Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court No. BS103840 of Los Angeles County. Ronald M. Sohigian, Judge.
Law Offices of Carol L. Newman, Carol L. Newman; and Timothy D. McGonigle for Defendants and Appellants.
Rutter Hobbs & Davidoff Incorporated and Geoffrey M. Gold for Plaintiff and Respondent.
ASHMANN-GERST, J.
Respondent Brandlin & Associates Accountancy Corporation (Brandlin) initiated arbitration against appellants Robert M. Silverman, a professional corporation, and Robert M. Silverman (collectively Silverman) to recover unpaid expert witness fees. The arbitrator awarded Brandlin all the unpaid expert witness fees that it billed ($278,975.54) even though Silverman argued that Brandlin should be limited to the reasonable value of its services ($80,000) under a quantum meruittheory. Despite Silverman’s petition to vacate the arbitration award, it was confirmed by the trial court. Silverman appeals, contending that the arbitrator was guilty of the following litany of errors: (1) he failed to decide the pivotal issue at arbitration, which was the reasonable value of Brandlin’s fees; (2) he refused to reopen the arbitration hearing to consider a declaration from a new expert who said he would have only charged $50,000 to $75,000; and (3) he failed to honor the parties’ contract to decide the reasonable value of its expert witness fees at the end of the engagement. Last, Silverman argues that Brandlin acted unethically by accepting an engagement it was not qualified for and that, as a result, the parties’ engagement contract violates public policy. In his view, the engagement contract cannot support an arbitration award.
We find no error and affirm. When a dispute is governed by a contract, as was the case here, a quantum meruit analysis is improper. The arbitrator properly decided not to reopen the hearing to consider a declaration from a new expert because an award had already been issued. Regardless, the declaration would not have changed the arbitration award. The arbitrator honored the parties’ engagement contract; it required Silverman to pay Brandlin on an hourly basis. Though Silverman suggests that there was a separate, superseding contract to arbitrate the reasonable value of Brandlin’s services, this finds no support in the record. Silverman’s public policy argument is based on the theory that Brandlin violated the code of professional conduct of the American Institute of Certified Public Accountants. Beyond the fact that there is no evidence that Brandlin acted unethically, an arbitration award is generally not subject to vacatur on the grounds of public policy unless it was based on a contract that violates a public policy expressed by the Legislature. There is no such public policy at play here. Moreover, Brandlin’s behavior cannot otherwise invalidate a contract that, on its face, did not have an illegal or improper purpose. The parties’ engagement contract was a standard and lawful agreement for expert witness services.
FACTS
Background
Silverman, an attorney, hired Duross O’Bryan (O’Bryan) to provide expert witness services and testimony on damages in an action against General Motors (General Motors action). Due to a conflict, O’Bryan was removed from the case. He recommended Brandlin as a replacement. Brandlin is an accounting firm that provides forensic accounting services.
Silverman hired Brandlin in August 2004.
By the end of January 2005, Brandlin’s bill was $151,657.32. On January 31, 2005, the parties signed an engagement contract. The engagement contract stated that it was Brandlin’s understanding that it would be paid for all fees and expenses incurred, whether or not the engagement was completed, or the results were used. Regarding fees, the engagement contract provided: “[Brandlin] will be compensated at our billing rates for professional time incurred in this engagement plus out-of-pocket expenses and administrative costs and such amounts are not contingent upon the outcome of [the] case. Our fees are based upon the hours actually expended by each assigned staff member extended by their hourly billing rate, which currently range[s] from $90 to $410 per hour, depending on the personnel assigned. [Brandlin] charge[s] for all time expended for travel.” Silverman was required to pay a $10,000 retainer.
The engagement contract further provided: “In accordance with [Brandlin’s] policies and procedures, we will provide you with reports of incurred time, fees and expenses as frequently as weekly. It is our practice to provide clients with copies of these reports via e-mail. The purpose of these reports is to keep clients advised of costs incurred in an effort to avoid otherwise avoidable misunderstandings and disputes. [¶] [Brandlin] will submit [its] billings periodically which provide for payment in full within 10 days. All past due invoices are subject to an 18.0% per annum interest charge (1.5% per month). Invoices are deemed accepted unless advised by you in writing within 10-days of issuance. . . . [¶] Although [Brandlin] will submit periodic billings according to the policies discussed in the preceding paragraph, [Silverman has] requested and [Brandlin has] agreed to defer payment of [Brandlin’s] fees and expenses,” other than the $10,000 retainer, upon the settlement or completion of the General Motors action. Silverman signed a guaranty.
