Opinion
D039528.
7-15-2003
POSTAL ANNEX+, INC., et al., Plaintiffs and Respondents, v. BENJAMIN CORK, SR., et al., Defendants and Appellants.
Defendants Benjamin Cork, Sr., and Helen Cork (together Cork) appeal a judgment favoring plaintiffs Postal Annex+, Inc. and Stephanie Gennaro (together Postal) on Postals petition to confirm an arbitration award based upon Corks breach of the parties franchise agreements (Franchise Agreements). (Code Civ. Proc., § 1287.4.) Seeking reversal of the judgment, Cork contends the court erred in confirming the arbitration award because the arbitrator assertedly (1) exceeded his powers, (2) made an improper finding Cork had waived objections to the arbitrators jurisdiction, and (3) engaged in misconduct. Cork also contends the court erred in not vacating or correcting the arbitration award. ( §§ 1286.2, subd. (a)(3) & (4), 1286.6, subd. (b).) However, since on this record Cork has not demonstrated any reversible error, the judgment must be affirmed.
All further statutory references are to the Code of Civil Procedure unless otherwise specified.
Section 1286.2 provides that an arbitration award must be vacated if "the rights of the party were substantially prejudiced by misconduct of a neutral arbitrator" (id., subd. (a)(3)) or if "the arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted" (id., subd. (a)(4)).
Section 1286.6 provides that the court must correct the arbitration award and confirm the award as corrected if the court determines "the arbitrators exceeded their powers but the award may be corrected without affecting the merits of the decision upon the controversy submitted" (id., subd. (b)).
I
INTRODUCTION
Since "courts may not review for sufficiency the evidence supporting an arbitrators award," we "take the arbitrators findings as correct without examining a record of the arbitration hearings themselves." (Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 367, fn. 1, 885 P.2d 994 (Advanced).)
Postal franchised businesses that provided mailing, packaging, shipping and copying services to the public.
In July/August 1998, Postal and Cork entered into four Franchise Agreements for Cork to operate franchised businesses at four locations in the State of Georgia that Postal had leased from Wal-Mart, Inc. under a master lease and then subleased to Cork (the Subleases). The Franchise Agreements provided that upon termination of the franchises, Cork was to pay various sums to Postal. The Franchise Agreements also provided the parties disputes arising out of the Franchise Agreements would be submitted for arbitration to the American Arbitration Association (AAA) in San Diego, except for disputes "related to or based on" any lease of real estate.
Specifically, the Franchise Agreements provided: "Franchisee agrees to pay Franchisor and its affiliates within ten (10) days after the effective date of termination or expiration of the Franchise, such royalty fees, advertising fees, amounts owed for purchases from Franchisor and its affiliates, interest due Franchisor and its affiliates on any of the foregoing, and all other amounts owed to Franchisor and its affiliates which are then unpaid."
Although Cork took possession of all four locations, two of Corks franchised businesses never opened. In December 1998 Cork opened the other two franchised businesses but closed them in May/June 1999. Corks termination of the franchises triggered the Franchise Agreements provisions requiring Cork to pay Postal. However, instead of paying, Cork disputed the terms of those agreements.
Thus, in June 1999 upon the parties inability to settle their dispute, Postal filed a demand for arbitration with the AAA in San Diego. In July 1999 Cork filed with the AAA a response and counterclaim to Postals arbitration demand. Included in Corks defenses was a claim the Subleases were invalid, a claim ultimately rejected by the arbitrator.
Later in July 1999 Cork filed a civil action against Postal in Georgia state court seeking either (1) rescission of the Franchise Agreements and Subleases, (2) damages for fraud in the inducement or (3) breach of contract damages. Further, Cork sought a stay of arbitration. In August 1999 Postal removed Corks Georgia civil action to federal court in Georgia. Postal also moved to dismiss or stay proceedings in that civil action.
In February 2000 the Georgia federal court denied Postals motion to dismiss Corks civil action. However, the Georgia federal court granted Postals motion to stay that civil action pending arbitration. In doing so, the Georgia federal court characterized Corks claims as "principally unrelated to real estate leases."
In May 2000 Cork filed an amended response and amended counterclaim with the AAA. In June and August 2000, Postals demand and Corks amended response/amended counterclaim were arbitrated in San Diego. Throughout the arbitration proceedings, Cork objected that the arbitrator lacked jurisdiction over Postals claim for damages since such claim was assertedly based on breaches of the Subleases. The arbitrator rejected Corks jurisdictional objections.
In October 2000 in his "partial final award," the arbitrator found Cork breached the Franchise Agreements by not paying Postal the sums due under those agreements upon Corks termination of the franchises. The arbitrator awarded Postal $ 33,658.71 on its breach of contract claims for unpaid rent, including penalties, unpaid franchise fees and advertising expenses. In April 2001 in his "final award," the arbitrator granted Postal $ 115,563.13 in attorney fees, expert witness fees and costs. The arbitrator also awarded Postal $ 2,670.88 for the AAAs fees/expenses and $ 15,786.88 for the arbitrators compensation.
