Malek Media Group LLC v. AXQG Corp. ( 2020 )

Filed 12/16/20
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION THREE
MALEK MEDIA GROUP LLC, B299743
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. SC128419)
v.
AXQG CORP.,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of Los
Angeles County, Harry Jay Ford III, Judge. Affirmed.
Law Offices of Jeffrey S. Konvitz and Jeffrey Konvitz for
Plaintiff and Appellant.
Eisner and Jeremiah Reynolds for Defendant and
Respondent.
——————————
Malek Media Group, LLC (MMG) appeals from a judgment
confirming an arbitration award in favor of AXQG, Corp.
(AXQG). MMG contends the arbitration award must be vacated
because the arbitrator failed to disclose his prior affiliation with
an LGBTQ rights organization, GLAAD, and failed to consider
material evidence. For the reasons stated below, we affirm the
judgment and grant AXQG’s motion for sanctions.
BACKGROUND
AXQG and MMG agreed to start a film production
company, Foxtail Entertainment, LLC (Foxtail). Anita Gou owns
AXQG. MMG’s principal is Matthew Malek. AXQG and MMG
adopted a limited liability company agreement that governed
their relationship and formed Foxtail (the Foxtail agreement).
Shortly after forming Foxtail, the relationship between Gou
and Malek soured. Malek routinely breached the Foxtail
agreement by withdrawing Foxtail funds in excess of $1,000,
including individual withdrawals up to $60,000, without AXQG’s
authorization and over Gou’s objections.1 Malek attempted to
satisfy a personal debt by promising to invest Foxtail funds in a
third party venture and, unbeknownst to Gou, entered into a
separate agreement to produce another film while depriving
Foxtail of an ownership interest. Malek had also sent sexually
explicit text messages to a prospective employee and his
temporary assistant, Francesca Salafia. Salafia informed Gou of
the text messages, stating that Malek had pressured her to
engage in inappropriate behavior and that Malek was “tarnishing
1 Pursuant to the Foxtail agreement, withdrawals over
$1,000 required Gou’s consent.
2
[Salafia’s] name and hindering leads for other opportunities of
work.”
Gou ultimately sought to terminate her business
relationship with Malek after he made an individual withdrawal
of $40,000 of Foxtail funds over her express objection. AXQG
filed a demand for arbitration with JAMS. The core of AXQG’s
case was the contention that Foxtail could no longer operate as
intended because Malek and Gou were irreconcilably alienated
and deadlocked from working in a productive manner. AXQG’s
demand also alleged various claims against Malek and MMG for
breach of fiduciary duty, fraud, and breach of the Foxtail
agreement. MMG and Malek counterclaimed for breach of
contract, breach of fiduciary duty, conversion, fraudulent
concealment, and declaratory relief.2
The parties selected Ambassador David Huebner (Ret.) as
arbitrator. The arbitrator had a decorated career as a diplomat
and 25 years of experience handling complex commercial
arbitrations. The parties did not question or comment on the
arbitrator’s fitness to preside over the proceedings. The
arbitration was lengthy and hard fought, lasting seven days with
17 witnesses and over 800 exhibits. The arbitrator issued a
2 Shortly thereafter, MMG and Malek filed an unverified
complaint in Los Angeles Superior Court against AXQG’s
counsel, AXQG, Gou, Salafia and others, for civil extortion,
tortious interference with contractual relations, conspiracy,
defamation, intentional infliction of emotional distress and
breach of contract. MMG’s complaint alleged that AXQG, Gou,
and others who had witnessed Malek’s misconduct, engaged in an
elaborate conspiracy against him. The trial court stayed the case
pending completion of the arbitration.
3
comprehensive 96-page final award detailing his findings and
conclusions.
The arbitrator found in favor of AXQG on its claims for
breach of the Foxtail agreement and breach of fiduciary duty.
The arbitrator gave AXQG the sole authority to wind down
Foxtail’s business in light of Malek’s gross negligence, willful
misconduct, and “propensity for destructive delay.” AXQG was
awarded its attorney fees and costs. MMG did not prevail on any
of its counterclaims and the arbitrator noted that several of
MMG’s contentions appeared to be frivolous based on its failure
to assemble a record of supporting evidence.
AXQG petitioned the trial court to confirm the award while
MMG petitioned to vacate it. After the arbitrator issued the final
award, Malek “commenced a deep-dive, internet search into [the
arbitrator’s] background.” He found the GLAAD organization
website which stated that the arbitrator had been a founding
board member of GLAAD and its chief counsel decades ago.
MMG argued that the arbitrator failed to disclose his background
and “his self-proclaimed status as a gender, social, female and
LBGTQ activist and icon, while facing a matter grounded in
gender and social issues, particularly sexual harassment.”
Specifically, MMG asserted that the arbitrator was obligated to
disclose his prior affiliation with GLAAD once made aware of
Malek’s Catholic background. MMG claimed that GLAAD was at
odds with the Catholic Church after the passage of Proposition 8,
which banned same-sex marriage in California. Thus, MMG
asserted that GLAAD and the Catholic Church were antagonistic
to each other and, by extension, the arbitrator against Malek,
casting doubt on the arbitrator’s impartiality.
