Wendt v. UBS Financial Services CA2/1

Filed 8/6/13 Wendt v. UBS Financial Services CA2/1
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication
or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered
published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION ONE
MARGARET A. WENDT, B241887
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. BC421811)
v.
UBS FINANCIAL SERVICES, INC.,
Defendant and Respondent.
Appeal from a judgment of the Superior Court of Los Angeles County, David L.
Minning, Judge. Affirmed.
Law Office of Jed Gladstein and Jed Gladstein for Plaintiff and Appellant.
Keesal, Young & Logan, Neal S. Robb, Bentley P. Stansbury III, and Bryan A. Gless
for Defendant and Respondent.
——————————
Plaintiff Margaret Wendt appeals from the trial court‘s order compelling her to
arbitrate her dispute with defendant UBS Financial Services, Inc. (UBS) and the judgment
confirming the resulting arbitration award. Plaintiff contends no agreement to arbitrate exists
because as a result of her multiple sclerosis, she cannot read documents and UBS knowingly
failed to inform her the brokerage contracts she executed with it contained an arbitration
provision. She further contends that we may conduct a review of the arbitration award
because it implicated her nonwaivable statutory rights, and that such review will disclose that
the trial court erred in confirming the arbitration award. We affirm.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
A. Motion to Compel Arbitration
1. Plaintiff’s Complaint
On September 15, 2009, plaintiff filed a complaint alleging that she had suffered losses
in connection with her brokerage account with UBS that was handled by UBS representative
Stanford Baer (Baer). Plaintiff‘s operative first amended complaint filed November 9, 2009,
alleged that she suffers from Multiple Sclerosis (MS) and as a result, has a cognitive
dysfunction making it difficult for her to read and understand documents—in particular
documents involving numbers and financial matters. Plaintiff alleged she had originally
worked with Baer at Wells Fargo Bank, where she had an investment account he handled for
her. Baer knew of plaintiff‘s cognitive difficulties, and that plaintiff was in special need of his
personal fidelity and sober business judgment. Plaintiff told Baer that she did not want to lose
a nickel of her money and would rather invest in bonds.
At an unspecified time, at Baer‘s urging, plaintiff moved her account from Wells
Fargo to UBS, where Baer continued to handle her account. Sometime in the summer of
2007, plaintiff received information that led her to believe it was not safe to be invested in
financial securities, and asked Baer to divest her of all such holdings. Baer told plaintiff she
was mistaken, but told her he would sell such securities; however, he did not do so. On the
contrary, plaintiff alleged that Baer invested an additional $50,000 in a new financial security
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issued by Lehman Brothers. By having plaintiff so heavily invested in the stock market, UBS
failed to honor her conservative investment objectives.
In July 2008, Baer left UBS and moved to Merrill Lynch. Unbeknownst to plaintiff
while she was at UBS, at Baer‘s behest, she had replaced an ordinary Wells Fargo mortgage
with one requiring repayment in full upon transfer of her account. UBS would not permit
plaintiff to follow Baer to Merrill Lynch until she paid off her mortgage. As a result, plaintiff
was unable to transfer her account at a time when stock values were falling and she was
prevented from divesting her account of risky securities, resulting in a substantial loss of her
investment portfolio. At this time, UBS assigned plaintiff‘s account to Robert Lovitt, who
refused to trade any of plaintiff‘s holdings unless she signed a document cancelling her
transfer to Merrill Lynch. Plaintiff sustained substantial losses as a result of Lovett‘s
continuing refusal to sell her securities during the period July to September 2008.
Plaintiff‘s first amended complaint stated claims for negligence, breach of fiduciary
duty, negligent misrepresentation, intentional misrepresentation, intentional infliction of
emotional distress, invasion of privacy, financial elder abuse, and discrimination in violation
of the Unruh Civil Rights Act.
2. UBS’s Motion to Compel Arbitration1
On December 9, 2009, UBS filed a motion to compel arbitration and stay proceedings.
UBS asserted that plaintiff had signed a total of eight valid agreements to arbitrate with UBS
between May 2004 and January 2008. The first four were signed in May 2004 when plaintiff
opened four investment accounts with UBS. Each of the arbitration agreements was
contained in plaintiff‘s brokerage agreements.2 The four subsequent agreements were
executed in September 2005, October 2005, September 2007, and January 2008.
1We set forth here solely the evidence proffered by the parties in connection with
the motion to compel arbitration.
2 The arbitration clauses appearing in Ms. Wendt‘s individual account agreements
provide that ―in accordance with the last paragraph of the Master Account Agreement entitled
‗Arbitration‘ I am agreeing in advance to arbitrate any controversies which may arise with
3
Plaintiff‘s opposition asserted that due to her long-standing MS, she never understood
that in signing the brokerage agreements that she had also agreed to arbitrate all disputes, and
UBS‘s fraud in misrepresenting their contents negated her consent. She made her disability
clear to Baer, and he understood that she would not be able to read any documents he asked
her to sign; in turn, plaintiff reasonably relied on Baer‘s statements regarding the contents of
the documents. Under Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th
394 (Rosenthal), her agreement to arbitrate was void as the product of fraud in the execution.
Plaintiff‘s declaration stated that she is a television producer, reporter, and spiritual
journalist. Her television shows focus on the paranormal, which is her area of expertise. She
suffers from MS and as a result has cognitive impairment; she is unable to understand or read
numerical concepts or process numbers. Plaintiff cannot use a computer or read complicated
materials. Reading numbers causes her to have panic attacks; she cannot balance a checkbook
or use a calculator. Although her symptoms became apparent at age 18, she was not
diagnosed with MS until age 30, and at the time of the motion to compel was 60 years old.
Until 1997, she was married to Ben Webster, a successful entrepreneur who handled the
couple‘s finances. In 1998, she was widowed, and inherited a small portion of Webster‘s
estate. She employs Marvin Grossman, an accountant, at a salary of $5,000 per month to
review her bank statements and bills. She trusted Baer to keep her advised of her financial
portfolio.
among others UBS Financial Services in accordance with the terms outlined therein.‖
(Boldface omitted.) The master account agreement provided: ―Client agrees that the Account
is subject to the arbitration rules of the NASD and that any and all controversies which may
arise between UBS Financial Services and of UBS Financial Services‘ employees or agents
and Client concerning any account, transaction, dispute or the construction, performance or
breach of this Agreement, or any other agreement, whether entered into prior to, on or
subsequent to the date hereof, shall be determined by arbitration.‖ Plaintiff asserts there was
only one agreement to arbitrate. The dispute is academic because she does not contend
no brokerage account existed, only that there was only one agreement, rather than eight
agreements.