In July 2001 Postal petitioned the superior court in San Diego to confirm the arbitration award. In August 2001 Cork filed a petition to vacate and set aside the arbitration award. The matters were consolidated in the superior court.
In October 2001 after hearing, the superior court denied Corks petition to set aside the arbitration award and granted Postals motion to confirm the arbitration award. In December 2001 adopting the arbitrators partial final award and final award as its judgment and findings, the court entered judgment awarding Postal $ 167,679.60 against Cork, denying Corks arbitration counterclaim, and granting Postal $ 14,732 in costs. Cork appeals.
II
DISCUSSION
Seeking reversal of the judgment confirming the arbitration award, Cork challenges various rulings made by the arbitrator. Alternatively, Cork contends this case should be dismissed or remanded to the superior court for correction of the award. As the party challenging the arbitration award, Cork is required to establish error by a proper record. (Lopes v. Millsap (1992) 6 Cal.App.4th 1679, 1685 (Lopes).)
A
Postals Claims Came Within Scope of Franchise Agreements Arbitration Clauses
Cork first contends the judgment must be reversed and the arbitration award vacated because the arbitrator purportedly exceeded his powers in ruling on "lease matters" assertedly excluded from arbitration by the Franchise Agreements arbitration clauses. ( § 1286.2, subd. (a)(4).) In essence, Cork contends the arbitrator strayed beyond the scope of the parties Franchise Agreements by resolving issues the parties had not agreed to arbitrate. However, on this record Cork has not demonstrated any error with respect to the courts finding the arbitrator acted within his powers.
1
The Law
In cases of private arbitration, the scope of arbitration is a matter of agreement between the parties. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9, 832 P.2d 899 (Moncharsh ).) As such, the arbitrators powers "derive from, and are limited by, the agreement to arbitrate." (Advanced , supra, 9 Cal.4th at p. 375; Bonshire v. Thompson (1997) 52 Cal.App.4th 803, 811 (Bonshire).) Accordingly, "California law allows a court to correct or vacate a contractual arbitration award if the arbitrators `exceeded their powers." (Advanced, at p. 366.) Specifically, awards exceeding "those powers may, under sections 1286.2 and 1286.6, be corrected or vacated by the court." (Id. at p. 375.)
The Supreme Court has observed that through the "detailed statutory scheme" commencing at section 1280, "the Legislature has expressed a `strong public policy in favor of arbitration as a speedy and relatively inexpensive means of dispute resolution." (Moncharsh , supra, 3 Cal.4th at p. 9.) Thus, courts must ""indulge every intendment to give effect to such proceedings."" (Ibid.; Lopes, supra, 6 Cal.App.4th at p. 1685.) Further, "an award reached by an arbitrator pursuant to contractual agreement to arbitrate is not subject to judicial review except on the grounds set forth in sections 1286.2 (to vacate) and 1286.6 (for correction)." (Moncharsh , at pp. 33, 9-13.)
In Moncharsh, supra, 3 Cal.4th 1, the Supreme Court concluded that "an arbitrators 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." (Id. at p. 6.) The Supreme Court also noted that one "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." (Id. at p. 12.) Thus, as stated by the Supreme Court, "it is the general rule that, with narrow exceptions, an arbitrators decision cannot be reviewed for errors of fact or law." (Id. at p. 11.)
On the "question how to review determinations of arbitrability, that is, whether an arbitrator exceeded his or her authority by deciding a particular issue," the Supreme Court has characterized its decisions as teaching that "courts should generally defer to an arbitrators finding that determination of a particular question is within the scope of his or her contractual authority." (Advanced , supra, 9 Cal.4th at p. 372; accord, Moncharsh, supra, 3 Cal.4th at pp. 10-11; Alexander v. Blue Cross of California (2001) 88 Cal.App.4th 1082, 1087 (Alexander).) Further, noting that section 1283.4 "provides the arbitrators written award shall determine all submitted questions `necessary in order to determine the controversy," the Supreme Court has observed that "it is for the arbitrators to determine what issues are `necessary to the ultimate decision. . . . `Likewise, any doubts as to the meaning or extent of an arbitration agreement are for the arbitrators and not the court to resolve." (Advanced, at p. 372.) Hence, on "issues concerning whether the arbitrator exceeded his powers, we review the trial courts decision de novo, but we must give substantial deference to the arbitrators own assessment of his contractual authority." (Alexander, at p. 1087; accord Ajida Technologies, Inc. v. Roos Instruments, Inc. (2001) 87 Cal.App.4th 534, 541 (Ajida).)