The General Motors action was settled in April 2005. Brandlin’s final bill was for $288,975.54. Silverman wrote Brandlin a conditional check for $70,000 to satisfy all fees. It was not cashed.
Arbitration
On August 9, 2005, Brandlin served a demand for arbitration on a claim for breach of contract against Silverman.
The stipulation
Brandlin and Silverman signed a stipulation regarding uncontested facts. According to the stipulation, inter alia, Brandlin hired Silverman pursuant to the engagement contract.
The prearbitration briefs
In its prearbitration brief, Brandlin sought $279,000, prejudgment interest and attorney fees and costs. Brandlin averred that the parties entered into a contract, Brandlin performed and Silverman failed to pay even though he never objected in writing within 10 days of receiving bills.
According to Brandlin, Silverman planned to argue that the issue at arbitration was the reasonable value of expert services. Brandlin disagreed, citing Hedging Concepts, Inc. v. First Alliance Mortgage Co. (1996) 41 Cal.App.4th 1410, 1419 (Hedging Concepts), which stated: “A quantum meruit or quasi-contractual recovery rests upon the equitable theory that a contract to pay for services rendered is implied by law for reasons of justice. . . . [Citation.] However, it is well settled that there is no equitable basis for an implied-in-law promise to pay reasonable value when the parties have an actual agreement covering compensation.”
Silverman also filed a prearbitration brief. He argued that the agreement should be rescinded because Brandlin violated ethical standards by accepting services it could not competently perform, and it violated the covenant of good faith and fair dealing by negligently supervising James Ward (Ward), padding the bills, submitting fraudulent bills, and lacking sufficient experience for the job. As a result, Silverman argued that Brandlin should only receive the reasonable value of its services, which was $80,000 less the original retainer of $10,000.
The witnesses
From April 12, 2006 to April 14, 2006, testimony was offered by Jeff Brandlin (the principal of Brandlin), Ward (a Brandlin employee), Linda Bang, Silverman, his cocounsel Carol L. Newman (Newman), and his clients in the General Motors action. Brandlin called William J. Michiels (Michiels) as an expert, and Silverman called O’Bryan as an expert.
Michiels testified that Brandlin’s billing was appropriate.
On cross-examination, Ward testified that on January 31, 2005, the day the engagement contract was signed, Silverman and he discussed Brandlin’s fees. Regarding that specific discussion, Ward was asked: “What . . . language do you recall?” He replied: “That at the end of the case if we needed to discuss the fees, we would discuss it at that time.” Additionally, Ward remembered Silverman stating that “we’d work it out later.”
Ward’s declaration
Ward submitted a declaration stating: He is a certified public accountant who has a “high degree of specialized professional expertise acting as an accounting expert and financial consultant doing litigation related support work.” He was present at the meeting in August 2004 when Silverman hired Brandlin. Jeff Brandlin disclosed that he had never testified in court as an expert witness. Nonetheless, it was agreed that Jeff Brandlin would be the testifying expert. It was further agreed that Ward would prepare the damages calculation. Silverman provided a set of three binders and said they contained all the information necessary to calculate economic damages. Brandlin asked for a $25,000 retainer to begin preparing an initial damages calculation. Brandlin then went to work.
During September and October 2005, Ward worked on the damages model analysis. On October 27, 2004, Ward hand delivered and e-mailed Silverman a work in progress report. It showed Brandlin’s time and expenses actually incurred during the period August 31, 2004, to October 24, 2004, and stated that the outstanding balance due was $27,018.01. On December 2, 2004, Ward sent Silverman a work in progress which indicated that the balanced due was $59,992. Another work in progress report was sent on December 8, 2004. By that time the balance due had risen to $69,312. After receiving the December 8, 2004 work in progress report, Silverman asked Brandlin to send a bill. The December 21, 2004 work in progress report, set forth a balance of $80,899.96. The next work in progress report, dated December 30, 2004, stated that $99,192.13 was due. According to the January 5, 2005 work in progress report, Silverman owed $106,659 for time and expenses through December 31, 2004. As represented in the January 21, 2005, invoice, the total amount due had grown to $151,657.32.
On January 31, 2005, Ward met with Silverman regarding the outstanding bill. He said that he would see to it that Brandlin was paid in full at the conclusion of the General Motors action, but in no event later than December 31, 2005. They discussed that Jeff Brandlin’s rate was $410 an hour. Silverman agreed to, and signed, the agreement and guaranty. He never stated that he had a problem with the amount of Brandlin’s fees, which were nearing $160,000. Ward sent a work in progress report on February 14, 2005. It stated that $161,910 was owing.
