Park Medical Pharmacy

[7] 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA [10] 11 PARK MEDICAL PHARMACY, et al., Case No. 22-cv-466-MMA (BGS) 12 Petitioners, ORDER: (1) DENYING 13 v. PETITIONERS’ PETITION AND MOTION TO CONFIRM IN PART 14 WESTERN PHARMACY GROUP LLC, AND VACATE IN PART et al., 15 ARBITRATION AWARD; (2) Respondents. GRANTING RESPONDENTS’ [16] PETITION AND MOTION TO 17 CONFIRM ARBITRATION AWARD; AND (3) CONFIRMING [18] ARBITRATION AWARD [19] [Doc. Nos. 1, 3, 9, 10] 20 WESTERN PHARMACY GROUP LLC, 21 et al., Cross-Petitioners, [22] v. [23] 24 PARK MEDICAL PHARMACY, et al, Cross-Respondents. [28] 1 Petitioners and Cross-Respondents Park Medical Pharmacy; each of Park 2 Medical’s owner trusts through their trustees, Joseph E. Grasela, as Trustee of the Joseph 3 E. Grasela Trust, dated November 6, 2000, the Joseph E. Grasela Trust, dated November 4 6, 2000, Mitchell J. Robins, individually and as Trustee of the John C. Grasela Trust, 5 dated October 1, 2001, the John C. Grasela Trust, dated October 1, 2001, George R. 6 Awad, as Trustee of the George and Mona Awad Family Trust, dated November 12, 7 2002, the George and Mona Awad Family Trust, dated November 12, 2002; and Robins 8 & Associates (collectively, “Petitioners” or “Park Medical”) petition the Court to confirm 9 in part and vacate in part the award of a JAMS arbitrator pursuant to California Code of 10 Civil Procedure Sections 1285, 1286.2(a)(1) and (a)(4), and 1287.4. See Doc. No. 1 11 (“Petition”). Respondents and Cross-Petitioners Western Pharmacy Group LLC, 12 Matthew Grayson, Kevin Faris, and Kevin McCarthy (collectively, “Respondents” or 13 “Western Pharmacy”) oppose vacatur and cross-petition to confirm the arbitration award 14 in its entirety pursuant to California Code of Civil Procedure Section 1285. See Doc. No. 15 3 (“Cross-Petition”). For the reasons set forth below, the Court DENIES Park Medical’s 16 Petition and Motion for Order Confirming in Part and Vacating in Part Arbitration Award 17 and GRANTS Western Pharmacy’s Cross-Petition and Motion for Order Confirming 18 Arbitration Award. 19 I. BACKGROUND1 20 A. The Asset Purchase Agreement 21 “Beginning in 2015, Park Medical initiated efforts to sell its pharmacies . . .” Doc. 22 No. 10-4 at 8 (“Final Award”) Ex. A. On February 9, 2016, Kevin Faris and Matthew 23 Grayson “prepared a proposed term sheet for purchase of” one of Park Medical’s stores. 24 Id. “At all times material, [ ] Grayson and [ ] Faris have been members of Western 25 [Pharmacy] . . . . Kevin McCarthy formerly was a member of the LLC.” Id. at 6. After [27] 1 Except where otherwise noted, the facts contained herein are from the Arbitrator’s Final Award, Doc. [28] 1 multiple rounds of negotiations, “[t]he transaction closed on December 15, 2017.” Id. at 2 14. Western Pharmacy ultimately purchased seven pharmacies from Park Medical. Id. at 3 8. The “Asset Purchase Agreement that the parties signed [was] effective July 19, 2017.” 4 See id. at 12; see also Doc. No. 10-5 (the “APA”) Ex. B. 5 “[Western Pharmacy] and Park Medical Pharmacy, with its shareholders, filed 6 separate Demands for Arbitration on June 16, 2020.” Final Award at 2. Western 7 Pharmacy’s “causes of action were set forth in a series of written demands that 8 culminated in a Third Amended Demand filed on March 17, 2021, and alleging 9 Intentional or Negligent Misrepresentation against Park Medical Pharmacy and Breach of 10 Warranty against Park Medical and its shareholders—three family trusts of the 11 company’s principals.” Id. at 3. “Claims against Mitchell Robins and Robins & 12 Associates, P.C. were pleaded in a federal court complaint filed August 31, 2020” and 13 “Park Medical’s Breach of Guaranty claims against Messrs. Grayson, Faris, and 14 McCarthy were pleaded in a draft complaint dated September 23, 2020, that was tendered 15 [to the arbitrator] but not filed in federal court.” Id. 16 The parties proceeded to arbitration before JAMS arbitrator Charles H. Dick, Jr. 17 (the “Arbitrator”). Id. at 4, 40. The Arbitrator held a seven-day evidentiary hearing in 18 October 2021. See id. at 2. On December 30, 2021, the Arbitrator issued an Interim 19 Award. Id. at 