Filed 8/18/26 Alharbi Brothers v. Corona Town Farmers Market CA4/1 NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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
ALHARBI BROTHERS, INC., D086595
Plaintiff and Respondent,
v. (Super. Ct. No. CVRI2300681)
CORONA TOWN FARMERS MARKET, INC. et al.,
Defendants and Appellants.
APPEAL from a judgment of the Superior Court of Riverside County, O.G. Magno, Judge. Vacated and remanded with directions but otherwise affirmed.
Chalifoux, Brast, Thompson & Potocki and Anthony S. Chalifoux;
Niddrie Addams Fuller Singh, John S. Addams and David A. Niddrie for Defendants and Appellants.
Denning & Grabel and Mark R. Denning for Plaintiff and Respondent. Jamal Abdo Ali Alharbi and Musa Nasser Alharbi, on behalf of Alharbi Brothers, Inc., entered into a business purchase agreement (BPA) with Muhammad Ali, on behalf of Fruiticana, Inc., to buy Corona Town Farmers Market (CTown), a grocery store. After the deal went south, Alharbi
Brothers sued Ali, Fruiticana, CTown, and Emad Abdallah, the majority shareholder in Fruiticana (collectively, Defendants). The parties stipulated to binding arbitration, and the arbitrator awarded damages, attorney fees, and costs totaling $1,735,334.21 to Alharbi Brothers. He also sanctioned Defendants for delaying his compensation.
On appeal, Defendants argue the arbitrator was statutorily barred from serving as an arbitrator by Business and Professions Code section 6125 and State Bar Rule 2.30, which prohibit State Bar licensees from engaging in certain activities once they become inactive. We conclude Defendants forfeited this argument by failing to object to the arbitrator’s disclosures in a timely fashion.
Defendants also claim the award must be vacated because the arbitrator failed to disqualify himself after they objected to his disclosure that he had accepted an offer to serve as a neutral in another matter involving Alharbi Brothers’ counsel’s firm. We conclude Defendants forfeited this argument as well by failing to object timely to the arbitrator’s disclosure that he would entertain such offers during the arbitration. But even on the merits, this claim fails, as an arbitrator’s disclosure that the arbitrator has accepted an offer of employment from a party or a party’s counsel, standing alone, does not require the arbitrator’s disqualification.
Defendants contend the arbitrator exceeded his authority by concluding that they were alter egos of one another when alter ego liability was not pled in the complaint, specified as an issue for the arbitrator to decide, or argued during the arbitration. We determine, however, that the complaint pled sufficient facts to put Defendants on notice that Alharbi Brothers sought to hold them all liable for acts even if taken by others. Further, Defendants were all represented by the same counsel and participated in the arbitration.
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Nor was alter ego expressly excepted from the issues the parties agreed the arbitrator could decide. We thus conclude the arbitrator’s findings did not exceed his authority.
Defendants further argue the arbitrator exceeded his authority by awarding Alharbi Brothers punitive damages when Alharbi Brothers did not argue entitlement to punitive damages during the arbitration. But because punitive damages were pled in the complaint and within the authority granted to the arbitrator, we discern no such transgression here. Nor was the arbitrator barred from awarding punitive damages by the rules that governed the arbitration.
Finally, Defendants claim the arbitrator exceeded his authority by sanctioning them without notice. We agree. Accordingly, we vacate the order confirming the arbitration award and the judgment and direct the trial court to confirm the award as to all but the sanctions and enter judgment accordingly.
As modified, we affirm the judgment in all other respects.
I. A.
In August 2021, Fruiticana, through its manager and CEO, Ali, listed CTown for sale through a real estate agent. Ali is also president and CEO of CTown. Abdallah, who is registered to do business as CTownFarmersMarket, owns 51% of Fruiticana. Fruiticana and CTown are parties to a management and operation agreement.
The real estate agent knew Alharbi Brothers, Inc. was in the market to purchase a grocery store and arranged for the parties to negotiate. Alharbi Brothers made an offer that resulted in the parties entering into the BPA.
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The BPA was between Jamal and Musa on behalf of Alharbi Brothers and Ali on behalf of Fruiticana. It contains an arbitration clause providing that “[t]he Parties agree that any dispute or claim in law or equity arising between them out of this [BPA] or any resulting transaction, which is not settled through mediation, shall be decided by neutral, binding arbitration . . . . The arbitrator shall be a retired judge or justice, or an attorney with at least 5 years of residential real estate Law experience, unless the parties mutually agree to a different arbitrator.”
