Sharifpour
v. Le

 

 

 

 

Filed 1/10/14 
Sharifpour v. Le CA4/3

 

 

 

 

 

 

 

>NOT TO BE PUBLISHED IN
OFFICIAL REPORTS

 

 

 

California Rules of Court, rule 8.1115(a),
prohibits courts and parties from citing or relying on opinions not certified
for publication or ordered published, except as specified by rule
8.1115(b).  This opinion has not been
certified for publication or ordered published for purposes of rule 8.1115.

 

 

 

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

 

FOURTH APPELLATE DISTRICT

 

DIVISION THREE

 

 
>

SINA SHARIFPOUR et al.,         Plaintiffs and Respondents,               v.   TAM LE et al.,         Defendants and Appellants.

G047481            (Super. Ct. No. 30-2008-00111427)            O P I N I O N

 

                        Appeal
from a judgment of the Superior Court of
Orange County, Franz E. Miller, Judge. 
Affirmed.

                        Donna
Bader for Defendants and Appellants.

                        Randall
A. Spencer; and Alexander H. Escandari for Plaintiffs and Respondents.

*                    *                    *

 

                        An
arbitration award against the sellers of residential real property was
confirmed to judgment.  The sellers, Tam
and Kim Le, contend the court erred in confirming to judgment the awards of
attorney fees and punitive damages,
inasmuch as the arbitrator exceeded his powers in making those awards in the
first place.  We disagree.  The terms of the purchase agreement between
the Les and the buyers of their property, Sina and Shekoufeh Sharifpour, did
not bar an award of attorney fees under the facts of this case.  Moreover, contrary to the Les’ assertion, they
had an opportunity to rebut the evidence of their financial condition as
presented by the Sharifpours, and indeed did rebut that evidence, so they were
not deprived of fundamentally fair procedures. 
We affirm.

I

FACTS

                        The Sharifpours
purchased a residential property from the Les. 
After the purchase, they discovered an undisclosed subsurface ravine
full of water on the property, which created substantial drainage and water
intrusion problems.  The Sharifpours
filed an action against the Les for fraud, breach
of contract, and violation of Civil Code section 1102.6 in the sale of the
property.

                        The Les filed a petition
to compel arbitration, which the
Sharifpours opposed.  The matter was
ordered to arbitration.  The Sharifpours
obtained an arbitration award in the amount of $933,682.89, consisting of
$184,000 in economic damages, $368,000 in punitive damages, and $381,682.89 in href="http://www.mcmillanlaw.us/">attorney fees and costs.  The trial court reduced the punitive damages
award to $147,000 and otherwise confirmed the award to judgment.

                        The Les filed an appeal
and the Sharifpours filed a cross-appeal. 
The cross-appeal was dismissed for failure to file a civil case information
statement.

 

 

II

DISCUSSION

>A.  Standard of Review:

                        “The
scope of judicial review of arbitration
awards is extremely narrow because of the strong public policy in favor of
arbitration and according finality to arbitration awards.  [Citations.] 
An arbitrator’s decision generally is not reviewable for errors of fact
or law.  [Citations.]  However, Code
of Civil Procedure section 1286.2 provides limited exceptions to this
general rule, including an exception where ‘[t]he arbitrators exceeded their
powers and the award cannot be corrected without affecting the merits of the
decision upon the controversy submitted.’ 
[Citations.]”  (>Ahdout v. Hekmatjah (2013) 213
Cal.App.4th 21, 33.)  An arbitrator
exceeds his or her “powers within the meaning of Code of Civil Procedure
section 1286.2 by issuing an award that violates a party’s statutory rights or
‘an explicit legislative expression of href="http://www.sandiegohealthdirectory.com/">public policy.’  [Citations.]” 
(Ahdout v. Hekmatjah,> supra, 213 Cal.App.4th at p. 37.) 
“‘[W]hether the arbitrator exceeded his or her powers . . . , and thus
whether the award should have been vacated on that basis, is reviewed on appeal
de novo.’  [Citation.]”  (Id.
at p. 33.)

                        Here, the Les contend
the arbitrator exceeded his powers in two ways: 


(1)
he awarded attorney fees where not permitted by the purchase agreement; and (2)
he awarded punitive damages where the Les had not had notice of the evidence
against them and an opportunity to rebut that evidence, such that he violated
the Les’ due process rights.  We disagree
with each of the Les’ assertions, for reasons we shall show.

