Arbitration Insight No. 1

WHEN DISCLOSURES BY NEUTRAL ARBITRATORS ARE REQUIRED

After attorneys have selected an arbitrator to preside over either a contractual or consumer arbitration, they should receive a disclosure checklist from the arbitrator that provides possible grounds for his or her disqualification.

The legal basis for the disclosures are found in C.C.P. §§ 1281.9, et seq. and the California Rules of Court, Appendix, Division VI, Ethics Standards for Neutral Arbitrators in Contractual Arbitration (“Ethical Standards”). Section 1281.9(a) provides that disclosures shall be made “In any arbitration pursuant to an arbitration agreement …” While the Code of Civil Procedure does not mention “consumer arbitrations,” section 1281.9(a)(2) does state that disclosures shall include “Any matters required to be disclosed by the ethics standards for neutral arbitrators adopted by the Judicial Council pursuant to this chapter.”

The term “consumer arbitration” first appears in the Ethical Standards. Instead of using “contractual arbitration” (which interestingly enough appears in the title to the Ethical Standards), these rules refer to “consumer arbitrations,” which are defined as contracts drafted by or on behalf of a non-consumer party with a consumer party who is required to accept the arbitration provision. (Ethical Standard 2(d).) A consumer party is an individual who seeks or acquires goods or services, primarily for personal, family or household purposes, including financial and insurance services as defined in Civil Code § 1761; enrollees, subscribers or insureds in health-care service or insurance plans within, respectively, H&S Code § 1345 and Ins. Code § 106; persons with medical malpractice claims subject to arbitration agreements or any employee or applicant for employment in a dispute arising out of or relating to the employee’s or applicant’s prospective employment that is subject to an arbitration agreement. (Ethical Standard 2(e).)

The above disclosure requirements do not apply to party arbitrators, arbitrations conducted pursuant to stipulation, arbitrations required pursuant to collective bargaining agreements (CCP § 1281.9(e)) or arbitrations mandated by statute (e.g., judicial arbitrations ordered pursuant to C.C.P. § 1141.11 and the arbitration of fee disputes between Cumis counsel and liability insurers pursuant to Civil Code § 2860(c)).

In the next Arbitration Insight, I shall discuss what a neutral arbitrator must disclose to the parties in a contractual and consumer arbitration.

Copyright, Michael D. Marcus, May 2005

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