1

Filed 10/23/13 (unmodified opn. attached)

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION ONE

MAVE ENTERPRISES, INC.,

Plaintiff and Respondent,

v.

THE TRAVELERS INDEMNITY 

COMPANY OF CONNECTICUT,

Defendant and Appellant.

 B241807

 (Los Angeles County

 Super. Ct. No. LC086852)

 ORDER MODIFYING OPINION

 [NO CHANGE IN JUDGMENT]

THE COURT:

It is ordered that the majority opinion filed herein and certified for publication in 

the Official Reports on September 26, 2013, be modified as follows:

To the paragraph commencing at the bottom of page 31 with ―Shahinian also noted 

that the Court of Appeal‖ and continuing on page 32, insert on page 32 the following 

quotation and citation between the citation to footnote 16 of Shahinian and the sentence 

that begins ―Private arbitration . . . really is private‖:

―If the limited state involvement of converting [an arbitration] award into a 

judgment were to engender the same due process incidents required with respect to 

[a judgment] originally assessed and imposed by a court, the contrasting simplicity, 

informality, and private nature of arbitration would be seriously undermined.‖ 

(Rifkind & Sterling, Inc. v. Rifkind, supra, 28 Cal.App.4th at p. 1292.)

There is no change in the judgment.

 MALLANO, P. J. CHANEY, J.
1

Filed 9/26/13 (unmodified version)

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION ONE

MAVE ENTERPRISES, INC.,

Plaintiff and Respondent,

v.

THE TRAVELERS INDEMNITY 

COMPANY OF CONNECTICUT,

Defendant and Appellant.

 B241807

 (Los Angeles County

 Super. Ct. No. LC086852)

APPEAL from an order and a judgment of the Superior Court of Los Angeles 

County, William D. Stewart, Judge. Affirmed.

Horvitz & Levy, Jeremy B. Rosen, John F. Querio; Weston & McElvain, 

Richard C. Weston and Aaron C. Agness for Defendant and Appellant.

Shernoff Bidart Echeverria Bentley, William M. Shernoff, Travis M. Corby and 

Jill P. McDonell for Plaintiff and Respondent.

___________________________________________
2

In this case, an insured filed a bad faith action against its insurer in the Los Angeles 

Superior Court. After spending a substantial amount of time litigating the case in the 

superior court, the parties stipulated to have their disputes resolved through binding 

arbitration. The terms of the stipulation were placed on the record, and the superior court 

retained jurisdiction, requiring the parties to submit periodic status reports about the 

arbitration proceedings. The parties entered into a separate, written stipulation to arbitrate 

under the auspices of a sponsoring organization.

The arbitrator found in favor of the insured and awarded $3,696,414. The insurer 

filed a petition to vacate, modify, or correct the award in the United States District Court 

for the Central District of California based on diversity of citizenship. For its part, the 

insured filed a motion to confirm the award in the superior court. The insurer then filed a 

motion in the superior court, requesting that it stay its proceedings pending a decision by 

the federal district court. Oppositions were filed to each motion. Before the federal 

district court had issued a decision, the superior court denied the insurer‘s request for a 

stay, confirmed the arbitration award in its entirety, and entered judgment in favor of the 

insured. The insured then filed a motion in the federal district court, requesting that it 

abstain from hearing the matter. The federal district court agreed based on the doctrine of 

abstention; it denied the insurer‘s petition and closed the case.

On appeal, the insurer contends that the superior court abused its discretion by 

denying the motion to stay its proceedings pending a decision by the federal district court. 

The insurer also asserts that the arbitration award should be reviewed under the procedural 

provisions of the Federal Arbitration Act (FAA) (9 U.S.C. §§ 10, 11), and the award must 

be vacated, modified, or corrected because, in calculating damages, the arbitrator 

exhibited a manifest disregard of the law. In the alternative, the insurer argues that, under 

the California Arbitration Act (CAA) (Code Civ. Proc., §§ 1280–1294.2), the award 

should be vacated or corrected.

We conclude that the superior court did not abuse its discretion by denying the 

insurer‘s motion for a stay, primarily because the superior court acquired jurisdiction over 

the parties‘ disputes long before the insurer filed its petition in the federal district court; 
3

the superior court retained jurisdiction over the case while it was being arbitrated and was 

kept informed of the arbitration proceedings; and the superior court was more 

knowledgeable about the litigation. We also conclude that, even assuming the parties‘ 

stipulations to arbitrate or the insurance policy involved interstate commerce, the 

procedural provisions of the CAA, not the FAA, govern judicial review of the award. 

Finally, under the CAA, we conclude that the superior court properly confirmed the 

arbitration award in its entirety.

I

BACKGROUND

The allegations and facts in this appeal are taken from the complaint and the papers 

submitted in connection with (1) the motions to confirm and vacate the arbitration award, 

and (2) the insurer‘s motion for a stay of the proceedings below.

A. The Complaint

The complaint alleged as follows. Plaintiff Mave Enterprises, Inc. (Mave), makes 

high quality Kosher foods. It is a California corporation and has its manufacturing plant in 

North Hollywood.

On or about February 1, 2006, The Travelers Indemnity Company of Connecticut 

(Travelers) issued a property casualty insurance policy to Mave. The policy covered 

property damage to Mave‘s manufacturing equipment and its inventory, business 

interruption losses, property damage, and lost business income.

On September 25, 2006, a severe fire occurred at Mave‘s manufacturing facility, 

which was covered under the Travelers policy. Mave submitted claims to Travelers. 

Travelers did not make timely payments to cover the losses. Travelers would either deny 

the claim, delay payment by conducting unreasonable investigations, or take unreasonable 

positions such as requiring Mave to pay for its large losses and then seek reimbursement 

from Travelers. The reimbursement process required Mave to borrow money at high 

interest rates. The interest and finance charges were excessive because (1) Travelers was 

slow in reimbursing Mave, and (2) on some items, Travelers improperly refused to 

reimburse Mave altogether. At other times, Travelers would decide that Mave was 
4

entitled to payment on a particular item but would not make a lump sum payment; instead, 

Travelers would make several smaller payments over time. Travelers contested the value 

of damaged goods, inventory, equipment, and food. Travelers also refused to pay for 

business interruption losses.

On January 30, 2008, Travelers wrote to Mave, indicating that its investigation into 

the fire damage was complete and that all issued checks were without prejudice to Mave‘s 

right to pursue additional benefits.

On September 9, 2009, Mave filed this action against Travelers in Los Angeles 

Superior Court, alleging two causes of action: (1) breach of contract based on Travelers‘s 

failure to investigate Mave‘s claims in a timely manner and its refusal and delay in paying 

various policy benefits; and (2) breach of the covenant of good faith and fair dealing.

The breach of covenant claim alleged that Travelers had acted in bad faith by 

denying to pay full benefits and by unreasonably delaying the payments it made. 

Travelers‘s bad faith conduct forced Mave to retain legal counsel, construction 

consultants, and other experts to obtain benefits under the policy. Travelers had engaged 

in acts or omissions that were malicious, oppressive, or fraudulent.

As relief, Mave sought consequential damages for breach of contract. On the 

breach of covenant claim, Mave sought damages for failure to pay the appropriate amount 

of benefits and an award of punitive damages.

Mave filed a first amended complaint on January 25, 2010, but did not add any 

causes of action against Travelers.

B. Arbitration

The trial began in the superior court in August 2011. On August 11, 2011, during 

jury selection, Mave and Travelers (parties) agreed to arbitrate their disputes. The oral 

agreement was placed on the record and consisted of these terms: (1) arbitration would be 

―a resolution of the trial of this matter‖; (2) the arbitration award would be limited to a low 

of $500,000 and a high of $7.5 million, but the arbitrator would not be told about the ―high 

low‖ provision; (3) the arbitration award would be binding; (4) the superior court‘s order 

on in limine motions would apply in the arbitration; (5) retired California Supreme Court 
5

Justice Edward Panelli had been selected as the arbitrator; and (6) the superior court 

retained jurisdiction to issue subpoenas. In addition, the superior court stated it would 

retain jurisdiction to ―make sure you‘re under way‖ and would also schedule periodic 

status conferences. The superior court set the first status conference for November 17, 

2011.

By minute order, also dated August 11, 2011, the superior court stated: ―The Court 

is informed that parties have reached a settlement agreement regarding binding arbitration. 

Terms of the Settlement are recited in open court . . . . Stipulation of parties re motions in 

limine to stand. The Court retains jurisdictions to enforce subpoenas. [¶] A Status 

Conference re Status of Arbitration is set on November 17, 2011.‖

On August 25, 2011, the parties signed a ―Stipulation for Arbitration and Selection 

of Arbitrator,‖ which read: ―It is stipulated and agreed by the Parties to submit all 

disputes, claims or controversies to neutral, binding arbitration at JAMS, pursuant to the 

JAMS Arbitration Administrative Policies and, unless otherwise agreed in writing by the 

parties, to the applicable JAMS Arbitration Rules and Procedures. . . .‖

JAMS rule 25 states: ―Proceedings to enforce, confirm, modify or vacate an Award 

will be controlled by and conducted in conformity with the Federal Arbitration Act, 

9 U.S.C. Sec 1 et seq. or applicable state law. The Parties to an Arbitration under these 

Rules shall be deemed to have consented that judgment upon the Award may be entered in 

any court having jurisdiction thereof.‖ (Italics & boldface added.)

