Lead Opinion
Opinion
The multiparty dispute arising out of a real estate purchase was submitted, on stipulation of all parties, to binding arbitration. The arbitrator found for defendants, the sellers. Although the real estate purchase agreement contained a clause providing for reasonable attorney fees to the prevailing party in an “arbitration or suit. . . brought to enforce the terms of this contract or any obligation herein,” and although the arbitrator found defendants were the prevailing parties on the complaint and on a cross-complaint, the arbitrator refused to award defendants any fees, reasoning that the contractual attorney fees clause was not broad enough to encompass the claims against defendants, claims the arbitrator found were noncontractual in nature.
The superior court denied defendants’ motion to correct the award (Code Civ. Proc., § 1286.6)
Procedural Background
Plaintiff Robin Moshonov sued defendants John D. Walsh and Eladia and Marty Ganulin for damages arising out of plaintiff’s purchase from defendants of a residential property in San Francisco. In addition to being the
Defendants answered and cross-complained against each other and against Richard Jarrette Kahn, Moshonov’s agent in the purchase and subsequently her contractor on the renovation. Kahn, in turn, cross-complained against defendants.
The real estate purchase contract contained the following attorney fees clause: “Should arbitration or suit be brought to enforce the terms of this contract or any obligation herein, including any action by Broker(s) to recover commissions, the prevailing party shall be entitled to reasonable attorney’s fees.” Fees were prayed for in the original complaint, the Ganulins’ cross-complaint, Walsh’s cross-complaint, the Ganulins’ answer to Walsh’s cross-complaint, Kahn’s answer to the Ganulins’ cross-complaint, Kahn’s cross-complaint, and the Ganulins’ answer to Kahn’s cross-complaint.
Before trial, all parties agreed “to send this matter to binding arbitration” before an arbitrator selected from the San Francisco Superior Court’s panel, with the further stipulation that “the Rules of Court shall govern the hearing of that arbitration.” The stipulation for arbitration did not expressly address attorney fees.
After hearing and briefing, the arbitrator ruled for defendants. The award provided that plaintiff would take nothing on her complaint and Kahn would take nothing on his cross-complaint. The defendants’ cross-complaints were deemed moot. The award provided that defendants were entitled to recover their costs, but made no specific provision for recovery of attorney fees.
The Ganulins moved in superior court to confirm the award and for an order naming them as prevailing parties and awarding them attorney fees. Upon considering the motion and opposition, the superior court remanded the case to the arbitrator “to determine whether attorneys fees are to be awarded, and, if so, to determine the appropriate amounts.”
Relying on DiMarco v. Chaney (1995)
The Court of Appeal affirmed. The court declined to review the merits of the arbitrator’s decision on fees. Relying on this court’s decision in Moncharsh, supra,
We granted the Ganulins’ petition for review.
Discussion
In Moncharsh, this court held judicial review of private, binding arbitration awards is generally limited to the statutory grounds for vacating (§ 1286.2) or correcting (§ 1286.6) an award; we rejected the view that a court may vacate or correct the award because of the arbitrator’s legal or factual error, even an error appearing on the face of the award. (Moncharsh, supra, 3 Cal.4th at pp. 8-28.) We further explained that arbitrators do not “exceed[] their powers” within the meaning of section 1286.2, subdivision (d) and section 1286.6, subdivision (b) merely by rendering an erroneous decision on a legal or factual issue, so long as the issue was within the scope of the controversy submitted to the arbitrators. “The arbitrator’s resolution of
We agree with the courts below that, under the principle of arbitral finality as explained in Moncharsh, the arbitrator’s award in the present case could not be judicially corrected to award defendants their attorney fees. As discussed above, all parties had prayed for fees in their various pleadings. The parties then submitted “this matter” to binding arbitration, without any pertinent limitation on the issues to be arbitrated.
The Ganulins argue that the disputed merits of the case, which they concede the arbitrator had final authority to decide, did not include questions of costs, such as attorney fees. They characterize the latter as merely “incident” to the judgment and outside the merits submitted for arbitration. The Court of Appeal correctly disposed of this argument as follows: “We do not think, however, that the term ‘the merits of the decision’ [(§ 1286.6, subd. (b))] is subject to any fixed meaning, incorporating a distinction between substantive issues and procedural remedies. The meaning of the phrase must rather be found in the terms of the submission. As we have noted, the parties here effectively submitted the issue of attorney fees to the arbitrator by submitting to arbitration all matters pending in the scheduled trial, including the prayer for attorney fees in the complaint. Hence, the issue of attorney fees related here to the merits of the arbitrator’s decision on the matters submitted to arbitration, though it may well lie outside the merits of the arbitrator’s decision in another case.”
The Ganulins’ distinction between the designation of the prevailing party and the decision whether to award that party attorney fees fails for two reasons. First, contrary to the Ganulins’ assertion, the latter issue was disputed before the arbitrator here. Plaintiff, in her opposition to defendants’ request for fees (before the arbitrator on remand) argued no fees should be awarded because the action was not one to enforce the contract, the very reasoning adopted by the arbitrator in denying fees. Second, even if this point had not been actively disputed by the parties, denial of fees on this basis would have been within the arbitrator’s agreed-upon power “to decide the law and facts of the case and make an award accordingly.” (Cal. Rules of Court, rule 1614(a)(7).) Although the parties, by agreement, can certainly exclude specific questions from arbitration, in the absence of such restriction an arbitrator has the power to decide the submitted matter on any legal or factual basis, whether or not any party has relied upon that particular basis.