4
MMG also argued that the arbitrator failed to hear or
consider evidence, specifically, witness testimony from Stephen
Epacs, an attorney who assisted Malek during the drafting of the
Foxtail agreement; an exhibit consisting of a chain of emails
produced by AXQG that MMG asserted were fraudulent, and
improperly limited MMG’s cross-examination of Salafia of how
she thought Malek perceived her responses to his sexually
explicit text messages.
The trial court summarily rejected MMG and Malek’s
arguments, confirmed the arbitration award, and entered
judgment in favor of AXQG.
DISCUSSION
MMG maintains the judgment must be overturned and the
arbitration award vacated because the arbitrator violated Code of
Civil Procedure3 section 1286.2 by failing to disclose his prior
affiliation with GLAAD; committed fraud and misconduct; and
refused to hear evidence material to the controversy. We find
MMG’s arguments meritless and its appeal frivolous. We
therefore affirm the judgment and award sanctions in favor of
AXQG.
I. Requests for judicial notice
MMG filed two requests for judicial notice on March 26 and
May 11, 2020.
MMG requested judicial notice of (1) “the existence of the
#MeToo movement” and the phrase “a woman alleging sexual
harassment must be believed”; (boldface and italics omitted)
3 All
further statutory references are to the Code of Civil
Procedure unless otherwise indicated.
5
(2) GLAAD press releases; (3) rules promulgated by Twitter
concerning the company’s verified user accounts; (4) screen-
captured tweets from the arbitrator’s verified Twitter account;
(5) exhibits that MMG attached to its petition to vacate the final
award in the trial court; (6) JAMS Comprehensive Rules and
Procedures; and (7) a portion of the arbitration evidentiary
hearing transcript.
As a reviewing court, we are obligated by Evidence Code
section 451 to take judicial notice of some matters and are given
discretion under Evidence Code section 452 to take judicial notice
of others. Proper subjects for judicial notice are facts and
propositions that “are of such common knowledge within the
territorial jurisdiction of the court that they cannot reasonably be
the subject of dispute” or “not reasonably subject to dispute and
are capable of immediate and accurate determination by resort to
sources of reasonably indisputable accuracy.” (Evid. Code, § 452,
subds. (g), (h).) Any matter to be judicially noticed must be
relevant to a material issue. (People ex rel. Lockyer v. Shamrock
Foods Co. (2000) 24 Cal.4th 415, 422, fn. 2.) MMG’s requests are
neither appropriate subjects for judicial notice nor relevant to the
issues here.
MMG requested judicial notice of the #MeToo movement
and the phrase a woman alleging sexual harassment must be
believed. MMG failed to provide sufficient evidence or
explanation that the #MeToo movement and the phrase a woman
alleging sexual harassment must be believed are facts of such
generalized knowledge that they cannot reasonably be the subject
of dispute. (See Evid. Code, § 451, subd. (f).) MMG asserts that
“one would be hard pressed to find an adolescent or adult who
has not heard of the #Me Too movement and understands what it
6
stands for in the United States.” This, however, does not make
the existence of a contemporary social movement the proper
subject of judicial notice. By their very nature, social movements
do not have defined boundaries and their scope, meaning, and
influence are subjects of debate is the subject of debate for years
after they emerge.
Next, MMG requested judicial notice of various press
releases from GLAAD’s website concerning an awards dinner
hosted by the organization and a webpage describing one of
GLAAD’s anti-discrimination campaigns. MMG asserted that
these materials show a connection between GLAAD and the
#MeToo movement, and thus, by extension, show a “kinship”
between the arbitrator and the #MeToo movement. But these
materials fail to show a connection between the arbitrator and
GLAAD, the #MeToo movement, or GLAAD’s anti-discrimination
campaign. MMG admits that it does not even know if the
arbitrator was at the awards dinner or whether he had any
involvement in GLAAD’s campaign. The materials are
irrelevant.
MMG also requested judicial notice of screenshots of
Twitter posts purportedly from the arbitrator’s Twitter account.
According to MMG, these posts show the arbitrator’s perspective
on “white privilege, men, religion, abuse of women and anything
that does not comport with [the arbitrator’s] social justice view of
the world.” Therefore, they show the arbitrator’s inability to act
impartially in a case involving a Catholic white male accused of
sending sexually explicit texts to a prospective employee.
However, the tweets are irrelevant to his disclosure obligations
7
because the arbitration had nothing to do with social justice,
religion, white privilege, or gender.
MMG requested that we take judicial notice of an extract
from the evidentiary hearing during the arbitration. However,
MMG has not described why this portion of the transcript is
relevant to its appeal. The transcript shows a brief exchange
between MMG’s counsel and the arbitrator regarding a discovery
issue and MMG’s decision not to call an MMG witness, Carson
Ulrich, who also served as MMG’s counsel’s litigation assistant.
MMG does not claim that the arbitrator refused to hear Ulrich’s
testimony or that Ulrich’s testimony is relevant to its argument
regarding the arbitrator’s disclosure obligations. This portion of
the transcript is therefore irrelevant to the matters at issue in
this appeal.
