Also, JAMS Rules Did Not Enlarge Arbitrator's Powers To Correct Final Award.
Cooper v. Lavely & Singer, Case No. B251508 (2/4 Sept. 26, 2014) (Manella, Epstein, Willhite) (published) offers a very instructive discussion about correction of an arbitration award. Perhaps the best lesson here is for arbitrators – be careful about issuing dicey final awards that may require further tinkering.
The key statutory provisions at issue in Cooper are: CCP section 1286.2, providing grounds for vacating an award by the court; section 1286.6, providing grounds for the court to correct an award; and, section 1284 providing grounds for an arbitrator to correct an award – which, however, precludes an arbitrator from making a substantive change that affects the merits of the final decision. See CCP sections 1284 and 1286.6(b), which work in tandem.
In an attorney fee dispute between client Cooper and law firm Lavely & Singer, the arbitrator issued a Final Award declaring the law firm the prevailing party, but denying fees to it, because it appeared that the law firm had represented itself in the litigation. However, after Lavely & Singer submitted a motion for "correction, modification and/or reconsideration of the Final Award," the arbitrator concluded that reconsideration was proper, and issued a Revised Final Award, incorporating the Final Award, and including attorney's fees.
The problem here is that "Section 1284 prohibits substantive amendments to final awards to include new awards of attorney fees." Section 1284 allows an arbitrator latitude to make other types of changes, where, for example, there is a miscalculation of figures, or the award is imperfect as to form. And there is even a further nonstatutory amendment doctrine, allowing the arbitrator to amend an award to include rulings on mistakenly omitted issues. Because the Revised Final Award here purported to eliminate substantive errors in the Final Award, it simply couldn’t be shoe-horned into any of the narrow exceptions that allow for amendment by the arbitrator.
However, the parties had agreed to be governed by JAMS rules, leaving as a “key issue . . . whether the parties . . . expanded the scope of the arbitrator’s ability to modify a final award beyond that granted by section 1284.” After all, some of the CCP rules governing arbitration can be governed by agreement of the parties, and whereas other rules will always, as a matter of policy, take priority over a private agreement. The JAMS rules, however, contain the further provision that “If any of these Rules . . . is determined to be in conflict with a provision of applicable law, the provision of law will govern over the Rule in conflict . . . “ Therefore, the Court of Appeal is able to conclude here, on these facts, that by agreeing to arbitrate under JAMS rules, the parties “did not attempt to modify section 1284 to permit substantive revisions of an award that was final for purposes of that statute . . . “
Here, the arbitrator, hamstrung by the earlier issuance of a Final Award, would have had more flexibility if an Interim Award had been issued.
So in the end, trial court erred by denying Cooper's petition to vacate the fee award contained in the Revised Final Award. Thus, Lively & Singer is the prevailing party – but it doesn't get attorney's fees incurred in the arbitration.
COMMENT: By concluding here that the parties, by agreeing to JAMS rules, did not intend to modify section 1284, the Court leaves it for another day to decide whether section 1284 could be modified by agreement of the parties to devise a more flexible procedure for correcting an award.