5. “[Western Pharmacy] and Park Medical [filed] post-hearing briefs and 20 replies requesting corrections and a recomputation of damages.” Id. “[T]he case was 21 deemed submitted for final resolution on February 17, 2022.” Id. On March 28, 2022, 22 the Arbitrator issued a Final Award. Id. at 40.2 [26] 2 In its Petition, Park Medical notes that “[d]ue to a typographical error the Final Award indicates that it 27 was entered on February 28, 2022. This is incorrect; the Final Award was not issued until March 28, 2022.” Petition at 2 fn.2. Western Pharmacy similarly indicates the Award was issued on March 28, [28] 1 B. The Arbitration Award 2 The Arbitrator determined that: (1) Western Pharmacy was “entitled to a Final 3 Award in its favor on the claims of Negligent Misrepresentation, Breach of Warranty, 4 and Breach of Contract against Park Medical Pharmacy; the George and Mona Awad 5 Family Trust, dated November 12, 2002; the Joseph E. Grasela Trust, dated November 6, 6 2000; the John C. Grasela Trust, dated October 1, 2001” with Western Pharmacy’s 7 “aggregate damages of $6,245,000 plus $34,192 SPA 17-0002 reimbursement [ ] offset 8 the parties’ Escrow Account and the original Principal balance of the Secured 9 Subordinated Promissory Note”; (2) Western Pharmacy’s “claim against Park Medical 10 Pharmacy for Fraud or Intentional Misrepresentation should be dismissed with 11 prejudice”; (3) Western Pharmacy’s “claims against Mitchell J. Robbins and Robins & 12 Associates, A Professional Corporation, should be dismissed with prejudice”; (4) Park 13 Medical was “entitled to a Final Award on its claim for Declaratory Relief against 14 [Western Pharmacy] and Messrs. Matthew Grayson, Kevin Faris, and Kevin McCarthy, 15 determining that after offset, [Western Pharmacy] owes Principal and Interest on the 16 Subordinated Secured Promissory for $975,104.35”; (5) “[t]he Final Award should direct 17 Park Medical Pharmacy to execute a Joint Release Instruction directing Citibank National 18 Association to disburse all Escrow Funds; (6) “[a]s the prevailing party, [Western 19 Pharmacy was] entitled to recover its attorney fees, costs, arbitration, and litigation 20 expenses for $1,828,383”; and (7) “[t]he Application of Mitchell J. Robins and Robins & 21 Associates, PC, for recovery of attorney fees and costs should be denied.” Id. at 39–40. 22 Park Medical now petitions and moves the Court to vacate in part and confirm in 23 part the Arbitrator’s Award. See Doc. Nos. 1, 10. Western Pharmacy moves the Court to 24 confirm the Arbitrator’s Award in its entirety. See Doc. No. 3, 9. [28] 1 II. LEGAL STANDARD 2 “In general, judicial review of an arbitration award is extremely limited.” 3 SingerLewak LLP v. Gantman, 241 Cal. App. 4th 610, 615 (2015). “[A]n arbitrator’s 4 decision is not generally reviewable for errors of fact or law, whether or not such error 5 appears on the face of the award and causes substantial injustice to the parties.” 6 Moncharsh v. Heily & Blase, 3 Cal. 4th 1, 6 (1992). California Code of Civil Procedure 7 Section 1286.2 sets forth grounds for vacating an arbitration award. Section 1286.2 8 states, in pertinent part, that “the court shall vacate the award if the Court determines” 9 that “(1) [t]he award was procured by corruption, fraud or other undue means” or that 10 “(4) [t]he arbitrators exceeded their powers and the award cannot be corrected without 11 affecting the merits of the decision upon the controversy submitted.” Cal. Civ. Proc. 12 Code § 1286.2(a)(1), (4). Pursuant to Section 1286.2(a)(1), [13] an award may be vacated if the award is secured by corruption, fraud or other [14] undue means. Fraud, as that term is used in section 1286.2, subdivision (a)(1), 15 is that perpetrated by the arbitrator or a party. Only extrinsic fraud which denies a party a fair hearing may serve as a basis for vacating an award. [16] (Maaso v. Signer (2012) 203 Cal.App.4th 362 , 371–372 [ 136 Cal. Rptr. 3d 17 853]; Pour Le Bebe, Inc. v. Guess? Inc. (2003) 112 Cal.App.4th 810, 813, 827 [ 5 Cal. Rptr. 3d 442 ]; Pacific Crown Distributors v. Brotherhood of Teamsters [18] (1986) 183 Cal.App.3d 1138, 1147, fn. 5 [ 228 Cal. Rptr. 645 ].) As to undue 19 means, a Ninth Circuit panel has defined the term thusly: “Although the term has not been defined in any federal case of which we are aware, it clearly [20] connotes behavior that is immoral if not illegal. See Black’s Law Dictionary 21 1697 (Rev. 4th ed. 1968) (‘Undue’ means ‘more than necessary; not proper; illegal,’ and ‘denotes something wrong, according to the standard of morals [22] which the law enforces.’ ‘Undue influence’ means any ‘improper or wrongful 23 constraint, machination, or urgency of persuasion whereby the will of a person is overpowered.’).” (A.G. Edwards & Sons, Inc. v. McCollough (9th Cir. [24] 1992) 967 F.2d 1401 , 1403–1404; accord, Pour Le Bebe, Inc. v. Guess? Inc., 25 supra, 112 Cal.App.4th at p. 831 .) Undue means can include representation of a party where an attorney is operating under a conflict of interest. (Pour [28] 1 Le Bebe, Inc., at pp. 813, 825–833.) Undue influence occurs when there is bribery or intimidation of the arbitrator. (Id. at p. 832.) [3] Comerica Bank v. Howsam, 208 Cal. App. 4th 790 , 822–23 (2012). Pursuant to Section [4] 1286.2(a)(4), [5] 6 California courts have found that an arbitrator exceeds his powers when he (1) acts without subject matter jurisdiction, (2) decides an issue that was not [7] submitted to arbitration, (3) arbitrarily remakes the contract, (4) upholds an 8 illegal contract, (5) issues an award that violates a well-defined public policy, (6) issues an award that violates a statutory right, (7) fashions a remedy that [9] is not rationally related to the contract, or (8) selects a remedy not authorized 10 by law. See Jordan v. Cal. Dep’t of Motor Vehicles, 100 Cal. App. 4th 431, 443 , 123 Cal. Rptr. 2d 122 (2002) (citing cases) (internal citations omitted). [11] “In other words, an arbitrator exceeds his powers when he acts in a manner 12 not authorized by the contract or by law.” Id. [13] 14 Johnson v. Gruma Corp., 614 F.3d 1062 , 1069–70 (9th Cir. 2010). “Arbitrators do not 15 exceed their powers by reaching erroneous factual or legal conclusions on the merits of 16 the parties’ claims, even if the award causes substantial injustice to one of the parties.” 17 Emerald Aero, LLC v. Kaplan, 9 Cal. App. 5th 1125, 1138 (2017) (first citing Richey v. 18 AutoNation, Inc., 60 Cal. 4th 909, 916 (2015); then citing Moncharsh, 3 Cal. 4th at 6 . 19 “The essence of arbitration is its freedom from the formality of ordinary judicial 20 procedure.’” Greenspan v. LADT, LLC, 185 Cal. App. 4th 1413, 1449 (2010) (quoting 21 Sapp v. Barenfeld, 34 Cal. 2d 515, 520 (1949)). [22] 23 * * * [28] 1 III. DISCUSSION 2 Park Medical moves to vacate the Award in part on the grounds that the Arbitrator 3 exceeded his powers and that the Award was procured through undue means. See 4 Petition. The gravamen of Park Medical’s Petition is that Western Pharmacy never 5 presented or mediated any claim for “negligent misrepresentation by omission or breach 6 of warranty based on any omission concerning inventory or accounts receivable 7 information[,]” and that the Arbitrator was therefore acting outside of the scope of his 8 power in ruling on these claims. See id. at 8. Instead, Park Medical urges that “[t]he 9 sole basis for Western’s claims throughout the arbitration . . . was two intentional and 10 affirmative misrepresentations regarding net ordinary income and gross margin and a 11 claim for breach of warranty premised on SPA 17-002 and the same two alleged 12 intentional misrepresentations.” Doc. No. 10-1 at 23 (emphasis and citations omitted). 13 On this basis, Park Medical seeks to (1) vacate the finding of liability against Park 14 Medical for negligent misrepresentation by omission and breach of warranty by omission 15 for failure to disclose “[(a)] “Park Medical’s use of estimated inventory figures, rather 16 than figures from an automated system, in connection with its financial reports during the 17 fourth quarter of 2016 and early 2017; and [(b)] that Park Medical ‘had difficulty 18 determining the company’s accounts receivable’” in the first quarter of 2017”; (2) vacate 19 the award of damages in the amount of $6,245,000 based upon those same claims; (3) 20 vacate the award of attorneys’ fees and costs in the amount of $1,828,383 based upon 21 Western Pharmacy’s prevailing party status against Park Medical on those same claims; 22 and (4) remand the case to JAMS for further proceedings, solely to determine the 23 appropriate amount of fees and costs to be awarded Park Medical as the prevailing party. 