Fujian Peak Group v. Huang CA4/1 ( 2014 )

Filed 5/15/14 Fujian Peak Group v. Huang 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
FUJIAN PEAK GROUP, INC., D063296
Plaintiff and Respondent,
v. (Super. Ct. No. 37-2010-00088762-
CU-PA-CTL)
DAVID HUANG,
Defendant and Appellant.
APPEAL from a judgment of the Superior Court of San Diego County, Lisa C.
Schall, Judge. Affirmed.
Keehn Law Group and L. Scott Keehn for Defendant and Appellant.
No appearance for Plaintiff and Respondent.
In this second appeal of a judgment that arises out of an order confirming an
arbitration award, we consider the denial of a request for attorney fees by appellant and
defendant David Huang. In our prior opinion (Fujian Peak Group, Inc. v. Huang
(Feb. 29, 2012, D059264) [nonpub. opn.]), we agreed with Huang "that the record before
us [did] not currently demonstrate that the superior court had personal jurisdiction over
him as an individual," and we ordered that further proceedings in the trial court take place
to determine, among other issues, whether it had jurisdiction to confirm the arbitration
award against him pursuant to California procedural law. (Code Civ. Proc., § 1286.)
However, our prior opinion also determined that the judgment against a California
corporation with which Huang was formerly associated (D&R Holdings, Inc., or D&R,
which never appealed), was final and was affirmed with other corrections not relevant
here.1
In the further proceedings conducted after remand, the trial court determined it
lacked jurisdiction, as to Huang as an individual, to confirm the arbitration award in favor
of plaintiff and respondent Fujian Peak Group, Inc., a corporation formed and existing
under the laws of the Peoples' Republic of China (Fujian Peak). The trial court then
denied a motion by Huang for contractual attorney fees pursuant to Civil Code section
1717.2 The court issued an amended and corrected judgment accordingly.
Huang now seeks reversal of the portion of the trial court's order and judgment
denying his request for attorney fees. He contends that the two contracts between the
parties, dated 2005 and 2006, contained attorney fees provisions, and/or that the fees
language found in commercial arbitration rules was incorporated into the contracts.
(American Arbitration Association, Commercial Arbitration Rules and Mediation
1 The trial court was directed to issue a modified and corrected judgment that
deleted another party, Robert Schrier, and there are no pertinent issues concerning him
here. (Code Civ. Proc., § 1286.)
2 All further statutory references are to the Civil Code unless noted.
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Procedures (2009) Rule R-43; the AAA rules.) Huang argues he is entitled to reciprocity
of that attorney fees clause, if any. (Hsu v. Abbara (1995) 9 Cal. 4th 863, 866 (Hsu).)
Alternatively, Huang argues that based on judicial estoppel principles, the AAA
rules should be interpreted to provide that when Fujian Peak tendered attorney fee
requests to the arbitrator in Texas, that action created a new or amended fee entitlement
under the contracts or the arbitration agreement. (Jackson v. County of Los Angeles
(1997) 60 Cal. App. 4th 171, 183 (Jackson) [summarizing elements of judicial estoppel
doctrine]; pt. IV, post.)
Fujian Peak has not filed a respondent's brief. We do not consider this to be a
concession, and reach the merits of Huang's appeal. (In re Marriage of Riddle (2005)
125 Cal. App. 4th 1075, 1078, fn. 1 (Riddle).) We determine the appeal based on the
record provided and Huang's opening brief. (Cal. Rules of Court, rule 8.220(a)(2).)
We reject Huang's contentions that the trial court erred as a matter of law in
denying his motion for attorney fees. The trial court was correct that Huang has not
identified any contractual basis for an award of attorney fees to him in this proceeding, to
which any reciprocity rights would attach. We affirm the order and judgment.