Neither the stipulation to arbitrate reached in the superior court nor the August 25, 

2011 JAMS stipulation designated the law of a particular jurisdiction to govern the 

arbitration proceedings. Both stipulations were silent on that issue. In that regard, JAMS 

rule 24(c) states: ―In determining the merits of the dispute, the Arbitrator shall be guided 

by the rules of law agreed upon by the Parties. In the absence of such agreement, the 

Arbitrator shall be guided by the rules of law and equity that the Arbitrator deems to be 

most appropriate. The Arbitrator may grant any remedy or relief that is just and equitable

and within the scope of the Parties’ agreement, including, but not limited to, specific 

performance of a contract or any other equitable or legal remedy.‖ (Italics added.)
6

On November 17, 2011, the parties filed a stipulation to continue the status 

conference in the superior court and to inform the court that Travelers had asked retired 

Justice Panelli to recuse himself as the arbitrator, which he did. The parties had agreed to 

arbitrate the case before Alexander Polsky of JAMS. The superior court continued the 

November 17, 2011 status conference to February 8, 2012. On January 9, 2012, the 

parties filed a request that the status conference be continued to a date after February 29, 

2012, because the arbitration hearing was scheduled for February 27 through February 29, 

2012. The superior court continued the status conference to March 21, 2012. 

The arbitration hearing began on February 27, 2012, and lasted approximately three 

days. On March 21, 2012, the arbitrator provided the parties with his ―Issue Findings of 

Arbitrator,‖ which indicated how he had resolved the major factual and legal disputes on 

each of Mave‘s claims. The arbitrator also requested supplemental briefing on: (1) the 

amount of compensatory damages that should be awarded on each claim; (2) the amount, 

if any, of exemplary damages that should be awarded; and (3) the amount, if any, of 

―attorney fees‖ that Mave should recover.1

At the March 21, 2012 status conference, the parties informed the superior court 

that the arbitration hearing had been conducted, and they were awaiting the arbitration 

award. Mave‘s counsel stated, ―I just want the ruling. Make sure they pay and at that 

point, we can dismiss obviously.‖

On March 29, 2012, the arbitrator issued ―Factual Findings,‖ consisting of 

12 pages. The arbitrator found that although Travelers had paid a total of $3,437,631.08 

 

1

 Technically, Mave did not seek an award of ―attorney fees.‖ ―When an insurer‘s 

tortious conduct reasonably compels the insured to retain an attorney to obtain the benefits 

due under a policy, it follows that the insurer should be liable in a tort action for that 

expense. The attorney‘s fees are an economic loss—damages—proximately caused by the 

tort. . . . These fees must be distinguished from recovery of attorney‘s fees qua attorney‘s 

fees, such as those attributable to the bringing of the bad faith action itself. What we 

consider here is attorney‘s fees that are recoverable as damages resulting from a tort in the 

same way that medical fees would be part of the damages in a personal injury action.‖ 

(Brandt v. Superior Court (1985) 37 Cal.3d 813, 817 (Brandt), citation omitted.)
7

in policy benefits, Travelers had acted in bad faith with respect to ―equipment 

reimbursement‖ and the ―inventory valuation process.‖ He rejected Mave‘s claims that 

(1) another company retained by Travelers as an appraiser and a salvager (Stoner & Co.) 

had impermissibly salvaged products that had been damaged in the fire, and (2) Travelers 

should have paid for more than six months of lost business income. At the end of the 

Factual Findings, the arbitrator established a briefing schedule on the subject of whether 

Mave was entitled to attorney fees and, if so, in what amount.

On April 11, 2012, the arbitrator issued the award, which recited that Travelers was 

liable for: (1) $161,939 in compensatory damages on Mave‘s inventory claim ($106,939, 

plus interest of $55,000); (2) $2,429,085 in punitive damages (15 times the amount of 

compensatory damages); and (3) Brandt fees (see Brandt, supra, 37 Cal.3d at pp. 817–

820), which the arbitrator calculated by multiplying the compensatory damages award and

the punitive damages award—a total of $2,591,024—by the 40 percent contingency rate 

set forth in the retainer agreement between Mave and its counsel. The arbitrator awarded 

$1,036,450 in Brandt fees. Costs totaled $68,940. The arbitrator awarded a total of 

$3,696,414.2

On or about April 18, 2012, Travelers submitted a motion to the arbitrator, 

requesting that he ―correct computational, typographical, and/or other similar errors in the 

award.‖ With regard to Brandt fees, Travelers argued that Mave was entitled to only those 

attorney fees incurred in recovering the policy benefits (compensatory damages); the 

 

2

In calculating the total award, the arbitrator made a mathematical error that the 

parties have not mentioned. In determining the amount of Brandt fees, the arbitrator 

added the award of compensatory damages, $161,939, to the award of punitive damages, 

$2,429,085, and multiplied that sum by 40 percent. The sum of the compensatory and 

punitive damages is $2,591,024. The arbitrator, however, used the figure $2,591,124—a 

difference of $100. The correct amount of Brandt fees, using the arbitrator‘s formula, is 

$161,939 + $2,429,085 = $2,591,024, then $2,591,024 x .40 = $1,036,409.60, rounded up 

to $1,036,410. Thus, the total arbitration award should have been $3,696,374, including 

costs, not $3,696,414.
8

arbitrator should not have taken the award of punitive damages into account. According 

to Travelers, the arbitrator should have calculated Brandt fees in the same way Mave did 

in its arbitration brief—by multiplying $161,939—the compensatory damages award—by 

the 40 percent contingency rate in Mave‘s retainer agreement. The award of punitive 

damages should not have been considered. (See Cassim v. Allstate Ins. Co. (2004) 

33 Cal.4th 780, 809–813.) Travelers also argued that the arbitrator had erred in 

determining the amount of punitive damages: The arbitrator had multiplied the 

compensatory damages award ($161,939) by 15. Instead, as Travelers explained, the 

arbitrator should have applied a multiplier to the tort recovery—the Brandt fees as 

properly calculated. Travelers also took issue with the arbitrator‘s use of a 15-to-1 ratio of 

punitive damages to compensatory damages, arguing it exceeded the constitutional 

maximum: Under the federal due process clause of the Fourteenth Amendment, the ratio 

of punitive damages to compensatory damages should not exceed a single-digit ratio, for 

example, four to one. Thus, the 15-to-1 ratio was unconstitutionally excessive. On 

April 19, 2012, the arbitrator denied Travelers‘s motion.

By letter dated April 23, 2012, the arbitrator thanked counsel for their ―confidence‖ 

and ―professionalism during this rather unusual arbitration.‖ He also stated, ―I cannot 

recall receipt of less developed testimony as to loss of revenues. Nor can I recall more 

aggravated conduct by a claim professional.‖ The arbitrator commented that ―[t]he result 

was apparent. A high multiplier which, due to the uniqueness of the conduct was 

considered in the fee claim; and a denial of what appeared to be a genuine loss of revenue, 

reputation and clients—but whose proofs fell below the required burden. [¶] I imagine 

both sides found themselves surprised, and have criticism for these two extremes. As an 

arbitrator, I can say that this ended up as one of the more extreme and unusual cases I have 

heard, and awards I have issued.‖

C. Challenges to the Award

At a status conference on April 25, 2012, Mave‘s counsel informed the superior 

court that she intended to file a motion to confirm the arbitration award. The superior 

court suggested that the parties reserve a date for the hearing. Before a date was chosen, 
9

counsel for Travelers announced that ―we are filing a petition to vacate or modify the 

award in federal court today,‖ referring to the United States District Court for the Central 

District of California (The Travelers Indemnity Company of Connecticut v. Mave 

Enterprises, Inc. (C.D.Cal., 2012, No. CV 12-3574)).3

The next day, April 26, 2012, Mave filed a motion in the superior court to confirm 

the award. On May 3, 2012, Travelers filed two motions in the superior court: (1) a 

motion seeking a stay of the action pending a decision by the federal district court, and 

(2) a motion to vacate or correct the arbitration award. On May 14, 2012, Travelers filed 

in the superior court an opposition to Mave‘s motion to confirm the award. Also on 

May 14, 2012, Mave filed in the superior court an opposition to each of Travelers‘s 

motions. All three motions—Mave‘s motion to confirm the award, Travelers‘s motion to 

stay the action, and Travelers‘s motion to vacate or correct the award—were heard on 

May 25, 2012. At the beginning of the hearing, the superior court issued a tentative 

ruling, granting Mave‘s motion to confirm the award and denying both of Travelers‘s 

motions. At the conclusion of the hearing, the superior court adopted the tentative as its 

order. On June 6, 2012, the superior court confirmed the arbitration award and entered 

judgment in Mave‘s favor for $3,696,414.

While motions were being filed and decided in the superior court, proceedings 

commenced in the federal district court on April 25, 2012, with the filing of Travelers‘s 

petition to vacate, modify, or correct the arbitration award. Travelers asserted in its 

petition that the arbitration was governed by the FAA and that the arbitration award should 

 

3 ―As for jurisdiction over controversies touching arbitration, the [FAA] does 

nothing, being  ̳something of an anomaly in the field of federal-court jurisdiction‘ in 

bestowing no federal jurisdiction but rather requiring an independent jurisdictional basis.‖ 

(Hall Street Associates, L.L.C. v. Mattel, Inc. (2008) 552 U.S. 576, 581–582 [128 S.Ct. 

1396].) In the present case, Travelers filed its petition in federal district court based on 

diversity jurisdiction (28 U.S.C. § 1332), taking the position that (1) Mave was a ―citizen‖ 

of California and Delaware, (2) Travelers was a ―citizen‖ of Connecticut, and (3) the 

amount in controversy exceeded $75,000.
10

be vacated, modified, or corrected based on the arbitrator‘s errors in calculating Brandt

fees and the amount of punitive damages. Mave filed an opposition. On August 28, 2012, 

the federal district court issued a tentative order, denying Travelers‘s petition in part and 

granting it in part. In the tentative order, the district court rejected Travelers‘s attack on 

the punitive damages award but concluded the arbitrator had manifestly disregarded the 

law in determining the amount of Brandt fees by including the award of punitive damages 

in its calculations. Accordingly, the federal district court recalculated the Brandt fees, 

multiplying the amount of compensatory damages ($161,939) by the 40 percent 

contingency rate in Mave‘s retainer agreement, yielding $64,775.60. The federal district 

court left the awards of compensatory and punitive damages untouched, resulting in a total 

award of $2,655,799.60.

On September 10, 2012, Mave filed a motion for reconsideration in the federal 

district court, requesting that it decline to exercise jurisdiction over the validity of the 

arbitration award in light of the superior court‘s prior order and judgment. The federal 

district court granted Mave‘s motion based on the doctrine of abstention. The district 

court vacated its tentative order and denied Travelers‘s petition to vacate, modify, or 

correct the award. The district court‘s order concluded by stating: ―This matter shall 

close.‖ Travelers appealed to the Ninth Circuit Court of Appeals, and, as of the date of 

our opinion, the Ninth Circuit has not scheduled the appeal for oral argument (Travelers 

Indemnity Company of Connecticut v. Mave Enterprises, Inc. (9th Cir., No. 12-57030)).4

 

4 Travelers requested that we take judicial notice of the documents filed in the 

federal district court. We initially granted the request as to only three documents: 

Travelers‘s petition, Mave‘s opposition to the petition, and the order granting Mave‘s 

motion for reconsideration. We now conclude that the request for judicial notice should 

be, and is, granted in its entirety to explain fully the proceedings in the federal district 

court. We have therefore considered the portions of Travelers‘s opening brief that discuss 

or mention federal court documents other than the three we judicially noticed at first.
11

II

DISCUSSION

We review de novo the superior court‘s judgment confirming the arbitration award. 

