Court Opinion

ID: 6352535
Source: CourtListenerOpinion
Date Created: 2022-06-22 17:03:00.166889+00
Date Added: 2024-06-11T12:48:52.031623
License: Public Domain

Filed 6/22/22 Roudi v. Paydar CA4/1

                 NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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or ordered published for purposes of rule 8.1115.

                COURT OF APPEAL, FOURTH APPELLATE DISTRICT

                                                 DIVISION ONE

                                         STATE OF CALIFORNIA

 ALEX ROUDI et al.,                                                   D078558

      Plaintiffs, Cross-defendants and
 Appellants,
                                                                      (Super. Ct. No.
           v.                                                          37-2019-00070138-CU-PA-CTL)

 REZA PAYDAR,

      Defendant, Cross-complainant
 and Respondent.

         APPEAL from an order of the Superior Court of San Diego County,
Gregory W. Pollack, Judge. Reversed and remanded with directions.
         Cooley, Steven M. Strauss and Erin Carey Trenda for Plaintiffs, Cross-
defendants and Appellants Alex Roudi and Interwest Capital Corporation.
         Koning Zollar, Blake M. Zollar and Neal R. Gibeault for Plaintiff,
Cross-defendant and Appellant Interwest Capital Corporation.
         Williams Iagmin and Jon R. Williams; English & Gloven, Donald A.
English and Christy I. Yee for Defendant, Cross-complainant and
Respondent.
      Plaintiffs, cross-defendants and appellants Alex Roudi and Interwest
Capital Corporation (Interwest) appeal from an order vacating an arbitration
award in their favor and striking their petition to confirm that award. The
arbitration award stemmed from two matters commenced by defendant,
cross-complainant and respondent Reza Paydar: a document inspection and
accounting dispute against Interwest and a shareholder derivative matter
against both Roudi and Interwest. In granting Paydar’s motion to vacate the
award, the superior court ruled that plaintiffs’ counsel, Cooley LLP (Cooley),

violated California Rules of Professional Conduct, rule 1.7(d)(3),1 prohibiting
lawyers from simultaneously representing two clients if one asserts a claim
against the other in the same proceeding, which created an unwaivable
conflict of interest. Specifically, the court found impermissible dual
representation in Cooley’s representation of Interwest in the
inspection/accounting matter including a cross-claim by Interwest against
Paydar, while Cooley also defended Roudi in the derivative action and
represented Roudi in Roudi’s cross-claim against Paydar.
      Plaintiffs contend the superior court lacked authority to review the
merits of the arbitrator’s decision, which included denying Paydar’s motions
to disqualify Cooley for Cooley’s asserted violation of the same Rule of
Professional Conduct barring dual representation of opposing clients in the
same proceeding. They further contend that even if such review of the
arbitrator’s award was authorized, the court erred on the merits because
there was not an unwaivable conflict of interest, and Cooley had both clients’
informed written consent to representation. We agree the court lacked
authority to review the award; that none of the statutory exceptions to

1     Rule references are to the Rules of Professional Conduct.

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limited judicial review raised by Paydar (Code Civ. Proc.,2 § 1286.2) apply.
Accordingly, we reverse the order. On remand the superior court shall grant
plaintiffs’ petition to confirm the arbitrator’s award and deny Paydar’s
motions to strike plaintiffs’ petition and to vacate the award.
              FACTUAL AND PROCEDURAL BACKGROUND
Prearbitration Disputes
      Roudi, Paydar and David Guss are shareholders of Interwest, which
Roudi created in 2003 to make real estate investments. Roudi is a majority
shareholder and Paydar and Guss are minority shareholders. The parties’

shareholder agreement contains an arbitration clause.3 Interwest
researched properties for new deals and managed the properties before they
were sold. Disputes arose between Roudi and Paydar; when Roudi reminded
Paydar that Paydar did not need to invest in deals he did not like, Paydar
responded by threatening to “destroy” Roudi. Paydar eventually decided he
no longer wished to participate in future real estate investment deals, so
Roudi unsuccessfully tried to negotiate a buyout of Paydar’s interest in the

2     Undesignated statutory references are to the Code of Civil Procedure.

3      The arbitration clause is included in a “Governing Law” provision, and
provides in part: “This Agreement and all acts and transactions pursuant
hereto and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflict of law. Any and all
disputes, claims or controversies arising out of or relating to this Agreement
that are not resolved by their mutual agreement shall be submitted to final
and binding arbitration in San Diego County, California before JAMS, or its
successor, pursuant to the United States Arbitration Act, 9 U.S.C. Sec. 1 et
seq. . . . The provisions of this paragraph may be enforced by any court of
competent jurisdiction, and the party seeking enforcement shall be entitled to
an award of all costs, fees and expenses, including reasonable attorneys fees,
to be paid by the party against whom enforcement is ordered.”
                                       3
research/management side of Interwest. The shareholders then voted to
transition Interwest’s day-to-day operations to a new entity, Interwest
Capital Group; that transition occurred in 2017.
      In 2016, Paydar, first as a shareholder then as a director, made
inspection demands on Interwest for, among other things, financial records
and tax returns going back to its inception. He received thousands of pages
of documents, including corporate records such as organizational documents,
Interwest board and shareholder meeting minutes, stock purchase
agreements and copies of the operating agreements for the assets at both
management and ownership level, as well as detailed financial information
such as profit and loss statements, balance sheets, general ledgers, cash flow
statements, and check registers.
First Arbitration
      In late 2016, Paydar served an arbitration demand on Interwest,
Paydar v. Interwest Capital Corporation, JAMS Case No. 1240022667.
Paydar claimed he was owed money and sought an accounting and damages
from Interwest. Cooley represented Interwest in responding to the
arbitration demand, and claimed in part that Paydar failed to provide
adequate notice of the basis for his claims. Interwest pointed out that Paydar
had received a large volume of Interwest’s business records, and asserted his
requests for documents had gone beyond the limited right of inspection under
the Corporations Code.
      In March 2017, Paydar initiated a superior court action against
Interwest seeking appointment of a limited purpose receiver. The superior
court judge stayed the action pending completion of the arbitration. Paydar
then filed in the arbitration another request for an inspection, and later, a
revised demand seeking to inspect Interwest’s books and records. Paydar

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alleged he was excluded from Interwest’s decisionmaking and was not given
the opportunity to invest in potential acquisitions. He further alleged
Interwest’s travel and entertainment expenses had “ballooned from
approximately $105,000[ ] in 2013 to approximately $180,000[ ] in 2014.” He
alleged Interwest’s payroll tax expenses had a roughly six-fold increase
without substantiation for the change. Interwest responded in part by
asserting “counter-claims” against Paydar for breach of the shareholders
agreement and breach of fiduciary duty.
      In 2018, the arbitrator ordered another inspection based on Paydar’s
rights as a director, to be conducted under a protocol developed by the
parties’ experts. The arbitrator found Paydar’s accounting claim was
inextricably bound with his inspection claims. A few months later, the
arbitrator ordered the inspection completed after hearing from Paydar’s
expert as well as the parties about its status.
Second Arbitration
      In October 2018, Paydar filed another demand for arbitration, JAMS
No. 1240023404, against Roudi and Interwest as the real party in interest in
a shareholder derivative action. Paydar asserted direct claims against Roudi
and derivative claims on behalf of Interwest. In part, he alleged Interwest
Capital Group had traded on and profited from Interwest’s name, reputation
and employees; Roudi had unilaterally and fraudulently diverted
management, income and skilled employees from Interwest to Interwest
Capital Group; Roudi refused to allow Paydar to inspect material Interwest
records despite his status as a director; and Roudi had used Interwest as his
“personal piggy bank,” directing or approving travel, meal and entertainment
expenses not for Interwest’s benefit. Paydar alleged Interwest paid Roudi