In Advanced, supra, 9 Cal.4th 362, the Supreme Court stated: "A rule of judicial review under which courts would independently redetermine the scope of an arbitration agreement already interpreted by the arbitrator would invite frequent and protracted judicial proceedings, contravening the parties expectations of finality." (Id. at p. 373; Moncharsh, supra, 3 Cal.4th at p. 10 ["Ensuring arbitral finality thus requires that judicial intervention in the arbitration process be minimized"]; Van Tassel v. Superior Court (1974) 12 Cal.3d 624, 626-627, 116 Cal. Rptr. 505, 526 P.2d 969 [de novo trial of jurisdictional facts would defeat purpose of choosing arbitration].)
In sum, the law "is well settled that the scope of judicial review of arbitration awards is extremely narrow." (Ajida, supra, 87 Cal.App.4th at p. 541.) "In determining whether private arbitrators have exceeded their powers, the courts must accord `substantial deference to the arbitrators own assessments of their contractual authority . . . ." (Ibid.) Nevertheless, unless the parties "have conferred upon the arbiter the unusual power of determining his own jurisdiction [citation], the courts retain the ultimate authority to overturn awards as beyond the arbitrators power, whether for an unauthorized remedy or decision on an unsubmitted issue." (Advanced, supra, 9 Cal.4th at p. 375; Ajida, at p. 541; Bonshire, supra, 52 Cal.App.4th at p. 811.) Thus, "guided by these standards, this court conducts a de novo review, independently of the trial court, of the question whether the arbitrator exceeded the authority granted him by the parties agreement to arbitrate. [Citations.] [Citations.] In undertaking our review, however, `we must draw every reasonable inference to support the award." (Ajida, at p. 541; Alexander, supra, 88 Cal.App.4th at p. 1087.)
2
The Record
The relevant terms of the Franchise Agreements were effectively identical: "Except for controversies, disputes or claims related to or based on . . . any lease of real estate, all controversies, disputes or claims between Franchisor . . . and franchisee . . . arising out of or related to: [P] (1) This agreement or any other agreement between the parties or any provision of such agreements; [P] (2) The relationship of the parties hereto; [P] (3) The validity of this Agreement or any other agreement between the parties or any provision of such agreements; or [P] (4) Any specification, standard or procedure relating to the establishment or operation of the unit [P] shall be submitted for arbitration to the San Diego, California office" of the AAA. Further, by adopting the AAAs Commercial Arbitration Rules, the Franchise Agreements specifically granted the arbitrator the power to decide the disputed jurisdictional issues. (Cf. Moore v. First Bank of San Luis Obispo (2000) 22 Cal.4th 782, 786-787, 996 P.2d 706; Hightower v. Superior Court (2001) 86 Cal.App.4th 1415, 1419, fn. 2.)
Rule 8(a) of the AAAs Commercial Arbitration Rules provided: "The arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope or validity of the arbitration agreement."
The challenged arbitration proceedings included Postals breach of contract claims and Corks amended response/amended counterclaim, which would have provided a complete defense to Postals contract claims and also entitled Cork to the affirmative relief of damages. In particular, Postals arbitration demand alleged breach of the Franchise Agreements and sought damages for Corks failure to pay rents, late charges, advertising expenses and associated expenses based upon the Franchise Agreements termination provisions. Postal also sought damages for unpaid franchise fees relating to the two locations where Corks franchised businesses never opened. Corks amended responses/amended counterclaims sought rescission of the Franchise Agreements on the ground of Postals alleged fraud in the inducement in not making proper disclosures about (1) the master lease, (2) revenue/earnings projections and (3) Wal-Marts experience in centers with businesses similar to Postals. Cork also argued Postal breached the Franchise Agreements by instructing Cork not to proceed with the two locations where Corks franchised businesses never opened. Further, Cork alleged various violations of federal and state franchising laws and claims under the Racketeer Influenced Corrupt Organizations Act (18 U.S.C. § 1961 et seq., RICO) and Georgia statutes. Moreover, Cork argued the Subleases were unenforceable as invalid under Georgia law.
Throughout the arbitration proceedings Cork made timely objections to the arbitrators jurisdiction. The arbitrator responded to Corks jurisdictional objections by ruling on an issue-by-issue basis. Thus, at a June 2000 hearing, the arbitrator stated, "it seems to me this case was initiated based on the franchise agreements." Similarly, at an August 2000 hearing, the arbitrator characterized the issue as whether Postal would be "allowed to put on evidence of rents in this arbitration proceeding or is this something that was not arbitrable to begin with. And all Im ruling is, that I believe it is arbitrable within the context of this proceeding."
