Sargon Enterprises, Inc. v. Browne George Ross, LLP

Respondent Browne George Ross LLP (BGR) represented

appellant Sargon Enterprises Inc. (Sargon) in long-running

litigation against the University of Southern California (USC).

After that litigation concluded, Sargon filed the present legal

malpractice action against BGR. BGR petitioned to compel

arbitration, and the superior court granted the petition and

ordered the parties to arbitrate.

The parties litigated two claims before the arbitrator:

Sargon’s claim against BGR for legal malpractice, and BGR’s

claim against Sargon for breach of contract. The breach of

contract claim alleged that the parties’ arbitration agreement

precluded resort to the courts to resolve disputes, and thus that

Sargon’s filing of the malpractice action constituted a breach of

the arbitration agreement.

The arbitrator found Sargon’s legal malpractice claim was

barred by a release of claims earlier entered into by the parties.

The arbitrator also found that Sargon had breached the

arbitration agreement by filing the malpractice action in superior

court and ordered Sargon to pay BGR damages of $200,000. The

trial court confirmed the arbitration award and entered

judgment.

We reverse in part. We conclude that the arbitrator erred

in finding that the parties’ arbitration agreement included a

promise to forego litigation, and thus in concluding that Sargon

breached the arbitration agreement by filing a malpractice action

in superior court. We further conclude that the arbitrator’s

award violated Sargon’s statutory right, as articulated in the

3

California Arbitration Act (the Act), Code of Civil Procedure1

section 1280 et seq., to seek a preliminary determination of

arbitrability from a court. Therefore, notwithstanding the

limited judicial review generally afforded arbitration awards, the

present arbitration award is subject to correction.

We do not, however, vacate the arbitration award in its

entirety. Because there is no basis for reversing the summary

disposition of Sargon’s legal malpractice claim against BGR—and

because the breach of contract and legal malpractice claims

depend on entirely separate facts and legal theories—we can

strike the portion of the arbitration award adjudicating BGR’s

breach of contract claim without affecting the merits of the

arbitrator’s summary disposition of Sargon’s malpractice claim.

We therefore direct the trial court to correct the arbitration

award and, as corrected, to confirm it.

FACTUAL AND PROCEDURAL BACKGROUND

I.

The Sargon/USC Litigation

A. First Trial and Appeal

In 1991, Sargon patented a dental implant developed by its

president and chief executive officer, Dr. Sargon Lazarof

(Lazarof). In 1996, Sargon contracted with USC to conduct a

five-year clinical study of the implant. (Sargon Enterprises, Inc.

v. University of Southern California (2012) 55 Cal.4th 747, 754–

755 (Sargon).)



1 All subsequent undesignated statutory references are to

the Code of Civil Procedure.

4

In May 1999, Sargon sued USC and members of its faculty

for breach of contract. USC cross-complained. (Sargon, supra,

55 Cal.4th at p. 754.)

Before trial, the trial court excluded evidence of Sargon’s

lost profits on the ground that USC could not reasonably have

foreseen them. A jury then found that USC had breached the

contract, and it awarded Sargon $433,000 in compensatory

damages. The jury also found in Sargon’s favor on USC’s crosscomplaint.

(Sargon, supra, 55 Cal.4th at p. 754.)

Sargon appealed. The Court of Appeal reversed the

judgment, holding that the trial court had erred in excluding

evidence of Sargon’s lost profits. (Sargon, supra, 55 Cal.4th at

p. 754.)

B. Sargon’s Retention of Browne, Woods & George LLP

In 2005, Sargon retained Browne, Woods & George LLP

(BWG) (now known as BGR) to represent it on remand.

2 The

retainer agreement signed by Sargon and BWG in September

2005 contained an arbitration clause, which provided as follows:

“Any and all disputes, claims, or proceedings between you and

BWG arising out of or relating to any work or services performed

by BWG, the nature, terms, or enforceability of this Agreement,

any claims for malpractice or professional negligence, collection

or payment of bills, fees, and costs, or any dispute of any nature

between you and BWG shall be settled by binding and final

arbitration held before a single arbitrator from JAMS. . . .

[¶] The parties agree to split evenly the fees and costs of the



2 In this opinion, we will sometimes use “BGR” to refer to

both Browne, Woods & George LLP and Browne George Ross

LLP.

5

arbitrator. Arbitration is final and binding on both BWG and

you. You and BWG are waiving the right to seek remedies in

court, including the right to jury trial. Pre-arbitration discovery

is generally more limited than, and different from, court

proceedings. An arbitration award is not required to include

factual findings or legal reasoning, and your and BWG’s right to

appeal or to seek modification of arbitration rulings is strictly

limited.”

C. Second Trial

Sargon’s case against USC proceeded to retrial. USC

moved to exclude as speculative the proffered opinion testimony

of one of Sargon’s experts, James Skorheim. At the conclusion of

an eight-day evidentiary hearing, the trial court excluded

Skorheim’s testimony. (Sargon, supra, 55 Cal.4th at pp. 755–

767.) Thereafter, in August 2007, the parties stipulated to entry

of judgment for Sargon on the breach of contract claim in the

amount of $433,000.