I
REINTRODUCTION
A. Contract and Arbitration
Fujian Peak brought a civil action in Texas against D&R, seeking damages arising
out of two similar contracts formed in 2005 and 2006, respectively, for D&R to supply
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advertising services to Fujian Peak. For our purposes, we treat the 2006 contract as
providing the operative language, since there are no material differences between them.
The contract contains the following arbitration clause: "Any controversy or claim
arising out of or relating to this Agreement or its alleged breach shall be settled by
binding confidential arbitration in Houston, Texas in accordance with the Commercial
Arbitration Rules of the American Arbitration Association ('AAA') and judgment on the
award rendered by the arbitrator may be entered by any court having jurisdiction
thereof." The contract also contained a choice of laws provision: "Agreement shall be
governed by and construed in accordance with the laws of the State of Texas, without
regard to principles of conflicts of laws."
The 2006 contract also contained the following indemnity language: "Company
[identified as D&R, not Fujian] shall indemnify and defend Team and Team's directors,
officers, agents, employees, partners, successors and assigns [apparently Fujian], against,
and hold them harmless from, any and all damages, liabilities, costs and expenses
whatsoever (including reasonable attorneys fees and expenses but excluding any
consequential or punitive damages) arising or resulting from any of the following: (a) the
pictorial or word content of any advertisement or other material provided by or requested
by Company; or (b) the negligence or willful misconduct of Company, its directors,
officers, employees or agents in connection with this Agreement. Team agrees to give
Company prompt notice of any claim or suit coming within the purview of this indemnity,
and Team shall furnish Company with all relevant information in its possession or under
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its control and shall cooperate fully with Company in its defense of such action." (Italics
added.)
After filing the action, Fujian Peak submitted a demand for contractual arbitration,
which proceeded in Texas. On the merits, the arbitrator found that D&R had breached its
duties to Fujian Peak by overreaching and taking a disproportionate commission for work
done. Fujian Peak was entitled to damages naturally flowing from the breaches
concerning the contract. The arbitrator added Huang, the chief executive officer (CEO)
of D&R, as an individual party:
"IT IS, THEREFORE, ORDERED and AWARDED that
Respondents, D&R HOLDINGS, INC. and DAVID HUANG, in his
individual capacity, jointly & severally, shall pay to the Claimant
FUJIAN PEAK GROUP, INC. the following: 1) Damages in the
amount of $586,000.00, of which $140,000.00 is escrowed and shall
be made available for immediate release to Claimant. 2) Attorneys'
fees and expenses in the amount of $106,573.45."
Separately, the arbitrator ordered D&R to pay certain fees and costs associated
with the arbitration itself. The award was stated to be the full and final settlement of all
claims by Fujian Peak against D&R and Huang, and all claims not expressly granted in
the award were denied.
B. Petition to Confirm the Arbitration Award; Prior Opinion
In March 2010, Fujian Peak filed a petition in San Diego Superior Court to
confirm the arbitration award pursuant to Code of Civil Procedure section 1285. The
petition named as respondents both Huang individually and D&R. The trial court
confirmed the award and ordered D&R, the contracting party, and its CEO Huang, in his
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individual capacity, to pay the awarded damages as well as attorney fees and costs.
Judgment was entered against D&R, Huang, and another party jointly and severally. (See
fn. 1, ante.)
In the prior appeal, Huang contended that the trial court had no personal
jurisdiction over him as an individual to enforce the judgment, since he never consented
to join the Texas arbitration as an individual party. Huang also argued that all attorney
fees and costs should have been awarded severally against D&R, not jointly and severally
against him individually, and he objected to the imposition of damages for fraud (fraud
damages were not part of the final arbitration award).
We resolved Huang's prior appeal by concluding that the previous record "does
not currently demonstrate that the superior court had personal jurisdiction over him as an
individual. We also agree that the judgment erroneously awarded fraud damages against
him, since they were not included in the final arbitration award. The issue as to whether
attorney fees and expenses were awarded jointly and severally is rendered moot by the
reversal on the jurisdiction issue. As to Huang individually, the matter is remanded to
superior court for further proceedings to determine whether it has jurisdiction to confirm
the arbitration award against him pursuant to California procedural law."