 

B.  Attorney
Fees:

                        (1)  Purchase agreement—

                        The Sharifpours and the
Les executed a California Association of Realtors standard form California
Residential Purchase Agreement.  Paragraph
22 of the purchase agreement provides: 
“ATTORNEY FEES:  In any action,
proceeding, or arbitration between Buyer and Seller arising out of this
Agreement, the prevailing Buyer or Seller shall be entitled to reasonable
attorney fees and costs from the non-prevailing Buyer or Seller, except as
provided in paragraph 17A.”

                        Paragraph 17A provides
in pertinent part:  “MEDIATION:  Buyer and Seller agree to mediate any dispute
or claim arising between them out of this Agreement, . . . before resorting to
arbitration or court action. . . .  If .
. . any party commences an action without first attempting to resolve the
matter through mediation, or refuses to mediate after a request has been made,
then that party shall not be entitled to recover attorney fees, even if they
would otherwise be available to that party in any such

action.
. . .”

                        Paragraph 17B states in relevant
part:  “ARBITRATION OF DISPUTES:  (1) Buyer and Seller agree that any dispute
or claim . . . arising between them out of this Agreement . . . , which is not
settled through mediation, shall be decided by neutral, binding arbitration . .
. .”

                        (2)  Mediation and arbitration
demands—

                        The arbitrator found
that the Sharifpours sent the Les a letter dated August 20, 2008 requesting mediation.  The
letter stated in part:  “[C]onsistent
with paragraph 17(A) of the Purchase Agreement . . . , [the] Sharifpours hereby
demand a mediation with you . . . .  You
will have until September 1, 2008, to inform the
undersigned about your willingness to participate in said mediation.  Of course, if you fail to communicate you[r]
acquiescence to this mediation by the due date, we . . . will immediately file
a complaint in the Orange County Superior Court . . . .”  (Boldface and underscoring omitted.)

                        The arbitrator also found
that the Les ignored the demand letter. 
He noted that if the Les had needed more time to consider the matter
they could have asked for it, but they did not do so.

 

 

                        The Sharifpours filed
their complaint on September 3, 2008.  The Les filed a demurrer on October 30, 2008.  The Sharifpours filed an
amended complaint on January 9, 2009. 

                        Twenty days later, counsel
for the Les sent a letter to counsel for the Sharifpours stating in pertinent
part:  “[T]he residential purchase
agreement mandates that this matter proceed by way of binding arbitration.  The agreement sets out the requirement for
mediation and arbitration of disputes at page 5, paragraph 17.  The agreement requires mediation of any
dispute or claim arising out of the agreement before resorting to arbitration
or court action.  Item 17B is a binding
arbitration clause which was signed by the parties . . . .  [¶] I
request that you stipulate to stay the proceedings and proceed by way of
binding arbitration.”  (Italics
added.)

                        By letter dated February 2, 2009, counsel for the Sharifpours replied:  “I am respectfully declining to stipulate as
it is our position that your client[s] waived the right to arbitrate when they
filed the demurrer to our original complaint. 
Furthermore, CCP section 1281.2(c) gives the Court discretion to stay
arbitration proceedings where there are additional parties to litigation in the
pending action who are not bound by the arbitration agreement, as it is in this
case.”href="#_ftn1" name="_ftnref1"
title="">[1]

                        The Les filed a motion
to compel arbitration, which the Sharifpours opposed.  The court granted the motion.

                        (3) Motion for attorney fees—

                        In their motion, the
Sharifpours stated that as prevailing parties, whose demand for mediation had
been refused, they were entitled to attorney fees under paragraphs 17A and 22
of the purchase agreement.  In opposition
to the motion, the Les contended that the Sharifpours had not sent a request
for mediation before filing their lawsuit. 
Consequently, they argued, the Sharifpours were not entitled to attorney
fees because they had commenced litigation without first trying to resolve the
matter through mediation, as required by paragraph 17A of the purchase
agreement.  The Les also asserted that
the Sharifpours’ rejection of their attorney’s demands constituted “a refusal
to mediate and arbitrate.”

                        The arbitrator, as we
have already noted, found that the Sharifpours had sent an August 20, 2008 mediation demand and that the Les had ignored it.  Although the arbitrator made no specific
findings with respect to the effects of either the Les’ January 29, 2009 demand letter or the Sharifpours’ response thereto, he impliedly
found that the Sharifpours’ response did not preclude an award of attorney
fees.  (Parada v. Superior Court (2009) 176 Cal.App.4th 1554, 1567; >Virtanen v. O’Connell (2006) 140
Cal.App.4th 688, 709.)

