Filed 10/21/13 (unmodified opn. attached)
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION THREE
MT. HOLYOKE HOMES, L.P., et al., B243912
Plaintiffs and Appellants, (Los Angeles County
Super. Ct. No. BC430142)
v.
JEFFER MANGELS BUTLER & ORDER
MITCHELL, LLP et al.,
(1) MODIFYING OPINION
Defendants and Respondents. (2) DENYING PETITION
FOR REHEARING
[NO CHANGE IN JUDGMENT]
THE COURT:
It is ordered that the opinion filed herein on September 24, 2013, be modified as
follows:
(1) On page 18, line 8, at the end of sentence ending with the words “… in
a legal malpractice action.”, insert the following sentence: Our conclusion is the same
even if we assume the truth of the facts stated in the Chernow declaration.
(2) Page 18, line 13, delete the entire paragraph beginning on line 13 with the
words “We reject Defendants argument …” and ending on line 20 with the words
“… make the required disclosure.”
(3) Page 18, line 13, insert new paragraph which reads as follows:
Defendants argue that Jones had constructive knowledge that
Judge Chernow had listed Mangels as a reference on his resume because his
resume was readily discoverable on the Internet. They argue that her
constructive knowledge precludes vacating the award based on the nondisclosure
of that information. We disagree. 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. (Betz v. Pankow
(1993) 16 Cal.App.4th 931, 937; cf. Urias v. Harris Farms, Inc. (1991)
234 Cal.App.3d 415, 425 [discussing judicial disqualification].) Instead, the
obligation rests on the arbitrator to timely make the required disclosure. The fact
that the information is readily discoverable neither relieves an arbitrator of the
duty to disclose nor precludes vacating the award based on the nondisclosure.
(4) Page 21, line 5, at the end of the sentence ending with the words “… the
Chernow declaration was admissible.”, please add the following footnote which reads as
follows:
Absent a statement of decision, we must infer all factual findings necessary to
support the judgment. (Fladeboe v. American Isuzu Motors Inc. (2007)
150 Cal.App.4th 42, 58.) But if the record clearly discloses the reasons for the
trial court‟s ruling, we will not presume that the court relied on a different
reason. (Border Business Park, Inc. v. City of San Diego (2007) 142 Cal.App.4th
2
1538, 1550; Lafayette Morehouse, Inc. v. Chronicle Publishing Co. (1995)
39 Cal.App.4th 1379, 1384.) The order here makes it clear that the reason for the
ruling was the court‟s conclusion that the limited relationship between
Judge Chernow and Mangels and the fact of the listing on the resume created no
appearance of impropriety, and not that Judge Chernow was unaware of the
listing on his resume at the time of the required disclosures. We therefore will
not infer such a finding.
The petition for rehearing is denied.
[There is no change in the judgment.]
3
Filed 9/24/13 (unmodified version)
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION THREE
MT. HOLYOKE HOMES, L.P., et al., B243912
Plaintiffs and Appellants, (Los Angeles County
Super. Ct. No. BC430142)
v.
JEFFER MANGELS BUTLER &
MITCHELL, LLP et al.,
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of Los Angeles County,
Zaven V. Sinanian and Michael P. Linfield, Judges. Reversed with directions.
Timothy D. McGonigle for Plaintiffs and Appellants.
Reuben Raucher & Blum, Timothy D. Reuben, Stephen L. Raucher and
K. Cannon Brooks for Defendants and Respondents.
_______________________________________
1
Mt. Holyoke Homes, L.P. (MHH), and Darla Jones (collectively Plaintiffs)
challenge the granting of a motion to compel arbitration and the denial of their motion
to vacate the arbitration award in a legal malpractice action against Jeffer Mangels
Butler & Mitchell, LLP (JMBM) and John Bowman (Defendants). They contend (1) an
arbitration provision in the parties‟ legal services agreement is unenforceable because it
was not adequately disclosed or explained to them; (2) the arbitrator failed to timely
disclose his prior relationship with a partner in JMBM, so the award must be vacated;
and (3) the trial court erred by overruling their objections to the arbitrator‟s declaration
filed in opposition to their petition to vacate the award.