(See Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 376, fn. 9;

Greenspan v. LADT, LLC (2010) 185 Cal.App.4th 1413, 1435.) We review the order 

denying a stay pending the federal district court‘s decision for an abuse of discretion. (See 

Caiafa Prof. Law Corp. v. State Farm Fire & Cas. Co. (1993) 15 Cal.App.4th 800, 804 

(Caiafa).)

On appeal, Travelers contends the superior court erred in denying the motion to 

stay its proceedings pending the outcome in federal district court. Travelers also argues 

that the arbitration was governed by the FAA because (1) Mave‘s insurance policy and the 

parties‘ stipulations to arbitrate involved interstate commerce, and (2) JAMS rule 25 states 

that ―[p]roceedings to enforce, confirm, modify or vacate an Award will be controlled by 

and conducted in conformity with the Federal Arbitration Act, 9 U.S.C. Sec 1 et seq. or

applicable state law.‖ (Italics and boldface added.)

Travelers asserts that under the FAA, the arbitration award must be vacated, 

modified, or corrected with respect to the calculation of Brandt fees and the award of 

punitive damages because, in deciding those issues, the arbitrator exhibited a manifest 

disregard of the law—a basis for challenging an arbitration award available under the 

FAA but not the CAA. According to Travelers: ―Under the FAA, an arbitration award 

must be vacated  ̳where the arbitrator[] exceeded [his] powers.‘ . . . An arbitrator 

 ̳―exceed[s] [his] powers‖‘ under the FAA where the award he issues . . . exhibits a 

manifest disregard of the law. . . . An arbitrator manifestly disregards the law where it is 

 ̳―clear from the record that the arbitrator[] recognized the applicable law and then ignored 

it.‖‘ . . . Additionally, in order for manifest disregard of the law to be shown, the law the 

arbitrator disregarded must be well-defined, explicit, and clearly applicable.‖ (See 

generally LaPrade v. Kidder, Peabody & Co., Inc. (D.C.Cir. 2001) 246 F.3d 702, 706; 

Schwarzer et al., Cal. Practice Guide: Federal Civil Procedure Before Trial (The Rutter 

Group 2013) ¶¶ 16:121.2 to 16:121.3, pp. 16-67 to 16-69 (rev. # 1, 2011).) A federal 
12

district court would be more likely to vacate or correct an arbitration award under the 

manifest disregard standard (see LaPrade, at p. 706) than a California superior court 

applying the standard of review under the CAA (see Moncharsh v. Heily & Blase (1992) 

3 Cal.4th 1, 10–11, 13, 26–27). This explains why Travelers wanted the federal district 

court to review the arbitration award and why Mave wanted the superior court to 

determine the validity of the award.

In the alternative, Travelers argues that even under the CAA, the arbitration award 

should be vacated or corrected as to the calculation of Brandt fees and the amount of 

punitive damages awarded.5

We conclude that the superior court did not abuse its discretion by denying the 

insurer‘s motion for a stay, primarily because the superior court acquired jurisdiction over 

the parties‘ disputes long before the insurer filed its petition in the federal district court; 

the superior court retained jurisdiction over the case while it was being arbitrated and was 

kept informed of the arbitration proceedings; and the superior court was more 

knowledgeable about the litigation. We also conclude that, even assuming the insurance 

policy or the parties‘ stipulations to arbitrate involved interstate commerce, the procedural 

provisions of the CAA, not the FAA, govern judicial review of the award because neither 

the insurance policy nor the stipulations included a choice-of-law clause designating the 

FAA as the controlling law. Finally, under the CAA, we conclude that the superior court 

properly confirmed the arbitration award in its entirety.

 

5 The statutory grounds for vacating and correcting an arbitration award are 

virtually identical under the FAA and the CAA. (Compare 9 U.S.C. §§ 10, 11, with Code 

Civ. Proc., §§ 1286.2, 1286.6). The manifest disregard standard is a judicially created 

basis for reviewing an award under the FAA (Carte Blanche (Singapore) Pte., Ltd. v. 

Carte Blanche Intern., Ltd. (2d Cir. 1989) 888 F.2d 260, 265) and is sometimes described 

as a judicial ―gloss‖ on the statutory grounds, specifically section 10(a) of the FAA (see 

Wachovia Securities, LLC v. Brand (4th Cir. 2012) 671 F.3d 472, 480–481 & fn. 7). 

Regardless, the manifest disregard standard, like the statutes on which it is based, 

constitutes procedural law under the FAA.
13

A. Stay of Superior Court Proceedings

In general, ―the pendency of a prior action in a court of competent jurisdiction, 

predicated on the same cause of action and between the same parties, constitutes good 

ground for abatement of a later action within the same jurisdiction either in the same court 

or in another court having . . . jurisdiction . . . ; and it is held that the first court to assume 

and exercise jurisdiction in a particular case acquires exclusive jurisdiction and prohibition 

lies to restrain another court from proceeding if it is threatening to do so.‖ (Simmons v. 

Superior Court (1950) 96 Cal.App.2d 119, 122–123, citation omitted, italics added.) ―In 

conformity with the rule of comity a . . . court  ̳which first takes the subject matter of a 

litigation into its control for the purpose of administering the rights and remedies with 

relation to specific [disputes] obtains thereby jurisdiction so to do, to the exclusion of the 

exercise of a like jurisdiction by other tribunals . . . , the powers of which are sought to be 

invoked by parties or their privies to the original action.‘‖ (Id. at p. 124, italics added.)

Under the Simmons standard, the superior court in this case properly denied 

Travelers‘s motion for a stay. The superior court acquired subject matter when the civil 

action was filed on September 9, 2009. Travelers did not invoke federal jurisdiction—by 

filing its petition challenging the arbitration award—until April 25, 2012. Thus, the 

superior court acquired jurisdiction of the subject matter approximately two years and 

seven months before the federal district court.

We decline Travelers‘s invitation to segregate the parties‘ litigation into discrete 

procedural stages, namely: the filing of the civil action, the arbitration hearing, the 

issuance of the arbitration award, and the determination of the award‘s validity. In 

Travelers‘s view, the federal district court obtained jurisdiction over the validity of the 

arbitration award before the superior court—by one day. Travelers filed its petition in 

federal district court on April 25, 2012; Mave filed its motion in the superior court on 

April 26, 2012. As Travelers asserts in its opening brief: ―[T]he federal court here was 

the first court to take jurisdiction over the controlling issue presented in this case—

whether the arbitration award should be vacated. That issue had nothing to do with the 

prior proceedings in the state trial court before the arbitration began.‖ (Italics added.) But 
14

the pertinent question before us is which court first obtained jurisdiction over the subject 

matter—the parties‘ disputes. And the answer to that question is the superior court. 

Although the parties stipulated to arbitrate their disputes after the civil action was filed, 

the stipulation was reached around 11 months after litigating the case in the superior court 

and during jury selection. The parties‘ stipulation to arbitrate was placed on the record in 

the superior court; the superior court retained jurisdiction of the case during arbitration; 

and the parties submitted periodic status reports about the arbitration proceedings. 

Travelers‘s argument exalts form over substance, which is disfavored. (See Civ. Code, 

§ 3528.)

As stated in Caiafa, supra, 15 Cal.App.4th 800: ―It is black letter law that, when a 

federal action has been filed covering the same subject matter as is involved in a 

California action, the California court has the discretion but not the obligation to stay the 

state court action. . . .

― ̳In exercising its discretion the court should consider the importance of 

discouraging multiple litigation designed solely to harass an adverse party, and of 

avoiding unseemly conflicts with the courts of other jurisdictions. It should also consider 

whether the rights of the parties can best be determined by the court of the other 

jurisdiction because of the nature of the subject matter . . . .‘ . . . The California Supreme 

Court also has isolated another critical factor favoring a stay of the state court action in 

favor of the federal action . . . —the federal action is pending in California not some other 

state.‖ (Caiafa, supra, 15 Cal.App.4th at p. 804, citations omitted.; accord, Simmons v. 

Superior Court, supra, 96 Cal.App.2d at pp. 124–125.) In Caiafa, the superior court 

stayed its own proceedings, allowing the federal district court to resolve the parties‘ 

dispute.

As an initial matter, we note that in Caiafa, the plaintiff insurer filed an action 

against the defendant attorney in the United Stated District Court for the Southern District 

of California nine months before the defendant attorney filed an action against the plaintiff 

insurer in Los Angeles Superior Court. (See Caiafa, supra, 15 Cal.App.4th at pp. 802–

803, 805, italics added.) Both lawsuits involved the same subject matter: The insurer had 
15

retained the attorney as Cumis counsel (San Diego Navy Federal Credit Union v. Cumis 

Ins. Society, Inc. (1984) 162 Cal.App.3d 358) to represent a third party who had been sued 

in several civil actions. The Court of Appeal held that the superior court did not abuse its 

discretion in staying its proceedings given that the federal action was filed first and 

involved substantially identical parties and the same subject matter.

Here, we have just the opposite situation: The state court action was filed years 

before the federal district court action. Based on the facts and result in Caiafa, the 

superior court in the present case did not abuse its discretion in denying Travelers‘s 

motion for a stay; it properly heard the parties‘ cross-motions to confirm and vacate the 

arbitration award and entered judgment accordingly.

Turning to the factors considered in Caiafa, the superior court here, by denying 

Travelers‘s motion for a stay, did not encourage multiple litigation designed solely to 

harass an adverse party. If anything, Travelers created ―multiple litigation‖ by filing a 

second lawsuit (in federal district court) even though the superior court already had 

jurisdiction over the subject matter.