                        (4) Analysis—

                        With regard to the Sharifpours’
August 20,
2008 demand for mediation, the arbitrator
found, as previously noted, that the Sharifpours had proven by a preponderance
of the evidence that they sent the same, in compliance with paragraph 17A, and
that the Les received the same and ignored it. 
Given this finding, it is clear the Les were the ones who refused to
mediate, not the Sharifpours.  Consequently,
the fact that the Sharifpours commenced litigation without the matter having
been submitted to mediation is no bar to the recovery of attorney fees under
paragraph 17A.

                        We turn, then, to the matter
of the Les’ January
29, 2009 demand letter.  The Les characterize the letter as a demand
for both mediation and arbitration and they characterize the Sharifpours’
response as “a refusal to mediate in violation of the express terms of the
Residential Purchase Agreement.”  Based
on those characterizations, they contend the Sharifpours are barred by paragraph
17A from receiving attorney fees.

                        We disagree.  After the Sharifpours had filed a complaint,
the Les had filed a demurrer, the court had ruled on the demurrer, and the
Sharifpours had filed an amended complaint, counsel for the Les sent out the January 29, 2009 demand letter.  That letter
does recite that paragraph 17 of the purchase agreement “sets out the
requirement for mediation and arbitration of disputes” and “requires mediation
of any dispute or claim arising out of the agreement before resorting to
arbitration or court action.”  However,
the letter begins by stating the “purchase agreement mandates that this matter
proceed by way of binding arbitration . . . .” 
It concludes with the demand:  “>I request that you stipulate to stay the
proceedings and proceed by way of binding arbitration.”  (Italics added.)  The letter did not demand mediation. 

                        When counsel for the
Sharifpours replied, he said that the Les had waived their right to demand
arbitration and that the court had the discretion to stay arbitration
proceedings.  There is no indication that
counsel for the Les provided a responsive clarification to the effect that the
demand was intended to be a demand for mediation.

                        The Les nonetheless maintain
that case law shows the Sharifpours’ refusal to acquiesce to the Les’ demand
made the Sharifpours ineligible for the recovery of attorney fees.  They cite several cases involving prior
versions of the standard form California Residential Purchase Agreement at
issue here.  Those cases are >Lange v. Schilling (2008) 163
Cal.App.4th 1412, Frei v. Davey (2004)
124 Cal.App.4th 1506, and Leamon v.
Krajkiewcz (2003) 107 Cal.App.4th 424. 
None of those cases support the Les’ position.

                        In Lange v. Schilling, supra,> 163 Cal.App.4th 1412, the buyer of
property did not tender a mediation demand to the sellers because he did not
know their whereabouts.  He filed a
lawsuit instead, and only thereafter hired a private investigator to locate the
sellers so he could serve them.  After he
served them with the lawsuit, he offered to stay the lawsuit and mediate the
matter.  (Id. at pp. 1414-1415.)  The
appellate court held that paragraph 17A of the purchase agreement barred an
award of attorney fees to the buyer/plaintiff because he filed a lawsuit
without first offering to mediate.  (>Id. at pp. 1416-1417.)  In the case before us, however, the
Sharifpours did offer to mediate before they filed their lawsuit.

                        In Frei v. Davey, supra,> 124 Cal.App.4th 1506, the buyers of
property sent a mediation demand to the sellers, but the sellers did not
respond.  The buyers then filed a lawsuit
and sent another letter offering to mediate the dispute.  The sellers declined.  (Id. at
pp. 1509, 1513.)  After the sellers
prevailed in the litigation, they sought attorney fees under paragraph 22 of
the purchase agreement.  (>Id. at pp. 1510-1511.)  The appellate court held that the sellers were
not entitled to attorney fees because they had refused to mediate, as required
by paragraph 17A.  (Id. at pp. 1513-1514, 1518.) 


                        In the matter before us,
however, the Sharifpours did not refuse to mediate.  They offered to mediate before they filed the
lawsuit.  True, the Sharifpours declined
an offer to arbitrate, which was tendered to them only after a complaint, a
demurrer, and an amended complaint had been filed.  However, paragraph 17A does not say that
attorney fees will be unavailable to a prevailing party whose offer to mediate
is rejected and who thereafter refuses to accept an offer to arbitrate made only
after the litigation has commenced.