D. The Interpleader Action

In January 2008, following entry of the stipulated

judgment, USC filed an interpleader action against Sargon and

several law firms, including BGR, for the resolution of attorney

fee disputes. Sargon asked BGR to represent it in the

interpleader action.

Before accepting the representation, BGR sent Dr. Lazarof

a letter stating that the firm’s representation of Sargon presented

a potential conflict of interest, as a result of which the firm

“would not feel comfortable proceeding absent your written,

informed consent indicating that there are no actual or potential

disputes or claims between you and our firm accompanied by full

mutual releases between my firm and you.” The letter then

6

stated as follows: “[O]ther than rights and responsibilities

specifically set forth in the [September 2005 retainer

agreement]—all of which shall bind the parties only from this

point forward—there are no additional rights, claims, obligations,

liabilities or responsibilities (whether past or present) between

you and my firm. . . . Thus, each party based on known facts

accordingly represents and warrants that he/it hereby releases

and absolutely forever discharges the other(s) of and from any

and all claims . . . and causes of action of every kind and nature

whatsoever, by reason of any matter or thing that directly or

indirectly is connected with the Action or the parties’ relationship

as of the date of this Agreement. . . .” Lazarof signed the letter on

behalf of himself and Sargon in February 2008.

E. The Second Appeal

Sargon appealed from the judgment entered after the

second trial. In February 2011, the Court of Appeal reversed the

judgment on the ground Sargon’s expert’s testimony should have

been admitted, and it remanded for a new trial on lost profits; it

also affirmed the trial court’s $1.8 million attorney fee award to

Sargon. (Sargon, supra, 55 Cal.4th at pp. 767.) However, the

Supreme Court granted review and reversed the decision of the

Court of Appeal, effectively affirming the $433,000 stipulated

judgment. (Id. at p. 781.)

II.

The Present Action

A. Sargon’s Legal Malpractice Complaint Against BGR

Sargon filed a complaint for legal malpractice against BGR

in May 2014. The complaint alleged that in August 2007, BGR

advised Sargon to enter into a stipulated judgment with USC

before appealing the order excluding the testimony of Sargon’s

7

lost profits expert. When that order ultimately was affirmed,

Sargon allegedly was not permitted to offer alternative evidence

of lost profits because BGR had failed to preserve the issue.

Sargon asserted that BGR “knew or should have known that

Sargon’s entry into a stipulated judgment [might] preclude

Sargon from introducing evidence relating to lost profits. [BGR],

however, advised Plaintiff Sargon to enter into the stipulated

judgment. [BGR’s] advice, which precluded Sargon from

introducing evidence relating to lost profits, fell below the

standard of care.”

B. BGR’s Demand for Arbitration and Motion to Compel

Arbitration

BGR filed a demand for arbitration with JAMS in June

2014. BGR asserted two claims: “(1) for damages resulting from

[Sargon’s] breach of the arbitration clause in the parties’

September 2, 2005 engagement and fee agreement, and (2) to

procure an award of declaratory relief establishing the lack of

merit to [Sargon’s] lawsuit entitled Sargon Enterprises, Inc. v.

Browne George Ross, LASC Case No. BC546363 (filed May 20,

2014).” Sargon filed an “Answer and Counter-Claim for Legal

Malpractice.”

BGR then filed a petition to compel arbitration of Sargon’s

pending superior court action for legal malpractice. The petition

asserted that under the terms of the 2005 retainer agreement,

“[a]ny and all disputes between BGR and [Sargon] regarding

BGR’s representation of [Sargon] must be resolved in

arbitration.” Sargon opposed the petition to compel, contending

that although it had agreed to arbitrate disputes with BWG, it

had never entered into such an agreement with BGR.

8

On August 26, 2014, the trial court found that BGR “has

met its burden of proof that there is a valid binding arbitration

clause in the 9/2/05 retainer agreement between [Sargon] and

BWG (now known as [BGR]) and that it is enforceable.” The

court granted the petition and ordered the parties to arbitrate.

III.

Arbitration Proceedings and Petition to

Confirm Arbitration Award

A. Arbitration Proceedings

1. Sargon’s legal malpractice claim

The arbitrator summarily rejected Sargon’s legal

malpractice claim. The arbitrator found that in February 2008,

when Sargon retained BGR to represent it in the interpleader

action, Sargon released BGR and its attorneys from all claims

that existed as of that date. Further, “there is no material issue

of fact as to whether the facts giving rise to [Sargon’s] pleaded

claims of malpractice were known to [Sargon] at the time

Dr. Lazarof executed the Release Agreement in February 2008.

Those facts—BGR’s advice to enter into the stipulated judgment

in the USC Action and the effect thereof—were known to

[Sargon] at the time of the advice and in February 2008. [¶] . . .

All claims based on these facts therefore were released.”

2. BGR’s breach of contract claim

Sargon sought leave to file a motion seeking summary

disposition of BGR’s breach of contract claim, urging that Sargon

had a constitutionally protected right to file a lawsuit. The

arbitrator denied Sargon’s request. Subsequently, the arbitrator

held a one-day hearing on BGR’s breach of contract claim. At the

conclusion of the hearing, the arbitrator found as follows:

9

(1) BGR proved the existence of a contract—namely, the

retainer agreement entered into between the parties in

September 2005. Sargon breached the retainer agreement by

filing a malpractice action against BGR in the superior court, “in

contravention of the clea[r] contractual clause mandating

arbitration for ‘[a]ny and all disputes, claims, or proceedings

between [Sargon] and BWG . . . .”

