Filed 3/14/22 Med Tech/Med Care v. Hemosure CA2/7

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SEVEN

MED TECH /MED CARE, LLC

,

Plaintiff and Respon dent

,

v.

HEMOSURE, INC.

,

Defendant and Appellant

. B 3 01519

(Los Angeles County Super. Ct. No. 19 PSCP00279 )

APPEAL from a judgment of the Superior Court of Los Angeles County, Gloria White

- Brown , Judge

. Affirmed

. Blair & Ramirez

, Oscar Ramirez

, Matthew P. Blair and
Kirill Lavinski for Defend ant and Appellant.
Sch neiders & Associates and Kathleen Smith ; Schoenberg
Finkel Beederman Bell Glazer and Richard M. Goldwasser for Plaintiff and Respondent

.

_______ __________

__________2 Hemosure, Inc. appeals from a judgment confirming an arbitration award in favor of Med Tech /Med Care, LLC ( Med
Tech )

. Hemosure contends the arbitrator exceed ed the scope of
his powers when he fai led to issue a “ reasoned award ” as requested by the parties under the American Arbitration Association’s (AAA) C ommercial A rbitration R ules

. We affirm.

BACKGROUND AND PROCEDURAL HISTORY

A. The Agreement
On December 1, 2016 Hemosure and Med Tech entered into

a one

- year independent sales representative agreement. Med
Tech agreed to “aggressively promote the sale of [Hemosure’s] products, to serv ice the customers and the distributors of the

company .

. . , and to make regular calls and in

- person visits to
these customers and on these distributors at acceptable intervals
of time .” Hemosure agreed to pay Med Tech a commission on a ll
net sales to medical distributors of Hemosure’s products upon invoice payments and verified tracings as provided by the
distributors

. The agreement contained an arbitration provision
that stated , “ An y dispute or disagreement arising out of or relating to this agreement or the relationship of the parties shall be settled by arbitration, according to the American Arbitration Association Rules, in Los Angeles, CA. ”

B. The Arbitration
I n January 2018 Med Tech filed an arbitration demand asserting claims for breach of contract, violation of the California Independent Whole sale Sales Representative s Contractual
Relations Act of 1990 ( Civ. Code, § 1738.10 et seq.; the Act)

,3

unjust enrichment

, and quantum mer uit based on Hemosure ’s
fail ure to pay commission s to Med Tech for January and February 2017. The arbitrator was appointed on February 8,
2018. In a March 23, 2018 schedu ling order following a preliminary hear ing, the arbitrator set an agreed

- upon schedule
for the arbitration . The order stated, “ The parties have requested
a reasoned award and have reserved the right to utilize the services of a court reporter.”
The arbitrat ion hearing was held on December 7, 2018 and February 25, 2019. Hemo sure argued Med Tech was not entitled
to commissions because it materially breached the contract by failing to p romote and solicit sales of Hemosure’s products

. Further, Hemosure asserted the Act did not apply because Med
Tech was not a “person” or “ ‘ [ w ] holesale sales representative ’ ” covered by the Act and did not engage in “soliciting wholesale
orders

. ” (S ee Civ. Code, § 1738.12, subd. (e)

. ) T hus

, treble damages were not available

. Alternatively, Med Tech was not entitled to treble damages because it failed to show Hemosure’s willful failure to pay commissions

.

C. The Arbitration Award On May 20, 2019 the arbitrator issued a two

- page arbitrati on award. The award stated

, “ The Arbitrator agrees
with Claimant [ Med Tech ] that this is a straightforward case.
Claimant seeks to recover the statutorily mandated treble damages on the $64,629.09 in sales commissions (or $193, 887.27) that Respondent Hem osure has refused to pay, plus attorney’s fees and costs, and prejudgment interest of 10%. Claimant has

prov ed its case in a very persuasive manner. Respondent’s novel
defense that it can withhold [ Med Tech ’s] commissions because it4

