Penhall Company vs. Bridgeway Civil Constructors, Inc.

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TENTATIVE RULING

***NOTICE: EFFECTIVE APRIL 13, 2026, THIS DEPARTMENT HAS MOVED TO THE TANI G. CANTIL-SAKAUYE COURTHOUSE LOCATED AT 500 G STREET SACRAMENTO, CA. ALL MOTIONS NOTICED FOR DEPARTMENT 28 WILL BE HEARD IN DEPARTMENT 8C OF THE NEW COURTHOUSE. ALL PAPERS FOR THIS DEPARTMENT MUST BE FILED AT THIS NEW LOCATION AND WILL NOT BE ACCEPTED AT THE HALL OF JUSTICE. ALL HEARINGS WILL TAKE PLACE AT THIS NEW LOCATION***

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

34-2021-00312809-CU-BC-GDS: Penhall Company vs. Bridgeway Civil Constructors, Inc. 08/05/2026 Hearing on Petition to Confirm, Correct, or Vacate Contractual Arbitration Award (Alternative Dispute Resolution) (Bridgeway) in Department 8C

The Court hereby jointly rules upon Bridgeway Civil Constructors, Inc.’s (“Bridgeway”) Petition to Confirm Arbitration Award and Penhall Company’s (“Penhall”) Petition/Motion to Vacate Final Arbitration Award.

On June 3, 2026, the Court continued the hearing and instructed the parties to submit supplemental papers supporting their arguments with specific references to declarations and/or other admissible evidence.

The Court has now reviewed the parties’ supplemental papers and rules upon the motions as follows.

Factual Background

The parties to this action agreed to arbitration, and this matter was arbitrated in two phases by Arthur Woodward, esq. (the “Arbitrator”). The Phase I evidentiary hearing was from April 29, 2024, to May 7, 2024, and the Phase II hearing was from April 16-17, 2025. (Decl. Cesar, ¶ 7.)

In Phase I, Penhall asserted that Caltrans was liable for delays because the rebar and polyester overlay were thicker than shown in the bid documents. The Arbitrator ruled against Penhall. (Decl. Cesar, ¶ 7.)

In Phase II, Bridgeway sought to recover damages caused by Penhall’s delay, in addition to attorneys’ fees and costs for both phases of arbitration, and prejudgment interest. (Decl. Cesar, ¶ 8.)

On July 28, 2025, the Arbitrator issued an Interim Award (the “Interim Award”).

On July 29, 2025, Penhall objected to the Interim Award, requesting the Arbitrator reconsider and revise the Interim Award. Specifically, the Arbitrator found: “the Subcontract does not exclude consequential damages. Thus, Bridgeway’s claims for the early completion bonus is not barred, as the loss of the bonus is a consequential damage.” (Decl. Cesar, ¶ 9.)

The Arbitrator determined that the applicable AAA Rules did not permit the Arbitrator to reconsider his merits decision. (Decl. Cesar, ¶ 10.)

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

34-2021-00312809-CU-BC-GDS: Penhall Company vs. Bridgeway Civil Constructors, Inc. 08/05/2026 Hearing on Petition to Confirm, Correct, or Vacate Contractual Arbitration Award (Alternative Dispute Resolution) (Bridgeway) in Department 8C

On November 26, 2025, the Final Arbitration Award was issued. The Final Award was issued in accordance with the reasons set forth in the Interim Award, which was attached as Attachment A to the Final Award.

The Interim Award contained a section titled, “The Subcontract Does Not Preclude Consequential Damages.” (Interim Award at p. 4-5.) In this section, the Arbitrator discussed subcontract Paragraph 9 (imposing liability for “direct losses, costs, expenses, liabilities or damages” from non-current critical path delay and capping such liability at the “subcontract value”). (Id.) He found Paragraph 9’s operative cap language applied to Bridgeway’s direct damages claim and, based on stipulated facts, identified the subcontract value as $291,340.

