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Arbitration Award Set Aside Based on Arbitrator’s Bias
Lack of Impartiality Is Inferred From Remark by Neutral, Late Judith Chirlin, That One Reason for Disbelieving Defendant Was That She Used an Interpreter, Without Need, to Create Illusion of Lack of Sophistication
By a MetNews Staff Writer
The Court of Appeal held yesterday that an arbitration award must be vacated based on the apparent bias of the arbitrator reflected by her remark that one reason for finding that a party was not credible in testifying was that she feigned a lack of sophistication by using an interpreter although she was conversant in the English language and had herself served as an interpreter.
The opinion by Justice William Dato of the Fourth District’s Div. One reverses a judgment by Riverside Superior Court Judge Daniel A. Ottalia, who confirmed the arbitration award in favor of FCM Investments, LLC. The arbitrator, former Los Angeles Superior Court Judge Judith Chirlin, now deceased, found that plaintiff FCM was justified in cancelling an escrow in light of dilatory tactics on the part of the defendants—San Francisco-area businesswoman Phuong Pham, her daughter, realtor Trish Pham, and her company, Grove Pham, LLC.
Chirlin awarded FCM loss-of-bargain damages in the amount of $9.1 million, plus interest, $127,040 in attorney’s fees, and $20,048 in costs, and ordered a return of its $650,000 deposit, plus interest.
Focusing on ‘Bias’
Dato noted that “[a]lthough the Phams seek to vacate the arbitration award on multiple grounds, we largely focus on one,” that being the issue of bias.
He wrote:
“Given the exceedingly narrow scope of judicial review of arbitration awards, assuring both the actual and apparent impartiality of a neutral arbitrator is crucial to the legitimacy of arbitration as a dispute resolution mechanism. Courts are empowered to act where that impartiality can reasonably be questioned. Here, the arbitrator’s credibility finding rested on unacceptable misconceptions about English proficiency and language acquisition. These misconceptions, in turn, give rise to a reasonable impression of possible bias on the part of the arbitrator requiring reversal of the judgment and vacating the arbitration award.”
Chirlin Quoted
Dato quoted Chirlin as saying that although the transaction “was rather complicated,” her decision was “made easier by an evaluation of the credibility of the witnesses.” She said the case was unique “both in 12 years of doing arbitration and 24½ years on the Los Angeles County Superior Court, in that the lack of credibility issues are so rampant and obvious.”
The late arbitrator, who was with Judicate West, found Phuong Pham and Trish Pham to lack credibility, saying of the mother:
“Among the items that stand out, is Mrs. Pham’s use of an interpreter. While the Arbitrator understands that people for whom English is a second language frequently prefer to testify in their native language in important legal matters, Mrs. Pham’s use of an interpreter appeared to the Arbitrator to be a ploy to appear less sophisticated than she really is. She has been in the country for decades, has engaged in sophisticated business transactions and has herself functioned as an interpreter.”
Chirlin added:
“That being said, the one part of Mrs. Pham’s testimony that appeared truthful is that she did not want to sell the business and property to FCM because she believed she could sell it for more money than her agreement with FCM contemplated.”
Claim Not Forfeited
FCM contended that the matter of bias was not raised by the defendants in the trial court and was therefore forfeited. Dato responded that cognizance of claims not raised below may be taken where they relate to an issue of law emerging from undisputed facts and where “matters involving the public interest or the due administration of justice” are implicated.
“[B]oth exceptions to the forfeiture rule apply as to the Phams’s claim of arbitrator bias,” he said.
“And even if the general forfeiture rule rather than its exceptions applied, we would exercise our discretion to reach the claim given the interests at stake,” Dato wrote.
Need for Interpreter
Addressing the merits, Dato said:
“As a factual matter, FCM’s own pleadings undercut the notion that Phuong’s use of an interpreter was a ploy. In its original complaint, filed long before the relationship between the parties completely unraveled, FCM acknowledged that Phuong used her daughter as a translator during a conference call based on her daughter’s ‘proficiency in English.’ If Phuong relied on her daughter to translate a conference call before the deal unraveled, it seems unsurprising that she would use an interpreter to testify in commercial arbitration proceedings.
“But whatever Phuong’s actual fluency in English, the four corners of the award raise an impression of possible arbitrator bias. Turning to the reasons cited by the arbitrator, living in the United States for decades does not reasonably imply sufficient English fluency to participate in arbitration without the assistance of an interpreter. A recent tabulation of Census data reveals that over 40 percent of foreign-born residents continue to speak English ‘less than very well’ (i.e., the marker of a limited English-proficient person, or LEP) after living in the United States for over 20 years.”
Not Fair Indicator
He continued:
“Nor is it accurate to assume that being LEP equates with a lack of business sophistication or economic success. Historic enclaves like San Francisco’s Chinatown, Los Angeles’s Koreatown, and Orange County’s Little Saigon speak to the ability of immigrants to run thriving businesses despite potential limitations in language skills. The fact that Phuong had ‘engaged in sophisticated business transactions’ does not reliably predict her English proficiency, much less her ability to proceed in a high-stakes commercial arbitration without an interpreter.”
Dato added that Chirlin did not explain what she meant by Phuong Pham having served as an interpreter, remarking that it could have been that she did so in an informal sense, as her daughter had done for her.
His opinion directs that, on remand, a new arbitration proceeding be ordered.
The case is FCM Investments, LLC v. Grove Pham, LLC, D080801. The Phams and Grove Pham were represented by Teri Thuy Pham, Philip M. Duclos and Thang Le of the Costa Mesa firm of Enenstein, Pham & Glass. Acting for FCM was North Hollywood attorney Richard Martin Foster.
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