decided after enterin g into a new contract with [ Med Tech ] that [ Med Tech ’s] performance under the parties ’ prior agreement was not satisfactory is not persuasive and must fail. [¶] The
Arbitrator specifically finds that the words and actions of Hemosure’s president, Dr. Wan , were unambiguously willful ( “ [ ‘ ] I’m not going to fucking pay those guys ’ ”), thereby triggering the trebling provisions of the Independent Wholesale [Sales] Representative [ s ] Act, as briefed thoroughly and persuasively by Claimant’s coun sel. The Arbitrator further finds that Claimant
is entitled to 10% annual prejudgment interest on the outstanding commissions p ursuant to Cal. Civ. Code [s]ection 3289(b). [¶] Finally, the Arb itrator finds that the attorney’s fees and costs sought by Cl aimant’s counsel, in the amount of $85,60 6.09, are reasonable.” The arbitrator award ed Med Tech a total of approximately $ 293 ,000 , comprised of treble damages, prejudgment interest

, and attorneys’ fees and costs

.

D. Confirm ation of the Arbitration Award
On June 21, 2019 Med Tech filed a petition to confirm the
arbitration award. On July 22 Hemosure filed a response and petition to correct and vacate the arbitration a ward

. 1 Hemosure argued the arbitrator exceeded his authority be cause he did not
issue a reasoned award.
At the August 2, 2019 hearing

, Hemosure’s attorney

c onfirmed that the parties did not request the arbitrator make findings of fact and conclusions of law

. After hearing argument
, the trial court granted Med Tech ’s petition to confirm and denied

1 The trial court ruled Hemosure’s response was untimely under Code of Civil Procedure section 1290.6, but the court “elect[ed] to consider Hemosure’s belated response.”5

Hemosure’s petition to vacate the arbitration award. The court rejected Hemosure ’s contention the arbitrator “exceeded his authority because his award was not ‘reasoned. ’ ’’ As t o the applicability of the Act, t he cou rt explained that the arbitrator, by awarding treble damages under the Act, “necessarily rejected Hemosure’s arguments against [the Act’s] application.” Hemosure timely appealed.

DISCUSSION

A. Governing Law and Standard of Review

“ California law favors alternative dispute resolution as a viable means of resolving legal conflicts. ‘ Because the decision to arbitrate grievances evinces the parties ’ intent to bypass the judicial system and thus avoid potential delays at the trial and

a ppellate levels, arbitral finality is a core component of the parties ’ agreement to submit to arbitration. ’ [Citation.] Generally, courts cannot review arbitration awards for errors of fact or law, even when those errors appear on the face of the
award o r cause substantial injustice to the parties. ” ( Richey v. AutoNation, Inc. (2015) 60 Cal.4th 909, 916 ; accord, Haworth v. Superior Court (2010) 50 Cal.4th 372, 3 80 ; Branches Neighborhood Corp. v. CalAtlantic Group, Inc. (2018)
26 Cal.App.5th 743, 750

- 751 [“ ‘ Because the finality of arbitration awards is rooted in the parties’ agreement to bypass the judicial system, ordinarily “‘[t]he merits of the controversy between the parties are not subject to judicial review.’”’” ].)

“ The exclusive grounds for vaca ting an arbitration award are provided in Code of Civil Procedure section 1286.2

. ” ( Soni v. SimpleLayers, Inc. (2019) 42 Cal.App.5th 1071, 1085 ; see6

Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 2 8 [“ we adhere to
the

. . . line of cases that limit judicial review of private
arbitration awards to those cases in which there exists a statutory ground to vacate or correct the award ”].) A s relevant here, Code of Civil Procedure section 1286.2, subdivision (a)(4)

, 2 provides that “the court shall vacate the award if the court determines” that “[t]he arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted. ”
In determining whether the arbitrators exceeded their

powers within the meaning of the section 1286.2,
subdivision (a)(4), we give “substantial deference to the
arbitrators ’ own assessments of their contractual authority

. . . . ” ( Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 373.) W hether the arbitrator exceeded his or her powers is a legal question we review de novo. ( Richey v. AutoNation, Inc.

, supra , 60 Cal.4th at p. 918, fn. 1; Branches Neighborhood Corp. v. CalAtlantic Group, Inc.

, supra , 60 Cal.4th at p. 751 .)

