Opinion
NOT TO BE PUBLISHED
Super. Ct. No. 134449
HULL, J.This case involves a challenge to an arbitrator’s refusal to award attorney fees to plaintiff Carol Miller after she prevailed on some of her claims against her former employer, defendant Lifestyles Senior Housing Managers. Appealing from the judgment confirming the arbitrator’s decision, plaintiff asserts that the arbitrator acted in excess of his authority by failing to award statutorily mandated fees. Defendants seek sanctions for a frivolous appeal. We deny the request for sanctions and affirm the judgment.
Facts and Proceedings
After plaintiff was fired from her job as the executive director of defendant’s assisted living facility, she filed a complaint against defendant and her supervisor, Michael Ruggles. (References to defendant, in the singular, are to Lifestyles Senior Housing Managers.) The six causes of action alleged various torts and Labor Code violations.
In accordance with the parties’ agreement, the complaint was heard by an arbitrator. The arbitrator decided against plaintiff on four of her causes of action (including all claims against her supervisor) but found in favor of plaintiff on two others. Specifically, in her fourth cause of action, plaintiff alleged she was fired because she refused to retain residents who required a higher level of care than defendant could legally provide. The arbitrator agreed that defendant’s conduct violated Labor Code section 1102.5, subdivision (c), which precludes an employer from retaliating against an employee “for refusing to participate in an activity that would result in a violation of state or federal statute, or a violation or noncompliance with a state or federal rule or regulation.” (Unspecified statutory references that follow are to the Labor Code.) The arbitrator also found for plaintiff on her fifth cause of action for wrongful termination in violation of public policy, based on the same set of facts.
The arbitrator awarded plaintiff $39,030, representing $29,030 in lost income and $10,000 in penalties pursuant to section 1102.5, subdivision (f). He asked the parties to provide additional briefing on the issue of whether attorney fees could be awarded.
Plaintiff filed a motion seeking $414,720 in attorney fees under section 2699. In order to put this claim and the arbitrator’s ruling in context, we briefly outline the relevant provisions of this statute.
Section 2699, subdivision (a) provides: “Notwithstanding any other provision of law, any provision of this code that provides for a civil penalty to be assessed and collected by the Labor and Workforce Development Agency... for a violation of this code, may, as an alternative, be recovered through a civil action brought by an aggrieved employee on behalf of himself or herself and other current or former employees....”
Many Labor Code provisions specify the amount of penalty to be imposed. For example, section 1102.5, the section under which plaintiff prevailed, provides that a penalty not to exceed $10,000 may be imposed for each violation of the statute. (§ 1102.5, subd. (f).)
Other provisions do not specify a particular penalty amount, and section 2699, subdivision (f) establishes the civil penalties to be imposed when a penalty is not specifically provided. For example, subdivision (f)(2) provides that an employer of one or more employees is subject to a penalty of $100 for each aggrieved employee per pay period for the initial violation and $200 per employee for each subsequent violation.
Section 2699, subdivision (g)(1) provides: “[A]n aggrieved employee may recover the civil penalty described in subdivision (f) in a civil action pursuant to [specified procedures] filed on behalf of himself or herself and any other current or former employees against whom one or more of the alleged violations was committed. Any employee who prevails in any action shall be entitled to an award of reasonable attorney’s fees and costs. Nothing in this part shall operate to limit an employee’s right to pursue or recover other remedies available under state or federal law, either separately or concurrently with an action taken under this part.” (Italics added.)
Plaintiff asserted she was entitled to fees under section 2699, subdivision (g)(1). The arbitrator denied plaintiff’s motion for attorney fees, ruling that section 2699 “has two separate and distinct provisions for private enforcement. Subsection (a) authorizes an aggrieved employee to bring an action to recover any civil penalty provided for in the Labor Code under certain circumstances. Here, plaintiff brought such an action to recover the penalty awarded pursuant to Labor Code section 1102.5. That action was successful; however, it is authorized by section 2699(a). That section of the Labor Code does not provide for a recovery of attorneys fees.
“The attorney’s fees provision of Labor Code section 2699[g] provides for the recovery of attorneys fees if the aggrieved employees successfully [bring] an action to recover the penalties provided for in section 2699[f]. The plaintiff did not bring such an action. Frankly, the link between the attorney fees clause in subsection [g], and the penalties in subsection [f] is so clear there is no discretion to be exercised.