Alharbi Brothers deposited funds into escrow and began its due diligence and initiated the lending process. The process revealed, however, that CTown’s financial data contradicted its profit and loss reports as well as its tax returns. While Alharbi Brothers qualified for the loan, Fruiticana and CTown did not. Fruiticana refused to reconcile its inconsistent financial records. Accordingly, the bank offered restructured loan options that reflected a significant reduction in loan funds.
Alharbi Brothers then learned the lease on the property on which CTown was operated was in the name of Abdallah rather than Fruiticana. Abdallah approached the landlord about assigning the lease to Alharbi Brothers, but the landlord was upset to learn the lease was in Abdallah’s name rather than Fruiticana’s and began eviction proceedings. Escrow was suspended until this eviction-related litigation was ultimately dismissed.
Allegedly believing Alharbi Brothers was not qualified to purchase CTown, Abdallah demanded the BPA and escrow be cancelled. By this point, Fruiticana was no longer cooperating with the transaction either.
B.
In February 2023, Alharbi Brothers sued CTown, Abdallah, Fruiticana, and Ali for specific performance, breach of contract, breach of the implied
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covenant of good faith and fair dealing, intentional interference with prospective economic advantage (IIPEA), and declaratory relief.
The complaint alleges Fruiticana, Abdallah, and CTown were “in a de[ ]facto partnership.” All claims were brought against all Defendants except the IIPEA claim, which was brought against Ali and Abdallah only. In the complaint, Alharbi Brothers sought punitive damages for IIPEA. The complaint also sought a declaration that all Defendants were parties to the BPA and thus obligated to arbitrate the matter.
Not long after, the parties stipulated to withdraw the cause of action for breach of the implied covenant of good faith and fair dealing but agreed to incorporate the paragraphs pleading it into the cause of action for breach of contract. Defendants answered together, all represented by the same counsel.
The parties attempted to mediate the matter without success. In January 2024, the parties filed a joint stipulation to proceed with arbitration and to stay the court proceedings. The court ordered the parties “to submit . . . to full and binding arbitration with Donald Cripe of CAMS Mediation and Arbitration Services, in accordance with such organization’s Rules and Procedures.”
C.
Before the court’s order, the parties had begun the arbitration process.
In September 2023, Alharbi Brothers’ counsel suggested either Donald Cripe or another candidate as a potential arbitrator, to which counsel for the Defendants replied, “Mr. Cripe is fine.”
In late October, the arbitrator e-mailed counsel for all parties, indicating the arbitration would be “pursuant to California Law, the AAA
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Consumer Rules[,] and the Arbitration agreement that controls.” The e-mail included the arbitrator’s disclosures and oath.
The October 2023 disclosures specified the arbitrator had been previously engaged to mediate and arbitrate matters for Alharbi Brothers’ counsel’s firm. In response to a question asking whether the arbitrator would “entertain offers of employment or new professional relationships in any capacity other than as a lawyer, expert witness, or consultant from a party or a lawyer for a party, including offers to serve as a dispute resolution neutral in another case,” the arbitrator responded, “If I am invited to serve in another case by any firm/attorney involved in this matter, it will be disclosed and the parties to this case will have an opportunity to object.” In another response to a question asking whether he had ever resigned his membership in the State Bar while disciplinary charges were pending, the arbitrator responded no but indicated he “recently resigned from the State Bar for Retirement from law practice.”
In late November, the parties fully executed the CAMS Agreement to Arbitrate and Stipulation to Jurisdiction. The agreement noted arbitration was binding and identified the following issues to be determined by the arbitrator: “The enforcement of a purchase agreement for a grocery store business that has leased premises and breach thereof. Then damages arising therefrom, and reduction of purchase price based on breach and/or delay. Plaintiffs seek performance and damages, and defendants deny said claims.” As to the arbitrator’s jurisdiction, the CAMS Agreement specified: “Purchase Agreement has arbitration clause for the above said issues, and arbitrator can adjudge as to all issues, including awarding or denying specific performance, claims of breach, and mon[e]tary damages.” The agreement further specified that “the arbitration shall be conducted pursuant to the
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Civil Arbitration Procedures and Rules as articulated in the California Code of Civil Procedure or, at the Arbitrator’s discretion, the Rules of the American Arbitration Association.”
In December, the arbitrator issued a scheduling order providing that “[t]he last date for either party to ‘increase or decrease the amount of its claim or counterclaim’” was February 9, 2024, at which point the amount “will be fixed at the amounts set forth in [the party’s] most recent timely pleading.”