B. Hemosure Was Entitled to a R easoned A ward
Med Tech contends Hemosure was not entitled to a
reasoned award under the AAA Commercial Arbitration Rules,
R

- 46(b) (R ule R

- 46(b) ) because Hemosure failed to request a reasoned award prior to the appointment of th e arbitrator, and
thus

, its request was not timely. This contention lacks merit.
As Med Tech points out, Rule R

- 46(b) provides, “ T he arbitrator need not render a reasoned award unless the parties request such an award in writing prior to the appointment of the

2 Further undesignated statutory references are to the Code of Civil Procedure.7

arbitrator or unless the arbitrator determines that a reasoned award is appropriate.” However, Med Tech ignores Rule R

- 1(a) of
the AAA Commercial Arbitration Rules

, which allows the parties

to modify the arbitration procedures by agreem ent with the
consent of the arbitrator . Rule R

- 1(a) provides

, “ [T] he parties, by written agreement, may vary the procedures set forth in these
rules. After appointment of the arbitrator, such modifications may be made only with the consent of the arbitra tor. ” The arbitrator’s March 23, 2018 scheduling order stated the order was made “[b]y agreement of the parties and Order of the Arbitrator

, ”
and “[t]he parties have requested a reasoned award

. ” Because the parties agreed to extend the deadline to request a reasoned
award and the arbitrator consented to th is modification of the procedural rules , the parties’ request was timely . ( See Cat Charter, LLC v. Schurtenberger ( 11 th Cir. 2011) 646 F.3d 836, 840, fn. 6 ( Cat Charter ) [arbitrators ’ scheduling o rder stating

“‘ [t]he form of the award also will be determined by agreement of the parties’” was “sufficient ‘consent’ within the mean ing of
Arbitration Rule R

- 1(a)” to allow the parties to “ validly alter [] the procedures to require a reasoned award when t hey subsequen tly communicated with the [arbitrators]”]; s ee also Leeward Constr. Co. v. Am. Univ. of Antigua

- College of Med. (2d Cir. 2016) 826 F.3d 634, 6 38 ( Leeward Construction ) [“ once the arbitrators stated in the preliminary hearing order that they would provide a reasoned award and neither party objected, a reasoned award was required ”]. ) Thus, the arbitrator w as obligated to issue a
reasoned award based on the parties ’ timely request

.8

C. The A rbitrator D id N ot E xceed His Powers
The AA A C ommercial A rbitration R ules do not specify what
constitutes “a reasoned award.” Hemosure contends a reasoned award requires findings of fact and conclusions of law pursuant to the standard articulated in Armendariz v. Found ation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 107 . In
Armendariz

, the Supreme Court held that “an arbitrator in a FEHA [ 3 ] case must issue a written arbitration decision that will reveal, however briefly, the essential findings and conclusions on which the award is based.” ( Armendariz , at p. 107; a ccord, Pearson Dental Supplies, Inc. v. Superior Court (2010) 48 Cal.4th 665, 679.) Armendariz does not assist Hemosure because the Supreme C ourt limited its holding to statutory FEHA claims and did not address the required findings for a n award in an
arbitration of a contract dispute between two companies

. Because no California c ourt has defined a r eason ed award
under the AAA Commercial Arbitrati on Rules, we look to federal
and other state courts for guidance. T he Eleventh Circuit Court of Appeals i n Cat Charter , supra , 646 F.3d at p age 844 observed

as to a r easoned award under the AAA

, “ G enerally, an arbitrator need not explain her decision; thus, in a typical arbitration where no specific form of award is requested, arbitrators may provide a

‘ standard award ’ and simply announce a result. ” ( Q uoting United
Steelworkers of America v. Enterp rise Wheel & Car Corp. (19 9 6) 363 U.S. 593, 598 .) The Cat Charter court explained

, “[T] he varying forms of awards may be considered along a ‘ spectrum of increasingly reasoned awards, ’ with a ‘ standard award ’ requiring the least explanation and ‘ findings of fact and conclusions of law ’

3 C alifornia Fair Employment and Housing Act (Gov. Code, § 12900 et seq.).9

requiring the most. [Citation.] In this light, therefore, a

‘ reasoned award is something short of findings and conclusions but more than a simple result. ’ ” ( Cat Charter

, at p

. 844 .) The court relied on the dictionary definition of the term “reasoned ” ( as

“ ‘ based on or marked by reasoning ’ ” and “ ‘ provided with or marked by the detailed listing or mention of reasons ’ ” ) to conclude a reasoned award is one “ provided with or marke d by the detailed listing or mention of