At the end of February 2005, Ward participated in a settlement conference in the General Motors action. The work in progress reports from February 25, 2005, and March 2, 2005, showed, respectively, that Silverman owed Brandlin $178,589 and $184,059. The March 22, 2005 work in progress report, indicated that the bill had increased to $185,675. As indicated in an April 6, 2005 work in progress report, the bill further increased to $235,841. The April 14, 2005, and April 25, 2005 work in progress reports, indicated that the billed amounts were $250,077 and $288,976, respectively.
During the engagement, Ward routinely provided Silverman with work in progress reports. Silverman never objected to Ward, either orally or in writing, regarding Brandlin’s billing.
The arbitrator’s initial impressions
Three days of hearings were completed on April 14, 2006. The arbitrator shared the following impressions with the parties: (1) Jeff Brandlin, the principal of Brandlin, was legally qualified as an expert witness. However, he was not sufficiently experienced in testifying in court as an expert witness in complex civil litigation and should have declined the engagement. (2) Brandlin should have exercised a higher degree of supervision over the work performed by its employee, Ward. (3) Serious questions were raised as to whether time spent by Ward was efficient, effective or necessary under the engagement. (4) If money was awarded to Brandlin, it was entitled to costs and attorney fees. The arbitrator asked Brandlin and Silverman to discuss these impressions in their postarbitration briefs.
The postarbitration briefs
Brandlin submitted a postarbitration brief and argued: Even if Ward should have received more supervision, Silverman cannot complain about the bills because he did not object in writing. Ward had over 35 years of experience as a litigation consultant, and Silverman never asked Brandlin to replace Ward. Instead, Silverman asked Ward to perform task after additional task. Brandlin did not submit fraudulent bills, as established by the evidence at the hearing. Also, it did not engage in unprofessional conduct. Silverman’s expert, O’Bryan, testified that he has high regard for Brandlin. He refused to offer an opinion on the quality of Brandlin’s work, or the content of its bills. There is no basis for Silverman to rescind the agreement. Though he argued that he signed the engagement contract due to duress, fraud or mistake, there is no such evidence. Brandlin performed the work professionally and in good faith.
In the responsive brief, Silverman averred: “[Jeff Brandlin] had no trial experience as an expert witness and would in [Silverman’s] view have been totally discredited before the jury in the [General Motors action]. [Brandlin] would never [had] been retained in the first instance if [Jeff Brandlin] had disclosed to [Silverman] that he never testified as a damage expert in a civil jury trial.” At trial, Jeff Brandlin performed so poorly that Silverman considered replacing him with Ward. This is because he failed to supervise Ward “or stay abreast of the case.” Due to Jeff Brandlin’s failure to supervise his staff and realistically evaluate his expertise for the assignment, Brandlin should recover nothing.
The interim award
On May 30, 2006, the arbitrator issued an interim award. In his findings, the arbitrator noted that Silverman was told that Jeff Brandlin had not previously testified as an expert witness. After Silverman interviewed Jeff Brandlin and Ward, Silverman determined that Jeff Brandlin was a good communicator and should testify, and that Ward, an experienced accountant, would provide analysis and assistance to Jeff Brandlin. At the commencement of the engagement, the parties discussed a fee of $25,000 to $75,000. The agreement, however, did not contain a cap on fees. Silverman agreed to pay an hourly rate for all work performed. Brandlin’s final bill was $288,975.54. Silverman never objected to any of Brandlin’s bills in writing, as required by the engagement contract. The interim award gave Brandlin $278,975.54, the amount billed less the $10,000 retainer, plus interest and costs. The arbitrator retained jurisdiction to award attorney fees.
Beyond the foregoing, the interim award contained the following statements: “35. There is no discussion in either [Silverman’s] closing or reply briefs as to what the arbitrator is to make of the fact that [Silverman] signed both the [agreement] and the guaranty on January 31, 2005 at a time when he knew that the current unpaid bill was $151,657.32. Is that to be completely disregarded? [¶] 36. Further, it is not contested that additional work was done by Brandlin (preparing for his deposition, being deposed, preparing for trial) and Ward (preparing questions for use in examination, attending depositions of opposing experts, etc.) after January 31, 2005 at the request of either Silverman or Newman. [¶] 37. [Silverman], as a competent attorney, surely knew the legal effect of signing a written contract for compensation on a time and material[] basis without any limiting dollar amount or cap included in the language. [¶] 38. The only direct evidence offered by anyone other than the interested parties in this case on the issue of accountant malpractice, breach of contract or violation of the implied covenant of good faith and fair dealing was the testimony of [Michiels]. The arbitrator’s expressed concerns about [Ward’s] efficiency or [Jeff Brandlin’s] effectiveness are not the equivalent of evidence. [¶] 39. The evidence is simply not sufficient for the arbitrator to find that there was a violation of the implied covenant of good faith and fair dealing or some other breach of the [agreement] between [Brandlin and Silverman] to bring a quantum meruit analysis into play. On top of that, there is no direct evidence that would enable such an analysis. The arbitrator is not willing to engage in speculation as to what a ‘reasonable’ or ‘fair’ amount would have been in the absence of such direct evidence.”
