Wednesday, September 25, 2013
C.A. Cites Lack of Disclosure, Throws Out Arbitration Award
Says Retired Judge Chernow Should Have Told Party He Listed Opposing Counsel as a Reference
By KENNETH OFGANG, Staff Writer
An arbitrator in a legal malpractice dispute was ethically bound to disclose that a partner in the firm that the claim was brought against was listed as a reference on the arbitrator’s resume, the Court of Appeal for this district ruled yesterday.
While there was no evidence that retired Los Angeles Superior Court Judge Eli Chernow was biased in favor of Jeffer Mangels Butler & Mitchell, LLP or that he had a close relationship with name partner Robert Mangels, Justice Walter Croskey wrote for Div. Three, the fact that Mangels was listed on a resume Chernow had been using for about 10 years “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.”
The ruling stemmed from a dispute between Mt. Holyoke Homes, L.P. and the law firm. Mt. Holyoke hired Reznik and Reznik to represent them in a matter concerning subdivision of Pacific Palisades property in 1992, and John Bowman and Ben Reznik took the matter with them when they joined Jeffer Mangels in 1997.
The developer then entered into a retainer agreement with Jeffer Mangels, including an arbitration clause requiring that any dispute be heard by a retired judge sitting in Los Angeles or San Francisco County. The firm continued to represent the developer with respect to the matter through 2008, when the Court of Appeal upheld a Coastal Commission decision denying the subdivision application.
In January 2010, the developer sued the firm for malpractice, claiming it was negligent in failing to timely challenge the commission’s jurisdiction. The firm had argued in a 2003 mandate petition that the commission lost jurisdiction when it failed to make a required finding within 49 days of the filing of an administrative appeal, but the Court of Appeal—reversing the trial court—held that the developer was estopped by its failure to raise the issue during litigation that took place in the 1990s.
After a Superior Court judge ordered arbitration, the parties selected Chernow as the arbitrator. He disclosed that attorneys representing Jeffer Mangels in the dispute had appeared before him in a mediation during the previous five years, and that he had known Reznik for many years, but did not mention Mangels’ listing on his resume.
The parties waived any objections to Chernow on the basis of the disclosures, and he proceeded to conduct the hearing and rule that the state of the law regarding the 49-day rule was unclear at the time, that the law firm fulfilled its duty of care, and that even if the firm was negligent, its negligence would not have been the cause of the client losing the case because the commission would have found another basis for jurisdiction.
He also found for the law firm on its cross-complaint for attorney fees, and awarded more than $18,000 in unpaid fees, $285,000 in fees as the prevailing party in arbitration, and over $150,000 in costs.
In petitioning to vacate the award, Mt. Holyoke filed a declaration by its principal, Darla Jones, saying that after the arbitration award was rendered, she found Chernow’s resume on the Internet site of an arbitration organization and discovered for the first time that he had listed Mangels as one of three references.
Petition to Confirm
In opposing the petition and moving to confirm the award, Jeffer Mangels countered with declarations by Chernow and Mangels. Chernow explained that he had no relationship with Mangels, besides the attorney having appeared before him in various proceedings years earlier, and that he had only listed him as a reference because Mangels was a well-known and respected attorney familiar with Chernow’s work, and that he had not discussed the listing with Mangels.
Mangels confirmed that he had no professional relationship with the jurist and had not discussed acting as a reference for him.
The petition to vacate was denied on the ground that “a person aware of the facts would not entertain a doubt as to the impartiality of the arbitrator.”
Croskey, in his opinion for the Court of Appeal, disagreed.
“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,” he wrote. “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.”
Nor, Croskey wrote, does the fact that the resume was readily available online excuse the lack of disclosure by Chernow. “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,” he wrote.
Attorneys on appeal were Timothy D. McGonigle for Mt. Holyoke and Timothy D. Reuben, Stephen L. Raucher and K. Cannon Brooks of Reuben Raucher & Blum for Jeffer Mangels.
The case is Mt. Holyoke Homes, L.P. v. Jeffer Mangels Butler & Mitchell, LLP, 13 S.O.S. 4982.
Copyright 2013, Metropolitan News Company