. . . statements offered as a justification of an act

— the ‘ act ’ here being, of course, the decision
of the [arbitrators]

. ” ( Ibid

. , quoting Webster’s 3d New In t ernat. Dict

. (1993) p. 1892

. )
In Cat Charter

, a panel of three arbitrators (the Panel)
issued a unanimous arbitration award finding the plaintiffs had proven their claims arising from the ir payment of $2 million for a yacht that was never delivered, prevail ing on their claims for
unfair trade practices and breach of contract “by the greater weight of the evidence.” ( Cat Charter, supra , 646 F.3d at pp. 840

- 841.) The Eleventh Circuit found this constituted a reasoned
award because the controversy turned on the Panel’s credibility
determinations

. 4 (

Id . at p. 844.) The court explained , “T he
statement that “ [o]n the claim of the [Plaintiffs] . . . for breach of
contract . . . we find that [Plaintiff] . . . has proven its claim

4 The Eleventh Circuit in Cat Charter considered whether the district court properly vacated the arbitration award under section 10(a)(4) of the Federal Arbitration Act (9 U.S.C. § 1 0 )

, which provides for vacatur where “the arbitrators exceeded their powers.” ( Cat Charter, supra , 646 F.3d at p

. 8 42 ; see Leeward Construction, supra

, 826 F.3d at p . 638 .) Although we review the arbitration award under section 1286.2, subdivision (a)(4), it similarly provides for vacatur where “ [t]he arbitrators exceeded their powers .”10

against [ D efendant ] by the greater weight of the evidence ” is easily understood to mean that, in the swearing match between the Plaintiffs and the Defendants, the Panel found the Plaintiffs ’
witnesses to be more credible. ” ( Id. at pp. 844

- 845.) The court noted the Panel “could have provided more,” but had the parties

want ed a more detailed explanation, the y should have requested the Panel provide findings of fact and conclusions of law. ( Id . at p. 845.)
The Second Circuit Court of Appeals i n Leew a rd
Constr uction, supra

, 826 F.3d at p age 640 agreed with Cat
Charter , explaining

, “[A] reasoned award is something more than a line or two of unexplained conclusions, but something less than full findings of fact and conclusions of law on each issue raised before the panel. A reasoned award sets forth the basic

rea soning of the arbitral panel on the central issue or issues
raised before it. It need not delve into every argument made by the parties. ” The court considered whether an arbitration awar d
that awarded separate amounts of damages for work performed by petitioner under the parties’ construction contract and work not specified by the contract was a reasoned award where the
award found the parties had waived the requirement for formal change orders and the amounts awarded were based on th e

“ ‘ evidence presented at trial

. ’ ” ( Id . at p. 637.) The Second Circuit
held the arbitration award was a reasoned award because “ while it does not provide a detailed rationale for each and every line of damages awarded, it does set forth the relevant fact s, as well as the key factual findings supporting its conclusions. ” ( I d. at

p. 640 ; see Rain CII Carbon, LLC v. ConocoPhillips Co. ( 5th Cir. 2012) 674 F.3d 469

, 474 ( Rain ) [ arbitration award resolving dispute over price formula under long

- term supply agreement11

was reasoned award because “the arbitrator laid out the facts, described the contentions of the parties, and de c i d ed which of the two proposals should prevail” ].)
We a gree with Cat Charter

, Leeward Construction , and
Rain that, as articulated by Leeward Construction

, a reasoned
award must set forth the basic reasoning of the arbitrator on the central issues, but it does not need to “ delve into ” every argument raised by the parties or provide findings of fact and conclusions of
law on each issue raised in the arbitration

. ( Leeward Construction, supra

, 826 F.3d at p. 640; see Rain, supra , 674 F.3d at p. 474; Cat Charter, supra , 646 F.3d at p. 844 .) In its closing brief in the arbitration, Hemosure argued that the witness testimony and exhibits showed that Med Tech was not following up on leads and taking the necessary steps to sell Hemosure’s products. Hemosure pointed to an investigation
it la unched in February 2016 into Med Tech’s performance and Hemosure’s conclusion based on that investigation that Med Tech had not been performing under the contract . According to Hemosure, it terminated its contract with Med Tech and refused to pay commissi ons for January and February 2017 because of this poor performance that resulted in a loss of sales to
Hemosure. The arbitrator rejected Hemosure’s defense, finding it
was based on Med Tech’s asserted poor performance on a prior agreement