Motions following the interim award
Brandlin filed a motion to fix costs and attorney fees.
Silverman filed a motion to tax costs. Additionally, he filed a motion to correct or reconsider the interim award or, in the alternative, to reopen the hearing. He argued that the parties agreed to defer a determination of the reasonableness of Brandlin’s fees until after the General Motors action, and that objections to the bills did not have to be in writing. In Silverman’s view, Brandlin should take nothing because Jeff Brandlin should have declined the engagement, or Brandlin should receive the reasonable value of its services, which was $70,000. Silverman pointed out that the arbitrator initially concluded that Jeff Brandlin should not have accepted the engagement, the time spent by Ward was unnecessary, and that Brandlin did not properly supervise the work performed by Ward.
Ruling on the motions
On July 24, 2005, the arbitrator responded to all three motions and stated: “Ruling on these motions is made . . . difficult by [Silverman’s] continuing to misstate the evidence, misstate the arbitrator’s findings, and then going on to suggest remedies that could be considered appropriate based on those misstatements. [¶] For example, [Silverman] implies that my statements in my April 15, 2006 memo were findings. . . . The memo clearly states those statements were impressions that counsel were to address in their closing briefs. They were not findings. [¶] He goes on to say, at p. 4:7-15, ‘. . [Brandlin’s] [engagement contract] which was executed on January 31, 2005 specifically did not require [Silverman] to put any objections to the billings in writing. . . .’ To the contrary, the engagement [contract] signed by [Silverman] contains the following language: ‘Invoices are deemed accepted unless advised by you in writing within 10-days of issuance. . . .’ Further, it defers payment to the end of the case. [¶] The only two participants to the January 31 conversation were Silverman who said words to the effect that ‘We’ll have to work it out later, but you’ve already tripled our initial expectation of the fees to be charged,’ and Ward who said nothing, and did not understand that Silverman was saying that he wasn’t going to pay the bill. . . . Then Silverman signed the [engagement contract] and the guarantee. Neither document refers to any dispute of the bills to date, nor did they contain any specific protocol for disputing subsequent bills other than the above quoted language.
“[Silverman] goes on to say that there was substantial testimony on the appropriate level of reasonable fees, and [Brandlin’s] expert ‘. . . never testified definitively that Brandlin’s bills were reasonable. . . .’ [¶] First, opinions of others who did not review Brandlin’s work and billing submissions for the specific purpose of determining their reasonableness are not entitled to great weight. The evidence is clear that Brandlin’s fees far exceeded any expectations of the lawyers in the case or [O’Bryan], but that evidence, by itself, cannot establish that Brandlin’s bills were unreasonable.” The arbitrator pointed out that Michiels testified that the billing was appropriate. “The fact that he used the word appropriate, not the word reasonable, is unimportant. Neither on direct examination or on cross[-]examination did anyone ask Michiels whether, in his opinion, Brandlin’s billings were ‘reasonable.’ The substance of his expert testimony was that Brandlin’s bills were justified. [¶] Simply stated, the Interim Award cannot be ‘corrected’ as requested by [Silverman]. American Arbitration Association Commercial rule R-46 . . . states that the arbitrator may ‘. . . correct any clerical, typographical or computational errors in the award. The arbitrator is not empowered to redetermine the merits of any claim already decided.’”
According to the arbitrator, “[t]he foregoing discussion was intended to illustrate that [Silverman] continues to fail to comprehend that in order to come to some different conclusion than that in the Interim Award, I would need to find [Michiels’] testimony inherently incredible (I did not), or there would have to be other direct evidence from a qualified person who reviewed Brandlin’s work product and billings and came to a different conclusion with a different number. No such direct evidence was produced. [¶] All the foregoing having been taken into consideration, the arbitrator is still concerned about the disparity between the amount expected by [Silverman] . . . to be billed for the engagement. . . . [O’Bryan] testified that, in his opinion, the number, ‘. . . around 300,000’ was outrageous. . . . However, his conclusion was based on what he had originally estimated for the engagement, not on a review of Brandlin’s bills or work product.”