4
As a result of plaintiff‘s condition and the death of her husband, she relies heavily on
financial advisors to inform her verbally regarding documents she is executing. She entrusted
her money to Bank of America, and later Wells Fargo after her advisor Brian McDermott
moved there. McDermott introduced plaintiff to Stanford Baer, stating Baer was one of the
best advisors at Wells Fargo. Plaintiff instructed Baer that she preferred conservative
investments. Baer told her that he was moving to UBS, and from what he had told plaintiff,
she believed her account was doing well.
When Baer moved to UBS, he requested that she sign documents that he explained
were to transfer her account to UBS. She signed whatever documents he requested her to sign
without reading them and signed them based upon his explanation. Some of the documents
were just the signature page, and Baer seemed to be in a rush to have her sign them. Had she
known the UBS agreements contained an arbitration clause, she would not have signed them.
Further, the papers specified her investment objective was ―moderate,‖ rather than
―conservative.‖ Plaintiff is not a sophisticated investor.
In reply, UBS asserted it never misrepresented the nature of the brokerage contracts to
plaintiff. On the contrary, UBS was not under a duty to explain the documents to her; rather,
plaintiff had a duty to read and review the agreement before signing it. UBS submitted
declarations contesting plaintiff‘s inability to read documents. Baer‘s declaration stated he
began serving as plaintiff‘s financial advisor in November 2003, and moved to UBS in April
2004. Baer left UBS in July 2008 and moved to Merrill Lynch. When plaintiff opened her
UBS account, Baer did not explain the terms of the account application or account agreement.
At the time plaintiff executed the agreement, Baer believed she had been investing for many
years and had transferred her account to different brokers a number of times and thus did not
need, nor did she request, that he explain the terms of the agreements to her. Most
importantly, at no time that Baer handled the account did plaintiff tell him that she had trouble
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processing numbers or numerical concepts. Although Baer did not recall whether plaintiff
told him she had MS, he did recall that she never informed him of any cognitive difficulties.3
In July 2008, another Merrill Lynch advisor, Robert Lovitt, took over plaintiff‘s
account. Lovitt, who handled plaintiff‘s account from July 2008 to January 2009, did not
recall plaintiff ever telling him that she had any cognitive impairments or difficulty processing
numbers. In August 2008, he attended a meeting with plaintiff and her accountant Marvin
Grossman at which they discussed a cash flow report, a sector allocation report, an asset
allocation report, and a snapshot of her account. Lovitt personally observed plaintiff
reviewing the documents and she did not mention having any difficulty doing so.
At the hearing, UBS pointed out that, as the moving party, it did not have the burden to
establish the plaintiff‘s failure to read the documents was reasonable. Rather, plaintiff needed
to establish her failure to read the agreements was reasonable given her condition. In that
regard, plaintiff failed to submit admissible evidence that she suffered from a recognized
medical condition that would prevent her from reading words on a page; there was no medical
declaration from her physician. Thus, plaintiff‘s condition—an aversion to reading
numbers—was not tantamount to blindness and thus did not bring her within the holding of
Rosenthal, supra, 14 Cal.4th 394. Plaintiff requested the court to postpone its ruling to give
her an opportunity to present evidence of her medical history, and she had a right to rely on
Baer because he was her fiduciary. UBS countered that plaintiff had ample opportunity to
procure her medical records.
The court granted the motion to compel arbitration and stay plaintiff‘s pending
superior court action. The court found there was no medical documentation to support
plaintiff‘s claim that she suffered from MS and as a result had cognitive difficulties
understanding numbers; further, there was no evidence from which the court could find her
3 Plaintiff asserts these declarations were improperly before the trial court because
they were part of UBS‘s reply. However, given the procedural posture of the motion to
compel arbitration, UBS did not have notice of the nature of plaintiff‘s opposition to its
motion to compel at the time it filed the motion. Hence, UBS was required to rebut
plaintiff‘s factual contentions in its reply.
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failure to read the agreements was not the result of negligence. Rather, plaintiff was
confronted with eight arbitration agreements which contained arbitration provisions, and
admitted that she paid Grossman $5,000 annually to manage her money and administer her
checking account—all of which indicated that plaintiff could have learned of the terms of the
UBS agreements had she chosen to do so.
3. Plaintiff’s Motion for Reconsideration
Plaintiff filed a motion for reconsideration in which she argued that the admissibility of
her declaration was not raised by UBS, the relevant law on the issue was not before the court
when it considered UBS‘s motion to compel. As a result, plaintiff submitted additional
evidence and additional legal authorities on the issue of a party‘s ability to testify to his or her
own illness in support.
Plaintiff submitted the declaration of Joseph Francis Hahn, M.D., who was not her
treating physician and who is not a neurologist, in which he stated that he was neighbors with
plaintiff when she was stricken with MS in 1982. Dr. Hahn stated that MS can affect many
parts of the nervous system, and some sufferers of MS have cognitive impairment. Often
such people do not appear to have anything wrong with them, but with cognitive impairment
caused by MS, such people might not be able to make sense of financial documents.
Plaintiff also submitted the declaration of Marvin Grossman, plaintiff‘s personal
accountant. In that capacity, Grossman reviewed her bank and investment statements but did
not make investment decisions for plaintiff. Plaintiff did not have a financial background and
did not have the ability to manage her financial affairs, and based on Grossman‘s
observations, she did not understand financial documents. At the time plaintiff moved her
account to UBS, Grossman witnessed plaintiff being shown financial documents by Baer,
who did not explain them to her; plaintiff did not read the documents, which were not filled
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out. No one at UBS asked Grossman to review the documents, and plaintiff did not ask him
to do so because she was relying on UBS to explain the documents to her.4
Plaintiff submitted the declaration of Albert Thomas Wendt, her husband during the
period 1969 to 1989. Wendt observed plaintiff was not able to function well with numbers,
and first manifested this inability in 1970. Plaintiff could not read the menus in restaurants,
and could not handle money at the market. When in restaurants, she would hold up a menu
and pretend to read it, and then order what others ordered or what the waiter suggested. After
the birth of their third child in 1980, plaintiff had difficulty seeing, slurred her speech, and had
trouble walking. In 1982 plaintiff collapsed and spent several weeks at the Cleveland Clinic,
where she was diagnosed with MS. Wendt helped plaintiff with her professional work by
transcribing documents which plaintiff would verbally edit. After they divorced and plaintiff
moved to California, Wendt helped her with the purchase of her home.