“Although this decision with respect to plaintiff’s claim for attorneys’ fees appears to be compelled by the statute, it would also appear to be compelled by considerations of due process. Basic due process requires that any litigant be put on notice of the claims made against them. The attorneys fees shifting provisions of code sections like Labor Code section 2699[g] create such huge exposure for a defendant that it would appear an unconstitutional deprivation of due process to award those fees in any case where the fact of that request has not been made crystal clear.”
The arbitrator awarded plaintiff $7,517 in costs (she had claimed $30,260), but also awarded costs to defendant Ruggles (plaintiff’s supervisor) in the amount of $7,705.
Defendants filed a motion to confirm the arbitrator’s award and plaintiff filed a motion to vacate it. She asserted that the arbitrator exceeded his powers by failing to award statutorily mandated attorney fees.
The trial court confirmed the award and denied plaintiff’s motion to vacate, ruling: “The court finds that, even if the arbitrator’s interpretation of [section] 2699, [subdivision] (g) was incorrect, the court does not have authority to overrule that determination. As stated by our Supreme Court..., ‘arbitrator’s do not “exceed their powers”... 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.’ Moshonov v. Walsh [2002] 22 Cal.4th 771, 775-776.... In the present case, the arbitrator interpreted the attorney’s fee provision of [section] 2699, [subdivision] (g), finding that it excluded cases sought under [section] 2699, [subdivision] (a).”
Plaintiff appeals from the ensuing judgment.
Discussion
Plaintiff reiterates her claim that the arbitrator exceeded his authority by refusing to award attorney fees that plaintiff contends are mandated by section 2699, subdivision (g). We disagree.
Arbitration is designed to resolve disputes quickly, inexpensively and conclusively. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 11. [Moncharsh]) Consequently, judicial review is available only in limited circumstances. Courts cannot review the merits of the dispute, the validity of the arbitrator’s reasoning, or the sufficiency of the evidence supporting an award. (Ibid.) Judicial review can take only one of two forms. In certain limited situations, such as obvious and correctable miscalculations or errors in form, a court may correct an arbitration award. (Code Civ. Proc., § 1286.6.) In cases of more substantive error, Code of Civil Procedure section 1286.2 permits a court to vacate an arbitration award in a few specific situations. This appeal centers on one such provision.
Plaintiff asserts that the arbitrator’s award should have been vacated under Code of Civil Procedure section 1286.2, subdivision (a)(4), which provides in relevant part that “the court shall vacate the [arbitration] award if... [t]he arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted.”
However, courts have repeatedly emphasized the limited nature of judicial review and have construed this provision very narrowly. In Moncharsh, a case nearly 20 years old, the California Supreme Court held that “an arbitrator’s decision is not generally reviewable for errors of fact or law, whether or not such error appears on the face of the award and causes substantial injustice to the parties.” (Moncharsh, supra, 3 Cal.4th at p. 6.) As the court explained, “[I]t is the general rule that, with narrow exceptions, an arbitrator’s decision cannot be reviewed for errors of fact or law. In reaffirming this general rule, we recognize there is a risk that the arbitrator will make a mistake. That risk, however, is acceptable for two reasons. First, by voluntarily submitting to arbitration, the parties have agreed to bear that risk in return for a quick, inexpensive, and conclusive resolution to their dispute. [Citation.] As one commentator explains, ‘the parties to an arbitral agreement knowingly take the risks of error of fact or law committed by the arbitrators and that this is a worthy “trade-off” in order to obtain speedy decisions by experts in the field whose practical experience and worldly reasoning will be accepted as correct by other experts.’ [Citation.] ‘In other words, it is within the power of the arbitrator to make a mistake either legally or factually. When parties opt for the forum of arbitration they agree to be bound by the decision of that forum knowing that arbitrators, like judges, are fallible.’ [Citation.]” (Id. at pp. 11-12.)
“A second reason why we tolerate the risk of an erroneous decision is because the Legislature has reduced the risk to the parties of such a decision by providing for judicial review in circumstances involving serious problems with the award itself, or with the fairness of the arbitration process.” (Moncharsh, supra, 3 Cal.4th at p. 12.)
An arbitrator has the power to resolve all of the merits of the controversy submitted by the parties, including all the contested issues of fact and law submitted for decision. (Moncharsh, supra, 3 Cal.4t at p. 28.) “It is well settled that ‘arbitrators do not exceed their powers merely because they assign an erroneous reason for their decision.’ [Citations.] A contrary holding would permit the exception to swallow the rule of limited judicial review; a litigant could always contend the arbitrator erred and thus exceeded his powers.” (Ibid.)