(2) BGR suffered damages as a result of Sargon’s breach.

“[Sargon’s] breach caused the very injuries—the public airing of a

dispute, and multiplication of legal proceedings—[that]

arbitration is intended to prevent. [Sargon’s] lawsuit was

publicized nationally, with the headlines ‘Browne George Faces

Malpractice Suit Over Sargon-USC Row’ and ‘Browne George

Gets Arbitration For Sargon Malpractice Suit.’ [Sargon’s] lawsuit

also multiplied legal proceedings in this matter, as BGR was

required to litigate the post hoc justifications proffered by

[Sargon] in an effort to maintain its lawsuit in court, rather than

submit to arbitration, as the Engagement Agreement mandated.”

Accordingly, Sargon “inflicted injury on BGR’s reputation, for

which [Sargon] is liable for general damages.”

(3) Sargon also breached the implied covenant of good

faith and fair dealing. Specifically, Sargon unfairly interfered

with BGR’s right to receive the benefits of the contract, by

breaching the arbitration clause without a good faith belief in its

right to do so. After filing the lawsuit and being apprised of the

arbitration clause, Sargon did not voluntarily dismiss its lawsuit

and submit its claims to arbitration.

The arbitrator therefore found that BGR had proven that

Sargon breached the retainer agreement and awarded BGR

$200,000 “as damages against [Sargon].”

10

B. Order Confirming Arbitration Award; The Present

Appeal

BGR petitioned to confirm the arbitration award; Sargon

opposed the petition to confirm and cross-petitioned to vacate.

Sargon argued that the damage award against Sargon for breach

of contract exceeded the arbitrator’s powers because it violated

Sargon’s constitutional right to petition, and the arbitrator’s

award of damages was not rationally related to Sargon’s breach.3

The trial court granted the petition to confirm and denied

the petition to vacate. Judgment on the arbitration award was

entered, and Sargon timely appealed.

On July 5, 2017, we issued a letter pursuant to

Government Code section 68081 asking the parties to brief the

following issues: “(1) Does the California Arbitration Act,

including without limitation Code of Civil Procedure sections

1281.2, 1281.7, and 1281.12, express a legislative intent that

issues of arbitrability should be resolved by a superior court

unless an arbitration agreement specifically provides otherwise?

[¶] (2) If so, was the arbitrator’s breach of contract award for

Sargon’s filing of the underlying legal malpractice action

inconsistent with Sargon’s statutory rights or an explicit

legislative expression of public policy, within the meaning of

Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 32 [(Moncharsh)],

Board of Education v. Round Valley Teachers Assn. (1996) 13

Cal.4th 269, 275–277 [(Round Valley)], and Richey v. AutoNation,

Inc. (2015) 60 Cal.4th 909, 916–917 [(Richey)]?” Both parties

filed letter briefs responding to these questions.



3 Sargon did not seek to vacate the arbitrator’s ruling on its

legal malpractice claim.

11

CONTENTIONS

Sargon contends that the arbitrator’s award of breach of

contract damages violated Sargon’s constitutional and statutory

right to petition the courts, and the award is subject to judicial

review because it contravenes a statutory right or an explicit

legislative expression of public policy.

BGR contends that Sargon waived the right to challenge

the arbitrator’s award of contract damages. Alternatively, BGR

urges that the arbitrator’s award is consistent with Sargon’s

right of petition and, in any event, the award is not subject to

substantive judicial review.

DISCUSSION

I.

Sargon Did Not Waive Its Right to Challenge

the Arbitrator’s Award of Contract Damages

We begin with BGR’s contention that Sargon waived its

objection to the breach of contract award. BGR asserts that a

party may “waive any objection to arbitrability by voluntarily

submitting to the jurisdiction of the arbitrator, or participating in

an arbitration proceeding without objecting to arbitral

jurisdiction.” In the present case, BGR contends that Sargon

waived any objection to the arbitrator considering the breach of

contract claim because Sargon did not assert it in the trial court

“pre-award.”

BGR’s waiver argument is without merit. Our Supreme

Court rejected a similar argument in Moncharsh, supra,

3 Cal.4th at p. 29. There, Moncharsh petitioned the superior

court to vacate or correct an unfavorable arbitration award,

contending that the parties’ agreement to arbitrate was

contained within an employment contract with an illegal fee-

12

splitting agreement. The defendant responded that Moncharsh

had waived the illegality issue by failing to raise it in the trial

court pre-award. The Supreme Court concluded that because the

asserted illegality claim would not have been a proper basis for

opposing a petition to compel arbitration under section 1281.2,

Moncharsh was not required to raise the issue in the trial court

pre-award. The Court explained: “Moncharsh does not contend

the alleged illegality constitutes grounds to revoke the entire

employment contract. Nor does he contend the alleged illegality

voids the arbitration clause of that contract. Accordingly, the

legality of the fee-splitting provision was a question for the

arbitrator in the first instance. Thus, Moncharsh was not

required to first raise the issue of illegality in the trial court in

order to preserve the issue for later judicial review.” (Moncharsh,

supra, 3 Cal.4th at p. 30, italics added.)