Later in August 2000 without success, Cork again sought dismissal of the arbitration proceedings on the ground the arbitrator lacked jurisdiction. Specifically, Cork argued: (1) "The first issue is the rent and the rent penalties. As we have said we dont believe that is in the jurisdiction of the court because that relates to the sublease"; (2) "the rent" Postal was seeking would "be barred" because there was assertedly "no underlying lease agreement"; and (3) the arbitrator did not have jurisdiction to "enforce the leases." Further, although asserting the arbitrator had the power to make a determination on the "validity" of the lease and should "rule that the lease is unenforceable," Cork argued the arbitrator lacked the power "to determine any awards of any damages or anything of that nature related to [the lease]." In response, the arbitrator queried that "if I have the power to determine the validity of the lease and I rule its valid, then what is it that denies me the jurisdiction to render an award for damages based on the lease?" Cork replied that "the franchise agreement is no good because the lease and the sublease are invalid."
In his partial final award, the arbitrator concluded Cork breached the Franchise Agreements by not paying Postal the sums due under those agreements termination provisions and awarded Postal $ 33,658.71 for unpaid rent, including penalties, unpaid franchise fees and advertising expenses. The arbitrator stated: "The Corks conducted themselves throughout the franchise relationship as though the leases were effective, and accepted the benefits of them. Their conduct in the franchise relationship estops them from now denying the effectiveness of those leases." The arbitrator also found Postal to be the prevailing party in the arbitration proceeding.
3
Analysis
The Franchise Agreements arbitration clauses expressly excluded from arbitration the parties "controversies, disputes or claims related to or based on . . . any lease of real estate." In determining he had jurisdiction over Postals claims for damages including rental sums due under the Subleases, the arbitrator effectively concluded those claims were not related to or based on the Subleases but instead were related to or based on the Franchise Agreements. Attacking the arbitrators jurisdictional determination, Cork contends the court erred in confirming an arbitration award that made legal/factual determinations and awarded damages assertedly exceeding the arbitrators powers. ( § 1286.2, subd. (a)(4).) On this record, we conclude the arbitrators jurisdictional determination was based upon a rational interpretation of the Franchise Agreements arbitration provisions. (Advanced , supra, 9 Cal.4th at pp. 376-377; Ajida, supra, 87 Cal.App.4th at pp. 541-542; Screen Actors Guild v. A. Shane Co. (1990) 225 Cal. App. 3d 260, 264-265, 275 Cal. Rptr. 220 (Screen).)
Preliminarily, we agree with Corks "basic premise that a party cannot be compelled to arbitrate without its consent." (Ajida , supra, 87 Cal.App.4th at p. 541.) "It is beyond cavil that `arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit." (Ibid.) However, as discussed, we must "analyze the issue against the backdrop of Californias `"strong public policy in favor of arbitration as a speedy and relatively inexpensive means of dispute resolution."" (Id. at p. 542.) Moreover, as noted, "to further the policy favoring arbitration, courts indulge every reasonable intendment giving effect to such proceedings. . . . For the same reason, `ambiguities in the scope of arbitration are resolved in favor of coverage. [Citations.] [Citation.] Moreover, `courts should generally defer to an arbitrators finding that determination of a particular question is within the scope of his or her contractual authority. [Citation.] The deference due an arbitrator thus ` requires a court to refrain from substituting its judgment for the arbitrators in determining the contractual scope of those powers. [Citation.] In short, we apply `a rule of substantial deference to the arbitrators jurisdictional determinations." (Ibid .)
An "appropriately deferential review starts not from the beginning, but from the arbitrators own rational assessment of his or her contractual powers and is dependent on (that is, rests on acceptance of) this and any other factual or legal determination made by the arbitrator." (Advanced, supra, 9 Cal.4th at p. 376.) "Recent decisions in the Courts of Appeal have employed two formulas to determine whether an arbitrators award exceeded his or her powers. The courts have asked whether the award rests on a `completely irrational construction of the contract [citations] or whether it amounts to an `arbitrary remaking of the contract [citations]." (Id. at pp. 376-377; Pacific Gas & Electric Co. v. Superior Court (1993) 15 Cal.App.4th 576, 582 (Pacific) ["finality does not immunize an arbitration award from review for error so egregious that it produces a result completely outside the expectations of the parties to a contract, i.e., where the arbitration award arbitrarily remakes the contract"].) Further, one appellate court has combined those tests "into a single formula: `Generally a decision exceeds the arbitrators powers only if it is so utterly irrational that it amounts to an arbitrary remaking of the contract between the parties." (Advanced , at p. 377.)