MMG requested judicial notice of the JAMS Comprehensive
Rules and Procedures because MMG referenced them in its
briefs. Once again, MMG failed to explain the relevance of its
request. MMG’s opening brief cites to JAMS rule 22(d), which
allows the arbitrator to limit evidence if it is unduly repetitive or
immaterial. MMG also cites JAMS rule 15(i) which allows a
party to challenge the arbitrator for cause. The exhibits consist
of a picture of the arbitrator, a list of his lectures and
publications, a short biography of the arbitrator, an article from
2010 honoring the arbitrator and stating that he was a founding
board member and chief counsel for GLAAD, and an article
authored by the Catholic News Agency criticizing a GLAAD
media guide that was released in anticipation of a visit from the
pope directing media outlets to promote certain Catholic groups
that supported LGBTQ rights and to scrutinize other Catholic
leaders who did not . MMG asserts the exhibits are relevant to
8
show the arbitrator’s background, the relationship between
LGBTQ rights, the #MeToo movement, and “GLAAD’s adverse
relationship with the Catholic Church.”
The lack of relevance or authentication of these exhibits
notwithstanding, MMG has plainly offered them for the truth of
their contents. This is not a proper use of judicial notice. At
most, we could judicially notice the existence of the press
releases, but not the truth of their contents (see Unlimited
Adjusting Group, Inc. v. Wells Fargo Bank, N.A. (2009) 174
Cal.App.4th 883, 888 fn. 4), which are “plainly subject to
interpretation and for that reason not subject to judicial notice”
(L.B. Research & Education Foundation v. UCLA Foundation
(2005) 130 Cal.App.4th 171, 180, fn. 2).
Accordingly, we deny MMG’s requests for judicial notice
filed on March 26 and May 11, 2020.
II. The arbitrator was not required to disclose his prior
relationship with GLAAD.
“The California Arbitration Act (§ 1280 et seq.) ‘represents
a comprehensive statutory scheme regulating private arbitration
in this state.’ [Citation.] The statutory scheme reflects a ‘strong
public policy in favor of arbitration as a speedy and relatively
inexpensive means of dispute resolution.’ [Citation.] ‘[I]t is the
general rule that parties to a private arbitration impliedly agree
that the arbitrator’s decision will be both binding and final.’ ”
(Haworth v. Superior Court (2010) 50 Cal.4th 372, 380
(Haworth).) However, a party may seek judicial review when
there are “ ‘serious problems with the award itself, or with the
fairness of the arbitration process.’ ” (Ibid.)
Our review, however, is limited. The only grounds for
judicially vacating an arbitration award are set by statute.
9
(Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 27–28.) Those
grounds are in section 1286.2, subdivision (a), which requires the
trial court to vacate the award if it determines that: (1) the
award was procured by corruption, fraud or other undue means;
(2) there was corruption in any of the arbitrators; (3) the rights of
the party were substantially prejudiced by misconduct of a
neutral arbitrator; (4) the arbitrators exceeded their powers and
the award cannot be corrected without affecting the merits of the
decision; (5) the rights of the party were substantially prejudiced
by the refusal of the arbitrators to postpone the hearing or by the
refusal of the arbitrators to hear evidence material to the
controversy; or (6) the arbitrator failed to disclose within the time
required for disclosure a ground for disqualification of which the
arbitrator was then aware or was subject to disqualification upon
grounds specified in section 1281.91.
Section 1281.91, subdivision (a) provides for arbitrator
disqualification if he or she fails to comply with section 1281.9.
In turn, section 1281.9, subdivision (a) requires arbitrators to
disclose “all matters that could cause a person aware of the facts
to reasonably entertain a doubt that the proposed neutral
arbitrator would be able to be impartial.” Section 1281.9 provides
a nonexhaustive list of matters to be disclosed (Dornbirer v.
Kaiser Foundation Health Plan, Inc. (2008) 166 Cal.App.4th 831,
836), and includes, the “existence of any ground specified in
Section 170.1 for disqualification of a judge,” and “matters
required to be disclosed by the ethics standards for neutral
arbitrators adopted by the Judicial Council’ ” (§ 1281.9,
subdivision (a)(1), (2)). Section 170.1, subdivision (a)(6)(A)(iii)
mandates disqualification when a “person aware of the facts
10
might reasonably entertain a doubt that the judge would be able
to be impartial.”
The ethics standards for neutral arbitrators directs
arbitrators to disclose, among other things, “all matters that
could cause a person aware of the facts to reasonably entertain a
doubt that the arbitrator would be able to be impartial, including
but not limited to, . . . [¶] . . . [¶] (15) Any other matter that: [¶]
(A) Might cause a person aware of the facts to reasonably
entertain a doubt that the arbitrator would be able to be
impartial.” (Cal. Rules of Court, Ethics Standards for Neutral
Arbitrators in Contractual Arbitration, std. 7(d)(15)(A), italics
omitted.)
