Weekly Law Resume: Civil Procedure – Stipulated High/Low Arbitration Binding as Contractual Term

by Low, Ball & Lynch
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Elsie Horath v. John Hess

Court Of Appeal, Fourth District (April 10, 2014)

Parties sometimes stipulate to high end/low end figures for arbitration, in an attempt to resolve a case that might not otherwise resolve short of trial.  In this case, the Court of Appeal considered such a stipulated agreement in the context of other statutory rules involving post-arbitration enforcement of an award.

Plaintiff Elsie Horath (“Horath”) was injured in an automobile accident with defendant John Hess (“Hess”).  Horath and Hess stipulated to resolve their dispute through arbitration and agreed that Hess would pay at least $44,000 and no more than $100,000, not including costs.  The parties also agreed that the arbitrator would not be informed of the “high-low” agreement.  The arbitrator awarded $366,527.22, including costs.  Horath filed a petition to confirm the arbitration award in the underlying Superior Court action, which apparently was unopposed.  Hess belatedly filed a motion to limit the judgment to the amount of $100,000, but this motion was denied because it was not filed within the one hundred day limit under Code of Civil Procedure Sections 1288 and 1288.2.  The court entered judgment for Horath in the amount of $366,527.22.  Horath rejected Hess’ tender of $100,000 plus costs as full satisfaction of the judgment.

After the judgment had been entered, Hess apparently filed a separate action and filed a motion for acknowledgment of satisfaction of judgment pursuant to Code of Civil Procedure § 724.050.  Horath opposed the motion, arguing that this motion was an improper procedural attack upon a judgment which had already been entered in a separate case.  The court denied Hess’ motion for acknowledgment of satisfaction of judgment on the grounds that the motion improperly requested the court to imply new terms in the stipulation to arbitration and would be an unauthorized modification of the arbitration award.  Also, the trial court found Hess’ failure to timely file motions to modify the award and to object to the judgment prior to its entry as further grounds for denying Hess’ motion.  Hess appealed the rulings in both actions.

The Court of Appeal reversed the trial court’s denial of Hess’ motion for acknowledgment of satisfaction of judgment and further held that ruling rendered the appeal of the underlying judgment based upon the arbitration award moot.  The Appellate Court held that the trial court had failed to interpret the stipulation to arbitration properly.  The Court of Appeal held that the stipulation’s language clearly stated that any party could have the arbitration award entered as a judgment pursuant to Code of Civil Procedure § 1285 et seq., but the stipulation also provided that Horath would not accept more than $100,000 plus costs.  The stipulation did not contain any language requiring Hess to enforce the stipulation’s “high-low” provision, to file a motion to vacate or correct the arbitration award or to respond to a petition to confirm the award.  The Court of Appeal found that the stipulation’s language implicitly, if not expressly, prohibited Hess from challenging the amount of the award or the judgment.  Therefore, to enforce the stipulation’s “high-low” provision, Hess necessarily would have the right to fully satisfy the judgment by paying or tendering an amount within the “high-low” provision (i.e., a maximum amount of $100,000 plus costs).  The stipulation required Horath to accept $100,000 plus costs in full satisfaction of the judgment entered confirming the award.

After being tendered the $100,000 plus costs, Horath should have filed an acknowledgment of full satisfaction of judgment.  When Horath refused to file the acknowledgment of full satisfaction of judgment, Hess properly filed a motion to require Horath to do so pursuant to Code of Civil Procedure § 724.050.  This motion should have been granted even though Hess did not file a motion to vacate or correct the arbitration award or timely file a motion to limit the judgment.  When Hess’ motion for acknowledgment of satisfaction of judgment was denied, Horath recovered attorney’s fees for opposing the motion pursuant to Code of Civil Procedure § 724.080.  As a result of the reversal of the trial court’s order denying Hess’ motion, Horath’s recovery of attorney’s fees was reversed, and the Appellate Court indicated that Hess may recover attorney’s fees from Horath for having to bring the motion pursuant to Code of Civil Procedure § 724.080.

COMMENT

This decision should deter any party from attempting to circumvent a stipulated limitation for an arbitration award if the actual award is lower or higher than the stipulated “high-low” limits.  Even obtaining a judgment based upon the arbitration award will not preclude a party from enforcing the stipulation through a motion for acknowledgment of satisfaction of judgment.

For a copy of the complete decision, see:
http://www.courts.ca.gov/opinions/documents/D063124.PDF

 

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