Wells Fargo Advisors v. Fernandez





















Filed 2/13/13 Wells
Fargo Advisors v. Fernandez CA4/2













NOT TO BE
PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115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 TWO






>

WELLS FARGO ADVISORS, LLC, Plaintiff and Appellant, v. ALDRICH J. FERNANDEZ, Defendant and Respondent.

E055058 (Super.Ct.No. RIC1101062) OPINION

APPEAL
from the Superior Court of href="http://www.adrservices.org/neutrals/frederick-mandabach.php">Riverside
County. John W. Vineyard, Temporary
Judge. (Pursuant to Cal. Const., art.
VI, § 21.) Affirmed.

Jones,
Bell, Abbott, Fleming & Fitzgerald, G. Thomas Fleming III, William M.
Turner, Samuel E. Endicott, Asha Dhillon, and Neil M. Katsuyama for Plaintiff
and Appellant

Law
Offices of Benjamin L. Meeker and Benjamin L. Meeker for Defendant and
Respondent.

Appellant Wells Fargo Advisors, LLC
(Wells Fargo) appeals from a judgment confirming an arbitration award (Code
Civ. Proc. §§ 1294 & 904.1, subd. (a)(2)). The arbitration decided a claim filed by
respondent Aldrich J. Fernandez against Wachovia Securities, LLC, a predecessor
of Wells Fargo. Fernandez filed his
claim to recover funds lost in his brokerage account due to alleged breach of
fiduciary duty by his broker. The
arbitration was held before a panel appointed by the Financial Industry
Regulatory Authority (FINRA) and was heard in accordance with FINRA’s rules and
procedures. The FINRA panel denied the
claims made by Fernandez in their entirety and denied “[a]ny and all relief not
specifically addressed herein . . . .”

Wells
Fargo eventually filed a petition to confirm the href="http://www.fearnotlaw.com/">arbitration award. The trial court subsequently confirmed the
award as a judgment.

Wells
Fargo then filed a memorandum of costs
totaling $29,479. Of that sum, $18,955
was claimed for expert witness fees allegedly due under Code of Civil Procedure
section 998 (section 998). Fernandez
filed his motion to strike and tax costs, and the trial court granted the
motion in part by striking the claim for expert witness fees.

On
appeal, Wells Fargo argues that the trial court erred in striking its claim for
expert witness fees. Since a valid
section 998 offer was made and refused while the arbitration was pending, the
issue presented is whether expert witness fees under section 998 may be
recovered as costs in a court proceeding that confirms the arbitration award as
a judgment.

Wells
Fargo primarily relies on Pilimai v.
Farmers Ins. Exchange Co. (2006) 39 Cal.4th 133. Fernandez primarily relies on >Maaso v. Signer (2012) 203 Cal.App.4th
362. Before discussing these cases, we
turn to the issue of the proper standard of review.

I

STANDARD OF REVIEW

Wells Fargo acknowledges
that cost awards under Code of Civil Procedure sections 1032 and 1033 are
generally reviewed under an abuse of discretion standard of review. It cites El
Dorado Meat Co. v. Yosemite Meat & Locker Service Inc. (2007) 150
Cal.App.4th 612, 617. Abuse of
discretion is obviously the applicable standard when the trial court is in a
better position than a reviewing court to determine a reasonable amount of
costs or fees to be awarded. (>Huber, Hunt & Nichols, Inc. v. Moore
(1977) 67 Cal.App.3d 278, 315.) More
specifically, a determination of a reasonable expert witness fee award under
section 998 is a discretionary determination by the trial court, which is
reviewed under an abuse of discretion standard.
(Peterson v. John Crane, Inc.
(2007) 154 Cal.App.4th 498, 513; Santantonio
v. Westinghouse Broadcasting Co. (1994) 25 Cal.App.4th 102, 121.) Accordingly, Fernandez argues that the abuse
of discretion standard should be applied to the issues in this case.