                        Finally, in >Leamon v. Krajkiewcz,> supra, 107 Cal.App.4th 424, the seller of property contended that the
purchase agreement she signed was invalid, because she signed it under
duress.  (Id. at pp. 428-429.)  After
prevailing in her quiet title action, she sought attorney fees on the principle
of mutuality, arguing that the buyers/defendants would have been entitled to
attorney fees under the purchase agreement had they prevailed in establishing
that it was valid.  (Id. at pp. 429-431.) 
However, the court held that attorney fees were unavailable to the
seller because she had failed to seek mediation before filing her lawsuit, and
indeed had refused a request to mediate. 
(Id. at pp. 429, 433.)  Leamon,
like the other cases the Les’ cite, is distinguishable from the one before us,
because the Sharifpours did seek mediation before filing their lawsuit.

                        In sum, paragraph 17A
states that a party shall not be entitled to attorney fees if he or she
“commences an action without first attempting to resolve the matter through
mediation.”  That is not the situation
here.  The Sharifpours did seek
mediation.  Paragraph 17A also provides
that attorney fees shall not be available to a party who “refuses to mediate
after a request has been made.”  Again,
that is not our situation.  The Les’
ultimately requested to arbitrate, not to mediate.  Inasmuch as paragraph 17A did not bar an
award of attorney fees in this matter, the arbitrator did not err in awarding
attorney fees to the Sharifpours as the prevailing parties.

 

C.  Punitive
Damages:

                        The Les also contend the court erred in confirming the award of
punitive damages, even in a reduced amount, because the arbitrator made the
award despite the fact that they had had no opportunity to respond to the Sharifpours’
evidence in support of their punitive damages request.

                        (1)  Background—

                        In his July 26, 2011 interim arbitration award the arbitrator found by clear and
convincing evidence that the Les had committed fraud against the
Sharifpours.  He asked the Sharifpours to
specify the amount of punitive damages they were requesting and provide their
reasoning in support of their request. 
He also gave them the opportunity to request further discovery relevant
to punitive damages.

                        The Sharifpours thereafter
filed a motion for an order permitting discovery of the Les’ financial
information.  They sought a production of
documents including copies of paychecks, W-2s, 1099s, federal and state tax
returns, a listing of real estate holdings, a listing of securities holdings,
evidence of ownership of foreign assets, a balance sheet, copies of credit card
statements, evidence of lines of credit, copies of credit applications, copies
of passports, copies of bank records, and other financial documents showing
income and/or assets, for a five-year period. 
The arbitrator ordered that the Les provide most of the requested
documents, for a two-year period only. 
He denied without prejudice the Sharifpours’ request to take the
depositions of the Les.

 

                        In their January 12,
2012 brief in support of their request for punitive damages, the Sharifpours stated
that they had had the CPA firm of White, Zuckerman, Warsavsky, Luna, Hunt, LLP
review and analyze the financial documents received, and that the firm’s report
of the Les’ net worth as of December 1, 2011 was attached to their brief as
Exhibit A (White Zuckerman Report).  The White
Zuckerman Report showed that the Les had a net worth of $1,473,000, excluding
the value of Dr. Le’s businesses—the Memorialcare Surgical Center at Orange
Coast LLC and Tam Huu Le M.D., Inc.—neither of which had been valued.  In addition, in the body of their brief, the
Sharifpours represented that the Les’ 2010 tax returns showed an annual income
of $829,278.  They requested punitive
damages in the amount of $1,656,000.

                        In opposition to the
request for punitive damages, the Les argued that the amount sought was out of
proportion to the $184,000 in compensatory damages that had been awarded.  They also argued that the White Zuckerman Report
was inadmissible hearsay, inasmuch as it was neither signed nor supported by a
declaration to authenticate the report and establish a foundation therefor.  The Les further argued that the Sharifpours
“should not be afforded the luxury of curing this defect in a reply brief.”

                        In support of their
opposition, the Les filed the declaration of CPA Mary Elizabeth Merkle.  She declared that she had reviewed the
financial documents provided by the Les and also the White Zuckerman Report.  In addition, she prepared her own report of the
Les’ net worth (Merkle Report), a copy of which was attached to her
declaration.  Merkle set the Les’ total
net worth at $304,370.  In her notes
attached to the Merkle Report, she explained where and why her figures differed
from the figures shown in the White Zuckerman Report.  For example, she noted that the amounts in
various cash accounts had been reduced dramatically or completely eradicated,
and she excluded the values of certain IRAs and college savings plan accounts.

                        The Sharifpours provided
a reply brief in support of their request for punitive damages, together with a
declaration of CPA Jack Zuckerman. 
Zuckerman declared that he was the one who had prepared the White
Zuckerman Report.  He also said that he
had received a copy of the Merkle Report and supporting declaration.  He provided his viewpoint on the differences
between the two reports.