Penhall contended a Special Conditions clause barred consequential damages. (Interim Award at p. 5.) The Arbitrator found the language about consequential damages in the Special Conditions was ambiguous. (Id. at p. 5, lines 8-10 (“The provision is ambiguous”).) The Arbitrator explained that reading this clause as a blanket bar would place it in direct conflict with Paragraph 9 and effectively “give no effect” to Paragraph 9. (Id. at p. 5, lines 10-21.) Applying Civil Code sections 1641 and 1652, the Arbitrator reconciled the provisions by construing the Special Conditions clause to apply only to terminations, and expressly found: “the Subcontract does not exclude consequential damages.” (Id.) The Arbitrator awarded Bridgeway (among other items) $200,000 in consequential damages for the lost early-completion bonus. (Id. at p. 10, lines 21-25.)

Bridgeway now seeks to confirm the arbitration award, and Penhall seeks to vacate the arbitration award.

Discussion

Penhall argues that in the November 25, 2025 Final Arbitration Award, the Arbitrator awarded Bridgeway $200,000 in consequential damages for the lost early completion bonus, despite an unambiguous contractual provision that expressly excluded consequential damages. Penhall asserts that in doing so, the Arbitrator exceeded the authority conferred by the Subcontract and the parties’ arbitration agreement, mandating vacatur under Code of Civil Procedure section 1286.2(a)(4). Additionally, Penhall contends that the award was further procured by undue means that deprived

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

34-2021-00312809-CU-BC-GDS: Penhall Company vs. Bridgeway Civil Constructors, Inc. 08/05/2026 Hearing on Petition to Confirm, Correct, or Vacate Contractual Arbitration Award (Alternative Dispute Resolution) (Bridgeway) in Department 8C

Penhall of a fair hearing, requiring vacatur under Code of Civil Procedure section 1286.2(a)(1).

Bridgeway opposes Penhall’s motion to vacate the award, and separately moves to confirm the award.

Arbitrator’s Ability to Award Consequential Damages

Penhall argues that while the Arbitrator had broad discretion to interpret contractual provisions, he did not have the authority to disregard or nullify express limitations on available remedies. Penhall adds that the remedy must be “rationally derived from the contract and the breach.” (Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 383, reaffirmed in Cable Connection, Inc. v. DIRECTV, Inc. (2008) 44 Cal.App.4th 1334, 1354.) Where an arbitrator fails to conform to the specific restrictions of the parties' agreement and then engages in a decision-making process outside of the scope of his authority, a reviewing court must vacate the award on the ground that the arbitrator has exceeded his powers and his authority as contractually provided to him by the written contract. “Arbitrators may not award remedies expressly forbidden by the arbitration agreement.” (Advanced Micro Devices, supra, 9 Cal.4th at 381.)

Penhall argues that here, the Subcontract between Bridgeway and Penhall provides “Exclusions: . . . Liquidated and consequential damages (if the contractor wishes to tie Penhall Company to the project disincentives, the contractor must also tie Penhall Company to the project incentives.)” Penhall urges that this language is unequivocal and contains no limitation restricting its application and that there was no authority for the Arbitrator to rewrite the contract to remove this specific exclusion of a type of specific contract damages. Penhall asserts that the arbitrator’s award of consequential damages in violation of the Subcontract exceeded his powers as arbitrator and must be vacated.

Bridgeway contends that Penhall’s petition to vacate is an impermissible attempt to convert binding arbitration into an appellate review of contract interpretation. Bridgeway explains:

Inherent in the broad powers of the arbitrator “is the possibility the arbitrator may err in deciding some aspect of the case. Arbitrators

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

34-2021-00312809-CU-BC-GDS: Penhall Company vs. Bridgeway Civil Constructors, Inc. 08/05/2026 Hearing on Petition to Confirm, Correct, or Vacate Contractual Arbitration Award (Alternative Dispute Resolution) (Bridgeway) in Department 8C

do not ordinarily exceed their contractually created powers simply by reaching an erroneous conclusion on a contested issue of law or fact, and arbitral awards may not ordinarily be vacated because of such error, for ‘ “[t]he arbitrator's resolution of these issues is what the parties bargained for in the agreement.” ’ (Moshonov v. Walsh, at pp. 775 776 [94 Cal.Rptr.2d 597, 996 P.2d 699], quoting Moncharsh, at p. 28 [10 Cal.Rptr.2d 183, 832 P.2d 899].)” (Gueyffier, at p. 1184, 77 Cal.Rptr.3d 613, 184 P.3d 739; San Francisco Housing Authority, supra, 182 Cal.App.4th 933 at 943.)

