Monday, August 6, 2018
Arbitrator’s Nondisclosures Require Vacating Award—C.A.
By a MetNews Staff Writer
Div. Eight of this district’s Court of Appeal has reversed an order confirming an arbitration award because the arbitrator—a former presiding justice of that division—failed to disclose employment in another matter involving the defendant’s counsel, in violation of California law.
The opinion does not identify the arbitrator, but records show it was Candace Cooper, who presided over Div. Eight from 2001-08, and is now a neutral with JAMS.
In 2013, Patricia Honeycutt brought a discrimination, retaliation, and wrongful termination suit against her former employer, JPMorgan Chase Bank (“Chase”). Chase successfully compelled arbitration of the claims, and the American Arbitration Association (“AAA”) assigned Cooper to arbitrate the matter.
Los Angeles Superior Court Judge Malcolm H. Mackey denied Honeycutt’s petition to vacate the award, which had been wholly in Chase’s favor. She appealed, citing Cooper’s failure to comply with Judicial Council rules requiring the disclosure of certain potential conflicts.
Justice John L. Segal of Div. Seven wrote Thursday’s opinion reversing Mackey’s order.
Strict and Unforgiving
“The arbitrator disclosure rules are strict and unforgiving. And for good reason. Although dispute resolution provider organizations may be in the business of justice, they are still in business. The public deserves and needs to know that the system of private justice that has taken over large portions of California law produces fair and just results from neutral decisionmakers…. Although the disclosure rules the arbitrator violated here may seem technical, they are part of the Legislature’s effort to ensure that private arbitrations are not only fair, but appear fair.”
The ethics standards for neutral arbitrators in contractual arbitration were adopted by the Judicial Council pursuant to a directive from the state Legislature in 2001.
Standard 12(b) requires an arbitrator to disclose to the parties within 10 days of assignment whether he or she is willing to entertain other employment offers from a party or lawyer involved in the arbitration. If the answer is in the affirmative, standard 12(d) requires the arbitrator to notify both parties of any such offers, and a separate notice of any acceptance of such offers, within five days of either.
Standard 7(d) includes an ongoing requirement that an arbitrator disclose “all matters that could cause a person aware of the facts to reasonably entertain a doubt that the arbitrator would be able to be impartial.” One example given is any employment with a party or lawyer involved in the arbitration.
If an arbitrator fails “to disclose within the time required for disclosure a ground for disqualification of which the arbitrator was then aware,” Code of Civil Procedure §1286.2 requires that the award be vacated.
Segal said that Cooper failed to provide the required notice, under standard 12(d), of two appointments to arbitrate for Chase, and eight instances of arbitrating for the bank’s counsel. Honeycutt learned of four of the assignments involving opposing counsel during the arbitration, but the other four only after demanding from the AAA a disclosure of all such assignments.
“Chase does not dispute the arbitrator violated Ethics standard 12(d).” Segal wrote. “The arbitrator accepted offers to serve as a neutral in eight other cases involving Chase’s attorneys and disclosed only four of them.”
He quoted Chase as saying that information as to four of the arbitrations were “not promptly distributed,” and remarked, in a footnote: “ ‘Not promptly’ is a euphemism for ‘not until after the arbitration.’ “
Segal noted that with respect to the four arbitrations that were disclosed, only the fact of the appointments was related, and not that they stemmed from offers by Chace’s lawyers.
He went on to say:
“The arbitrator also violated Ethics standard 7(d). As Chase concedes, one of the matters on the non-exclusive list of matters in Ethics standard 7(d) that an arbitrator has a continuing duty to disclose is service as an arbitrator in another pending case involving a party or lawyer for a party in the current arbitration….By not disclosing the four pending arbitrations with counsel for Chase, the arbitrator violated the continuing disclosure duties under Ethics standard 7(d).”
Knowledge of Breaches
Chace stressed that under §1286.2, there is a scienter requirement. It speculated that through clerical error, disclosure letters were not sent.
Segal responded, in a footnote, that no evidence of that appeared, and commented:
“We…question whether an arbitrator, unlike an attorney, can blame a case manager, assistant, or secretary for an arbitrator’s failure to comply with the Ethical Standards.”
The jurist declared:
“The arbitrator here was actually aware of the four other pending arbitrations involving counsel for Chase. Therefore, under section 1286.2, the arbitrator’s failure to disclose the four arbitrations with counsel for Chase was a failure ‘to disclose within the time required for disclosure a ground for disqualification of which the arbitrator was then aware,’ which requires vacatur of the award.”
The case is Honeycutt v. JPMorgan Chase Bank, N.A., 18 S.O.S. 3810.
Twila S. White of Westchester and Imran A. Rahman of Sherman Oaks were attorneys on appeal for Honeycutt. Chase was represented by Jeffrey A. Wortman, Candace Bertoldi, and Timothy M. Fisher of Seyfarth Shaw’s downtown office.
Cooper Not Identified
Segal’s opinion does not identify Cooper beyond mentioning that the arbitrator in the case was a “retired judge.” He referred to Cooper exclusively as “the arbitrator.”
Prior to serving as Div. Eight’s presiding justice, she was an associate justice in Div. Two for two years.
She was a judge of the Los Angeles Superior Court from 1987-99, after sitting on the Los Angeles Municipal Court from 1980-87.
A Los Angeles native, she obtained her law degree from USC in 1973, after which she worked for Gibson, Dunn & Crutcher until her appointment to the bench by Gov. Jerry Brown in 1980.
Cooper was president of the California Judges Association in 1988-89.
Copyright 2018, Metropolitan News Company