As relevant to the present case, the statutory grounds on

which a party may oppose arbitration are limited: Pursuant to

section 1281.2, a court “shall” order parties to arbitrate if it

determines that an agreement to arbitrate exists, unless it finds

that (a) the right to compel arbitration has been waived by the

moving party, (b) grounds exist for revocation of the agreement,

or (c) a party to the arbitration agreement is also a party to a

pending court action with a third party arising out of the same

transaction. The statute is explicit, moreover, that if the court

determines a written agreement to arbitrate a controversy exists,

an order to arbitrate such controversy “may not be refused on the

ground that the petitioner’s contentions lack substantive merit.”

(§ 1281.2, italics added.)

In the present case, Sargon’s contention that breach of

contract damages were not recoverable went to the “substantive

13

merit” of BGR’s claims, not to waiver or revocation. Accordingly,

such contention was not a proper basis on which to oppose the

order to arbitrate, and Sargon’s failure to oppose arbitration on

that ground did not waive the issue.

Sargon was required to raise its objection to a breach of

contract award with the arbitrator in order to preserve it for

judicial review (Moncharsh, supra, 3 Cal.4th at p. 30), and it did

so. Prior to the arbitration hearing, Sargon urged the arbitrator

to summarily dispose of BGR’s breach of contract claim because

BGR was seeking to recover damages for Sargon’s “act of filing a

lawsuit,” which it alleged was “constitutionally privileged

conduct.” Sargon made the same point in its opening statement

before the arbitrator, asserting that the damages BGR sought

“aren’t recoverable based upon the filing of a lawsuit because

that’s a privileged act under the [Code of Civil Procedure].”

Then, at the conclusion of the arbitration hearing, Sargon

submitted proposed findings of facts and conclusions of law

urging that BGR was not entitled to breach of contract damages

because (1) BGR obtained specific performance and made a

binding election of remedies, (2) “the Legislature has spoken in

great detail on the issue of contractual arbitration in the

California Arbitration Act, which contains no provisions

permitting damages to be awarded when a party seeks relief in

Court,” and (3) “the public policy goals served by arbitration as

expressed in the California Arbitration Act cannot overcome the

constitutional right of litigants to petition their government for

redress.” Accordingly, Sargon adequately preserved for our

review the issue of the arbitrator’s power to award breach of

contract damages. We turn now to that issue.

14

II.

Judicial Review of Arbitration Awards

A. Overview

The legal standards governing judicial review of arbitration

awards are well established. “California law favors alternative

dispute resolution as a viable means of resolving legal conflicts.

‘Because the decision to arbitrate grievances evinces the parties’

intent to bypass the judicial system and thus avoid potential

delays at the trial and appellate levels, arbitral finality is a core

component of the parties’ agreement to submit to arbitration.’

(Moncharsh[, supra,] 3 Cal.4th [at p.] 10).) Generally, courts

cannot review arbitration awards for errors of fact or law, even

when those errors appear on the face of the award or cause

substantial injustice to the parties. (Id. at pp. 6, 28.) . . . .

“The California Arbitration Act (Code Civ. Proc., § 1280 et

seq.) and the Federal Arbitration Act (9 U.S.C. § 10 et seq.)

provide limited grounds for judicial review of an arbitration

award. Under both statutes, courts are authorized to vacate an

award if it was (1) procured by corruption, fraud, or undue

means; (2) issued by a corrupt arbitrator; (3) affected by

prejudicial misconduct on the part of the arbitrator; or (4) in

excess of the arbitrator’s powers. (Code Civ. Proc., § 1286.2,

subd. (a); 9 U.S.C. § 10(a).) An award may be corrected for

(1) evident miscalculation or mistake; (2) issuance in excess of the

arbitrator’s powers; or (3) imperfection in the form. (Code Civ.

Proc., § 1286.6; 9 U.S.C. § 11.)” (Richey, supra, 60 Cal.4th at

p. 916.) Our analysis concerns whether the arbitrator acted in

excess of his powers when he awarded BGR damages for Sargon’s

filing the malpractice action in superior court. (Code Civ. Proc.,

§ 1286.2, subd. (a)(4).)

15

We review de novo the trial court’s decision that the

arbitrator did not exceed his powers. (Richey, supra, 60 Cal.4th

at p. 918, fn. 1; Ling v. P.F. Chang’s China Bistro, Inc. (2016) 245

Cal.App.4th 1242, 1252.)

B. Notwithstanding the Limited Judicial Review

Normally Afforded Arbitration Awards, an Award

Must Be Vacated If It Violates a Party’s Statutory

Rights or Clearly Defined Public Policy

One of the ways an arbitrator exceeds his or her powers is

by issuing an award “that violates a party’s unwaivable statutory

rights or that contravenes an explicit legislative expression of

public policy.” (Richey, supra, 60 Cal.4th at p. 916.) Thus,

although our Supreme Court has noted that arbitral “finality is

the rule rather than the exception” (Round Valley, supra,

13 Cal.4th at p. 277), it has on several occasions vacated

arbitration awards that violate a party’s statutory rights or welldefined

public policy. Two such cases are illustrative.