Nor did the denial of Travelers‘s motion for a stay cause ― ̳unseemly conflicts with 

the courts of other jurisdictions.‘‖ (Caiafa, supra, 15 Cal.App.4th at p. 804.) As the 

superior court stated in denying Travelers‘s motion: ―Since this Court first took subject 

matter jurisdiction over this case, it is expected that the federal court will decline to 

entertain jurisdiction over this matter in light of the rule of comity. Further, there is no 

evidence of a hearing date or date on which the federal court will issue a ruling. This 

Court should decline to issue a stay that has an indefinite period of time.‖ As it turned out, 

the federal district court ultimately declined to entertain jurisdiction of the parties‘ 

disputes based on the doctrine of abstention.

We cannot say that ― ̳the rights of the parties [could have been] best . . . determined 

by the court of the other jurisdiction because of the nature of the subject matter.‘‖ 

(Caiafa, supra, 15 Cal.App.4th at p. 804.) The superior court was just as capable as the 

federal district court in determining whether the procedural provisions of the FAA or the 

CAA applied and, if the FAA applied, of reviewing the arbitration award under the 
16

manifest disregard standard. (See, e.g., Countrywide Financial Corp. v. Bundy (2010) 

187 Cal.App.4th 234, 238, 250–254, 255–256, 260; Rodriguez v. American Technologies, 

Inc. (2006) 136 Cal.App.4th 1110, 1121–1122.) The superior court also had greater 

knowledge of the parties‘ disputes because it had presided over preliminary trial 

proceedings, ruled on in limine motions, enforced the parties‘ stipulation to arbitrate their 

disputes, and supervised the arbitration proceedings by requiring periodic status reports. 

In addition, because Travelers filed its petition in the United States District Court for the 

Central District of California, the two cases were in the same city—Los Angeles—making 

both tribunals equally convenient for the parties. (See Caiafa, supra, 15 Cal.App.4th at 

p. 804, citing Thomson v. Continental Ins. Co. (1967) 66 Cal.2d 738, 747–748.) As 

provided by JAMS rule 25: ―The Parties to an Arbitration . . . shall be deemed to have 

consented that judgment upon the Award may be entered in any court having jurisdiction 

thereof.‖ This rule permitted (1) Mave to file its motion to confirm the award in superior 

court, and (2) Travelers to file its petition to vacate, modify, or correct the award in federal 

district court. But the rule does not address which court shall have priority or exclusive 

jurisdiction to review the award.

Travelers contends it was prejudiced by the superior court’s denial of its motion for 

a stay given that the federal district court subsequently granted its petition in part. 

Because the superior court denied Travelers‘s motion for a stay, confirmed the arbitration 

award in its entirety, and entered judgment in favor of Mave, the federal district court 

deferred to the superior court proceedings under the doctrine of abstention. If the superior 

court had stayed its proceedings, Travelers‘s partial victory in the federal district court—

the tentative order—would have become final, and the federal court would have had 

exclusive jurisdiction over the matter.

As we see it, Travelers‘s prejudice argument suffers from two flaws. First, in 

ruling on a motion for a stay, the superior court does not, and did not, determine how a 

stay might affect the validity of the arbitration award. In other words, ―prejudice,‖ as 

defined by Travelers—whether the award should be confirmed, vacated, or corrected—is 

not a relevant factor in ruling on a motion to stay. Second, Travelers‘s prejudice argument 
17

is nothing more than a complaint that, after the federal district court had partially granted 

Travelers‘s petition in the tentative order, the district court granted Mave‘s motion for 

reconsideration, decided to abstain from reviewing the arbitration award, denied 

Travelers‘s petition, and deferred to the superior court‘s decision. To the extent Travelers 

suffered any prejudice from the federal district court‘s abstention, it was self-inflicted. 

The superior court was the proper tribunal to review the arbitration award. Both the 

superior court and the federal district court came to that conclusion. Travelers‘s failed 

attempt to obtain relief in federal district court is not a ground for reversing the superior 

court‘s denial of the motion for a stay.

As the federal district court stated in granting Mave‘s motion for reconsideration: 

―[T]he principles of federalism, equity, and comity outweigh the Court‘s obligation to 

exercise jurisdiction over the matters before it. Importantly, the state court here has 

exercised jurisdiction over the underlying dispute for several years before Travelers‘ 

Petition, and the state court entered a judgment confirming the arbitration award prior to 

this Court‘s Tentative Order. These state court proceedings were entirely adequate. 

Finally, there was no clear choice of law clause in the arbitration agreement indicating that 

the FAA was to be used in the event of arbitration. Accordingly, the Court finds that 

abstention is proper.‖

Travelers fails to understand that, although the superior court enforced the parties‘ 

stipulation to arbitrate their disputes, it did not lose jurisdiction of the matter. ―The 

statutory scheme outlined in [the CAA] contemplates the court‘s continuing involvement

in the arbitration process.  ̳―The proceeding to compel arbitration . . . is in essence a suit 

in equity to compel specific performance of the contract.‖‘ . . . If the parties fail to agree 

upon an arbitrator the court  ̳shall,‘ upon petition, appoint one. . . .

―The underlying [civil] action is stayed once arbitration begins . . . . However, the 

court retains jurisdiction over the matter . . . and there are several specific instances in 

which that jurisdiction might be exercised. In contract actions, for example, if the parties‘ 

agreement does not grant the arbitrator general law discovery powers, the court must 

intervene. . . . [A] court which has ordered arbitration retains  ̳the power . . . to entertain a 
18

petition by the plaintiff for judicial assistance in moving the arbitration forward where the 

matter is foundering for reasons beyond plaintiffs‘ control . . . .‘ . . . [And] if a party is 

dissatisfied with the award of the arbitrator, the court may correct or vacate it.‖ 

(California Teachers Assn. v. Governing Board (1984) 161 Cal.App.3d 393, 399, citations 

omitted, quoted with approval in Roberts v. Packard, Packard & Johnson (2013) 

217 Cal.App.4th 822, 841–842.) In California, ―[t]he making of an agreement in this State 

providing for arbitration to be had within this State shall be deemed a consent of the 

parties thereto to the jurisdiction of the courts of this State to enforce such agreement by 

the making of any orders provided for in [the CAA] and by entering of judgment on an 

award under the agreement.‖ (Code Civ. Proc., § 1293, italics added.)

B. Application of the FAA or the CAA

Travelers contends that the arbitration award is subject to the procedural provisions 

of the FAA, thereby subjecting the award to review under the manifest disregard standard. 

(See 9 U.S.C. §§ 10, 11 [stating grounds for vacating and correcting award].) As noted, 

neither the stipulation to arbitrate reached in the superior court nor the August 25, 2011 

JAMS stipulation designated the law of a particular jurisdiction to govern the arbitration. 

According to Travelers, the FAA is made applicable by JAMS rule 25, which is a choiceof-law provision stating: ―Proceedings to enforce, confirm, modify or vacate an Award 

will be controlled by and conducted in conformity with the Federal Arbitration Act, 

9 U.S.C. Sec 1 et seq. or applicable state law.‖ (Italics & boldface added.) But this rule 

is worded in the disjunctive and does not indicate when the FAA, as opposed to state law, 

is applicable. Travelers takes the position that the FAA applies under JAMS rule 25 

because the choice-of-law provision is ambiguous, and the insurance policy and the 

parties‘ stipulations to arbitrate involved interstate commerce. That assertion, in turn, is 

based on Travelers‘s contention that, because Mave and Travelers are incorporated in 

different states, any agreement between them involved interstate commerce. Nevertheless, 

even assuming for the sake of argument that the insurance policy or the stipulations to 

arbitrate involved interstate commerce, the procedural provisions of the FAA did not 

necessarily apply in determining the validity of the arbitration award.
19

We examined this issue at length in Valencia v. Smyth (2010) 185 Cal.App.4th 153. 

There, we reviewed several California decisions addressing when the FAA‘s substantive 

and procedural provisions apply to an arbitration proceeding and award. We concluded 

that if an arbitration agreement or other pertinent transaction involves interstate 

commerce, the FAA‘s substantive provision (9 U.S.C. § 2) applies. That provision—

section 2 of the FAA—states: ―A written provision in any . . . contract evidencing a 

transaction involving commerce to settle by arbitration a controversy thereafter arising out 

of such contract or transaction, or the refusal to perform the whole or any part thereof, or 

an agreement in writing to submit to arbitration an existing controversy arising out of such 

a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon 

such grounds as exist at law or in equity for the revocation of any contract.‖ Section 2 

― ̳―is a congressional declaration of a liberal federal policy favoring arbitration 

agreements, notwithstanding any state substantive or procedural policies to the contrary. 

The effect of the section is to create a body of federal substantive law of arbitrability, 

applicable to any arbitration agreement within the coverage of the [FAA].‖ . . . The rule of 

enforceability established by section 2 of the [FAA] preempts any contrary state law and is 

binding on state courts as well as federal. . . .‘‖ (Valencia v. Smyth, supra, 

185 Cal.App.4th at p. 165.)6

 

6 See, e.g., Southland Corp. v. Keating (1984) 465 U.S. 1, 10–11, 13 [104 S.Ct. 

852] [FAA preempts California law exempting claims from arbitration that arise under 

Franchise Investment Law (Corp. Code, §§ 31000–31516)]; Perry v. Thomas (1987) 

482 U.S. 483, 490–492 [107 S.Ct. 2520] [FAA preempts California Labor Code 

section 229, which exempts wage claims from arbitration]; Doctor’s Associates, Inc. v. 