Plaintiff submitted medical documentation establishing she suffered from MS.
Plaintiff‘s declaration discussed the onset of MS and her development of coping
mechanisms. Plaintiff was a straight-A student in college, and would have obtained a degree
at Elmhurst College in Illinois except that her husband Tom Wendt was transferred to Iowa.
Over the course of her 40-year professional career, plaintiff has been a fashion manager at
Carson, Tiere, Scott (a department store chain in Chicago), did a morning television program
for NBC, and a North Coast Magazine Sunday morning television show for CBS, which was
the lead-in for Charles Kurault‘s Sunday ―On the Road‖ show. Plaintiff worked on CBS‘s
PM Magazine, a syndicated television show in which she did the style, society, and
entertainment segments. Plaintiff was also a medical and consumer reporter for the nighttime
news. After her divorce from Wendt, plaintiff moved to California and began producing her
own documentaries emphasizing spiritual topics, people, and events. She partnered with
Roland Perkins of CAA to create, write and co-produce Psychic Chronicles for Paramount
4Grossman submitted a supplemental declaration in which he stated that he did not
witness plaintiff‘s initial document signing in May 2004, but witnessed a document
signing when Baer moved from UBS to Bank of America in the summer of 2008.
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Pictures. When she married Ben Webster, she moved to Canada for five years, where she
helped her husband as his vice president of human resources. Although all of these positions
required her to function at a high level, none of them required her to read and make sense of
financial and legal documents. She relies on other people to explain legal and financial
documents related to her job duties because she is incapable of reading them.
When she was widowed in 1997 and moved back to California, she had accumulated a
nest egg and contacted Bank of America to set up an account with Brian McDermott. When
McDermott moved to Wells Fargo, she moved with him. McDermott gave the account to
Baer. Plaintiff did not have occasion to mistrust Baer, and he seemed genuinely concerned
about plaintiff‘s well being and the need to preserve her life savings. She explained her
problem reading financial documents to Baer. Her relationship and dealings with Baer were
very good while she had her accounts at Wells Fargo. However, after she went to UBS, she
lost her savings.
She remembered signing the contracts with UBS. Baer insisted on signing the
documents on a particular day, although plaintiff was busy. She made time for him, but he
was late, and when he arrived, plaintiff was ready to leave. They hurriedly signed the papers,
and plaintiff remembers only being handed signature pages.
Plaintiff‘s attorney‘s declaration stated that he attempted to compile medical records
relating to plaintiff‘s long-standing affliction with MS in response to the motion to compel
arbitration, but many of the medical records were more than 20 years old and had been
destroyed, and her initial treating physician in 1982 was deceased. However, several days
before the hearing, they received plaintiff‘s medical records from 1982 establishing plaintiff‘s
initial diagnosis with MS.
Jane Wang, M.D., a doctor specializing in neurology, was plaintiff‘s treating
physician, and had known plaintiff since 2005 and assisted her in connection with plaintiff‘s
diagnosis of MS.
UBS‘s opposition asserted that plaintiff could not rely on Rosenthal, supra, 14 Cal.4th
394 because plaintiff did not allege that Baer misrepresented the nature of the contract, but
9
instead asserted Baer‘s failure to interpret the contract for her, and in any event, she could not
demonstrate reasonable reliance on any purported misrepresentations because she had eight
opportunities to review the contract before signing it.
In reply, plaintiff submitted a declaration in which she claimed she told Lovitt about
her cognitive problems, and disputed his version of events. Her attorney submitted a
declaration in which he detailed his efforts to obtain plaintiff‘s 1982 medical records. A
colleague of plaintiff submitted a declaration stating that she knew of plaintiff‘s disability and
observed that plaintiff became very flustered and disoriented when required to read
documents having to do with figures and financial information.
At the hearing, plaintiff argued that a party may testify to their own medical condition.
The trial court denied plaintiff‘s motion for reconsideration because there was no new
evidence or law.
B. UBS’s Motion for Confirmation of Arbitration Award
1. The Arbitration Briefs
Plaintiff‘s statement of claim filed in the arbitration stated she has suffered from MS
for over 30 years, which causes her to have difficulty reading certain kinds of documents,
including contracts and other writings relating to her finances and investments. When she
attempts to read such documents, the letters start to move around on the page, she becomes
disoriented and dizzy, and goes into a panic. As a result, she is dependent upon others to
explain the meaning of documents.
Following the death of her husband in 1997, plaintiff invested her life savings in bonds
with Wells Fargo, where Baer became her financial advisor. She relied on Baer for all matters
connected with her portfolio, and told Baer about her disability. In early 2004, Baer left Wells
Fargo to work for UBS. At that time, Baer asked plaintiff to move her portfolio to UBS. Baer
put some papers in front of her and asked her to sign the signature pages, stating the papers
would allow him to move her account to UBS. He did not show her the rest of the documents,
nor did he explain them. It was not until 2010 when plaintiff filed this action that she saw the
account agreements and learned that her level of acceptable risk was ―moderate‖ instead of
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―conservative‖ and her secondary risk profile was ―aggressive/speculative‖ rather than
―conservative.‖ Plaintiff never agreed to these account profiles. Indeed, following his move
to UBS, Baer put plaintiff‘s money in over 120 stocks without her knowledge and consent,
and concealed this fact from her. Baer convinced her to pay off her Wells Fargo mortgage
and replace it with a UBS mortgage with a rate that he claimed was better, and he failed to tell
her the mortgage would need to be paid off if she ever left UBS. When Baer wanted to move
to Merrill Lynch in 2008, she could not move with him unless she paid off the mortgage. In
August 2008, she met Lovitt and for the first time learned her money was in 120 different
stocks. While the market was in a state of precipitous decline, Lovitt refused to allow her to
sell her stocks unless she received authorization to transfer her portfolio to Merrill Lynch—a
move which required her to pay off the UBS mortgage. Therefore, for several weeks, she
struggled to make enough money to pay off the mortgage and a line of credit. In January
2009, she was finally able to do so, but in the interim, she had lost about $750,000. During
this time, plaintiff alleged that Lovitt and other UBS employees acted with indifference to
plaintiff‘s financial welfare and in disregard of her physical, mental, and emotional wellbeing.