                                        5
millions of dollars in capital finder fees without evidence that Roudi had
brought in outside investors as required by operating agreements.
      Given the derivative claims, Interwest retained new counsel to
represent it in its derivative capacity, and Cooley advised the arbitrator it
would continue to represent Roudi. Cooley obtained Interwest’s written
consent; Guss signed the consent form on Interwest’s behalf.
      Paydar then moved to disqualify Cooley, pointing out Cooley was
representing Interwest in the first arbitration at the same time it was
representing Roudi in the derivative matter, which matters were in a sense
“both concurrent and successive . . . .” Paydar argued rule 1.7 prohibited such
conflicts and made disqualification mandatory notwithstanding consent or
waiver; the allegations of the derivative matter, particularly the allegations
of fraudulent activity on Roudi’s behalf, established the conflict and made it
unwaivable. The arbitrator denied the motion, ruling “Cooley . . . has
handled the representation of [Interwest and Roudi] ‘in an appropriate way’
that is consistent with the California Rules of Professional Conduct and
relevant case law authority.”
Arbitrator’s Rulings on the Merits
      Following a four-day evidentiary hearing, the arbitrator issued an
“interim award and order of consolidation” ruling in favor of Roudi and
Interwest on all of Paydar’s claims and causes of action. He pointed out the
inspection matter was combined with the derivative matter along with
Interwest’s counterclaims in the inspection matter for breach of fiduciary
duty and breach of the shareholder’s agreement, and that Roudi also had a
counterclaim for breach of the shareholder’s agreement in the derivative
matter. The arbitrator stated that throughout the inspection process, Paydar
relied heavily on his absolute inspection rights as a director but used those

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rights to obtain evidence to be used for his own interests, not Interwest’s.
The interim award states in part: “It is clear to the Arbitrator that [Paydar]
from the beginning was out to make [Roudi] pay for his perceived arrogance.
[Paydar] while testifying stated that he believed that he was the most
talented negotiator of the shareholders and it was obvious that he felt
slighted by [Roudi] because he didn’t recognize this. He resented the [capital
finders] promotes created to recognize the efforts of primarily [Roudi]. [¶]
This arbitration and all of the actions taken before filing it were done to keep
[Paydar’s] threat made to [Roudi] in June 2013, ‘I am going to destroy you.’ ”
The arbitrator ruled that Roudi and Interwest could make an appropriate
motion for fees and costs.
      Following issuance of the interim award, Paydar filed motions to
reconsider and/or renew his motion to disqualify Cooley, reopen the hearing
to set aside the award, and moot the arbitral proceeding in light of Cooley’s
asserted conflict of interest. The arbitrator then issued an amended final
award, in part denying Paydar’s motions as “completely without merit.” The
final award states that “[t]he arbitrator made no award for fees and costs in
the inspection matter. It was combined with this new case along with the
counterclaims of [Interwest] in the first action for breach of fiduciary duty
and breach of the shareholder’s agreement.” The arbitrator made factual and

                                       7
legal findings in Roudi and Interwest’s favor.4 He “rule[d] against Paydar on
all claims and causes of action against [Roudi and Interwest]”; ordered that
Paydar “shall take nothing pursuant to this action and the prior inspection
action”; and “rule[d] in favor of [Roudi and Interwest] on their cross
complaints,” ordering Paydar to pay $1,975,276.57 in damages ($927,221.57
to Interwest, and $1,048,055 to Roudi).
Postarbitration Proceedings
      Roudi and Interwest jointly petitioned to confirm and enter judgment
on the arbitrator’s award, arguing there were no grounds to vacate or correct
it. They argued they met all of the statutory requirements for the court to
“ ‘confirm the award as made’ ” and enter judgment in conformity with it.
More specifically, Roudi and Interwest argued (1) they were parties to the
arbitration in which the award was made; (2) they served and filed the
petition in a timely manner; (3) they named all parties to the arbitration
proceeding as respondents to the petition; (4) the petition met the

4      Specifically, the arbitrator found Paydar (1) lacked standing to file a
derivative action because he failed to satisfy Corporations Code demand
requirements; (2) failed to establish claims for breach of fiduciary duty and
unjust enrichment; (3) did not establish breach of fiduciary duty, fraud by
suppression/concealment, breach of the implied covenant of good faith and
fair dealing, or unjust enrichment for purposes of his direct claims; (4) was
bound by the written agreements that he signed; (5) was offered fair market
value for his interest in the Interwest platform and when he turned it down it
was proper for the majority of the shareholders to voluntarily wind up and
begin Interwest’s dissolution; (6) breached his fiduciary duty to Interwest in
that he used his status as a director for his own personal benefit and to
Interwest’s detriment and engaged in actions that were disruptive and
strained the company’s limited resources; and (7) breached the shareholder
agreement by failing to arbitrate in good faith against either Interwest or
Roudi. The arbitrator found as to any other claims or issues “against the
party having the burden of proof and in favor of the opposing party.” (Some
capitalization omitted.)
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requirements of section 1285.4; (5) the court was the proper venue for the
petition; and (6) there were no grounds to vacate, correct, or otherwise modify
the award.
      Paydar moved to strike the joint petition or assertedly “irrelevant,
false, or improper” portions of it pertaining to plaintiffs’ request to confirm a
“consolidated” award in both the derivative and accounting/inspection
matters. In part, Paydar argued that the joint petition “requests relief that is
not authorized by law and is contrary to the Rules of Professional Conduct.”
He argued the joint petition should be stricken as a “sham pleading” under
section 436. He argued the court would violate his fundamental due process
rights by entering judgment in both the inspection/accounting matter and the
derivative matter based on an award issued only in the derivative action.
      Paydar also petitioned to vacate the award on grounds the arbitrator
exceeded his power by issuing an award that violated public policies (1)
prohibiting a lawyer’s representation of clients with directly adverse
interests; (2) protecting Paydar’s statutory rights to inspect Interwest’s books
and records; (3) protecting Paydar’s right to pursue his claims in arbitration;
and (4) prohibiting the illegal receipt of fees for transactions that require a
broker’s license. He argued the arbitrator exceeded his powers by awarding

attorney fees not authorized by the parties’ written agreement.5 With
respect to his claim of improper dual representation, Paydar argued in part
under Sheppard, Mullin, Richter & Hampton, LLP v. J-M Manufacturing

