Case Title: Heimlich v. Shivji

Citation: 

Docket Number: S243029

State: california

Court: California Supreme Court

Date: 2019-05-30T00:00:00Z

Document:
IN THE SUPREME COURT OF 
CALIFORNIA 
 
ALAN HEIMLICH, 
Plaintiff and Respondent, 
v. 
SHIRAZ M. SHIVJI, 
Defendant and Appellant. 
 
S243029 
 
Sixth Appellate District 
H042641 
 
Santa Clara County Superior Court 
112CV231939 
 
 
May 30, 2019 
 
Justice Corrigan authored the opinion of the court, in which 
Chief Justice Cantil-Sakauye and Justices Chin, Liu, Cuéllar, 
Kruger, and Groban concurred.   
 
 
 1 
HEIMLICH v. SHIVJI 
S243029 
 
Opinion of the Court by Corrigan, J. 
 
Code of Civil Procedure section 9981 creates an incentive 
for settlement.  It authorizes an award of costs to a party that 
makes a pretrial settlement offer when the opponent rejects the 
offer and obtains a lesser result at trial.  (Martinez v. Brownco 
Construction Co. (2013) 56 Cal.4th 1014, 1019.)  In 1997, the 
Legislature amended the statute to make the same incentive 
available in arbitrations.  (Stats. 1997, ch. 892, § 1, p. 6390; 
Pilimai v. Farmers Ins. Exchange Co. (2006) 39 Cal.4th 133, 139, 
149.)  This case involves the procedures for seeking these costs 
in arbitration. 
We hold a request for costs under section 998 is timely if 
filed with the arbitrator within 15 days of a final award.  In 
response to such a request, an arbitrator has authority to award 
costs to the offering party.  However, if an arbitrator refuses to 
award costs, judicial review is limited.  The Court of Appeal 
erred in relying on a narrow exception to those limits, for failure 
to consider evidence.  We reverse. 
I.   FACTUAL AND PROCEDURAL BACKGROUND 
In 2003, engineer and inventor Shiraz Shivji retained 
Attorney Alan Heimlich to handle a range of intellectual 
property matters.  The representation agreement included a 
                                        
1  
All further unlabeled statutory references are to the Code 
of Civil Procedure. 
HEIMLICH v. SHIVJI 
Opinion of the Court by Corrigan, J. 
 
2 
clause providing for private arbitration of all disputes, including 
those involving legal fees.  Heimlich represented Shivji in 
connection with patent applications and formation of a start-up 
company. 
In 2012, Heimlich sued Shivji, alleging he owed roughly 
$125,000 in legal fees.  One year into the litigation, Shivji made 
an offer to settle the case under section 998 (998 offer) for 
$30,001.  The offer was not accepted.  In November 2013, with 
proceedings ongoing, Shivji filed a demand for arbitration with 
the American Arbitration Association.  Heimlich requested 
dismissal, urging that Shivji had waived his arbitration rights.  
The arbitrator denied the request pending a judicial 
determination of the waiver question.  The court granted Shivji’s 
motion to compel arbitration and stayed further litigation. 
Shivji and Heimlich then filed claims against each other.  
Shivji asked for a refund of $176,000 for sums already paid.  
Heimlich sought $125,000 for unpaid fees.  Each party also 
requested costs, placing that issue squarely before the 
arbitrator.  On March 5, 2015, the arbitrator issued an award 
granting $0 to both Heimlich and Shivji and directed that “each 
side will bear their own attorneys’ fees and costs.”  
(Capitalization altered.)  The award was “intended to be a 
complete disposition of all claims and counterclaims submitted 
to this Arbitration.” 
On March 11, 2015, Shivji advised the arbitrator of the 
original 998 offer and a second one for $65,001.  Shivji sought 
costs because Heimlich had failed to obtain a more favorable 
result.  He assumed “the demand for an award for recovery of 
these costs should be submitted to the Arbitrator rather than 
directly to the Court.”  The arbitrator replied by email:  
HEIMLICH v. SHIVJI 
Opinion of the Court by Corrigan, J. 
 
3 
“Counsel, once I issued [my] Final Award I no longer [had] 
jurisdiction to take any further action in this matter.  As 
discussed in the Award, whatever may have been costs, fees, etc. 
associated with the [court] litigation were to be borne by the 
parties and I didn’t award either party attorneys’ fees related to 
the arbitration.” 
Shivji then filed a trial court motion to confirm the award 
and attached a memorandum of costs seeking $76,684.02.  The 
court confirmed the award but refused to add costs.  It relied on 
Maaso v. Signer (2012) 203 Cal.App.4th 362, which held a 
request for section 998 costs in connection with an arbitration 
must be resolved by the arbitrator. 
The Court of Appeal reversed, holding Shivji’s postaward 
request to the arbitrator was timely.  It observed that a “section 
998 determination necessarily must postdate an arbitration 
award,” and that a 998 offer “ ‘cannot be given in evidence upon 
the trial or arbitration.’ ”  (Heimlich v. Shivji (2017) 12 
Cal.App.5th 152, 169, review granted Aug. 23, 2017, S243029, 
quoting § 998, subd. (b)(2), italics omitted.)  Moreover, it held 
the trial court could vacate the arbitrator’s award because the 
arbitrator had “ ‘refus[ed] . . . to hear evidence material to the 
controversy’ ” 
(Heimlich, 
at 
p. 
175, 
quoting 
§ 1286.2, 
subd. (a)(5)) when he summarily rejected Shivji’s attempt to 
raise the issue (Heimlich, at pp. 175–177). 
II.   DISCUSSION 
A. 
The Allocation of Costs Was an Issue for the 
Arbitrator in the First Instance 
Arbitration is a matter of consent.  (Sandquist v. Lebo 
Automotive, Inc. (2016) 1 Cal.5th 233, 252.)  Consequently, 
HEIMLICH v. SHIVJI 
Opinion of the Court by Corrigan, J. 
 
