Archive for the ‘Arbitration’ Category

Arbitration Insight No. 26

MICHAEL D. MARCUS’S ARBITRATION INSIGHT NO. 26

APPEALING AN ARBITRATION AWARD

The question whether an arbitration award is final or appealable is answered by Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, Cable Connection, Inc. v. DIRECTV, Inc. (2008) 44 Cal.4th 1334 and Pearson Dental Supplies, Inc. v. Superior Court (2010) 48 Cal.4th 665. Moncharsh holds, “It is the general rule that, with narrow (statutory) exceptions (such as arbitrators exceeding their powers), an arbitrator’s decision cannot be reviewed for errors of fact or law.” (At p. 11.) Thus, “[a]rbitrators, unless specifically required to act in conformity with rules of law, may base their decision upon broad principles of justice and equity, and in doing so may expressly or impliedly reject a claim that a party might successfully have asserted in a judicial action.” (Id. at pp. 10-11.) Cable Connection provides that parties may expressly agree to obtain judicial review of an arbitration award. (At p. 1340.) Pearson Dental Supplies holds that an error of law by an arbitrator in a FEHA case can be reviewed by the trial court, where the employee was subject to a mandatory arbitration agreement. (At pp. 669-670.)

The waiver language by the parties in Cable Connection was “[t]he arbitrators shall not have the power to commit errors of law or legal reasoning, and the award may be vacated or corrected on appeal to a court of competent jurisdiction for any such error.” Harshad & Nasir Corp. v. Global Sign Systems, Inc. (2017) 14 Cal.App.5th 523 holds that arbitration waiver language to be binding need not be identical to the language in Cable Connection. (Harshad at p. 536.) The acceptable waiver wording in Harshad was “The arbitrator shall apply the substantive law of the State of California and the United States, if such law would apply if the matter were decided in court, in deciding the issues submitted to arbitration. The parties agree that the decision of the [a]rbitrator and the findings of fact and conclusions of law shall be reviewed on appeal to the trial court and thereafter to the appellate courts upon the same grounds and standards of review as if said decision and supporting findings of fact and conclusions of law were entered by a court with subject matter and present jurisdiction.”

The guiding principle for crafting effective waiver language to arbitration awards is that “the parties constrain the arbitrators’ authority by requiring a dispute to be decided according to the rule of law, and make plain their intention that the award is reviewable for legal error.” (Cable Connection at p. 1355; emphasis in the original.) Harshad’s above terms satisfied that standard.

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, September 2017

Arbitration Insight No. 25

MICHAEL D. MARCUS’S ARBITRATION INSIGHT NO. 25

RULES OF EVIDENCE AT ARBITRATION

There is uncertainty about the application of the rules of evidence at arbitration. Some attorneys believe that arbitration should be an informal process while others think it should be more structured. The Arbitration Act does not resolve that conflict. Code of Civil Procedure section 1282.2, subd. (d) merely provides, in part, that “The parties to the arbitration are entitled to be heard, to present evidence and to cross-examine witnesses appearing at the hearing but rules of evidence and rules of judicial procedure need not be observed.” (Emphasis added.) As a starting point, therefore, the applicable arbitration agreement, if there is one, should govern the manner in which the arbitration is to be conducted. If there is neither an agreement nor a specified procedure, the parties should decide how they want the arbitration to be administered. If they cannot agree, arbitrators should advise the parties before the arbitration begins that the hearing, including the application of the rules of evidence, can be formal or informal; it is up to the individual parties to decide whether they wish to object to evidence and, if there are objections, that the arbitrators will rule on all objections as they are made.

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, July 2016

Mediation Message No. 139

EIGHTH ANNUAL YEAR-END REVIEW

This year’s eleven Mediation Messages and one Arbitration Insight include observations about mediation processes, the appealing of arbitration awards, employment law, evidence and civil procedure. Refer to my website (www.marcusmediation.com) for the Mediation Messages and Arbitration Insight identified below if the following summaries do not suffice.