. The arbitrator explain ed in the arbitration award
that Hemosure’s “ novel defense that it can withhold [ Med Tech ’s] commissions because it decided after entering into a new contract with [Med Tech] that [ Med Tech ’s] performance under the parties’ prior agreement was not satisfactory is not persuasive
and must fail. ” Further, the arbitrator explained his finding that Hemosure had acted willfully, justifying treble damages under12

the Act, citing Dr. Wan ’s statement

, “I’m not going to fucking pay those guys

. ” Th e arbitrator ’s explanations are sufficient for a
reasoned award. Whether the arbitrator provided a reasoned
award as to Hemosure’s legal arguments that the Act did not apply to Med Tech is a closer call. By award ing treble damages under the Act, the arbitrator impliedly found the Act applied to
Med Tech , rejecting Hemosure’s arguments that Med Tech was

not a “person” or a “ ‘ wholesale sales representative ’ ” and did not “solicit [] ” wholesale orders , as required for the Act to apply. Further, in concluding the treble damages provision under the
Act was “trigger[ed]

, ” the arbitration award noted the issue had
been “briefed tho roughly and persuasively by [ Med Tech’s ] counsel.” A reasoned award, unlike more detailed findings of fact and conclusions of law, need not go into detail as to every argument raised by the parties. ( Leeward Construction, supra

, 826 F.3d at p. 640 .) Further, we cannot tell from the record on appeal whether the issues raised by Hemosure in its closing brief on the applicability of the Act were central issues in the
arbitration . Hemosure has failed to include in the appellate record any briefing by M ed Tech or the transcript of the arbitration hearing. The “ appellant ‘ has the burden of providing

an adequate record. [Citation.] Failure to provide an adequate record on an issue requires that the issue be resolved against [the appellant]. ’ ” (

Blue Mou ntain Enterprises, LLC. v. Owen (2022) 74 Cal.App.5th 537 , 557 ; accord, Ketchum v. Moses (2001) 24 Cal.4th 1122, 1141 [“‘Because [the appellant] failed to furnish an adequate record of the attorney fee proceedings, [the appellant ’ s]
claim must be resolved against [him]

. ’”].)

The Fifth Circuit’s decision in Rain , supra , 674 F.3d 469 is on point. There, the Court of Appeals found an arbitration award13

that articulated and then rejected a party’s proposal for a price
formula but did not provide a further explanation

, was a reasoned award. Th e Fifth Circuit explained rejection of the award would be “ inconsistent with the deference owed to arbitral awards and the congressional policy favoring arbitration of commercial disputes , and is also contrary to the interest of finality. ” (

Id. , at p. 474.) We likewise conclude the arbitrator’s consideration and rejection of Hemosure’s legal arguments as to why the Act did not apply were sufficient for a reasoned award. Stage Stores, Inc . v. Gunnerson (Tex.Ct.App. 2015)

477 S.W.3d 848, 860, relied on by Hemosure, is not to the contrary. The r e, the T exas Court of Appeal s applied the
standard for a reasoned award under Cat Charter and Rain and
concluded the arbitration award was not a reasoned award
be cause the arbitrator “failed to address one of [the employer’s] key defenses: that [the employee] failed to provide the requisite notice and opportunity to cure in order to avail himself of the good

- cause t ermination provision.” ( Ibid .) Further, although the arbitration award provided reasoning as to its other conclusions, the failure to identify or address one of the employer’s three defenses required vacatur. ( Id . at p. 863.) In contrast to Stage
Store s , the arbitration award made clear the arbitrator considered but rejected Hemosure’s arguments that the Act did not apply. Although certainly the better practice would have been for the arbitrator to provide his analysis of why the Act applied, in light of the deference we give to arbitration awards,

we affirm the trial court’s order confirming the award.14 DISPOSITION

We affirm the judgment. Med Tech is entitled to recover its costs on appeal

.

FEUER, J.
We concur:

SEGAL

, Acting P. J.

WISE

, J. *

* Judge of the Alameda County Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitu tion.