THE APPELLATE COURT REVISTS BENJAMIN, WEILL & MAZUR V. KORS
A few months ago or last December (see Arbitration Insight No. 16), I discussed Benjamin, Weill & Mazer v. Kors (2010) 189 Cal.App.4th 126 (BW&M), which held that part-time lawyer-arbitrators should disclose their legal involvement in business interests that are similar to the facts of the matter to be arbitrated. In BW&M, one of the arbitrators in a mandatory fee arbitration (MFA) failed to advise the aggrieved former client that he was representing a large law firm in a case before the California Supreme Court involving an attorney fee dispute and was also representing another major law firm in an action for attorney malpractice and related torts.
The BM&W decision was inconsistent with Haworth v. Superior Court (2010) 50 Cal.4th 372 which had held only two months earlier that the appearance-of-partiality standard concerning arbitrator recusal should not be broader than the same standard applicable to judicial recusal. More specifically, Haworth found, in part, that “The arbitrator cannot reasonably be expected to identify and disclose all events in the arbitrator’s past, including those not connected to the parties, the facts, or the issues in controversy, that conceivably might cause a party to prefer another arbitrator.” (At p. 394.)
BW&M distinguished Haworth because, it reasoned, an arbitrator’s non-disclosures of concurrent business interests similar to a party’s interests could never occur in judicial matters, as they do private arbitration. Thus, it held that arbitrators must disclose their ties to the business world “to the extent these relationships are substantial and involve financial considerations creating an impression of possible bias …” What BW&M failed to recognize is that sitting judges, although not practicing law, may also have commercial ties, such as stock or building ownership or an interest in a business, that may be both substantial and factually similar to the cases before them but, under present appearance-of-partiality standards, need not be disclosed. Therefore, upon analysis, BW&M’s stated need for more disclosures in arbitrations than in the courts does not stand up to scrutiny.
Shortly after issuing the above decision, the BW&M court, on its own motion, ordered a rehearing as to two issues: whether the trial court had improperly merged a MFA dispute into a binding California Arbitration Act (CAA) proceeding and whether the disclosure requirements under the CAA are applicable to non-binding MFA arbitrations. The parties’ additional briefing (which concluded in December 2010) gives the appellate court an opportunity to revise its original holding, which surely would have caused the Supreme Court to either depublish it or grant a hearing to review its controversial analysis.
Judge Michael D. Marcus (Ret.)
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Copyright Michael D. Marcus, February 2011
Please visit my website at www.marcusmediation.com for information about my mediation and arbitration background and experience. Copies of my previous Mediation Messages and Arbitration Insights are available by going to the articles link on the website.