Based on these considerations, the arbitrator reopened the hearing. Brandlin had 10 days to advise the arbitrator whether it would waive its claim for attorney fees and costs. If Brandlin waived its claim, then the hearing would once again be closed. If Brandlin declined to waive its claim for attorney fees and costs, then Silverman was given 30 days “to submit a declaration . . . by a person with qualifications similar to those of [Michiels]. The declaration shall state that the person has reviewed the same documents reviewed by Michiels, and, if they consent to be interviewed, has interviewed Ward and [Jeff Brandlin], or, in the alternative, he/she has read [Jeff Brandlin’s] deposition and arbitration hearing testimony and Ward’s arbitration hearing testimony. The declaration shall contain the conclusions drawn by such a potential witness including, in the opinion of such expert, what would be a reasonable amount to be charged for the work performed.” If Silverman submitted a declaration, Brandlin had 15 days to submit a counter-declaration or further reply brief regarding the motion to reopen the hearing.
Brandlin objected to the ruling. It argued that the interim award could not be altered or revisited under either the American Arbitration Association Commercial Rules of Arbitration (arbitration rules) or California law. Rule 46 of the arbitration rules states that after an award is issued, “[t]he arbitrator has no power to reconsider or reweigh the merits of the award.”
The quoted language comes from Brandlin’s letter brief asking the arbitrator to reconsider his ruling on Silverman’s motion to reopen the arbitration hearing. The language is similar to the current language of the rule found at [as of 2/6/08]. The current rule 46 states: “The arbitrator is not empowered to redetermine the merits of any claim already decided.”
The arbitrator noted that pursuant to the interim award, he retained jurisdiction only as to attorney fees and costs. As a result, the arbitrator opined that reopening the hearing on the merits might be impermissible. As a result, the arbitrator sustained Brandlin’s objection.
The final award
The arbitrator issued a final award. It reiterated the interim award, then awarded attorney fees and costs.
Silverman’s expert
Silverman submitted a declaration from Kevin L. Prins (Prins). Prins reviewed hearing transcripts, the interim award, Brandlin’s billings, the declaration of Ward, and the deposition of Jeff Brandlin. Prins opined that the engagement would be considered routine for an experienced litigation consultant, and that he would have charged about $50,000 to $75,000. According to Prins, Brandlin could have reduced its fees by allocating certain tasks to lower level employees instead of having them performed by Jeff Brandlin or Ward.
The arbitrator’s response to the Prins declaration
The arbitrator acknowledged receipt of the Prins declaration, but stated that he lacked jurisdiction to act further.
The parties’ petitions to the trial court
Brandlin petitioned to confirm the arbitration award. Silverman petitioned to vacate it. He argued that the final arbitration award was defective because: (1) it rewarded Brandlin’s unethical decision to accept an assignment it was not capable of handling; (2) the final award failed to rule on the reasonable value of Brandlin’s services; (3) the arbitrator refused to enforce the agreement between the parties that they would defer any dispute over fees until the General Motors action was finally resolved; and (4) the arbitrator prejudiced Silverman by refusing to consider the declaration submitted by his expert, Prins.
The trial court denied Silverman’s petition and granted Brandlin’s petition. Judgment was entered for Brandlin.
This timely appeal followed.
STANDARD OF REVIEW
A trial court’s decision to deny a petition to correct or vacate an arbitration award is subject to de novo review. (SWAB Financial, LLC v. E*Trade Securities, LLC (2007) 150 Cal.App.4th 1181, 1198.) Insofar as the trial court resolved issues of disputed fact, we apply the substantial evidence rule. (Malek v. Blue Cross of California (2004) 121 Cal.App.4th 44, 55.)
DISCUSSION
Silverman contends that the trial court should have vacated the arbitration award because the arbitrator did not reach all issues submitted, such as the reasonable value of Brandlin’s services; the arbitrator refused to hear material evidence; the arbitrator refused to honor the parties’ agreement; and the award was based on a contract that was void as against public policy.
The issues are parsed below.
1. Principles generally applicable to arbitration.
Unless arbitrators are specifically required to act in conformity with rules of law, they may base their decision upon broad principles of justice and equity, and may expressly or impliedly reject a claim that might have been successful in court. The merits of the controversy between the parties are not subject to judicial review. Courts will not review the validity of an arbitrator’s reasoning, nor the sufficiency of the evidence to support an award. Though there is a risk that an arbitrator will make a mistake, this risk is acceptable because the parties voluntarily submitted to arbitration in exchange for quick, inexpensive and conclusive resolution of their dispute. (Moncharsh v. Heiley & Blase (1992) 3 Cal.4th 1, 6 (Moncharsh).)