Courts apply an objective test in determining whether
under section 1281.9, subdivision (a) neutral arbitrators must
disclose matters that could reasonably cause a person aware of
the facts to entertain a doubt that the proposed arbitrator would
be impartial. (Mt. Holyoke Homes, L.P. v. Jeffer Mangels Butler
& Mitchell, LLP (2013) 219 Cal.App.4th 1299, 1311.) The
“objective test . . . focuses on a reasonable person’s perception of
bias and does not require actual bias.” (Ibid.) Accordingly, we
are not concerned with the subjective question of whether the
arbitrator was actually biased, but whether an objective,
reasonable person aware of the facts reasonably could entertain a
doubt that he could be impartial in the case. (Haworth, supra, 50
Cal.4th at pp. 385–386.)
The reasonable person under this objective test “ ‘is not
someone who is “hypersensitive or unduly suspicious,” but rather
is a “well-informed, thoughtful observer.” ’ [Citations.] ‘[T]he
partisan litigant emotionally involved in the controversy
underlying the lawsuit is not the disinterested objective observer
11
whose doubts concerning the judge's impartiality provide the
governing standard.’ [Citations.] [¶] ‘An impression of possible
bias in the arbitration context means that one could reasonably
form a belief that an arbitrator was biased for or against a party
for a particular reason.’ ” (Haworth, supra, 50 Cal.4th at p. 389.)
In this context, “ ‘[i]mpartiality’ entails the ‘absence of bias or
prejudice in favor of, or against, particular parties or classes of
parties, as well as maintenance of an open mind.’ ” (Ibid.) The
“appearance-of-partiality ‘standard “must not be so broadly
construed that it becomes, in effect, presumptive, so that recusal
is mandated upon the merest unsubstantiated suggestion of
personal bias or prejudice.” ’ ” (Ibid.)
When the facts are not in dispute, whether an arbitrator
was required to disclose particular information involves the
application of the disclosure rule to the undisputed facts. Our
review of this mixed question of law and fact is de
novo. (Haworth, supra, 50 Cal.4th at pp. 384–385.)
MMG’s arguments that the arbitrator was required to
disclose his prior relationship with GLAAD are strained and
convoluted to say the least. According to MMG, the arbitrator
founded GLAAD, which MMG characterizes as a
“militant, . . . social justice organization” that “engaged in civil
warfare against Malek’s Catholic church.” Next, MMG connects
GLAAD with the #MeToo movement, asserting that both GLAAD
and supporters of that social movement adhere to the mantra, a
woman alleging sexual abuse has to be believed. Thus, MMG
posits, the arbitrator’s prior affiliation with GLAAD actually
prevented him from being impartial or, at least, would give a
reasonable person aware of the facts cause to doubt the
arbitrator’s impartiality in a case that primarily involved “a
12
sexual harassment claim by a female against an observant male
Catholic.”
MMG mischaracterizes the arbitration as one that
primarily involved issues of sexual harassment or social justice.
The arbitration involved the dissolution of Foxtail based on the
irreconcilable conflict between Malek and Gou and the numerous
breaches by Malek of the Foxtail agreement, primarily, Malek’s
misuse of Foxtail funds. While there were substantiated
allegations that Malek sent sexually explicit messages to a
prospective employee, they were only relevant to the extent that
they exposed Foxtail to reputational harm and potential
litigation. The arbitrator noted that there was no need to
determine whether the prospective employee could state a claim
for sexual harassment against Malek as she was not a party to
the arbitration. Rather, the arbitrator focused on the potential
that Malek’s actions had for exposing Foxtail to litigation. The
arbitrator awarded AXQG nominal damages in the amount of
$500 for this claim.
MMG’s absurd arguments based on a mischaracterization
of the underlying dispute expose MMG as a partisan litigant
emotionally involved in the controversy and confirm that it is not
a disinterested objective observer as set forth in Haworth, supra,50 Cal.4th at page 389. “The arbitrator cannot reasonably be
expected to identify and disclose all events in the arbitrator’s
past, including those not connected to the parties, the facts, or
the issues in controversy, that conceivably might cause a party to
prefer another arbitrator. Such a broad interpretation of the
appearance-of-partiality rule could subject arbitration awards to
after-the-fact attacks by losing parties searching for potential
disqualifying information only after an adverse decision has been
13
made. [Citation.] Such a result would undermine the finality of
arbitrations without contributing to the fairness of arbitration
proceedings.” (Id. at pp. 394–395.) Just as Haworth predicted,
MMG’s position would encourage parties to include unrelated
testimony on controversial or partisan topics for the sole purpose
of manufacturing a claim that the arbitrator was biased against
those beliefs and thus could not act impartially.
Rebmann v. Rohde (2011) 196 Cal.App.4th 1283 is
instructive. In Rebmann, a company controlled by descendants of
German army officers who served during World War II lost a
commercial arbitration. Thereafter, the company performed an
extensive internet search on the arbitrator’s background because
“[s]omething did not smell right.” (Id. at p. 1288.) The company
discovered that the arbitrator lost family in the Holocaust and
was affiliated with a club dedicated to avoiding a repeat of the
Holocaust (Ibid.) The company sought to vacate the award based
on the arbitrator’s failure to disclose this part of his background.