5      Paydar also argued the superior court could not consider the joint
petition to confirm because it improperly sought to confirm an award issued
solely in the derivative matter as a consolidated award in two separate
arbitration matters. Paydar does not renew that contention in his
respondent’s brief but rather asserts that the court’s consolidation of the
arbitration matters was a “procedural anomaly” that exacerbated Cooley’s
actual conflict of interest.
                                        9
Company, Inc. (2018) 6 Cal.5th 59 (Sheppard, Mullin), that an arbitration
award based on a violation of the Rules of Professional Conduct is contrary to
public policy and mandates the derivative award be vacated as a matter of
law under section 1286.2, subdivision (a)(4). He maintained Cooley’s
violation of ethical duties prejudiced his right to a fair hearing, and also
Interwest’s right to its counsel’s undivided loyalty.
      The superior court determined that Cooley violated rule 1.7(d)(3) by
engaging in improper dual representation of Interwest in the
inspection/accounting matter and Roudi in the derivative matter. According
to the court, its determination required the arbitration award be vacated
under section 1286.2, subdivision (a)(4), on grounds “ ‘[t]he arbitrator[ ]
exceeded [his] powers and the award cannot be corrected without affecting
the merits of the decision upon the controversy submitted.’ ” It acknowledged
that most legal errors in arbitration are not reviewable, but ruled the
arbitrator’s decision was not protected by that general rule: “ ‘A party
seeking confirmation cannot be permitted to rely upon the arbitrator’s
conclusion of legality for the reason that paramount considerations of public
policy require that this vital issue be committed to the court’s determination
whenever judicial aid is sought.’ [(Sheppard, Mullin, supra, 6 Cal.5th at
p. 75.)] ‘An Arbitrator exceeds his powers when he . . . issues an award that
violates a well-defined public policy . . . issues an award that violates a
statutory right . . .’ or ‘when he acts in a manner not authorized by the
contract or law.’ [Citation.] Whether a particular law firm may or may not
represent a party in a hotly contested, [four]-day arbitration goes to the very
heart of the proceeding. Cooley’s violation of [rule] 1.7(d)(3) resulted in an
arbitration proceeding that violated public policy and should not have been

                                        10
allowed to proceed given Cooley’s dual representation of Interwest in the
inspection/accounting case and Roudi in the derivative case.”
      Plaintiffs filed this appeal.
                                  DISCUSSION
                  I. Legal Principles and Standard of Review
      “When parties contract to resolve their disputes by private arbitration,
their agreement ordinarily contemplates that the arbitrator will have the
power to decide any question of contract interpretation, historical fact or
general law necessary, in the arbitrator's understanding of the case, to reach
a decision. [Citations.] Inherent in that power is the possibility the
arbitrator may err in deciding some aspect of the case. Arbitrators do not
ordinarily exceed their contractually created powers simply by reaching an
erroneous conclusion on a contested issue of law or fact, and arbitral awards
may not ordinarily be vacated because of such error, for ‘ “[t]he arbitrator’s
resolution of these issues is what the parties bargained for in the arbitration
agreement.” ’ ” (Gueyffier v. Ann Summers, Ltd. (2008) 43 Cal.4th 1179,
1184.) “[C]ourts will not review the validity of the arbitrator’s reasoning.”
(Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 10 (Moncharsh).) This is so
“even when . . . errors [of fact or law] appear on the face of the award or cause
substantial injustice to the parties.” (Richey v. AutoNation, Inc. (2015) 60
Cal.4th 909, 916; see also Moshonov v. Walsh (2000) 22 Cal.4th 771, 775
[it is settled that arbitrators do not exceed their powers “merely by rendering
an erroneous decision on a legal or factual issue, so long as the issue was
within the scope of the controversy submitted to the arbitrators”].) “ ‘[B]y
voluntarily submitting to arbitration, the parties have agreed to bear the risk
[of uncorrectable legal or factual error] in return for a quick, inexpensive, and
conclusive resolution to their dispute.’ ” (Heimlich v. Shivji (2019) 7 Cal.5th

                                       11
350, 367; Richey, at p. 916.) Thus, “[m]ost legal errors in arbitration are not
reviewable.” (Heimlich, at p. 367.)
      Both the California Arbitration Act and the Federal Arbitration Act
contain limited and “exclusive” grounds for review of an arbitration award.
(Richey v. AutoNation, Inc., supra, 60 Cal.4th at p. 916, citing § 1286.2, subd.
(a), 9 U.S.C. § 10(a); Soni v. SimpleLayers, Inc. (2019) 42 Cal.App.5th 1071,
1085-1086, citing Moncharsh, supra, 3 Cal.4th at pp. 27-28.) One of the
statutory exceptions allowing judicial review requires that the court vacate
an arbitration award if “[t]he arbitrators exceeded their powers and the
award cannot be corrected without affecting the merits of the decision upon

the controversy submitted.” (§ 1286.2, subd. (a)(4).)6 But these statutory

6      Paydar’s petition to vacate also raised section 1286.2, subdivision (a)(5),
which requires a court to vacate an award when “[t]he rights of [a] party were
substantially prejudiced . . . by the refusal of the arbitrators to hear evidence
material to the controversy or by other conduct of the arbitrators contrary to
the provisions of this title.” (§ 1286.2, subd. (a)(5).) On appeal Paydar
touches on that section and claims without meaningful argument it presents
a separate ground to affirm the court’s order. Subdivision (a)(5) of section
1286.2 is a “ ‘safety valve in private arbitration that permits a court to
intercede when an arbitrator has prevented a party from fairly presenting its
case’ ” and “comes into play, for example, when an arbitrator, without
justification, permits only one side to present evidence on a disputed material
issue.” (Heimlich v. Shivji, supra, 7 Cal.5th at p. 368.) It can be invoked
when an arbitration panel permits one party to speak “unsworn and at
length” but “denie[s] the [other party] the opportunity to cross examine . . . or
to speak herself” out of concerns that the arbitration will take too long. (Id.
at pp. 368-369.) Though he complains about Cooley’s misconduct in

                                       12
“exceptions to the limits on review of awards protect against error that is so
egregious as to constitute misconduct or so profound as to render the process
unfair. The Legislature has authorized ‘judicial review in circumstances
involving serious problems with the award itself, or with the fairness of the
arbitration process.’ [Citation.] ‘ “The statutory provisions for [review of an
arbitration award] are manifestly for the sole purpose of preventing the
misuse of the proceeding, where corruption, fraud, misconduct, gross error, or
mistake has been carried into the award to the substantial prejudice of a
party to the proceeding.” ’ ” (Heimlich v. Shivji, supra, 7 Cal.5th at p. 368,
fn. omitted.) If not properly limited, the exceptions “ ‘could swallow the rule
that arbitration awards are generally not reviewable on the merits.’ The
[exceptions are] not ‘a back door to Moncharsh through which parties may
routinely test the validity of legal theories of arbitrators.’ ” (Ibid.)
      In determining whether an arbitrator exceeded his powers, we review
the superior court’s decision de novo. (Advanced Micro Devices, Inc. v. Intel
Corp. (1994) 9 Cal.4th 362, 376, fn. 9 (Advanced Micro Devices); Kelly
Sutherlin McLeod Architecture, Inc. v. Schneickert (2011) 194 Cal.App.4th
519, 528.) “[E]valuating a challenge to an arbitration award is a two-step
process—first the court must determine whether the award is reviewable,
and only if review is appropriate does the court consider whether the award

