Archives: June 2007
Fri Jun 29, 2007
Arbitrator Disclosure
Federal courts have clearly rejected vacating an arbitration award on grounds of arbitrator error in applying the law or the facts, but non-prevailing parties in arbitration are now searching resources to determine if the arbitrator was subject to disqualification pursuant to 9.U.S.C. 10 (a) (2) authorizing vacatur “where there was evident partiality or corruption in the arbitrators, or either of them.” Although the plain language of this section refers to “evident partiality”of an arbitrator, a phrase applicable to the conduct of the arbitration, the Supreme Court in Commonwealth Coatings Corp. v. Continental Casualty Co., 393 U.S. 145 (1968) interpreted the statute to require, under certain circumstances, disclosure by the arbitrator of prior professional or personal relationships among counsel or the parties.
Commonwealth is a plurality opinion and federal circuit courts have interpreted the case differently. In a Fifth Circuit case the court held non-disclosure alone does not require vacating an arbitral award for “evident partiality;” non-disclosure must involve a “significant compromising connection to one of the parties.”
The case is an en banc rehearing and several judges dissented but the Supreme Court denied cert. on June 11. The issue of non-disclosure of an arbitrators’s prior personal and professional relationships with the parties will not go away any time soon. See, Ovitz v. Schulman, 133 Cal.App.4th 830 (2005) interpreting CCP 1281.85 (a); 1281.9 (a) (2); 1281.95 and 1286.2 (a) (6) (A) [all relating to arbitrator disclosure]. Cf: Hayden v. Robertson Stephens, Inc., 150 Cal.App.4h 360 (2007).
According to the Fifth Circuit, the Ninth Circuit interpretation of Commonwealth Coatings in Schmitz v. Zilveti, 20 F.3d 1043 (9th Cir. 1994) interpreting the standard of “evident partiality” as the equivalent of a “reasonable impression of bias” is an “outlier.”
See, www.ArbitrationAdr, Ch. V-D-2
Thu Jun 28, 2007
Interim Order for Attorney Fees in Arbitration
An arbitration clause in a lease contract authorized attorney fees to a party who instituted any action or proceeding to resolve a dispute other than in an arbitration forum. The plaintiff filed an action against the defendant who immediately filed a petition to compel arbitration and to enforce the arbitration clause requiring the payment of fees.
The Cal. Court of Appeal held (2-1) the interim order to pay fees was enforceable without waiting for rendition of the award; and, the trial judge, not the arbitrator, should compute the amount of fees and order payment if the claim for attorney fees was made in connection with the petition to compel arbitration.
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Fri Jun 22, 2007
Mediation & Confidentiality
Mediators conduct innumerable meditations successfully, without incident and to the mutual satisfaction of the participants. But sometimes a mediation goes wrong as illustrated by a recent California appellate case.
Plaintiff filed a civil action alleging his attorney mis-informed him of the settlement demand from the other party during the course of a prior mediation in a related case. The evidence, gleaned from mediation briefs and e mails contemporaneous with the mediation produced during discovery in the course of the legal malpractice action against his attorney, tended to corroborate that allegation. The trial court refused to exclude evidence of communications in the mediation briefs and e-mails reflecting allegedly inconsistent statements by plaintiff’s lawyer (now the defendant in the malpractice case).
Seeking mandate, the defendant sought reversal of the trial court order on the ground the plaintiff’s evidence was derived from communications occurring during the mediation and subject to the confidentiality provisions of the Ev. Code. The Court of Appeal, citing two previous California Supreme Court cases, held that Ev. Code 1119 imparts confidentiality to written or oral communications prepared “for the purpose of, in the course of, or pursuant to a mediation or mediation consultation” in addition to those communications occurring during the course of a mediation.
The Court of Appeal cites several other California cases interpreting Ev. Code 1119 precluding evidence of misconduct occurring during a mediation as well as any documents confirming criminal conduct. “Confidentiality” of communications is not confined to the parties or counsel. A mediator cannot report misconduct if the evidence emerges from mediation proceedings (other than a crime); Ev. Code 703.5.
Excluding all evidence of communications in mediation does not occur automatically. Any facts obtained prior to-and independent of- the mediation and otherwise admissible are not insulated from disclosure merely because counsel inserted those facts in a brief.
The central issue of disclosure in any mediation becomes whether the communications, written or oral “occurred or were prepared for the purpose of, in the course of, or pursuant to the mediation.” In the instant case, the appellate court excluded the mediation briefs, obviously prepared for the purpose of mediation, and the e-mails discussing the forthcoming mediation.
As a consequence of its ruling, the appellate court notes the probable inability of the plaintiff to prove his legal malpractice case. “Confidentiality” of communications is the necessary price paid for mediation to encourage candor and privacy among the participants, but the alterative of disclosure is equally perilous. The court notes the potential injustice of strict rules on confidentiality and encourages the legislature to revisit the issue.
See, Text in ArbitrationAdr.com Ch. X; XI-B-2-a
Sun Jun 03, 2007
Arbitration & the Statute of Limitations
The California Supreme Court has assigned the ruling on applicability of the statute of limitations to the arbitrator-not the court. According to the Court, the statute of limitations is an affirmative defense within the meaning of a broad arbitration clause (“any dispute arising out of their contract”).
When does the statute begin to run in arbitration? The statute does not begin to run until one party refuses to submit to arbitration; CCP 1281.2.
In an earlier case, the California Supreme Court had held that if a party refused to arbitrate, the statutory or contractual time limits to initiate arbitration in the underlying litigation mark the beginning of the time line. In contract, the statute is four years.
In the absence of an action on file, if a party fails to respond to a demand for arbitration, the moving party must file a petition to compel arbitration within a reasonable time after non-performance of an act, condition or occurrence of an event. Otherwise the moving party may have waived the right to arbitrate.
Federal courts operate under a similar rule. If an action is on file and a party “fails, neglects or refuses to arbitrate,” the moving party may file a petition to arbitrate; 9 U.S.C. 3/4. Under the FAA, federal courts apply state substantive law. An affirmative defense is substantive law.
If no action is on file, the District Court lacks jurisdiction to order arbitration in the absence of diversity of citizenship and a party must initiate arbitration in state court.
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