In Law Finance Group v. Key (2021 WL 3240276), the Second Appellate District, Division Two, held that the time to move to vacate an arbitration award is jurisdictional and may not be extended by stipulation or principles of waiver and estoppel.

Sarah Plott Key (Key) borrowed $2.4 million from Law Finance Group (LFG) to help finance a probate action against her sister in which Key contended that her sister exercised undue influence over their mother in orchestrating changes to the mother’s trust. Key prevailed in the probate action, winning a right to sell one third of their parents’ estate. Although Key repaid the principal borrowed from LFG, she refused to pay interest, claiming that the terms of the note violated the California Financing Law at Finance Code §22000 et seq.

LFG demanded arbitration under the loan agreement, which proceeded before a panel of three arbitrators. The arbitrators found that some of the loan terms were invalid but otherwise found the loan agreement to be enforceable. The panel awarded LFG nearly $800,000 in interest plus attorneys’ fees and costs. The panel subsequently issued a modified award, reducing the costs that were awarded.

Less than two weeks after the modified award was served, LFG timely petitioned the superior court to confirm the award. Due to a §170.6 challenge of the assigned judge and attempts to set a briefing schedule, several months elapsed before counsel finally agreed to a briefing schedule. The briefing schedule included an agreement that Key would file her petition 130 days after the modified award was served. She made the same arguments opposing LFG’s motion to confirm the award as she did in her petition to vacate. She argued that the arbitrators exceeded their authority by finding that the loan from LFG was a consumer loan but nevertheless improperly enforced it rather than declaring it void. The superior court agreed with Key and vacated the award.

LFG appealed on both substantive and procedural grounds; however, only the procedural grounds were addressed on appeal because Key’s requests to vacate the arbitration award was untimely.

THE TIME LIMIT TO VACATE THE AWARD IS JURISDICTIONAL

Code of Civil Procedure §1288 requires that a petition to vacate an arbitration award must be filed and served not later than 100 days after service of the award. §1288.2 imposes the same deadline on a response to a petition to confirm an arbitration award when the response requests that the award be vacated, that is, regardless of whether or not the request to vacate the award is by way of petition or by way of opposition to confirm an arbitration award, the request to vacate must be made within 100 days of service of the award.

In reversing the trial court, the court of appeal held that these deadlines are jurisdictional. (Santa Monica College Faculty Assn. v. Santa Monica Community College Dist. (2015) 243 Cal.App.4th 538, 544–545; Douglass v. Serenivision, Inc. (2018) 20 Cal.App.5th 376, 384–385.)

Key argued that principles of waiver and estoppel applied to extend the time due to having been misled due to the agreed-upon briefing schedule. The court rejected this argument because neither §1288 nor §1288.2 permits extension of the 100-day deadline through agreement of the parties. The court even notes that these sections appear in the Code of Civil Procedure under a section entitled “Limitations of Time,” establishing a clear and certain 100-day deadline for any request to vacate an arbitration award. The fact that §1290.6 allows the parties to extend the time to serve and file a response may not be utilized to extend the 100-day deadline to request that the award be vacated.

Even if relief were being sought by way of §473 due to attorney mistake, cases have held that attorney mistake cannot be relied upon to avoid a jurisdictional statute of limitations. (Santa Monica, supra, 243 Cal.App.4th at 545.)

The reasoning behind this is that a petition to vacate or correct an arbitration award typically requires factual determinations, so a 100-day time-frame ensures that the evidence is fresh and witnesses are available. Absent a challenge, there may be no need for judicial intervention. The award is treated as a contract (§1287.6) allowing the prevailing party a substantially longer period to obtain satisfaction of the award before seeing court intervention. It is similar to the four-year statute of limitations for breach of contract (§337(1)). In the event of satisfaction, judicial relief will not be necessary, conserving court resources. If it’s not, the prevailing party may convert it into an enforceable judgment by way of a simple petition to confirm. (§§1287.4, 1288.)

SUMMARY AND CONCLUSION

Jurisdictional limits such as these are clear and may not be waived by agreement of the parties and/or counsel. Careful attention should be paid to such jurisdictional limitations because even a meritorious position may fall by the wayside when the court loses jurisdiction to rule in that party’s favor.

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