II
PROCEEDINGS ON REMAND AFTER PRIOR OPINION; HUANG SEEKS FEES
The trial court heard the matter on remand and issued an order amending and
correcting the contractual arbitration award, to delete Huang as a party, because the
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evidence failed to establish he was ever served or consented to participate as an
individual in the arbitration proceedings.
Huang brought his motion for attorney fees and costs, relying on the
indemnification language in the contracts, and upon the arbitration clause which provided
for proceedings under the AAA rules. Rule R-43 of the AAA rules allowed for an
arbitrator to include attorney fees as part of the award, and Huang argued that he had
prevailed in the action on the contract when he demonstrated that he was not a party to it,
and therefore he was entitled to a reciprocal award of attorney fees.3 He documented
$108,978.75 attorney fees and costs of $10,679.04.
The trial court denied Huang's motion for attorney fees and costs, giving three
reasons. First, the court found the indemnity clause did not provide an attorney fee
entitlement. Second, the court found the effect of the AAA rules was limited to the
arbitration proceedings, not to any judicial proceedings. Third, the court found no basis
for judicial estoppel against Fujian Peak that would have required it to admit to Huang's
entitlement to any attorney fees recovery (based on its own award of attorney fees
obtained in arbitration as against D&R). The court concluded that Huang had not
identified a contractual basis for an award of attorney fees to him in this proceeding.
An amended and corrected judgment was subsequently issued, recognizing that
Huang had previously been awarded his costs on appeal in the amount of $987, and that
3 In relevant part, and to be more fully described later, then effective AAA rule
R-43 permitted an arbitrator to "grant any remedy or relief that the arbitrator deems just
and equitable and within the scope of the agreement of the parties . . . ."
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he was not entitled to further recover any attorney fees and costs, in the remand
proceedings. Huang timely appealed.
III
RULES OF REVIEW AND APPLICABLE STANDARDS
We review the legal sufficiency of the order or judgment on appeal, and not the
reasoning of the trial court. (D'Amico v. Board of Medical Examiners (1974) 11 Cal. 3d
1, 19; Adajar v. RWR Homes, Inc. (2008) 160 Cal. App. 4th 563, 571, fn. 3.) Our point of
departure in analyzing these claims is the language of the contracts, as interpreted under
statutory standards. Under these circumstances, this presents pure questions of law.
(Topanga and Victory Partners v. Toghia (2002) 103 Cal. App. 4th 775, 779-780.)
We initially disagree with Huang that any law of the case effect on the fees issues
has resulted from our prior opinion. (People v. Stanley (1995) 10 Cal. 4th 764, 786.) In
the prior opinion, we did not set forth any rule of law necessary to the decision regarding
fees that must be adhered to throughout the progress of the case. (Ibid.) Rather, we left
the fees entitlement question regarding Huang entirely open, because of the serious
personal jurisdiction problems that were left to be resolved upon remand, about his
involvement with the arbitration proceedings. The arbitrator had made a joint and several
attorney fees award against D&R and Huang, which could not be allowed to stand due to
the particular jurisdictional problem then presented about Huang, to be resolved upon
remand. We accordingly required the judgment to be adjusted in that respect. On
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remand, the trial court properly heard Huang's motion for an award of fees, and that
matter has not previously been brought before this court.
To address the current issues on appeal, we begin with the statutory provision that
"each party to the arbitration shall pay his pro rata share of the expenses and fees of the
neutral arbitrator, together with other expenses of the arbitration incurred or approved by
the neutral arbitrator, not including counsel fees or witness fees or other expenses
incurred by a party for his own benefit." (Code Civ. Proc., § 1284.2.) This rule is subject
to an exception, where an arbitration agreement or a separate contract between the parties
otherwise provides for an award of attorney fees. (Ibid.)