(Ibid.) Rebmann concluded that the arbitrator was not required
to disclose these facts or his religious background because they
had nothing to do with the commercial case before him. (Id. at p.
1292.) Rebmann also rejected the argument that the arbitrator’s
association with a minority group could serve as a basis to
question his impartiality. (Id. at pp. 1292–1293.)
Like Rebmann v. Rohde, supra, 196 Cal.App.4th 1283,
MMG’s belated discovery of the arbitrator’s prior association with
GLAAD is insufficient to raise questions regarding his
impartiality in a commercial case involving a Catholic litigant. If
the arbitrator in Rebmann had no duty to disclose his connections
to the Holocaust and Judaism to litigants who were descendants
of German army officers because those issues were irrelevant to
14
any matter in the case, then the arbitrator here had no obligation
to disclose his affiliation with GLAAD to MMG because the
arbitration did not concern LGBTQ or religious rights. (See id. at
pp. 1292–1293.)
Despite its assertions to the contrary, MMG cannot show
that the arbitration had anything to do with LGBTQ issues,
GLAAD, religion, or the Catholic Church. This is because the
arbitration primarily concerned misappropriation of corporate
funds, entering into agreements that conflicted with Malek’s role
as the manager of Foxtail, and exposing Foxtail to reputational
harm and litigation costs. MMG has manufactured a connection
with Malek’s Catholic faith through his biographical testimony
that he studied for the Catholic priesthood and that he was later
involved with Catholic charities at some point prior to forming
Foxtail. MMG cannot credibly argue that the arbitrator was
required to disclose his affiliation with GLAAD because Malek
chose to testify about his Catholic faith when that information
was irrelevant to the present dispute over his managerial
misconduct.
MMG’s convoluted argument reveals itself to be that of a
hypersensitive or unduly suspicious litigant rather than a well-
informed, thoughtful observer. (See, e.g., Haworth, supra, 50
Cal.4th at p. 389.) We therefore reject any contention that the
15
arbitrator was required to disclose his past affiliation with
GLAAD.
III. The arbitrator did not fail to hear evidence
MMG also argues that the arbitration award should be
vacated because the arbitrator failed to hear evidence material to
the final award.
An arbitration award may be vacated if a party’s rights
were substantially prejudiced by the refusal of the arbitrator to
hear evidence material to the controversy. (§ 1286.2, subd.
(a)(5).) “When a party contends it was substantially prejudiced
by the arbitrator’s exclusion of material evidence, a court should
generally consider prejudice before materiality. [Citation.] To
find substantial prejudice, the court must first accept the
arbitrator’s theory and conclude the arbitrator might well have
made a different award had the evidence been allowed.” (Epic
Medical Management, LLC v. Paquette (2015) 244 Cal.App.4th
504, 518.)
MMG asserts that the arbitrator (1) disallowed one of
MMG’s witnesses, Stephen Epacs, from testifying; (2) prevented
MMG’s counsel from cross-examining Salafia on how she
perceived Malek’s sexually explicit text messages; and (3)
excluded an exhibit that included a chain of emails that MMG
argued had been doctored by AXQG and its counsel.
A. Epacs’s testimony
MMG speculates that the arbitrator made a calculated
decision to exclude MMG’s witness, Epacs.
However, MMG has not cited to anything in the record
showing that it attempted to call Epacs as a witness. If MMG
believed Epacs was a material witness, MMG’s counsel had a
16
duty to preserve that issue for appeal. (See Nienhouse v.
Superior Court (1996) 42 Cal.App.4th 83, 93–94.) Instead, we are
left with hearsay statements from MMG’s counsel, Malek, and
Ulrich that the arbitrator said he would not hear Epacs’s
testimony in an off-the-record conversation. MMG’s self-serving
hearsay statements are insufficient to show that it attempted to
call Epacs as a witness. Therefore, there is no basis in the record
for the contention that the arbitrator refused to hear his
testimony.
B. MMG’s cross-examination of the prospective employee
MMG argues that the arbitrator cut off its counsel’s cross-
examination of Salafia with respect to at least 50 questions
regarding her responses and perceptions of her text exchanges
with Malek. Again, MMG has not presented any factual support
for this argument. MMG cites to a portion of the arbitration
transcript where the arbitrator warned MMG’s counsel that he
should “tread very carefully on this topic,” because it was “a
difficult situation” which MMG could “only make worse.” After
the warning, MMG’s counsel continued to cross-examine Salafia
regarding the text exchanges between herself and Malek. Thus,
the record does not support MMG’s contention that the arbitrator
“shutdown” its counsel’s line of questioning. If MMG’s counsel
believed that the warning effectively deprived MMG of soliciting
material testimony, it had a duty to preserve that issue
accordingly by, for example, making a proffer, on the record,
about the relevance of its unasked questions. Therefore, MMG’s
argument on this point fails because it cannot show what
evidence was excluded.