Wells Fargo contends,
however, that a de novo standard of review is applicable here because the issue
presented is a question of law, that is, whether an expert witness fee claimed
under section 998 may be claimed as a cost after a petition to confirm an
arbitration award is granted. It cites >Rodriquez v. American Technologies, Inc.
(2006) 136 Cal.App.4th 1110, 1117.

De novo review is generally
appropriate when the reviewing court is in as good a position as the trial
court to decide the applicability of legal principles to the facts found by the
trial court. “If . . . the inquiry
requires a critical consideration, in a factual context, of legal principles
and their underlying values, the question is predominantly legal and its determination
is reviewed independently.
[Citation.]” (>Crocker National Bank v. City and County of
San Francisco (1989) 49 Cal.3d 881, 888.)
We agree with Wells Fargo that the issue here is primarily a legal
issue, and we therefore apply a de novo standard of review.

II

Recovery
of Expert Witness Fees Under Section 998

Section
998, subdivision (d) provides: “If an
offer made by a plaintiff is not accepted and the defendant fails to obtain a
more favorable judgment or award in any action or proceeding other than an
eminent domain action, the court or arbitrator, in its discretion, may require
the defendant to pay a reasonable sum to cover postoffer costs of the services
of expert witnesses, who are not regular employees of any party, actually
incurred and reasonably necessary in either, or both, preparation for trial or
arbitration, or during trial or arbitration, of the case by the plaintiff, in
addition to plaintiff’s costs.”

Fernandez does not dispute
the assertions by Wells Fargo that it made him a valid and enforceable offer
under section 998, that he refused it, and that he therefore may be liable for
expert witness fees. He contends,
however, that a request for expert witness fees should have been made to the
arbitration panel and that the panel’s award denying “[a]ny and all
relief not specifically addressed herein” precluded
an award of expert witness fees by the court, which confirmed the same award.

Pilimai primarily held that an
arbitration required under the uninsured motorist statute (Ins. Code, §
11580.2) is a contractual arbitration subject to the provisions of the
California Arbitration Act. (>Pilimai v. Farmers Ins. Exchange Co., >supra, 39 Cal.4th at p. 137.) It also held that an award of costs under
Code of Civil Procedure section 998 could exceed the coverage limits of the
insurance policy, that prejudgment interest was not available, and that costs
could include deposition and exhibit preparation expenses. (Pilimai,
at p. 137.)

Wells Fargo cites a
sentence from the discussion of deposition and exhibit preparation costs: “[I]t is apparent that once
the conditions of [section 998] are met, a defendant may be required to pay
expert witness fees incurred during arbitration.” (Pilimai
v. Farmers Ins. Exchange Co., supra,
39 Cal.4th at p. 149.) But here there is
no issue as to the liability of Fernandez for expert witness fees. The only question is whether the fees were
recoverable in the trial court following approval of a petition for
confirmation of the arbitration award.

Wells Fargo argues that it
was unable to make a request for section 998 fees to the arbitrators because
section 998, subdivision (b)(2) provides that an offer that is not accepted is
deemed withdrawn and “cannot be given in evidence upon the trial or
arbitration.” Relying on this
subsection, Wells Fargo argues that the panel was unaware of the section 998
offer when it made its award, and after entering the award the arbitrators lost
jurisdiction over the case. Wells Fargo
thus took the only avenue available to it by including expert witness fees in
the cost bill it submitted to the trial court.

Two questions are presented
by this argument. The first is whether
the inclusion of such expert witness fees in the cost bill was an avenue open
to Wells Fargo. The second is whether
the failure of Wells Fargo to submit a request for expert witness fees under
section 998 to the arbitrators barred a later request to the trial court.

The arbitration award in >Pilimai was silent on the issues of
costs and prejudgment interest. (>Pilimai v. Farmers Ins. Exchange Co., >supra, 39 Cal.4th at p. 137.) Both parties filed petitions to confirm the
arbitrator’s decision. In his petition,
Pilimai requested costs, including expert witness fees due under section
998. The trial court found that Pilimai
was entitled to recover such costs but limited recovery to the amount of the
policy limits. The appellate court
reversed, finding that Pilimai was entitled to recover costs and prejudgment
interest in excess of the policy limits.
It directed the trial court to enter a new judgment for the policy
limits plus costs and prejudgment interest.
(Pilimai, at pp.
138-139.) Our Supreme Court affirmed the
appellate court’s award of other costs but reversed the award of prejudgment
interest. The Supreme Court remanded the
case to the trial court to determine the proper cost award. (Id.
at pp. 151-152.)