In Advanced, supra, 9 Cal.4th 362, the Supreme Court was faced with deciding "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." (Id. at p. 366.) The Supreme Court concluded that "in the absence of more specific restrictions in the arbitration agreement, the submission or the rules of arbitration, the remedy an arbitrator fashions does not exceed his or her powers if 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.) However, since Advanced involved "an arbitrators choice of remedies, rather than interpretation of the agreement," the Supreme Court did not reach the issue "whether an arbitrators interpretation of a contract is subject to review for `irrationality or `arbitrariness." (Id . at p. 377, fn. 10.) Nonetheless, the Supreme Court reiterated that "an award generally may not be vacated or corrected, under California law, for errors of fact or law." (Ibid.)
Those statements of the standard for determining whether an arbitration award exceeded the arbitrators powers "tend to focus the inquiry on the arbitrators construction of the contract." (Advanced, supra, 9 Cal.4th at p. 377.) "Arbitrators are not obliged to read contracts literally . . . ." (Id. at p. 381.) Thus, an arbitration award "will be upheld so long as it was even arguably based on the contract." (Ibid .) Further, "courts will not review the validity of the arbitrators reasoning." (Moncharsh, supra, 3 Cal.4th at p. 11.) Accordingly, where, as here, the arbitrators "decision has some basis" in the contract, "the courts have no business overruling [the arbitrator] because their interpretation of the contract is different from [the arbitrators.] [Citation.] ` If, on its face, the award represents a plausible interpretation of the contract in the context of the parties conduct, judicial inquiry ceases and the award must be affirmed." (Screen, supra, 225 Cal. App. 3d at pp. 264-265.)
Although acknowledging the applicable deferential standard of review, Cork contends the provisions in the Franchise Agreements arbitration clauses that excepted lease disputes from arbitration manifested the parties intent that only nonlease claims would be arbitrable. Thus, characterizing the arbitrators interpretation of those provisions as an "irrational, tortured and contorted construction," Cork concludes the arbitrator did not rationally interpret such provisions. However, the record indicates that Postals arbitration demand did not assert a claim for breach of the Subleases. Instead, Postal simply asserted that Cork had breached specific posttermination provisions of the Franchise Agreements. Further, although the damages sought by Postal under the Franchise Agreements included sums measured under the Subleases, nothing in the record indicates the parties disputed the amounts of those sums as such. Indeed, Postal was awarded the precise amount it had claimed at the arbitration hearing.
On this record Cork has not shown the arbitrators jurisdictional determination was so "utterly irrational" as to exceed his powers. (Advanced, supra, 9 Cal.4th at p. 377.) Similarly, Cork has not shown the arbitrators jurisdictional determination arbitrarily remade the Franchise Agreements. (Pacific , supra , 15 Cal.App.4th at p. 582.) Accordingly, we conclude the arbitrators jurisdictional determination satisfied the applicable "limited standard of review." (Ibid.) Achieving "success in vacating an arbitration award under this standard requires more than a mere conviction that another construction of the contract is plainly correct. As Moncharsh[, supra, 3 Cal.4th 1,] repeatedly says, arbitrators do not exceed their powers merely by reaching an erroneous decision. . . . The test is one of arbitrariness, not correctness. [P] This is not the sort of review accorded a construction of a contract by the trial court in a legal proceeding. In such a proceeding the reviewing court (the appellate court), in the absence of conflicting extrinsic evidence, resolves questions of ambiguity. [Citation.] With respect to an arbitration the power to construe matters within the range of ambiguity of the language and evidence of the surrounding circumstances is assigned, with finality, to the arbitrator." (Pacific , at p. 594.)
In sum, where, as here, "the arbitrators reading and application of the contract is clearly within the range of ambiguity, i.e., within the ordinary bounds of semantic permissibility, there can be no tenable claim that the contract has been arbitrarily remade." (Pacific, supra, 15 Cal.App.4th at p. 594.) Hence, we conclude the arbitrator did not exceed his powers.
In light of our conclusion that the arbitrator did not exceed his powers, we must also reject Corks contention that the damages portion of the arbitration award should be vacated as including assertedly improper lease damages and penalties.
Further, we reject as meritless Corks contention that the Franchise Agreements arbitration clauses as interpreted by the arbitrator should have been stricken as "illusory" in assertedly allowing only Postal to arbitrate lease matters (Saika v. Gold (1996) 49 Cal.App.4th 1074, 1076-1077, 1080, 1082). Moreover, in any event, the rule of limited judicial review may generally not be avoided by a claim that provisions of the Franchise Agreements as construed or applied by the arbitrator were illusory. (Cf. Moncharsh, supra, 3 Cal.4th at p. 33 [involving claim that contractual provision construed/applied by arbitrator was "illegal"].)
B
No Prejudicial Error Involving Issue Whether Cork Waived Jurisdictional Objections
Seeking reversal of the judgment, Cork contends the superior court erred in assertedly adopting the arbitrators purported determination that Cork had waived objections to the arbitrators jurisdiction by participating in the arbitration proceedings. According to Cork, those jurisdictional objections, made before and during the arbitration proceedings, were preserved. (National Union Fire Ins. Co. v. Stites Prof. Law Corp.