In late February 2024, the arbitrator informed the parties by e-mail that he “ha[d] been invited to serve as a mediator, and ha[d] accepted the invitation, in a different AAA case unrelated to this one, that involves [Alharbi Brothers’ counsel]’s firm.” In early March, Defendants’ counsel indicated she was objecting to the arbitrator’s service given the other matter. The same day, the arbitrator responded that he would “not voluntarily recuse for there is no basis to do so.” He stated, “The argument I have seen is because I have handled cases with an attorney from one side I must be recused. One wonders how that would play if an attorney filed a [section] 17[0].6 motion against a judge for the same reason. Simply put, there is no bias and no basis for recusal.” The record contains no further communication on this matter.
Alharbi Brothers’ July 2024 arbitration brief requested specific performance with financial offsets or, alternatively, damages for breach. Alharbi Brothers also argued “Defendants should not benefit from their bad faith acts and omissions” and Plaintiff “should be awarded specific performance and damages.”
The arbitration occurred over a period of four days: three days in mid-
July 2024, followed by a final day on September 10.
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The parties submitted final briefing on September 17. Defendants’
closing brief is not part of the appellate record. Alharbi Brothers’ closing brief sought specific performance of the contract and “damages to offset the increased financing costs . . . and to compensate for lost profits.”
In October 2024, the arbitrator issued an interlocutory arbitration award in favor of Alharbi Brothers and against Defendants.
Several weeks later, counsel for Defendants submitted a letter brief titled “Errors in award claimed by Defendants.” Defendants argued that the award in favor of Alharbi Brothers on breach of the implied covenant of good faith and fair dealing was error because the parties had stipulated to that claim’s dismissal. Because only Fruiticana and Alharbi Brothers were parties to the BPA and “[t]he arbitrator is bound by the four corners of the Complaint,” which “did not allege alter ego,” Defendants claimed “[t]here was no evidence presented” on this issue and so “the award reaches beyond the allegations.” Finally, Defendants contested the award of punitive damages given the lack of “evidence presented to impose liability” and the prayer for relief sought only punitive damages against Ali and Abdallah, neither of whom was “a signatory to the BPA.”
Alharbi Brothers opposed what it titled Defendants’ “Demand for Corrections.” Later that month, the arbitrator issued a ruling granting Defendants’ request as to breach of the implied covenant but otherwise denying Defendants’ request.
D.
The arbitrator explained his findings in the Clarified Final Binding Arbitration Award. Beginning with the Alharbis, he found Jamal and Musa “very credible.” He found the real estate agent to be a credible historian of the transaction. He found Alharbi Brothers’ expert on the loan transaction to
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be “highly credible.” The arbitrator concluded Ali “destroyed” what credibility he had initially established. He found Abdallah credible as to his relationship with Fruiticana. The landlord was “reasonably credible,” but Fruiticana’s CFO was “not credible.”
Based on the “substantial evidence elicited during the arbitration regarding the operation of the corporation, Fruiticana,” which “illuminated the noncompliance with corporate expectations giving rise to corporate protections,” the arbitrator found it appropriate to pierce the corporate veil and hold all Defendants jointly and severally liable for “the conduct of the corporations.” The arbitrator noted that “this issue was addressed obliquely during the arbitration” but concluded “it clearly was addressed” and accordingly “presented as an issue to the arbitrator.”
Although Fruiticana “was not sufficiently ‘unique’ to support an award of Specific Performance,” the arbitrator found the BPA was a binding contract and “overwhelming” evidence showed that Fruiticana and CTown “breached the BPA” with “malicious intent.” The arbitrator awarded Alharbi Brothers two years of lost profits, totaling $936,000, for the breach claim.
The arbitrator found Defendants liable for IIPEA. Ali “and possibly others” formed a separate entity that purchased the property on which CTown was located from the landlord. The entity then entered into a new lease with “CTown/Fruiticana” with “rent approximately five times the rate of the lease at the time the BPA was executed” so the lease assigned to Alharbi Brothers as part of the sale would be at a higher rate that would benefit Defendants. The arbitrator awarded Alharbi Brothers $250,000 “as direct and consequential bad faith damages.”
“Though no direct evidence of the financial condition or the ability for Defendants to respond to a punitive/exemplary damages award” was
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presented, the arbitrator found that “there was ample collateral evidence of the ability of Defendants to respond to this Award.” Because Defendants’ acts were performed “willfully, unlawfully, and maliciously,” the arbitrator awarded Alharbi Brothers an additional $500,000 in punitive damages. The arbitrator also awarded Alharbi Brothers the $68,000 held in escrow, with interest from the date of deposit; and attorney fees and costs in the amount of $49,334.21 under the BPA.