It is well accepted " ' "[t]he powers of an arbitrator are limited and circumscribed
by the agreement or stipulation of submission." ' " (Cobler v. Stanley, Barber, Southard,
Brown & Associates (1990) 217 Cal. App. 3d 518, 530.) A reviewing court will refrain
from substituting its own judgment for the arbitrator's determinations about the
contractual scope of the powers granted by the arbitration agreement. (Advanced Micro
Devices Inc. v. Intel Corp. (1994) 9 Cal. 4th 362, 372.) "[T]he remedy an arbitrator
fashions does not exceed his or her powers if it bears a rational relationship to the
underlying contract as interpreted . . . by the arbitrator and to the breach of contract
found . . . by the arbitrator." (Id. at p. 367.)
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IV
ANALYSIS
A. Principles Regarding Reciprocity of Prevailing Party Attorney Fees Clauses
Huang mainly relies upon the arbitration clause in the contracts as supplying an
attorney fees entitlement, and he claims the principles of reciprocity allow the contract to
be enforced to justify awarding him fees. (Hsu, supra, 9 Cal. 4th 863, 866.) In Hsu the
Supreme Court was considering a standard prevailing party attorney fees clause, found in
a form real estate contract as follows: " 'In any action between Broker, Buyer or Seller
arising out of this agreement, the prevailing party shall be entitled to reasonable
attorney's fees and costs.' " (Ibid.)
In Hsu, supra, 9 Cal. 4th 863, the court clarified that the policy of section 1717
requires that a prevailing party on a contract, which includes such an attorney fees clause,
"is entitled to attorney fees under section 1717 'even when the party prevails on grounds
the contract is inapplicable, invalid, unenforceable or nonexistent, if the other party
would have been entitled to attorney's fees had it prevailed.' [Citations.]" (Hsu, supra, at
p. 870; Reynolds Metals Co. v. Alperson (1979) 25 Cal. 3d 124, 128.)
Further, the court in Hsu, supra, 9 Cal. 4th 863, 876 held, "in deciding whether
there is a 'party prevailing on the contract,' the trial court is to compare the relief awarded
on the contract claim or claims with the parties' demands on those same claims and their
litigation objectives as disclosed by the pleadings, trial briefs, opening statements, and
similar sources. The prevailing party determination is to be made only upon final
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resolution of the contract claims and only by 'a comparison of the extent to which each
party ha[s] succeeded and failed to succeed in its contentions.' [Citation.] [¶] Here, the
judgment was a 'simple, unqualified win' [citation] for the [Defendants/Sellers] on the
only contract claim between them and the Hsus [prospective buyers]." In Hsu, the trial
court lacked any discretion to deny the prevailing defendants their attorney fees under
section 1717, when the defendants had prevailed by showing the contract was never
formed. (Id. at pp. 870, 877.)
B. Contract Principles of Incorporation by Reference; Judicial Estoppel
We cannot apply the above basic principles of reciprocity under section 1717
unless the subject contract actually included such "prevailing party" language concerning
the recovery of fees. On appeal, Huang focuses primarily upon the provisions of the
arbitration clause, as incorporating such language, from the AAA rules regarding the
scope of the award.
Under former AAA rule R-43(a), an arbitrator could "grant any remedy or relief
that the arbitrator deems just and equitable and within the scope of the agreement of the
parties . . . ." The arbitrator could include in any final award an assessment of fees,
expenses, and compensation among the parties. (AAA rules R-43(b), (c).) The award
could include an award of attorney fees "if all parties have requested such an award or it
is authorized by law or their arbitration agreement. (AAA rules R-43(d).)