representing Roudi and Interwest including by withholding unspecified
documents, Paydar makes no such claims about the arbitrator’s conduct of
the proceeding. This subdivision is not a basis to affirm the superior court’s
order. Other statutory grounds are corruption, fraud or other undue means
in procuring the award (§ 1286.2, subd. (a)(1)); corruption by the arbitrators
(§ 1286.2, subd. (a)(2)); arbitrator misconduct (§ 1286.2, subd. (a)(3)); and the
arbitrator’s failure to disclose a ground for disqualification or to disqualify
when required to do so (§ 1286.2, subd. (a)(6)). (See Heimlich v. Shivji, at p.
368, fn. 10.)
                                         13
should be upheld.” (SingerLewak LLP v. Gantman (2015) 241 Cal.App.4th
610, 622; see Prima Donna Development Corp. v. Wells Fargo Bank, N.A.
(2019) 42 Cal.App.5th 22, 45.)
II. The Arbitrator Issued Decisions on the Merits of Cooley’s Alleged Conflict
                                    of Interest
      We begin with a simple proposition that plaintiffs advance and Paydar
does not contest: The arbitrator considered Paydar’s requests to disqualify
Cooley for its asserted conflict of interest in representing both Roudi and
Interwest, and denied both the original and renewed motions. This was part
of the merits of the controversy to be decided by the arbitrator as bargained
for by the parties in their arbitration clause, which broadly encompassed
“any and all disputes, claims or controversies arising out of or relating to [the
shareholder agreement] . . . .” (Moncharsh, supra, 3 Cal.4th at p. 38
[“Obviously, the ‘merits’ include all the contested issues of law and fact
submitted to the arbitrator for decision”]; Gueyffier v. Ann Summers, Ltd.,
supra, 43 Cal.4th at p. 1185 [arbitrator’s powers derive from, and are limited
by, the agreement to arbitrate].) “[I]t is within the ‘powers’ of the arbitrator
to resolve the entire ‘merits’ of the ‘controversy submitted’ by the parties”
(Moncharsh, at p. 28) and this included the controversy over whether Cooley
should have been disqualified from representing Interwest in the arbitration
proceeding due to perceived conflicts of interest. In addition, “it is for the
arbitrators to determine what issues are ‘necessary’ to the ultimate decision.”
(Advanced Micro Devices, supra, 9 Cal.4th at p. 372.)
      The arbitrator did not exceed his powers by acting in a manner beyond
the scope of the parties’ agreement. As a consequence, the arbitrator’s
analysis and resolution of the merits of that controversy are not subject to
judicial review. (Richey v. AutoNation, Inc., supra, 60 Cal.4th at p. 917

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[“ ‘ “[a]rbitrators do not ordinarily exceed their contractually created powers
simply by reaching an erroneous conclusion on a contested issue of law or
fact, and arbitral awards may not ordinarily be vacated because of such
error” ’ ”]; Moncharsh, supra, 3 Cal.4th at p. 6.) Here, by accepting the
benefits of arbitration, the parties “accept[ed] the risk of ‘an erroneous
decision by the arbitrator’ ” on the issue of Cooley’s asserted violation of
Rules of Professional Conduct by conflicted representation. (Emerald Aero,
LLC v. Kaplan (2017) 9 Cal.App.5th 1125, 1138.)
 III. The Arbitrator’s Award of Money Damages in This Shareholder Dispute
                         Does Not Violate Public Policy
      Paydar nevertheless maintains the court properly reviewed and
vacated the arbitration award because it was contrary to public policy due to
Cooley’s violation of the Rules of Professional Conduct. It is true that
“[a]rbitrators may exceed their powers by issuing an award that violates a
party’s unwaivable statutory rights or that contravenes an explicit legislative
expression of public policy.” (Richey v. AutoNation, Inc., supra, 60 Cal.4th at
p. 916; Sargon Enterprises, Inc. v. Browne George Ross LLP (2017) 15
Cal.App.5th 749, 764.) “ ‘Vacating an arbitration award based on public
policy or a statutory right requires an explicit legislative expression of a
public policy violated by the award or a conflict with a statutory scheme.’
[Citation.] Courts are otherwise reluctant to invalidate an arbitration award
because ‘the Legislature has already expressed its strong support for private
arbitration and the finality of arbitral awards in title 9 of the Code of Civil
Procedure.’ ” (Ling v. P.F. Chang’s China Bistro, Inc. (2016) 245 Cal.App.4th
1242, 1252, italics added.)
      This exception to limited judicial review applies in very narrow
circumstances as, for example, where conducting private arbitration itself

                                        15
would contravene a statutory public policy (see Board of Education v. Round
Valley Teachers Assn. (1996) 13 Cal.4th 269, 274-274, 287-288 [Education
and Government Code sections reflected “an ‘explicit legislative expression of
public policy’ that issues involving the reelection of probationary teachers not
be subject to arbitration,” thereby barring arbitrator’s enforcement of
collective bargaining agreement's procedures that limited school district’s
dismissal of probationary teachers and allowing for judicial review]) or the
award itself violates a statutory limitation. (Jordan v. Department of Motor
Vehicles (2002) 100 Cal.App.4th 431, 438, 444, 450-451 [exception applied to
vacate $88 million attorney fee award in statutorily authorized arbitration
that limited award to $18 million; the arbitration award of $88 million,
founded on an improper common fund theory, was “both against public policy
and an unconstitutional gift of public funds” and the prohibition against gifts
of public funds was “a clear public policy set forth in” the state Constitution].)
      In Moncharsh, the California Supreme Court declined to apply this rule
permitting judicial review of an arbitration award in circumstances involving
an attorney’s dispute with his former law firm. The attorney had argued
both during the arbitration and on appeal that a fee-splitting provision in his
employment contract violated public policy as well as various Rules of
Professional Conduct prohibiting certain types of fee-splitting arrangements,
unconscionable fees, and agreements restricting an attorney’s right to
practice. (Moncharsh, supra, 3 Cal.4th at pp. 7, 32-33.) The court rejected
the attorney’s effort to obtain judicial review of the award on that ground:
“We perceive . . . nothing in the Rules of Professional Conduct at issue in this
case that suggests resolution by an arbitrator of what is essentially an
ordinary fee dispute would be inappropriate or would improperly protect the

                                       16
public interest. Accordingly, judicial review of the arbitrator’s decision is
unavailable.” (Id. at p. 33.)
      We review de novo whether an arbitration award contravenes an
unwaivable statutory right or public policy. (Department of Human
Resources v. International Union of Operating Engineers (2020) 58
Cal.App.5th 861, 873; Sargon Enterprises, Inc. v. Browne George Ross LLP,
supra, 15 Cal.App.5th at p. 763; Ling v. P.F. Chang’s China Bistro, Inc.,
supra, 245 Cal.App.4th at p. 1252.)
      Doing so compels us to reverse the order vacating the award. The
arbitrator here awarded Interwest and Roudi monetary damages on their
counterclaims against Paydar for what the arbitrator found was Paydar’s
breach of fiduciary duty (using his status as a director for his own personal
benefit and to Interwest’s detriment), and breach of the shareholder
agreement (his failure to arbitrate in good faith). The damages consist of the
fees and costs Interwest and Roudi incurred as a result of Paydar’s breaches.
      Does this award of money damages in a dispute among corporate
shareholders violate a well-defined public policy or an unwaivable statutory
right? Is the award of such damages irreconcilable with any such policy or
right? The answer is no.
      Paydar would argue this conclusion is contrary to the California
Supreme Court’s decision in Sheppard, Mullin, supra, 6 Cal.5th 59.
He states the “key principle” in that case is “that a violation of the Rules of
Professional Conduct is contrary to public policy and cannot be upheld by
the court reviewing an arbitration award . . . .” (Emphasis omitted.)
According to Paydar the Sheppard, Mullin court held a violation of those
rules “can afford . . . [a] ground for vacating an award under section
1286.2[, subdivision] (a)(4) . . . .” (Emphasis omitted.)