2. Statutory grounds to vacate an arbitration award.
An arbitration award can be vacated if the arbitrator exceeded his powers, the rights of the party were substantially prejudiced by the refusal of the arbitrator to hear evidence material to the controversy, or the rights of the party were substantially prejudiced by conduct of the arbitrator contrary to Code of Civil Procedure section 1280, et. seq. (§ 1286.2, subd. (a).)
All further statutory references are to the Code of Civil Procedure unless otherwise indicated.
3. The arbitrator decided all necessary issues.
According to Silverman, the arbitration award must be vacated because the arbitrator refused to determine the reasonable value of Brandlin’s services, an issue submitted for arbitration.
We disagree.
a. Section 1283.4.
Section 1283.4 provides that an arbitration award “shall include a determination of all the questions submitted to the arbitrators the decision of which is necessary in order to determine the controversy.” If “the record shows that an issue has been submitted to an arbitrator and that he totally failed to consider it, such failure may constitute ‘other conduct of the arbitrators contrary to the provisions of this title’ justifying vacation of the award under section 1286.2, subdivision (e).” (Rodrigues v. Keller (1980) 113 Cal.App.3d 838, 841 (Rodrigues).)
b. Quantum meruit was not necessary to the decision; regardless, the arbitrator considered and rejected it.
Herein, two questions are presented: Did the arbitrator need to calculate the reasonable value of Brandlin’s services under a quantum meruit theory in order to determine the controversy? Did the arbitrator totally fail to consider the issue? The answer to both questions is no.
The only reason for the arbitrator to calculate the reasonable value of Brandlin’s services was if the engagement contract was unenforceable and Brandlin’s compensation was based on quasi-contract. But the arbitrator determined that the parties had a valid contract, it was enforceable, and Silverman was obligated to pay Brandlin’s hourly rate. As Hedging Concepts established, there is no need for quantum meruit analysis if the parties to the dispute have a contract.
Regardless, the arbitrator addressed the quantum meruit issue, so there is no basis to vacate the award under Rodrigues. In the final arbitration award, the arbitrator stated that there was no evidence of accountant malpractice, breach of the implied covenant of good faith, or any other breach of contract by Brandlin. As a result, the arbitrator concluded that the evidence was not sufficient “to bring a quantum meruit analysis into play.” The arbitrator also stated that “there is no direct evidence that would enable such an analysis.”
In Silverman’s discussion of section 1283.4, he makes the following statement: “The parties . . . sought arbitration to determine the amount of reasonable fees. They specifically tabled the fee issue until the end of the General Motors [action] and sought arbitration when settlement negotiations failed.” But the record shows that Brandlin wanted to arbitrate its claim for breach of contract, not the reasonable value of its services. Also, Silverman has not adverted to any evidence showing that the parties agreed that Brandlin would receive a reasonable fee rather than the hourly fees that it submitted in its bills. The engagement contract provided that Brandlin would be paid at an hourly rate for all work performed. The guaranty contains an integration clause stating that Brandlin did not make “any promise or representation not incorporated herein to cause [Silverman] to sign this Guaranty, and there are no oral understandings, statements or agreements that have not been included in this Guaranty.” The only conclusion we can draw is that Silverman has premised his argument on facts that are not supported by the record.
Silverman adverts to his colloquy with Ward on January 31, 2005, and suggests that they formed a contract which bound Brandlin and superseded the engagement contract. As we further discuss in part 5 of our discussion, this does not amount to evidence of a separate contract.
4. The arbitrator heard all material evidence.
Silverman contends: “The [a]rbitrator refused to determine the reasonable value of Brandlin’s services but acknowledged the importance of this determination when he initially reopened the hearing to receive a declaration from Silverman’s new expert, [Prins]. This action severely prejudiced Silverman[.] When the [a]rbitrator reversed himself and ignored the Prins [d]eclaration, he violated [section 1286.2, subdivision (a)(5)]. The [a]rbitrator had inherent equitable powers and ample authority under the Commercial Arbitration Rules of Procedure to reopen the hearing. Yet he ultimately failed to do so.” Based on this, Silverman argues that the arbitration award should be vacated because the arbitrator did not consider the Prins declaration with respect to the reasonable value of services.
Silverman’s position is unavailing.
a. Section 1286.2, subdivision (a)(5).
Pursuant to section 1286.2, subdivision (a)(5), a court must vacate an arbitration award if it determines the rights of the party were substantially prejudiced by the refusal of the arbitrators to hear evidence material to the controversy. A trial court must find that the complaining party “has been ‘substantially prejudiced by the refusal of the arbitrators to postpone the hearing upon sufficient cause being shown therefore or by the refusal of the arbitrators to hear evidence material to the controversy or by other conduct of the arbitrators contrary to the provisions of this title.’” (Hall v. Superior Court (1993) 18 Cal.App.4th 427, 439 (Hall).) When a party “complains of excluded material evidence, the reviewing court should generally focus first on prejudice, not materiality. To find substantial prejudice the court must accept, for purposes of analysis, the arbitrator’s legal theory and conclude that the arbitrator might well have made a different award had the evidence been allowed.” (Ibid.)
b. Nothing required the arbitrator to reopen the hearing on the merits.