The court noted that earlier decisions had permitted judicial review of an arbitrator’s decision when a party claimed the entire contract or transaction was illegal, and it recognized “that there may be some limited and exceptional circumstances justifying judicial review of an arbitrator’s decision when a party claims illegality affects only a portion of the underlying contract. Such cases would include those in which granting finality to an arbitrator’s decision would be inconsistent with the protection of a party’s statutory rights. [Citation [Such as when] ‘Congress intended to preclude a waiver of judicial remedies of the statutory rights at issue’].)” (Moncharsh, supra, 3 Cal.4th at p. 32.) However, “[a]bsent a clear expression of illegality or public policy undermining this strong presumption in favor of private arbitration, an arbitral award should ordinarily stand immune from judicial scrutiny.” (Ibid.)
These principles have been reaffirmed in numerous subsequent decisions. We briefly outline three as examples.
In Moshonov v. Walsh, supra, 22 Cal.4th 771 (Moshonov), a clause in a real estate purchase contract entitled the prevailing party in a dispute to attorney fees. (Id. at p. 774.) The purchaser filed a complaint against the seller and his brokers for a variety of tort and contract claims. The arbitrator found in favor of the defendants but his award did not initially mention attorney fees. On remand, however, the arbitrator “found defendants were the prevailing parties and were entitled to their costs of suit, but ruled the underlying contract did not provide for attorney fees on the tort actions pled against defendants.” (Id. at p. 775.) The arbitrator therefore denied defendants’ motion for attorney fees.
Citing often to Moncharsh, the Moshonov court again emphasized the very narrow circumstances justifying review of an arbitration award. (Moshonov, supra, 22 Cal.4th at p. 775.) The court ruled that judicial review was unavailable because the parties had submitted the matter, including the issue of fees, to arbitration and the arbitrator had the power to decide these matters. (Id. at p. 776.) The recovery or nonrecovery of fees was a “contested issue[] of law and fact submitted to the arbitrator for decision” and could not be examined for error. (Ibid.) The court also concluded that because the arbitrator’s decision was based on his interpretation of the attorney fees clause, it did not conflict with the express terms of the contract. (Id. at p. 778.) The same is true here. The arbitrator’s decision was based on his interpretation of the statutory fee provision; by concluding that section 2699, subdivision (g)(1) was inapplicable to plaintiff, his decision did not conflict with the terms of that statute.
In another case, Jordan v. Department of Motor Vehicles (2002) 100 Cal.App.4th 431 (Jordan), this court reiterated that review is not available to reconsider the “merits of the controversy, the validity of the arbitrator’s reasoning, or the sufficiency of the evidence. [Citation.] Indeed, an arbitrator’s decision is not generally reviewable for errors of fact or law, even if the error appears on the face of the award and causes substantial injustice.” (Id. at p. 443.) We outlined the few situations in which an arbitrator’s decision can be deemed an excess of powers: “when he acts without subject matter jurisdiction [citation], decides an issue that was not submitted to arbitration [citations], arbitrarily remakes the contract [citation], upholds an illegal contract [citation], issues an award that violates a well-defined public policy [citation], issues an award that violates a statutory right [citation], fashions a remedy that is not rationally related to the contract [citation], or selects a remedy not authorized by law [citations]. In other words, an arbitrator exceeds his powers when he acts in a manner not authorized by the contract or by law.” (Id. at. p. 443.)
In Jordan, arbitrators ordered an $88 million award against the State of California. We relied on the public policy exception to judicial review of arbitration decisions, and concluded the arbitrators exceeded their powers in making an award that violated the constitutional prohibition against gifts of public funds. (Jordan, supra, 100 Cal.App.4th at pp. 450-453.) No such concerns are present in plaintiff’s case.
Most recently, in Pearson Dental Supplies, Inc. v. Superior Court (2010) 48 Cal.4th 665 (Pearson), the California Supreme Court again emphasized that judicial review of contractual arbitration awards is very limited, and that “generally speaking, a court is not permitted to vacate an arbitration award when the award is based on errors of law.” (Id. at p. 669.) However, the court found the case before it in fact involved a reviewable legal error. (Id. at p. 679.) In Pearson, an arbitrator erroneously concluded that plaintiff had not submitted his claims to binding arbitration within the requisite timeframe and therefore had forfeited his rights to proceed in arbitration. (Id. at pp. 671-782.)