4 
whether an arbitrator or court should allocate costs depends on 
the parties’ agreement, which defines the scope of the 
arbitrator’s power.  (Moncharsh v. Heily & Blase (1992) 3 
Cal.4th 1, 8.) 
Here, that agreement is broad.  It commits the parties to 
arbitrate “all disputes or claims of any nature whatsoever, 
including but not limited to those relating to [Heimlich’s] fees or 
the adequacy or appropriateness of [Heimlich’s] services . . . .”  
(Capitalization altered.)  While the agreement does not 
explicitly address jurisdiction over ancillary matters such as 
costs, neither does it exclude them from consideration.  “Absent 
an express and unambiguous limitation in the contract or the 
submission to arbitration, an arbitrator has the authority to find 
the facts, interpret the contract, and award any relief rationally 
related to his or her factual findings and contractual 
interpretation.”  (Gueyffier v. Ann Summers, Ltd. (2008) 43 
Cal.4th 1179, 1182.)  This principle extends specifically to costs:  
If the parties’ agreement does “not limit the issues to be resolved 
through arbitration, the issue of [a party’s] entitlement to . . . 
costs, as requested in his complaint, [is] subject to 
determination in arbitration proceedings.”  (Corona v. Amherst 
Partners (2003) 107 Cal.App.4th 701, 706; see Moshonov v. 
Walsh (2000) 22 Cal.4th 771, 776; Maaso v. Signer, supra, 203 
Cal.App.4th at p. 377.) 
As a result, Shivji was required to request costs from the 
arbitrator in the first instance.  Failure to do so would have 
precluded relief.  (See Maaso v. Signer, supra, 203 Cal.App.4th 
at pp. 377–378; Corona v. Amherst Partners, supra, 107 
Cal.App.4th at pp. 706–707.)  Shivji’s request for costs in his 
arbitration claim and his March 11 attempt to raise the issue 
HEIMLICH v. SHIVJI 
Opinion of the Court by Corrigan, J. 
 
5 
with the arbitrator were sufficient to avoid this bar.  The next 
question is timeliness. 
B. 
Evidence of a Section 998 Offer May Be Presented 
Before or After a Final Arbitration Award 
Section 1032 provides:  “Except as otherwise expressly 
provided by statute, a prevailing party is entitled as a matter of 
right to recover costs in any action or proceeding.”  (§ 1032, subd. 
(b).)  Section 998 amends this rule, creating an additional 
avenue for cost recovery.  A party that might not otherwise 
qualify as prevailing may still be entitled to costs because it 
extended a formal pretrial or prearbitration settlement offer 
that was declined and a better outcome ensued.  (See § 998, 
subds. (c)–(e).)  “It is the very essence of section 998 that, to 
encourage both the making and the acceptance of reasonable 
settlement offers, a losing defendant whose settlement offer 
exceeds the judgment is treated for purposes of postoffer costs 
as if it were the prevailing party.”  (Scott Co. v. Blount, Inc. 
(1999) 20 Cal.4th 1103, 1114.)  A plaintiff who rejects a 
defendant’s 998 offer, then fails to obtain a more favorable 
judgment, cannot recover postoffer costs.  That plaintiff is also 
liable for the defendant’s postoffer costs, and in the discretion of 
the court, for expert witness fees as well.  (§ 998, subd. (c)(1).) 
A 998 offer must be made at least 10 days before the 
beginning of trial or arbitration.  (§ 998, subd. (b).)  If the offer 
is declined or not accepted in time, “it shall be deemed 
withdrawn, and cannot be given in evidence upon the trial or 
HEIMLICH v. SHIVJI 
Opinion of the Court by Corrigan, J. 
 
6 
arbitration.”  (Id., subd. (b)(2).)2  Shivji contends this restriction 
on admissibility prevented him from seeking costs until after 
the arbitrator issued an award because he was barred until then 
from telling the arbitrator about his settlement offers.  Heimlich 
argues that under White v. Western Title Ins. Co. (1985) 40 
Cal.3d 870, there is no evidentiary bar.  To the contrary, he 
urges preaward submission is mandatory because the arbitrator 
loses all jurisdiction after an award. 
Both views are incorrect.  With certain limits, evidence of 
a 998 offer may be presented before or after an arbitrator’s final 
award on the merits.  While Shivji would not have been 
categorically prohibited from advising the arbitrator of the 
rejected 998 offer sooner, his proffer six days after the final 
award was timely. 
1. 
Notice of a Section 998 Offer Before an Award 
In White v. Western Title Ins. Co., supra, 40 Cal.3d 870, 
plaintiffs sued a title insurance company for breach of contract 
and negligence.  The insurer made a series of settlement offers, 
including one pursuant to section 998.  The insureds rejected all 
offers and added a claim for breach of the covenant of good faith 
and fair dealing.  The court bifurcated proceedings, trying the 
contract and negligence claims first.  After the insurer was 
found liable, trial proceeded on the good faith claim.  To prove 
the insurer handled the underlying insurance claim in bad faith, 
the insureds introduced evidence of the settlement offers.  
(White, at pp. 878–879.) 
                                        
2  
These offers expire after 30 days or at the start of trial or 
arbitration, whichever comes first.  (§ 998, subd. (b)(2).)  There 
is no dispute Shivji’s offers were never accepted. 
HEIMLICH v. SHIVJI 
Opinion of the Court by Corrigan, J. 
 