All told, the arbitrator awarded Alharbi Brothers damages, costs, and fees in the combined sum of $1,735,334.21.
The arbitrator also sanctioned Defendants $1,822.50, payable to him, for being dilatory in resolving issues involving his compensation.
E.
On November 25, 2024, Alharbi Brothers filed a petition to confirm the arbitration award in court.
Defendants twice attempted to file a petition to vacate the award, but their filings were rejected. We deny Defendants’ motion to consider additional documentary evidence—namely, their first rejected petition—as unnecessary to our decision.
On December 19, Defendants successfully filed their petitions to vacate the arbitration award. It appears each Defendant filed a separate but substantively identical petition. Alharbi Brothers objected to the petitions.
A hearing on the petitions to confirm and vacate was held in February 2025. Before the hearing, the court issued a tentative ruling confirming the arbitration award and denying the petitions to vacate. After hearing argument from both sides, the court ordered the tentative ruling to become the final ruling.
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The trial court concluded the arbitrator was not required to disqualify himself. Defendants failed to object timely to the disclosures that he had resigned from the State Bar and that the arbitrator would continue to accept offers to serve as a neutral in other unrelated matters involving the parties or their counsel. As to the alter ego and punitive damages issues, the court concluded that these “determination[s] of fact and application of law . . . were within the purview of the arbitrator’s power[s].”
II.
In private arbitration, like here, “the scope of arbitration is a matter of agreement between the parties, and the powers of an arbitrator are limited and circumscribed by the” arbitration agreement. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 8-9 [cleaned up].) “[U]nless specifically required to act in conformity with rules of law,” arbitrators “may base their decision upon broad principles of justice and equity, and in doing so may expressly or impliedly reject a claim that a party might successfully have asserted in a judicial action.” (Id. at pp. 10-11 [cleaned up].) Thus, “it is the general rule that [t]he merits of the controversy between the parties are not subject to judicial review,” and “courts will not review the validity of the arbitrator’s reasoning.” (Id. at p. 11 [cleaned up].) “In other words, it is within the power of the arbitrator to make a mistake either legally or factually. When parties opt for the forum of arbitration they agree to be bound by the decision of that forum knowing that arbitrators . . . are fallible.” (Id. at p. 12 [cleaned up].)
“Any party to an arbitration in which an award has been made may petition the court to confirm, correct[,] or vacate the award.” (Code Civ. Proc., § 1285.) The court “shall confirm the award as made” unless, as relevant here, it vacates the award because the arbitrator “exceeded their powers and
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the award cannot be corrected without affecting the merits of the decision upon the controversy submitted.” (§§ 1286, 1286.2(a)(4).)
We review de novo the superior court’s order on whether the arbitrator exceeded its authority—but we do not review the arbitrator’s award itself. (Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 376, fn. 9.) Public policy strongly favors arbitration as a means to expeditiously and finally resolve disputes and avoid the courts, so courts “indulge every intendment to give effect to such proceedings.” (Moncharsh, 3 Cal.4th at p. 9 [cleaned up].) Accordingly, “arbitration awards are generally subject to extremely narrow judicial review. Courts will not review the merits of the controversy, the validity of the arbitrator’s reasoning[,] or the sufficiency of the evidence supporting the arbitrator’s award.” (Hoso Foods, Inc. v. Columbus Club, Inc. (2010) 190 Cal.App.4th 881, 887.)
A.
As an initial matter, Alharbi Brothers argues we can affirm the trial court’s judgment without reaching the merits because Defendants’ petitions to vacate were untimely and the applicable deadlines are “strictly enforced.” The Supreme Court, however, has unequivocally held that the applicable “deadline for seeking vacatur of an arbitral award is a nonjurisdictional statute of limitations that is subject to equitable tolling and equitable estoppel.” (Law Finance Group, LLC v. Key (2023) 14 Cal.5th 932, 959-960.) Here, the trial court appropriately exercised its discretion to accept Defendants’ late-filed petitions to vacate. This is therefore not a basis for affirmance.
B.
Defendants argue vacatur is required because the arbitrator failed to disclose that he was statutorily ineligible to serve as a private arbitrator;
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because of that ineligibility, they claim any acts he took as an arbitrator necessarily exceeded his authority. We conclude Defendants failed to object timely on this basis and accordingly forfeited the issue.