Casarotto (1996) 517 U.S. 681, 686, [116 S.Ct. 1652] [FAA preempts Montana law 

requiring that contract containing arbitration provision bear notice of provision on first 

page of contract]; Preston v. Ferrer (2008) 552 U.S. 346, 349–350 [128 S.Ct. 978] [FAA 

preempts state law vesting initial adjudicatory authority in administrative agency]; Marmet 

Health Care Center, Inc. v. Brown (2012) 565 U.S. __ [132 S.Ct. 1201, 1202–1204 [FAA 

preempts West Virginia public policy exempting claims from arbitration brought against 

nursing homes for personal injury or wrongful death].)
20

But we also held that the presence of interstate commerce was not sufficient, by 

itself, to make the FAA‘s procedural provisions, including its provisions regarding judicial 

review (9 U.S.C. §§ 10, 11), applicable in California state courts. This is so because a 

state court applies its own procedural law—here, the procedural provisions of the CAA—

absent a choice-of-law provision expressly mandating the application of the procedural 

law of another jurisdiction. As we stated: ―[I]f a contract involves interstate commerce, 

the FAA‘s substantive provision (9 U.S.C. § 2) applies to the arbitration. But the FAA‘s 

procedural provisions (9 U.S.C. §§ 3, 4, 10, 11) do not apply unless the contract contains 

a choice-of-law clause expressly incorporating them.‖ (Valencia v. Smyth, supra, 

185 Cal.App.4th at pp. 173–174; see id. at pp. 173–175 [discussing cases]; Cable 

Connection, Inc. v. DIRECTV, Inc. (2008) 44 Cal.4th 1334, 1350–1352, 1354; id. at 

p. 1351 [FAA provisions governing judicial review do not apply in state court, in part 

because ―the provisions for judicial review of arbitration awards in sections 10 and 11 of 

the FAA are directed to  ̳the United States court in and for the district where the award 

was made‘‖]; Cronus Investments, Inc. v. Concierge Services (2005) 35 Cal.4th 376, 384, 

388–389, 391, 394; id. at p. 389 [―the United States Supreme Court does not read the 

FAA‘s procedural provisions to apply to state court proceedings‖]; Rosenthal v. Great 

Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 405–410; id. at pp. 402, 407–409 

[FAA provision requiring jury trial to determine question regarding existence of 

arbitration agreement (9 U.S.C. § 4) does not apply in California state courts; instead, 

CAA provision governs, which requires that determination be made in manner provided 

for hearing and deciding motions (Code Civ. Proc., §1290.2)]; Mount Diablo Medical 

Center v. Health Net of California, Inc. (2002) 101 Cal.App.4th 711, 716, 722 [generic 

choice-of-law-clause stating that parties‘ agreement shall be governed by California law 

required application of procedural provisions of CAA, not FAA]; Rodriguez v. American 

Technologies, Inc. (2006) 136 Cal.App.4th 1110, 1122 [language in parties‘ agreement 

stating that any controversy or claim shall be arbitrated ―pursuant to the FAA‖ meant 

parties ―adopted the FAA—all of it—to govern their arbitration‖].)
21

Thus, in this case, assuming the insurance policy or the parties‘ stipulations to 

arbitrate involved interstate commerce, the procedural provisions of the FAA, including its 

provisions regarding judicial review of arbitration awards (9 U.S.C. §§ 10, 11), were not 

applicable because the parties‘ stipulations did not expressly adopt the FAA as the 

controlling law. JAMS rule 25—to which both parties agreed—did not dictate the 

applicable procedural law because it refers to the FAA or ―applicable state law,‖ and the 

parties‘ stipulations did not ―expressly‖ incorporate the procedural provisions of the FAA. 

As a consequence, the procedural provisions of the CAA, including its provisions 

governing judicial review (Code Civ. Proc., §§ 1286.2, 1286.6), determine the validity of 

the award. (See Valencia v. Smyth, supra, 185 Cal.App.4th at pp. 172–175.)

By the same token, a federal district court will apply the procedural provisions of 

the FAA unless the parties expressly adopt the provisions of the CAA. (See Sovak v. 

Chugai Pharmaceutical Co. (9th Cir. 2002) 280 F.3d 1266, 1269.) And, as noted, under 

the FAA‘s manifest disregard standard, a federal district court would be more likely to 

vacate or correct an award than a California superior court applying the CAA. Indeed, 

that is what almost happened here: The superior court confirmed the award in its entirety, 

and the federal district court tentatively concluded that the arbitrator had manifestly 

disregarded the law in calculating Brandt fees.

C. Judicial Review of the Award

We first discuss the standard of review applied to arbitration awards under the 

CAA and then apply that standard to the award of Brandt fees and the award of punitive 

damages.

1. California Arbitration Act

Under the CAA, ―[t]he merits of a controversy that has been submitted to 

arbitration are not subject to judicial review. This means that we may not review the 

validity of the arbitrator‘s reasoning, the sufficiency of the evidence supporting the award, 

or any errors of fact or law that may be included in the award. . . . Judicial review is 

severely limited because that result  ̳vindicates the intentions of the parties that the award 
22

be final, and because an arbitrator is not ordinarily constrained to decide according to the 

rule of law. . . .‘ . . .

―Code of Civil Procedure section 1286.2 sets forth a list of circumstances under 

which we may vacate an arbitrator‘s award, including where  ̳[t]he rights of the parties 

were substantially prejudiced by misconduct of a neutral arbitrator,‘ (Code Civ. Proc., 

§ 1286.2, subd. (a)(3)) and where,  ̳[t]he arbitrators exceeded their powers and the award 

cannot be corrected without affecting the merits of the decision upon the controversy 

submitted.‘ (Code Civ. Proc., § 1286.2, subd. (a)(4).)  ̳Unless one of the enumerated 

grounds exists, a court may not vacate an award even if it contains a legal or factual error 

on its face which results in substantial injustice.‘ . . . An arbitrator does not exceed his or 

her powers by making a legal or factual error or by giving erroneous reasons for an

award.‖ (Harris v. Sandro (2002) 96 Cal.App.4th 1310, 1313, some citations omitted; 

accord, Hoso Foods, Inc. v. Columbus Club, Inc. (2010) 190 Cal.App.4th 881, 887–888.)

With regard to Travelers‘s challenge of the Brandt fees and other damages—which 

the arbitrator awarded for bad faith breach of the insurance contract—we look for 

guidance to the principles set forth in Greenspan v. LADT, LLC, supra, 185 Cal.App.4th 

1413: ― ̳Judicial review of [arbitral] remedies . . . looks not to whether the arbitrator 

correctly interpreted the agreement, but to whether the award is drawn from the agreement 

as the arbitrator interpreted it or derives from some extrinsic source. . . . [W]here an 

arbitrator is authorized to determine remedies for contract violations, ―courts have no 

authority to disagree with his honest judgment in that respect. . . . [A]s long as the 

arbitrator is even arguably construing or applying the contract and acting within the scope 

of his authority, that a court is convinced he committed serious error does not suffice to 

overturn his decision.‖‘ (Id. at p. 1447, quoting Advanced Micro Devices, Inc. v. Intel 

Corp., supra, 9 Cal.4th at p. 378.)

― ̳[A]rbitrators, unless expressly restricted by the agreement of the parties, enjoy 

the authority to fashion relief they consider just and fair under the circumstances existing 

at the time of arbitration, so long as the remedy may be rationally derived from the 

contract and the breach.‘‖ (Greenspan v. LADT, LLC, supra, 185 Cal.App.4th at p. 1448, 
23

quoting Advanced Micro Devices, Inc. v. Intel Corp., supra, 9 Cal.4th at p. 383.) ―As 

pertinent here, JAMS Rule 24(c) provides:  ̳[T]he Arbitrator shall be guided by the rules 

of law and equity that the Arbitrator deems to be most appropriate. The Arbitrator may 

grant any remedy or relief that is just and equitable and within the scope of the Parties‘ 

agreement. . . .‘ This type of rule  ̳has been described as ―a broad grant of authority to 

fashion remedies‖ . . . and as giving the arbitrator ―broad scope‖ in choice of relief.‘‖ 

(Greenspan, at p. 1448, quoting Advanced Micro Devices, Inc. v. Intel Corp., supra,

9 Cal.4th at pp. 383–384.)

In the present case, Travelers does not dispute that Mave was entitled to Brandt 

fees or punitive damages. It merely disagrees with the amount of Brandt fees and punitive 

damages and the manner in which the arbitrator calculated them. But the parties‘ 

stipulations did not specify that the substantive law of a particular jurisdiction should 

govern the resolution of Mave‘s claims or the available remedies. Thus, under JAMS 

rule 24(c), the arbitrator was ― ̳guided by the rules of law and equity‘‖ and had a broad 

grant of authority to impose ― ̳any remedy or relief that is just and equitable.‘‖ 

(Greenspan v. LADT, LLC, supra, 185 Cal.App.4th at p. 1448.) If Travelers had wanted a 

court to judicially review the arbitration award for errors of law, it should have included 

the appropriate language in the parties‘ stipulations. (See Cable Connection, Inc. v. 

DIRECTV, Inc., supra, 44 Cal.4th at pp. 1355, 1361.) It failed to do so. As a result, the 

arbitrator‘s award was ― ̳within the scope of the Parties‘ [stipulations]‘‖ because the 

parties agreed that JAMS rule 24(c) would govern any relief the arbitrator awarded, and 

the stipulations did not ―expressly restrict[] . . . the [arbitrator‘s] authority to fashion 

relief.‖ (Advanced Micro Devices, Inc. v. Intel Corp., supra, 9 Cal.4th at p. 383; see 

Greenspan v. LADT, LLC, supra, 185 Cal.App.4th at p. 1448.) Absent an express 

restriction, ―arbitrators . . . may act contrary to substantive law and base their decisions 

upon broad principles of justice and equity.‖ (Hoso Foods, Inc. v. Columbus Club, Inc., 

supra, 190 Cal.App.4th at p. 887, italics added.)
24

2. Award of Brandt Fees

The arbitrator stated he was awarding Brandt fees based on Travelers‘s 

reprehensible conduct and the language in Mave‘s retainer agreement, which authorized 

Mave‘s counsel to recover ―forty percent (40%) of the total gross recovery‖ (italics 

added), that is, 40 percent of compensatory damages and punitive damages. In calculating 

Brandt fees, the arbitrator reasoned: ―The efforts undertaken to address and obtain redress 

for [Travelers‘s] conduct justify strict application of the retainer. Specifically, an award of 

the 40% contingency fee on both the compensatory and exemplary damages is justified 

herein.‖ (Italics added.)

Travelers emphasizes that, because both parties calculated Brandt fees in their 

arbitration briefs based solely on compensatory damages, and the arbitrator awarded 

Brandt fees based on compensatory and punitive damages, the arbitrator exceeded his 

powers by providing a remedy ―expressly forbidden by the arbitration agreement or 

submission,‖ citing Advanced Micro Devices, Inc. v. Intel Corp., supra, 9 Cal.4th at 

pages 381–382. But the arbitrator did no such thing: The parties submitted the issue of 

Brandt fees to the arbitrator for determination, and nothing in the parties‘ stipulations to 

arbitrate or their arbitration briefs constituted an express agreement to limit the manner in 

which he could calculate Brandt fees. Under basic contract law, it is difficult to 

understand how the arbitration briefs of opposing parties could create an express 

agreement limiting the arbitrator‘s authority. Although the parties calculated Brandt fees 

using one formula and the arbitrator calculated them using another, it does not follow that 

the arbitrator exceeded his authority. If Travelers had wanted to restrict the manner in 

which the arbitrator calculated Brandt fees or damages, it should have ―set out such 

limitations explicitly and unambiguously in the [stipulations to arbitrate].‖ (Advanced 

Micro Devices, Inc. v. Intel Corp., supra, 9 Cal.4th at p. 383, italics added.)