7 
On appeal, we rejected Western Title’s argument that its 
settlement offers were inadmissible.  The policy behind the 
Evidence Code’s general prohibition against introduction of 
settlement offers (see Evid. Code, § 1152) is that candor is 
essential 
to 
productive 
settlement 
negotiations 
(C & K 
Engineering Contractors v. Amber Steel Co. (1978) 23 Cal.3d 1, 
13).  Parties should be encouraged to make offers without fear 
that they will be treated as an admission of either liability or 
the minimal value of a claim.  However, Western Title’s offers 
were not being used to show contractual liability.  Because that 
question had already been adjudicated in the first part of the 
bifurcated proceeding, the offers could be admitted for a 
different purpose:  to show the insurer’s bad faith.  (White v. 
Western Title Ins. Co., supra, 40 Cal.3d at pp. 887–888.) 
White acknowledged that Code of Civil Procedure section 
998, subdivision (b)(2), imposes a specific and arguably broader 
bar against admissibility.  While the Evidence Code bars 
admission of a settlement offer specifically “to prove [a party’s] 
liability for . . . loss or damage” (Evid. Code, § 1152, subd. (a)), 
the Code of Civil Procedure states without any limitation that a 
declined 998 offer “cannot be given in evidence” (Code Civ. Proc., 
§ 998, subd. (b)(2)).  Nonetheless, we concluded that provision 
should be read to implement the same policies as those 
underlying the Evidence Code bar, and thus be subject to similar 
limitations, notwithstanding its absolute terms.  Accordingly, 
although a 998 offer is inadmissible to prove liability, it may be 
admissible to prove unrelated matters.  (White v. Western Title 
Ins. Co., supra, 40 Cal.3d at p. 889.) 
White limits the force of section 998’s broad language by 
conforming the scope of its evidentiary bar to circumstances 
implicating the policy underlying the prohibition.  The Court of 
HEIMLICH v. SHIVJI 
Opinion of the Court by Corrigan, J. 
 
8 
Appeal erred in concluding, without discussion of White, that 
section 998, subdivision (b)(2), prevented Shivji from revealing 
the offer.  (See Heimlich v. Shivji, supra, 12 Cal.App.5th at 
p. 169, rev. granted.) 
 
2. 
Notice of a Section 998 Offer After an Award 
Just because Shivji could have raised the rejected 998 offer 
sooner does not mean that he was required to do so.  The text of 
section 998 and the rules governing arbitration do not mandate 
that a rejected offer be presented to an arbitrator before 
issuance of an award.  Furthermore, the policy underlying 
section 998 militates in favor of permitting disclosure after 
issuance. 
Section 998 sets out when a settlement offer may be made 
and by when it must be accepted.  (§ 998, subd. (b).)  It does not 
address when a request for costs must be made.  In court cases, 
that timing is governed by California Rules of Court, rule 
3.1700.  A party seeking costs must file a memorandum within 
15 days of notice of entry of judgment, or 180 days of entry of 
judgment in the absence of a notice.  (Cal. Rules of Court, rule 
3.1700(a)(1); see Kahn v. The Dewey Group (2015) 240 
Cal.App.4th 227, 234–237.)  This postjudgment window allows 
a party to wait until after a decision on the merits to reveal a 
998 offer. 
 When the Legislature amended section 998 to extend its 
application to private arbitrations, it did not specify a different 
timeline for seeking costs.  (Stats. 1997, ch. 892, § 1, pp. 6389–
HEIMLICH v. SHIVJI 
Opinion of the Court by Corrigan, J. 
 
9 
6391.)3  Had the Legislature sought to impose more stringent 
time limits, it was free to say so.  But neither the statutory text 
nor any relevant legislative history reflects an intent to deviate 
from settled court practice and require different timing. 
The policies underlying Code of Civil Procedure section 
998 strengthen the inference that the Legislature did not intend 
to require pre-decision introduction of settlement offers.  As 
discussed, section 998 and its limits on settlement offer 
admissibility were drafted to promote the same pro-settlement 
policies as Evidence Code section 1152.  (White v. Western Title 
Ins. Co., supra, 40 Cal.3d at p. 889; see Bank of San Pedro v. 
Superior Court (1992) 3 Cal.4th 797, 804.)  The statutes 
recognize that if a court or jury is informed of a settlement offer 
before determining liability, the offering party may be 
prejudiced in its ability to obtain any outcome better than that 
which it had previously expressed a willingness to accept.  (See 
Stockman v. Oakcrest Dental Ctr., P.C. (6th Cir. 2007) 480 F.3d 
791, 800 [“The prejudice that inheres in [knowledge of] offers to 
settle is patently virulent”].)  That reality could chill the making 
of reasonable offers and undermine the policy favoring 
settlement.  Accordingly, the statutes insulate parties from this 
potential prejudice by limiting admissibility.  (Evid. Code, 
§ 1152, subd. (a); Code Civ. Proc., § 998, subd. (b)(2).) 
When the Legislature amended section 998 to encompass 
arbitrations, it sought to place parties in arbitration on equal 
footing with parties to civil actions.  (See Sen. Com. on Judiciary, 
Analysis of Sen. Bill. No. 73 (1997–1998 Reg. Sess.) as amended 
                                        
3  
The timeline for recovering costs in court was the same in 
1997 as it is today.  (See Cal. Rules of Court, former rule 
870(a)(1).) 
HEIMLICH v. SHIVJI 
Opinion of the Court by Corrigan, J. 
 
10 
May 1, 1997, p. 7; Pilimai v. Farmers Ins. Exchange Co., supra, 
39 Cal.4th at pp. 150–151.)  By extending the general rule 
against admissibility to arbitrations (§ 998, subd. (b)(2)), the 
Legislature expressed its view that arbitrators, no less than 
juries and judges, may be influenced if aware of settlement 
offers.  To require parties in an arbitration to disclose settlement 
offers before an award is made would contradict the goal of equal 
treatment. 
There was no risk of prejudice in White v. Western Title 
Ins. Co., supra, 40 Cal.3d 870, because the jury had already 
determined the insurer’s liability for contract damages.  The 
same is not true for disclosure of a settlement offer before an 
arbitrator’s decision on the merits.  Requiring a defendant to 
advise an arbitrator it has offered to settle, even if no amounts 
are mentioned, could influence a merits determination by 
signaling that the defendant is willing to pay at least some 
amount.  Heimlich argues that a party could alert the arbitrator 
to the existence of an offer without disclosing the amount or who 
made it.  But as Shivji rightly notes, a decision maker alerted to 
an offer may likely assume the alert comes from the party with 
an incentive to mention it:  the party whose offer was rejected. 
Against these considerations, Heimlich asserts that 
allowing a 998 offer to be raised after a final award would 
destroy the finality of arbitration awards.  At common law, the 
issuance of an arbitration award was treated as functus officio, 
an act that terminates the actor’s authority.  (See Moshonov v. 
Walsh, supra, 22 Cal.4th at p. 780, fn. 1 (conc. opn. of Kennard, 
J.).)  “It is, apparently, an ancient rule that ‘when arbitrators 
have published their award by delivering it to the parties as the 
award, that it is not the subject of revision or correction by them, 
and that any alteration without the consent of the parties will 
HEIMLICH v. SHIVJI 
Opinion of the Court by Corrigan, J. 
 
