Arbitrator Disclosure: California Appeals Court’s Vacation of Award Sparks Controversy

On September 24, 2013, California’s Second Appellate District vacated an arbitral award in Mt. Holyoke Homes v. Jeffer Mangels Butler & Mitchell, 2013 WL 5321158, 2013 Cal. App. Lexis 765 (CA Dist. 2 Ct. App., Sept. 25, 2013), because the sole arbitrator had failed to disclose that a partner of the defendant law firm was listed as a reference on the arbitrator’s decade-old, online resume.

The claimants in Mt. Holyoke, a legal malpractice dispute, challenged the timeliness of the arbitrator’s disclosure of a prior relationship with a partner at the respondent law firm, Jeffer Mangels Butler & Mitchell LLP (JMBM). The arbitrator, retired Los Angeles Superior Court Judge Eli Chernow, disclosed during the arbitration his prior working relationships as judge, arbitrator and mediator, as well as his acquaintance, with several of the firm’s attorneys but did not disclose that he had at some point listed on his resume on the website of the National Academy of Distinguished Neutrals a name partner in JMBM as a reference. After Mt. Holyoke lost the arbitration and was preparing its petition to vacate the award, it found the online resume in an internet search, and filed a petition to vacate the arbitration award because of Judge Chernow’s failure to disclose this relationship with JMBM. The arbitrator and the partner concerned submitted declarations dispelling any inference of a meaningful relationship. Indeed, the arbitrator had never contacted the partner to ask for a reference. The trial court confirmed the arbitration award, but the appellate court refused to accept the resume’s easy availability on the internet as an excuse for the arbitrator’s lack of timely disclosure. The court concluded that “the fact that the arbitrator had listed a partner in JMBM as a reference on his resume reasonably could cause an objective observer to doubt his impartiality as an arbitrator,” and his failure to make a timely disclosure was grounds for vacating the award.  

This decision on the scope of an arbitrator’s disclosure obligation has sparked significant controversy among lawyers, arbitrators, and other legal practitioners.  

In online discussions, participants have expressed a variety of opinions. Some contributors agree with the California appellate court, arguing that the arbitrator should have disclosed this relationship, regardless of the resume’s age or other factors, because of the nature of the reference. Indeed, some arbitrators eagerly welcomed the challenge of making broad and careful disclosure in their own practice. Another contributor distinguished between a party’s right to make an informed choice in selecting arbitrators and the requirement that an arbitrator not be partial or biased, and contended that courts and arbitral institutions strictly enforce disclosure requirements to protect that right. Other contributors defended the appellate court’s decision against those who characterized it as “extreme” or “abnormal,” calling the decision “commonsensical,” while suggesting that arbitrators aim to disclose all nontrivial facts – including all relationships with a party or lawyer – erring always on the side of disclosure. Timely disclosure can help parties avoid expensive appeals and re-hearings.  

On the other hand, many disagree with the California appellate court’s decision. Some opined that given the facts of this case, the arbitrator’s relationship to the reference attorney was a past and remote one, and that the lack of disclosure failed to actually interfere with the arbitrator’s independence or impartiality. Many characterized the decision as inconsistent with precedent, unfair, impractical, and one that undermines the arbitration process and risks the absurd. Indeed, one commentator suggested that because professionals commonly interact with one another, a truly neutral arbitrator would be impossible to find among competent and experienced professionals. In addition, some warned that this decision makes even court proceedings look more efficient than arbitration, and risks discouraging individuals from serving as arbitrators. Moreover, some assert that the purpose of extensive disclosure is actual arbitrator impartiality, rather than the parties’ right to make an informed choice.  

Given the responses to the appellate court’s decision, the scope of arbitrator disclosure in California – and indeed in many jurisdictions – remains uncertain, but the trend seems to be toward disclosure of all matters, however trivial, as well as the imposition on arbitrators of a duty of due diligence in identifying matters to disclose.  

-  Cynthia Galvez, CPR Legal Intern