In Round Valley, a school district notified a probationary

teacher that it would not renew his teaching contract for the

following academic year. The teacher filed a grievance with the

district, alleging that the nonrenewal violated a provision of the

collective bargaining agreement (CBA) entered into by the

district and a teachers’ association. That provision required the

district to provide reasons for a decision not to renew a teaching

contract and to provide a right to appeal. (Round Valley, supra,

13 Cal.4th at p. 273.)

An arbitrator found the district had violated the CBA and

ordered it to comply. (Round Valley, supra, 13 Cal.4th at p. 273.)

The district then petitioned the superior court to vacate the

arbitrator’s award, urging that the award violated provisions of

16

the Education Code that permitted the district to decline to

renew a teaching contract without providing a statement of

reasons or a right of appeal. (Id. at pp. 273–274.) The trial court

granted the district’s petition and vacated the award. (Id. at

p. 274.)

The Supreme Court held that the trial court properly

vacated the arbitration award. It explained that when the

Legislature amended the Education Code in 1983, it established a

contract renewal procedure in which a hearing and a statement

of reasons were not required. Further, under the statutory

scheme governing collective bargaining and the reelection of

probationary teachers, “a school district’s decision not to reelect a

probationary teacher after the second year of employment is

vested exclusively in the district and may not be the subject of

collective bargaining.” (Round Valley, supra, 13 Cal.4th at

p. 287.) The arbitrator’s contrary decision conflicted with the

statute, and “because the arbitrator’s decision below is

inconsistent with District’s statutory rights under the Education

Code, the issue is subject to judicial review.” (Id. at pp. 287–288.)

The Supreme Court similarly concluded in Pearson Dental

Supplies, Inc. v. Superior Court (2010) 48 Cal.4th 665 (Pearson

Dental). There, an employer fired the plaintiff, a janitor, when he

was 67 years old. The plaintiff filed a complaint in superior court

alleging age discrimination and wrongful termination. (Id. at

p. 670.) The employer filed a motion to compel arbitration,

contending that the plaintiff was bound by a dispute resolution

agreement requiring him to submit any disputes arising out of

the employment relationship to binding arbitration within one

year of the date the dispute arose. (Id. at pp. 670–671.) The trial

court granted the motion to compel. Thereafter, the arbitrator

17

found the plaintiff’s claims were time-barred because they had

been submitted to arbitration more than a year after the

plaintiff’s termination. (Ibid.) The trial court vacated the

arbitration award, concluding that the arbitrator had made an

error of law by, among other things, misinterpreting the tolling

provisions of section 1281.12. (Id. at p. 672.)

The Supreme Court agreed with the trial court that the

arbitration award was properly vacated. It explained that the

arbitrator had made a clear error of law because under the tolling

provision of section 1281.12, the plaintiff’s filing of the civil action

tolled the applicable time limitations contained in the arbitration

agreement, and thus plaintiff’s claims were not time-barred.

(Pearson Dental, supra, 48 Cal.4th at p. 673–675.) Further, the

error was subject to judicial review: “Here, as a result of the

arbitrator’s clear legal error, plaintiff’s claim was incorrectly

determined to be time-barred. Indeed, the legal error

misconstrued the procedural framework under which the parties

agreed the arbitration was to be conducted, rather than

misinterpreting the law governing the claim itself. [Footnote

omitted.] It is difficult to imagine a more paradigmatic example

of when ‘granting finality to an arbitrator’s decision would be

inconsistent with the protection of a party’s statutory rights’

(Moncharsh, supra, 3 Cal.4th at p. 32) than the present case, in

which, as a result of allowing the procedural error to stand, and

through no fault of the employee or his attorney, the employee

will be unable to receive a hearing on the merits of his FEHA

claims in any forum.” (Id. at pp. 679–680.)

Considered together, Round Valley and Pearson Dental

stand for the proposition that where an arbitrator’s decision has

the effect of violating a party’s statutory rights or well-defined

18

public policies—particularly those rights and policies governing

the conduct of the arbitration itself—that decision is subject to

being vacated or corrected. With this framework in mind, we

now consider Sargon’s claim of error.

III.

The Arbitrator’s Damages Award Violated

Sargon’s Statutory Right to Initiate

Litigation in Court

A. The California Arbitration Act

As pertinent here, “ ‘ “[t]he constitutional right to petition

. . . includes the basic act of filing litigation or otherwise seeking

administrative action.” ’ ” (Briggs v. Eden Council for Hope &

Opportunity (1999) 19 Cal.4th 1106, 1115; see also Cal. Const.,

art. 1, § 3(a).) The right of petition in the context of private

agreements to arbitrate is set out in the Act, which “represents a

comprehensive statutory scheme regulating private arbitration in

this state. [Citation.]” (Moncharsh, supra, 3 Cal.4th at p. 9.)

“The fundamental premise of the [arbitration] scheme is

that ‘[a] written agreement to submit [either a present or a future

controversy] to arbitration . . . is valid, enforceable and

irrevocable, save upon such grounds as exist for the revocation of

any contract.’ (Code Civ. Proc., § 1281.) [Footnote omitted.] The

statutes set forth procedures for the enforcement of agreements

to arbitrate (id., §§ 1281.2–1281.95), establish rules for the

conduct of arbitration proceedings except as the parties otherwise

agree (id., §§ 1282–1284.2), describe the circumstances in which

arbitrators’ awards may be judicially vacated, corrected,

confirmed, and enforced (id., §§ 1285–1288.8), and specify where,

when, and how court proceedings relating to arbitration matters

19

shall occur (id., §§ 1290–1294.2).” (Vandenberg v. Superior Court

(1999) 21 Cal.4th 815, 830.)

