Shulman Bastian LLP

Arbitrators' Authority Extends Post-Award for § 998 Claims

In Heimlich v. Shivji, 2017 Cal. App. LEXIS 499 (May 31, 2017), Plaintiff (Attorney) sued Defendant (Client) in the trial court for unpaid invoices despite a retainer agreement providing for arbitration. After answering, Client made a § 998 offer to Attorney for $30,001 and later demanded arbitration. The trial court ordered the matter to arbitration which ultimately resulted in zero recovery for either side. Six days after the arbitration award, Client requested that the arbitrator award costs pursuant to § 998. The arbitrator refused on the grounds that he no longer had jurisdiction to take further action on the matter post-award. Client then asked the trial court to confirm the arbitration award and to award costs pursuant to § 998. The court confirmed the arbitration award but denied Client's demand for costs under § 998 as untimely. Client appealed.

The Court of Appeals reversed the order confirming the arbitration award and directed than an order be entered partially vacating the award to allow for a determination of Client's request for cost under § 998 by the arbitrator. The Court of Appeals held that because § 998(b)(2) states an offer that is not accepted "cannot be given in evidence upon the trial or arbitration," Client's request for fees was timely and the arbitrator's refusal to hear evidence of Attorney's rejection of Client's § 998 was in error.

The Court of Appeals noted that the AAA Commercial Arbitration Rules empower an arbitrator to make "interim, interlocutory, or partial" awards "[i]n addition to a final award" in order to "assess and apportion the fees, expenses, and compensation related to such award..." and held that when a party's § 998 request is made post-award (as necessitated by § 998(b)(2)), an arbitrator is empowered to recharacterize the existing award as interim, interlocutory, or partial and proceed to resolve the § 998 request by subsequent award.

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