The court underlined that it was crafting a “narrow[] rule” to address the situation before it. (Pearson, supra, 48 Cal.4th at p. 679.) The court framed the issue as one in which “as a result of the arbitrator’s clear legal error, plaintiff’s claim was incorrectly determined to be time-barred. Indeed, the legal error misconstrued the procedural framework under which the parties agreed the arbitration was to be conducted, rather than misinterpreting the law governing the claim itself. It is difficult to imagine a more paradigmatic example of when ‘granting finality to an arbitrator’s decision would be inconsistent with the protection of a party’s statutory rights’ [citation] than the present case, in which, as a result of allowing the procedural error to stand, and through no fault of the employee or his attorney, the employee will be unable to receive a hearing on the merits of his FEHA claims in any forum.... [¶] We therefore hold that when, as here, an employee subject to a mandatory employment arbitration agreement is unable to obtain a hearing on the merits of his FEHA claims, or claims based on other unwaivable statutory rights, because of an arbitration award based on legal error, the trial court does not err in vacating the award.” (Id. at p. 680, fn. omitted.)
Here, however, plaintiff received a full hearing on the issue of attorney fees. The parties briefed and argued the matter, and the arbitrator, interpreting section 2699, subdivision (g)(1), determined that plaintiff’s claim was not brought under a statutory provision that entitled her to fees. Whether that conclusion was right or wrong is immaterial. Plaintiff had a hearing, made her case, and lost. Under these circumstances, Pearson is inapplicable. The arbitrator’s decision was not subject to review.
Plaintiff nonetheless argues that because she was entitled to attorney fees under section 2699, subdivision (g), the arbitrator’s failure to make such an award violated her statutory rights, thereby exceeding the arbitrator’s authority. Consequently, she insists, the arbitrator’s award is reviewable. We do not agree. Under plaintiff’s interpretation, the exception would subsume the rule, permitting review any time an arbitration involved a statutory claim and a party did not like the arbitrator’s conclusion. That simply is not the case.
For example, in Alexander v. Blue Cross of California (2001) 88 Cal.App.4th 1082, a plaintiff complained that an arbitrator exceeded his authority by failing to impose discovery sanctions that she believed were mandated by statute. (Id. at pp. 1086-1087.) Citing California Supreme Court decisions, the court reiterated that an arbitrator does not exceed his or her powers merely by rendering an erroneous decision on a legal or factual issue if the issue was within the scope of the controversy submitted for arbitration. (Id. at p. 1089.) The court concluded that by submitting the discovery issue to arbitration, the plaintiff could not later assert that the arbitrator exceeded his powers by deciding the matter, even if he decided it incorrectly. (Ibid.) Even if an arbitration agreement requires an arbitrator to apply a particular law, the failure to do so is not in excess of the arbitrator’s powers. (Id. at p. 1090.) “A different conclusion would unduly extend the scope of judicial review of arbitration proceedings.” (Ibid.) The same is true here.
Moreover, we note that plaintiff’s underlying premise is debatable: it is not clear that the arbitrator actually violated section 2699, subdivision (g), as evidenced by the events leading up to this appeal. The parties disputed whether this statute authorized an award of attorney fees in actions brought under other subdivisions of the statute, and whether fees were available if the lawsuit was brought in an individual capacity rather than as a class action. Contrary to plaintiff’s claim, this is not a situation in which an arbitrator failed to apply a statute. Instead, the arbitrator interpreted the statute and concluded that plaintiff was not entitled to attorney fees. This decision was within the arbitrator’s authority and is not reviewable. To hold otherwise would result in courts reviewing virtually any arbitration award involving a statute, directly contravening the purposes and policies underlying arbitration.
The cases plaintiff cites are inapposite. For example, in Board of Education v. Round Valley Teachers Assn. (1996) 13 Cal.4th 269 (Round Valley), an arbitrator exceeded his powers by enforcing provisions of a collective bargaining agreement that purported to give greater procedural protections to probationary employees than authorized by the Education and Government Codes. (Id. at pp. 272, 276-277.) Specifically, public policy as expressed through statutes gave school districts the right not to retain a probationary teacher, whether or not there was cause; the collective bargaining agreement, however, covered these teachers and entitled them to the arbitration provisions of the agreement. (Id. at pp. 272-273, 276.) The court held that requiring arbitration for probationary employees would conflict with public policy and the school district’s statutory right not to retain a teacher. (Id. at p. 277.) The court did not reach the merits of the arbitrator’s decision, but simply concluded that the arbitrator had no authority to arbitrate the probationary teachers’ claims because statutes preempted the collective bargaining provisions that permitted arbitration.