11 
vitiate it.’ ”  (Elliott & Ten Eyck Partnership v. City of Long 
Beach (1997) 57 Cal.App.4th 495, 501, quoting Porter v. Scott 
(1857) 7 Cal. 312, 316.)  “Arbitrators exhaust their power when 
they make a final determination on the matters submitted to 
them.  They have no power after having made an award to alter 
it; the authority conferred on them is then at an end.”  (Bayne v. 
Morris (1863) 68 U.S. 97, 99; see Doke v. James (1851) 4 N.Y. 
568, 575–576.)  From this, Heimlich reasons, notice of a 
settlement offer must necessarily be given before the final 
award, when the arbitrator still has the power to act. 
But the rule that issuance of a final award terminates an 
arbitrator’s power is not so rigid.4  “Functus officio” renders an 
actor “without further authority or legal competence because the 
duties and functions of the original commission have been fully 
accomplished.”  (Black’s Law Dict. (10th ed. 2014) p. 787, col. 2.)  
The doctrine applies only after the arbitrator’s assigned duties 
have ended.  Further, common law rules are subject to 
legislative revision.  (McMillin Albany LLC v. Superior Court 
(2018) 4 Cal.5th 241, 249.)  The Legislature may confer 
authority to correct or amend a final decision or make additional 
rulings contingent upon, and necessarily subsequent to, a final 
award.  A change in the scope of an arbitrator’s duties will affect 
when those duties have been completed and the arbitrator’s 
powers extinguished. 
The California Arbitration Act (§§ 1280–1294.2; the 
Arbitration Act) governs private arbitration.  Section 1284 
expressly vests arbitrators with continuing jurisdiction for a 
                                        
4  
As one sister court has noted, the rule, “riddled with 
exceptions, . . . is hanging on by its fingernails.”  (Glass, Molders 
v. Excelsior Foundry Co. (7th Cir. 1995) 56 F.3d 844, 846.) 
HEIMLICH v. SHIVJI 
Opinion of the Court by Corrigan, J. 
 
12 
brief period following a final award:  “The arbitrators, upon 
written application of a party to the arbitration, may correct the 
award upon any of the grounds set forth in subdivisions (a) and 
(c) of Section 1286.6 not later than 30 days after service of a 
signed copy of the award on the applicant.  [¶]  Application for 
such correction shall be made not later than 10 days after 
service of a signed copy of the award on the applicant.”  Section 
1288.4 protects this arbitral jurisdiction; it bars parties from 
filing petitions in superior court to vacate or confirm an award 
“until at least 10 days after service of the signed copy of the 
award on the petitioner.”  These provisions ensure that an 
arbitrator retains jurisdiction to modify an award for at least 10 
and as many as 30 days after its filing and service.  (See Cooper 
v. Lavely & Singer Professional Corp. (2014) 230 Cal.App.4th 1, 
18.)  If no application for correction is filed within 10 days, 
jurisdiction expires and a petition to vacate or confirm may be 
filed in superior court.  If an application is filed, the arbitrator 
retains jurisdiction for up to 30 days after the award was filed.  
(§ 1284.) 
To be sure, the grounds for correction of an award are 
narrow (see § 1286.6) and are not implicated here.  But the 
principle the Arbitration Act illustrates is that issuance of an 
award does not immediately and automatically terminate an 
arbitrator’s powers.  Instead, the Legislature can, and has, 
authorized continuing jurisdiction even after issuance of a final 
award. 
The Arbitration Act also provides implicit authority for 
ongoing jurisdiction.  Section 1283.4 requires that an award 
“include a determination of all the questions submitted to the 
arbitrators the decision of which is necessary in order to 
determine the controversy.”  (Italics added.)  In light of this 
HEIMLICH v. SHIVJI 
Opinion of the Court by Corrigan, J. 
 
13 
duty, courts have inferred that when a putatively final 
arbitration award omits resolution of an issue necessary to 
decide the parties’ controversy, the arbitrator retains power to 
amend the award to address the undecided issue.  (Delaney v. 
Dahl (2002) 99 Cal.App.4th 647, 657–658; Century City Medical 
Plaza v. Sperling, Isaacs & Eisenberg (2001) 86 Cal.App.4th 865, 
879–882 (Century City); A.M. Classic Construction, Inc. v. Tri-
Build Development Co. (1999) 70 Cal.App.4th 1470, 1475–1478.)  
This retention of authority stems from the statutory obligation 
to decide all issues within the scope of the arbitrator’s 
assignment.  It flows as well from the policy underlying that 
duty:  “[T]he fundamental purpose of contractual arbitration is 
to finally resolve all of the issues submitted by the parties as 
expeditiously as possible [citation], without the time and 
expense burdens associated with formal judicial litigation.”  
(Century City, at p. 882).5 
For example, in Century City, supra, 86 Cal.App.4th 865, 
the arbitrator issued an award in a landlord-tenant dispute.  
The landlord promptly contacted the arbitrator, seeking to have 
the award amended to include prejudgment interest, costs, and 
contractual attorney fees.  The landlord reasoned that because 
fees were to be awarded to the prevailing party following entry 
of judgment, it “was required to await the award before making 
a motion for attorney fees.”  (Id. at p. 872.)  The arbitrator by 
letter agreed to make an award and directed the landlord to 
                                        
5  
These cases can be interpreted as recognizing a legislative 
modification of the functus officio doctrine or, alternatively, as 
recognizing that the doctrine only comes into play once an 
arbitrator’s duties have been fully discharged and is 
inapplicable if the arbitrator has failed to resolve an issue 
necessary to fully resolve the dispute. 
HEIMLICH v. SHIVJI 
Opinion of the Court by Corrigan, J. 
 