As our Supreme Court held in an analogous case involving attorney fees, not 

Brandt fees: ―[T]he arbitrator had the power to decide the entire matter of recovery of 

attorney fees. The recovery or nonrecovery of [attorney] fees being one of the  ̳contested 

issues of law and fact submitted to the arbitrator for decision‘ . . . , the arbitrator‘s decision 
25

was final and could not be judicially reviewed for error.‖ (Moshonov v. Walsh (2000) 

22 Cal.4th 771, 776, citation omitted.) ―Although the parties, by agreement, can certainly 

exclude specific questions from arbitration, in the absence of such restriction an arbitrator 

has the power to decide the submitted matter on any legal or factual basis, whether or not 

any party has relied upon that particular basis.‖ (Id. at p. 777, italics added.) Here, the 

arbitrator could calculate Brandt fees regardless of the particular method used by the 

parties.

Travelers argues that the award of Brandt fees violated its rights under section 1021 

of the Code of Civil Procedure, which provides: ―Except as attorney‘s fees are 

specifically provided for by statute, the measure and mode of compensation of attorneys 

and counselors at law is left to the agreement, express or implied, of the parties . . . .‖ But 

Travelers concedes that under Brandt v. Superior Court, supra, 37 Cal.3d 813, an insured 

that prevails on a bad faith claim against its insurer is entitled to recover Brandt fees as a 

form of damages (see id. at pp. 817–819); Brandt fees ―must be distinguished from the 

recovery of attorney‘s fees qua attorney‘s fees . . . . What we consider here is attorney‘s 

fees that are recoverable as damages resulting from a tort . . . .‖ (Id. at p. 817, some italics 

added.) As noted, Travelers does not dispute that the arbitrator was authorized to award 

Brandt fees. It objects only to the amount and the manner of their calculation. Those are 

errors of law we cannot review. And Travelers‘s rights under section 1021, if any, do not 

trump Mave‘s right to Brandt fees, even if the arbitrator miscalculated them.

Travelers‘s reliance on Totem Marine Tug & Barge v. North Am. Towing (5th Cir. 

1979) 607 F.2d 649 (Totem Marine), is misplaced. There, two companies, Totem and 

North American entered into a six month time charter agreement on June 19, 1975. Under 

the charter, Totem would use a vessel owned by North American to tow a barge through 

the Panama Canal. On October 19, 1975, Totem terminated the charter allegedly because 

of excessive repairs and delays caused by the vessel. The parties submitted their dispute 

to arbitration. Although North American did not request damages for ―charter hire‖—the 

contract amount for use of the vessel between October 19 (the date of Totem‘s alleged 

breach) and December 19 (the end of the charter term)—the arbitration panel awarded 
26

them nonetheless. (Id. at p. 650.) The arbitrators issued an award in favor of North 

American, and the federal district court confirmed the award.

The Fifth Circuit Court of Appeals reversed, stating: ―The arbitration panel 

exceeded its powers by awarding damages for charter hire to North American. Not only 

did North American fail to list charter hire in its itemized statement of damages submitted 

to Totem, but in its brief submitted to the arbitration panel, North American conceded that 

charter hire was not an issue in the arbitration. Totem prepared and argued a case in 

which return expenses, and not charter hire, was the main issue. . . . In place of the 

$45,000 North American requested for return of the vessel, the arbitrators awarded charter 

hire totaling $117,440.00 . . . . [¶] . . . Although return expenses were specifically listed, 

damages for charter hire were not. By awarding charter hire, the arbitrators ignored the 

arbitral dispute submitted by the parties and dispensed their  ̳own brand of industrial 

justice.‘‖ (Totem Marine, supra, 607 F.2d at pp. 651–652, italics added.)

Unlike Totem Marine, in the present case, Travelers knew that Mave was seeking 

Brandt fees, and they both submitted arbitration briefs addressing that issue. Here, the 

arbitrator did not award ―an unrequested item of damages‖ or a type of relief that Mave 

had ―conceded . . . was not at issue in the arbitration.‖ (Totem Marine, supra, 607 F.2d at 

p. 651.)

In sum, ― ̳―arbitrators are not bound to award on principles of dry law, but may

decide on principles of equity and good conscience, and make their award . . . [according 

to what is just and good].‖‘‖ (Advanced Micro Devices, Inc. v. Intel Corp., supra, 

9 Cal.4th 362, 375.) We may not review the validity of the arbitrator‘s reasoning, the 

sufficiency of the evidence supporting the award, or any errors of fact or law that may be 

included in the award. (See Moncharsh v. Heily & Blase, supra, 3 Cal.4th at pp. 10–11; 

accord, Pour Le Bebe, Inc. v. Guess? Inc. (2003) 112 Cal.App.4th 810, 825.)

3. Award of Punitive Damages

Travelers contends that the arbitrator erred in awarding punitive damages based on 

the compensatory damages award ($161,939) and, instead, should have based punitive 
27

damages on the award of tort damages, namely, the Brandt fees as properly calculated. 

Travelers also takes issue with the ratio of punitive damages to compensatory damages.

We conclude the award of punitive damages cannot be reviewed for legal error for 

the same reasons as the award of Brandt fees. (See pts. II.C.1., II.C.2., ante.) In short, 

―An arbitrator does not exceed his or her powers by making a legal or factual error or by 

giving erroneous reasons for an award.‖ (Harris v. Sandro, supra, 96 Cal.App.4th at 

p. 1313.) The arbitrator used a 15-to-1 ratio of punitive damages to compensatory 

damages because he found that Travelers had engaged in ―aggravated,‖ ―malicious,‖ and 

―reprehensible‖ conduct.

In confirming the arbitration award, the superior court addressed the arbitrator‘s use 

of a 15-to-1 ratio, explaining: ―[Travelers] argues that there are grounds to vacate the 

award because the arbitrator [erred] when he awarded punitive damages at a 15 to 1 ratio 

because this exceeds a single-digit ratio. . . . [E]ven if this were an error in law, it is not 

grounds to vacate the arbitration award under California law because the Court may not 

set aside an arbitration award even if the arbitrator made an error of law. . . . Further, the 

15 to 1 ratio is not an error in law because the Courts eschew  ̳rigid numerical limits‘ to 

awards of punitive damages. [(See Simon v. San Paolo U.S. Holding Co., Inc. (2005) 

35 Cal.4th 1159, 1171–1172.)] The due process clause of the Fourteenth Amendment to 

the United States Constitution places limits on state courts’ awards of punitive damages. 

[(Id. at p. 1171, italics added.)] The imposition of  ̳grossly excessive or arbitrary‘ awards 

is constitutionally prohibited, for due process entitles a tortfeasor to fair notice not only of 

the conduct that will subject the tortfeasor to punishment, but also of the severity of the 

penalty that a State may impose. [(Ibid.)] In making this determination, the Courts 

eschew rigid numerical limits. [(Id. at pp. 1171–1172.)] Instead, Courts engage in a three 

factor weighing analysis that considers the nature and effects of the defendant‘s tortious 

conduct and the state’s treatment of comparable conduct in other contexts. This includes 

the following: [¶] (1) the degree of reprehensibility of the defendant‘s misconduct; 

(2) the disparity between the actual or potential harm suffered by the plaintiff and the 

punitive damages award; and (3) the difference between the punitive damages awarded by 
28

the jury and the civil penalties authorized or imposed in comparable cases. [(Simon v. San 

Paolo U.S. Holding Co., Inc., supra, 35 Cal.4th at p. 1172, italics added.)]‖

The superior court continued: ―With regards to the single-digit ratio, special 

justification is required to support an award of punitive damages when the ratio between 

the punitive damages award and the plaintiff‘s actual or potential compensatory damages 

is significantly greater than 9 or 10 to 1. [(Simon v. San Paolo U.S. Holding Co., Inc., 

supra, 35 Cal.4th at p. 1182.)] Accordingly, the arbitrator‘s decision to award punitive 

damages at a 15 to 1 ratio to the compensatory damages is not [an] . . . error in law unless 

it could not be supported by findings under the three factor weighing analysis described 

above. Since the Court may not review the merits of the controversy, the validity of the 

arbitrator‘s reasoning, or the sufficiency of the evidence in making its decision whether to 

vacate the award, this is not a basis to vacate the award.‖

Similarly, in issuing its tentative order on Travelers‘s petition to vacate, modify, or 

correct the arbitration award, the federal district court, applying the manifest disregard 

standard, addressed the validity of the 15-to-1 ratio and concluded it was not excessive: 

―Mave obtained in punitive damages an award that was fifteen times more than the 

$161,939 it recovered in compensatory damages. . . . The arbitrator found that 

[Travelers‘s]  ̳willful and reprehensible‘ conduct justified a  ̳significant multiplier.‘ . . . 

Travelers contends that the arbitrator utilized an  ̳unconstitutionally high ratio‘ with the 

intent of  ̳giv[ing] Mave a windfall of punitive damages, in manifest disregard of the limits 

the Due Process Clause places on such awards.‘ . . .

― ̳Exemplary damages must bear a ―reasonable relationship‖ to compensatory 

damages . . . .‘ BMW of [North America], Inc. v. Gore, 517 U.S. 559, 580 (1996). 

However,  ̳there are no rigid benchmarks that a punitive damages award may not surpass.‘ 

[State Farm Mut. Automobile Ins. Co. v.] Campbell, 538 U.S. [408, 425 (2003)].  ̳[T]he 

notion that the constitutional line is marked by a simple mathematical formula, even one 

that compares actual and potential damages to the punitive award,‘ has been routinely 

dismissed. Gore, 517 U.S. at 582. Therefore,  ̳ratios greater than those [the Supreme 

Court has] previously upheld may comport with due process where a particularly 
29

egregious act has resulted in only a small amount of economic damages.‘ Campbell, 

538 U.S. at 425. The propriety of a punitive damages award ultimately turn[s] on  ̳the 

facts and circumstances of the defendant‘s conduct and the harm to the plaintiff.‘ Id.