(1991) 235 Cal. App. 3d 1718, 1723-1724 ["Subject matter jurisdiction, . . . meaning the arbitrators authority or power to adjudicate a certain" issue, "cannot be conferred by consent, waiver, or estoppel"]; Thompson v. Jespersen (1990) 222 Cal. App. 3d 964, 968, 272 Cal. Rptr. 132 ["precaution" of raising nonarbitrable issues as "protective measure" during arbitration did not effect "waiver" of jurisdictional objection]; International Film Investors v. Arbitration Tribunal of Directors Guild (1984) 152 Cal. App. 3d 699, 706, 199 Cal. Rptr. 690 ["There is no risk that the jurisdictional issue will be waived by participation in the arbitration as long as the jurisdictional objection is raised prior to participation"]).) However, on this record Cork has not established the existence of any reversible error with respect to rejection of Corks jurisdictional objections.
At a June 2000 hearing, the arbitrator stated, "it seems to me this case was initiated based on the franchise agreements." At an August 2000 hearing, the arbitrator characterized the issue as whether Postal would be "allowed to put on evidence of rents in this arbitration proceeding or is this something that was not arbitrable to begin with. And all Im ruling is, that I believe it is arbitrable within the context of this proceeding." Further, in response to Corks counsel statement that Cork was "just trying to make sure the record doesnt — there is no indication there was a waiver," the arbitrator stated: "No, there is no waiver. There is no waiver in this at all."
In the section of his partial final award entitled "Were the Master Lease and Subleases Enforceable," the arbitrator stated: "The Arbitrator recognizes that many of the issues addressed in this section of the Partial Final Award relate to the leases of real estate and are, therefore, seemingly outside this arbitration proceeding. [Citation.] They were raised, however,during the arbitration hearing by counsel for the Corks as part of the Corks motion for judgment, and revisited during closing argument by counsel for the Corks. The Arbitrator has thus been invited by the Corks to address those issues and determine them in this Partial Final Award."
In granting Postals application for reimbursement of attorney fees/costs in his final award, the arbitrator discussed an issue raised in Corks opposing papers "relating to the scope of arbitration itself and, derivatively, the scope of the Arbitrators authority regarding this application." Specifically, in that discussion the arbitrator stated: "The first issue raised is that the issues litigated related to the real estate leases or to advertising and were, accordingly, not arbitrable. This issue is a repeat of an objection previously raised by the Corks and ruled on adversely to them. That ruling will stand. Moreover, as pointed out in the Partial Final Award, counsel for the Corks expressly invited the Arbitrator to consider and address several issues relating to the validity of the subleases and the Arbitrator did so. That provides an independent ground for rejecting the Corks argument as to arbitrability of these remaining claims." Cork characterizes the last two sentences of the arbitrators discussion as a finding that Cork had waived all jurisdictional objections in the arbitration proceedings by raising the lease issues during arbitration and in closing. However, Cork makes too much of those two sentences.
Reasonably construed in context, the two challenged sentences in the arbitrators final award merely set forth an additional reason for his rejection of Corks opposition to Postals application for attorney fees/costs. After reaffirming his ruling that the litigated issues related to the real estate leases or to advertising were arbitrable and could thus properly support an award of attorney fees/costs, the arbitrator in his two challenged sentences simply indicated that Cork could not prevail on Corks theory that the "remaining issues" submitted by Cork were not arbitrable and thus insufficient to support the recovery of fees/costs. Further, nothing in the challenged sentences referred to the matters submitted into arbitration by Postal or otherwise indicated that Cork had waived all jurisdictional objections for purposes of the arbitration proceedings themselves. Instead, the arbitrator stated only that the bulk of the lease issues litigated during the arbitration had been raised by Cooks invitation to decide those issues and, as the prevailing party on those issues, Postal was entitled to recover attorney fees/costs.
Cork contends there was no option other than to participate in the arbitration once the arbitrator stated he could determine his own jurisdiction. However, when Postal filed its initial arbitration demand, Cork could have chosen not to participate in the arbitration until so ordered by the superior court. (§ 1281.) Instead, Cork chose to submit the remaining lease issues into arbitration. Once Cork did so, the arbitrator had the power and obligation to rule on those issues. (Cf. Porter v. Golden Eagle Ins. Co. (1996) 43 Cal.App.4th 1282, 1291; Ulene v. Murray Millman of California (1959) 175 Cal. App. 2d 655, 661, 346 P.2d 494.)
