Appearance of Partiality Disclosures by Neutral Arbitrators
LACBA Update, December 2011
By Judge Michael Marcus (ret.), a mediator, arbitrator, and discovery referee with ADR Services in Los Angeles. He is a member and past chair of LACBA's Professional Responsibility and Ethics Committee. The opinions expressed are his own.
After attorneys have selected an arbitrator to preside over either a contractual or consumer arbitration, the arbitrator should provide a disclosure checklist presenting his or her responses to possible grounds for disqualification. The legal basis for disclosures can be found in Code of Civil Procedure Sections 1281.9, et seq. and the California Rules of Court, Appendix, Division VI, Ethics Standards for Neutral Arbitrators in Contractual Arbitration (“Ethical Standards”). Five recent cases show how the courts have interpreted an arbitrator’s obligation to disclose “matters that could cause a person aware of the facts to reasonably entertain a doubt that the...neutral arbitrator would be able to be impartial.”1
Haworth v. Superior Court holds that the above appearance-of-partiality standard concerning arbitrator recusal should not be broader than the same standard applicable to judicial recusal.2 In La Serena Properties v. Weisbach, the arbitrator should have disclosed his relationship with counsel for the opposing party, including that he had had a relationship with that attorney’s sister.3 Johnson v. Gruma Corp. holds, in applying California law, the arbitrator did not have to disclose that his wife had been a former law partner of Gruma’s attorney eight years earlier because the Ethical Standards only require disclosures about the spouse’s current associations.4 Benjamin, Weill & Mazer v. Kors, in which the appellate court reversed the confirmation of an arbitration award on behalf of a defendant law firm, holds that part-time lawyer-arbitrators should disclose their legal involvement in business interests that are similar to the facts of the matter to be arbitrated. In that case, one of the arbitrators in a mandatory fee arbitration failed to advise the ultimately unsuccessful client litigant that he, the arbitrator, was representing a large law firm in a case before the California Supreme Court involving an attorney fee dispute and was also representing another major law firm in an action for attorney malpractice and related torts.5 Rebmann v. Rohde states that an arbitrator’s disclosure obligation does not extend to information about the arbitrator’s background that has nothing to do with the facts of the case.6
In Haworth, the trial court vacated an arbitration award for a doctor involving a female patient’s claim—that the doctor had been negligent in performing plastic surgery to her lip—because the arbitrator, a retired judge, failed to disclose that 10 years earlier he had been publicly censured for making statements to court employees, which created “an overall courtroom environment where discussion of sex and improper ethnic and racial comments were customary.” The California Supreme Court held that the arbitrator was not required to disclose the censure because nothing in its background facts would suggest to a reasonable person that the retired judge could not be fair to female litigants.7
La Serena Properties is important because it reminds aggrieved arbitration parties that common law immunity applies to claimed acts of bias by arbitrators, including an arbitrator’s failure to make adequate disclosures of potential conflicts of interest. As a result, the exclusive remedy for an arbitrator’s failure to disclose a potential disqualifying fact is to set aside the award.8
Johnson v. Gruma Corp. is relevant because it denied, in part, the arbitrator’s obligation to make disclosures about his wife’s former law partnership with Gruma’s counsel because the appellant had waived Ethical Standard 7(d)(3), which requires disclosure if "[t]he arbitrator or a member of the arbitrator's immediate family has or has had a significant personal relationship with any party or lawyer for a party," by not raising the issue at the trial level or in his appellate papers.9
Benjamin, Weill & Mazur distinguishes Haworth—which holds that disclosure obligations for arbitrators and judges are the same—because, it reasons, the arbitrator’s nondisclosures of concurrent business interests similar to the parties’ interests could never occur in judicial matters as they do in private arbitration. Thus, it held that arbitrators must disclose their ties to the business world “to the extent these relationships are substantial and involve financial considerations creating an impression of possible bias....”10
In Rebmann, Rohde sued his former business partner Rebmann for allegedly misrepresenting material facts about their joint venture. (Relevant only to post-arbitration proceedings was that Rohde was born in Berlin in 1943, his father had been in the German Army in World War II, and his father-in-law had been a member of the German SS during the war.) The lawsuit was arbitrated. The arbitrator made no disclosures specific to the case, and the matter was heard on its merits. The arbitrator ultimately found for the Rebmann parties. Rohde opposed Rebmann’s petition to confirm the award, contending that the arbitrator should have disclosed he and his parents were German Jews, had lost family and property in the Holocaust, and were members of an organization dedicated to avoiding a repeat of the Holocaust.
The appellate court was dismissive of Rohde’s argument and affirmed the judgment to confirm the award because, relying upon Haworth, there was nothing in the arbitrator’s professional record to indicate a bias toward Germans or anyone else. More importantly, the arbitrator’s background had nothing to do with the facts of the case, which had nothing to do with World War II or the Holocaust.11 Rebmann also rejects the assumption that an arbitrator or “judge who is a member of a minority cannot be fair when a case somehow related to that minority status—no matter how remote or tenuous that relationship might be—comes before that judge. A judge or arbitrator's impartiality should never be questioned simply because of who he or she is.”12
The lesson from these five cases is that arbitrators are well advised to fully disclose all circumstances that could create a reasonable doubt about their ability to be impartial. At the same time, attorneys should conduct their own due diligence into a prospective arbitrator’s background because there are limitations regarding what an arbitrator must disclose.
1 Code Civ. Proc. §1281.9(a).
2 Haworth v. Superior Court, 50 Cal. 4th 372, 393 (2010).
3 La Serena Properties v. Weisbach, 186 Cal. App. 4th 893 (2010).
4 Johnson v. Gruma Corp., 614 F. 3d 1062 (9th Cir. 2010).
5 Benjamin, Weill & Mazer v. Kors, 195 Cal. App. 4th 40 (2011).
6 Rebmann v. Rohde, 196 Cal. App. 4th 1283 (2011).
7 Haworth, 50 Cal. 4th at 390.
8 La Serena Properties, 186 Cal. App. 4th at 907; see also Code Civ. Proc. §1286.2(a)(6)(A) providing that a reviewing court “shall vacate the award if the court determines...[a]n arbitrator making the award...failed to disclose within the time required for disclosure a ground for disqualification of which the arbitrator was then aware.”
9 Johnson, 614 F. 3d at 1069.
10 Kors, 195 Cal. App. 4th at 73.
11 Rebmann, 196 Cal. App. 4th at 1291-92.
12 Id. at 1293.