Mediation

“Basic Introductory Remarks at Mediation” (March; Mediation Message no. 131): If a plaintiff, defendant or representative of either is unfamiliar with the mediation process, I begin their separate caucus by talking about confidentiality, my neutrality and the uncertainty and expense of litigation. These introductory comments are intended to put the parties at ease and serve as a bridge to the subsequent and more critical legal and factual discussions about their cases.

“Negotiation Phases or Processes at Mediation” (April; Mediation Message no. 132): This Message examined the types of negotiation tools (distributive or marketplace bargaining, brackets, what is your authority?, wouldya-couldya, split the baby, take it or leave it, best and final, baseball, mediator’s proposal, court trial or arbitration and hi-lo) in the order they occur at mediations.

“Don’t Give Up. Don’t Ever Give UpJimmy Valvano” (July; Mediation Message no. 135): Former North Carolina State coach Jimmy Valvano’s uplifting message, “Don’t give up. Don’t ever give up,” which he made about his failing health, is both a wonderful life lesson and an appropriate mantra for mediation when nothing seems to be working.

“You Can’t Always Get What You Want” (August; Mediation Message no. 136): This memorable song title, known by all rock ‘n’ roll fans, is also the perfect reminder at mediation for unrealistic or disappointed litigants when either the facts, the law or an intransigent opponent seem to frustrate their expectations. When that occurs, appropriately observing, “You can’t always get what you want, but if you try sometimes well you might find you get what you need” most always brings the timely realization that, despite existing obstacles, reasonable results are still achievable.

“Mediation Music: The Mediation Concert Hall” (September; Mediation Message No. 137): Popular song titles prove there’s a correlation between the messages in music and all phases of the mediation process.

The Room Where It Happens (November; Mediation Message no. 138): The answer to “What’s the mediator talking about in the other room?” is not very much different from what I talk about in both rooms, with the significant difference being that I emphasize the weaknesses rather than the strengths of the party in whose room I’m in.

Arbitration

“Appealing an Arbitration Award” (October; Arbitration Insight no. 26): The question whether an arbitration award is final or appealable is answered by Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, Cable Connection, Inc. v. DIRECTV, Inc. (2008) 44 Cal.4th 1334 and Pearson Dental Supplies, Inc. v. Superior Court (2010) 48 Cal.4th 665. Moncharsh holds, “It is the general rule that, with narrow (statutory) exceptions (such as arbitrators exceeding their powers), an arbitrator’s decision cannot be reviewed for errors of fact or law.” (At p. 11.) Thus, “[a]rbitrators, unless specifically required to act in conformity with rules of law, may base their decision upon broad principles of justice and equity, and in doing so may expressly or impliedly reject a claim that a party might successfully have asserted in a judicial action.” (Id. at pp. 10-11.) Cable Connection provides that parties may expressly agree to obtain judicial review of an arbitration award. (At p. 1340.) Pearson Dental Supplies holds that an error of law by an arbitrator in a FEHA case can be reviewed by the trial court, where the employee was subject to a mandatory arbitration agreement. (At pp. 669-670.)

Employment

“Contacts with Current and Former Employees, Officers, Directors and Managing Agents” (May – Mediation Message no. 133): This lengthy Message discusses the law (including Rules of Professional Conduct) which either limits or allows contacts with current and former employees and members of a company’s control group.

Evidence

“The Attorney-Client Privilege Is Now Diminished” (January – Mediation Message no. 129): The simple question in Los Angeles County Board of Supervisors v. Superior Court (2016) 2 Cal.5th 282 (L.A. County) was whether invoices by an outside law firm to a governmental agency are covered by the attorney-client privilege and, therefore, exempt from disclosure under the California Public Records Act (PRA). L.A. County’s supposedly narrow holding that the privilege may not extend to such invoices in inactive matters has, however, much broader implications. As Justice Werdegar warned in her dissenting opinion, “The majority’s suggestion the protective power of the attorney-client privilege under section 954 may not continue to encompass all portions of a document that previously qualified as a ‘confidential communication’ under section 952 is mischievous in the extreme. Following today’s decision, attorneys in this state must counsel their clients that confidential communications between lawyer and client, previously protected by the attorney-client privilege, may be forced into the open by interested parties once the subject litigation has concluded. If a limiting principle applies to this new rule, it is not perceptible to me.” (Id. at p. 305.)