Although the relevant statute and the parties phrase this as a waiver, the word “waiver” has “been loosely used at times, including in the disqualification context, to signify what is properly understood as a forfeiture.” (North American Title Co. v. Superior Court (2024) 17 Cal.5th 155, 177.) “When a party does not raise an objection in the manner required, their failure to do so, without more, constitutes a forfeiture, not a waiver.” (Id. at p. 178.) Accordingly, we use the term “forfeiture” instead. (See Goodwin v. Comerica Bank, N.A. (2021) 72 Cal.App.5th 858, 867, fn. 8 [noting section 1281.91(c) “uses the term ‘waived,’ but it is clear in context that the Legislature meant ‘forfeited’”].)
“No person shall practice law in California unless the person is an active licensee of the State Bar.” (Bus. & Prof. Code, § 6125.) State Bar Rule 2.30(b) relevantly provides that any State Bar licensee who occupies “a position wherein [the licensee] is called upon to give legal advice or counsel or examine the law or pass upon the legal effect of any act, document or law” cannot “be enrolled as an inactive licensee.” Rule 2.30(c) makes an exception for “a licensee serving for a court or any other governmental agency” in certain positions, including as an arbitrator. (Italics added.)
Defendants argue Alharbi Brothers forfeited any challenge based on the arbitrator’s licensure status by failing to respond timely to the arbitrator’s disclosure that he had transitioned to inactive status. We agree.
“In any arbitration pursuant to an arbitration agreement, when a person is to serve as a neutral arbitrator, the proposed neutral arbitrator shall disclose all matters that could cause a person aware of the facts to
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reasonably entertain a doubt that the proposed neutral arbitrator would be able to be impartial.” (Code Civ. Proc., § 1281.9(a).) A proposed neutral arbitrator who complies with this requirement “shall be disqualified on the basis of the disclosure statement” if any party serves a notice of disqualification “within 15 calendar days after service of the disclosure statement.” (§ 1281.91(b)(1).) “[U]nless the proposed [arbitrator] makes a material omission or material misrepresentation in [the] disclosure,” a party who fails to serve a disqualification notice within 15 days loses the right to disqualify the arbitrator under this section. (§ 1281.91(c).)
Here, the arbitrator disclosed in October 2023 that he had “recently resigned from the State Bar for Retirement from law practice.” This disclosure did not contain a material omission or misrepresentation. Defendants did not serve a notice of disqualification based on this disclosure within 15 days. Accordingly, Defendants forfeited their right to disqualify the arbitrator on this ground.
Defendants’ contrary claims do not persuade us. Defendants argue the arbitrator’s disclosure “was ambiguous and misleading” because “[h]e did not disclose . . . under . . . State Bar Rule 2.30(B)[ that] the resignation meant he could no longer serve as an arbitrator.” But we perceive nothing ambiguous about the disclosure, as it made clear the arbitrator was no longer an active licensee. And we see no reason why the arbitrator was required to mention State Bar Rule 2.30 in his disclosures. Defendants were represented by counsel, and the State Bar Rules are publicly available. (Rules of the State Bar <https://www.calbar.ca.gov/legal-professionals/rules/rules-state-bar> [as of August 18, 2026].) Regardless of what Defendants may have actually known, “[g]enerally, an attorney’s knowledge is imputed to [the] client,” “and an
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attorney is presumed to know the laws and rules of procedure which govern the forms of litigation, the legal remedies, which [the attorney] selects and pursues.” (Strong v. Sutter County Bd. of Supervisors (2010) 188 Cal.App.4th 482, 498 [cleaned up].)
Defendants also argue that “if Rule 2.30’s limitation on [the arbitrator]’s authority to act as an arbitrator is jurisdictional, it cannot be” forfeited. While Defendants argue, relying on section 170.6, that a disqualified arbitrator lacks jurisdiction over the parties to an arbitration, the arbitrator here was not disqualified. Defendants cite no law, nor have we located any, for the proposition that Rule 2.30 and section 6125 are jurisdictional, much less that an inactive licensee lacks jurisdiction over the parties to an arbitration. If parties may agree to have a nonlawyer act as an arbitrator (Code Civ. Proc., § 1141.18), we fail to perceive how or why an arbitrator’s licensure status affects the arbitrator’s jurisdiction to serve as an arbitrator or violates public policy.
Because Defendants did not timely disqualify the arbitrator, they forfeited this issue.
C.
Defendants claim the arbitrator was required to disqualify himself after their counsel objected to him accepting an offer to serve as a mediator in an unrelated matter involving Alharbi Brothers’ counsel’s firm. Once again, Defendants’ failure to object timely on this basis forfeited the issue. But even on the merits, the arbitrator was not required to disqualify himself on this record.