As relevant to BGR’s breach of contract claim, the Act

provides that “[i]f a controversy referable to arbitration under an

alleged agreement is involved in an action or proceeding pending

in a superior court,” a party may file a petition for an order to

arbitrate in lieu of an answer to the complaint. (§§ 1292.4,

1281.7.) If a petition is filed, the superior court “shall order the

petitioner and the respondent to arbitrate the controversy” if the

court determines that an agreement to arbitrate the controversy

exists, unless it finds that the right to compel arbitration has

been waived, or grounds exist for the revocation of the

agreement, or a party to the arbitration agreement is also a party

to a pending court action with a third party arising out of the

same transaction and there is a possibility of conflicting rulings.

(§ 1281.2.)

The Act thus anticipates that a party to an arbitration

agreement may file a lawsuit in court, and it describes the

procedural vehicles through which the opposing party may

respond—i.e., it may file either an answer to the complaint or a

section 1281.2 petition to compel. The Act also prescribes the

remedy the court must order if any party demands arbitration of

an arbitrable dispute that is the subject of a lawsuit—specific

performance of the arbitration agreement, not a damages award

for breach of contract. (See, e.g., Espejo v. Southern California

Permanente Medical Group (2016) 246 Cal.App.4th 1047, 1057

[“A petition to compel arbitration is a suit in equity seeking

specific performance of an arbitration agreement.”].)

Significantly for our purposes, the Act separately provides

that a party may challenge the enforceability of an arbitration

20

agreement in court without forfeiting the right to arbitrate

should the challenge to the arbitration agreement be

unsuccessful. Specifically, section 1281.12 says: “If an

arbitration agreement requires that arbitration of a controversy

be demanded or initiated by a party to the arbitration agreement

within a period of time, the commencement of a civil action by

that party based upon that controversy, within that period of

time, shall toll the applicable time limitations contained in the

arbitration agreement with respect to that controversy, from the

date the civil action is commenced until 30 days after a final

determination by the court that the party is required to arbitrate

the controversy, or 30 days after the final termination of the civil

action that was commenced and initiated the tolling, whichever

date occurs first.” (Italics added.)

The Act thus recognizes that a party to an arbitration

agreement may elect to initiate a civil action, rather than an

arbitration proceeding, and it specifically protects the party’s

right to do. Our Supreme Court recently explained why the

Legislature wrote such protection into the Act: “According to its

legislative history, [section 1281.12] prevents ‘parties from being

either forced to abide by arbitration agreements of dubious

validity instead of seeking court evaluation, initiating costly and

duplicative proceedings, or being unfairly deprived of any forum

for resolution of the dispute. Supporters observe that there are

many legitimate reasons why a party might file a lawsuit in court,

rather than demanding or pursuing arbitration. Among these are

the following: (1) the plaintiff may believe the claims are not

subject to arbitration because the arbitration agreement is

unenforceable on grounds of unconscionability or similar

concepts; (2) there may be a dispute about whether the particular

21

claims at issue do or do not fall within the scope of an arbitration

agreement; (3) the plaintiff may contend that one or more of the

statutory grounds for denying a petition to compel arbitration set

forth in Code of Civil Procedure section 1281.2 exist, assuming

the defendant does file a petition to compel arbitration in

response to the plaintiff’s filing of the lawsuit; (4) the plaintiff

may prefer a court trial or jury trial and simply be hopeful that

the defendant will not assert any right to arbitrate the claims, for

whatever reason [indeed, the defendant may decide that it

prefers a court proceeding as well]; and (5) the plaintiff might not

even be aware that there is an arbitration agreement governing

the controversy.’ (Assem. Com. on Judiciary, Analysis of Assem.

Bill No. 1553 (2005–2006 Reg. Sess.) for hearing Apr. 5, 2005,

p. 3, underlining and extra capitalization omitted.)” (Pearson

Dental, supra, 48 Cal.4th at pp. 673–674, italics added.)

B. The California Arbitration Act Preserves the Right of

Parties to an Arbitration Agreement to Initiate

Litigation in Court

The courts have relied on the statutory provisions described

above to hold that even where a party has entered into an

arbitration agreement, that party may file a complaint in

superior court seeking resolution of a dispute potentially subject

to the arbitration agreement. In Brock v. Kaiser Foundation

Hospitals (1992) 10 Cal.App.4th 1790, 1795–1796 (Brock), the

court explained: “A party to a contractual arbitration agreement

may compel a recalcitrant party to comply with a valid

agreement by means of a petition pursuant to section 1281.2,

which is in essence a suit in equity to compel specific performance

of the arbitration agreement. [Footnote omitted.] [Citation.] [¶]

But as this court recognized long ago, contractual arbitration is

22

in no sense . . . a usurpation or ouster of the judicial power vested

in the trial court of this state by our Constitution. (Snyder v.