Civil Procedure

“Expert Witness Declarations and Motions for Summary Judgment” (February – Mediation Message no. 130): Perry v. Bakewell Hawthorne, LLC (2017) 2 Cal.5th 536 holds that the exclusionary rule for expert witness declarations that do not meet disclosure requirements applies to summary judgment as well as the trial phase. The case is also a valuable reminder about the importance of admissible evidence at MSJs and the remedies available when an expert disclosure is late or needs to be amended or augmented.

“Trial Courts Are Gatekeepers as to Default Applications” (June – Mediation Message no. 134): Grappo v. McMills (2017) 11 Cal.App.5th 996 sends a strong statement to both attorneys and, in particular, the trial courts that applications for default judgments must be closely scrutinized and that only appropriate claims should be approved.

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, December 2017

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

Arbitration Insight No. 23

MICHAEL D. MARCUS’S ARBITRATION INSIGHT NO. 23

THE MFAA AND AN ATTORNEY’S DEMAND TO ARBITRATE THE FEE DISPUTE

Rosenson v. Greenberg Glusker Fields Claman & Machtinger LLP (2012) 203 Cal.App.4th 688 is required reading for all attorneys who have a fee or costs dispute with a client.

In Rosenson, Greenberg Glusker and its client initially participated in nonbinding arbitration pursuant to the Mandatory Fee Arbitration Act. (MFAA; Bus. and Prof. Code section 6200 et seq.) Note that the MFAA does not require the existence of a fee agreement with the client; also, “whereas a client cannot be forced under the MFAA to arbitrate a dispute concerning legal fees, at the client’s election an unwilling attorney can be forced to do so.” (Schatz v. Allen Matkins Leck Gamble & Mallory LLP (2009) 45 Cal.4th 557, 565.) Either party may seek a trial de novo from the MFAA award, unless they had previously agreed in writing to binding arbitration. (Ibid.)

Within 30 days of a nonbinding MFAA arbitration award in favor of Rosenson, Greenberg Glusker filed a demand for binding arbitration pursuant to a retainer agreement. The client chose instead to file a petition to confirm the MFAA award. The trial court granted the client’s petition after finding that the law firm’s demand for binding arbitration was ineffective because it had not filed beforehand an action to compel arbitration. The trial court reasoned that the filing of the demand for arbitration was not the filing of an action under the MFAA. The appellate court reversed the trial court because it held that the law firm’s arbitration demand effectively invoked the arbitration clause without first filing a superior court action to compel arbitration. (Rosenson, supra, at p. 693.)

Rosenson provides both a reminder and a lesson: If a client has opted to engage in the nonbinding MFAA  process, and should the attorney be dissatisfied with the result, the attorney can demand arbitration, without first moving to compel it, if there is an existing written agreement with the client to arbitrate all fee and costs disputes. Without that agreement, the attorney’s remedy is to file a complaint for fees.

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, March 2012

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.

Arbitration Insight No. 23

MICHAEL D. MARCUS’S ARBITRATION INSIGHT NO. 23

THE MFAA AND AN ATTORNEY’S DEMAND TO ARBITRATE THE FEE DISPUTE

Rosenson v. Greenberg Glusker Fields Claman & Machtinger LLP (2012) 203 Cal.App.4th 688 is required reading for all attorneys who have a fee or costs dispute with a client.