Under section 1286.2(a)(6)(B), a court “shall vacate” an arbitration award if the arbitrator “was subject to disqualification upon grounds specified
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in Section 1281.91 but failed upon receipt of [a] timely demand to disqualify himself or herself.” (Italics added.)
Defendants forfeited this ground for disqualification. One of the questions in the initial disclosure form asked whether, while the arbitration was pending, the arbitrator would “entertain offers of employment or new professional relationships in any capacity . . . from a party or a lawyer for a party, including offers to serve as a dispute resolution neutral in another case.” (Italics added.) He responded, “I am a professional ADR service provider” who “mediate[s] and arbitrate[s] many cases a year . . . . If I am invited to serve in another case by any firm/attorney involved in this matter, it will be disclosed and the parties to this case will have an opportunity to object.” If Defendants were opposed to the arbitrator serving as a neutral in other matters involving Alharbi Brothers’ counsel, they should have served a notice of disqualification within 15 days of that October 2023 disclosure. They failed to do so. Accordingly, they forfeited the issue. (§ 1281.91(c).)
At any rate, because the arbitrator informed the parties of his offer and acceptance of employment as a neutral by Alharbi Brothers’ counsel’s firm, under California’s Ethics Standards for Neutral Arbitrators in Contractual Arbitration, he was “not subject to disqualification under standard 10(a)(2), (3), or (5) solely on the basis of that offer or [his] acceptance of that offer.” (Std. 12(d)(3)(C), italics added.) Standard 10(a)(5) concerns the reason for disqualification Defendants invoke on appeal—“[i]f any ground specified in Code of Civil Procedure section 170.1 exists and the party makes a demand that the arbitrator disqualify himself or herself” under section 1281.91(d).
Because Defendants sought to disqualify the arbitrator solely based on his acceptance of an offer to serve as a neutral in a matter involving the firm of Alharbi Brothers’ counsel, under the Ethics Standards, the arbitrator was
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not subject to disqualification. Accordingly, the arbitrator’s refusal to disqualify himself on this basis is not grounds to vacate the arbitration award.
D.
Defendants contend the arbitrator exceeded his authority in holding them all liable jointly and severally on an alter-ego basis because (1) except for Fruiticana, they were not signatories to the BPA, and they stipulated to arbitrate only the claims and remedies as to which Alharbi Brothers put them on notice; (2) the complaint did not allege alter ego liability; and (3) alter ego is beyond the scope of the issues the parties agreed were arbitrable. We disagree.
1.
Abdallah, Ali, and CTown were not parties to, and accordingly could not be forced to submit to arbitration under, the BPA. But Defendants’ counsel later executed a joint stipulation under which “[Alharbi Brothers], on the one hand, and Defendants, on the other hand, and each of them, have agreed to submit the present case for mediation and arbitration.” (Italics added.) While Defendants reserved the right to “claim they are not bound to the” BPA’s arbitration provision, they nonetheless stipulated “to proceed with binding arbitration.”
A different division of this court found such attorney-signed stipulations to arbitrate binding on parties who did not personally sign them where the parties ratified the stipulation by conducting themselves “consonant with a binding arbitration.” (Rivera v. Shivers (2020) 54 Cal.App.5th 82, 93.) Here, Defendants were represented at and participated in the arbitration proceeding at all times through the same counsel. The record contains no indication Defendants intended not to be
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bound to the stipulation to arbitrate until after the award was made against them. Rather, they conducted themselves consistently with binding arbitration.
Accordingly, we conclude Defendants voluntarily submitted themselves to the arbitrator’s jurisdiction.
2.
We further determine Defendants were on notice of the possibility they would be held liable on an alter ego theory. “‘To recover on an alter ego theory, a plaintiff need not use the words “alter ego,” but must allege sufficient facts to show a unity of interest and ownership, and an unjust result if the corporation is treated as the sole actor.’” (A.J. Fistes Corp. v. GDL Best Contractors, Inc. (2019) 38 Cal.App.5th 677, 696.)