When plaintiff learned that a large portion of her savings had been lost, she asked UBS to
assume financial responsibility for her losses, and UBS‘s attorney responded, ―[w]e didn‘t
leave you enough money to sue us.‖
Plaintiff asserted claims for negligence, breach of fiduciary duty, intentional
misrepresentation, unauthorized trading, unsuitable investing, invasion of privacy, failure to
supervise, intentional infliction of emotional distress, financial abuse of a dependent adult,
unfair and deceptive business practices, and violation of the Unruh Civil Rights Act. Plaintiff
asserted that UBS and its employees, including Baer and Lovitt, failed to invest her money
properly, and UBS failed to properly supervise Baer and Lovitt, and that its conduct caused
her severe emotional distress. Plaintiff sought economic and noneconomic damages of
$750,000, $750,000 for pain and suffering, and statutory treble damages for $2.250 million
for unfair business practices, punitive damages, interest, and attorney fees.
11
UBS responded that plaintiff executed numerous documents stating that her
investment objectives and risk tolerance were moderate and that she sought income and
capital appreciation. Further, plaintiff had served as vice president of finance for Helix
Investments, her husband‘s investment company; served as the vice president of a Fortune
500 company; and served as the host of a radio program and television producer, writer and
reporter for over 25 years. During the time plaintiff had her investments at UBS, she invested
through Goldline International and hosted an internet program devoted to investing in
precious metals through Goldline.
Baer first served as plaintiff‘s financial advisor in November 2003. Her first
investment was $100,000, which she discussed in detail with Baer. In May 2004, when Baer
moved to UBS, plaintiff met with him to address the objectives of her account. She
represented that she had a $4 million net worth, 10 years experience investing, and executed
numerous documents expressing her investment objectives as moderate-aggressive-
speculative; her risk tolerance appeared on her account statements every month. Plaintiff
transferred approximately $2 million in a diversified portfolio from Wells Fargo to UBS.
Plaintiff spoke with Baer about all transactions in her account, and plaintiff‘s monthly
statements detailed the allocation of her investments. During the period May 2004 to
December 2007, plaintiff saw her account profit by $540,000. In October 2004, plaintiff took
out a $1 million credit line with UBS with a variable interest rate. Initially plaintiff borrowed
$25,000 against the credit line, and an additional $263,000 in October 2007.
In January 2008, plaintiff opened additional accounts with UBS valued at
approximately $264,000 containing UBS stock, a Wells Fargo bond, and a structured product
linked to a currency basket. Plaintiff did not conduct many transactions in this account. In
January 2008, she used profits from this account to buy a Lehman Brothers structured
product; in September 2008, Lehman Brothers filed for bankruptcy protection.
At the time Baer left UBS in July 2008, plaintiff elected to transfer her accounts along
with him. Plaintiff had a $250,000 loan collateralized by the investments she intended to
transfer out of UBS; thus, she could not transfer the collateral to Merrill Lynch unless the loan
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was paid off. When Lovitt took over plaintiff‘s accounts, he met with plaintiff and Grossman.
Plaintiff elected to pay off the UBS loan and by January 2009 had transferred her assets out of
UBS.
UBS asserted that it consulted with plaintiff over all of her investments and properly
discharged any duties it owed to plaintiff.
2. Conduct of the Arbitration
The arbitration was conducted before a panel of arbitrators of the Financial Industry
Regulatory Authority (FINRA), and the parties mutually selected FINRA arbitrators in March
2011. The arbitration took place in October and November 2011. The proceedings were
recorded manually and on tape.5
Plaintiff submitted a lengthy declaration dated August 18, 2011 in which she detailed
her life with MS, explained why she cannot understand financial documents, how she copes
with MS, her dealings with Baer, Lovitt, and UBS, how she was risk-averse financially,
5 On September 17, 2012, plaintiff lodged with this court a CD audiotape of the
―administrative proceedings‖ (FINRA arbitration hearings) in this matter. On
December 10, 2012 plaintiff requested to augment the record with: (1) UBS‘s objections
to the Declarations of her attorney Jed Gladstein, her friend Ann Schlichter, and her own
declaration filed on July 6, 2010 in connection with the motion to compel arbitration;
(2) the untranscribed CD audio record of the FINRA arbitration; (3) her arbitration brief;
(4) her motion in limine dated August 31, 2011 in the arbitration proceedings, and the
order granting the motion on September 26, 2011; and (5) her supplemental motion in
limine dated October 31, 2011. On January 15, 2013, we denied the request to augment
the record, except as to UBS‘s objections to plaintiff‘s declarations.
On January 8, 2013, plaintiff filed a motion for judicial notice of the same five
documents. We deny plaintiff‘s request to take judicial notice of the five documents for
the reason that the request is moot as to the first document, and plaintiff acknowledges
the remaining four documents were not before the trial court. (Evid. Code, §§ 452, 459.)
With respect to the untranscribed audio tape, it does not constitute administrative
proceedings and is not properly lodged with this court. (Cal. Rules of Court, rule
8.122(b)(4)(B).) Furthermore, the record of oral proceedings in an appeal may take only
three forms: (1) A reporter‘s transcript in conformity with California Rules of Court,
rule 8.130; (2) an agreed statement under rule 8.134, and (3) a settled statement under
rule 8.137. (Cal. Rules of Court, rule 8.120(b).) As the audio CD is not transcribed and
does not comply with any of these rules, we disregard it.
