Court Opinion

ID: 6323008
Source: CourtListenerOpinion
Date Created: 2022-03-14 19:02:05.067732+00
Date Added: 2024-06-11T09:21:20.129810
License: Public Domain

Filed 3/14/22 Med Tech/Med Care v. Hemosure CA2/7
   NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                        SECOND APPELLATE DISTRICT

                                     DIVISION SEVEN

MED TECH/MED CARE, LLC,                                    B301519

         Plaintiff and Respondent,                         (Los Angeles County
                                                           Super. Ct.
         v.                                                No. 19PSCP00279)

HEMOSURE, INC.,

         Defendant and Appellant.

       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 Defendant and Appellant.
       Schneiders & Associates and Kathleen Smith; Schoenberg
Finkel Beederman Bell Glazer and Richard M. Goldwasser for
Plaintiff and Respondent.

                             ___________________________
      Hemosure, Inc. appeals from a judgment confirming an
arbitration award in favor of Med Tech/Med Care, LLC (Med
Tech). Hemosure contends the arbitrator exceeded the scope of
his powers when he failed to issue a “reasoned award” as
requested by the parties under the American Arbitration
Association’s (AAA) Commercial Arbitration Rules. 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 service 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 all
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, “Any 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
      In January 2018 Med Tech filed an arbitration demand
asserting claims for breach of contract, violation of the California
Independent Wholesale Sales Representatives Contractual
Relations Act of 1990 (Civ. Code, § 1738.10 et seq.; the Act),

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unjust enrichment, and quantum meruit based on Hemosure’s
failure to pay commissions to Med Tech for January and
February 2017. The arbitrator was appointed on February 8,
2018. In a March 23, 2018 scheduling order following a
preliminary hearing, 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 arbitration hearing was held on December 7, 2018 and
February 25, 2019. Hemosure argued Med Tech was not entitled
to commissions because it materially breached the contract by
failing to promote 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.” (See Civ. Code, § 1738.12, subd. (e).) Thus, 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
arbitration 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 Hemosure has refused to pay, plus attorney’s
fees and costs, and prejudgment interest of 10%. Claimant has
proved its case in a very persuasive manner. Respondent’s novel
defense that it can withhold [Med Tech’s] commissions because it

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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. [¶] 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 counsel. The Arbitrator further finds that Claimant
is entitled to 10% annual prejudgment interest on the
outstanding commissions pursuant to Cal. Civ. Code [s]ection
3289(b). [¶] Finally, the Arbitrator finds that the attorney’s fees
and costs sought by Claimant’s counsel, in the amount of
$85,606.09, are reasonable.” The arbitrator awarded Med Tech a
total of approximately $293,000, comprised of treble damages,
prejudgment interest, and attorneys’ fees and costs.

D.    Confirmation 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 award.1 Hemosure
argued the arbitrator exceeded his authority because he did not
issue a reasoned award.
      At the August 2, 2019 hearing, Hemosure’s attorney
confirmed 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.”

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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 to the
applicability of the Act, the court 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
appellate 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 or 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, 380; 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 vacating an arbitration award
are provided in Code of Civil Procedure section 1286.2.” (Soni v.
SimpleLayers, Inc. (2019) 42 Cal.App.5th 1071, 1085; see

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Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 28 [“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”].) As 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.) Whether 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 Reasoned Award
      Med Tech contends Hemosure was not entitled to a
reasoned award under the AAA Commercial Arbitration Rules,
R-46(b) (Rule R-46(b)) because Hemosure failed to request a
reasoned award prior to the appointment of the arbitrator, and
thus, its request was not timely. This contention lacks merit.
      As Med Tech points out, Rule R-46(b) provides, “The
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.

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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 agreement 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 arbitrator.” 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 this modification of the
procedural rules, the parties’ request was timely. (See Cat
Charter, LLC v. Schurtenberger (11th Cir. 2011) 646 F.3d 836,
840, fn. 6 (Cat Charter) [arbitrators’ scheduling order stating
“‘[t]he form of the award also will be determined by agreement of
the parties’” was “sufficient ‘consent’ within the meaning of
Arbitration Rule R-1(a)” to allow the parties to “validly alter[] the
procedures to require a reasoned award when they subsequently
communicated with the [arbitrators]”]; see also Leeward Constr.
Co. v. Am. Univ. of Antigua-College of Med. (2d Cir. 2016) 826
F.3d 634, 638 (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 was obligated to issue a
reasoned award based on the parties’ timely request.

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C.     The Arbitrator Did Not Exceed His Powers
       The AAA Commercial Arbitration Rules 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. Foundation 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; accord,
Pearson Dental Supplies, Inc. v. Superior Court (2010) 48 Cal.4th
665, 679.) Armendariz does not assist Hemosure because the
Supreme Court limited its holding to statutory FEHA claims and
did not address the required findings for an award in an
arbitration of a contract dispute between two companies.
       Because no California court has defined a reasoned award
under the AAA Commercial Arbitration Rules, we look to federal
and other state courts for guidance. The Eleventh Circuit Court
of Appeals in Cat Charter, supra, 646 F.3d at page 844 observed
as to a reasoned award under the AAA, “Generally, 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.” (Quoting United
Steelworkers of America v. Enterprise Wheel & Car Corp. (1996)
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     California Fair Employment and Housing Act (Gov. Code,
§ 12900 et seq.).

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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 marked 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 Internat.
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 their payment of $2 million for a
yacht that was never delivered, prevailing 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, “The
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. § 10),
which provides for vacatur where “the arbitrators exceeded their
powers.” (Cat Charter, supra, 646 F.3d at p. 842; 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.”

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against [Defendant] 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
wanted a more detailed explanation, they should have requested
the Panel provide findings of fact and conclusions of law. (Id. at
p. 845.)
       The Second Circuit Court of Appeals in Leeward
Construction, supra, 826 F.3d at page 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
reasoning 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 award
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 the
“‘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 facts, as well as
the key factual findings supporting its conclusions.” (Id. 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 agreement

                                10
was reasoned award because “the arbitrator laid out the facts,
described the contentions of the parties, and decided which of the
two proposals should prevail”].)
       We agree 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 launched 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 commissions 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 explained 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 under

                                11
the Act, citing Dr. Wan’s statement, “I’m not going to fucking pay
those guys.” The 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 awarding 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 thoroughly 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 Med 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 Mountain 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 award

                                12
that articulated and then rejected a party’s proposal for a price
formula but did not provide a further explanation, was a
reasoned award. The 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. There, the Texas Court of Appeals applied the
standard for a reasoned award under Cat Charter and Rain and
concluded the arbitration award was not a reasoned award
because 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 termination 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
Stores, 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.

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                         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 Constitution.

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