Here, the complaint alleges many irregularities in the business of CTown, Fruiticana, Ali, and Abdallah. For example, during due diligence, “it was discovered that SBA Loans were secured on the personal property for C Town, but the named debtor was Corona Town,” while “the Franchise Tax Board and other government agencies . . . listed/named Fruiticana as the owner of C Town.” Further, “it was discovered that the Fruiticana did not have a proper lease for C Town premises”; instead, “the lease for C Town was actually in the name of Defendant [Abdallah], in his individual capacity. It is upon information and belief that [Abdallah] as an individual and in his capacity as officer for Corona Town, had previously sold C Town to Fruiticana without getting consent from the Landlord of the premises to which C Town is located and operates from, and without abiding by the proper notice requirements to creditors.” The complaint further alleges on information and belief “that Defendant Fruiticana, [Abdallah], and Corona Town are in a defacto partnership, whereby Defendant Fruiticana owns and operates
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C Town, and [Abdallah] holds the lease, and Corona Town owns or holds an interest in certain personal property that is part of the overall business of C Town. Accordingly, the named defendants shall be referenced herein as Defendant[] Sellers.” “Based on . . . information and belief, it is further alleged that after entering the [BPA], Defendant [Ali] tried to purchase the real property where C Town is located from the Landlord, in the name of a different entity so that they could quickly enter a new lease between the newly created shell entity and Defendant Sellers at a higher rental rate and then assign said new lease for C Town to Plaintiff with that higher rental rate.” These allegations suggest unity of interest and ownership and an unjust result should Defendants not be held liable together.
The complaint also pleads the BPA is “between [Alharbi Brothers] and Defendants” and seeks a declaration of “the rights and obligations of the Defendant Sellers and” Alharbi Brothers. (Italics added.) Given only Fruiticana was a signatory to the BPA, the allegations were sufficient to put Defendants on notice that Alharbi Brothers sought to hold all Defendants liable for the acts of one another. Coupled with the other allegations, this put Defendants on notice that alter ego liability was on the table. Whether sufficient evidence of alter ego liability was presented is not open to review. (Moncharsh, 3 Cal.4th at p. 11.)
3.
Alter ego liability is also fairly encompassed within the issues the parties agreed to arbitrate.
“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
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a decision.” (Gueyffier v. Ann Summers, Ltd. (2008) 43 Cal.4th 1179, 1184.) “An exception to the general rule assigning broad powers to the arbitrators arises when the parties have, in either the contract or an agreed submission to arbitration, explicitly and unambiguously limited those powers.” (Id. at p. 1185.) “The scope of an arbitrator’s authority is not so broad as to include an award of remedies ‘expressly forbidden by the arbitration agreement or submission.’” (Ibid.)
The BPA does not, as Defendants claim, “preserve[] each party’s right to have the courts decide all equitable and provisional remedies,” including alter ego liability. Rather, the BPA’s arbitration provision expressly provides that “[t]he Parties agree that any dispute or claim in law or equity arising between them out of this Agreement or any resulting transaction, which is not settled through mediation, shall be decided by neutral, binding arbitration.” (Italics added.) The BPA therefore does not preclude the arbitrator from reaching the equitable issue of alter ego.
Nor does the CAMS Agreement prevent the arbitrator from making alter ego findings. In the CAMS Agreement, the parties indicated the issues for arbitration were “[t]he enforcement of a purchase agreement for a grocery store business that has leased premises and breach thereof. Then damages arising therefrom, and reduction of purchase price based on breach and/or delay. Plaintiffs seek performance and damages, and defendants deny said claims.” As to the arbitrator’s jurisdiction, the CAMS Agreement provided: “Purchase Agreement has arbitration clause for the above said issues, and arbitrator can adjudge as to all issues, including awarding or denying specific performance, claims of breach, and monetary damages.” Making alter ego findings is well within the broad scope of these provisions and is not expressly excluded from the arbitrator’s powers.
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Accordingly, the arbitrator did not exceed his authority in finding all Defendants liable as alter egos of one another.
E.
Defendants claim the arbitrator exceeded his authority in awarding punitive damages. We conclude otherwise.
As noted above, an arbitrator’s authority is generally construed broadly. Defendants concede punitive damages were prayed for in the complaint. They were accordingly on notice that such damages were at issue. And the broad language of the CAMS Agreement—which gives the arbitrator jurisdiction to adjudge “monetary damages”—does not specifically preclude the recovery of punitive damages. Awarding punitive damages was thus within the arbitrator’s purview.
Yet Defendants argue awarding punitive damages “violated both the AAA rules and [the arbitrator’s] own rules of procedure” because punitive damages were requested by Alharbi Brothers in neither its opening nor closing arbitration briefs. We grant Defendants’ unopposed request that we judicially notice the AAA Commercial Arbitration Rules and AAA Consumer Arbitration Rules. (Evid. Code, § 452(h); Boghos v. Certain Underwriters at Lloyd’s of London (2005) 36 Cal.4th 495, 505, fn. 6 [judicially noticing AAA rules].)