Citing this court’s decision in Advanced Micro Devices, supra, 9 Cal.4th 362, the Ganulins contend the award should have been corrected because the arbitrator’s refusal to award attorney fees was in direct conflict with the express terms of the arbitrated contract, to wit, the purchase agreement’s attorney fees clause. We disagree.
In Advanced Micro Devices, we applied Monchars’s general rule of arbitral finality in the context of an arbitrator’s remedial choice; specifically, we sought to elucidate the standard “by. which courts are to determine whether a contractual arbitrator has exceeded his or her powers in awarding relief for a breach of contract.” (Advanced Micro Devices, supra, 9 Cal.4th at p. 366.) Adopting a deferential standard derived from federal case law, we held that, unless the contract, the submission, or the rules of arbitration provide otherwise, an arbitrator’s choice of relief does not exceed his or her powers so long as it “bears a rational relationship to the underlying contract as interpreted, expressly or impliedly, by the arbitrator and to the breach of contract found, expressly or impliedly, by the arbitrator.” (Id. at p. 367.) We stressed the award may be based on a contractual interpretation “implied in
Because the arbitrator found the present action was not one for breach of contract, a decision we have already explained is unreviewable under Moncharsh, supra,
Finally, the Ganulins contend DiMarco, supra,
In DiMarco, purchasers of real estate sued to rescind the purchase contract, which contained a clause providing for attorney fees to the prevailing party in any action arising out of the contract. Pursuant to an arbitration clause in that contract, the action was referred to arbitration. The arbitrator found for the defendant seller. The arbitrator further stated that the defendant was the prevailing party, and that the arbitrator was aware of Civil Code section 1717, which provides that attorney fees are recoverable as costs by the prevailing party if the contract provides for an award of fees to any party. The arbitrator nevertheless denied the defendant’s request for fees, stating only that he believed he had the discretion to do so. The superior court corrected the award by giving the defendant her reasonable attorney fees. (DiMarco, supra, 31 Cal.App.4th at pp. 1812-1813 & fn. 1.)
The appellate court affirmed, reasoning: “Here, the arbitrator’s decision to deny Chaney an award of attorney fees, notwithstanding his finding Chaney was the prevailing party, exceeded his powers because the agreement provides ‘the prevailing party shall be entitled to reasonable fees and costs.’ (Italics added.) [¶] Had the arbitrator found neither DiMarco nor Chaney was
We need not decide whether DiMarco’s reasoning is correct, for that case is readily distinguishable from this one. In DiMarco, supra,
Conclusion
Because the disputed issue of contractual interpretation—whether the purchase agreement’s attorney fees clause was broad enough to encompass the causes of action against defendants—was committed to final adjudication by the arbitrator, rather than the courts, we decline, as did the Court of Appeal, to consider the issue’s merits. Regardless of whether the arbitrator’s contractual interpretation and related ruling denying fees was legally correct, it was final and binding by agreement of the parties.
Disposition
The judgment of the Court of Appeal is affirmed.
George, C. J., Baxter, J., Chin, J., and Brown, J., concurred.
Notes
Unless otherwise specified, all further statutory references are to the Code of Civil Procedure.
The stipulation provided that “all issues of law shall be determined in the San Francisco Superior Court up to the commencement of the Arbitration.” No suggestion has been made, however, that any legal issue regarding fees was raised or decided in court before the arbitration.
Concurrence Opinion
I agree with the majority that the arbitrator’s decision in this case to deny attorney fees to defendants should be upheld.
When an arbitrator decides a dispute, the arbitrator’s decision is not just a private suggestion that the parties to the dispute can choose to obey or ignore. Rather, it becomes a judicially enforceable command in which all the awesome power of the state compels one party to turn over money or property to the other, or to behave in conformity with the arbitrator’s injunction. In Moncharsh v. Heily & Blase, supra,
Here, applying the Moncharsh rule, the majority holds that the arbitrator’s decision in this case is unreviewable. I disagree, and would instead review the arbitrator’s decision under the traditional standard of arbitral review set forth in my dissent in Moncharsh: Is the arbitrator’s decision erroneous on its face and does it cause substantial injustice? (Moncharsh v. Heily & Blase, supra,
The arbitrator decided this tort action in favor of defendants. A contract between plaintiff and defendants provided that, if litigation occurred between them, any prevailing party would be compensated for its attorney fees by the opposing party. Some defendants sought their attorney fees from plaintiff; the arbitrator denied their request, ruling that the fee provision was limited to contract actions, which this tort action was not.
Reviewing the arbitrator’s decision on attorney fees under the standard articulated in my dissent in Moncharsh v. Heily & Blase, supra,
Mosk, J., concurred.
The course of proceedings was actually somewhat more complicated. Initially, the arbitrator issued an order that decided the merits of the litigation and awarded costs to defendants but was silent as to attorney fees. Some of the defendants made a motion in the trial court to confirm the award and for an order awarding them attorney fees as the prevailing party. The trial court “remanded” the case to the arbitrator “to determine whether the attorney fees are to be awarded."
The validity of the trial court’s “remand” procedure is somewhat uncertain. Historically, an arbitrator’s act of making an award terminated the arbitrator’s power; it was considered functus officio, an act whose performance terminates the legal authority of the actor. (1 Domke, Commercial Arbitration (rev. ed. 1999) § 22.01, p. 337; Hyle v. Doctor's Associates, Inc. (2d Cir. 1999)