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Arbitrators Cannot be Disqualified Based on Voluntary Disclosures

By Stephanie Robinson

In a case of first impression, the California Court of Appeal has rejected an attempt to disqualify an arbitrator after the arbitrator volunteered information that was not required to be disclosed under the rules and statutes governing arbitration. In Luce, Forward, Hamilton & Scripps, LLP v. Koch, 2008 WL 1886606 (Cal. App. 2008), the Court of Appeal, Fourth Appellate District, held that the arbitrator could not be disqualified based on information he voluntarily disclosed orally during the proceedings. Luce Forward filed a breach of contract suit against four former clients who had retained the firm to represent them in a complex securities litigation. Other than their initial retainer, the former clients did not pay Luce Forward any fees, and after filing suit, Luce Forward successfully compelled arbitration under the fee agreements, which contained an arbitration clause. Judge J. Richard Haden, a retired Superior Court judge with the Judicial Arbitration and Medication Services (?JAMS?) was selected as the arbitrator. As required by the rules, the Judge Haden sent the parties a written disclosure indicating that he had served as mediator in three cases in which Luce Forward was a party and attorneys at the firm participated as counsel in those mediations. The judge indicated that the mediations did not concern issues arising in this case and stated that he did not believe that his prior work would impact his ability to be fair. None of the parties challenged the disclosure. After the arbitration commenced, the judge stated that after reviewing the witness list and the pleadings the weekend before the arbitration, he discovered that he had served on the board of a local trial lawyers? association with one of the witnesses and one of the firm?s lawyers. Koch then requested that the judge disqualify himself, but the judge denied that challenge. Ultimately, the judge issued an award in favor of the law firm, and the award was confirmed by the superior court. The Court of Appeal rejected Koch?s contention that Judge Haden was required to disqualify himself based on the disclosures made during the arbitration. According to the court, ?Judge Haden was not legally required to make any disclosures pertaining to? the witness of the attorney where ?there was no indication Judge Haden had a personal relationship, or close friendship? with either of them. There was no evidence of a business relationship, and serving on a volunteer board or participating in the same professional organizations did not create one. Generally, no disclosure is required when there has been slight or attenuated contact because ?arbitrators cannot sever all their ties with the business world? or the legal community. The court noted that ?under the defendants? theory, an arbitrator could be disqualified during arbitration for orally revealing even the most attenuated contact with a party?s counsel or witness, such as occasionally shopping at the same grocery store.? Because Judge Haden was not required to make the disclosures, he also was not obligated to disqualify himself after voluntarily disclosing the relationships. The judge complied with the disclosure obligations under the statutes, and an arbitrator may only be disqualified ?when the disclosure is legally required.? Full Opinion Text: http://www.courtinfo.ca.gov/opinions/documents/D049788.PDF

Full post as published by Business and Technology Law on May 14, 2008 (boomark / email).