―In the context of this case, Travelers‘s conduct, and the harm it caused Mave, 

render the arbitrator‘s imposition of a 15-to-1 ratio appropriate. As the arbitrator noted, 

[Travelers‘s] delay in reimbursing Mave for its equipment loss  ̳place[d] an unreasonable 

burden on [Mave].‘ . . . Because Travelers eventually reimbursed Mave its equipment loss, 

the arbitrator properly found that Mave sustained no compensatory damage in this 

regard. . . . But Travelers‘s dilatory conduct, which  ̳appear[ed] targeted to Mave,‘ harmed 

Mave by depleting its financial resources and besmirching its reputation. . . . Such 

egregious conduct warrants the punishment and deterrence that a 15-to-1 ratio imposes.

―Travelers‘s dilatory conduct also extended to the inventory valuation process. 

Travelers hired Stoner[ & Co.] to appraise Mave‘s inventory losses following the fire. . . . 

The arbitrator found that: [¶]  ̳Stoner . . . took a hand count of each inventory item and 

priced the replacement cost value of the inventory loss. It was a very thorough assessment 

of the inventory. Stoner received available backup, and created a full inventory with 

verified pricing information, and on 12/5/06 sent a letter to [Jim] DeBaca[, Travelers‘s 

claims examiner,] confirming completion in October which contained Stoner‘s assessment 

of the actual cash value of the loss as $1,971,923.17. . . .‘

―DeBaca was satisfied with Stoner‘s report but later commissioned [Jim] Kinsel to 

revalue Mave‘s inventory loss. . . . Kinsel  ̳micro-analyzed simple issues . . . mis-analyzed 

the costs of labels,‘ and spend over twenty months redoing what Stoner had already 

done. . . . This protracted investigation caused Mave to  ̳los[e] goodwill with its suppliers 

because of late payments, and los[e its] placement positions in [Albertson‘s, K-Mart, 

Pavilions, Ralph‘s and Stater Brothers] because it could not keep up with product 

demands.‘ . . . Eventually, Mave had to  ̳sell off [a] part of [its] company to meet financial 

obligations, retain clients, and recover those who departed due to lack of service.‘ . . .

―However, Mave only received  ̳[t]he shortfall between the amount [Travelers] paid 

and the policy limit‘ in compensatory damages. . . . Considering that  ̳DeBaca acted in 
30

a[n] . . . unreasonable manner, against the interests of [Mave], at a time when he had 

reasonable information [from] his own agent, and was aware of the impact of the fire loss 

on [Mave‘s] continuing operations‘ . . . , a compensatory award of only the Policy limit is 

not substantial. When compensatory damages are low, a high punitive damages award is 

justifiable. See [Campbell, supra], 538 U.S. at 425. The Court concludes, therefore, that 

the 15-to-1 ratio of punitive-to-compensatory damages does not rise to the level of 

manifest disregard of the law in this instance.‖7

We agree with the analysis of both the superior court and the federal district court 

in concluding that the arbitrator‘s use of a 15-to-1 ratio in calculating punitive damages is 

not the type of legal error—if it was an error at all—that permits the vacatur of the 

arbitration award under the CAA.

Travelers asserts that the due process clause of the 14th Amendment of the United 

States Constitution limits an arbitrator‘s award of punitive damages. In Shahinian v. 

Cedars-Sinai Medical Center (2011) 194 Cal.App.4th 987 (Shahinian), our colleagues in 

Division Eight of this district rejected an attack on an arbitrator‘s award of punitive 

damages, saying: ―Here, the agreement gave the arbitrator broad authority to grant 

remedies available in court, and made no reference to punitive damages or to any 

limitation on the amount of such an award. If the punitive damages award was excessive, 

the arbitrator‘s error would be no different from other errors of law, which are generally 

not reviewable  ̳whether or not such error appears on the face of the award and causes 

substantial injustice to the parties.‘ . . . Moreover, where the arbitrator has made a legal 

error  ̳―in either determining the appropriate law or applying it,‖‘ the parties may obtain 

court review of the merits  ̳only if the arbitration agreement expressly provided that the 

 

7 By its own terms, the federal district court‘s tentative order was to become a final 

order on September 11, 2012—14 days after it was issued, provided there were no 

objections. Mave filed its motion for reconsideration in the federal district court on 

September 10, 2012—one day before the tentative order would have become final.
31

arbitrator‘s errors of law were reviewable in court.‘ . . .  ̳[T]o take themselves out of the 

general rule that the merits of the award are not subject to judicial review, the parties must 

clearly agree that legal errors are an excess of arbitral authority that is reviewable by the 

courts.‘ There was no such agreement here.‖ (Id. at pp. 1006–1007, citations omitted.)

Division Eight then addressed the defendant‘s contention that the award of punitive 

damages violated the due process clause of the United States Constitution, explaining: 

―[D]efendant [makes] the claim that the award violates public policy . . . because the 

punitive damages awarded allegedly exceed constitutional limits. And indeed the due 

process clause of the Fourteenth Amendment to the federal Constitution does impose 

substantive limits on a state’s imposition of punitive damages, preventing  ̳grossly 

excessive‘ awards. . . . But this is not a case where the state, through its judicial system, 

has imposed a  ̳grossly excessive‘ award of punitive damages that constitutes  ̳an arbitrary 

deprivation of property.‘ . . . This was a private arbitration that the parties voluntarily 

agreed would be  ̳final and binding.‘

―The point is clearly stated in Rifkind & Sterling, Inc. v. Rifkind (1994) 

28 Cal.App.4th 1282 (Rifkind). In Rifkind, the party against whom the arbitrator assessed 

punitive damages argued that the due process clause requires some measure of judicial 

review of the size of and basis for a punitive damage award . . . . The court rejected this 

notion, observing that the  ̳fundamental fallacy‘ in the argument was the premise that due 

process requires judicial review of private arbitral awards of punitive damages:  ̳That 

clause applies only to state action. . . . [¶] The arbitration in this case, however, was not 

state action. It was a private proceeding, arranged by contract, without legal 

compulsion. . . . Before its confirmation, the resulting award possessed the legal status of a 

private contract. . . . Consequently, the arbitration and award themselves were not 

governed or constrained by due process, including its elements applicable to judicial 

proceedings to impose punitive damages.‘‖ (Shahinian, supra, 194 Cal.App.4th at 

p. 1007, citations omitted.)

Shahinian also noted that the Court of Appeal in Rifkind ―rejected the notion that 

judicial review is constitutionally mandated when confirmation of the arbitration award is 
32

sought (a proceeding that does constitute state action). The court [in Rifkind] pointed out 

that California‘s statutory procedures provide the safeguards traditionally required, namely 

notice and a hearing, and in addition provide for judicial review  ̳―in circumstances 

involving serious problems with the award itself, or with the fairness of the arbitration 

process.‖ . . .‘ . . . The court further observed that only a limited degree of state action is 

involved in confirming an arbitration award:  ̳The state does not impose the award, or 

mark out its criteria. It only allows the contracting contestants to secure enforcement of 

their own bargain.‘‖ (Shahinian, supra, 194 Cal.App.4th at p. 1007, fn. 16, citation 

omitted.) ―Private arbitration . . . really is private; and since constitutional rights are in 

general rights against government officials and agencies rather than against private 

individuals and organizations, the fact that a private arbitrator denies the procedural 

safeguards that are encompassed by the term  ̳due process of law‘ cannot give rise to a 

constitutional complaint.‖ (Elmore v. Chicago & Illinois Midland Ry. (7th Cir. 1986) 

782 F.2d 94, 96; accord, Federal Deposit Ins. Corp. v. Air Florida Sys., Inc. (9th Cir. 

1987) 822 F.2d 833, 842, fn. 9 [―The arbitration involved here was private, not state, 

action; it was conducted pursuant to contract by a private arbitrator. . . . [W]e do not find 

in private arbitration proceedings the state action requisite for a constitutional due process 

claim.]; U.S. v. American Soc. of Composers, Authors & Pub. (S.D.N.Y. 1989) 

708 F.Supp. 95, 96–97 [court‘s approval of arbitration as a means of resolving parties‘ 

disputes is not state action].)

Nor does the confirmation of an arbitration award constitute state action. ―When 

arbitrators issue awards, they do so pursuant to the disputants‘ contract—in fact the award 

is a supplemental contract obligating the losing party to pay the winner. The fact that the 

courts enforce these contracts, just as they enforce other contracts, does not convert the 

contracts into state or federal action . . . .‖ (Smith v. American Arbitration Ass’n, Inc. (7th 

Cir. 2000) 233 F.3d 502, 507; accord, Davis v. Prudential Securities, Inc. (11th Cir. 1995) 

59 F.3d 1186, 1190–1193 [judicial confirmation of arbitration award granting punitive 

damages is not state action]; id. at p. 1191 [―we agree with the numerous courts that have 

held that the state action element of a due process claim is absent in private arbitration 
33

cases‖]; MedValUSA Health Programs, Inc. v. MemberWorks, Inc. (2005) 273 Conn. 634, 

640–652, 663 [872 A.2d 423, 428–435, 441] [judicial confirmation of arbitration award 

granting no compensatory damages and $5 million in punitive damages did not violate due 

process because confirmation of award is not state action]; Cremin v. Merrill Lynch Pierce 

Fenner & Smith, Inc. (N.D.Ill. 1997) 957 F.Supp. 1460, 1465–1470 [arbitration 

proceeding and confirmation of arbitration award do not constitute state action]; see also 

Smith v. American Arbitration Ass’n, Inc., supra, 233 F.3d at p. 507 [rejecting equal 

protection challenge to arbitration award because neither arbitration nor judicial 

confirmation of award involves federal or state action].)

