Sitrick Group v. Vivera Pharmaceuticals ( 2023 )

Filed 3/30/23
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION TWO
SITRICK GROUP, LLC, B317546
(Los Angeles County Super.
Plaintiff and Respondent, Ct. No. 21STCP02156)
v.
VIVERA
PHARMACEUTICALS, INC.,
Defendant and Appellant.
APPEAL from the judgment of the Superior Court of Los
Angeles County, Barbara M. Scheper, Judge. Affirmed.
De Novo Law Firm, Benjamin Yrungaray for Defendant
and Appellant.
Nemecek & Cole, Frank W. Nemecek and Claudia L. Stone
for Plaintiff and Respondent.
******
The California Arbitration Act (the Act) (Code Civ Proc., §
1280 et seq.)1 requires potential and retained arbitrators to
disclose, among other things, matters that the Ethics Standards
for Neutral Arbitrators in Contractual Arbitration (Ethics
Standards) dictate must be disclosed. (§ 1281.9, subd. (a)(2).) Do
the Ethics Standards require a retained arbitrator in a
noncommercial case to disclose in one matter that he has been
subsequently hired in a second matter by the same party and
same law firm? We hold that the answer is “no,” at least where
the arbitrator has previously informed the parties—without any
objection thereto—that no disclosure will be forthcoming in this
scenario. Because the arbitrator’s disclosures were proper here,
the trial court properly overruled an objection based on
inadequate disclosure. We accordingly affirm.
FACTS AND PROCEDURAL BACKGROUND
I. Facts
A. Breach of contract
Sitrick Group, LLC (Sitrick) is a “corporate communication
advisor and crisis manager.” In mid-2019, Vivera
Pharmaceuticals, Inc. (Vivera) was developing a medical test kit,
but had received “negative publicity” from its litigation with a
rival company. Vivera hired Sitrick to manage a public relations
campaign aimed at curbing the negative press.
On July 10, 2019, Vivera signed a written contract
retaining Sitrick and agreeing to pay an hourly rate for its
services. The contract contained an agreement to arbitrate “any
dispute or claim arising out of or relating to” the contract.
1 All further statutory references are to the Code of Civil
Procedure unless otherwise indicated.
2
Between July 2019 and May 2020, Sitrick provided
$292,773.32 in services to Vivera. Vivera did not make any
payments.
B. Arbitration
1. Initiation of arbitration, selection of arbitrator,
and disclosures
On June 26, 2020, and again on July 16, 2020, Sitrick filed
demands for arbitration with Judicial Arbitration and Mediation
Services (JAMS).
On August 20, 2020, the parties selected retired Judge
Coleman A. Swart (Judge Swart) to arbitrate their dispute.
Five days later, on August 25, 2020, Judge Swart issued to
the parties a written “Disclosure Checklist for All Arbitrations.”
As pertinent here, the checklist indicated that:
● Judge Swart “will . . . entertain offers of employment
or new professional relationships . . . from a party [or] lawyer in
the arbitration . . . while [the] arbitration is pending, including
offers to serve as a dispute resolution neutral in another case,”
and relatedly advised that “[i]f this is a nonconsumer arbitration,
the arbitrator will not inform the parties if he or she
subsequently receives an offer or new matter while the
arbitration is pending.”
● “Based on the parties’ written submissions,” the
arbitration in this case “is NOT a Consumer Arbitration.”
● The above-two disclosures “constitute[] a waiver of
any further requirement to disclose subsequent employment
involving the same parties or lawyers or law firms.”
Vivera did not object to Judge Swart serving as the
arbitrator within 15 days of receiving the checklist.
3
On February 24, 2021, JAMS set the arbitration for a
three-day hearing starting on May 26, 2021.
2. Judge Swart’s new retention and voluntary
disclosure
On April 13, 2021, Judge Swart was selected to serve as an
arbitrator in a separate matter between Sitrick and Legacy
Development (the Legacy matter). In that matter, Sitrick was
employing the same law firm (but a different lawyer) as was
representing it in the arbitration with Vivera.
On May 14, 2021, JAMS disclosed Judge Swart’s retention
in the Legacy matter to Vivera.
3. Vivera’s motion to disqualify Judge Swart
On May 19, 2021, Vivera moved to disqualify Judge Swart
based on Sitrick and the same law firm being involved in the
Legacy matter as well as Judge Swart’s “inadequate” disclosure of
his retention in the Legacy matter.