The basic rules for incorporating a document by reference into a contract require
precision: " ' " 'For the terms of another document to be incorporated into the document
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executed by the parties the reference must be clear and unequivocal, the reference must
be called to the attention of the other party and he must consent thereto, and the terms of
the incorporated document must be known or easily available to the contracting
parties.' " ' " (Adajar v. RWR Homes, Inc., supra, 160 Cal. App. 4th 563, 571.)
Under those standards, Huang cannot show that the AAA rules created an
independent entitlement to attorney fees, separate from the arbitration clause, which does
not contain the required prevailing party language. Here, there is no "express provision
nor one from which an implication may be drawn that the parties have agreed that the
successful party shall be entitled to reimbursement of his attorney's fees." (Thompson v.
Jespersen (1990) 222 Cal. App. 3d 964, 968.) Rather, the arbitration clause only requires
controversies or claims "arising out of or relating to this agreement or its alleged breach"
to be settled by arbitration in accordance with the AAA rules, but it does not clearly
allocate fees.
We disagree with the trial court's statement that this was a forum-specific
arbitration agreement that applied only to the arbitration portion of the proceedings.
Rather, the clause anticipates that judicial proceedings may be necessary to obtain
judgment upon the award, which is standard procedure for an arbitration agreement. (See
Hastings v. Matlock (1985) 171 Cal. App. 3d 826, 841 [contractual attorney fees clause
need not be restricted to breach of contract claims].) However, that particular issue does
not make any difference in this case, in which there is no prevailing party fee entitlement
expressly or impliedly created by the contracts.
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This arbitration clause mentions the AAA rules more specifically with respect to
selection of the arbitrator, under the process set forth therein. That language does not
serve to incorporate or expand any other particular rules, such as the remedy portions of
AAA rule R-43 on the scope of the award. Although that rule allows the arbitrator to
grant any remedy or relief that the arbitrator deems "just and equitable," the remedy or
relief must be within the scope of the agreement of the parties. It would expand the
entitlements or remedies created by the arbitration agreement, and its reference to the
AAA rules, to create a contractual fee provision and apply it reciprocally.
Huang alternatively argues for application of the doctrine of judicial estoppel, to
prevent Fujian Peak from resisting his requested enforcement of the AAA rules, on the
grounds that Fujian Peak is receiving attorney fees from D&R. Judicial estoppel
elements include the following: "(1) the same party has taken two positions; (2) the
positions were taken in judicial or quasi-judicial administrative proceedings; (3) the party
was successful in asserting the first position (i.e., the tribunal adopted the position or
accepted it as true); (4) the two positions are totally inconsistent; and (5) the first position
was not taken as a result of ignorance, fraud, or mistake." (Jackson, supra, 60
Cal. App. 4th 171, 183 [applying federal doctrine to California law].)
Huang's reliance on judicial estoppel is unavailing. The award of attorney fees by
the arbitrator has been upheld in our prior opinion as to D&R, a party to the contract,
which did not challenge it. The arbitrator interpreted the contract as to those parties'
entitlement and imposed that remedy, which we are not now entitled to change.
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(Advanced Micro Devices Inc. v. Intel Corp., supra, 9 Cal. 4th 362, 372 [arbitrator is
empowered to determine the contractual scope of the powers under the arbitration
agreement].) Under these procedural circumstances and in light of the status of the case,
the correct answers on the attorney fees entitlement questions are not totally inconsistent
as to D&R or Huang, when reciprocity rules are taken into account. (Jackson, supra, 60
Cal.App.4th at p. 183.)
C. Indemnity Ground of Trial Court's Ruling
Indemnification agreements ordinarily relate to third party claims, rather than the
resolution of disputes between the parties to the agreement. (Myers Building Industries,
Ltd. v. Interface Technology, Inc. (1993) 13 Cal. App. 4th 949, 968-969.) "A clause which
contains the words 'indemnify' and 'hold harmless' is an indemnity clause which generally
obligates the indemnitor to reimburse the indemnitee for any damages the indemnitee
becomes obligated to pay third persons." (Id. at p. 969.) Such indemnity provisions are
generally interpreted according to the language of the contract and the intention of the
parties, as indicated by the contract. (Ibid.)
