Where's Your Interim Award Now, Flanders...

Kaiser Foundation Heath Plan v. Superior Court, No. B272284 (D2d7 Jul. 31, 2017) 

This is a very complicated-seeming healthcare reimbursement litigation between some Hospitals and an Insurer. The parties ultimately agreed to arbitrate the dispute. A big issue in the arbitration was whether some of Hospital’s claims were preempted by provisions of the Medicare Act. The arbitrator found they were not and issued a “Partial Final Award” saying so.

Insurer asked the superior court to vacate the award. But instead, the superior court confirmed it. Insurer now appeals.

But that’s dead end.

It is true that the rules of the relevant arbitral forum (here, JAMS) foresee the issuance of interim awards that can be confirmed by a court piecemeal. Problem is, the Code of Civil Procedure does not. Under § 1285, a “party to an arbitration in which an award has been made” can petition the superior court to confirm or vacate it. If the award is confirmed, the court then enters a judgment under § 1287.4, which gets treated just like a final judgment in any case.

But § 1283.4, which sets out what an “award” is, says that an award “shall include a determination of all the questions submitted to the arbitrators the decision of which is necessary in order to determine the controversy.” That is, an  “award” is basically the arbitral equivalent of a final judgment. So a “partial final award” that, like the one in this case, determines only some of the issues in controversy is not an “award” subject to confirmation in state court.

Which means the superior court didn’t have jurisdiction to confirm the award. Which means that the superior court’s confirmation order was not a final judgment. Which means that the Court of Appeal doesn’t have jurisdiction to hear the appeal. So the Court of Appeal treats the appeal as a writ, but only for the limited purpose of ordering the superior court to vacate its confirmation for lack of jurisdiction.

Appeal dismissed, writ issued.

This ruling has an interesting upshot. In recent years, many providers of arbitration services (inducing JAMS, the service provider here) have attempted to write rules that would permit parties to obtain interim relief like preliminary injunctions in the arbitral forum. The sticking point of that is that there’s no such thing as contempt of an arbitrator, so a ruling on, of instance, a preliminary injunction is somewhat lacking in force beyond the voluntary acquiescence of the parties.

The way the services tried to get around that is to write rules permitting interim awards, which—at least they assumed—could be taken to a court for confirmation and enforcement. But under the logic of this case, it is the Code—not the arbitral rules—that define what is and what is not an “award” that can be confirmed and enforced. So you could be left with a arbitrator’s TRO or PI order that can’t be enforced through the threat of contempt.

Under the circumstances, unless sure that a counterparty will comply with a provisional remedy issued by an arbitrator, it seems like the safest thing to do to take a request for preliminary relief directly to the court under § 1281.8(b).