We conclude that the arbitration agreement is enforceable and the trial court
properly compelled arbitration. We also conclude that the fact that the arbitrator had
listed a partner in JMBM as a reference on his resume reasonably could cause an
objective observer to doubt his impartiality as an arbitrator, and his failure to timely
disclose that fact compels the conclusion that the arbitration award must be vacated.
We therefore will reverse the judgment with directions to vacate the arbitration award.
FACTUAL AND PROCEDURAL BACKGROUND
1. Factual Background
Jones and her late husband formed MHH for the purpose of developing real
property in Pacific Palisades. They retained Reznik and Reznik in 1992 to represent
them in connection with an application for subdivision of the property. Their legal
services agreement contained no provision requiring the arbitration of disputes.
2
John Bowman was the attorney primarily responsible for handling the matter.
Benjamin Reznik was another attorney with the same firm.
Benjamin Reznik and Bowman joined JMBM in 1997. Jones signed a legal
services agreement with JMBM in October 1997. Paragraph 11 of the agreement stated
in bold capital letters:
“ARBITRATION AND WAIVER OF JURY TRIAL. ANY DISPUTE
BASED UPON OR ARISING OUT OF OUR ENGAGEMENT, THIS LETTER
AGREEMENT AND/OR THE PERFORMANCE OR FAILURE TO PERFORM
SERVICES (INCLUDING, WITHOUT LIMIT, CLAIMS OF BREACH OF
DUTY OR PROFESSIONAL NEGLIGENCE) SHALL BE SUBJECT TO
BINDING ARBITRATION TO BE HELD IN LOS ANGELES OR
SAN FRANCISCO COUNTY, CALIFORNIA (WHICHEVER COUNTY IS THE
ONE IN WHICH THE FIRM’S OFFICE IS LOCATED WHICH PERFORMED
MORE OF THE SERVICES IN QUESTION) BEFORE A RETIRED
CALIFORNIA SUPERIOR COURT JUDGE. JUDGMENT ON THE
ARBITRATOR’S AWARD SHALL BE FINAL AND BINDING, AND MAY BE
ENTERED IN ANY COMPETENT COURT. AS A PRACTICAL MATTER, BY
AGREEING TO ARBITRATE ALL PARTIES ARE WAIVING JURY TRIAL.”
Paragraph 13 of the legal services agreement with JMBM stated, in part, “We are
not advising you with respect to this letter because we would have a conflict of interest
in doing so. If you wish advice, you should consult independent counsel of your
choice.” The agreement also provided that the prevailing party in any arbitration or
3
litigation was entitled to recover its attorney fees, expert fees and costs. The agreement
stated above the signature line for Jones:
“The undersigned has read and understood this agreement. The undersigned
acknowledges that this letter agreement is subject to binding arbitration as provided in
Paragraph 11 above. The foregoing accurately sets forth all the terms of your
engagement, and is approved and accepted on OCT 20, 1997.”
The City of Los Angeles denied an application for a preliminary parcel map and
a coastal development permit in April 1992. MHH and the Joneses filed a petition for
writ of mandate in the trial court challenging the denial. The court granted the petition
and issued a peremptory writ of mandate in December 1993 directing the city to vacate
its decision and reconsider the application. After extensive negotiations, MHH agreed
to reduce the scope of development and accept conditions of approval, and the city
approved the revised proposal in April 1999.
A neighbor appealed the city‟s approval to the California Coastal Commission
(Commission). The Commission scheduled a public hearing for July 13, 1999, to
determine whether the appeal presented a substantial issue. The city failed to provide
the administrative record of its proceedings to the Commission by that date. On the date
of the hearing, the Commission opened and continued the hearing without determining
whether the appeal presented a substantial issue. JMBM obtained the record and
provided it to the Commission by March 29, 2000. The Commission held a hearing on
May 9, 2000, in which it determined that the appeal presented a substantial issue and
4
therefore should proceed. The Commission reviewed the subdivision application
de novo and denied the application on June 11, 2003.