In Rosenson, Greenberg Glusker and its client initially participated in nonbinding arbitration pursuant to the Mandatory Fee Arbitration Act. (MFAA; Bus. and Prof. Code section 6200 et seq.) Note that the MFAA does not require the existence of a fee agreement with the client; also, “whereas a client cannot be forced under the MFAA to arbitrate a dispute concerning legal fees, at the client’s election an unwilling attorney can be forced to do so.” (Schatz v. Allen Matkins Leck Gamble & Mallory LLP (2009) 45 Cal.4th 557, 565.) Either party may seek a trial de novo from the MFAA award, unless they had previously agreed in writing to binding arbitration. (Ibid.)

Within 30 days of a nonbinding MFAA arbitration award in favor of Rosenson, Greenberg Glusker filed a demand for binding arbitration pursuant to a retainer agreement. The client chose instead to file a petition to confirm the MFAA award. The trial court granted the client’s petition after finding that the law firm’s demand for binding arbitration was ineffective because it had not filed beforehand an action to compel arbitration. The trial court reasoned that the filing of the demand for arbitration was not the filing of an action under the MFAA. The appellate court reversed the trial court because it held that the law firm’s arbitration demand effectively invoked the arbitration clause without first filing a superior court action to compel arbitration. (Rosenson, supra, at p. 693.)

Rosenson provides both a reminder and a lesson: If a client has opted to engage in the nonbinding MFAA  process, and should the attorney be dissatisfied with the result, the attorney can demand arbitration, without first moving to compel it, if there is an existing written agreement with the client to arbitrate all fee and costs disputes. Without that agreement, the attorney’s remedy is to file a complaint for fees.

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, March 2012

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.

Arbitration Insight No. 22

MICHAEL D. MARCUS’S ARBITRATION INSIGHT NO. 22

WAIVER OF THE RIGHT TO ARBITRATE

Not infrequently, where an arbitration agreement exists, a defendant will move to compel arbitration when a plaintiff has filed a complaint in the trial court. (An action to compel arbitration is in essence a suit to compel specific performance of a contractual term. [See Freeman v. State Farm Mutual Automobile Ins. Co. (1975) 14 Cal.3d 473, 479].) Plaintiffs, who don’t want to concede the motion, may argue, inter alia, that the defendant has waived the right to arbitrate the dispute. The following is a cursory review of the waiver argument.
It is well-accepted that waiver may occur where “the party seeking to compel arbitration has previously taken steps inconsistent with an intent to invoke arbitration,” “unreasonably delayed in undertaking the procedure” or acted in “bad faith” or engaged in “wilful misconduct.” (Davis v. Blue Cross of Northern California (1979) 25 Cal.3d 418, 425-426.)
Examples of conduct inconsistent with an intent to invoke arbitration: The following three cases were discussed in Service Employees International Union, Local 1021 v. San Joaquin County (2011) 202 Cal. App.4th 449, 460: Case v. Kodota Fig Assn. (1950) 35 Cal.2d 596, 605–606 (moving party pursued a lawsuit on the same issue as that to be arbitrated); Local 659, I.A.T.S.E. v. Color Corp. of America (1956) 47 Cal.2d 189, 197–198 (express refusal to participate in arbitration in order to seek ruling by the Labor Commissioner) and Bodine v. United Aircraft Corp. (1976) 52 Cal.App.3d 940, 945–946 (failed to demand arbitration on the rationale that it would have been stayed in any event by collateral litigation). Sobremonte v. Superior Court (1998) 61 Cal.App.4th 980, cited with approval in Saint Agnes Medical Center v. Pacificare of California (2003) 31 Cal. 4th 1187, 1196, discussed waiver examples including that the parties “were well into preparation of a lawsuit” before the moving party notified the opposing party of an intent to arbitrate and a defendant seeking arbitration filed a counterclaim without asking for a stay of the proceedings. Saint Agnes Medical Center, on the other hand, holds that Pacificare’s filing of a separate lawsuit against St. Agnes did not preclude it from moving to compel arbitration.
Unreasonable delay in seeking arbitration: “When an arbitration agreement does not specify the time within which arbitration must be demanded, a reasonable time is allowed; a party who does not demand arbitration within a reasonable time is deemed to have waived the right to arbitration.” (Citations.) “[W]hat constitutes a reasonable time is a question of fact, depending on the situation of the parties, the nature of the transaction, and the facts of the particular case.” (Spear v. California State Automobile Association (1992) 2 Cal. 4th 1035, 1043.) Sobremonte v. Superior Court, supra, provides that unreasonable delay may include whether “a party … requested arbitration enforcement close to the trial date,” “important intervening steps [e.g., taking advantage of judicial discovery procedures not available in arbitration] had taken place” or  “the delay ‘affected, misled, or prejudiced’ the opposing party.” (Id. at p. 992; see also Zamora v. Lehman (2010) 186 Cal. App. 4th 1, 6 holding that parties who conducted discovery before moving to compel arbitration had waived arbitration.)
Waiver, however, is not an easy finding to obtain. Because of the strong policy favoring arbitration agreements, “close judicial scrutiny of waiver claims” is required. (Citation.) “Although a court may deny a petition to compel arbitration on the ground of waiver (statute), waivers are not to be lightly inferred and the party seeking to establish a waiver bears a heavy burden of proof.” (Saint Agnes Medical Center v. Pacificare of California, supra, at p. 1195.)
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, February 2012

