Arbitration Insight No. 24

MICHAEL D. MARCUS’S ARBITRATION INSIGHT NO. 24

YOU CAN NEVER BE TOO CAREFUL

Mt. Holyoke Homes, LP, et al. v. Jeffer Mangels Butler & Mitchell, LLP (2013) 219 Cal.App.4th 1299 sends the message that arbitrators can never be too careful when disclosing possible conflicts to potential parties and their counsel. Mt. Holyoke Homes et al. sued Jeffer Mangels Butler and Mitchell (JMBM) for legal malpractice. JMBM cross-complained for its legal fees. The arbitrator disclosed that he had mediated a matter with JMBM’s counsel, knew one of the JMBM attorneys who had been involved in the underlying matter and had previously conducted an arbitration and mediation with one of the claimants. After the arbitrator found for JMBM, one of the losing parties discovered that the arbitrator had not disclosed that he had named Robert Mangels of JMBM as a reference on his resume. The resume was available on the internet. Apparently, the arbitrator had no professional relationship with Mangels and had prepared the resume ten years before the arbitration. The trial court granted JMBM’s’ petition to confirm the arbitration award and denied claimants’ petition to vacate the award because of the arbitrator’s failure to disclose the Mangel’s reference.
The appellate court vacated the arbitration award, not because the arbitrator was biased, but because “An objective observer reasonably could conclude that an arbitrator listing a prominent litigator as a reference on his resume would be reluctant to rule against the law firm in which that attorney is a partner as a defendant in a legal malpractice action.” (Id. at p. 1313; i.e. a reasonable person aware of the facts could reasonably entertain a doubt that the arbitrator could be impartial.) The appellate court rejected the argument that the arbitrator had no duty to disclose the resume because it was readily discoverable on the internet. “A party to an arbitration is not required to investigate a proposed neutral arbitrator in order to discover information, even public information, that the arbitrator is obligated to disclose.” (Ibid.)
MDM’s observation about the Mt. Holyoke decision: Arbitrators must be careful to disclose all facts that might cause a doubt about their potential biases but, at the same time, parties and their attorneys should have a concomitant obligation to learn of all public information about potential arbitrators. Such a duty was not realistic fifteen years ago. Today, because of the internet, there are few public secrets; thus, it is unreasonable to allow a party, after a negative ruling, to claim arbitrator bias when, with reasonable diligence, it could have discovered the basis for that alleged bias before the arbitrator’s selection.
Judge Michael D. Marcus (Ret.)
ADR Services, Inc.
1900 Avenue of the Stars, Suite 250
Los Angeles, California 90067
(310) 201-0010

Copyright Michael D. Marcus, October 2013

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