24 Petition at 3, 16–17. 25 The Court considers each of Park Medical’s arguments in turn, and concludes that 26 Park Medical has failed to raise grounds upon which the Court can vacate the Award. [28] 1 A. Motion to Confirm in Part and Vacate in Part 2 1. Waiver 3 As an initial matter, Western Pharmacy urges that many of Park Medical’s 4 arguments in the instant motion have been waived by Park Medical’s failure to raise them 5 with the Arbitrator. Park Medical urges that “JAMS Rules afforded Petitioners no 6 procedural ability to attack the Arbitrator’s disregard for his limited authority—JAMS 7 Rules only allow a party to seek correction of awards based on ‘computational, 8 typographical or other similar error[s].’” Doc. No. 16 at 6 (quoting JAMS Rule 24(j)) 9 (additional citation omitted). The Court is not convinced these arguments were waived. 10 JAMS Rule 24(j) states the following: [11] Within seven (7) calendar days after service of a Partial Final Award or Final [12] Award by JAMS, any Party may serve upon the other Parties and on JAMS a 13 request that the Arbitrator correct any computational, typographical or other similar error in an Award (including the reallocation of fees pursuant to Rule [14] 31(c) or on account of the effect of an offer to allow judgment), or the 15 Arbitrator may sua sponte propose to correct such errors in an Award. A Party opposing such correction shall have seven (7) calendar days thereafter in [16] which to file any objection. The Arbitrator may make any necessary and 17 appropriate corrections to the Award within twenty-one (21) calendar days of receiving a request or fourteen (14) calendar days after his or her proposal to [18] do so. The Arbitrator may extend the time within which to make corrections 19 upon good cause. The corrected Award shall be served upon the Parties in the same manner as the Award. [20] 21 Doc. No. 13-5 at 30 (“JAMS Rules & Procedures”) Ex. 3. The plain language reading of 22 JAMS Rule 24(j) rule is that, after service of a Pretrial Final Award or Final Award, the 23 parties are limited to requesting corrections of “any computational, typographical or other 24 similar error.” See id. Moreover, the Court notes that waiver occurs when a party “sit[s] 25 idle through an arbitration procedure and then collaterally attack[s] that procedure on 26 grounds not raised before the arbitrators when the result turns out to be adverse.” Marino 27 v. Writers Guild of Am., E., Inc., 992 F.2d 1480, 1484 (9th Cir. 1993). The record does [28] 1 not show waiver. Accordingly, it appears Park Medical did not waive the instant 2 arguments. The Court therefore considers Park Medical’s arguments on the merits. 3 2. Arbitrability and Jurisdiction 4 Park Medical argues that “[t]he Award’s omission rulings violate specific 5 restrictions in the parties’ arbitration agreement providing that detailed notice of any 6 claimed breach of warranty, as well as nonbinding mediation of any ‘controversy or 7 claim’ are mandatory conditions precedent to any arbitration proceeding.” Doc. No. 10-1 8 at 20–21 (emphasis omitted). Additionally, Park Medical argues that “[t]he Award also 9 violates the parties’ submissions for arbitration because neither Park Medical nor 10 Western ever submitted the claims the Arbitrator ultimately ruled upon to arbitration.” 11 Id. at 23. 12 Specifically, Park Medical points to Sections 10(g) and 17(n) of the APA, arguing 13 that “[b]ecause Western never furnished Park Medical the required notice of a breach of 14 representation and warranty claim premised on non-disclosure of inventory or accounts 15 receivable information, and the parties never mediated such a claim, no right to arbitrate 16 these claims was ever triggered and the Arbitrator exceeded his contractual powers by 17 ruling on such claims.” Id. at 22. 