Arbitration: California Appeals Court Turns Back a List of Arbitration Objections (Web)

An unpublished California appellate court opinion runs through a laundry list of claims by a plaintiff seeking to overturn an arbitration award and reopen a case against him.

In Giacomazza v. Coldwell Banker, et al. No. B173551 (Cal.App. 2d Dist. Sept. 27, 2006)(unpublished)(also available at http://www.courtinfo.ca.gov/opinions/nonpub/B173551.PDF#search=%22giacomazza%20banker%20coldwell%20michele%20%22appeals%20from%20a%20judgment%22%22), the California Second Appellate District, Division One, discusses the value of an oral stipulation in open court to binding arbitration, and assesses whether an arbitration award was based upon improper actions.

In a dispute over a commercial real estate deal that fell through, the plaintiff filed suit in Los Angeles against the defendants, including a partnership that owned property the plaintiff had tried to buy; the defendant’s broker, and the broker’s agent.

In addition, at the trial court's suggestion, the plaintiff and the defendants' counsel orally stipulated in open court to binding arbitration. The stipulation and the court's subsequent order for binding arbitration were entered in the minutes.

Before arbitrating, the plaintiff, who had been conducting the case pro se, hired an attorney, and filed an ex parte application for an order vacating the stipulation for binding arbitration. He claimed that he did not knowingly waive his right to a jury trial. The trial court denied the motion.

After an arbitrator denied all his claims, the plaintiff filed a motion to vacate the arbitration award. The trial court denied the plaintiff's motion as insufficient under the statute to vacate the arbitration award.

On February 3, 2004, plaintiff and defendants filed a stipulation to confirm the arbitration award as a judgment, and to have judgment entered in favor of defendants. Both the plaintiff and his lawyer signed the stipulation. The trial court issued an order for entry of judgment.

But then, two weeks later, the plaintiff filed a notice of appeal. He contended that the trial court erred ordering the case into binding arbitration and denying his motion to vacate the arbitration award based upon the arbitrator's improper actions.

The appeals court decided to consider the merits of each of the plaintiff's contentions, despite the parties' stipulation to confirm the arbitration award. The consideration was given because there were indications by both sides that they wanted to preserve the right to appeal: The plaintiff filed a notice of appeal only 14 days after the stipulation was filed, and defendants did not seek the appeal’s dismissal.

The first substantive issue that the appeals court addressed was the enforceability of the oral agreement committing to binding arbitration, under California contract law. The court found abundant evidence that plaintiff had freely and knowingly consented to binding arbitration: The plaintiff had answered affirmatively when the trial court asked him in open court if he would stipulate to binding arbitration.

During the hearing, the court had referred to “binding arbitration” several times. The plaintiff had the opportunity to ask the court about the significance of the arbitration being binding, but had not given any indication that he had not understood.

The evidence thus supported a finding that plaintiff had given free and mutual consent to binding arbitration.

The panel then examined the plaintiff's contentions that the trial court had erred in denying his motion to vacate based upon the arbitrator's improper actions. The alleged improper actions were: (1) requiring the plaintiff to disclose confidential information about his obtaining fee waivers and using the information to assess the plaintiff's credibility; (2) engaging in ex parte communications with the defendants' counsel during the arbitration process, thereby showing bias and corruption; and (3) denying the plaintiff's request for an extension of time for discovery as a result substantially prejudicing the plaintiff's rights.

On the alleged requirement by the arbitrator to disclose confidential information, and the fact that the arbitrator used this information as a basis for assessing the plaintiff's credibility, the panel found that the plaintiff had voluntarily disclosed the fact that he had obtained a fee waiver during arbitration testimony.
Additionally, the arbitrator's decision clearly indicated that the fee waiver information had been only one of a number of factors that had raised doubts about the plaintiff's credibility.
On the alleged ex parte communications, the plaintiff had to demonstrate that there had been a preexisting business or social relationship between the arbitrator and defendants' counsel which would have colored the arbitrator's judgment and created the impression of bias in the mind of a reasonable person. Additionally, the plaintiff had to show that his rights had been prejudiced by the conduct.

But the panel notes that the plaintiff only presented evidence based on conversations between the arbitrator and the defendant's counsel during the two days of arbitration hearings, and the defendants' counsel's declaration established that the conversations had been “small talk.”

According to the plaintiff, the defendant's counsel and the arbitrator discovered they had attended the same university and talked about knowing some of the same people and professors. But the plaintiff made no claim or showing that the arbitrator and defendants' counsel had discussed substantive matters relevant to the arbitration issues, nor did he show they developed a relationship that resulted in the arbitrator’s bias.

The appeals court stated that mere ex parte conversation does not constitute grounds for disqualifying an arbitrator or for vacating an award.

The panel also disagreed on the plaintiff's assertion that the arbitrator's refusal to stay the arbitration to allow him additional time for discovery constituted grounds for vacating the award. A requesting party has to show the materiality of any evidence expected to be discovered and the party's diligence in seeking to procure it sooner. It also must show that he or she was substantially prejudiced by the arbitrator's refusal to stay the arbitration.

The panel first concluded that the plaintiff's request had been speculative in nature. The plaintiff asserted the discovery sought might lead to evidence that would impeach some of the defendants' testimony and show that defendants were at fault.

The appellate panel then found that the plaintiff's request had not been diligent. He had not made the discovery request until several days after the parties had each rested their case at the close of the hearings, and the matter had been submitted for decision.

The plaintiff's counsel had submitted the request to the arbitrator by fax a little more than two days prior to the scheduled decision issue date. In the decision, the arbitrator noted that the plaintiff had ample prior opportunity, including at least five years for discovery prior to the arbitration hearings, a fact that was confirmed by the case chronology. Also, during the arbitration proceedings, the plaintiff had been given additional time to obtain and submit further documentary evidence.

--Victoria Brassart, CPR Intern