MHH and the Joneses filed a petition for writ of mandate in the trial court in
July 2003 challenging the Commission‟s decision. They argued for the first time that
the Commission lost jurisdiction to decide the matter when it failed to find that the
appeal presented a substantial issue within 49 days after the appeal was filed with the
Commission. The court granted the petition on that ground and issued a peremptory
writ of mandate in November 2006 ordering the Commission to set aside its disapproval
of a parcel map and a coastal development permit and dismiss the appeal.
The Commission appealed the trial court‟s decision to the Court of Appeal.
Division Seven of the Second Appellate District held that after litigating the matter to
completion before the Commission without challenging its jurisdiction, MHH and Jones
were estopped from challenging the Commission‟s jurisdiction. The Court of Appeal
therefore reversed the judgment by the trial court, leaving the Commission‟s denial of
the application as the final decision. (Mt. Holyoke Homes, LP v. California Coastal
Com. (2008) 167 Cal.App.4th 830, 842-845.)
2. Complaint and Arbitration
MHH, Jones and Scott Adler filed a complaint for legal malpractice against
JMBM and Bowman in January 2010.1 They allege that Defendants‟ failure to timely
1
Adler later dismissed his complaint and is not a party to this appeal.
5
challenge the Commission‟s jurisdiction was negligent and that a timely challenge
would have resulted in an approved final parcel map and a coastal development permit.
Defendants filed a petition to compel arbitration pursuant to the arbitration
provision in the legal services agreement. Plaintiffs opposed the petition. The trial
court granted the petition in May 2010, issued an order compelling arbitration and
stayed the trial court proceedings.
The parties initially selected a retired superior court judge, Patricia L. Collins, as
the arbitrator, but Jones later objected to Judge Collins after she disclosed a prior
relationship with Defendants‟ counsel. The parties then selected another retired
superior court judge, Eli Chernow, as the arbitrator. Judge Chernow disclosed that
Defendants‟ counsel had represented a party to a mediation before him within the past
five years, but stated that he was not aware of any relationship with any party or
attorney involved in this matter that would impair his ability to act fairly and
impartially. Judge Chernow later disclosed that he had known Benjamin Reznik for
many years. He also disclosed that he had conducted an arbitration and a mediation
involving Adler more than five years earlier. The parties agreed to his appointment as
arbitrator despite these disclosures. JMBM filed a cross-complaint in arbitration against
plaintiffs and Adler seeking to recover unpaid legal fees.
Judge Chernow issued an Interlocutory Decision in January 2012 finding that, in
light of the state of the law at the time regarding the 49-day rule, Defendants had
satisfied their duty of care. He also found that it was likely that the Commission would
have established a basis to exercise jurisdiction even if the defense were timely asserted,
6
and therefore concluded that Plaintiffs had failed to establish causation. Judge Chernow
concluded that Plaintiffs were entitled to no relief on their claims and that JMBM was
entitled to recover its unpaid legal fees for services provided and its reasonable attorney
fees incurred in connection with the arbitration. He adopted the Interlocutory Decision
as his final award in March 2012, awarding JMBM $18,132.81 in unpaid legal fees,
$285,000 in attorney fees incurred in connection with the arbitration, and over $150,000
in costs.
3. Petitions to Vacate and to Confirm the Arbitration Award
The arbitration award prompted Jones to search the Internet for evidence of the
arbitrator‟s bias. She discovered for the first time a previously undisclosed resume in
which Judge Chernow had named Robert Mangels, a name partner in JMBM, as
a reference. She found a link to the resume on the Internet site of the National Academy
of Distinguished Neutrals. Mangels was the first of three “References” listed on the
resume. Plaintiffs and Adler filed a petition to vacate the arbitration award in
April 2012 arguing that the award must be vacated because of Judge Chernow‟s failure
to disclose his relationship with JMBM through Mangels. Defendants opposed the
petition and filed a petition to confirm the award. Defendants filed declarations by
Judge Chernow and Mangels in support of their opposition.
The Chernow declaration stated, “I have no relationship with Mr. Mangels other
than as a neutral involved in mediation, adjudication, and discovery and other reference
proceedings. The cases in which Mr. Mangels appeared before me occurred in the
1990s and early 2000s.” He stated that his contacts with Mangels did not prevent him
7
from acting impartially in this matter, “nor was such contact a required disclosure under
California law.” He also stated that he had listed Mangels as a reference only because
Mangels was a well-known and highly-regarded litigator who was familiar with his
abilities as a neutral, that he had prepared the resume approximately 10 years earlier and
that he had never discussed with Mangels naming his as a reference.