In the trial court, Huang relied on the indemnity clause as amounting to a
prevailing party attorney fee clause, because it required D&R to indemnify Fujian Peak
against damages, liabilities, and costs and expenses (such as fees), arising from "the
negligence or willful misconduct of [D&R or its agents], in connection with this
agreement." Because the arbitrator had awarded attorney fees to Fujian Peak, Huang
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argued to the trial court he was entitled to his own attorney fees award under principles of
reciprocity.
In our prior opinion, we interpreted the arbitration award as being restricted to
contract relief for damages that flowed from breaches of duty concerning the contract.
The award expressly denied all claims not specifically granted (e.g., fraud). As such, it
does not support any award of fees based upon negligence or willful misconduct, since
those torts do not clearly relate to the contract issues that went to arbitration. Further,
Huang has shown no existing third party "claim or suit coming within the purview of this
indemnity," that might now invoke the attorney fees language of this clause, on a
reciprocal basis. The indemnity clause does not appear to meet the standards of a
contractual prevailing party attorney fees clause.
On appeal, Huang does not appear to rely on the indemnity portion of the contract
as giving rise to a reciprocal attorney fee entitlement. He has mainly argued on appeal
that the arbitration clause controlled. In any case, the trial court rejected any reliance on
the indemnity clause to supply an attorney fees entitlement. Its ruling focused at length
upon the effect of the indemnity clause, as invoking an established exception to the fees
clause reciprocity rule. (See Baldwin Builders v. Coast Plastering Corp. (2005) 125
Cal. App. 4th 1339 (Baldwin) [interpreting an attorney fee clause found within a separate
indemnity agreement, reached between a general contractor and subcontractors, as
reciprocal, and determining that because the general contractor was seeking such
indemnification, the subcontractors were entitled to recover fees and costs incurred in
15
defending its negligence claims against them; remanded for further appropriate
proceedings].)
In Baldwin, this court set forth authorities stating that this rule of reciprocity under
section 1717 is "itself subject to an exception where the recovery of attorney fees is
authorized as an item of loss or expense in an indemnity agreement or provision.
[Citations.] Because an indemnity agreement is intended by the parties to unilaterally
benefit the indemnitee, holding it harmless against liabilities and expenses incurred in
defending against third party tort claims [citation], application of reciprocity principles
would defeat the very purpose of the agreement. [Citation.] In requiring reciprocity of
only those provisions that authorize the recovery of attorney fees 'in an action on [the]
contract,' section 1717(a) expressly excludes indemnity provisions that allow the
recovery of attorney fees as an element of loss within the scope of the indemnity."
(Baldwin, supra, 125 Cal.App.4th at p. 1344.)
In Baldwin, supra, 125 Cal. App. 4th 1339, 1344-1346, this court held that the
attorney fee provisions in the stand alone indemnity agreements were properly subject to
section 1717, subdivision (a) and no exception (for indemnity) prevented reciprocity. We
said, "the express language of the attorney fee clauses authorizes the recovery of attorney
fees where one of the parties to the agreement brings an action to enforce the indemnity;
such an action is one 'on [the] contract' within the meaning of section 1717(a) and thus
the attorney fee clauses are subject to the statutory requirement of reciprocity. [Citation.]
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The fact that the attorney fee clauses are set forth in the indemnity agreements does not
alter this conclusion." (Baldwin, supra, at p. 1346.)
We need not further discuss the validity of this separate ground of the current
ruling, because the trial court's overall conclusion controls here. Huang has not identified
a contractual basis for any award of attorney fees to him in this proceeding.
DISPOSITION
The judgment and order are affirmed. Each party shall bear its own costs on
appeal.
HUFFMAN, J.
WE CONCUR:
McCONNELL, P. J.
O'ROURKE, J.
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