                                        17
      Sheppard, Mullin does not stand for such general rules. That case
involved a law firm that concurrently represented opposing parties in
litigation but failed to inform their new client of that conflict of interest.
(Sheppard, Mullin, supra, 6 Cal.5th at pp. 68-70.) When litigation ensued
between the firm and new client, the firm petitioned to compel arbitration
under a clause in the client retainer agreement. In response, the client
unsuccessfully argued the conflict had rendered the entire agreement illegal
and the matter proceeded to arbitration resulting in a favorable ruling for the
firm and a $1.3 million award of fees and interest. (Id. at pp. 70-71.) On the
firm’s petition to confirm the award, the superior court held violation of the
Rules of Professional Conduct did not render the retainer agreement
unenforceable, and thus the arbitrators did not exceed their power in
awarding contractual fees. (Id. at p. 71.)
      The Court of Appeal reversed, and the California Supreme Court
agreed that the law firm’s ethical breach and violation of the Rules of
Professional Conduct, which “affected the whole” of the client retainer
agreement including its arbitration clause, rendered the entirety of that
agreement unenforceable as against public policy. (Sheppard, Mullin, supra,
6 Cal.5th at pp. 68, 80, 87.) The court said, “[A] contract or transaction
involving attorneys may be declared unenforceable for violation of the Rules
of Professional Conduct, the set of binding rules governing the ethical
practice of law in the State of California.” (Sheppard, Mullin, at p. 73, see
also p. 74 [“an attorney contract that has as its object conduct constituting a
violation of the Rules of Professional Conduct is contrary to the public policy
of this state and is therefore unenforceable”].) As a result, “an agreement to
arbitrate is invalid and unenforceable if it is made as part of a contract that
is invalid and unenforceable because it violates public policy.” (Id. at

                                        18
pp. 78-79.)
      In addressing whether judicial review of the award was proper, the
court explained the statutory exceptions for judicial review (§ 1286.2)
included circumstances where the arbitrator exceeded his or her powers.
(Sheppard, Mullin, supra, 6 Cal.5th at pp. 72-73, citing § 1286.2, subd. (a)(4).)
It relied on the “framework” established in Loving & Evans v. Blick (1949) 33
Cal.2d 603 (Loving), which held such an “excess-of-authority exception
applies, and an arbitral award must be vacated, when a court determines
that the arbitration has been undertaken to enforce a contract that is ‘illegal
and against the public policy of the state.’ ” (Sheppard, Mullin, at p. 73.) In
Loving, the illegal agreement was that of a group of unlicensed contractors,
who received an arbitration award in their favor. (Sheppard, Mullin, at
p. 74, citing Loving, at pp. 604-607.) “[T]o enforce the agreement of an
unlicensed contractor would violate the public policy codified in statutes
forbidding unlicensed persons from engaging in the contracting business and
from recovering compensation for such business.” (Sheppard, Mullin, at
p. 74, citing Loving, at pp. 606-607, 613-614.) In such a case, the rules of
finality for an arbitrator’s determination of ordinary questions of fact or of
law are “inapplicable where the issue of illegality of the entire transaction is
raised in a proceeding for the enforcement of the arbitrator’s award.”
(Sheppard, Mullin, at p. 74, quoting Loving, at p. 609; see also Moncharsh,
supra, 3 Cal.4th at pp. 31-32 [“Loving [and other cases] . . . permitted judicial
review of an arbitrator’s ruling where a party claimed the entire contract or
transaction was illegal”; “Although we recognized the general rule [in Loving]
that the merits of a dispute before an arbitrator are not subject to judicial
review, ‘the rules which give finality to the arbitrator’s determination of
ordinary questions of fact or of law are inapplicable where the issue of

                                       19
illegality of the entire transaction is raised in a proceeding for the
enforcement of the arbitrator’s award’ ” (italics omitted)].) The illegality of
the underlying contract presented an issue for judicial determination, not for
the arbitrator. (Sheppard, Mullin, at pp. 74-75.)
      The ethical conflict in Sheppard, Mullin tainted the parties’ entire
engagement agreement, including its provision to arbitrate disputes, and
made the firm’s representation of the client illegal from the outset. Under
those circumstances, the superior court properly vacated the arbitration
award in favor of the attorneys seeking fees under that agreement for their
representation as in excess of the arbitrator’s authority. This is not a
situation as in Sheppard, Mullin, supra, 6 Cal.5th 59 or Loving, supra, 33
Cal.2d 603, where one party to the arbitration challenges the legality of the
entire underlying agreement between the parties. Here, the agreement
underlying the dispute between Paydar, Roudi and Interwest and permitting
arbitration is the parties’ shareholder agreement. There is no claim Cooley’s
actual or potential conflict of interest invalidated that agreement or rendered
it unenforceable in its entirety, and thus the circumstances do not implicate
Sheppard, Mullin’s excess-of-authority exception for a contract made illegal
or unenforceable due to a Rules-of-Professional-Conduct violation.
      Sheppard, Mullin does not state a general public policy exception to the
rule of limited judicial review where a public policy issue is “involve[d]” in an
arbitration. More particularly, the case does not stand for a rule requiring an
arbitration award be vacated where the award “sanctions” or is “based on” a
violation of the Rules of Professional Conduct, as Paydar maintains. Were we
to credit Paydar’s arguments and give a broad construct to the exception
stated in Sheppard, Mullin, the exception would “ ‘swallow the rule that
arbitration awards are generally not reviewable on the merits.’ ” (Heimlich v.

                                        20
Shivji, supra, 7 Cal.5th at p. 368.) We decline to create a “ ‘a back door to
Moncharsh through which parties may routinely test the validity of legal
theories of arbitrators.’ ” (Ibid.)
      Paydar also relies on City of Palo Alto v. Service Employees
International Union (1999) 77 Cal.App.4th 327. But there too, the
arbitrator’s award itself—requiring an employer to unconditionally reinstate
a potentially violent employee subject to a workplace restraining order—was
held to contravene an injunction and public policy requiring obedience to
judicial orders. (Id. at pp. 339-340.) The award was in favor of a union,
which argued an employee’s dismissal failed to comply with a union contract.
But the employee had threatened to kill another employee and his wife and
child, and the city who employed them had obtained a no-contact injunction
against that employee. (Id. at pp. 331-332.) The appellate court held: “We
see no way that the arbitrator’s award reinstating [the employee] could have
been put into operation without [him] disobeying the . . . injunction. Thus,
the arbitration award of unconditional reinstatement was irreconcilable with
the public policy requiring obedience to court orders, especially an injunction
issued pursuant to . . . section 527.8. The conflict was all the more profound
since the injunction was based upon a judicial finding by clear and convincing
evidence that [the employee] had made a credible threat of violence against
[the other employee].” (Id. at pp. 339-340.) The award of money damages in
this shareholder dispute raises no such public policy violation.
      Paydar references Ahdout v. Hekmatjah (2013) 213 Cal.App.4th 21,
another case that applies the exception to the rules prohibiting judicial
review. That case involved an arbitrated dispute between two members of a
limited liability company over alleged mismanagement, construction delays
and cost overruns in the company’s condominium development project. (Id.

                                       21
at pp. 24, 26-27.) The members had hired one of the respondent’s general
contracting companies, which was unlicensed, for the project. (Id. at p. 29.)
In arbitration, the appellant unsuccessfully argued the absence of a license
required that the contractor disgorge all compensation for its contracting
services under Business and Professions Code section 7031. (Id. at p. 24.)
The superior court ruled the arbitrators’ decision was not reviewable and
denied appellant’s petition to vacate the award, in which he argued the
arbitrators had exceeded their authority by allowing respondents to keep the
compensation they had received for work on the project despite being
unlicensed. (Id. at pp. 28, 29.) The Court of Appeal reversed, holding section
7031 “constitutes an explicit legislative expression of public policy regarding
unlicensed contractors” and thus the general prohibition of judicial review of
arbitration awards did not apply. (Id. at p. 38.) The court continued, “[T]he
trial court should have conducted a de novo review of the evidence to
determine whether disgorgement of compensation for [the contractor's]
construction work was required by section 7031.” (Id. at p. 39.) Thus, in
Ahdout, as in City of Palo Alto v. Service Employees International Union,
supra, 77 Cal.App.4th 327, the award of compensation to an unlicensed
contractor contravened an explicit statutory public policy, bringing it within
the exception to the rules of limited judicial review.
      These cases do not create a generally applicable public policy exception
to section 1286.2’s limitations on the review of arbitration awards. They do
not compel a conclusion that the arbitrator here exceeded his powers by
awarding Roudi and Interwest money damages for Paydar’s breaches of his
fiduciary duty and the shareholder agreement.

