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Arbitrator in Non-Consumer Dispute Need Not Make Meticulous Disclosures—C.A.
By a MetNews Staff Writer
A judge, in confirming a $2.7 million arbitration award, correctly spurned the contention of the losing party that the arbitrator was remiss in having failed to disclose her precise ownership interest in JAMS, the alternate dispute resolution firm that was used, and the number of matters the company had handled for the law firm on the other side, O’Melveny & Myers, Div. Three of the Fourth District Court of Appeal has held.
Justice Richard D. Fybel authored the opinion, filed Monday. It backs the decision by Orange Superior Court Judge James Di Cesare to give effect to an arbitration award in favor of The Advantage Fund, LLC and three other investment funds in their cross complaint against Steven M. Speier, a former investment fund manager.
The arbitrator was Gail A. Andler, a former Orange Superior Court judge. She awarded the funds $433,117.23 in damages plus $2,112,974.03 in attorney fees and $157,709.87 in other costs.
Under the California Rules of Court Ethics Standards for Neutral Arbitrators in Contractual Arbitration, the particularized disclosures Speier insists should have been made did not need to be provided because the parties were not consumers, Fybel declared.
“If this were a consumer case, which all parties agree it was not,” the jurist said, standard 8 of the standards would require a disclosure of “[a]ny significant past, present, or currently expected financial or professional relationship or affiliation between the administering dispute resolution provider organization and a party or lawyer in the arbitration” as well as the arbitrator’s relationship with the provider.
Disclosures that Andler did make included this:
“I practice in association with JAMS. Each JAMS neutral, including me, has an economic interest in the overall financial success of JAMS. In addition, because of the nature and size of JAMS, the parties should assume that one or more of the other neutrals who practice with JAMS has participated in an arbitration, mediation or other dispute resolution proceeding with the parties, counsel or insurers in this case and may do so in the future.”
While agreeing with Speier that an arbitration award may be vacated rather than confirmed where an arbitrator fails to make a pre-arbitration disclosure of a ground for disqualification, Fybel said that “JAMS’s disclosures were sufficient” inasmuch as the parties were not consumers.
Andler’s ownership interest in JAMS, Fybel pointed out, did not exceed .1 percent. JAMS had handled 245 matters in the preceding five-year period for O’Melveny & Myers, representing the funds, and precisely the same number for Alston & Bird, attorneys for Speier in the arbitration, the jurist noted.
He said:
“There are no facts or circumstances in our record, and Speier does not point to any, that show how the arbitrator’s receipt a distribution of not more than .1 percent of JAMS’s total revenue in a given year in any way favors one party or party’s law firm over the other.
“The parties’ arbitration attorneys are from law firms that had the same number of matters before JAMS in the five years prior to the arbitrator’s assignment to this case. Therefore, the information Speier contends should have been known and disclosed by the arbitrator, whether considered independently or collectively as a whole, does not reasonably raise a doubt about the arbitrator’s impartiality. As the arbitrator did not fail to make a required disclosure, and Speier offers no other challenges to the arbitration award, the trial court did not err by denying Speier’s motion to vacate, confirming the final award, and entering judgment accordingly.”
Federal Case
Speier relied on the Ninth U.S. Circuit Court of Appeals’s 2019 decision in Monster Energy Co. v. City Beverages, LLC. There, the majority of a three-judge panel held in an opinion by Judge Milan D. Smith Jr. that the award by an Orange County JAMS arbitrator should not have been confirmed because JAMS’s frequent handling of disputes involving the plaintiff had not been divulged.
Smith wrote:
“We conclude, given the Arbitrator’s failure to disclose his ownership interest in JAMS, coupled with the fact that JAMS has administered 97 arbitrations for Monster over the past five years, that vacatur of the Award is necessary on the ground of evident partiality.”
Case Distinguished
Differentiating the circumstances in that case, Fybel said:
“[T]the most glaring differences are that Monster Energy was a party to the dispute, had appeared before JAMS repeatedly, and had JAMS written into its arbitration agreement. None of those facts is present here. The arbitration provision in the operating agreements did not require the use of or even suggest any particular arbitrator or arbitration provider. Furthermore, it was Speier, not the Funds, who moved to compel the arbitration of the parties’ disputes and for an order appointing an arbitrator in this case.”
He made note that “Monster Energy is a federal court decision interpreting federal law,” adding that the opinion does not reflect whether JAMS had handled any matters for the opposing party, implying that it had not, while in the present case, JAMS had handled an equal number of cases for both of the parties’ law firms.
The case is Speier v. The Advantage Fund, LLC, 2021 S.O.S. 1595.
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