The lack of support in the record notwithstanding, MMG’s
argument still fails because as the arbitrator noted, Salafia’s
17
interpretation of Malek’s text messages had no effect on the final
award. “There is no need to parse and decide each point of
conflict between the testimony of . . . Salafia and . . . Malek, nor
to rule on whether sexual harassment under a particular body of
law has been proven under the standards established
therein. . . . [AXQG]’s contention is that . . . Malek breached his
fiduciary duties as president of Foxtail by engaging in activity
with a prospective employee that could expose Foxtail to
significant litigation costs and reputational damage, and that
MMG, by virtue of those actions of its principal, breached the
Agreement and its fiduciary duties to AXQG.” (Fn. omitted.)
Thus the arbitrator concluded that the evidence was sufficient to
establish that MMG and Malek exposed Foxtail to risk of
significant reputational harm, litigation expense, and potential
damages by reason of Malek’s behavior. Additional testimony on
the merits of a potential sexual harassment claim by Salafia was
therefore immaterial to the arbitrator’s final award.
C. Exhibit
Lastly, MMG asserts that the arbitrator failed to hear
evidence on the authenticity of an exhibit consisting of a chain of
emails. MMG contends the exhibit was fabricated by AXQG and
its counsel and thus would have called into question AXQG’s
entire case. Again, this contention is not supported by the record.
AXQG produced the exhibit seven months before the
hearing and introduced it into evidence on the first day of the
hearing during the direct examination of Gou. MMG did not
object to the exhibit until the last day of the hearing. MMG’s
counsel claimed to have presented Malek with the exhibit three
days earlier to which Malek asserted that he had never seen the
emails before and that they were “not real.” Despite MMG’s
18
contentions that this exhibit was “one of the most important
exhibits in the entire case” and having that information prior to
Malek’s testimony, MMG’s counsel never asked Malek anything
about the exhibit on the record. Nevertheless, the arbitrator
ordered the parties to meet and confer on the exhibit’s
authenticity. MMG accused of AXQG of spoliating evidence,
claiming that the chain of emails had been manipulated and
assembled from other emails that Malek and “cyber security
experts” had determined were “removed,” “stolen,” and
“manipulated” from Malek’s computer in “the middle of the night”
and sent to Gou. MMG sent the arbitrator a three-page
explanation of how each part of the email chain had supposedly
been manipulated to show that the exhibit was fraudulent.
After considering MMG’s theory of AXQG’s alleged
spoliation of evidence, the arbitrator issued a separate order
laying out his conclusions on the matter. MMG offered no
credible explanation for why it failed to review the exhibit until
the hearing was well underway or why it failed to ask Malek or
any other witness about its authenticity despite having multiple
opportunities to do so. The arbitrator stated that MMG’s
allegations of fabrication of evidence, hacking of computers, and
theft of electronic or physical documents lacked any credible
support, diligent follow up, or proper evidentiary submission.
The arbitrator found that MMG had not established sufficient
grounds for holding an evidentiary hearing on the authenticity of
the exhibit or that it was anything but what it purported to be.
The arbitrator ultimately struck the exhibit from the record,
without opining on its authenticity in the final award.
Again, MMG’s argument that the arbitrator did not
consider the authenticity of the exhibit is completely unsupported
19
by the record. The arbitrator did hear evidence regarding the
exhibit, considered it, but disagreed with MMG’s conclusion that
it carried any weight or impeached the credibility of AXQG’s
witnesses’ testimony or documentary evidence.
We conclude the arbitrator did not fail to hear evidence,
and therefore affirm the trial court’s order denying MMG’s
petition to vacate the arbitration award.4
VI. Motion for sanctions
AXQG moved to sanction MMG and its counsel, Jeffrey S.
Konvitz, in the amount of $56,0005 for filing a frivolous appeal
based on the following grounds: (1) MMG’s appeal is objectively
frivolous, (2) MMG’s appeal is subjectively frivolous, and
(3) MMG’s briefing has violated multiple rules governing
appellate practice, including failing to support the factual
statements with proper cites to the record. (See § 907, Cal. Rules
4 MMG’s briefing also contains a section titled “Actual Bias”
that purports to be an additional ground for reversal. (Boldface
and underscore omitted.) However, MMG’s contentions under
that heading are either repetitions of its other arguments for the
arbitrator’s disclosure or his purported failure to hear evidence.
To the extent they are not retreads of those arguments, MMG’s
contentions are stated as disagreements with the arbitrator’s
conclusions and findings, which it concedes are not the subject of
this appeal.
5 The sum of $56,000 is comprised of $46,000 in attorney
fees and costs incurred by AXQG in opposing MMG’s appeal and
requests for judicial notice as well as its motion for sanctions.
20
of Court, rule 8.276(a)(1).) We advised MMG and its counsel that
we were considering sanctions for filing a frivolous appeal.
Sanctions may be imposed for frivolous appeals where the
appeal was prosecuted for an improper motive or the appeal
indisputably has no merit. (§ 907;Cal. Rules of Court, rule
8.276(a)(1).) To determine whether an appeal is frivolous, we
apply both a subjective standard, examining the motives of
appellant and its counsel, and an objective standard, analyzing
the merits of the appeal. (In re Marriage of Flaherty (1982) 31
Cal.3d 637, 649–650.) A finding of frivolousness may be based on
either standard by itself, but the two tests are ordinarily used
together, with one sometimes providing evidence relevant to the
other. (Ibid.)