                                       22
   IV. Paydar’s Claim that the Arbitrator Conducted an Unfair Hearing by
                     Permitting Conflicted Representation
       Paydar contends in various places in his respondent’s brief that the
arbitrator’s procedures resulted in an unfair hearing; that the arbitrator
interfered with his right to a fair hearing or prevented him from fairly
presenting his case. He argues: “[T]he arbitrator conducted an unfair
proceeding by allowing Cooley’s improper simultaneous, dual representation
of two adverse parties, Interwest and Roudi. This compromised the integrity
of the entire proceedings and was substantially prejudicial to Interwest and
its shareholders including Paydar.” He argues the dual representation “was
also prejudicial to the adversarial process and our system of justice.” Citing
O’Flaherty v. Belgum (2004) 115 Cal.App.4th 1044, he argues “[t]his
[principle that an arbitration be conducted in a fair and neutral manner] is a
direct corollary of the long established principle that arbitrators exceed their
powers when they issue an award that contravenes ‘a well-defined public
policy.’ ”
       O’Flaherty does not support such a proposition. That case involved the
dissolution of a law partnership having a partnership agreement with an
arbitration clause specifying that the arbitrator had no power to “ ‘grant any
remedy . . . not available in a court of law.’ ” (O’Flaherty v. Belgum, supra,
115 Cal.App.4th at p. 1049.) The partnership agreement did not allow for
forfeiture of a partner’s capital account; it provided that capital would be
returned to withdrawing partners even if the withdrawal was wrongful.
(Id.at pp. 1057-1058.) The Uniform Partnership Act governing the
partnership did not authorize forfeiture of capital accounts as a remedy (id.
at p. 1057) and caselaw did not support forfeiture as an available remedy in
disputes related to partnership accounts. (Id. at pp. 1058-1059.) The

                                       23
appellate court thus held an arbitrator exceeded his authority by
contradicting the arbitration agreement’s provision and ordering that the
withdrawing partners forfeit their partnership capital accounts. “By
providing a remedy inconsistent with the provisions of the partnership
agreement and specifically in contradiction to the partnership agreement
provision that the arbitrator has no power to order a remedy prohibited by
the agreement or not available in a court of law, the arbitrator in effect
awarded ‘a remedy expressly forbidden by the arbitration agreement.’ ”
(O’Flaherty, at p. 1061.) O’Flaherty did not involve claims of an “unfair”
arbitration hearing or violation of public policy, and it does not support the
proposition that conducting an “unfair hearing” is a “direct corollary” or has
any relation to the latter principle concerning public policy. (See Gueyffier v.
Ann Summers, Ltd., supra, 43 Cal.4th at pp. 1187-1188 [summarizing
O’Flaherty].)
      Paydar also relies on cases such as Hoso Foods, Inc. v. Columbus Club,
Inc. (2010) 190 Cal.App.4th 881 and Emerald Aero, LLC v. Kaplan, supra, 9
Cal.App.5th 1125 for the proposition that an arbitrator will exceed his powers
by conducting an unfair hearing. In Hoso Foods, the arbitrator permitted
only a single representative of the appellant, a corporate lessor, to be present
during an arbitration. (Hoso Foods, Inc. v. Columbus Club, Inc., supra, 190
Cal.App.4th at pp. 883, 885-886.) The individual, Rodela, had been sued
personally along with the corporation, he was not the lessor’s choice of
representative, he was not involved in significant aspects of the transaction,
and he was dismissed from the action at the hearing’s conclusion. (Id. at
p. 883.) Undisputed evidence in the record demonstrated that no other officer
or representative was permitted to participate in or observe the proceedings
except during their own testimony, even though the corporation wanted

                                       24
someone other than Rodela present. (Id. at p. 891.) The appellate court
reversed an order confirming the arbitration award, explaining at the outset
that “ ‘[a]rbitration procedures violate the common law right to a fair hearing
“only in the clearest of cases, i.e., when the applicable procedures essentially
preclude the possibility of a fair hearing.” ’ ” (Id. at pp. 888-889, see also
p. 892 [an arbitration procedure violates a party’s right to a fair hearing
under “extremely limited circumstances” as when it essentially precludes the
possibility of a fair hearing].) Nothing in the rules of commercial arbitration
suggested the arbitrator had the power to preclude the corporation from
designating a representative; rather, the rules restricted the arbitrator from
excluding persons with direct interests in the arbitration from the
proceedings. (Id. at p. 889.) The absence of an independent representative
prejudiced the appellant because Rodela was unable to dispute the other
party’s representations and evidence concerning lease negotiations. (Id. at
p. 892.) “Rodela had neither the knowledge nor the incentive to effectively
represent appellant’s interests at the arbitration.” (Ibid.) Under those
circumstances, the court should have vacated the arbitration award. (Ibid.)
      In Emerald Aero, the parties’ arbitration agreement expressly
incorporated the American Arbitration Association rules, which required 14
days’ written notice before a party changed or increased its claim. (Emerald
Aero, LLC v. Kaplan, supra, 9 Cal.App.5th at pp. 1140-1141.) In violation of
these rules, the plaintiffs made a request for punitive damages 24 hours
before the arbitration hearing. (Id. at p. 1141.) This court held the arbitrator
exceeded his powers by awarding punitive damages without the notice to the
defendant that the arbitration agreement required, and also where the
defendant may have lacked notice of several critical hearings and orders in
the case as well as notice and clarity regarding the plaintiffs’ claimed

                                        25
compensatory damages. (Emerald Aero, at pp. 1143, 1146.) This prevented
the defendant from having a fair arbitration hearing on the damages issues.
We explained that “a party may successfully challenge an arbitration award
if the relief granted was in violation of ‘specific restrictions’ (1) ‘in the
arbitration agreement’; (2) ‘the submission’ of the claim to the arbitrator; or
(3) ‘the rules of arbitration.’ ” (Id. at p. 1140, quoting Advanced Micro
Devices, Inc. v. Intel Corp., supra, 9 Cal.4th at p. 367.) In Emerald Aero,
judicial review was permitted because the arbitrator issued an award that
“violated applicable arbitration rules and procedural fairness principles.” (Id.
at p. 1130.) Paydar does not raise such procedural shortcomings in this case.
      We reject Paydar’s suggestion that judicial review of an arbitration
award is warranted when one party perceives some “unfairness” in the award
or the proceeding. The California Supreme Court explains that it is through
the limited statutory exceptions that the Legislature permits judicial review
where there are serious problems with the award itself or the fairness of the
arbitration process. (Moncharsh, supra, 3 Cal.4th at pp. 12-13.) That the
arbitrator conducted the arbitration hearing with one party represented by
potentially or actually conflicted counsel does not constitute a “ ‘ “serious
problem[ ] with the . . . fairness of the arbitration process” ’ ” (Emerald Aero,
LLC v. Kaplan, supra, 9 Cal.App.5th at p. 1138, italics added) or meet the
extremely limited circumstances that would justify judicial review. (Hoso
Foods, Inc. v. Columbus Club, Inc., supra, 190 Cal.App.4th at pp. 892.) Nor
was it a violation of a “ ‘ “specific restriction[ ]” ’ ” in the arbitration
agreement, the arbitration rules, or the submission of the claim to the
arbitrator. (Emerald Aero, at p. 1140.)
      Judicial review here is particularly inappropriate because the
arbitrator himself decided the question of whether Cooley’s representation