The Mangels declaration stated that he had appeared before Judge Chernow as
a judge, mediator and arbitrator, but not within the past five years, and that the two had
no professional or personal relationship. He stated that he had never discussed acting as
a reference for Judge Chernow.
Plaintiffs objected to the Chernow declaration on the grounds that he had no
jurisdiction in this case after issuing a final arbitration award and that the existence or
nonexistence of actual bias was irrelevant.
The trial court granted Defendants‟ petition to confirm the arbitration award and
denied Plaintiffs‟ petition to vacate the award. The order stated: “From the declarations
of Judge Chernow and Mangels, it is clear that the parties have virtually no relationship
beyond Mangels having appeared before Judge Chernow in the past. Simply listing
Mangels, amongst other named partners, on a 10-year old resume is insufficient to
trigger [Code of Civil Procedure] section 1281.9(a)(6). Further, the Court finds that a
person aware of the facts would not entertain a doubt as to the impartiality of the
arbitrator.”
8
4. Judgment and Appeal
The trial court entered a judgment in July 2012 awarding Plaintiffs no relief on
their complaint and awarding Defendants the amounts awarded in the arbitration award,
plus interest. The judgment also states that Defendants are entitled to recover their
attorney fees incurred in this action. The court later awarded JMBM $43,762.40 in
attorney fees on JMBM‟s motion for attorney fees. Plaintiffs timely appealed the
judgment.
CONTENTIONS
Plaintiffs contend (1) the arbitration provision is unenforceable because it was
not adequately disclosed or explained to them; (2) the arbitrator failed to timely disclose
his prior relationship with Mangels, so the award must be vacated; and (3) the trial court
erred by overruling their objections to the Chernow declaration.
DISCUSSION
1. The Trial Court Properly Compelled Arbitration
The California Arbitration Act (Code Civ. Proc., § 1280 et seq.)2 compels the
enforcement of valid arbitration agreements. (Armendariz v. Foundation Health
Psychcare Services, Inc. (2000) 24 Cal.4th 83, 97 (Armendariz).) Section 1281 states:
“A written agreement to submit to arbitration an existing controversy or a controversy
thereafter arising is valid, enforceable and irrevocable, save upon such grounds as exist
for the revocation of any contract.” “The statutory scheme reflects a „strong public
2
All further statutory references are to the Code of Civil Procedure unless stated
otherwise.
9
policy in favor of arbitration as a speedy and relatively inexpensive means of dispute
resolution.‟ [Citation.]” (Haworth v. Superior Court (2010) 50 Cal.4th 372, 380
(Haworth).)
A party petitioning the court to compel arbitration (§ 1281.2) bears the burden of
proving by a preponderance of evidence the existence of an arbitration agreement.
A party opposing the petition bears the burden of proving by a preponderance of
evidence any fact necessary to its defense. (Rosenthal v. Great Western Fin. Securities
Corp. (1996) 14 Cal.4th 394, 413 (Rosenthal).) The trial court sits as the trier of fact for
purposes of ruling on the petition. (Engalla v. Permanente Medical Group, Inc. (1997)
15 Cal.4th 951, 972.)
The arbitration provision here unambiguously states that any dispute arising out
of the firm‟s engagement as counsel, specifically including claims of professional
negligence, is subject to binding arbitration. The last paragraph before the signature
line further states that Jones, as the undersigned, has read the agreement and
acknowledges that it is subject to binding arbitration. Plaintiffs do not argue that the
arbitration provision is inconspicuous or procedurally unconscionable in any way. Nor
do they argue that the provision is one-sided or substantively unconscionable. Instead,
they argue that Defendants had a duty to disclose and explain the significance of the
arbitration provision and the failure to satisfy such duty invalidates the arbitration
agreement. This is a claim of fraud in the execution, also known as fraud in the
inception.
