Thursday, May 31, 2007
C.A. Strictly Limits Time to Challenge Arbitration Award
By TINA BAY, Staff Writer
A trial court properly disregarded a challenge to an arbitration award that was brought three weeks after the statutory time limit, the Court of Appeal for this district ruled yesterday.
Div. One concluded that Los Angeles Superior Court Judge David L. Minning, presiding over a mechanics lien suit, properly confirmed an arbitration award against homeowners Michael and Amy Brown because they did not petition to correct or vacate the award within 100 days after it was served.
The Browns were sued in July 2005 by Eternity Investments, Inc., the construction company they contracted to remodel their kitchen.
Eternity alleged that it had fully performed its obligations under the home improvement contract but that the Browns still owed $49,745. The company sought damages in that amount as well as foreclosure of a previously filed mechanics lien.
Under the parties’ agreement, all disputes were subject to binding arbitration before the American Arbitration Association.
The Browns filed a demand for arbitration with the association in February 2005, seeking $30,000 from Eternity. In its answering statement, the contractor filed a counterclaim for $49,750.
An arbitrator heard the case in June and in August rendered a $36,575 award in Eternity’s favor. The association served a copy of the signed award on the parties on Sept. 7, both by mail and facsimile.
Under the California Arbitration Act, the Browns had 100 days after service of the signed copy of the award to file a petition seeking to correct or vacate the award. The defendants did not file a challenge within the 100-day period.
On Jan. 6, 2006, Eternity asked the trial court to confirm the award and asserted the court was required to rule in its favor because the defendants had lost their right to attack the award.
The Browns responded the following month by filing both an opposition and a petition seeking to vacate the award as invalid.
In support of their petition, the homeowners contended the arbitrator had exceeded his authority by awarding compensation to an unlicensed contractor, improperly precluded them from introducing material evidence, and failed to adequately explain his decision in writing. Additionally, they claimed, Eternity failed to produce adequate proof of licensure during the arbitration hearing.
Following a hearing, Minning granted Eternity’s petition to confirm the award, implicitly denying the Browns’ petition to vacate, and entered judgment in its favor.
Writing for Div. One, Justice Robert M. Mallano said that under the CAA, specifically Code of Civil Procedure Sec. 1286, confirmation of an award was the mandatory outcome absent either its correction or vacatur pursuant to a timely petition, or the court’s dismissal of the petition to confirm.
Eternity had up to four years to request confirmation of the award, he wrote, noting the strategic value of its delayed petition:
“[A]ccording to a leading treatise: ‘If you represent the winning party in the arbitration, wait until after the 100-day period before petitioning to confirm the award. Unless the losing party files in the interim, the delay may cut off any challenge to the award!...”
By the time Eternity filed its petition to confirm—121 days after service of the award—it was too late for the Browns to seek correction or vacatur, the justice said. Moreover, the defendants did not request a dismissal of the petition, he wrote.
“Under the plain language of the CAA, the trial court had no alternative but to ‘confirm the award as made’ notwithstanding the Browns’ argument that the award was invalid,” Mallano said.
The defendants did not present a reasonable excuse, such as extrinsic mistake or fraud, for failing to satisfy the time limit, he added.
“The CAA’s deadlines for challenging and confirming arbitration awards serve important goals,” the justice noted.
Justice Miriam A. Vogel and Los Angeles Superior Court Judge Frank Jackson, sitting by assignment, concurred in the opinion.
Arguing on appeal were Woodland Hills attorney William Rehwald for the plaintiff and Long Beach lawyer Joseph Ribakoff for the defendants.
The case is Eternity Investments, Inc. v. Brown, 07 S.O.S. 2832.
Copyright 2007, Metropolitan News Company