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Neutrals: CA Appeals Panel Finds Arbitrator Correctly Rules in Second, 'Renewed' (Web)

In Patchett v. Bergamot Station Ltd., Docket No. B183049, 143 Cal.App.4th 1390 (Oct. 17, 2006)(also available at: ), a California state appeals court found that an arbitrator did not exceed his powers when he construed an arbitration agreement as authorizing him to serve as the arbitrator for subsequent disputes between the parties.

Following an arbitration provision contained in a settlement agreement between Thomas Patchett–the plaintiff in the trial court and the respondent in the Second Appellate District, Division Eight appellate case--and Wayne Blank, who were partners in Bergamot Station galleries in Santa Monica, Calif., Patchett served a February 2001, arbitration demand.

The parties selected former Santa Monica, Calif., Superior Court Judge Robert W. Thomas as arbitrator. Thomas issued an award in favor of Patchett to allow Patchett to hold private events at the galleries, but denied a demand for accounting. Arbitrator Thomas found that “the proof was insufficient in this Arbitration to establish [Patchett's] rights to the relief requested. This is also an issue that may have to be determined another day.”

On July 3, 2001, Patchett served another arbitration demand. He renewed his call for an accounting. Bergamot Station objected to Arbitrator Thomas's service in the new arbitration proceeding.

On Aug. 25, 2001, the arbitrator granted Patchett's “motion for renewed arbitration,” according to the appeals court opinion, and denied Bergamot Station's objection to Thomas’s reappointment.

Bergamot Station objected to Thomas' jurisdiction over it in connection to the new arbitration. Patchett petitioned to compel arbitration. On Dec. 6, 2001, Patchett petitioned to confirm the first arbitration award; the petition was later consolidated with his petition to compel the second arbitration.

On Aug. 5, 2002, the trial court granted Patchett's petitions. Bergamot Station appealed in October 2002, but 13 months later, the appeal was dismissed “pursuant to stipulation. . . .”

The second arbitration was held in July 2004, and Arbitrator Thomas examined the numbers, holding that Bergamot Station’s increase in maintenance charges wasn’t justified. The award lowered Patchett’s maintenance payments by nearly $1,000 per month to $488, and ordered repayment of nearly $40,000 in excessive charges, as well as nearly $54,000 in attorneys’ fees and costs.

A trial court confirmed the second arbitration award in March 2005. The trial court judge found that Thomas had jurisdiction of the controversy, and didn’t exceed his authority.

Bergamot Station appealed, arguing that the arbitrator had no authority to act because Bergamot Station did not agree to his reappointment for the second arbitration.

Preliminarily, Appellate Court Associate Justice Paul Boland, writing for a unanimous three-judge panel, found irrelevant the fact that the second arbitration was styled a “renewed” demand for arbitration by Patchett, since “renewed” doesn’t correspond to any statutory language. The appeals panel considered it a second arbitration demand, not a “renewal” of a previous matter.

The opinion then explains that there is no basis for concluding that the arbitrator was without authority to act in the second arbitration, for procedural and substantive reasons.

Procedurally, the panel opinion found that a party, on the one hand, cannot dismiss an appeal without expressly delineating the basis for doing so, and on the other hand preserve its original objection to an order.

Substantively, Justice Boland writes that “an agreement that grants the arbitrator the power to decide any controversy ‘of whatever nature . . . in relation to the interpretation’ of the agreement, expressly including the jurisdictional issue of arbitrability, logically and necessarily gives the arbitrator the power to interpret the agreement provisions governing arbitral selection.”

(Citations omitted.)

To Bergamot Station's argument that the agreement could not have meant that “the parties would pick one arbitrator ‘for life,’” Justice Boland notes, “There is nothing irrational about agreeing to have all disputes decided by the same arbitrator.”

The panel denied Patchett’s motions for sanctions for a frivolous appeal, but in affirming the judgment confirming the award, it also says Patchett is entitled to recover his appeals costs.

–Victoria Bassart, CPR Intern