18 Western Pharmacy argues that all of Park’s Medical’s arguments regarding Section 19 10 and 17 of the APA lack merit and that “the Court need not even reach Park Medical’s 20 arguments regarding the sufficiency of Western’s pleading (or any other attacks on the 21 Arbitrator’s jurisdiction over Western’s successful claims) because the parties 22 specifically delegated to the Arbitrator all issues regarding arbitrability and jurisdiction.” 23 Doc. No. 13 at 6, 10–16. 24 Section 10 of the APA sets forth the indemnification obligations of the parties; 25 Section 10(g) sets forth the indemnification procedure. APA at 34–38. Section 17(n) 26 sets forth the contractually-agreed upon procedure for dispute resolution, requiring the 27 parties to first attempt to settle “any dispute or controversy” through “direct discussion”, 28 then “endeavor to settle the dispute by nonbinding mediating administered by JAMS, 1 Inc.”, and as a final resort, settle “[a]ny remaining unresolved controversy or claim” by 2 “binding arbitration.” Id. at 43–44. 3 Section 10(g) of the APA provides as follows, in relevant part: [4] (g) Indemnification Procedure. [5] (i) If a party seeking indemnification (“Claiming Party”) seeks [6] indemnification pursuant to this Section 10 or if such Claiming Party receives 7 a claim or demand from a third party (a “Third Party Claim”) for which the Claiming Party may be entitled to such indemnification, such Claiming Party [8] shall promptly notify the Indemnifying Party in writing of its discovery of 9 such claim or demand, (a “Notice of Claim”). The Notice of Claim shall state that the Indemnified Party has paid or incurred Losses for which such [10] Indemnified Party is entitled to indemnification pursuant to this Section 10, 11 and specify in reasonable detail the basis for such claim. Notwithstanding anything to the contrary herein, no delay by a Claiming Party in providing a [12] Notice of Claim or failure to follow the other protocols set forth above shall 13 relieve the Indemnifying Party of its indemnification obligations under this Agreement except if and to the extent the Indemnifying Party is adversely [14] affected by such delay or failure. [15] 16 Id. at 36–37. 17 The relevant portion of Section 17(n) of the APA provides as follows: [18] 19 (n) Mediation/Arbitration. Notwithstanding Section 17(a) above, the parties acknowledge that any dispute or controversy concerning this Agreement or [20] the rights and obligations of the parties herein, including whether or not such 21 dispute or controversy is arbitrable, or any breach of the representations, warranties, covenants or agreements under this Agreement, shall be [22] determined in accordance with the following provisions: [23] 24 (i) Upon the occurrence of any dispute or controversy that cannot be settled through direct discussions, the parties shall endeavor to settle [25] the dispute by nonbinding mediation administered by JAMS, Inc. 26 (“JAMS”), before resorting to arbitration. The parties shall agree to a mediator and if they are unable to agree, JAMS shall select a mediator [27] who may be rejected by the parties only for bias. The parties shall 28 notify the mediator in writing of the existence of a dispute and the 1 mediator shall have thirty (30) days from receipt of notification to meet with the parties and help them resolve the dispute, unless the parties [2] mutually agree to an extension of the deadline. The cost of mediation 3 (but not the attorneys’ fees of the respective parties) shall be borne equally between the parties. No party may compel arbitration before [4] the end of the thirty (30) day period. [5] (ii) Any remaining unresolved controversy or claim arising out of or [6] relating to this Agreement shall be settled by binding arbitration, which 7 shall constitute the sole and exclusive remedy. Either party desiring to institute an arbitration proceeding hereunder shall send written notice [8] thereof, briefly describing the nature of the matter to be arbitrated, to 9 JAMS with a copy to the other party. Any such arbitration proceeding shall be carried out in accordance with the following provisions: [10] 11 (A) The arbitration proceeding shall be conducted pursuant to the JAMS Comprehensive Arbitration Rules & Procedures (“JAMS [12] Rules”), in effect at the time a demand for arbitration is made. 13 To the extent that there is any conflict between the JAMS Rules and these arbitration provisions, these provisions shall govern [14] and determine the rights of the parties. [15] 16 Id. at 43–44. 