A finding that an arbitrator “exceeded powers” requires more than a disputed contract interpretation. Where the arbitrator is interpreting the contract, courts will not substitute their interpretation for the arbitrator’s. (Id.; Moncharsh, supra, 3 Cal.4th at 28.)

(Bridgeway Opposition, 4:x – 5:3.)

Bridgeway argues that after two evidentiary phases, extensive briefing, and a reasoned written award, the Arbitrator interpreted the subcontract as a whole, reconciled potentially conflicting provisions, issued a reasoned decision, and concluded that Bridgeway suffered recoverable damages arising from Penhall’s critical-path delay, including the $200,000 loss of Bridgeway’s early-completion bonus.

The Court concurs with Bridgeway’s analysis here. The Court does not reach the issue of whether the Arbitrator’s interpretation of the Subcontract was correct, but rather reviews whether the Arbitrator had the authority to interpret the Subcontract and reach his finding that consequential damages were allowable. The Court finds that the Arbitrator held such authority, and did not exceed his authority if reaching his determination that consequential damages should be included in the award.

Fair Hearing

Penhall also argues that the Arbitration Award was procured by undue means and extrinsic fraud.

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

34-2021-00312809-CU-BC-GDS: Penhall Company vs. Bridgeway Civil Constructors, Inc. 08/05/2026 Hearing on Petition to Confirm, Correct, or Vacate Contractual Arbitration Award (Alternative Dispute Resolution) (Bridgeway) in Department 8C

As set forth by Penhall, “’Undue means’ under section 1286.2(a)(1) encompasses conduct that undermines the fundamental fairness of the arbitration process. (Pour Le Bebe, Inc. v. Guess? Inc. (2003) 112 Cal.App.4th 810, 830.) Extrinsic fraud exists where a party is deprived of a fair opportunity to present or challenge a dispositive issue. In the arbitration setting, extrinsic fraud is conduct ‘which results in depriving either of the parties of a fair and impartial hearing to their substantial prejudice.’ (Stockwell v. Equitable F. & M. Ins. Co. (1933) 134 Cal.App. 534, 540–541.) Such conduct justifies the setting aside of an arbitration award.” (Penhall Motion to Vacate, 9:21-28.)

Penhall asserts that by disregarding the contractual provision that excluded consequential damages, the Arbitrator effectively introduced a new contractual construction post-hearing, and thereby deprived Penhall of a fair opportunity to litigate the dispositive issue, constituting undue means and extrinsic fraud.

Bridgeway opposes this contention and argues that Penhall cannot establish undue means or extrinsic fraud because it received a fair hearing and its complaint is only about reasoning behind the Arbitrator’s decision regarding consequential damages.

It appears to the Court that Penhall had a full and fair adversarial hearing and that the issue it complains of (the Arbitrator’s finding regarding the disputed clause regarding consequential damages) was fully addressed. The Final Award shows the arbitrator addressed the consequential damages issue and articulated his reasoning for construing the Special Conditions clause narrowly.

The Court concludes that Penhall has failed to meet its burden to show that the Arbitrator acted with undue means or extrinsic fraud.

Disposition

Penhall’s motion to vacate the Arbitration Award is DENIED.

Bridgeway’s motion to confirm the Arbitration Award is GRANTED.

The Court need not reach the Penhall’s objections in making this determination.

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

34-2021-00312809-CU-BC-GDS: Penhall Company vs. Bridgeway Civil Constructors, Inc. 08/05/2026 Hearing on Petition to Confirm, Correct, or Vacate Contractual Arbitration Award (Alternative Dispute Resolution) (Bridgeway) in Department 8C