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Baer‘s departure from UBS and her portfolio‘s decimation. Plaintiff detailed how she had
found ―coping mechanisms to do things that other people can do normally. . . . I began to
watch every word people said, and to imprint what they said to my memory. That is one of
the primary ways I have been able to figure out what is going on in the world. And that
particular skill served me professionally . . . . It allowed me to develop a career as an on-
camera television personality . . . . Fortunately, the networks allowed their ‗talent‘ to put extra
shows in the can in advance, so I was able to have three or four shows ready to run if I had an
attack that kept me from showing up at work.‖ Plaintiff handled her condition with discretion
because she found out she would be fired if people knew she had MS; she knew when to ask
for help and when not to talk about it. The producers of her television shows accommodated
her disability, and she developed personality skills and got jobs where she could memorize
lines or ad-lib. Later, plaintiff became a television producer and developer of her own shows.
Plaintiff would suffer from severe stress, consisting of hallucinations, panic attacks,
vertigo, and fainting, when confronted with personal matters of emotional importance. Her
first husband took care of her contracts and their legal and financial matters during their
marriage. After her divorce, plaintiff had to rely on other persons to explain documents to her.
In 1996, plaintiff married Ben Webster, a wealthy businessman who owned Helix
Investments. During her two-year marriage to Webster, who died in 1997, plaintiff‘s finances
were handled by Webster. Webster put plaintiff on the board of directors of Helix and other
companies; because he valued her people skills, he made her director of human resources at
Helix. After Webster‘s death, plaintiff returned to Los Angeles with about $3 million that she
inherited from Webster. Webster had told her never to put her money in stocks.
After her return to Los Angeles, plaintiff worked as a television host, writer, producer,
director, and consultant. She worked on television specials and series, including American
Idol, Band of Brothers, Into the Unknown, America‘s Psychic Past, and JFK: A Hero in
Question. Plaintiff‘s day-to-day finances were handled by Bridgett Ryan and Marvin
Grossman became her accountant. Plaintiff explained to Grossman that MS made it
impossible for her to read and understand everyday bills, bank statements and other financial
14
documents. Grossman agreed to spend a few hours once or twice a month with plaintiff going
over her bills, but Grossman was not her financial advisor.
Plaintiff told Baer she wanted to remain in conservative investments, and they agreed
that he would never let her principal drop below $2 million. However, while at Wells Fargo
and UBS, he put her money in stocks. Plaintiff had lost some money at Wells Fargo with a
different broker, and Baer told her he would make the money back at UBS. Baer had her sign
a document in October 2004 that opened a line of credit at UBS, and in May 2006 she sent
him a fax authorizing her to borrow $10,000 on a UBS loan account, but she did not
understand what the documents were for. Plaintiff put a numerology radio show on her
website in 2007, and consulted a numerologist who told her the stock market would be getting
bad in 2008. She called Baer and asked that he put her money in cash. He reassured her that
nothing would happen to the market and that he was putting her money in cash. Up until the
time Baer left UBS, she believed her money was safe.
The first plaintiff learned of the UBS loan was in July 2008 when Baer left UBS.
When she tried to follow him to Merrill Lynch, UBS would not transfer her funds unless she
paid off a $230,000 loan on her daughter‘s condominium. At the time in July 2008 when
Baer told her he was leaving UBS, he wanted to meet plaintiff at a restaurant. Grossman
agreed to go with plaintiff. Baer was in a hurry and said he wanted to get his clients out of
UBS before it found out he was leaving. Baer gave her a piece of paper to sign, and the next
day came by with more papers for her to sign. Baer told her it would take a couple of days to
transfer her account to UBS and conditions were bad and he wanted to get her money into
cash. UBS called her but she did not answer the phone. Grossman advised her to answer the
phone because he thought the situation with Baer was ―fishy.‖ The next time UBS called, she
answered the phone, and it was Lovitt. Lovitt gave her a sales pitch. She told him she was
going with Baer. The next day Lovitt called and told her the paperwork was not in order and
what she had signed was not valid. Plaintiff learned the truth about the mortgage on the
condo and that she would have to pay it off to leave UBS. Baer told her none of it was true,
and told her to tell Lovitt to sell into the rally. She found out Lovitt did not sell her stocks as
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she asked him. She did not know what was going on with her money or her account, or how
much money she was losing. Lovitt called her and called her names and was very insulting.
She found his behavior to be sleazy, and she later learned Lovitt had called Grossman to
complain about her. Later, Lovitt called to apologize, but during the month of July 2008 he
continued to tell her that she could not transfer her money without paying off the loan. At the
end of July she learned that Baer had put her money in stocks.
During July 2008, because she could not trade, her assets dwindled. Plaintiff enlisted
the help of a friend to get her money out of UBS. When she got her money, she only had
$732,000 left. During the time she was with UBS, it violated her privacy by sending her
statements to her children. As a result of UBS‘s conduct, she has suffered from emotional
distress and physical problems, including aggravation of her MS, high blood pressure, and
stomach ulcers. In 2008, she fell three times, broke her ankle and leg on separate occasions,
and in January 2009, she had a heart attack.
After the presentation of plaintiff‘s case in chief before the arbitrators, on
November 23, 2011, UBS moved to dismiss on the grounds plaintiff had presented no
evidence that her investment accounts lost money while at UBS. UBS argued that plaintiff
admitted making false statements in her declaration filed in the trial court because she
believed she would lose her case. UBS argued that plaintiff had presented no evidence that it
was negligent, breached a fiduciary duty, made misrepresentations, conducted any
unauthorized transactions in her account, made unsuitable investments, invaded her privacy,
or engaged in any other wrongful conduct. On the contrary, the evidence contradicted
plaintiff‘s claims and showed that she presented no evidence in support of them: for example,
she sent an email in November 2006 stating, ―should I take a loan from my line of credit or
take stock money‖ and she permitted her son to receive copies of her statements. Finally,
plaintiff presented no evidence in support of her damages.
Plaintiff‘s opposition argued that the arbitrators were ignoring her evidence, the UBS
attorneys were causing plaintiff emotional distress, the arbitrators ignored plaintiff and refused
to listen to her, one of the arbitrators was always looking at his computer, and plaintiff felt
16
belittled and demeaned. Plaintiff disputed the factual basis of the motion, contending that
when she left UBS, she only had $750,000 left.
On December 8, 2011, the arbitrators heard the motion to dismiss by way of telephonic
hearing. On December 9, 2011, the arbitrators granted the motion to dismiss.