In sum, Cork has not demonstrated that the arbitrator applied the principle of waiver to preclude any jurisdictional objection by Cork during the arbitration proceedings. Instead, the arbitrator simply rejected Corks jurisdictional objections. Moreover, to the extent Cork contends rejection of those objections was error, Cork cannot establish reversible prejudice since, as discussed, the arbitrator did not exceed the scope of his powers. (Advanced, supra, 9 Cal.4th at pp. 376-377 & fn. 10; Ajida, supra, 87 Cal.App.4th at pp. 541-542; Screen, supra, 225 Cal. App. 3d at pp. 264-265.)
C
No Arbitrator Misconduct Involving Georgia Federal Court Order
Cork contends the court erred in confirming the arbitrators award since the arbitrator assertedly engaged in misconduct by purportedly disregarding the Georgia federal court order and effectively coercing Cork to address the lease issues in the arbitration. However, the "burden is on the party complaining to affirmatively show error was committed by the arbitrators." (Turner v. Cox (1961) 196 Cal. App. 2d 596, 603, 16 Cal. Rptr. 644 (Turner).) Further, in "order that the claimed departure from the usual procedure be held to amount to misconduct of the arbitrators sufficient to vacate the award it must be shown that such departure" prejudiced the partys rights. (Pacific Vegetable Oil Corp. v. C.S.T., Ltd. (1946) 29 Cal.2d 228, 240, 174 P.2d 441; Good v. Kaiser Foundation Hospital (1984) 152 Cal. App. 3d 819, 823, 199 Cal. Rptr. 581; Lauria v. Soriano (1960) 180 Cal. App. 2d 163, 170, 4 Cal. Rptr. 328; Turner, at p. 603.)
Thus, the arbitration award here "will not be vacated for any error that does not prejudice" Corks rights. (Turner, supra, 196 Cal. App. 2d at p. 603.) However, on this record Cork has not demonstrated the arbitrator engaged in misconduct with respect to the Georgia federal court order (§ 1286.2, subd. (a)(3)) or that any such asserted misconduct prejudiced Corks rights. To the contrary, the record indicates the arbitrators conduct and the arbitration awards references to the Georgia federal court order were consistent with that order.
In February 2000 although denying Postals motion to dismiss Corks civil action, the Georgia federal court nevertheless granted Postals motion to stay that civil action. Specifically, characterizing "the only issue" as whether Corks "claims fall within the arbitration provisions of the Franchise Agreements," the Georgia federal court found Corks claims were "principally unrelated to real estate leases." Ultimately, the Georgia federal court concluded: "Because [Cork had] stated some claims that are arguably related to the leases and because those claims are within the jurisdiction of this Court, the Court refuses to grant [Postals] Motion to Dismiss. This Court does, however, grant [Postals] Motion for a Stay of Action Pending Arbitration because most of [Corks] claims do not relate to leases and are thus subject to arbitration pursuant to the Franchise Agreements. Arbitration on the parties disputed claims should proceed. If, after arbitration, any unresolved claims remain that are within the jurisdiction of this Court, the case may be reopened."
At an August 2000 hearing, the arbitrator stated that his reading of the Georgia federal court order and his "view of what we have been doing throughout this arbitration, to this point, leads me to the conclusion that these rents that are being claimed are claimed as damages based on the termination provision in the franchise agreement, and . . . if people want to . . . argue them as an element of damages later, I11 allow you to do so. But I believe that the [federal] judge recognized that this is largely a franchise case and that were really not talking about the internal workings . . . of the subleases."
Characterizing the issue before the Georgia federal court as whether Corks claims came within the scope of the Franchise Agreements arbitration clauses, the arbitrators partial final award stated the Georgia federal court had found that "most" of Corks claims did "not relate to leases" and were thus "subject to this arbitration." Moreover, in the context of analyzing Postals application for attorney fees/costs, the arbitrator observed in his final award: "It is fair to describe the Georgia proceedings, which consisted of a complaint for fraud followed by motions to dismiss and to compel arbitration, as, in effect, a forum selection process through which each side was seeking to select its preferred forum in which to recover amounts it felt were owed by the other. Further, the granting of the motion to compel arbitration in the Georgia court gave birth to the arbitration proceeding in which the present application is being considered."
Although Corks opening brief contends Cork participated in arbitration in San Diego only after ordered to do so by the Georgia federal court, the record indicates Corks response to Postals San Diego arbitration demand was filed before Corks civil action was commenced in Georgia. Further, the precise matter at issue in the Georgia federal court was the arbitrability of Corks claims against Postal, albeit with implications for the arbitrability of Postals claims against Cork.
On this record, Cork has not shown that the arbitrator disregarded the Georgia federal court order. Further, Cork has not identified anything in the arbitration award contravening the Georgia federal court order. As noted, the Georgia federal court had found Corks claims to be "principally unrelated to real estate leases" and had stayed Corks civil action pending arbitration. Moreover, as discussed, Postals arbitration claims against Cork did not raise issues involving enforcement of the Subleases but instead simply sought various sums due to Postal under the Franchise Agreements termination clauses, including some damages measured under the Subleases, to wit, undisputed amounts of unpaid rent.