17 Nothing in Sections 10(g) or 17(n) allows this Court to find that the Arbitrator 18 exceeded the scope of his contractual authority. In essence, Park Medical asks this Court 19 to interpret the APA as imposing a requirement that each individual claim, and its precise 20 supporting theory, proceed through notice, direct discussion, mediation, and finally 21 arbitration. The Court finds no support for this in the APA. To the contrary, the first 22 time the APA uses the term “claim” in Section 17(n) is in the final clause discussing 23 arbitration, whereas the earlier clauses refer more broadly to a “dispute or controversy”; 24 similarly, Section 10(g) requires a claiming party to notify an indemnifying party “in 25 writing of its discovery of such claim or demand” and to “specify in reasonable detail the 26 basis for such a claim.” See id. at 36–37, 43–44. 27 Park Medical urges that cases like Harshad & Nasir Corp. v. Global Sign Systems, 28 Inc., 4 Cal. App. 5th 523 (2017), Emerald Aero, LLC v. Kaplan, 9 Cal. App. 5th 1125 1 (2017), and Pacific Crown Distribs. v. Bhd. Of Teamsters, 183 Cal. App. 3d 1138 (1986), 2 lend support to their arguments. However, these cases are inapposite in the instant case, 3 where the Arbitrator explicitly found that “the last Demand asserted a negligence claim 4 as a lesser included offense of the alleged fraudulent conduct by Park Medical.” Final 5 Award at 23. 6 Accordingly, the Court finds that Park Medical’s arguments regarding arbitrability 7 and jurisdiction provide no basis for vacatur. 8 3. Violation of JAMS Rules 9 Park Medical argues that “[t]he Award violates the JAMS Comprehensive Rules of 10 Arbitration, which unequivocally prohibit arbitrators from considering claims not 11 contained within a parties’ notice of claims[.]” Doc. No. 10-1 at 25. Western Pharmacy 12 argues there was no violation of JAMS Rules 9 or 10. See Doc. No. 13 at 23. JAMS 13 Rule 9(a) provides rules regarding notice of claims: [14] Each Party shall afford all other Parties reasonable and timely notice of its [15] claims, affirmative defenses or counter-claims. Any such notice shall include 16 a short statement of its factual basis. No claim, remedy, counterclaim or affirmative defense will be considered by the Arbitrator in the absence of such [17] prior notice to the other Parties, unless the Arbitrator determines that no Party 18 has been unfairly prejudiced by such lack of formal notice or all Parties agree that such consideration is appropriate notwithstanding the lack of prior notice. [19] 20 JAMS Rules & Procedures at 13. JAMS Rule 10 provides rules for changes of claims: [21] 22 After the filing of a claim and before the Arbitrator is appointed, any Party may make a new or different claim against a Party or any third party that is [23] subject to Arbitration in the proceeding. Such claim shall be made in writing, 24 filed with JAMS and served on the other Parties. Any response to the new claim shall be made within fourteen (14) calendar days after service of such [25] claim. After the Arbitrator is appointed, no new or different claim may be 26 submitted, except with the Arbitrator’s approval. A Party may request a hearing on this issue. Each Party has the right to respond to any new or [27] amended claim in accordance with Rule 9(c) or (d). [28] 1 Id. at 14. 2 The Arbitrator concluded that “[t]he initial Demand for Arbitration . . . alleged 3 Fraud, but it was not until March 17, 2021, that a claim of negligent misrepresentation 4 was filed against Park Medical. . . . The Third Demand relates back to June 2020 and 5 should be deemed as timely filed with the applicable, two-year period of limitation.” 