To the extent Defendants rely on the AAA Consumer Arbitration Rules, however, they do not apply—as they themselves recognize, the arbitrator’s invocation of these rules was likely a typographical error. And to the extent Defendants rely on rule R-4(a)(iv)(d) of the AAA Commercial Arbitration Rules, their focus is misplaced. Rule R-4 details the filing requirements and procedures that apply to the parties. “Absent an express and unambiguous limitation in the submission to arbitration, an arbitrator has the authority to
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award any relief rationally related to [the arbitrator’s] factual findings.” (Emerald Aero, LLC v. Kaplan (2017) 9 Cal.App.5th 1125, 1140 [cleaned up].) While Emerald Aero vacated an arbitration award where punitive damages were never requested in the complaint and only requested by a party roughly 24 hours before the hearing, here, the arbitrator exercised his authority to make an award of damages requested but not subsequently pursued by the party. Emerald Aero is accordingly distinguishable in that Defendants had notice in the complaint of the possibility of punitive damages, which the arbitrator ultimately awarded without further request from Alharbi Brothers.
Defendants also argue the award is problematic in awarding punitive damages against all Defendants but awarding damages on the IIEPA claim only against CTown, Abdallah, and Ali. They argue this makes it “unclear whether the arbitrator attempted to award punitive damages on the breach of contract claim, awarded them under the [IIEPA] claim, or both.” They further note punitive damages were pled in the complaint against only Abdallah and Ali. But we have affirmed the arbitrator’s alter ego findings, which permitted the arbitrator to hold all Defendants liable for punitive damages regardless of whether each Defendant was found independently liable for the underlying tort.
Defendants further argue the punitive damages award is flawed because, in the arbitrator’s own words, he “considered only ‘collateral evidence of the ability of Defendants to respond to this Award.’” This argument, however, essentially challenges the sufficiency of the evidence underlying the award, and “a court may not review the sufficiency of the evidence supporting an arbitrator’s award.” (Moncharsh, 3 Cal.4th at p. 11.) To the extent Defendants suggest this is a due process issue, “the fundamental fallacy resides in [their] basic premise[] that due process
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requires judicial review of private arbitral awards of punitive damages,” which “misconceives the applicability of the due process clause” to private arbitration. (Rifkind & Sterling, Inc. v. Rifkind (1994) 28 Cal.App.4th 1282, 1291.)
Accordingly, we perceive no grounds to vacate the punitive damages award.
F.
Finally, Defendants argue the arbitrator exceeded his authority in sanctioning them without notice. In their briefing, Alharbi Brothers did not take a position on this issue. We conclude that, while the arbitrator exceeded his authority in this respect, it does not warrant vacating the entire arbitration award.
Although Defendants did not raise this issue below, we exercise our discretion to address this pure question of law on undisputed facts. (Fort Bragg Unified School Dist. v. Colonial American Casualty & Surety Co. (2011) 194 Cal.App.4th 891, 907.)
“An arbitrator exceeds his powers by conducting an unfair proceeding.”
(Emerald Aero, 9 Cal.App.5th at p. 1142.) “Thus, ‘arbitration procedures that interfere with a party’s right to a fair hearing are reviewable on appeal.’” (Ibid.) “Notice and an opportunity to be heard are essential ingredients to a fair hearing, and these principles apply to arbitration hearings.” (Ibid.)
Under the AAA Commercial Arbitration Rules applicable to this proceeding, “[t]he arbitrator must provide a party that is subject to a sanction request with the opportunity to respond prior to making any determination regarding the sanctions application.” (Rule R-60(b).) The record here lacks any indication Defendants received notice of, much less a chance to be heard on, the sanctions issue the arbitrator seemingly raised on his own.
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Accordingly, the procedure by which the arbitrator imposed sanctions was unfair and therefore exceeded his authority. We conclude, however, the award can be corrected without affecting its merits by striking the sanctions award. (Code Civ. Proc., § 1286.6(b).)
III.
We reverse the order confirming the arbitration award to the extent it confirms the arbitrator’s award of sanctions against Defendants and vacate the judgment. On remand, we direct the trial court to vacate the portion of the arbitration award issuing sanctions against Defendant but otherwise confirm the award and enter judgment accordingly. As modified, the judgment is affirmed in all other respects. The parties shall bear their own costs on appeal. (Cal. Rules of Court, rule 8.278(a)(3).)
CASTILLO, J.
WE CONCUR:
MCCONNELL, P. J.
O’ROURKE, J.