Shahinian acknowledged that in Moncharsh v. Heily & Blase, supra, 3 Cal.4th 1, 

the Supreme Court ―expressly stated that there may be  ̳limited and exceptional 

circumstances justifying judicial review of an arbitrator‘s decision,‘ such as  ̳those in

which granting finality to an arbitrator‘s decision would be inconsistent with the 

protection of a party‘s statutory rights,‘ but that  ̳[w]ithout an explicit legislative 

expression of public policy, . . . courts should be reluctant to invalidate an arbitrator‘s 

award on this ground.‘ . . . [¶] [The] defendant [in Shahinian] maintain[ed] that  ̳[i]t 

cannot be true that arbitrators have unlimited power to award punitive damages,‘ and that 

 ̳[a]t some point, an award is so arbitrary and so oppressive that it is both irrational and 

contravenes public policy.‘‖ (Shahinian, supra, 194 Cal.App.4th at p. 1008, italics 

added.) In response, the Court of Appeal stated: ―We find nothing in the award here 

suggests this is such a case. The ratio of punitive to compensatory damages is just over 

1.22 to 1. In Roby v. McKesson Corp. (2009) 47 Cal.4th 686, the court held that a one-toone ratio was the federal constitutional limit, but that was  ̳base[d] . . . on the specific facts 

of [the Roby] case.‘ . . . In short, every case depends on its facts, and we are not at liberty 

to review the facts underlying an arbitration award absent  ̳limited and exceptional 

circumstances.‘‖ (Shahinian, at p. 1008, citations omitted.)

Nor does the present case involve ―limited and exceptional circumstances justifying 

judicial review of an arbitrator‘s decision.‖ (Moncharsh v. Heily & Blase, supra, 

3 Cal.4th at p. 32.) As previously discussed, the 15-to-1 ratio of punitive damages to 
34

compensatory damages does not constitute the type of legal error—assuming it was 

error—that warrants vacatur under the CAA. Further, because the parties did not 

designate the substantive law of a particular jurisdiction to govern the arbitration, the 

arbitrator was authorized by JAMS rule 24(c) to award relief that is ―just and equitable‖ 

and in accordance with ―the rules of law and equity.‖ In construing the comparable rule of 

the American Arbitration Association (AAA), which authorizes ―any remedy or relief that 

the Arbitrator deems just and equitable,‖ our Supreme Court stated: ―The AAA rule [is] 

. . .  ̳a broad grant of authority to fashion remedies‘ . . . and [gives] the arbitrator  ̳broad 

scope‘ in choice of relief.‖ (Advanced Micro Devices, Inc. v. Intel Corp., supra, 9 Cal.4th 

at pp. 383–384 [interpreting AAA rule 43(a)].) In this case, the award of punitive 

damages was not unjust or inequitable, nor was it beyond the arbitrator‘s broad authority 

to fashion remedies or the broad scope accorded him in choosing relief. And ―[n]othing in 

the [parties‘] arbitration [stipulations], . . . [the] rules adopted . . . , or the . . . reference [to 

arbitration] indicates an intent to place any special restrictions on the arbitrator‘s 

discretion to fashion remedies.‖ (Id. at p. 384.)

Finally, we deny Mave‘s motion to impose sanctions for a frivolous appeal. ―[A]n 

appeal should be held to be frivolous only when it is prosecuted for an improper motive—

to harass the respondent or delay the effect of an adverse judgment—or when it 

indisputably has no merit—when any reasonable attorney would agree that the appeal is 

totally and completely without merit.‖ (In re Marriage of Flaherty (1982) 31 Cal.3d 637, 

650.) Applying that standard, the appeal is not frivolous.

In sum, the procedural provisions of the CAA, not the FAA, govern our review of 

the arbitration award. Under the CAA, an arbitrator‘s errors of law, if any, are not 

reviewable unless the parties ―clearly agree that legal errors are an excess of arbitral 

authority that is reviewable by the courts.‖ (Cable Connection, Inc. v. DIRECTV, Inc., 

supra, 44 Cal.4th at p. 1361.) The parties in this case did not so agree.
35

III

DISPOSITION

The order granting plaintiff‘s motion to confirm the arbitration award and the 

judgment entered in plaintiff‘s favor are affirmed.

CERTIFIED FOR PUBLICATION.

MALLANO, P. J.

I concur:

CHANEY, J.
Rothschild, J., concurring in the judgment:

I agree that the superior court did not abuse its discretion by declining to issue a 

stay. I also agree that the judgment should be affirmed, but I write separately because my 

reasoning differs from the majority‘s.

Apart from the stay, the threshold issue is whether the proceedings in the superior 

court to confirm, vacate, or modify the award should have been governed by the 

California Arbitration Act (CAA) or the Federal Arbitration Act (FAA). Under Valencia 

v. Smyth (2010) 185 Cal.App.4th 153, 174, ―the procedural provisions of the CAA apply 

in California courts by default,‖ and ―the FAA‘s procedural provisions . . . do not apply 

unless the contract contains a choice-of-law clause expressly incorporating them.‖ 

(Italics omitted.)

The superior court was therefore correct to apply the CAA unless the parties 

expressly agreed that the FAA would govern. But the parties did expressly agree in 

writing to be bound by the JAMS Arbitration Rules and Procedures, including rule 25, 

which provides as follows: ―Proceedings to enforce, confirm, modify or vacate an Award 

will be controlled by and conducted in conformity with the Federal Arbitration Act, 

9 U.S.C. Sec 1 et seq. or applicable state law.‖ The rule thus calls for application of both 

federal and state law. Unfortunately, the rule does not say which law applies in which 

circumstances, and there is no federal or state case law (inside or outside California) 

interpreting it.

In my view, JAMS rule 25 should be interpreted to mean that proceedings to 

enforce, confirm, modify, or vacate an award are to be governed by whatever state or 

federal law would apply by default. That is, state procedural law will apply in state court, 

federal procedural law will apply in federal court, and insofar as the proceedings call for 

the application of substantive law, the governing law shall be selected according to 

whatever choice-of-law rules would otherwise be applicable (e.g., a California court will 

apply California choice-of-law rules).

Travelers‘ only argument against this interpretation is that, so interpreted, 

JAMS rule 25 is superfluous because it merely calls for application of the same legal 
2

rules that would apply if rule 25 itself did not exist. I agree that that is the effect of my 

interpretation, but I do not believe that it renders my interpretation implausible, 

particularly in the absence of a more plausible alternative. JAMS rule 25 reflects that, 

for purposes of proceedings to enforce, confirm, modify, or vacate an award, JAMS 

(and any parties who agree to the JAMS rules) intended to leave the law as it is. The rule 

provides an answer to the question of which law to apply in such proceedings, and the 

answer is: the same law that would apply by default.

Travelers argues, to the contrary, that JAMS rule 25 means that the FAA should 

apply if the dispute arises from a transaction in interstate commerce, and state law should 

apply otherwise. The concept of interstate commerce, however, is exceptionally broad 

and malleable. (See, e.g., Wickard v. Filburn (1942) 317 U.S. 111, 118-129.) It would 

be anomalous for a JAMS rule to compel state courts throughout the country, in a large 

number (and perhaps an overwhelming majority) of arbitration cases, to adhere to 

procedures that were foreign to those courts. And if JAMS had intended to effect such a 

sweeping imposition of federal procedural law on state courts, it is unlikely that JAMS 

would have used a rule as opaque and ambiguous as rule 25 to accomplish that purpose.

1

I conclude that the most plausible interpretation of JAMS rule 25 is that it calls for 

the application of state procedural law in state courts and federal procedural law in 

federal courts. The trial court therefore was correct in choosing to apply the CAA.

The only remaining issue is whether the arbitrator exceeded his powers. In 

calculating the amount of attorney fees to award as damages on the bad faith claim under 

Brandt v. Superior Court (1985) 37 Cal.3d 813 (Brandt), the arbitrator used a percentage 

of the sum of the breach of contract damages and the bad faith punitive damages, rather 

 

1

Regardless of whether I am right about the proper interpretation of JAMS rule 25, 

JAMS might wish to consider revising the rule so as to clarify when the FAA or, 

alternatively, state law should govern proceedings to enforce, confirm, modify, or vacate 

an award.
3

than a percentage of the contract damages alone. The arbitrator‘s approach appears to be

legally erroneous (Cassim v. Allstate Ins. Co. (2004) 33 Cal.4th 780, 807-812), and no 

party advocated it. To the contrary, both parties‘ submissions to the arbitrator calculated 

the fees as a percentage of the contract damages alone.

Arbitrators‘ awards are not reviewable for mere legal error, but Travelers argues 

that the arbitrator exceeded his powers, within the meaning of Code of Civil Procedure 

section 1286.2, subdivision (a)(4), and section 1286.6, subdivision (b), by calculating the 

fee award in a manner different from the method proposed by both parties. I disagree. 

It is undisputed that, pursuant to the parties‘ agreement, the arbitrator had the power to 

award Brandt fees. The parties did not restrict that power by jointly adopting a particular 

calculation method in their submissions. If, for example, the submissions of both parties 

had advocated a calculation method that was legally (or even mathematically) incorrect, 

their submissions would not have deprived the arbitrator of the power to issue a legally 

(and mathematically) correct award.

In arguing to the contrary, Travelers relies upon Totem Marine Tug & Barge v. 

North Am. Towing (5th Cir. 1979) 607 F.2d 649 (Totem Marine), which the Supreme 

Court cited with approval in Advanced Micro Devices, Inc. v. Intel Corp. (1994) 

9 Cal.4th 362, 382. In Totem Marine, the arbitrators awarded ―damages for charter hire‖ 

(i.e., the lost rental value of a boat) even though the claimant expressly conceded in its 

written submissions ―that charter hire was not an issue in the arbitration.‖ (Totem 

Marine, supra, 607 F.2d at p. 651.)

Totem Marine is distinguishable because it is undisputed that Brandt fees were an 

issue in the arbitration in this case. In Totem Marine, the claimant did not merely 

concede that a particular method of calculating the amount of damages for charter hire 

was correct; rather, the claimant expressly conceded ―that charter hire was not an issue in 

the arbitration‖ at all. (Totem Marine, supra, 607 F.2d at p. 651.) Here, because Brandt

fees were undeniably an issue in the arbitration, the arbitrator had the power to award 

them and thus had the power to calculate the amount to be awarded, even if his method of 
4

calculation differed from the method advocated by both parties. And the legal 

correctness of the arbitrator‘s chosen method of calculation is not judicially reviewable.

For all of the foregoing reasons, I agree that the judgment of the superior court 

should be affirmed, and I therefore concur in the judgment.

ROTHSCHILD, J.