6 Final Award at 23. In doing so, the Arbitrator necessarily considered the scope of the 7 pleaded allegations, noting that “[a]pplication of the [relation back] rule hinges on 8 whether a party has been put on notice of facts against which a defense must be mounted” 9 and that “[t]he original Demand for Arbitration and each of the succeeding amendments 10 posit liability on misstatements of Park Medical’s financial performance.” See id. 11 “An arbitrator’s interpretation of JAMS Rules may be judicially reviewed on the 12 merits where the parties have explicitly and unambiguously agreed that the arbitration 13 award is subject to that scope of review.” Greenspan, 185 Cal. App. 4th at 1452 (citing 14 Cable Connection, Inc. v. DIRECTV, Inc., 44 Cal. 4th 1334, 1355, 1361 , 1364–65 & 15 fn.23 (2008)). In the instant case, the parties did not “explicitly and unambiguously” 16 agree to expanded review. See APA at 43–44. 17 Accordingly, this is not a ground for vacatur. 18 4. Notice of Negligent Misrepresentation Theory 19 Park Medical argues that “[a]ny claim by Western that negligent misrepresentation 20 by omission is simply a type of negligent misrepresentation, and therefore was submitted 21 by Western for arbitration, must be rejected” because (1) “ no claim for negligent 22 misrepresentation by omission appears to even exist under California law, except perhaps 23 in instances presenting foreseeable and substantial risk of physical harm to a third 24 person”; and (2) Western Pharmacy was required to plead any misrepresentation claims 25 “with particularity[.]” Doc. No. 10-1 at 26–27 (citations, quotation marks, and emphasis 26 omitted). Western Pharmacy argues that Park Medical had full and fair notice of Western 27 Pharmacy’s successful negligent misrepresentation theory. Doc. No. 13 at 24. 28 In essence, Park Medical is asking the Court to reassess the Arbitrator’s legal 1 conclusion that “California law recognizes a deceit claim for negligent omission or 2 concealment of a material fact.” See Final Award at 19. The Court can find no legal 3 basis to do so.4 Emerald Aero, 9 Cal. App. 5th at 1138 (“Arbitrators do not exceed their 4 powers by reaching erroneous factual or legal conclusions on the merits of the parties’ 5 claims, even if the award causes substantial injustice to one of the parties.”) (citations 6 omitted).5 7 5. Limitation of Liability 8 Park Medical argues that “[t]he award violates the APA’s limitation of liability 9 provision through the award of $6.245 million for breach of the representation and 10 warranty” because “[t]he APA specifically and clearly limits damages for any such 11 breach to $4.5 million.” Doc. No. 10-1 at 29 (citing Ex. B. § 10(d)). Western Pharmacy 12 argues that the cap in “Section 10(d) does not apply to facts that sound in fraud and 13 negligent misrepresentation is a species of fraud.” Doc. No. 13 at 30 (citing Ex. B. § 14 10(d)) (additional citation omitted). 15 The Arbitrator concluded that Western Pharmacy was entitled to $6.245 million in 16 damages for negligent misrepresentation and breach of warranty. Final Award at 27–30, 17 33, 39–40. In making the calculation, the Arbitrator stated that “[t]he measure of 18 damages in a California claim for deceit is the difference between the ‘actual value of 19 that which the defrauded person parted and the actual value of that which he received’” 20 and “[t]he measure of damages for breach of contract is ‘the amount that will compensate 21 the party aggrieved for all the detriment proximately caused’ by the breach. See id. at 27 22 (citations omitted). The Arbitrator did not parse the total damage award by claim. Id. at 23 27–30. The APA states, in relevant part, “nothing in this Agreement shall be deemed to [25] 4 The Court is similarly unpersuaded by Park Medical’s argument that Western Pharmacy was required 26 to plead any misrepresentation claims “with particularity.” See Greenspan v. LADT, LLC, 185 Cal. App. 4th 1413, 1449 (2010) (quoting Sapp v. Barenfeld, 34 Cal. 2d 515, 520 (1949)) (“The essence of 27 arbitration is its freedom from the formality of ordinary judicial procedure.’”). 5 The Court takes no position on the existence or scope, if any, of a claim for negligent [28] 1 limit any Party’s recovery for Losses resulting from fraud or intentional 2 misrepresentation.” APA at 36 (emphasis added). Based on the record and the language 3 in the APA, the Court cannot find the Arbitrator exceeded his powers; Park Medical’s 4 challenge to the Arbitrator’s interpretation of the APA and calculation of damages is not 5 a basis for vacatur. 