Friday, August 6, 2004
Court of Appeal Upholds Immunity for Arbitration Organizations
By KENNETH OFGANG, Staff Writer/Appellate Courts
California’s common law rule immunizing arbitrators against liability for their actions extends to the organizations that employ them, the Court of Appeal for this district ruled yesterday.
Div. One affirmed a judgment in favor of the American Arbitration Association, which was sued by the losing party in a contractual arbitration. The plaintiff, Shanel Stasz, claimed the AAA caused her substantial damages by appointing a biased arbitrator to hear her case.
Stasz is a law school graduate and represented herself in the Court of Appeal.
The appellate court also rejected Stasz’s claims against several other parties, including her former lover Hugo Quackenbush; his employer, The Charles Schwab Corporation; and company founder Charles R. Schwab.
The relationship between Stasz—who also worked at Schwab—and Quackenbush ended bitterly in 2000; he sued for a restraining order and she threatened a cross-complaint before lawyers for the two negotiated a settlement.
The settlement agreement, signed by both parties, required that the nature of their disputes and the existence of the agreement be kept confidential. Stasz agreed that she would not disparage Quackenbush, Schwab, the company, or the firm’s officers and directors; Quackenbush agreed that he would not disparage Stasz.
The parties also agreed they would have no personal contact with each other, that each would return to the other all papers of the other in his or her possession without retaining copies, that Stasz would vacate her apartment in a building owned by Quackenbush, and that Quackenbush would pay her $2.5 million when she moved out and $225,000 a year for three years after that.
Within three months of signing the agreement, however, Quackenbush initiated proceedings with the AAA, pursuant to an arbitration clause in the agreement. He claimed that he had complied with his obligations under the agreement, including the $2.5 million payment, but that Stasz had breached the settlement by constantly phoning him and by revealing matters that the agreement required be kept confidential.
She also sent a letter to his attorney threatening a lawsuit unless she was paid $50 million.
Stasz challenged the arbitration clause in a Los Angeles Superior Court action, but Judge Ronald Cappai, since deceased, ruled the clause was enforceable. The Court of Appeal affirmed in an unpublished opinion.
Stasz later sued Quackenbush on various tort theories, including fraud and intentional infliction of emotional distress. She accused him of threatening to breach the confidentiality provisions of the settlement unless she agreed to certain modifications of the agreement.
Judge Marvin Lager ordered that the claims in the complaint be arbitrated. Both he and the arbitrator denied Stasz’s requests that the arbitration be stayed pending her appeal of Cappai’s ruling.
Stasz later filed her third suit, naming Schwab, the firm, Quackenbush’s lawyers, and others as defendants. The complaint was stricken as to all defendants other than the AAA under the anti-SLAPP law; that ruling was upheld in an unpublished portion of yesterday’s opinion.
The Quackenbush-Stasz arbitration went forward. The arbitrator found that Stasz violated various provisions of the settlement, and that she had damaged Quackenbush in various ways, including damaging his relationship with Schwab, who was not only his boss but a personal friend for decades.
Quackenbush was awarded $1.5 million in damages and costs, plus various forms of declaratory and injunctive relief. He was relieved of the obligation to pay the remaining amounts due Stasz under the agreement.
Lager confirmed the award. That ruling was likewise upheld yesterday.
Judge Victor Person sustained the AAA’s demurrer, ruling that the organization was immune.
Justice Robert Mallano, writing for the Court of Appeal, agreed. The immunity of organizations that sponsor arbitrations is well-established in California and elsewhere, he said. A party who claims that an arbitrator was biased has an exclusive remedy, he explained, through a petition to vacate the award.
“A suit against an arbitrator or a sponsoring organization is nothing more than a collateral attack on the arbitration award,” he wrote.
The case is Stasz v. Schwab, 04 S.O.S. 4240.
Copyright 2004, Metropolitan News Company