This is not a case in which an arbitrator refused to receive an expert declaration at the arbitration hearing. Rather, this is a case in which the arbitrator was presented with an expert declaration only after: (1) the arbitrator issued an interim award and retained jurisdiction to fix attorney fees and costs, (2) the arbitrator reopened the hearing to consider further evidence, (3) Brandlin objected to the ruling, (4) the arbitrator sustained the objection and considered the hearing closed, and (5) the arbitrator issued the final arbitration award. As presented, the initial inquiry is whether the arbitrator was required to reopen the hearing.
Though Silverman did not provide a record or internet citation, he refers us to the arbitration rules. At [as of 2/6/08], the current arbitration rules, rule R-35, provides that a hearing shall be closed when the parties have offered all proof and witnesses, or the arbitrator is satisfied that the record is complete. Rule R-36 provides: “The hearing may be reopened on the arbitrator’s initiative, or upon application of a party, at any time before the award is made.” Rule 46, as we previously indicated, prohibits an arbitrator from revisiting the merits of any claim already decided. The arbitration rules do not make any exception.
The engagement contract provides: “Any controversy . . . arising out of or relating to this contract, the breach thereof, or the services performed by [Brandlin] shall be settled by binding arbitration before a single arbitrator in accordance with the American Arbitration Association (AAA), and a judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction hereof. The arbitration shall be initiated at the AAA offices in Los Angeles.”
Under the current arbitration rules, the arbitrator had no power to reopen the hearing on the merits after he issued the interim arbitration award.
The parties have not provided us with a copy of the arbitration rules that were in effect during 2006. We have no reason to believe that the relevant rules have changed in any material way.
Despite the current arbitration rules, Silverman nonetheless informs us that the arbitrator had inherent equitable powers and ample authority under the arbitration rules to reopen the hearing. As his legal bulwarks, Silverman cites Cable Connection, Inc. v. DirectTV, Inc. (2006) 143 Cal.App.4th 207, 210 and footnote 4, Advanced Micro Devices, Inc. v. Intel Corporation (1994) 9 Cal.4th 362, 383 (Advanced), and Moncharsh.
Cable Connection was depublished, so it is not citable.
We turn next to page 383 in Advanced. Far from on point, it is educational only regarding the ability of arbitrators to fashion remedies. It states: “[A]rbitrators, unless expressly restricted by the agreement of the parties, enjoy the authority to fashion relief they consider just and fair under the circumstances existing at the time of arbitration, so long as the remedy may be rationally derived from the contract and the breach. The rights and obligations of the parties under the contract as it was to be performed are not an unfailing guide to the remedies available when the contract has been breached. It follows that parties entering into commercial contracts with arbitration clauses, if they wish the arbitrator’s remedial authority to be specially restricted, would be well advised to set out such limitations explicitly and unambiguously in the arbitration clause.” (Advanced, supra, 9 Cal.4th at p. 383.)
Last, we look to Moncharsh. At page 6, the page cited, our Supreme Court held: “[A]n 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.) We fail to see the relevance of this quote to Silverman’s cause.
In sum, Silverman has not established that the arbitrator was required to reopen the hearing to consider the Prins declaration.
c. There is no showing of substantial prejudice.
To find prejudice under Hall, we must accept the arbitrator’s legal theory but nonetheless conclude that the arbitrator might well have made a different award had the evidence been allowed.
The legal theory for the arbitrator’s interim award was that the engagement contract was enforceable. There was no basis for engaging in a quantum meruit analysis. Insofar as the Prins declaration set forth evidence regarding the reasonable value of Brandlin’s services, that declaration was irrelevant. In other words, the Prins declaration would not have changed the award.
5. The arbitrator honored the agreement.
As asserted by Silverman: “The [a]rbitrator refused to honor the agreement of the parties; instead he based his decision on the terms of an [engagement contract,] which was subsequently modified on January 31, 2005. Silverman and Ward agreed to determine the reasonable value of Brandlin’s services at the end of the General Motors case. There was no ambiguity here. Disregarding this fact, the [a]rbitrator held that Silverman should have put in writing objections to Brandlin’s fees once a bill was received pursuant to the [engagement contract]. This holding was arbitrary and capricious. The [a]rbitrator awarded Brandlin his full billings despite the agreement of the parties to determine reasonable value. The [a]rbitrator exceeded his powers and should be reversed.”