Superior Court (1937) 24 Cal.App.2d 263, 267.) As a result, there

is nothing to prevent one of the parties to a contractual arbitration

provision from resorting initially to an action at law. (Spence v.

Omnibus Industries (1975) 44 Cal.App.3d 970, 975 [(Spence)];

Ross v. Blanchard (1967) 251 Cal.App.2d 739, 742–743.) The

other party, if determined to pursue arbitration, must then take

action to compel arbitration. (Spence, supra, 44 Cal.App.3d at

p. 975.) ‘A right to compel arbitration is not . . . self-executing. If

a party wishes to compel arbitration, he must take active and

decided steps to secure that right, and is required to go to the

court where the [other party]’s action [at law] lies.’ (Gunderson v.

Superior Court (1975) 46 Cal.App.3d 138, 143.) Consequently,

the party seeking to enforce the contractual arbitration clause

must file the section 1281.2 petition in the action at law (or raise

it as an affirmative defense in the answer) or else the right to

contractual arbitration is waived.” (Italics added; see also Dial

800 v. Fesbinder (2004) 118 Cal.App.4th 32, 44–45 [quoting

Brock].)

The court similarly described the effect of an arbitration

agreement on the rights of parties to pursue civil litigation in

Spence, supra, 44 Cal.App.3d at p. 975: “Plaintiffs initially

waived arbitration by filing a suit in the superior court on the

basic contract without seeking arbitration. [Citations.] This was

their prerogative. A provision for arbitration does not divest the

court of jurisdiction to hear the controversy. It merely means

that if one of the parties chooses arbitration, he may so petition

the court and the court will stay proceedings, order arbitration,

then confirm the award. (Code Civ. Proc., § 1280 et seq.) But

23

lacking a request for arbitration, the courts stand ready, willing

and able to decide controversies between the parties even though a

provision for arbitration exists.” (Italics added.)

And in Ross v. Blanchard (1967) 251 Cal.App.2d 739, 742,

the court said as follows: “Our own reading of California’s

arbitration statute and the cases interpreting it convinces us that

a contract to arbitrate by no means precludes a party to the

contract from initially resorting to the courts. . . . [¶] . . . [¶]

From [section 1281.4] and other sections of the statute, both

directly and by implication, it is apparent, [¶] 1. either party may

demand arbitration and both may waive it [citation]; [¶] 2. a

party may be estopped to demand arbitration; [¶] 3. the

particular issue in controversy may not fall within the terms of

the arbitration agreement [citation]; [¶] 4. an agreement to

arbitrate is an affirmative defense [citations].” (Italics added.)

C. Sargon’s Claim That the Arbitrator Exceeded His

Powers By Entering a Breach of Contract Award Is

Subject to Judicial Review

Taken together, the authorities discussed above lead us to

conclude that an arbitration agreement requires a party to

submit a dispute to arbitration if ordered by a court to do so—but

it does not preclude a party from initiating a civil action or asking

a court to resolve disputed issues over an arbitration agreement’s

applicability or enforceability. To the contrary, the Act expressly

protects a party’s right to do so.

In the present case, therefore, none of Sargon’s actions

breached the arbitration provisions of the retainer agreement.

The retainer agreement contained a garden-variety arbitration

clause, requiring the parties to submit to arbitration “[a]ny and

all disputes, claims, or proceedings between you and BWG.” As

24

we have said, such a provision is not self-executing and does not

preclude a party from commencing an action in the superior

court. Nor does an arbitration provision prohibit a party from

filing opposition to a petition to compel arbitration in order to

urge that the arbitration agreement does not bind it, or is

unenforceable, or is inapplicable to the parties’ dispute.

Sargon’s initiation of its malpractice lawsuit in superior

court, therefore, was entirely consistent with the arbitration

agreement. Under that agreement, and pursuant to California

law, Sargon was permitted both to file a complaint in superior

court and to oppose BGR’s petition to compel arbitration. Only

after the superior court ordered it to submit to arbitration was it

required to do so. The arbitrator thus erred when he concluded

that Sargon committed an actionable breach of the arbitration

agreement by “fil[ing] a malpractice claim against BGR in the

Los Angeles Superior Court” and refusing to “voluntarily dismiss

its lawsuit and submit its claims in arbitration.”4



4 Citing Tiri v. Lucky Chances, Inc. (2014) 226 Cal.App.4th

231, 241 (Tiri), BGR urges that parties to an arbitration

agreement may choose to delegate questions of arbitrability to

the arbitrator, and that the parties did so here. BGR is correct

only in part. Although parties to an arbitration agreement may

agree to delegate questions of arbitrability to the arbitrator, it is

the court, not the arbitrator, that must decide the “threshold

issue” of “ ‘the validity . . . of the precise agreement to arbitrate at

issue . . . before ordering compliance with that agreement. . . .’