10
A contract is void for fraud in the execution if the promisor was deceived as to
the nature of his or her act and did not know what he or she was signing or never
intended to enter into a contract. (Rosenthal, supra, 14 Cal.4th at p. 415.) For example,
a misrepresentation as to the character or essential terms of a proposed contract can
render the promisor‟s assent ineffective. (Id. at p. 420.) If the parties were in
a fiduciary relationship in which the defendant owed the plaintiff a duty to explain the
terms of a proposed contract between them, a breach of that duty may constitute
constructive fraud and establish fraud in the execution. (Brown v. Wells Fargo Bank,
N.A. (2008) 168 Cal.App.4th 938, 959.) The scope of a fiduciary‟s duty depends on the
particular facts. (Rosenthal, supra, at p. 425; Brown, supra, at p. 961.) The existence
and scope of a duty is a question of law for the court to decide, so our review is de novo.
(Castaneda v. Olsher (2007) 41 Cal.4th 1205, 1213.)
Desert Outdoor Advertising v. Superior Court (2011) 196 Cal.App.4th 866
(Desert Outdoor) rejected essentially the same argument asserted here in similar
circumstances. The plaintiffs in Desert Outdoor initially signed an attorney fee
agreement with no arbitration provision. When their attorney changed firms, the
plaintiffs signed a new fee agreement containing a provision requiring binding
arbitration of any dispute between the parties. The plaintiffs later sued the attorney for
legal malpractice, and the attorney successfully petitioned to compel arbitration. (Id. at
pp. 869-870.) The plaintiffs argued that the attorney had a duty to disclose and explain
the arbitration provision in the new fee agreement and that the arbitration agreement
was invalid because he failed to do so. The Court of Appeal concluded that the attorney
11
had no such duty. (Id. at pp. 873-874.) Desert Outdoor stated that the arbitration
provision was clearly set forth in the fee agreement signed by the clients, who were
knowledgeable business persons, they were advised to consult separate counsel before
signing the agreement, and the agreement was not a contract of adhesion. (Id. at
p. 874.)
Similarly here, the arbitration provision was clear and explicit. Jones had hired
Reznik and Reznik in 1992 to obtain development approvals, litigated the matter against
the city in the trial court, and then negotiated with the city for several years. She had
substantial experience with litigation and legal representation before signing the legal
services agreement with JMBM in 1997. The agreement expressly advised Jones to
consult independent counsel if she wished to be advised on the agreement, and plaintiffs
have not shown that the agreement was a contract of adhesion. We conclude that, in
these circumstances, Defendants had no duty to point out the existence of the arbitration
provision or to explain its significance, and their failure to do so does not invalidate the
arbitration contract.
Lawrence v. Walzer & Gabrielson (1989) 207 Cal.App.3d 1501 (Lawrence) and
Powers v. Dickson, Carlson & Campillo (1997) 54 Cal.App.4th 1102 (Powers), cited by
Plaintiffs, are not on point. Lawrence concluded that an arbitration provision in
a retainer agreement was limited to fee disputes and other financial matters and did not
extend to legal malpractice claims. (Lawrence, supra, at pp. 1506-1508.) The
agreement was devoted almost exclusively to financial matters, and the trial court found
that the client did not understand that she was agreeing to submit any future malpractice
12
claims to arbitration. (Id. at pp. 1506-1507.) Lawrence stated that any uncertainty
should be resolved against the attorney as the party who caused the uncertainty to exist
(Civ. Code, § 1654), and concluded that the phrase “ „any other aspect of our
attorney-client relationship‟ ” in the arbitration provision should be interpreted as
referring only to financial matters similar to the types of financial matters specifically
referenced in the agreement. (Lawrence, supra, at pp. 1506-1507.) Here, in contrast,
the arbitration provision is clear and explicit, expressly encompasses claims of
professional negligence and is not limited to financial matters.