14 
submit a motion for fees and costs under Civil Code section 1717.  
The arbitrator then issued an amended award that included 
amounts for interest, costs, and fees.  (Century City, at pp. 872–
873.)  The trial court refused to confirm the amended award, but 
the Court of Appeal reversed, explaining that while arbitrators 
generally are without power to correct errors of fact or law in 
rulings they made, they retain power to rule on issues submitted 
to them but left undecided.  (Id. at pp. 877–881.) 
Century City and other amendment cases rest on the 
understanding that an arbitrator’s authority does not expire at 
the moment an award is issued, even when the award was 
intended as final.  The Legislature has imposed a duty to 
determine all questions necessary to resolve the parties’ dispute 
(§ 1283.4) and has enacted “no statutory provisions precluding 
issuance of an amended award.”  (A.M. Classic Construction, 
Inc. v. Tri-Build Development Co., supra, 70 Cal.App.4th at 
p. 1477.)  Arbitrators can, and do, revisit final awards to ensure 
aspects of the parties’ controversy not addressed in those awards 
are resolved.  Indeed, “[f]ailure to find on all issues submitted is 
. . . a statutory ground for vacating an award.”  (Banks v. 
Milwaukee Ins. Co. (1966) 247 Cal.App.2d 34, 38.)6 
The Arbitration Act is not the only legislative source of 
arbitral power.  Pilimai v. Farmers Ins. Exchange Co., supra, 39 
                                        
6  
In contrast, arbitrators are constrained by the legislative 
limits on arbitral correction of awards from revisiting final 
awards to alter their decisions on matters actually addressed in 
those awards.  (§ 1284; Cooper v. Lavely & Singer Professional 
Corp., supra, 230 Cal.App.4th at pp. 12–19; Severtson v. 
Williams Construction Co. (1985) 173 Cal.App.3d 86, 93–96; 
Banks v. Milwaukee Ins. Co., supra, 247 Cal.App.2d at pp. 36–
37.) 
HEIMLICH v. SHIVJI 
Opinion of the Court by Corrigan, J. 
 
15 
Cal.4th 133, held parties to an uninsured motorist arbitration 
(see Ins. Code, § 11580.2) could recover deposition and exhibit 
preparation costs.  Even though the Arbitration Act did not 
authorize these costs, “Code of Civil Procedure section 998 itself 
provides the statutory authorization.”  (Pilimai, at p. 150.)  
Pilimai recognized that section 998 can act as supplemental 
legislative authorization for an arbitrator’s action, in addition to 
authority provided in the Arbitration Act itself. 
A harmonization of section 998, the Arbitration Act, and 
the applicable Rules of Court leads to the following conclusions.  
Cost applications in court are filed after a judgment, generally 
within 15 days.  (Cal. Rules of Court, rule 3.1700(a)(1).)  Cost 
applications in a case governed by section 998 likewise must 
come after a judgment or award.  Only then can the outcome be 
compared with the terms of the settlement offer and deemed 
more or less favorable.  Section 998 is intended to place parties 
to arbitration and court proceedings on equal footing and should 
be read to grant arbitration parties the same shield against 
premature disclosure of settlement offers that parties in court 
enjoy.  Arbitrators have limited continuing jurisdiction after 
issuance of a final award, and the Legislature by statute can 
expand an arbitrator’s powers.  The rule most consistent with 
these principles is this:  Consistent with practice in civil 
litigation, for 15 days after issuance of a final award, a party to 
an arbitration may submit a cost request asserting rejection of 
an earlier 998 offer.  The arbitrator has implicit power under 
section 998 to consider the request and amend any award 
accordingly.  To deem any postaward application untimely 
would ignore the parity between arbitrations and court cases 
that section 998 sought to ensure; the policy against early 
disclosure of settlement offers reflected in section 998, 
HEIMLICH v. SHIVJI 
Opinion of the Court by Corrigan, J. 
 
16 
subdivision (b)(2); and the Legislature’s power to grant 
arbitrators supplemental but limited authority to act even after 
a final award. 
Contrary 
to 
Heimlich’s 
argument, 
the 
American 
Arbitration Association’s commercial rules do not conflict with 
the procedures we derive from the statutory scheme.  Rule R-47 
describes the range of dispositions an arbitrator may issue:  “In 
addition to a final award, the arbitrator may make other 
decisions, including interim, interlocutory, or partial rulings, 
orders, and awards.”  (American Arbitration Assn., Commercial 
Arbitration Rules and Mediation Procedures (2013) rule R-
47(a).)  Neither rule R-47 nor rule R-7, which expressly governs 
the arbitrator’s jurisdiction, provides that the issuance of a final 
award terminates that jurisdiction.  (See id., rules R-7, R-47.)  
To the contrary, rule R-50 preserves postaward arbitral 
jurisdiction to consider requests for correction filed within 20 
days.  (Id., rule R-50.)  Under rule R-50, “[t]he arbitrator is not 
empowered to redetermine the merits of any claim already 
decided” (ibid.), but the rule does not preclude decisions on 
undecided claims.  Rule R-47 also confers authority to “grant 
any remedy or relief that the arbitrator deems just and 
equitable and within the scope of the agreement of the parties 
. . . .” (id., rule R-47(a)).  Nothing in these provisions forecloses 
an arbitrator from deciding whether to award costs under 
section 998 after all underlying claims have been resolved. 
Heimlich relies principally on Maaso v. Signer, supra, 203 
Cal.App.4th 362.  But Maaso does not require submission of an 
offer’s details before a final award.  There, the party that made 
a rejected 998 offer so advised the arbitrators before issuance of 
a final award.  Even so, the arbitrators made no cost award to 
the offeror, instead directing that each side bear its pro rata 
HEIMLICH v. SHIVJI 
Opinion of the Court by Corrigan, J. 
 