In December 2011, plaintiff made a request for immediate suspension of the arbitrators
based upon bias and other wrongful conduct of the arbitrators. On January 18, 2012, FINRA
responded to plaintiff‘s letter, denying her request but offering plaintiff the opportunity to
challenge the panel pursuant to FINRA Rules. FINRA requested a response by January 25,
2012. On January 26, 2012, plaintiff declined by fax to challenge the arbitrators.
2. The Arbitrator’s Award, Motions for Confirmation and Vacation
On February 3, 2012, the arbitrators served their award, finding in favor of UBS and
dismissing plaintiff‘s claims in their entirety. The award contained no findings of fact or other
written analysis of plaintiff‘s case. The arbitrators charged $22,200 in forum fees to plaintiff,
and $1,800 to UBS.
On March 12, 2012, UBS moved to confirm the award. Simultaneously, plaintiff
moved to vacate the award, contending she was compelled to go to arbitration in violation of
law, and FINRA panel of arbitrators harbored bias. Her counsel‘s declaration stated that
―despite the expedited nature of the arbitration due to plaintiff‘s Multiple Sclerosis, the
arbitrators postponed the hearing for months in order to accommodate the vacation plans of
UBS‘[s] counsel. The unctuous deference with which the arbitrators treated counsel for UBS
was so blatant that when objections were made to his behavior during the course of the
hearing, the arbitrators pronounced rulings without giving plaintiff the opportunity to be heard
on the objections. . . . Despite their claim to have read plaintiff‘s pleadings and considered her
evidence, the statements of the arbitrators on the record showed that they did not do so. And
when they thought they were in a private session but forgot to turn off a live video feed to an
adjacent room, the arbitrators were caught on television admitting that they would not read
and consider some of the most cogent and compelling evidence showing how UBS was able
to deceive and defraud the plaintiff due to her MS cognitive disabilities.‖
17
In opposition to plaintiff‘s motion to vacate, UBS argued that plaintiff failed to
establish that the award was procured by bias, fraud, corruption, or other undue means, and
instead only offered vague and conclusory allegations. On the contrary, the arbitrators
rescheduled hearings at plaintiff‘s request; installed audio/visual equipment so that plaintiff
could have her own room to watch the proceedings via closed-circuit television; permitted
plaintiff to present some testimony by way of her lengthy declaration; and scheduled the
arbitration to accommodate UBS‘s counsel‘s need to attend a meeting during one week. UBS
also contended that plaintiff failed to specify what evidence the arbitrators refused to admit
and failed to make any showing of evidence that would have affected the arbitrators‘
conclusion.
On April 5, 2012, the trial court confirmed the arbitration award in favor of UBS, and
on April 25, 2012, entered judgment in favor of UBS.
DISCUSSION
I. Formation of Arbitration Agreement
Plaintiff argues that the undisputed evidence at the hearing on the motion to compel
arbitration established fraud in the execution of the UBS agreements signed May 3, 2004; on
this issue the evidence established she was incapable of reading and understanding the
signature page Baer handed to her to sign. Further, the evidence established Baer had a
confidential relationship with plaintiff because he had handled her account prior to her
coming to UBS, and she was not negligent for failing to consult her accountant concerning the
meaning of the UBS agreement because her accountant only handled her checking account.
Finally, she argues the trial court erred in denying her motion for reconsideration because she
had the right to testify to the symptoms of her disease, and in ignoring the declarations she
submitted in support of her opposition. UBS counters that plaintiff never informed either
broker (Baer or Lovitt) that she had difficulty processing numbers or a cognitive aversion to
financial documents, nor was there any medical documentation to support her claim of such a
cognitive difficulty, and plaintiff‘s motion for reconsideration did not put forth any new facts
or law and was properly denied.
18
A. Agreement to Arbitrate
Code of Civil Procedure section 12816 provides that predispute arbitration agreements
are ―valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of
any contract.‖ Under section 1281.2, a party may petition the court to order arbitration of a
controversy; the court may deny the petition if it finds the party resisting arbitration did not
agree to arbitrate. Such petitions are determined in the manner provided by law for the
making and hearing of motions. (§ 1290.2.) The petitioner bears the burden of proving an
arbitration agreement. The party claiming a defense bears the burden of proving the defense.
(Rosenthal, supra, 14 Cal.4th at p. 413.) We review the trial court‘s resolution of factual
issues for substantial evidence. (NORCAL Mutual Ins. Co. v. Newton (2000) 84 Cal.App.4th
64, 71.)
A court can consider a claim that a party was fraudulently induced to include an
arbitration clause (as is the case here) in a contract. (Prima Paint v. Flood & Conklin (1967)
388 U.S. 395, 402–404 [87 S.Ct. 1801, 18 L.Ed.2d 1270]; Engalla v. Permanente Medical
Group, Inc. (1997) 15 Cal.4th 951, 973.) Parties dealing at arm‘s length generally owe no
duty to explain the terms of a contract. A party‘s failure to explain to the other the meaning
and effect of an arbitration clause is ordinarily not a fraudulent nondisclosure of facts. (Cohen
v. Wedbush, Noble, Cooke, Inc. (9th Cir. 1988) 841 F.2d 282, 286–287; Madden v. Kaiser
Foundation Hospitals (1976) 17 Cal.3d 699, 710 [party is presumed to have read contract and
know its contents].) ―California law . . . requires that the plaintiff, in failing to acquaint
himself or herself with the contents of a written agreement before signing it, not to have acted
in an objectively unreasonable manner. One party‘s misrepresentations as to the nature or
character of the writing do not negate the other party‘s apparent manifestation of assent, if the
second party ‗had reasonable opportunity to know of the character or essential terms of the
proposed contract.‘‖ (Rosenthal, supra, 14 Cal.4th at p. 423.) ―To make out a claim of fraud
in the execution, . . . plaintiffs must show their apparent assent to the contracts—their
6 All statutory references are to the Code of Civil Procedure unless otherwise
indicated.
19
signatures on the client agreements—is negated by fraud so fundamental that they were
deceived as to the basic character of the documents they signed and had no reasonable
opportunity to learn the truth.‖ (Id. at p. 425.)
