Second District, Division Three, Reminds Us Simple Mistake of Law or Fact is Not Necessarily in Excess of an Arbitrator's Powers.
Frederick Lax, former President and CEO of Tekelec, brought an arbitration proceeding against Tekelec, seeking compensation for options that were lost when Tekelec did not issue necessary financial statements until after the options expired. The arbitrator issued an award in favor of Lax, awarding Lax expert witness fees, in addition to damages, attorney's fees, and costs. The trial Court confirmed the award. One of the issues appealed - the only issue that concerns us -- is whether the arbitrator awarded expert fees improperly. Tekelec v. Lax, Case No. B212759 c/w B213669 (2nd Dist., Div. 3, July 30, 2009) (not to be published).
The reason there was a problem at all was that there were two fee clauses in Lax's separation agreement, and Tekelec sought to drive a wedge between the two clauses, arguing one expressly applied to arbitration, whereas the other did not. Paragraph 16.10 of the separation agreement, relating to arbitration, provided that "the prevailing party shall recover costs and attorneys' fees incurred in arbitration." Paragraph 16.12, relating to lawsuits, provided, "the prevailing party in such lawsuit shall be entitled to recover from the losing party all reasonable attorneys' fees, costs of suit and expenses (including the reasonable fees, costs and expenses of appeals)." The arbitrator's decision referred to the language in the provision applying to lawsuits as a basis for awarding expert fees. Tekelec, however, argued that expert witness fees are "expenses", awardable only in a lawsuit, but not in arbitration.
A mistake, perhaps, but not a fatal one.
The Court of Appeal explained:
"First, we would be hard-pressed to say the award of expenses was an act in excess of the arbitrator's powers rather than a simple mistake of fact or law. . . . Second, an arbitration award is to be vacated only when the arbitrators 'exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted. . . .Even if the award of expert witness fees was an act in excess of the arbitrator's jurisdiction, it does not provide a basis to vacate the award."
Result: Judgment affirmed, in a 3-0 opinion authored by Justice Croskey.
Practice Tip: Attorneys drafting prevailing party fee clauses should consider whether the provisions governing lawsuits and arbitrations are consistent -- and whether they want them to be consistent.
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