17 
share of costs.  (Id. at p. 377.)  The party claiming costs sought 
to confirm the arbitration award in court but asked the court to 
“add costs and interest not awarded by the panel, and which 
were in fact inconsistent with the panel’s award.”  (Id. at p. 378.)  
The Court of Appeal rejected this approach, explaining that the 
prevailing party was at fault for never “stat[ing] the amount or 
seek[ing] to present evidence on the issue” to the arbitrators.  
(Id. at p. 377.)  The prevailing party thus lost because (1) he 
made an inadequate presentation to the arbitrators, who had 
jurisdiction to confer costs; (2) the arbitrators issued an award 
that did not provide for section 998 cost shifting; and (3) even if 
that omission was legal error, it was not one that could be cured 
by the courts in the guise of confirming the arbitration award.  
(Maaso, at pp. 377–380.)  Maaso did not hold that section 998 
cost requests must be presented before issuance of an award on 
the merits.7 
Here, Shivji raised the issue six days after the arbitrator’s 
award.  His request for costs was timely.8 
                                        
7  
Although Maaso did not expressly require preaward 
submission, Heimlich quotes from a treatise stating that Maaso 
imposes that requirement.  (Knight et al., Cal. Practice Guide: 
Alternative Dispute Resolution (The Rutter Group 2015) 
¶ 5:402.14 [“The arbitrator must be informed, however, of the 
rejected . . . § 998 offer prior to making a final award in order to 
impose any applicable costs ‘penalties’ ”].)  The gloss from a 
treatise cannot change the actual holding of a case.  (See Cooper 
v. Lavely & Singer Professional Corp., supra, 230 Cal.App.4th at 
p. 18, fn. 7 [rejecting reliance on the Knight treatise on similar 
grounds].) 
8  
Parties may also agree to jointly tell an arbitrator, before 
any award is announced, that a 998 offer was made and rejected, 
 
HEIMLICH v. SHIVJI 
Opinion of the Court by Corrigan, J. 
 
18 
C. 
The Arbitrator’s Denial of Costs Cannot Be Vacated 
The conclusion that Shivji’s request was timely does not 
automatically entitle him to judicial relief.  “Typically, those 
who enter into arbitration agreements expect that their dispute 
will be resolved without necessity for any contact with the 
courts.”  (Blanton v. Womancare, Inc. (1985) 38 Cal.3d 396, 402, 
fn. 5.)  A court’s power to correct or vacate an erroneous 
arbitration award is closely circumscribed.  (Moshonov v. Walsh, 
supra, 22 Cal.4th at pp. 775–776; Moncharsh v. Heily & Blase, 
supra, 3 Cal.4th at pp. 8–13 (Moncharsh).)  Shivji has not shown 
a basis for correcting the arbitrator’s error. 
Most legal errors in arbitration are not reviewable.  
(Moshonov v. Walsh, supra, 22 Cal.4th at p. 775; Moncharsh, 
supra, 3 Cal.4th at pp. 11, 33.)9  An award may be vacated only 
for fraud, corruption, misconduct, an undisclosed conflict, or 
similar “circumstances involving serious problems with the 
award itself, or with the fairness of the arbitration process.”  
(Moncharsh, at p. 12; see § 1286.2, subd. (a).)  Otherwise, 
judicial corrections are limited to remedying “obvious and easily 
correctable mistake[s],” “technical problem[s],” and actions in 
excess of authority so long as the correction leaves the merits of 
                                        
without identifying the terms or who made the offer.  Such 
notice would permit the arbitrator to designate an otherwise 
final award as interim and then consider the parties’ 
presentations concerning costs and fees.  But a stipulation is not 
required, and in its absence Shivji was not untimely in advising 
the arbitrator when he did. 
9  
Parties can expand judicial review of arbitration awards 
to reach ordinary errors of law (Cable Connection, Inc. v. 
DIRECTV, Inc. (2008) 44 Cal.4th 1334, 1339–1340), but no such 
agreement was entered here. 
HEIMLICH v. SHIVJI 
Opinion of the Court by Corrigan, J. 
 
19 
the decision unaffected.  (Moncharsh, at p. 13; see § 1286.6.)  
“[B]y voluntarily submitting to arbitration, the parties have 
agreed to bear the risk [of uncorrectable legal or factual error] 
in return for a quick, inexpensive, and conclusive resolution to 
their dispute.”  (Moncharsh, at p. 11.) 
Here, the arbitrator refused to consider Shivji’s request for 
costs.  On its face, the arbitrator’s response shows he believed 
he lacked jurisdiction to consider Shivji’s request.  While this 
conclusion was incorrect as explained above, ordinary errors in 
ruling on costs are not subject to correction, nor do they serve as 
a basis for vacating an award.  An arbitrator’s legal or factual 
error in determining which party prevailed may not be reversed.  
(Pierotti v. Torian (2000) 81 Cal.App.4th 17, 24–26; Creative 
Plastering, Inc. v. Hedley Builders, Inc. (1993) 19 Cal.App.4th 
1662, 1666.)  Error in failing to identify any prevailing party, 
even upon request, is likewise unreviewable.  (Moore v. First 
Bank of San Luis Obispo (2000) 22 Cal.4th 782, 788.)  Most 
specifically, error in failing to award costs to a qualifying party 
under section 998 is not grounds for relief.  (Maaso v. Signer, 
supra, 203 Cal.App.4th at pp. 377–380; Woodard v. Southern 
Cal. Permanente Medical Group (1985) 171 Cal.App.3d 656, 
661–662.) 
Shivji relies on cases holding that arbitrators have the 
power to amend their decisions to add cost and fee awards.  (See 
Evans v. Centerstone Development Co. (2005) 134 Cal.App.4th 
151, 159–160; Britz, Inc. v. Alfa-Laval Food & Dairy Co. (1995) 
34 Cal.App.4th 1085, 1105–1106.)  But if an arbitrator elects not 
to amend a decision in order to add costs or fees, these cases do 
not hold that a court may overrule that refusal. 
HEIMLICH v. SHIVJI 
Opinion of the Court by Corrigan, J. 
 