On May 24, 2021, JAMS’s National Arbitration Committee
denied Vivera’s motion. Specifically, the Committee explained
that the disclosure of the Legacy matter was “a courtesy[ and] not
a required disclosure” because, in the disclosure checklist, Judge
Swart had indicated he could entertain new offers while this
nonconsumer arbitration was pending without having to disclose
them and because Vivera had not objected to that term within
the 15-day window for doing so. Further, the Committee found
that the overlap of party and law firm between the two
arbitrations did not suggest that Judge Swart was “bias[ed]” or
unable to be fair or impartial. The Committee did not inform
Judge Swart of Vivera’s motion or its ruling on that motion.
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4. Arbitration hearing and award
Judge Swart held the hearing in this arbitration from May
26 to May 28, 2021. Vivera elected not to participate. In his
interim and final awards, Judge Swart concluded that Vivera had
breached its contract with Sitrick, and that it owed a total of
$556,639.98 comprised of unpaid services, interest through the
date of the award, attorney’s fees, and costs.
The final award was served on the parties on June 23,
2021.
II. Procedural Background
On July 6, 2021, and again on August 10, 2021, Sitrick filed
petitions to confirm the arbitration award.
On July 26, 2021, and again on September 8, 2021, Vivera
filed what it captioned as “oppositions” to Sitrick’s petitions, but
which asked the trial court to vacate the arbitrator’s award due
to Judge Swart’s inadequate disclosure of the Legacy matter.
The trial court issued an order confirming the arbitrator’s
award.
Vivera filed this timely appeal.
DISCUSSION
Vivera argues that the trial court erred in confirming the
arbitration award because Judge Swart did not comply with the
Act’s disclosure requirements. Where, as here, resolution of an
argument turns on statutory interpretation and the application of
undisputed facts to those statutes, our review is de novo.
(Haworth v. Superior Court (2010) 50 Cal.4th 372, 383 (Haworth);
Luce, Forward, Hamilton & Scripps, LLP v. Koch (2008) 162
Cal.App.4th 720, 729-730 (Luce); Martinez v. Brownco
Construction Co. (2013) 56 Cal.4th 1014, 1018.)
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The Act is meant to be a “comprehensive statutory scheme
regulating private arbitration” in our State. (Moncharsh v. Heily
& Blase (1992) 3 Cal.4th 1, 9.) To ensure that an arbitrator is
truly neutral and able to “serve[] as an impartial decision
maker,” the Act “requires [a potential] arbitrator to disclosure to
the parties any grounds for disqualification.” (Haworth, supra,50 Cal.4th at p. 381; Azteca Construction, Inc. v. ADR Consulting,
Inc. (2004) 121 Cal.App.4th 1156, 1165 [requiring disclosures as a
means of “protecting the fairness of the [arbitration] process”
given the “mighty and largely unchecked power” “arbitrators
wield”]; § 1281.9, subd. (a).) The Act enforces this duty of
disclosure by empowering a party to vacate an arbitration award
if an arbitrator fails to make the disclosures required by the Act
or fails to disqualify himself when a party objects on the basis of
those disclosures. (§ 1286.2, subd. (a)(6).)
As pertinent here, the Act requires a potential arbitrator to
“disclose” “[a]ny matters required to be disclosed” by the Ethics
Standards.2 (§ 1281.9, subd. (a)(2); Ethics Standards, archived at
(as of Mar. 21, 2023).) As a
general matter, the Ethics Standards “require the disclosure of
‘specific interests, relationships, or affiliations’ and other
‘common matters that could cause a person aware of the facts to
reasonably entertain a doubt that the arbitrator would be able to
be impartial.’” (Haworth, supra, 50 Cal.4th at p. 381; see also,
Gray v. Chiu (2013) 212 Cal.App.4th 1355, 1362-1363.) More
specifically, the Ethics Standards pertinent to the issues in this
2 By not raising it on appeal, Vivera has abandoned its
argument that Judge Swart’s retention in the Legacy matter
disqualified him from serving as an arbitrator under the
standards set forth in Code of Civil Procedure section 170.1.
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case require a potential arbitrator to disclose any relationship he
or she has with any party or party’s lawyer at the time of the
disclosure or at any time in the past. (Ethics Standards, std.
