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The California Court of Appeal held that an appraisal qualifies as arbitration under the California Arbitration Act (CAA) while also noting that an agreement can be both a settlement and arbitration agreement.
In Bank of Orange County v. Azar, No. G035918, 2007 WL 521893 (Cal. Ct. App. Feb. 21, 2007), the parties entered into an agreement for an appraisal of the value of shares held by Azar. The agreement provided that each party would select an appraiser. If the two appraisal values were within 10 percent of each other, the averaged value would be "final and binding."
The appraisers' values were significantly different. Accordingly, the parties' agreement called for the appointment of a third "neutral" appraiser, whose appraisal would not be "final and binding."
The third appraisal was favorable to the Bank, which thus sought an ex parte entry of judgment. In opposition, Azar argued that the appraiser's decision was an arbitration decision and, accordingly, that the CAA required the court to entertain a petition to confirm, modify or vacate the appraisal.
The Court agreed with Azar that the third appraisal was an arbitration award subject to challenge under the CAA. As the Court noted, appraisals have been included as arbitrations within the purview of the CAA for over 40 years. Additionally, although the Bank argued that the agreement was a settlement agreement, the Court pointed out that an agreement can be both a settlement and arbitration agreement.
Finally, the Court noted that under the parties' agreement, the procedure for obtaining an ex parte judgment would only come into play after a "final" appraisal. Under the terms of the agreement, the third appraisal was not "final and binding." Accordingly, ex parte judgment would have been improper.
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