20 
Alternatively, Shivji contends, and the Court of Appeal 
held, that the award here could be vacated because “[t]he rights 
of [a] party were substantially prejudiced . . . by the refusal of 
the arbitrators to hear evidence material to the controversy 
. . . .”  (§ 1286.2, subd. (a)(5); see Heimlich v. Shivji, supra, 12 
Cal.App.5th at pp. 175-177, rev. granted.)  This analysis fails. 
The exceptions to the limits on review of awards protect 
against error that is so egregious as to constitute misconduct or 
so profound as to render the process unfair.10  The Legislature 
has authorized “judicial review in circumstances involving 
serious problems with the award itself, or with the fairness of 
the arbitration process.”  (Moncharsh, supra, 3 Cal.4th at p. 12, 
italics added.)  “ ‘The statutory provisions for [review of an 
arbitration award] are manifestly for the sole purpose of 
preventing the misuse of the proceeding, where corruption, 
fraud, misconduct, gross error, or mistake has been carried into 
the award to the substantial prejudice of a party to the 
proceeding.’ ”  (Pacific Vegetable Oil Corp. v. C. S. T., Ltd. (1946) 
29 Cal.2d 228, 240.) 
It follows that vacation of an award for “refusal . . . to hear 
evidence material to the controversy” (§ 1286.2, subd. (a)(5)) 
must rest on more than a simple error in applying the rules of 
evidence.  As Schlessinger v. Rosenfeld, Meyer & Susman (1995) 
40 Cal.App.4th 1096, 1110, noted, section 1286.2 subdivision 
(a)(5), “if not properly limited, could swallow the rule that 
                                        
10  
See, e.g., section 1286.2, subdivision (a)(1) (“corruption, 
fraud, or other undue means”), (2) (“corruption”), (3) 
(“misconduct”), (4) (action in excess of powers), (6) (failure to 
disclose ground for disqualification or to disqualify when 
required to do so). 
HEIMLICH v. SHIVJI 
Opinion of the Court by Corrigan, J. 
 
21 
arbitration awards are generally not reviewable on the merits.”  
The provision is not “a back door to Moncharsh through which 
parties may routinely test the validity of legal theories of 
arbitrators.”  (Hall v. Superior Court (1993) 18 Cal.App.4th 427, 
438–439.)  Instead, it was designed as a “safety valve in private 
arbitration that permits a court to intercede when an arbitrator 
has prevented a party from fairly presenting its case.”  (Id. at 
p. 439.)  It comes into play, for example, when an arbitrator, 
without justification, permits only one side to present evidence 
on a disputed material issue.  (See Moncharsh, supra, 3 Cal.4th 
at p. 13.)  The Arbitration Act codifies “the fundamental 
principle that ‘[a]rbitration should give both parties an 
opportunity to be heard.’ [Citation.] . . . [T]he opportunity to be 
heard must be extended to all parties equitably.”  (Royal 
Alliance Associates, Inc. v. Liebhaber (2016) 2 Cal.App.5th 
1092, 1108.)  To conduct an arbitration without abiding by that 
principle evinces bias, constituting misconduct. 
Royal Alliance Associates, Inc. is the paradigmatic 
example of when a refusal to hear evidence will justify vacation 
of an award.  A financial services client alleged a securities 
broker sold her unsuitable, high-risk investments.  The broker’s 
firm settled the arbitration claim, then sought to have the 
arbitration panel expunge the allegations from the broker’s 
public record.  At a hearing, the panel allowed the broker to 
speak, unsworn and at length.  Over her counsel’s objection, it 
denied the former client the opportunity to cross-examine the 
broker or to speak herself.  (Royal Alliance Associates, Inc. v. 
Liebhaber, supra, 2 Cal.App.5th at pp. 1097–1100.)  The record 
suggested the arbitration panel may have felt itself too busy to 
allow each side the opportunity to present evidence.  Addressing 
one member’s thought that perhaps they should grant the 
HEIMLICH v. SHIVJI 
Opinion of the Court by Corrigan, J. 
 
22 
former client’s request, the presiding arbitrator said, “ ‘Well, 
how can we make sure we’re not going to be here for another two 
hours?  That’s the problem.’ ”  (Id. at p. 1099.)  The third panelist 
concurred, and the requests to speak and cross-examine the 
broker were denied.  In its award, the panel found the broker 
credible and repeatedly relied on the former client’s failure to 
dispute the broker’s account or to offer evidence of financial 
losses.  (Id. at pp. 1100–1102.)  The award was vacated because 
“the hearing was not fair.  The arbitrators gave [the brokerage] 
an unfettered opportunity to bolster the written record but 
denied [the client] even a limited chance to do the same.”  (Id. at 
p. 1110.) 
In contrast, section 1286.2, subdivision (a)(5) does not 
contemplate vacation of an award merely because arbitrators 
refuse to consider evidence they find legally irrelevant, even if 
the irrelevance determination rests upon an incorrect legal 
foundation.  (See Schlessinger v. Rosenfeld, Meyer & Susman, 
supra, 40 Cal.App.4th at pp. 1110–1111; Hall v. Superior Court, 
supra, 18 Cal.App.4th at pp. 438–439.)  This case presents such 
a circumstance.  The arbitrator refused to hear any evidence 
concerning Shivji’s 998 offer because he viewed the underlying 
controversy submitted to him as a dispute over attorney fees.  
Having resolved that dispute, the arbitrator concluded he “ ‘no 
longer [had] jurisdiction to take any further action in this 
matter.’ ”  (Heimlich v. Shivji, supra, 12 Cal.App.5th at p. 159, 
rev. granted.)  There is a difference between a legal conclusion 
that jurisdiction is lacking and an arbitrary refusal to hear 
relevant evidence on an issue properly before the arbitrator.  
Shivji’s complaint is with the underlying jurisdictional 
determination.  Neither that determination nor the resulting 
refusal to consider evidence erroneously deemed irrelevant is 
HEIMLICH v. SHIVJI 
Opinion of the Court by Corrigan, J. 
 