In the court’s discussion
of costs, the Supreme Court noted that Farmers agreed that expert witness fees
were recoverable under section 998, subdivision (d). (Pilimai
v. Farmers Ins. Exchange Co., supra,
39 Cal.4th at p. 148.) The court
therefore focused on deposition and exhibit-preparation costs and did not
discuss the issues presented by the argument of Wells Fargo in this case. (Id.
at pp. 138-139.) Thus, although the
procedure advocated by Wells Fargo was used by one party in >Pilimai without objection by the other
party, the procedure itself was not approved by the Supreme Court. We therefore find that Pilimai is not dispositive here. “An opinion is not authority for a point not
raised, considered, or resolved therein.”
(Styne v. Stevens (2001) 26
Cal.4th 42, 57.)

Wells Fargo also attacks the trial
court’s reasoning in distinguishing Pilimai
and holding it inapplicable. Under settled precedent, however, the trial
court does not err if it is right for the wrong reason. (D’>Amico v. Board of Medical Examiners
(1974) 11 Cal.3d 1, 19.)

Turning to the second
question, we agree with Fernandez that the case of Maaso v. Signer, supra,
203 Cal.App.4th 362 is persuasive. Maaso
asserted a medical malpractice claim against Signer. Maaso made a section 998 offer before the
arbitration. Signer rejected the
offer. A subsequent arbitration award in
favor of Maaso was in excess of the offered amount. (Maaso,
at pp. 366-368.) However, the award was
vacated on grounds it was procured by “‘undue means.’” (Id.
at p. 368.)

A second arbitration was
ordered and held. During the
second arbitration proceedings, Maaso’s counsel advised the arbitrators that
Maaso had previously made a section 998 offer that was rejected by Signer,
without stating the amount of the offer.
Maaso did not request that the arbitrators rule on the issue of section
998 costs or seek to present evidence on the issue. The arbitrators subsequently awarded Maaso an
amount in excess of the section 998 offer, plus “[c]osts and fees in accordance
with the arbitration agreement.” (>Maaso v. Signer, supra, 203
Cal.App.4th at p. 369.)

Maaso then filed a petition to confirm
the award. He also filed a cost bill,
which included a request for section 998 costs.
The trial court granted the petition and held a hearing on the cost
bill. It subsequently decided that all
costs associated with the arbitration, including section 998 costs, “were
within the sole purview of the arbitrators and not the court.” (Maaso v. Signer, >supra, 203 Cal.App.4th at p. 369.)

Maaso appealed, contending the trial
court erred in refusing to award him section 998 costs and prejudgment
interest. (Maaso v. Signer, supra, 203 Cal.App.4th
at p. 369.) The appellate court
rejected the contention and held that Maaso was not entitled to section 998
costs and prejudgment interest because he had not requested the arbitrators to
award those costs to him. (>Maaso, at p. 377.) Although the arbitrators were aware of the
section 998 issue, the arbitrators merely awarded “costs and fees in accordance
with the arbitration agreement.” (>Maaso, at p. 377.)

Wells Fargo first seeks to distinguish >Maaso by arguing that, in this case, the
arbitrators were unaware of its section 998 cost claim because section 998,
subdivision (b)(2) provides that such offers cannot be given in evidence. But we agree with Fernandez that the section
merely prevents the claim from being offered into evidence. It does not prevent the person claiming
entitlement to a section 998 award from raising the issue with the arbitrators,
as was done in Maaso. The arbitrators were unaware of the claim
because the person asserting the claim, Wells Fargo, failed to make them aware
of it. Having not done so, Wells Fargo
cannot reassert the claim later by submitting a cost bill for section 998 costs
after the arbitration award has been confirmed.