“Courts have struggled to apply . . . section 907. [Citation.]
On the one hand, the statute should be used to compensate for a
party’s egregious behavior, and to deter abuse of the court system
and the appellate process. [Citations.] On the other hand,
sanctions should not be awarded simply because an appeal is
without merit. Indiscriminate application of section 907 could
deter attorneys from vigorously representing their clients, and
deter parties from pursuing legitimate appeals.” (Computer
Prepared Accounts, Inc. v. Katz (1991) 235 Cal.App.3d 428, 434.)
An appeal is considered objectively frivolous “ ‘ “when any
reasonable attorney would agree that the appeal is totally and
completely without merit.” ’ ” (In re Marriage of Schnabel (1994)
30 Cal.App.4th 747, 754.) We look to the merits of the appeal
from a reasonable person’s perspective. The inquiry is not
whether counsel acted in the honest belief it had grounds for
appeal, but rather would any reasonable person agree that the
appeal is completely devoid of merit, and thus frivolous. (Doran
21
v. Magan (1999) 76 Cal.App.4th 1287, 1296.) An appeal may be
objectively frivolous if there is already a legal authority
“addressing the precise issue . . . raised” (Pierotti v. Torian (2000)
81 Cal.App.4th 17, 31), or when appellant’s arguments rest on
negligible legal foundation (Kurokawa v. Blum (1988) 199
Cal.App.3d 976, 995–996). An appeal is totally devoid of merit
where there are “no unique issues, no facts that are not amenable
to easy analysis in terms of existing law, and no reasoned
argument by [appellant] for an extension of existing law.”
(Westphal v. Wal-Mart Stores, Inc. (1998) 68 Cal.App.4th 1071,
1081.)
MMG’s appeal is objectively and subjectively frivolous.
MMG’s appeal is objectively frivolous because it is devoid of
factual or legal support. Its primary argument is that the
arbitrator was required to disclose his prior relationship with an
LGBTQ rights organization because that relationship would
cause a reasonable person to question his impartiality in a
commercial arbitration where one of the parties’ principals was a
white male Catholic. MMG’s argument is based on a
mischaracterization of the underlying arbitration as “headlining
a major social justice issue” concerning sexual harassment
between an employee and her boss. Not only has MMG failed to
define what it believes are social justice issues, but the case was
a commercial arbitration between co-owners of a film production
company who sought to dissolve the company after their
relationship became irreconcilable. Neither LGBTQ rights nor
the Catholic Church have any connection to this case. Further,
MMG has failed to support its alarmist characterization of
GLAAD as a militant social justice organization or that the
arbitrator was the organization’s “ideological motor.” Setting
22
aside its lack of relevance, MMG never connected GLAAD or
Catholicism to the #MeToo movement in such a way that would
give any reasonable person a basis to believe the arbitrator could
not be impartial in a case involving a Catholic litigant.6
Moreover, MMG’s requests for judicial notice lacked merit
and ignored the rules of evidence, asking this court, for example,
to judicially notice the #MeToo movement and the phrase a
woman alleging sexual harassment must be believed. MMG’s
unreasonable requests reflect that its theory of this case lacked
any merit. Indeed, MMG effectively admits that there was a
tenuous connection between the facts of this case, GLAAD, the
#MeToo movement, and the arbitrator when it says it spent
“many weeks . . . investigating and discovering content to fill in
the blanks once the arbitrator’s connection [to] GLAAD was
uncovered” because, according to MMG, all the “dots had to be
connected.” There were, however, no dots to connect. The Court
of Appeal is not an appropriate forum to peddle far-fetched
conspiracy theories, laced with sexism and homophobia,
6 Despite MMG’s insistence that GLAAD is an anti-Catholic
organization that is “pitted heavily against the Catholic Church,”
MMG never discusses California Rules of Court, Ethics
Standards for Neutral Arbitrators in Contractual Arbitration,
standard 7(d)(14), which requires arbitrators to disclose their
membership in “any organization that practices invidious
discrimination on the basis of race, sex, religion, national origin,
or sexual orientation.” MMG’s position, however, would
effectively invert this disclosure requirement from requiring
arbitrators to disclose their membership in groups that practice
discrimination to disclosing their memberships in organizations
that fight against it.
23
disguised as a legitimate appeal. Nor is it a forum to launch
personal attacks against an arbitrator.
MMG’s argument regarding the arbitrator’s failure to hear
evidence was also completely unsubstantiated in the record.
MMG attempted to get around this fatal flaw by filing
declarations that included potentially attorney-client privileged
information and multiple levels of hearsay regarding what the
arbitrator said off-the-record and what Malek said to his counsel.
Judging from the arbitrator’s award, MMG has a history in this
dispute of making frivolous claims. As noted by the arbitrator,
MMG “did not assemble a record to support its conspiracy
theories” and that MMG’s “hyperbolic
characterizations . . . nefarious deeds, criminal acts, and
pervasive persecution by dark forces impaired the credibility
of . . . Malek’s testimony.”
Even had MMG established factual support for any of its
claims, its appeal lacked any legal foundation. MMG did not cite
to a single case requiring the type of disclosure that MMG
advocated for here. MMG’s attempt to distinguish Rebmann v.