7(d); Honeycutt v. JPMorgan Chase Bank, N.A. (2018) 25
Cal.App.5th 909, 922-923 (Honeycutt); Roussos v. Roussos (2021)
60 Cal.App.5th 962, 972.) What is more, the Ethics Standards
make this duty of disclosure “a continuing duty” that applies
“until the conclusion of the arbitration proceeding.” (Ethics
Standards, std. 7(f); Luce, supra, 162 Cal.App.4th at p. 729.) As
part of that continuing duty to disclose, an arbitrator must
always disclose, at the time of appointment, if he or she “will
entertain offers of employment or new professional relationships”
with a party or a lawyer for a party “as a dispute resolution
neutral” during the pendency of the arbitration. (Ethics
Standards, std. 12(b)(1); Honeycutt, at p. 923.) If the parties do
not timely object to the arbitrator’s indicated willingness to
entertain new offers of employment, the scope of the arbitrator’s
duty to make further disclosures depends on whether the current
arbitration is a “consumer” arbitration or a “nonconsumer”
arbitration. If the current arbitration is a “consumer”
arbitration, the arbitrator has a continuing duty to disclose to the
parties “if he or she subsequently receives an offer” and if he or
she has accepted any such offer. (Ethics Standards, stds.
12(b)(2)(A), 7(b)(2)(B).) But if the current arbitration is a
“nonconsumer” arbitration, the arbitrator is “not required” to
disclose any future offers of employment as long as the arbitrator
tells the parties, up front, that he or she “will not inform the
parties if he or she subsequently receives an offer while th[e]
arbitration is pending.” (Ethics Standards, stds. 12(b)(2)(B),
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12(d)(4)(A), 7(b)(2)(A); Ovitz v. Schulman (2005) 133 Cal.App.4th
830, 840-841 [so noting].)
Judge Swart’s disclosures complied with the Ethics
Standards and consequently complied with the Act. Contrary to
what Vivera contends, the arbitration in this case is a
“nonconsumer” arbitration. Judge Swart’s disclosure checklist so
indicated. What is more, the Ethics Standards define a
“consumer arbitration” to specifically exclude “arbitration
proceedings conducted under or arising out of. . . private sector . .
. agreements” (Ethics Standards, std. 2(d)), yet that is precisely
what the contract between Sitrick and Vivera is—a private sector
agreement between two companies. In the disclosure checklist,
Judge Swart disclosed that he would “entertain offers of
employment” “as a dispute resolution neutral” while this
arbitration was pending. Vivera did not object to this disclosure
within the 15 days the Act specifies for such objections to be
made; thus, Vivera is deemed to have acceded to this term of
Judge Swart’s retention. (§ 1281.91, subds. (b)(1) [15-day
requirement], (c) [waiver of disqualification if there is no timely
objection to disclosure].) As a result, Judge Swart was under no
obligation to make any further disclosures because, as required
by the Ethics Standards, he had specifically informed the parties
that he was not required to do so in the initial disclosure
checklist. (Jolie v. Superior Court (2021) 66 Cal.App.5th 1025,
1048 [“In nonconsumer arbitrations, . . . if the arbitrator states
he or she will entertain offers of employment or new professional
relationships and he or she will not inform the parties of offers or
acceptance of offers, no further disclosure of subsequent offers
need be made.”].) Because Judge Swart was not required to
disclose the Legacy matter (and did so voluntarily solely as a
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courtesy to the parties), his failure to do so is not a basis for
vacating the arbitration award. (Luce, supra, 162 Cal.App.4th at
p. 735 [“disqualification based on a disclosure is an absolute right
only when the disclosure is legally required”], italics added.)
Vivera resists this conclusion with two further arguments.
First, Vivera asserts that the month-long delay between Judge
Swart being appointed in the Legacy matter and that
appointment being disclosed provides a basis for disclosure. It
does not. A disclosure that is not required cannot be the basis for
vacating an arbitration award, late or not. Second, Vivera
contends that Judge Swart’s decision to voluntarily disclose the
Legacy matter somehow makes that disclosure a required one.
Again, it does not. This precise argument was rejected in Luce,
supra, 162 Cal.App.4th at pages 724-725, 735, and for what we
agree are good reasons.
* * *
In light of our analysis, we have no occasion to reach
Sitrick’s alternative arguments for affirming.3
3 Also, we have no occasion to address whether Vivera’s
responses to Sitrick’s petitions to confirm the arbitration award—
which appear to have been filed more than 10 days after Vivera
was served with those petitions—were untimely filed, which
would thereby obligate us to affirm without reaching the merits
of Vivera’s challenges on appeal. (See generally, Darby v.
Sisyphian, LLC (2023) 87 Cal.App.5th 1100, 1111-1112.)
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DISPOSITION
The judgment is affirmed. Sitrick is entitled to its costs on
appeal.
CERTIFIED FOR PUBLICATION.
______________________, J.
HOFFSTADT
We concur:
_________________________, P. J.
LUI
_________________________, J.
ASHMANN-GERST
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