More
important, whether the claim was submitted to the arbitrators or not, the
arbitration award specifically provided that “any and all relief not
specifically addressed herein, is denied.”
This award was subsequently confirmed by the trial court. The request of Wells Fargo for additional
relief in the form of section 998 costs contradicts both the award and the
trial court’s confirmation of the award.

Wells
Fargo also cites a discussion of this issue in Knight et al., California
Practice Guide: Alternative Dispute
Resolution (The Rutter Group 2011) ¶ 5:402.14, page 5-275: “The arbitrator must be informed, however, of
the rejected CCP Sec. 998 offer prior to making a final award in order to
impose any applicable costs ‘penalties’ (see below).” The following comment points out that the
statute does not state how the notification is to be made and suggests that the
arbitrators should determine whether a section 998 offer was made and rejected
before making a final award. (Knight, >supra, ¶ 5:402.15, p. 5-276.) The discussion is not helpful to the position
of Wells Fargo because it supports the argument that the arbitrators must be
informed of the offer.

>Maaso was decided after the discussion
in the California Practice Guide, and it sheds some light on the issues
presented here. First, it held that
“[u]nder the statutory scheme, a party’s failure to request the arbitrator to
determine a particular issue within the scope of the arbitration is not a basis
for vacating or correcting an award.
[Citations.] Unless a statutory
basis for vacating or correcting an award exists, a reviewing court “shall
confirm the award as made . . . .”
[Citation.]’ [Citation.] The court concluded: ‘Such an interpretation
of the applicable statutes promotes the Legislature’s determination that there
is a “‘strong public policy in favor of arbitration as a speedy and relatively
inexpensive means of dispute resolution.’”
[Citation.] As a general rule,
parties to a private arbitration impliedly, if not expressly, agree that the
arbitrator’s decision will be both binding and final and thus the arbitrator’s
decision “should be the end, not the beginning, of the dispute.” [Citation.]
Allowing a party to request that the trial court make an award that was
within the scope of the arbitration but not pursued in that forum is
inconsistent with the policies underlying the statutory private arbitration
scheme.’ [Citation]” (Maaso
v. Signer, supra, 203 Cal.App.4th at p.
378.)

Second,
the Maaso court stated: “Additionally, it makes sense that only the
arbitrator decides section 998 costs incurred in arbitration because an award
of expert witness costs, and the amount, is discretionary under section
998. ‘[N]ot only is the determination as
to the amount [of attorney fees and costs] properly within the purview of the
arbitrator, but we observe it is the arbitrator, not the trial court, which is
best situated to determine the amount of reasonable attorney fees and costs to
be awarded for the conduct of the arbitration proceeding.’ [Citation.]”
(Maaso v. Signer, supra, 203 Cal.App.4th at p. 379.)

Fernandez asks the proper question: “How could the lower court (or now, this
Court), which had no involvement in the arbitration whatsoever, make a
determination as to whether it was reasonably necessary to hire numerous
experts regarding a standard securities arbitration suitability claim at a cost
of $18,955?” We agree that such
decisions were, and should be, within the scope of discretion given to the
arbitrators by the arbitration submission
agreement.

Finally, Maaso discusses Pilimai
as follows: “The cases on which Maaso
relies do not assist him. In >Pilimai . . . , the
court was not called upon to decide whether it was for the court or the
arbitrator to make an award of section 998 costs, but to address other issues,
including whether the cost-shifting provisions of section 998 and Code of Civil
Procedure section 1032 applied to uninsured motorist arbitrations mandated by
Insurance Code section 11580.2.
[Citations.]” (>Maaso v. Signer, supra, 203 Cal.App.4th at p. 379.)
As discussed above, we also find Pilimai
inapplicable to the situation here.
Accordingly, we agree with the trial court in Maaso that the determination and award of section 998 costs is a
matter for the arbitrators and such costs should not be included in a cost bill
after confirmation of the arbitration award by the trial court.

III

DISPOSITION

The judgment is affirmed. Respondent is awarded costs on appeal.

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

RICHLI

J.

We concur:



McKINSTER

Acting
P. J.



MILLER

J.