                        After receiving and
considering the reports and declarations of each of the CPAs, and the briefing
of each party, the arbitrator issued another interim arbitration award, this
one addressing punitive damages.  The
arbitrator considered the degree of reprehensibility of the Les’ conduct and
sought to fix a punitive damages award that ensured both proportionality and
reasonableness.  He awarded $368,000 in
punitive damages—an amount equal to double the amount of the compensatory
damages awarded.

                        The Les filed a motion
for reconsideration.  They claimed that
the Sharifpours had failed to provide timely, admissible evidence of the Les’
financial condition, inasmuch as the White Zuckerman Report, which had been attached
to the Sharifpours’ moving papers, was unaccompanied by a declaration laying a foundation. 

                        The arbitrator overruled
the Les’ objections to the White Zuckerman Report, based on Evidence Code
section 1400,href="#_ftn2"
name="_ftnref2" title="">[2] and denied the motion for reconsideration.  He explained, inter alia, that:  (1) the White Zuckerman Report was written on
the letterhead of the Sharifpours’ retained forensic experts—an established
forensic accounting firm; (2) the report relied on documents that the
arbitrator had ordered produced; and (3) the Sharifpours later properly
provided the signed declaration of Zuckerman. 
The arbitrator also stated that the evidence was sufficient to establish
that the Les had a positive net worth.

                       

 

>                        (2)  Analysis—

                        The Les
cite Adams v. Murakami (1991) 54
Cal.3d 105, for the proposition that “evidence of the defendant’s financial
condition is a prerequisite to a punitive damages award” and the burden of
producing that evidence is on the plaintiff. 
(Id. at p. 119.)  The Les say that when the Sharifpours filed
their brief in support of their request for punitive damages, they provided no
admissible evidence in support of their request.  They contend that the arbitrator exceeded his
powers when he considered the Sharifpours’ request, unsupported by admissible
evidence. 

                        By analogy to summary
judgment law, the Les argue that the request should not have been considered because
the Sharifpours’ moving papers were not supported by admissible evidence.  (Cf. San
Diego Watercrafts, Inc. v. Wells Fargo Bank (2002) 102 Cal.App.4th 308, 315
[in ruling on summary judgment motion, “court may ignore evidence not disclosed
in moving party’s separate statement of undisputed facts”].)  They also claim, by analogy to the rules of
appellate procedure, that the arbitrator should not have considered evidence
disclosed for the first time in the Sharifpours’ reply brief.  (Cf. Reichardt
v. Hoffman (1997) 52 Cal.App.4th 754, 764 [unfair to respondent to consider
point raised for first time in appellant’s reply brief].)

                        More specifically, the
Les state that they were entitled to adequate notice of the evidence being
presented against them and a fair opportunity to rebut the same.  (Cf. Carpenters
46 N. CA Conference Bd. v. Zcon Builders (1996) 96 F.3d 410, 413 [under
federal labor law, parties to arbitration entitled to fundamentally fair
hearing].)  They say they got neither.  The Les claim that the evidence was presented
only in support of the Sharifpours’ reply brief and that they had no
opportunity to rebut it.

                        We disagree with this
characterization of the events.  The White
Zuckerman Report was attached to the Sharifpours’ moving papers and the Les had
an opportunity to rebut the same. 
Indeed, they did so, by providing a report by Merkle, their own CPA,
criticizing the White Zuckerman Report. 
What they did not have was an opportunity to challenge two items
attached to Zuckerman’s declaration—his curriculum vitae and his chart showing
the differences between the White Zuckerman Report and the Merkle Report.  So, Merkle provided a description of the
differences between her report and Zuckerman’s and Zuckerman provided a chart
laying out the differences in another format. 
At the end of the day, the arbitrator had the competing reports of two CPAs—one
representing the interests of the Sharifpours and one representing the
interests of the Les.  Most importantly,
the Les’ CPA had had an opportunity to criticize the work of the Sharifpours’ CPA.  The Les were not subjected to a fundamentally
unfair procedure.  In short, none of the Les’
citations to authority convince us that the arbitrator exceeded his powers in
considering the White Zuckerman Report and in awarding punitive damages.

III

DISPOSITION

                        The judgment is affirmed.  The Sharifpours shall recover their costs on
appeal.

 

                                                                                   

                                                                                    MOORE,
ACTING P. J.

 

WE CONCUR:

 

 

 

ARONSON, J.

 

 

 

THOMPSON, J.