6 6. Fraud or Other Undue Means 7 Park Medical argues that “[t]he Arbitrator not only exceeded his powers by ruling 8 on claims of concealment after the arbitration hearing and post-hearing briefing were 9 completed, but also failed to ensure a fair hearing such that the Award was procured by 10 ‘fraud or other undue means’ under Code of Civil Procedure Section 1286.2(a)(1).” Doc. 11 No. 10-1 at 24 (citations omitted). Park Medical also argues that the Arbitrator “issued 12 an award procured by ‘fraud or other undue means’” by violating JAMS Rules 9(a) and 13 10 by “considering claims not contained within a parties’ notice of claims,” and 14 “ignor[ing] JAMS rules providing procedural safeguards concerning the addition of any 15 ‘new or different’ claim” by “request[ing] ‘short comments’ within a week from the date 16 of his email” instead of “allowing Park Medical to submit a response and any affirmative 17 defense within 14 days.” Id. at 25–26 (first citing Emerald Aero, 9 Cal. 5th at 1141–42; 18 then citing Cal. Code Civ. Pro. §1286.2(a)(1), (4)). 19 “Fraud, as that term is used in [Section 1286.2(a)(1)], is that perpetrated by the 20 arbitrator or a party. Only extrinsic fraud which denies a party a fair hearing may serve 21 as a basis for vacating an award.” See Comerica, 208 Cal. App. 4th at 822–23 (citations 22 omitted). Undue means, as used in Section 1286.2(a)(1), “clearly connotes behavior that 23 is immoral if not illegal.” Id. (citations omitted). 24 The record does not support Park Medical’s claim that the Award was procured by 25 undue means. 26 7. Summary 27 Park Medical fails to raise grounds upon which the Court can vacate the award of 28 liability and damages against Park Medical for negligent misrepresentation by omission 1 and breach of warranty by omission. Accordingly, there is also no basis for the Court to 2 vacate the award of attorneys’ fees and costs or for the Court to remand the case to 3 JAMS. The Court therefore DENIES Park Medical’s Motion to Confirm in Part and 4 Vacate in Part the Arbitration Award. 5 B. Motion for Confirmation of Final Arbitration Award 6 Western Pharmacy moves pursuant to California Code of Civil Procedure Section 7 1280, et seq. for (1) confirmation of the Award; (2) reasonable attorneys’ fees and costs; 8 and (3) judgment in favor of Western Pharmacy in conformance with the Award. See 9 Doc. No. 9. 10 Under California law, “the court shall confirm the award as made, whether 11 rendered in this state or another state, unless in accordance with this chapter it corrects 12 the award and confirms it as corrected, vacates the award or dismisses the proceeding.” 13 Cal. Code Civ. Proc. § 1286. Because the Court has not corrected or vacated the Award, 14 or dismissed the proceeding, the Court must confirm the Award. See id. Additionally, 15 “[i]f an award is confirmed, judgment shall be entered in conformity therewith.” Cal. 16 Code Civ. Proc. § 1287.4. [17] 18 *** [28] IV. CONCLUSION 2 For the foregoing reasons, the Court DENIES Park Medical’s Petition and Motion 3 ||to Confirm in Part and Vacate in Part the Award. See Doc. Nos. 1, 10. The Court further 4 ||GRANTS Western Pharmacy’s Cross-Petition and Motion for Confirmation of Final 5 || Arbitration Award. See Doc. Nos. 3, 9. The Court CONFIRMS the Arbitrator’s Final 6 || Award and DIRECTS the Clerk of Court to enter judgment in accordance with the 7 || Award. Doc. No. 10-4 at 39-40. 8 Western Pharmacy has also requested attorneys’ fees and costs in the Cross9 || Petition, but has not specified in what amount, nor supported the request with appropriate 10 |/evidence. See Doc. No. 3 at 7. Federal Rule of Civil Procedure 54(d) permits a party to 11 ||move for attorneys’ fees and costs. Fed. R. Civ. P. 54(d). Western Pharmacy may file a 12 || properly supported motion for attorneys’ fees and costs no later than December 9, 2022. 13 IT IS SO ORDERED. 14 || Dated: November 9, 2022 15 phi bal Daa bbs 16 HON. MICHAEL M. ANELLO 17 United States District Judge