Thursday, January 31, 2019
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Court of Appeal:
Judge Can’t Countermand Arbitrator’s Denial of Attorney Fees
Div. Seven of This District’s Court of Appeal Differs With 1995 Div. Three Opinion
By a MetNews Staff Writer
Div. Seven of the Court of Appeal for this district yesterday declared that an arbitrator’s denial of attorney fees to the prevailing party in a contract dispute was within his powers even though the contract required such fees to be awarded, repudiating a 1995 opinion by Div. Three expressing the opposite view.
Yesterday’s opinion by Justice John L. Segal also holds that an attorney did not have standing to petition to compel arbitration of his client’s claims but that the arbitrator did not exceed his authority by substituting the actual clients into the proceedings, and that a parent company was bound, on an agency theory, by an arbitration agreement entered into by its subsidiary.
The 1995 opinion which Segal found “is not persuasive” came in the case of DiMarco v. Chaney. Then-Presiding Justice Joan Dempsey Klein (now retired) wrote the opinion for Div. Three.
Exceeded Powers
She declared that the arbitrator “exceeded his powers” in denying attorney fees and other costs to the prevailing party, Dixie N. Chaney because she “was entitled thereto as the prevailing party under the contract.”
Although Klein concluded that “the trial court was empowered to correct the award to provide for an award of attorney fees and costs to Chaney,” her opinion reverses Los Angeles Superior Court Judge Ronald S. Coen’s award of $19,575 to Chaney, saying that the setting of the amount should be left to the arbitrator.
“An award of attorney fees for the arbitration itself is within the arbitrator’s purview,” Klein wrote.
Fourth District’s Opinion
That ruling, Segal noted, has been whittled at over the years, with the Fourth District’s Div. One in 2014, rejecting the reasoning. In Safari Associates v. Superior Court, Justice Cynthia Aaron wrote:
“To the extent that DiMarco can be read as holding that a trial court may vacate an arbitration award on the ground that the arbitrator ‘explicit[ly] contradict[ed]’ the parties’ agreement…we decline to follow such reasoning. In our view…, a legally incorrect decision, even one that ‘explicitly contradict[s]’ the parties’ agreement, is just that—a legally incorrect decision, which is not subject to correction by a trial court.”
Segal expressed agreement with the decision in Safari.
Arbitrator’s Decision
The arbitration agreement in the present case provided that the prevailing party was entitled “to an award of its reasonable costs and expenses, including, but not limited to, attorneys’ fees.” Nonetheless, arbitrator Michael Harrison made no such award.
Segal noted that the arbitrator in the present case interpreted an agreement by the parties as conferring upon him “discretion to deny an award of attorneys’ fees where the prevailing parties’ fees had been paid by a non-prevailing party,” and, the jurist observed:
“The arbitrator had the authority to make that interpretation.”
He commented that if the parties “wanted to tie the hands of the arbitrator, they could have included language requiring the arbitrator to award attorneys’ fees to the prevailing party,” but that the attorney fee provision in their agreement “did not do that.”
In confirming the arbitration award, Stern declined to award attorney fees and costs in connection with that proceeding. He remarked:
“I think the arbitrator had the authority and the analysis to do what was done in the arbitration. I’m just going to leave it the way it is and deny the motion for attorneys’ fees.”
Segal said that Code of Civil Procedure §1293.2 provides that the “court shall award costs upon any judicial proceeding under this title,” governing arbitrations, and that. On remand, the amount of those fees must be set.
The case is Cohen v. TNP 2008 Participating Notes Program, LLC, 2019 S.O.S. 447.
The defendants in the case were represented by Michael F. Sitzer and Stefanie M. Sitzer of Sitzer Law Group in Newport Beach, and Daniel J. Callahan, David J. Darnell and Stephanie A. Sperber of Callahan & Blaine in Santa Ana. Gerard P. Fox and Marina V. Bogorad of Gerard Fox Law in Los Angeles were counsel for the plaintiffs.
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