Powers, supra, 54 Cal.App.4th 1102, also involved an arbitration provision in
a retainer agreement. The initial retainer agreement included an arbitration provision, as
did a subsequent amendment to the agreement signed after the attorney had changed
firms. (Id. at pp. 1106-1107.) Powers stated that both arbitration provisions
unambiguously encompassed legal malpractice claims. (Id. at p. 1113, distinguishing
Lawrence, supra, 207 Cal.App.3d 1501.) Powers noted that a nonbinding, formal
advisory opinion of the State Bar‟s Standing Committee on Professional Responsibility
and Conduct stated that an attorney was ethically required to fully disclose to an
existing client the terms and consequences of an arbitration provision in a new retainer
agreement. (Id. at pp. 1113-1114.) Powers stated, however, that the arbitration
provision in the initial retainer agreement did not attempt to limit the attorney‟s liability
for legal malpractice, was not ethically improper and violated no conflict of interest
rules, and that the arbitration provision in the later amendment merely confirmed the
existing arbitration agreement. (Id. at pp. 1114-1115.) Powers therefore concluded that
13
the arbitration provision was enforceable and reversed an order denying a petition to
compel arbitration. (Id. at p. 1116.) In discussing the nonbinding advisory opinion,
Powers did not hold or suggest that an attorney has a duty to point out and explain to an
existing client an arbitration agreement in a new retainer agreement. In the
circumstances of this case, we conclude that Defendants had no such duty.
2. The Denial of the Petition to Vacate the Arbitration Award Was Error
a. Legal Framework
A proposed neutral arbitrator must timely disclose to the parties “all matters that
could cause a person aware of the facts to reasonably entertain a doubt that the proposed
neutral arbitrator would be able to be impartial,” including, without limitation, specified
information.3 (§ 1281.9, subd. (a); see also Ethics Standards for Neutral Arbitrators in
Contractual Arbitration, Standard 7(d) (Ethics Standards).)4 The disclosures must be
made in writing within 10 calendar days after service of notice of the proposed
nomination or appointment. (§ 1281.9, subd. (b).) The parties have an opportunity to
disqualify the proposed neutral arbitrator based on the disclosures. (§ 1281.91,
3
“ „Neutral arbitrator‟ means an arbitrator who is (1) selected jointly by the parties
or by the arbitrators selected by the parties or (2) appointed by the court when the
parties or the arbitrators selected by the parties fail to select an arbitrator who was to be
selected jointly by them.” (§ 1280, subd. (d).)
4
The Judicial Council adopted the Ethics Standards in 2002 as required by the
Legislature (§ 1281.85, subd. (a)). Standard 7(d) states in language essentially identical
to the language in section 1281.9, subdivision (a), quoted ante, the same disclosure
requirement, in addition to other disclosure requirements. A neutral arbitrator must
comply with the Ethics Standards, and a proposed neutral arbitrator must disclose any
matters required to be disclosed under the Ethics Standards. (§§ 1281.85, subd. (a),
1281.9, subd. (a)(2).)
14
subd. (b).) If a party petitions the trial court to vacate an arbitrator‟s award and the
court finds that the arbitrator “failed to disclose within the time required for disclosure
a ground for disqualification of which the arbitrator was then aware” (§ 1286.2,
subd. (a)(6)(A)), the court must vacate the award. (§§ 1286.2, subd. (a), 1286.4,
subd. (a).) Vacation of the arbitrator‟s award is required in those circumstances, and no
prejudice need be shown. (Haworth, supra, 50 Cal.4th at p. 394.)
The general requirement that a proposed neutral arbitrator disclose any matter
that reasonably could cause a person aware of the facts to entertain a doubt that the
proposed arbitrator would be impartial (§ 1281.9, subd. (a)) involves an objective test
that focuses on a reasonable person‟s perception of bias and does not require actual bias.
(Haworth, supra, 50 Cal.4th at pp. 385-386.) “ „Impartiality‟ entails the „absence of
bias or prejudice in favor of, or against, particular parties or classes of parties, as well as
maintenance of an open mind.‟ [Citation.] „Judges, like all human beings, have widely
varying experiences and backgrounds. Except perhaps in extreme circumstances, those
not directly related to the case or the parties do not disqualify them.‟ ” (Id. at p. 389.)