Rohde, supra, 196 Cal.App.4th 1283, which was directly on point,
was based on unsubstantiated characterizations of the arbitrator
and the issues presented at the arbitration. MMG failed to
adhere to the standard in Haworth, supra, 50 Cal.4th at page
389, which laid out the criteria for disclosures, explaining that it
is not based on the perspective of the unduly suspicious person or
the partisan litigant.
Likewise, MMG’s appeal is subjectively frivolous. Under
the subjective test, an appeal is frivolous when “ ‘ “it is
prosecuted for an improper motive—to harass the respondent or
delay the effect of an adverse judgment.” ’ ” (Personal Court
24
Reporters, Inc. v. Rand (2012) 205 Cal.App.4th 182, 191.) We
look to the subjective good faith of the appellant and counsel.
(In re Marriage of Flaherty, supra, 31 Cal.3d at p. 649.) A
complete lack of merit is evidence that the appellant brought the
appeal for the purpose of delay. (Id. at pp. 649–650.)
MMG adopted a war-like mentality toward AXQG, its
counsel, and anyone else involved with this case. The record is
replete with personal attacks on Gou and AXQG’s counsel, as
well as numerous unsubstantiated claims that everyone who was
purportedly against Malek and MMG was engaged in an
elaborate conspiracy to destroy him. These included allegations
that Gou orchestrated “an extensive conspiracy to ‘crush’ and
‘destroy’ [Malek], which conspiracy . . . included cybercrimes,
safe-cracking, sexual espionage, manufactured evidence, the
extensive suborning of perjury, and ‘human chess pieces moving
to create artificial breaches.’ ” But, as the arbitrator concluded,
MMG “introduced no credible evidence to support its overarching
conspiracy theory. The most charitable inference to be drawn
from the record is that [MMG’s] repeated insinuation of
‘conspiracy’ was a colloquial, rhetorical device intended to
undermine the credibility of [AXQG] and its counsel. Setting
charity aside, and considering the lack of competent supporting
evidence in the record, it would appear that certain of the
conspiracy contentions were frivolously asserted.”7
Sanctions may be awarded against both an appellant and
its counsel. (In re Marriage of Schnabel, supra, 30 Cal.App.4th at
7 MMG’s conspiracy theories grew to include the arbitrator
as well. In its opening brief, MMG asserts without support that
the arbitrator “wiped his social media accounts clean to prevent
25
p. 756.) Sanctions are appropriate when appellant’s counsel had
a professional obligation not to pursue the appeal or should have
declined the case outright. (Ibid.) Sanctions against the party
are appropriate when the record indicates the party benefitted
from the delay or was otherwise involved in the bad faith
conduct. (Id. at pp. 755–756.) The amount of sanctions is
determined by looking to respondent’s attorney fees on appeal,
the judgment against the appellant, the degree of objective
frivolousness and delay, and the need to discourage similar
conduct in the future. (In re Marriage of Gong & Kwong (2008)
163 Cal.App.4th 510, 519.) Additionally, we may impose
sanctions to compensate the court for the costs associated with
processing, reviewing and considering the appeal. (Young v.
Rosenthal (1989) 212 Cal.App.3d 96, 135–137.)
MMG and its counsel are equally culpable for pursuing this
frivolous and bigotry-infused appeal. MMG’s counsel had
numerous opportunities to dismiss the appeal and to withdraw
its baseless claims, but chose not to. Instead, MMG’s counsel
persisted in its efforts without any legal or factual support, filing
wholly deficient briefs and nonsensical requests for judicial
notice, supported by declarations from Malek and his counsel. As
stated above, this court is not the forum for MMG or its counsel
to rant about conspiracies or their politics. This court has wasted
the discovery of material that might have imperiled his ability to
remain the arbitrator.” As AXQG correctly notes, to credit this
theory as true, we would have to accept that the arbitrator
jeopardized his distinguished diplomatic and legal career by
fraudulently concealing any information about his association
with GLAAD, for the sole purpose of issuing an award against
MMG.
26
its time and resources considering MMG’s appeal, which has only
served as a drain on the judicial system and the taxpayers of this
state.
DISPOSITION
The judgment is affirmed. Malek Media Group, LLC and
Jeffrey S. Konvitz shall pay AXQG Corp. the amount of $46,000.
Malek Media Group, LLC and Jeffrey S. Konvitz are also
assessed $10,000 in sanctions for bringing this frivolous appeal,
payable to the clerk of this court no later than 15 days after the
date of the remittitur is filed. These obligations are joint and
several. The clerk of this court is directed to deposit said sum in
the general fund. Jeffrey S. Konvitz is also ordered to report the
sanctions to the State Bar. (Bus. & Prof. Code, § 6068,
subd. (o)(3).) The clerk of this court is directed to forward a copy
of this opinion to the State Bar. (Bus. & Prof. Code, § 6086.7,
subd. (c).)
CERTIFIED FOR PUBLICATION.
DHANIDINA, J.
We concur:
LAVIN, Acting P. J.
EGERTON, J.
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