23 
misconduct under the evidentiary prong of section 1286.2, 
subdivision (a)(5).  Under Moncharsh, supra, 3 Cal.4th 1, the 
award should have been allowed to stand. 
The Court of Appeal held the arbitrator erred by 
“refus[ing] even to hear evidence relevant to” the 998 offer.  
(Heimlich v. Shivji, supra, 12 Cal.App.5th at p. 176, rev. 
granted.)  To support this conclusion, it relied principally on 
Burlage v. Superior Court (2009) 178 Cal.App.4th 524.  There, 
the arbitrator ruled that any damages in the action were fixed 
at the date that escrow closed on the property at issue, and 
thereafter excluded evidence regarding postescrow events that 
would seem to have substantially limited the compensable 
damages.  Consistent with our holding today, the majority 
acknowledged that it could not vacate the award based on the 
original legal error.  (Id. at p. 530.)  But the majority then went 
on to vacate based on the evidentiary rulings that logically 
followed from that error.  (Id. at pp. 530–532.)  As the dissent 
persuasively argued, “[v]irtually every ruling on a ‘legal issue’ 
at trial results in limiting the admissibility of evidence.”  (Id. at 
p. 532 (dis. opn. of Perren, J.).)  To allow an arbitration award 
to be set aside under section 1286.2, subdivision (a)(5), 
whenever an erroneous legal ruling results in the exclusion of 
evidence deemed important would undermine a foundation of 
the Arbitration Act, that an arbitrator’s legal error ordinarily is 
not judicially reviewable. 
The Hall and Schlessinger view preserves the limits on 
judicial review while protecting against arbitrary refusal to hear 
one side’s case.  Burlage cannot be reconciled with these 
decisions.  (Burlage v. Superior Court, supra, 178 Cal.App.4th 
at pp. 533–535 (dis. opn. of Perren, J.).)  Hall, Schlessinger, and 
the Burlage dissent are more faithful to Moncharsh and the 
HEIMLICH v. SHIVJI 
Opinion of the Court by Corrigan, J. 
 
24 
Arbitration Act.  Burlage v. Superior Court, supra, 178 
Cal.App.4th 524, is disapproved to the extent it is inconsistent 
with this opinion. 
As the party challenging the arbitrator’s award and the 
trial court’s judgment, Shivji must establish his entitlement to 
relief.  His sole argument for vacating the arbitrator’s award is 
an alleged refusal to hear evidence.  (See § 1286.2, subd. (a)(5).)  
Accordingly, all other arguments are forfeited, and we do not 
consider whether any other basis for challenge might exist 
under the Arbitration Act.  
Insofar as appears from the record, Shivji did not seek a 
stipulation that would allow the parties jointly to advise the 
arbitrator of a 998 offer.  Instead, he chose to wait until shortly 
after the arbitrator’s merits award to raise the issue.  While 
Shivji was legally entitled to do so, he ran the risk that the 
arbitrator would erroneously refuse to award costs, leaving him 
without recourse under the narrow grounds for vacation or 
correction contained in the statutory scheme.  “ ‘[I]t is within the 
power of the arbitrator to make a mistake either legally or 
factually.  When parties opt for the forum of arbitration they 
agree to be bound by the decision of that forum knowing that 
arbitrators, like judges, are fallible.’ ”  (Moncharsh, supra, 3 
Cal.4th at p. 12, quoting That Way Production Co. v. Directors 
Guild of America, Inc. (1979) 96 Cal.App.3d 960, 965.) 
HEIMLICH v. SHIVJI 
Opinion of the Court by Corrigan, J. 
 
25 
III.   DISPOSITION 
The Court of Appeal’s judgment is reversed with directions 
to affirm the trial court’s confirmation of the arbitration award 
and denial of costs. 
 
 
 
 
 
 
 
CORRIGAN, J. 
 
We Concur: 
CANTIL-SAKAUYE, C. J. 
CHIN, J. 
LIU, J. 
CUÉLLAR, J. 
KRUGER, J. 
GROBAN, J. 
 
 
See next page for addresses and telephone numbers for counsel who argued in Supreme Court. 
 
Name of Opinion Heimlich v. Shivji 
__________________________________________________________________________________ 
 
Unpublished Opinion 
Original Appeal 
Original Proceeding 
Review Granted XXX 12 Cal.App.5th 152 
Rehearing Granted 
 
__________________________________________________________________________________ 
 
Opinion No. S243029 
Date Filed: May 30, 2019 
__________________________________________________________________________________ 
 
Court: Superior 
County: Santa Clara 
Judge: William J. Elfving 
 
__________________________________________________________________________________ 
 
Counsel: 
 
Ellahie & Farooqui, Javed I. Ellahie, Omair M. Farooqui and Leila N. Sockolov for Defendant and 
Appellant. 
 
Law Offices of Nicholas D. Heimlich, Nicholas D. Heimlich and Caitlin E. Kaufman for Plaintiff and 
Respondent. 
 
 
 
 
 
 
 
 
 
 
 
Counsel who argued in Supreme Court (not intended for publication with opinion): 
 
Omair M. Farooqui 
Ellahie & Farooqui 
1023 Corporation Way, 2nd Floor 
Palo Alto, CA  94303 
(408) 294-0404 
 
Nicholas D. Heimlich 
Law Offices of Nicholas D. Heimlich 
5595 Winfield Boulevard, Suite 110 
San Jose, CA  95123 
(408) 457-9364