The California Supreme Court in Haworth, supra, 50 Cal.4th 372, cautioned
against construing the governing standard too broadly. “[T]he appearance-of-partiality
„standard “must not be so broadly construed that it becomes, in effect, presumptive, so
that recusal is mandated upon the merest unsubstantiated suggestion of personal bias or
prejudice.” ‟ [Citation.] „The “reasonable person” is not someone who is
“hypersensitive or unduly suspicious,” but rather is a “well-informed, thoughtful
observer.” ‟ [Citation.] „[T]he partisan litigant emotionally involved in the controversy
15
underlying the lawsuit is not the disinterested objective observer whose doubts
concerning the judge‟s impartiality provide the governing standard.‟ [Citations.] [¶]
„An impression of possible bias in the arbitration context means that one could
reasonably form a belief that an arbitrator was biased for or against a party for
a particular reason.‟ [Citation.]” (Haworth, supra, 50 Cal.4th at p. 389.)
“ „If the impression of possible bias rule is not to emasculate the policy of the
law in favor of the finality of arbitration, the impression must be a reasonable one.‟
[Citation.] An arbitrator must be able to determine at the outset, with reasonable
certainty, what information must be disclosed. It is reasonable to expect that a neutral
arbitrator will be able to identify, without much difficulty, the information that must be
disclosed regarding the particular relationships and interests that are clearly defined in
section 1281.9 and standard 7 of the Ethics Standards. It may well be more difficult for
the arbitrator to determine whether a disclosure must be made under the general
standard of appearance of partiality, because that standard, although objective, is not
clear-cut. . . . 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. Such a broad interpretation of the appearance-of-partiality rule could subject
arbitration awards to after-the-fact attacks by losing parties searching for potential
disqualifying information only after an adverse decision has been made. [Citation.]
Such a result would undermine the finality of arbitrations without contributing to the
fairness of arbitration proceedings.” (Haworth, supra, 50 Cal.4th at pp. 394-395.)
16
b. Standard of Review
If the facts are undisputed, the question whether an arbitrator was required to
disclose a particular matter involves the application of the rule requiring disclosure to
undisputed facts. This is a mixed question of fact and law. Our review is de novo.
(Haworth, supra, 50 Cal.4th at pp. 385-386.)
c. An Objective Observer Reasonably Could Entertain a Doubt
as to Judge Chernow’s Ability to Be Impartial in this Case
Some of the material facts are undisputed. Mangels is a partner in JMBM, the
law firm defendant in this action. Judge Chernow listed Mangels as a reference on his
resume, which was available on Internet at the time of the award. Plaintiffs discovered
this fact for the first time after the arbitration.
The Chernow declaration augmented these undisputed facts with additional facts
seemingly favorable to Defendants. Plaintiffs presented no conflicting evidence. We
will assume for the purpose of argument that the Chernow declaration is admissible and
that the facts stated in the declaration are undisputed. Accordingly, we will assume that
it is undisputed that Judge Chernow never discussed with Mangels the fact that he was
listed as a reference and listed him only because Mangels was a well-known and
highly-regarded litigator who was familiar with Judge Chernow‟s abilities as a neutral,
that the two have no professional relationship, and that Judge Chernow prepared the
resume approximately 10 years before issuing the arbitration award.
The question is not whether Judge Chernow actually was biased, but whether
a reasonable person aware of the facts reasonably could entertain a doubt that he could
17
be impartial in this case. (Haworth, supra, 50 Cal.4th at pp. 385-386.) We conclude
that the answer is yes. Judge Chernow had listed Mangels as a reference on a resume
that was publicly available on the Internet at the time of his selection as an arbitrator in
this matter. Judge Chernow presumably believed that Mangels had a favorable opinion
of his abilities as a neutral and would speak positively about him if asked. 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. To entertain a doubt as
to whether the arbitrator‟s interest in maintaining the attorney‟s high opinion of him
could color his judgment in these circumstances is reasonable, is by no means
hypersensitive, and requires no reliance on speculation. We believe that an objective
observer aware of the facts reasonably could entertain such a doubt.5
We reject Defendants‟ argument that because the resume was readily
discoverable on the Internet Judge Chernow had no obligation to disclose the fact that
he had listed Mangels as a reference. 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. (Betz v. Pankow (1993)
16 Cal.App.4th 931, 937; cf. Urias v. Harris Farms, Inc. (1991) 234 Cal.App.3d 415,
425 [discussing judicial disqualification].) Instead, the obligation rests on the arbitrator
to timely make the required disclosure.