                                          26
violated the Rules of Professional Conduct, a question of law on undisputed
facts that is not reviewable. (See Hance v. Super Store Industries (2020) 44
Cal.App.5th 676, 683 [application of rule to undisputed facts is a question of
law reviewed de novo].) Paydar’s arguments about unfairness do not bring
the circumstances outside the extremely limited judicial review of arbitral
awards.
                        V. Paydar’s Alternative Arguments
         We reject Paydar’s alternative arguments for affirming the court’s
order.
A. Forfeiture With Regard to Paydar’s Motion to Strike
         Paydar contends that while plaintiffs include a section in their opening
brief headed, “No Alternative Grounds to . . . Grant the Motion to Strike,”
they did not develop any argument against the superior court’s order striking
their petition to confirm. He maintains plaintiffs thereby waived any
challenge to that order, requiring that we allow it to stand and affirm on that

independent basis.7 Plaintiffs point out in response that the superior court
considered all of the motions together and granted Paydar’s motion to strike
on the same ground as the motion to vacate the award.
         We reject Paydar’s waiver argument. The court’s order states: “The
three formal motions before the court, i.e., (1) Roudi’s and Interwest’s petition

7      Paydar has also moved to strike unspecified portions of pages 60
through 63 of plaintiffs’ reply brief on appeal on the ground plaintiffs are
improperly raising arguments for the first time there concerning his motion
to strike made below. To the extent plaintiffs’ reply arguments merely
rebutted the waiver claims Paydar made in his respondent’s brief, they are
not new. (See American Indian Model Schools v. Oakland Unified School
Dist. (2014) 227 Cal.App.4th 258, 275-276 [an issue is new if it does more
than rebut arguments made in the respondent’s brief].) In any event, we
deny Paydar’s motion to strike portions of plaintiffs’ reply brief for the
reasons stated below.
                                         27
to confirm the arbitration award, (2) Paydar’s motion to strike Roudi’s and
Interwest’s petition to confirm the arbitration award, and (3) Paydar’s
petition to vacate the arbitration award, require a determination by this
court of the same basic issues. As discussed below, this court finds in favor of
Paydar and against Roudi and Interwest on each of the three motions based
upon [Cooley’s] violation of [rule] 1.7(d)(3).” The court’s ruling on Paydar’s
motion to strike stands and falls on its determination that Cooley suffered an
invalidating conflict of interest. Plaintiffs have thoroughly briefed this issue
on appeal.
      Our own review of Paydar’s motion to strike made below does not give
us a basis otherwise to affirm the superior court’s order. In addition to
asserting the joint petition was contrary to Rules of Professional Conduct
forbidding dual representation, Paydar argued the court could not “as a
matter of law” grant the requested “consolidated relief” on the two assertedly
separate arbitration matters, therefore warranting striking the entire joint
petition to confirm the arbitration award under sections 436 and 431.10,
subdivision (b)(3). Section 436 authorizes a court to “[s]trike out all or any
part of any pleading not drawn or filed in conformity with the laws of this
state, a court rule, or an order of the court.” (§ 436, subd. (b), italics added.)
Section 431.10, subdivision (b)(3) defines an “immaterial allegation in a
pleading” as “[a] demand for judgment requesting relief not supported by the
allegations of the complaint or cross-complaint.” (Italics added.) “The
pleadings are the formal allegations by the parties of their respective claims
and defenses, for the judgment of the Court” (§ 420) and for purposes of a
motion to strike, “[t]he term ‘pleading’ means a demurrer, answer, complaint,
or cross-complaint.” (§ 435.) Interpretation of these statutes presents legal
questions subject to de novo review. (See Ruiz v. Musclewood Investment

                                         28
Properties, LLC (2018) 28 Cal.App.5th 15, 24.) Where materials are not
connected with a “pleading,” a statutory motion to strike is not available.
(Overstock.com, Inc. v. Goldman Sachs Group, Inc. (2014) 231 Cal.App.4th
471, 499; accord, PH II, Inc. v. Superior Court (1995) 33 Cal.App.4th 1680,
1682-1683 [motion to strike may challenge portions of causes of action or
where a complaint fails to state particular facts, and its use “should be
cautious and sparing” so as not to create a “procedural ‘line item veto’ for the
civil defendant”].)
      A statutory motion to strike does not lie in a proceeding to enforce an
arbitration award. Petitions to confirm arbitration awards and responses
thereto are governed respectively by sections 1285 [“Any party to an
arbitration in which an award has been made may petition the court to
confirm, correct or vacate the award”] and 1285.2 [“A response to a petition
under this chapter may request the court to dismiss the petition or to
confirm, correct or vacate the award”]. The latter does not authorize a motion
to strike. Even if such a petition was a “pleading” or “demand for judgment”
within the meaning of sections 436 and 431.10, neither warrants striking the
joint petition in full. That the petition may have mischaracterized the
arbitration proceedings or sought a consolidated award does not make it
nonconform to state law, court rules, or a court order. (§ 436, subd. (b).) But
the petition does not contain false or sham matters; the arbitrator’s final
award plainly states the inspection matter “was combined” with the
derivative matter. Its award provides Paydar “shall take nothing pursuant to
this action and the prior inspection action” and ruled in favor of
Roudi/Interwest “on their cross[-]complaints . . . .” (Italics added.)

                                        29
B. Paydar’s Other Asserted Statutory Violations
      1. Litigation Privilege
      Paydar advances other grounds he claims warrant vacating the award.
He contends the arbitrator exceeded his powers by imposing attorney fees on
him for exercising his right to pursue his claims in arbitration, which right is
protected by the Civil Code section 47, subdivision (b) litigation privilege. He
argues Interwest and Roudi’s counterclaims, which he compares to a SLAPP

suit,8 attacked him for seeking such redress, and “were contrary to public
policy protecting a litigant’s rights to pursue his claims without the fear of
being punished for doing so.” He thus argues the fee award is contrary to
those statutory rights.
      Plaintiffs maintain Paydar forfeited this claim by failing to raise it to
the arbitrator, but we need not decide the point. The monetary award for
Paydar’s breach of fiduciary duty or the shareholder agreement, whether
characterized as damages or attorney fees, does not itself contravene the
litigation privilege. The arbitrator found Paydar had used his director status
for his personal benefit and to Interwest’s detriment, disrupting and
straining Interwest’s limited resources, and breached the shareholder
agreement by failing to arbitrate in good faith, warranting damages in the
form of attorney fees and costs. These conclusions based on contested issues
of law or fact are not reviewable for error. (Richey v. AutoNation, Inc., supra,
60 Cal.4th at p. 916.)
      Paydar’s sole cited authority, Moore v. Conliffe (1994) 7 Cal.4th 634
does not support a different conclusion. Moore addressed whether
communications in connection with private arbitration proceedings are