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.

Arbitration Insight No. 21

MICHAEL D. MARCUS’S ARBITRATION INSIGHT NO. 21

RETIREMENT DOES NOT WAIVE ARBITRATION CLAIM

The question whether a disciplined employee’s contractual claim for relief at arbitration survives despite his/her retirement was answered in Service Employees International Union, Local 1021 v. County of San Joaquin (2011) 202 Cal.App.4th 449. In that matter, San Joaquin County terminated the employee because he had stolen $250 worth of County-owned recyclables. The disciplined employee, who had the right, pursuant to a MOU, to appeal the finding to the Civil Service Commission or an arbitrator, chose arbitration. He then retired one month after requesting arbitration. The trial court accepted the County’s argument that the employee had waived his arbitration rights by retiring before the arbitration had begun and, thus, denied the employee’s petition to compel arbitration.

On appeal, the County contended that the employee’s future employment was no longer an issue because his receipt of retirement benefits was a waiver of his election to arbitrate the propriety of his termination. The Appellate Court disagreed, finding that the employee had not taken steps inconsistent with an intent to invoke arbitration. (Id. at pp. 459-460.) “Although he did draw upon his vested right to retirement benefits … that right was independent of his interest in continued employment for the County.” (Id. at p. 460.)

The Appellate Court distinguished County of Los Angeles Dept. of Health Services v. Civil Service Com. of County of Los Angeles (2009) 180 Cal.App.4th 391 (retirement is a voluntary resignation that automatically divests a civil service commission of jurisdiction to decide a disciplinary action) and Hall-Villareal v. City of Fresno (2011) 196 Cal.App.4th 24 (receipt of retirement benefits does not preclude an employee from appealing her termination to the Civil Service Commission) because neither case involved a request for arbitration, which is a matter of contract. (Id. at pp. 461-462.)

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, January 2012

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.

Arbitration Insight No. 20

MICHAEL D. MARCUS’S ARBITRATION INSIGHT NO. 20

BUSINESS REPRESENTATIVES CANNOT BE EXCLUDED AT ARBITRATION
    
The number of business representatives entitled to be present at an arbitration was addressed in Hoso Foods, Inc. v. Columbus Club, Inc. (2010) 190 Cal. App.4th 881. In Hoso Foods, a catering business leased an assembly hall, refurbished it, then learned it could not use the hall’s liquor license and was unable to obtain one on its own. In the subsequent arbitration, the arbitrator allowed only Columbus Club’s president, who had signed the lease and was a named respondent, to attend the proceeding on Columbus Club’s behalf. The Club’s secretary, who had participated in the lease negotiations but was not a party, was precluded from being present except when testifying. The arbitrator awarded Hoso Foods $1,263,135 in damages, including costs and attorney’s fees.