However, a special relationship may exist between the parties such that one party has
the duty to explain the terms of the contract to the other party, such as the relationship
between a broker and a client. The scope of the fiduciary duty between brokers and clients
varies with the facts of the relationship. (Rosenthal, supra, 14 Cal.4th at p. 425.) In
Rosenthal, 24 bank customers sued over agreements to arbitrate, claiming they were deceived
about the nature of the agreements. The bank led customers to believe a securities salesman
worked for the bank; the salesman led the customers to believe agreements containing
arbitration clauses were actually mere formalities to open an account. With respect to some of
the plaintiffs, their reliance on what the salesman told them was not a defense to enforcement
because of their negligence in failing to read the agreements. However, other plaintiffs who
were illiterate and blind, because they had a prior relationship with the defendant, could claim
fraud in the inducement because a duty arose on the part of the bank to explain the terms of a
contract to them. (Id. at pp. 426–428.)
Here, plaintiffs seeks to bring herself within the second group of Rosenthal plaintiffs
by asserting that UBS had a duty to explain the contract to her because of her MS. This
argument fails for two reasons. First, the trial court, sitting as factfinder, was within its
powers to disbelieve her statements that she had a disability that prevented her from reading
financial documents, and that she made her disability known to UBS brokers Baer or Lovitt;
the trial court was within its powers as factfinder to credit the statements of Baer and Lovitt in
their declarations that they had no knowledge of any disability of plaintiff such that they
would be required to inform her of the terms of the account agreement. If UBS had no
knowledge of plaintiff‘s disability, or its consequences, its lack of notice of any duty arising
therefor is fatal to her claim of fraud in the inducement. Second, the trial court, sitting as
factfinder, was within its powers to conclude that plaintiff, given her inability to read financial
documents, should have shown the documents to her accountant Grossman or some other
20
person to learn their contents, or asked Baer or Lovitt to explain the account agreements to her
in sufficient detail to acquaint her with their contents but without going beyond her level of
comprehension given her cognitive difficulties. The trial court was therefore justified in
concluding plaintiff was negligent in failing to learn the bare bones of the account agreements
and thus because she failed to make her disability known and failed to seek to learn the
contents of the documents, she is not within the holding of Rosenthal, supra, 14 Cal.4th 394.
B. Motion for Reconsideration
Section 1008, subdivision (a) provides in relevant part that a party may apply for
reconsideration of a prior court ruling on the basis of ―new or different facts, circumstances,
or law.‖ The party must demonstrate ―what new or different facts, circumstances, or law are
claimed to be shown.‖ (§ 1008, subd. (a).) Section 1008 is jurisdictional; ―[n]o application to
reconsider any order or for the renewal of a previous motion may be considered by any judge
or court unless made according to this section.‖ (§ 1008, subd. (e).) Section 1008 is intended
to reduce the number of reconsideration motions heard by judges. (Le Francois v. Goel
(2005) 35 Cal.4th 1094, 1098.) The party seeking reconsideration based on new or different
facts must also provide a satisfactory explanation why the evidence was not presented sooner.
(Jones v. P.S. Development Co., Inc. (2008) 166 Cal.App.4th 707, 724.) We review the trial
court‘s ruling under the abuse of discretion standard. (New York Times Co. v. Superior Court
(2005) 135 Cal.App.4th 206, 212.)
Here, the trial court did not err in denying plaintiff‘s motion for reconsideration. Even
assuming the additional medical information would have helped her case given the trial
court‘s finding that plaintiff did not seek to make her disability known or to learn the contents
of the documents, plaintiff presented no reason why the medical records could not have been
presented earlier aside from the fact they dated from 1982 and were difficult to obtain. It is
unlikely that plaintiff had not seen a doctor for over 30 years concerning her MS, a very
serious illness, such that diagnosis and treatment was not ongoing and contemporary medical
information from her current treating physician would be easily obtained.
21
II. Confirmation of Arbitrator’s Award
Plaintiff‘s appeal focuses on three of her claims (her claims for financial abuse, unfair
business practices, and unlawful discrimination in violation of the Unruh Act) and contends
the arbitrators prevented her from vindicating these unwaivable statutory rights and issued an
award with insufficient factual and legal findings to enable this court to determine whether
plaintiff was able to vindicate such statutory rights; further; the award here, which was
without reason or fact and rendered by partial arbitrators, exceeded the power of the
arbitrators; and the arbitrators dismissed her statutory claims under an unconstitutional rule.
The scope of judicial review of arbitration awards is extremely narrow because of the
strong public policy in favor of arbitration and according finality to arbitration awards. We
will not review an arbitrator‘s decision for errors of fact or law, evaluate the validity of an
arbitrator‘s reasoning, or consider the sufficiency of the evidence supporting an arbitrator‘s
award. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 11.) As our Supreme Court
recognized as early as 1852, ―‗The arbitrators are not bound to award on principles of dry law,
but may decide on principles of equity and good conscience, and make their award ex aequo
et bono [according to what is just and good].‘‖ (Ibid., quoting Muldrow v. Norris (1852) 2
Cal. 74, 77.)
As a result, the grounds for vacating or correcting an arbitration award are strictly
limited by statute. Under section 1286.2, the grounds on which a court may vacate an award
are if it was (1) procured by corruption, fraud, or undue means, (2) issued by corrupt
arbitrators, (3) affected by prejudicial misconduct on the part of the arbitrators, or (4) in excess
of the arbitrators‘ powers. (Cable Connection, Inc. v. DIRECTV, Inc. (2008) 44 Cal.4th 1334,
1340; § 1286.2, subd. (a).) There is a presumption in favor of the validity of the award, and
the challenger bears the burden of establishing a claim of invalidity. (Betz v. Pankow (1993)
16 Cal.App.4th 919, 923.) Absent conflicting extrinsic evidence, whether the arbitrator
exceeded his or her powers in granting relief, and thus whether the award should have been
vacated on that basis, is reviewed on appeal de novo. (Reed v. Mutual Service Corp. (2003)
22
106 Cal.App.4th 1359, 1365 [―whether the award was made in excess of the arbitrators‘
contractual powers‖ is a question of law].)
