securities, LLC (2007)
Evidence Code section 703.5 provides: “No person presiding at any judicial or quasi-judicial proceeding, and no arbitrator or mediator, shall be competent to testify, in any subsequent civil proceeding, as to any statement, conduct, decision, or ruling, occurring at or in conjunction with the prior proceeding, except as to a statement or conduct that could (a) give rise to civil or criminal contempt, (b) constitute a crime, (c) be the subject of investigation by the State Bar or Commission on Judicial Performance, or (d) give rise to disqualification proceedings under paragraph (1) or (6) of subdivision (a) of Section 170.1 of the Code of Civil Procedure. However, this section does not apply to a mediator with regard to any mediation under Chapter 11 (commencing with Section 3160) of Part 2 of Division 8 of the Family Code.”