Here, however, there is no question that the arbitrator had the authority to hear the attorney fees issue. Plaintiff’s argument is instead focused on her belief that the arbitrator reached an erroneous decision in resolving the parties’ dispute, a matter unrelated to Round Valley. As defendant points out, Round Valley actually reiterated the general rule that “the merits of an arbitration award, either on questions of fact or of law, are not subject to judicial review.” (Round Valley, supra, 13 Cal.4th at p. 275.) Here, the arbitrator decided that plaintiff had not brought her action under the statute that permits the recovery of attorney fees. Plaintiff’s unhappiness with that decision does not transform the arbitrator’s ruling into a violation of public policy or statute that entitles plaintiff to judicial review.
Plaintiff also relies on DiMarco v. Chaney (1995) 31 Cal.App.4th 1809, in which a real estate contract provided that the prevailing party “shall be entitled to reasonable attorney’s fees and costs.” (Id. at p. 1815.) Although the arbitrator found defendant to be the prevailing party, he refused to award fees. The Court of Appeal concluded that the contract compelled an award of attorney fees and the arbitrator therefore exceeded his powers in denying defendant’s request. (Id. at pp. 1814-1815.)
Contrary to plaintiff’s claim, courts have not continued to cite to DiMarco as “authority, ” at least in a stare decisis or even compelling sense. DiMarco has been repeatedly distinguished and repeatedly questioned, but never (to our knowledge) followed. (See, e.g., Gueyffier v. Ann Summers Ltd. (2008) 43 Cal.4th 1179, 1188; Moshonov v. Walsh, supra, 22 Cal.4th at p. 779; Moore v. First Bank of San Luis Obispo (2000) 22 Cal.4th 782, 788-789; Century City Medical Plaza v. Sperling, Isaacs & Eisenberg (2001) 86 Cal.App.4th 865, 876 at fn. 20, 881; Kahn v. Chetcuti (2002) 101 Cal.App.4th 61, 67-68.)
The Moshonov court’s comments distinguishing DiMarco are equally applicable here: “In DiMarco..., the appellate court found no interpretation of the fees clause, express or implied in the arbitrator’s decision, according to which the defendant would not have been entitled to her fees; rather, the court concluded the arbitrator’s denial of fees to the prevailing party on an action to rescind the contract, based solely on the arbitrator’s belief he had discretion to do so, conflicted with the explicit and mandatory terms of the agreement, which provided that the prevailing party in an action arising from the agreement ‘shall’ recover fees. Here, by contrast, the arbitrator expressly based her decision on an interpretation of the contractual fees clause according to which the clause did not apply to the action at hand. Interpretation of the contract underlying this dispute being within the matter submitted to arbitration, such an interpretation could amount, at most, to an error of law on a submitted issue, which we have held is not in excess of the arbitrator’s powers[.]” (Moshonov, supra, 22 Cal.4th at p. 779.)
Here too the arbitrator based his decision on an interpretation of a fee provision. Unlike DiMarco, he did not flagrantly disregard the fee provision, but instead attempted to construe it. He concluded that section 2699, subdivision (g) authorized an award of fees only if the underlying action was brought under section 2699, subdivision (f). Since plaintiff did not bring her lawsuit under that statute, she was not entitled to fees and section 2699, subdivision (g) was inapplicable. As Moshonov noted, an erroneous interpretation of a fee provision is “at most... an error of law on a submitted issue, which... is not in excess of the arbitrator’s powers.” (Moshonov, supra, 22 Cal.4th at p. 779.)
Whether or not the arbitrator’s decision was correct is beside the point. He did not exceed his powers in deciding the matter submitted to him by the parties. The trial court recognized the well-established principles governing review of arbitration decisions and confirmed the arbitrator’s award. Plaintiff’s claim of error is without merit.
Defendants seek sanctions for a frivolous appeal.
An appeal is frivolous if it “indisputably has no merit--when any reasonable attorney would agree that the appeal is totally and completely without merit.” (In re Marriage of Flaherty (1982) 31 Cal.3d 637, 650; see Code Civ. Proc., § 907.) For years, courts have made it abundantly clear that judicial review of an arbitrator’s decision is available only in very limited situations, and that an alleged misapplication of the law is not one of them. However, plaintiff clearly believed that this case involved more, namely, that the arbitrator’s ruling violated public policy by ignoring a statutory mandate for attorney fees. For reasons already explained, we reject plaintiff’s characterization of the arbitrator’s decision. But determining this case against plaintiff is not equivalent to finding her appeal frivolous. While defendants’ motion for sanctions presents a close question, we conclude that sanctions are unwarranted.
Disposition
Defendants’ motion for sanctions for a frivolous appeal is denied. The judgment is affirmed. Defendants are awarded their costs on appeal. (Cal. Rules of Court, rule 8.278(a).)
We concur: BLEASE, Acting P. J. BUTZ, J.