    The court of appeal noted that neither the Code of Civil Procedure nor the rules of the arbitral forum (AAA) suggested that the arbitrator had the power to preclude a corporate party from designating a representative to attend the arbitration proceedings. (Id. at pp. 889-890.) The court also found it of no moment that Columbus Club had not requested that it be allowed to have additional representatives at the hearing. “[N]othing in either the statutes or applicable rules governing arbitration proceedings mandates that such a motion be made.” (Id. at p. 891.)

    The 2-1 majority also found that Columbus Club had been actually prejudiced by the absence of additional representatives because its president testified he had not been involved in drafting the lease and, thus, could not dispute the testimony of the Hoso Food’s principal concerning representations made during the lease negotiations. On the other hand, Columbus Club’s excluded secretary, who was not available to assist during cross-examination of Hoso Food’s witnesses, testified he had drafted the lease, was present at all lease negotiations and was unaware of any restrictions on the transfer of Columbus Club’s liquor license.
  
    While acknowledging that arbitration awards are generally subject to extremely narrow judicial review (citing  Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1), Hoso Foods vacated the award pursuant to C.C.P. sec. 1286.2 because the arbitrator had exceeded his powers by limiting Columbus Club’s representation at the arbitration to an individual who had been sued personally, was not appellant’s choice of representative, was not involved in significant aspects of the transaction and was dismissed from the action at the conclusion of the hearing. (Id. at pp. 884, 889.)
         
    Hoso Foods holding should apply to any business entity which had more than one person involved in the events in controversy. Nonetheless, attorneys should be prepared to argue that exclusion of their respective business client’s representatives at an arbitration will be prejudicial.

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 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.

Arbitration Insight No. 19

MICHAEL D. MARCUS’S ARBITRATION INSIGHT NO. 19

ARBITRATORS NEED NOT DISCLOSE BACKGROUND FACTS IRRELEVANT TO THE CASES BEFORE THEM

It is accepted that arbitrators have a duty, pursuant to Code of Civil Procedure section 1281.9(a), to disclose matters that could cause a person to reasonably entertain a doubt about their impartiality but Rebmann v. Rohde (2011) 196 Cal.App.4th 1283 (hearing denied September 14, 2011) holds that this disclosure duty does not extend to information about an arbitrator’s background that has nothing to do with the facts of the case.
In Rebmann, Rohde sued his former business partner Rebmann for allegedly misrepresenting material facts about their joint venture. (Relevant only to post-arbitration proceedings was that Rohde was born in Berlin in 1943, his father had been in the German Army in World War II and his father-in-law had been a member of the German SS during the War.) The lawsuit was arbitrated. The arbitrator made no disclosures specific to the case and the matter was heard on its merits. The arbitrator ultimately found that the Rohde parties had not proved any of their claims and awarded the Rebmann parties $1,000 on their counterclaims and $1,136,000 in attorney’s fees and costs.
Rohde opposed Rebmann’s petition to confirm the award, contending that the arbitrator should have disclosed that he and his parents were German Jews, had lost family and property in the Holocaust and were members of an organization dedicated to avoiding a repeat of the Holocaust.
The appellate court was dismissive of Rhode’s argument and affirmed the judgment to confirm the award because, relying upon Haworth v. Superior Court (2010) 50 Cal.4th 372 (see Arbitration Insight No. 16), there was nothing in the arbitrator’s professional record to indicate a bias towards anyone, no less Germans. More importantly, the arbitrator’s background had nothing to do with the facts of the case, which had nothing to do with World War II or the Holocaust. (Id. at pp. 1291-1292.)
Rebmann also rejects the assumption that an arbitrator or “judge who is a member of a minority cannot be fair when a case somehow related to that minority status—no matter how remote or tenuous that relationship might be—comes before that judge. A judge or arbitrator’s impartiality should never be questioned simply because of who he or she is.” (Id. at p. 1293.)
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, September 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.

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