Nonetheless, Cork contends that although the Georgia federal court maintained jurisdiction over the lease claims, the arbitrator assertedly usurped those lease claims from the Georgia federal court by finding Cork raised lease issues during arbitration. However, Corks contention of usurpation should properly be addressed in the first instance to the Georgia federal court. In any event, Corks contention is meritless because, as discussed, the arbitrator acted within the scope of his contractual powers and did not reversibly err in rejecting Corks jurisdictional objections. (Advanced, supra, 9 Cal.4th at pp. 376-377 & fn. 10; Ajida, supra, 87 Cal.App.4th at pp. 541-542; Screen, supra, 225 Cal. App. 3d at pp. 264-265.) In essence, Cork again attempts to assert error with respect to the arbitrators factual and legal conclusions, including his jurisdictional determinations, an assertion we have rejected. Thus, to the extent Cork contends the arbitrator engaged in misconduct within the meaning of section 1286.2, subdivision (a)(3) merely by reaching a purportedly erroneous decision, Cork is wrong. (Cf. Moncharsh, supra, 3 Cal.4th at p. 28.)
Cork also faults the arbitrator for effectively forcing Cork to address the lease issues by resolving Corks jurisdictional objections as each issue arose rather than making a preliminary ruling on jurisdiction. However, as discussed, the arbitration involved numerous issues, including franchise regulatory matters and Postals alleged violations of RICO statutes, apart from the matters challenged on this appeal. To the extent Cork contends the arbitrator engaged in misconduct under section 1286.2, subdivision (a)(3) simply by arriving at a purportedly erroneous resolution of Corks jurisdictional objections, Cork is wrong again. (Cf. Moncharsh, supra, 3 Cal.4th at p. 28.)
The arbitrator stated: ". . . I would prefer to determine the issues well in advance of the arbitration hearing so that the parties would know the scope of the proceeding while they are preparing for hearing. We do not have that luxury here, however, since the hearing is almost upon us. Moreover, the relationship between the franchise agreements and the subleases appears to be an issue that we will be confronting throughout the hearing, as each claim and counterclaim presents itself." The arbitrator also stated that "this issue about what is to be determined here and what is to be determined later by the district judge in Georgia, is one — thats the reason I didnt rule on it earlier, is were going to be dealing with this for the whole time, issue by issue, and this doesnt lend itself to be determined in a clean fashion, if you will."
In sum, on this record Corks contention that the arbitration award should be reversed for purported arbitrator misconduct is without merit.
D
Corks Additional Contentions
Cork contends the arbitration award should be vacated because the arbitrators assertedly improper rulings involving the Subleases are purportedly intertwined with other rulings and cannot be distinguished. Stated otherwise, Cork contends the arbitrators rulings substantially concerned Sublease matters without distinction between damages awarded to Postal on lease claims and those awarded on "arbitrable" claims. However, those contentions must necessarily be rejected given our conclusion that Cork has not shown the arbitrator exceeded his powers. (Advanced , supra, 9 Cal.4th at pp. 376-377 & fn. 10; Ajida, supra, 87 Cal.App.4th at pp. 541-542; Screen, supra, 225 Cal. App. 3d at pp. 264-265.) Similarly, we must reject Corks alternative contention that the arbitration award should be corrected (§ 1286.6) by excluding all Sublease-related damages and the attorney fees/costs award.
Finally without merit is Corks alternative contention that Postals petition should be dismissed in its entirety under section 1287.2, a statute that provides: "The court shall dismiss the proceeding under this chapter as to any person named as a respondent if the court determines that such person was not bound by the arbitration award and was not a party to the arbitration." First, Cork asserts that to the extent the arbitrator purported to rule on lease matters, the arbitration proceedings did not bind Cork. However, as discussed, Cork has not demonstrated that the arbitrator exceeded his contractual powers. (Advanced, supra, 9 Cal.4th at pp. 376-377 & fn. 10; Ajida, supra, 87 Cal.App.4th at pp. 541-542; Screen, supra, 225 Cal. App. 3d at pp. 264-265.) Cork also asserts Cork was effectively not a party to the arbitration because Cork was forced to appear physically at the risk of default and appeared only under objection with a reservation of rights. However, as noted, when Postal filed its initial arbitration demand, Cork could have chosen not to participate in the arbitration until ordered to do so by the superior court. ( § 1281.2) Instead, Cork chose to respond to Postals demand and submit counterclaims.
Further, as discussed, the Georgia federal court later ordered that arbitration of the parties disputed claims "should proceed." On this record Cork was clearly a party to the arbitration.
III
DISPOSITION
The judgment is affirmed.
WE CONCUR: BENKE, J., and McINTYRE, J.