8    SLAPP stands for a strategic lawsuit against public participation. (See
Wilson v. Cable News Network, Inc. (2019) 7 Cal.5th 871, 882, fn. 2.)
                                       30
protected by the litigation privilege. (Id. at p. 640.) Moore concluded they
were, and the privilege protected witnesses who testified in such proceedings
from subsequent tort actions based on that testimony. (Id. at p. 644
[“Because such a proceeding is designed to serve a function analogous to—
and typically to eliminate the need to resort to—the court system [citation],
the need for an absolute privilege to foster the giving of complete and truthful
testimony is as vital in the private contractual arbitration setting as it is in a
court proceeding”].) We fail to see how Moore establishes that the arbitrator’s
damages award in this case violates the privilege. If we were to conclude
that awarding Roudi and Interwest damages for breach of fiduciary duty or
breach of the shareholder agreement somehow punished Paydar for pursuit
of his claims in arbitration in violation of the litigation privilege, virtually
any damages award on a defendant’s counterclaim brought in a legal
proceeding could be said to “punish” the losing plaintiff for initiating the
proceeding.
      2. Corporations Code Inspection Rights
      Paydar further contends the award violates his “protected statutory
rights to inspect the corporation’s books and records as a shareholder under
Corporations Code section 1601 and as a director under Corporations Code

section 1602.”9 According to Paydar, the counterclaims in arbitration

9      Corporations Code section 1601, subdivision (a)(1) provides in part:
“The accounting books, records, and minutes of proceedings of the
shareholders and the board and committees of the board of any domestic
corporation . . . shall be open to inspection at the corporation’s principal office
in this state, or if none, at the physical location for the corporation’s
registered agent for service of process in this state, upon the written demand
on the corporation of any shareholder or holder of a voting trust certificate at
any reasonable time during usual business hours, for a purpose reasonably
related to the holder’s interests as a shareholder or as the holder of a voting
trust certificate.”
                                        31
attacked those rights by mischaracterizing them as pretextual or taken in
bad faith. He additionally contends the award contravenes public policy
expressed in Corporations Code section 1604, which he says allows only the
shareholder exercising inspection right, not the opposing parties, to recover

attorney fees incurred to enforce those rights.10 Thus, Paydar argues the
court properly vacated the award because according finality to the
arbitrator’s decision is incompatible with the protection of those statutory
rights.
      As stated, an arbitrator’s decision may be subject to judicial review
when the arbitrator “issue[s] an award that violates a party’s unwaivable
statutory rights or that contravenes an explicit legislative expression of
public policy.” (Richey v. AutoNation, Inc., 60 Cal.4th at p. 916; Cable
Connection, Inc. v. DIRECTV, Inc. (2008) 44 Cal.4th 1334, 1362 [“Arbitration
awards have been reviewed to determine whether the arbitrators complied
with statutes conferring unwaivable rights”].) The rule is “limited and
exceptional . . . .” (Moncharsh, supra, 3 Cal.4th at p. 32; Board of Education
v. Round Valley Teachers Assn., supra, 13 Cal.4th at p. 276.) “Without an
explicit legislative expression of public policy . . . courts should be reluctant to

      Corporations Code section 1602 provides in part: “Every director shall
have the absolute right at any reasonable time to inspect and copy all books,
records and documents of every kind and to inspect the physical properties of
the corporation of which such person is a director and also of its subsidiary
corporations, domestic or foreign.”

10     Corporations Code section 1604 provides: “In any action or proceeding
under Section 1600 or Section 1601, if the court finds the failure of the
corporation to comply with a proper demand thereunder was without
justification, the court may award an amount sufficient to reimburse the
shareholder or holder of a voting trust certificate for the reasonable expenses
incurred by such holder, including attorneys’ fees, in connection with such
action or proceeding.”
                                        32
invalidate an arbitrator’s award on this ground. The reason is clear: the
Legislature has already expressed its strong support of private arbitration
and the finality of arbitral awards . . . . Absent a clear expression of illegality
or public policy undermining this strong presumption in favor of private
arbitration, an arbitral award should ordinarily stand immune from judicial
scrutiny.” (Moncharsh, at p. 32, italics added; SingerLewak LLP v. Gantman,
supra, 241 Cal.App.4th at pp. 610, 620 [courts refuse to apply the exception
for statutory violation absent an explicit legislative expression of public
policy].) Where the sole issue is merely an alleged error in the interpretation
or application of the law governing the claim properly subject to arbitration,
the exception is inapplicable. (See Richey, at p. 917; SingerLewak, at p. 620.)
“So long as a disagreement is ‘ “within the scope of the controversy submitted
to the arbitrator[,] ‘[t]he arbitrator’s resolution of these issues is what the
parties bargained for in the arbitration agreement.’ ” ’ ” (State Farm Mutual
Automobile Insurance Company v. Robinson (2022) 76 Cal.App.5th 276, 284.)
      Do the laws concerning corporate records inspections and attorney fee
awards to shareholders enforcing those rights evince settled public policies
overriding the strong presumption in favor of arbitration? Do the laws
protect unwaivable rights? Paydar does not address these points with regard
to sections 1601 and 1602 of the Corporations Code. He refers to an “express
public policy” in Corporations Code section 1604, but we see no such policy
mentioned in the statute and he cites no authority from which we can
conclude this provision creates unwaivable rights, much less important
public rights or policies. (Compare Pearson Dental Supplies, Inc. v. Superior
Court (2010) 48 Cal.4th 665, 669, 670-672 [arbitrator’s decision that claim
was time-barred was a clear error of law; the legal error meant an employee
was deprived of a hearing on the merits of an unwaivable statutory

                                        33
employment claim under the California Fair Employment and Housing Act
and thus the award was properly vacated]; SingerLewak LLP v. Gantman,
supra, 241 Cal.App.4th at p. 622 [Business and Professions Code section
16600 evinces a settled legislative policy in favor of open competition and
employee mobility protecting Californians and the “ ‘ “important legal right of
persons to engage in businesses and occupations of their choosing” ’ ”;
appellate court noted case law indicated it is an unwaivable right, but found
the code itself created an exception to the policy and the arbitration award
thus did not contravene a public policy]; Ahdout v. Hekmatjah, supra, 213
Cal.App.4th at p. 39 [Legislature expressly articulated public policy behind
prohibition on unlicensed contractor work to protect the public from the
hazards of shoddy construction work].)
      At bottom, Paydar’s argument is an attack on the arbitrator’s remedy,
his award of damages. But there is no basis to conclude the damages award
was not authorized by the parties’ shareholder agreement or the remedy not
rationally related to the breach. (See Advanced Micro Devices, supra, 9
Cal.4th at p. 381 & fn. 12 [remedy imposed by the arbitrator “must be related
in a rational manner to the breach”; “[an] award is rationally related to the
breach if it is aimed at compensating for, or alleviating the effects of, the
breach”].) “We have no authority to review the reasoning by which the
arbitrator reached the conclusions [he] reached [citation], and that includes
the amount of . . . damages to be awarded.” (Shahinian v. Cedars-Sinai
Medical Center (2011) 194 Cal.App.4th 987, 1001.) Paydar “may be unhappy
with the result, but [he] agreed to ‘final and binding’ arbitration, and that is
what [he] got.” (Ibid.)

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                                DISPOSITION
      The order granting Paydar’s motion to strike plaintiffs’ petition to
confirm the arbitration and vacate the arbitration award is reversed. The
superior court is directed to enter a new order denying Paydar’s motions and
granting Roudi and Interwest’s petition to confirm the award. Roudi and
Interwest shall recover costs on appeal.

                                                                O’ROURKE, J.

WE CONCUR:

McCONNELL, P. J.

HUFFMAN, J.

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