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C.A. Rebuffs Contention Arbitrator ‘Manifestly’ Skirted Law
Says Former Justice Aldrich Properly Made $1.2 Million Attorney Fees/Costs Award Against Alleged Fraudster
By a MetNews Staff Writer
Div. Three of the Fourth District Court of Appeal has rejected the contention that an arbitrator displayed a “manifest disregard of the law” in awarding more than $1.2 million in costs and attorney fees in a matter that was resolved by a summary disposition and that he committed a like error in failing to vacate his award after the fraud conviction of plaintiff’s principal—an event affecting the outcome of the arbitration—was set aside.
Tuesday’s opinion by Presiding Justice Kathleen E. O’Leary affirms a judgment by Orange Superior Court Judge James J. Di Cesare which followed his confirmation of an arbitration award by former Court of Appeal Justice Richard Aldrich. Aldrich sat on this district’s Div. Three until his retirement in 2016 and now works for JAMS.
His award was in favor of Pacific Oak SOR Richardson Portfolio JV, LLC, an investment company. That company was sued by land developer JP-Richardson, LLC after Pacific Oak removed it in 2017 as the managing member of their joint venture in light of the disgrace brought upon the enterprise by an FBI investigation, then in progress, of JP’s principal, Mark Jordan.
Arbitration Demanded
Fresh on the heels of the ouster, which was pursuant to a “Just Cause Event” clause in the joint venture agreement, JP invoked an arbitration proviso in that agreement. It specified JAMS’s Orange County office as the site of the proceedings, with Delaware law to be applied. Jordan was indicted on May 16, 2018 by a federal grand jury for the Eastern District of Texas. The indictment alleged that from May 2013 through April 2015, Jordan conspired with the then-Mayor of Richardson, Texas (which is 14 miles from the City of Dallas) “to benefit and enrich themselves through bribery.”
It set forth that in exchange for “favorable support and votes” by Laura Maczka (as she was then known) in connection with the joint venture’s proposed housing development, Palisades Property, Jordan “offered and gave to Maczka, and Maczka accepted” things of value. These were enumerated as “monetary payments, which caused interstate wire communications, payments for renovations of Maczka’s residence, luxury hotel stays, flight upgrades, meals, lucrative employment with one of Jordan’s companies that involved the Palisades Property, intimate sexual contact, and other personal benefits….”
Jordan and his co-defendant—who had become his wife (now Laura Jordan)—were convicted by a jury on March 7, 2019. The following month, Aldrich summarily found in favor of the defendant, declaring that there were multiple “Just Cause Events” justifying the removal of JP from managing the joint venture’s affairs.
New Trial Ordered
District Court Judge Amos L. Mazzant III of the Eastern District of Texas on May 2 of that year set aside the jury’s verdict and ordered a new trial based on a court security officer having conversed with some jurors about the case. With his conviction having been nullified, Jordan asserted in the arbitration proceeding that Aldrich was obliged to vacate the award.
The former jurist disagreed. He said that “implications for the Palisades Project” stemming “from Jordan’s misconduct with Mayor Maczka are grave.”
Noting that the trial “was extensively covered by the newspapers and television news media,” he observed that reputations of those involved in the Palisades Project, including Pacific Oak, which had a 90 percent stake in the project, have been “severely damaged.”
He commented: “The fact there will be a retrial with its attendant publicity only makes matters worse for the Joint Venture. The assets of the Joint Venture have clearly been placed in jeopardy and put under a cloud of suspicion.”
Aldrich denied reconsideration and made a final award with costs granted to Pacific Oak in the amount of $88,838.93 and attorney fees in its favor set at $1,127,826.26.
O’Leary’s Opinion
In her opinion affirming Di Cesare’s judgment based on the arbitration award, O’Leary noted that under Delaware law, as under California law, circumstances are narrow under which such an award will be judicially snubbed. She wrote:
“After discussing Delaware’s case law regarding reasonable attorney fees, JP concludes the arbitrator should not have awarded over $1 million in fees, for the work of 17 different lawyers, and over $88,000 in costs for a single deposition case resolved on a dispositive motion. JP provides the following argument, ‘Specific and unrebutted evidence was submitted by JP that most of these fees and costs were unrecoverable. Yet, the arbitrator ignored the facts, evidence, law and the parties’ agreement and awarded every single dollar.’ These statements represent JP’s entire legal analysis of this issue.”
The jurist continued:
“[I]t is simply not enough to regurgitate applicable case law and disagree with the arbitrator’s findings. Factual and legal errors regarding the reasonableness of the awarded fees in arbitration are not reviewable….JP failed to meet his [sic] burden of showing the arbitrator acted in manifest disregard of the law, or that the attorney fee award was more than an alleged legal or factual error.”
Vacating of Conviction
Addressing the contention that Aldrich should have scrapped the award after the federal conviction was vacated, O’Leary said:
“JP argues the award ‘was expressly based’ on a conviction vacated in May 2019. JP discusses the concept of collateral estoppel, correctly asserting that under both California and Delaware law, this legal doctrine requires a final judgment on the merits….JP notes he [sic] advised the arbitrator there was no final judgment because the federal court ordered a new trial. JP states he [sic] advised the arbitrator the collateral estoppel doctrine required a final judgment ‘yet he willfully flouted the law by refusing to apply it.’ We reject this contention, in part, because the award was based on evidence other than the vacated fraud conviction. In addition, JP’s argument misconstrues the record because there was no evidence the arbitrator willfully ignored legal authority regarding the doctrine of collateral estoppel.”
O’Leary added: “JP’s argument overlooks the procedural history of this case, in that the arbitrator reconsidered its [sic] initial April 2019 arbitration award, after the court vacated the fraud conviction. The arbitrator concluded there were reasons, other than the conviction, to uphold the award.”
Other contentions by JP were also found lacking in merit. The case is JP-Richardson v. Pacific Oaks SOR Richardson Portfolio JV, LLC, 2021 S.O.S. 2822.
JP-Richardson was represented by Mitchell Madden and Dennis M. Holmgren of the Dallas firm of Holmgren Johnson. Acting for Pacific Oaks were David Farkas and Alexander Wolf of the Los Angeles office of DLA Piper.
Not reflected by the opinion is that Mark and Laura Jordan were indicted anew by a federal grand jury in December on 11 counts, including tax fraud. Voir dire in their second trial is scheduled to start on Tuesday.
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