5
We do not suggest in any manner that Judge Chernow actually was biased in
favor or against any party to this litigation.
18
An arbitrator‟s failure to make a required disclosure presumably would not
justify vacating the arbitrator‟s award if the party challenging the award had actual
knowledge of the information yet failed to timely seek disqualification.6 (See Kaiser
Foundation Hospitals, Inc. v. Superior Court (1993) 19 Cal.App.4th 513, 517.) Courts
have also held that if the arbitrator disclosed information or a party had actual
knowledge of information putting the party on notice of a ground for disqualification,
yet the party failed to inquire further, the arbitrator‟s failure to provide additional
information regarding the same matter does not justify vacating the award. (Dornbirer
v. Kaiser Foundation Health Plan, Inc. (2008) 166 Cal.App.4th 831, 842; Fininen v.
Barlow (2006) 142 Cal.App.4th 185, 190-191; Britz, Inc. v. Alfa-Laval Food & Dairy
Co. (1995) 34 Cal.App.4th 1085, 1096-1097.) Here, however, it is undisputed that
Jones did not discover until after the arbitration that Judge Chernow had listed Mangels
as a reference on his resume, and there is no indication that she previously had actual
knowledge of information that would have put her on inquiry notice of that undisclosed
fact.
The holding in Haworth, supra, 50 Cal.4th 372, is distinguishable. Haworth
involved an action by a female patient against a male doctor who had performed
cosmetic surgery on her, allegedly without her consent and negligently. The neutral
arbitrator, a former judge, failed to disclose that ten years earlier he had received
6
Haworth, supra, 50 Cal.4th at page 394, footnote 15, declined to decide the
impact on a motion to vacate an arbitration award of a party‟s actual or constructive
knowledge, prior to the arbitration, of a ground for disqualification.
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a public censure for inappropriate conduct toward court employees involving sexually
suggestive comments, comments demeaning to women and an ethnic slur. (Id. at
pp. 378-379.) Haworth concluded, “the circumstances underlying the public censure
would not suggest to a reasonable person that Judge Gordon‟s conduct and attitude
toward women would cause him to favor a male physician over a female patient in
a case in which the appearance of the patient who underwent cosmetic surgery instead
was worsened. . . . Judge Gordon‟s public censure simply provides no reasonable basis
for a belief that he would be inclined to favor one party over the other in the present
proceedings. [¶] Unlike cases in which evidence of gender bias has required
disqualification of a judge, the subject matter of this arbitration was not such that the
circumstance of gender was material, or that gender stereotyping was likely to enter into
the decision made by the arbitrators.” (Id. at p. 391.) It was in this context, after noting
the lack of connection between the undisclosed fact and the subject matter of the
arbitration, that Haworth cautioned against construing the appearance-of-partiality
standard too broadly. (Id. at pp. 385-386.)
Here, in contrast, the connection between the undisclosed fact of the arbitrator‟s
naming an attorney as a reference on his resume and the subject matter of the
arbitration, a legal malpractice action against the law firm in which the same attorney is
a partner, is sufficiently close that a person reasonably could entertain a doubt that the
arbitrator could be impartial. We conclude that Judge Chernow was required to disclose
the fact that he had listed Mangels as a reference on his resume. Judge Chernow did not
state in his declaration that at the time of his required disclosures he was not aware that
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he had listed Mangels as a reference on his resume, and there appears to be no
reasonable dispute that he was aware of that fact at that time. His failure to timely
disclose this ground for disqualification of which he was then aware compels the
vacation of the arbitrator‟s award. (§ 1286.2, subd. (a)(6)A).) In light of our
conclusion, we need not decide whether the Chernow declaration was admissible.
DISPOSITION
The judgment is reversed with directions to the trial court to vacate the
arbitration award and conduct further proceedings consistent with the views expressed
in this opinion. Plaintiffs are entitled to recover their costs on appeal.
CERTIFIED FOR PUBLICATION
CROSKEY, Acting P. J.
WE CONCUR:
KITCHING, J.
ALDRICH, J.
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