As we explain, these assertions are faulty.
a. Section 1286.2, subdivision (a)(4).
A court shall vacate an 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.” (§ 1286.2, subd. (a)(4).) In connection with a contract dispute, “a decision exceeds the arbitrator’s powers only if it is so utterly irrational that it amounts to an arbitrary remaking of the contract between the parties. [Citations].” (Southern Cal. Rapid Transit Dist. v. United Transportation Union (1992) 5 Cal.App.4th 416, 423 [disapproved on other grounds in Advanced, supra, 9 Cal.4th at p. 376, fn. 9].)
b. The contract between the parties.
As we take it, Silverman argues that the contract being arbitrated was not the engagement contract but rather some separate contract he entered into with Ward. Our problems with this are multiple.
The parties stipulated that Brandlin hired Silverman pursuant to the engagement contract. Also, the arbitrator found that the dispute was controlled by the engagement contract. Per Moncharsh, we are not empowered to review the arbitrator’s reasoning, or the sufficiency of the evidence.
The ruling on the postarbitration motions gives insight into what the arbitrator was thinking. He found that Silverman signed the engagement contract only after stating that the parties would work things out later, and that Ward did not know that Silverman was saying that he was not going to pay Brandlin’s bills. Inferentially, these findings informed the arbitrator when he made the interim award. They support a determination that Silverman and Ward did not enter into a separate contract that superseded the engagement contract.
Even if Ward entered into a separate contract with Silverman, Silverman does not contend that Ward was authorized to enter into a contract on Brandlin’s behalf, or that Brandlin ratified this contract. Also, Silverman does not explain why he was not bound by his stipulation.
Silverman argues that the arbitrator “refused to honor or enforce the agreement of the parties to arbitrate a reasonable value.” But the record does not establish that he and Jeff Brandlin (or Ward, for that matter) ever discussed a later resolution of the reasonable value of services.
c. The arbitrator did not exceed his powers.
Silverman’s argument that the arbitrator exceeded his powers is premised on the contention that there was a contract to arbitrate the reasonable value of Brandlin’s services. But the arbitrator found that the dispute was governed by the engagement contract. That finding cannot be disturbed. Because that document was honored, the arbitrator acted within his power.
6. Public policy does not require vacatur.
Silverman argues: “Brandlin should have declined the engagement. He was not qualified to render an opinion on damages in a complex civil trial. Brandlin failed to supervise his associate, [Ward], and his billings could not be substantiated. Ethical rules governing certified public accountants in California were therefore violated. The [a]rbitrator’s holding that he saw no evidence of malpractice or breach of the covenant of good faith and fair dealing does not alter this fact. Public policy dictates that the [agreement] be voided.”
These arguments fail.
a. The law.
An arbitration award based on an illegal contract is subject to judicial review and can be vacated despite the general rule of arbitral finality. (Moncharsh, supra, 3 Cal.4th at p. 32.) “Without an explicit legislative expression of public policy, however, courts should be reluctant to invalidate an arbitrator’s award on this ground. The reason is clear: the Legislature has already expressed its strong support for private arbitration and the finality of arbitral awards in title 9 of the Code of Civil Procedure. [Citation.] Absent 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.)
b. There is no statutory basis for declaring the engagement contract void.
Silverman does not contend that the agreement transgresses a clear expression of illegality or public policy by the Legislature. He merely argues that Jeff Brandlin violated rule 201 of the Code of Professional Conduct promulgated by the American Institute of Certified Public Accountants because he accepted the engagement even though he was not qualified to render an opinion. That rule provides that a member shall undertake only those professional services that the member or the member’s firm can reasonably expect to be completed with professional competence; exercise due professional care in the performance of professional services; adequately plan and supervise the performance of professional services; and obtain sufficient relevant data to afford a reasonable basis for conclusions or recommendations in relation to any professional services performed.
The code of professional conduct promulgated by the American Institute of Certified Public Accountants can be located on the internet at [as of 2/6/08].
This rule was not promulgated by the Legislature, so it cannot factor into our analysis. Moreover, whether Jeff Brandlin acted ethically is separate from whether the engagement contract was illegal or against public policy. On its face, there is nothing illegal or troublesome about it. Finally, the arbitrator never determined that Jeff Brandlin acted unethically, or that Brandlin was guilty of malpractice due to its performance, supervision or billing.
DISPOSITION
The judgment is affirmed.
Brandlin shall recover its costs on appeal.
We concur:, P. J., BOREN, DOI TODD J.