BENJAMIN, WEILL & MAZER v. KORS
189 Cal.App.4th 126 (2010)
116 Cal. Rptr. 3d 677
BENJAMIN, WEILL & MAZER, Plaintiff and Respondent,
v.
NANCY HURWITZ KORS, Defendant and Appellant.
No. A125732.
Court of Appeals of California, First District, Division Two.
October 12, 2010.
OPINIONKLINE, J.—
The California Arbitration Act (CAA) requires that "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" be timely disclosed to all parties (Code Civ. Proc., § 1281.9, subd. (a).)1 The issue in
this case is whether this requirement may include business relationships with persons or entities that are not parties or lawyers for parties in the subject arbitration and, if so, whether such relationships should have been disclosed by the arbitrator here. Appellant Nancy Hurwitz Kors appeals from an order granting the petition filed by respondent law firm, Benjamin, Weill & Mazer, a professional corporation (BWM), to confirm an arbitration award, and denying her petition to vacate that award. The order must be reversed, she claims, because the chief arbitrator failed to disclose business relationships casting doubt on his ability to be impartial, as required by the CAA. (§ 1281.9, subd. (a).)
We agree that in the circumstances of this case the arbitrator's business relationships "could cause a person aware of the facts to reasonably entertain a doubt that the proposed neutral arbitrator would be able to be impartial" (§ 1281.9, subd. (a)), which is all that is necessary to create the duty to disclose them. Accordingly, we shall reverse the order appealed from.
FACTS AND PROCEDURAL HISTORYThe Arbitration
1. All statutory references are to the Code of Civil Procedure unless otherwise indicated.
2. Kors moved for an award of attorney fees for prevailing on her motion to compel arbitration, but the motion was denied.
3. Under the BASF rules, arbitrators are selected by the chair of the Attorney Fee Dispute Executive Committee (BASF rule 1(B)) from a list maintained by the committee "based upon relevant factors including availability; experience; complexity of the case; and any Client request . . . for an Arbitrator who practices civil or criminal law." (BASF rule 7(A).) The rules also provide that "[i]n cases in which the amount in controversy is $10,000 or more, and the Client has agreed to Binding Arbitration, a Panel of three (3) Arbitrators shall be appointed to hear the case, one of which is not an attorney. Notwithstanding the amount in controversy, the parties may agree to have the matter heard by one (1) Arbitrator. That Arbitrator shall be an attorney." (BASF rule 7(B)(2).) In all cases assigned to a three-member panel, BASF staff "shall appoint one (1) Attorney member as Chief Arbitrator. The Chief Arbitrator shall have an equal vote with the other members of the Panel but shall be responsible for the conduct of the Arbitration and the writing of the Arbitration Award." (BASF rule 7(D).)
4. The panel thus concluded that the amount of fees and costs that should have been charged Kors was exactly the amount BWM claimed: $306,749.22. The panel reduced that amount to $303,579.34 only because Federal Express and Westlaw charges in the respective amounts of $55.88 and $3,114 were deducted from the amount of the award.
5. Namely, that the arbitrators (1) delayed the arbitration award for 175 days, far beyond the "objective" of the BASF rules that the award issue no later than 45 days after the matter is submitted; (2) improperly refused to hear material evidence; and (3) "failed to address the pertinent issues."
6. The grounds for correcting an arbitration award and the applicable conditions are set forth in sections 1286.6 and 1286.8.
7. Subdivisions (a)(1) through (5) of section 1286.2 require vacation of an arbitration award where "(1) The award was procured by corruption, fraud or other undue means. [¶] (2) There was corruption in any of the arbitrators, [¶] (3) The rights of the party were substantially prejudiced by misconduct of a neutral arbitrator. [¶] (4) The arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted. [¶] (5) The rights of the party were substantially prejudiced by the refusal of the arbitrators to postpone the hearing upon sufficient cause being shown therefor or by the refusal of the arbitrators to hear evidence material to the controversy or by other conduct of the arbitrators contrary to the provisions of this title."
8. The standards were adopted by the Judicial Council pursuant to section 1281.85, which provides that the standards "shall be consistent with the standards established for arbitrators in the judicial arbitration program and may expand but may not limit the disclosure and disqualification requirements established by this chapter. The standards shall address the disclosure of interests, relationships, or affiliations that may constitute conflicts of interest, including prior service as an arbitrator or other dispute resolution neutral entity, disqualifications, acceptance of gifts, and establishment of future professional relationships." (§ 1281.85, subd. (a).)
9. The comment to Standard 7 explains: "While the remaining subparagraphs of (d) require the disclosure of specific interests, relationships, or affiliations, these are only examples of common matters that could cause a person aware of the facts to reasonably entertain a doubt that the arbitrator would be able to be impartial. The absence of the particular interests, relationships, or affiliations listed in the subparagraphs does not necessarily mean that there is no matter that could reasonably raise a question about the arbitrator's ability to be impartial and that therefore must be disclosed." (Cal. Rules of Court, com. to Std. 7.)
10. Section 638 provides in relevant part that "[a] referee may be appointed upon the agreement of the parties filed with the clerk, or judge, or entered in the minutes, or upon the motion of a party to a written contract or lease that provides that any controversy arising therefrom shall be heard by a referee if the court finds a reference agreement exists between the parties . . . ." Section 639 provides, among other things, that on the motion of a party or on its own motion, the court may appoint a referee in certain cases even if the parties do not agree. The fees of referees authorized by sections 638 and 639 are ordinarily paid by the parties. (See § 645.1.)
11. As material, subdivision (a)(6) of section 1281.9 requires disclosure of "[a]ny professional or significant personal relationship the proposed neutral arbitrator . . . has or has had with any party to the arbitration proceeding or lawyer for a party."