(Rent-A-Center[, West, Inc. v. Jackson (2010)] 561 U.S. [63],

71 [(Rent-A-Center)].)” (Tiri, supra, at p. 241, fn. 4.) The reason

for this rule is clear: “Delegation clauses have the potential to

create problems of circularity. For example, suppose an

arbitration agreement delegates the issue of enforceability to the

arbitrator. If the arbitrator concludes that the arbitration

25

Further, the arbitrator’s error had the effect of depriving

Sargon of a statutory right—namely, the right pursuant to the

Act (as articulated in sections 1281, 1281.12, 1281.2, and 1292.4)

to test in court the validity and enforceability of an arbitration

agreement before submitting to arbitration. (See Round Valley,

supra, 13 Cal.4th at pp. 287–288; Pearson Dental, supra,

48 Cal.4th at p. 681.) And, as in Pearson Dental, “[i]t is difficult

to imagine a more paradigmatic example of when ‘granting

finality to an arbitrator’s decision would be inconsistent with the

protection of a party’s statutory rights’ ” (Pearson Dental, supra,

48 Cal.4th at p. 680) than the present case, in which Sargon

suffered the entry of a $200,000 damages award against it for

taking an action specifically authorized by the arbitration

statute—that is, challenging the validity of an arbitration

agreement in court—in precisely the manner the statute permits.

Therefore, notwithstanding the limited judicial review generally

afforded arbitration awards, the present arbitration award is

subject to our judicial review.

5



agreement is, in fact, not enforceable, this would mean that the

entire agreement, including the delegation clause, is

unenforceable—a finding that would undermine the arbitrator’s

jurisdiction to make that finding in the first place.” (Malone v.

Superior Court (2014) 226 Cal.App.4th 1551, 1559.) Thus, even

where the parties purport to delegate issues of arbitrability to the

arbitrator, the court must determine whether the delegation

provision is enforceable before ordering the parties to arbitration.

(E.g., Rent-A-Center, supra, 561 U.S. at pp. 69–70.)

5 Having so concluded, we do not consider Sargon’s

alternative grounds for vacating the arbitration award.

26

IV.

The Proper Course Is to Correct, Rather Than

to Vacate, the Arbitration Award

Having concluded that the arbitrator made an error of law

that is subject to judicial review, we turn to the final issue before

us: whether the error requires that the award be vacated in full

or merely corrected.6

If parties to an arbitration award petition to confirm or

correct the award, the court must take one of three actions: It

must either (1) confirm the award, (2) vacate the award in its

entirety, or (3) “correct[] the award and confirm[] it as corrected.”

(§ 1286.) A court may “correct the award and confirm it as

corrected if the court determines that: [¶] . . . [¶] . . . The

arbitrator[] exceeded [his] powers but the award may be corrected

without affecting the merits of the decision upon the controversy

submitted. . . .” (§ 1286.6, subd. (b).)

Where a part of an arbitration award cannot be confirmed

due to the arbitrator’s error of law, the award may be corrected

by striking the erroneous part if doing so does not affect the

merits of the part that remains. Thus, for example, in Jones v.

Humanscale Corp., supra, 130 Cal.App.4th 401, the Court of

Appeal determined that an arbitrator properly upheld a covenant

not to compete entered into between a former employer and

employee, but erred in ordering the arbitrator’s administrative



6 Although neither party filed a petition to correct the award,

we have the power to correct sua sponte because “[a] petition or

response requesting that the award be vacated has been duly

served and filed and; [¶] . . . All petitioners and respondents are

before the court. . . .” (§ 1286.8, subd. (b)(1); see also Jones v.

Humanscale Corp. (2005) 130 Cal.App.4th 401, 412.)

27

fees and compensation to be split equally between the employer

and employee. Because the correction of the award’s division of

arbitration fees and expenses would “not affect the arbitrator’s

findings on the merits of the substantive issues,” the trial court

“had authority to correct the arbitration award and should have

exercised its power to do so rather than vacating the entire award

because of the erroneous division of the arbitration fees and

expenses.” (Id. at p. 412, italics added.)

Similarly, in Ling v. P.F. Chang’s China Bistro, Inc. supra,

245 Cal.App.4th 1242, the Court of Appeal concluded that the

arbitrator exceeded his power by awarding statutory attorney

fees to a defendant employer who defeated an employee’s Labor

Code claims. However, the court rejected the plaintiff employee’s

claim that the error required the trial court to vacate the entire

award: “[T]he trial court correctly noted that it had no authority

to upset the arbitrator’s rulings on the merits of plaintiff’s

overtime and missed meal periods claims—rulings unreviewable

under the Act. [Citation.] Vacatur of the award in its entirety

under Code of Civil Procedure section 1286.2 would have defeated

the finality of those rulings and undermined the Act’s purpose to

resolve disputes efficiently and conclusively.” (Id. at p. 1259.)

In the present case, BGR’s breach of contract claim against

Sargon, and Sargon’s legal malpractice claim against BGR, are

based on separate and distinct facts and legal theories.

Therefore, the portion of the arbitration award adjudicating

BGR’s breach of contract claim can be stricken without affecting

the merits of the arbitrator’s summary disposition of Sargon’s

malpractice claim. For this reason, and because further

adjudication of the legal malpractice claim before a new

arbitrator would undermine the Act’s purpose of conclusively

28

resolving disputes, the proper course is to correct, rather than to

vacate, the arbitration award.

The judgment and order granting the petition to confirm the arbitration award are reversed insofar as they award contract damages to BGR, and otherwise are affirmed. The matter is remanded to the superior court with directions (1) to correct the award by striking the portion that found Sargon breached the

contract and ordered Sargon to pay damages to BGR, and (2) to enter judgment on the corrected award. The parties shall bear their own costs on appeal