Generally, because we may not review the merits of the controversy between the
parties, the validity of the arbitrator‘s reasoning, or the sufficiency of the evidence supporting
the arbitration award, ―‗it is within the power of the arbitrator to make a mistake either legally
or factually. When parties opt for the forum of arbitration they agree to be bound by the
decision of that forum knowing that arbitrators, like judges, are fallible.‘‖ (Moncharsh, supra,3 Cal.4th at p. 12.) Thus, unless the arbitration agreement provides otherwise, arbitrators have
no obligation to state reasons for their award. (Severtson v. Williams Construction Co. (1985)
173 Cal.App.3d 86, 92.) Thus, the arbitrator is usually not required to submit findings of fact
or detail the process by which the result was reached or give any reasons for the award: ―It is
not the finding on issues that is required; it is the determination thereof.‖ (Cothron v.
Interinsurance Exchange (1980) 103 Cal.App.3d 853, 860.) The parties may, by agreement,
require the arbitrator to issue with the ―award a written discussion sufficient to [allow]
limited judicial review to enforce or vacate the . . . award.‖ (Biller v. Toyota Motor Corp.
(9th Cir. 2012) 668 F.3d 655, 666.)
A private arbitration award does not constitute state action and there is no due process
right to judicial review. (Rifkind & Sterling, Inc. v. Rifkind (1994) 28 Cal.App.4th 1282,
1292.) We review the trial court‘s order de novo, while the arbitrator‘s award is entitled to
deferential review. (Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362, 376,
fn. 9.)
A. Unwaivable Statutory Rights
Although we may not review the arbitrators‘ decision for errors of fact or law, an
arbitrator exceeds his or her power within the meaning of section 1286.2 and the award is
properly vacated where granting finality to the arbitration would be inconsistent with a party‘s
unwaivable statutory rights. (Pearson Dental Supplies, Inc. v. Superior Court (2010) 48
Cal.4th 665, 677 (Pearson Dental).) In such instance, a reviewing court may set aside the
award for manifest errors of law. (Id. at pp. 679–680.) Whether a statutory right is
23
unwaivable in an arbitration context is determined based on the context and purpose of the
specific statute in question. (Bickel v. Sunrise Assisted Living (2012) 206 Cal.App.4th 1, 13.)
Generally, such unwaivable rights include claims for elder abuse (Welf. & Inst. Code,
§ 15600 et seq.) (Bickel, supra, 206 Cal.App.4th at pp. 11–12), certain statutory rights under
the California Fair Employment and Housing Act (Gov. Code, § 12900 et seq.) and the Labor
Code, as well as Tameny7 claims for wrongful discharge in violation of public policy. (See
Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1081–1085; Gentry v. Superior Court
(2007) 42 Cal.4th 443, 455.) Although such claims may be subject to arbitration (Boghos v.
Certain Underwriters at Lloyd’s of London (2005) 36 Cal.4th 495, 506–508), arbitrator‘s
rulings regarding such rights are not entitled to the normally deferential standard of review.
(Pearson Dental, supra, 48 Cal.4th at pp. 679–680.)
Specifically addressing the issue of unwaivable statutory rights in the context of ―a
mandatory employment arbitration agreement, i.e., an adhesive arbitration agreement that an
employer imposes on the employee as a condition of employment,‖ the Supreme Court has
recognized ―‗that an arbitration agreement cannot be made to serve as a vehicle for the waiver
of statutory rights created by the FEHA‘ [citation], because the enforcement of such rights
was for the public benefit and was not waivable.‖ (Pearson Dental, supra, 48 Cal.4th at
p. 677; see also Board of Education v. Round Valley Teachers Assn. (1996) 13 Cal.4th 269,
272–277 [judicial review and vacatur of arbitration award is proper when upholding
arbitrator‘s decision would be inconsistent with the protection of a party‘s clear statutory
rights].) To ensure full vindication of an employee‘s statutory rights in an arbitral forum,
there must be both a written decision and judicial review ―‗―‗sufficient to ensure the
arbitrators comply with the requirements of the statute.‘‖‘‖ (Pearson Dental, at p. 677; accord
Cable Connection, supra, 44 Cal.4th at p. 1353, fn. 14.)
The Court in Pearson Dental declined to opine broadly as to the appropriate level of
judicial review required in every case involving an employee‘s unwaivable statutory rights.
7 Tameny v. Atlantic Richfield Co. (1980) 27 Cal.3d 167.
24
However, the Court emphasized the arbitrator‘s written decision should not be viewed as ―an
idle act, but rather as a precondition to adequate judicial review of the award so as to enable
employees subject to mandatory arbitration agreements to vindicate their rights under FEHA.‖
(Pearson Dental, supra, 48 Cal.4th at p. 679.) Crafting only a rule sufficient to resolve the
case before it, the Court concluded the arbitrator‘s ―clear legal error‖ in finding the
employee‘s FEHA claim to be time-barred, thus precluding any hearing on the merits of the
claim, and the corresponding failure to provide a written decision revealing ―‗the essential
findings and conclusions on which the award [was] based,‘‖ required the award‘s vacatur.
(Ibid.)
Here, plaintiff waived any contention that the arbitrators failed to explain the reasoning
and factual basis for their award sufficient to enable her to seek review of the panel‘s ruling
on her unwaivable statutory rights. Plaintiff failed to raise the issue of the insufficiency of the
arbitrator‘s award vis-à-vis findings on unwaivable statutory rights in the trial court when she
sought vacation of the award. Waiver is the relinquishment of a known right, but can also
refer to ―loss of a right as a result of a party‘s failure to perform an act it is required to
perform.‖ (St. Agnes Medical Center v. PacificCare of California (2003) 31 Cal.4th 1187,
1195, fn. 4.) A party to an arbitration who has knowledge of irregularity in the proceedings
cannot sit by and take part in the proceedings and later object on the basis of the irregularity;
such party ―‗waives any objection on account of such irregularity for he cannot thus take the
chance of a favorable [outcome].‘‖ (Blatt v. Farley (1990) 226 Cal.App.3d 621, 629.)
In addition, aside from the fact plaintiff cites no statutory ground for overturning the
arbitration award, plaintiff fails to explain by reference to fact and law, other than through
conclusory statements, why the FINRA panel‘s ruling against her resulted in her being unable
to vindicate her nonwaivable statutory rights. Even without factual findings in the award, the
motion to dismiss was clear on plaintiff‘s failure to make a prima facie case on these
unwaivable claims, or to establish that UBS wrongfully put her money in stocks without her
knowledge. Plaintiff presents no developed argument on why the Panel‘s dismissal was
erroneous. ―‗The reviewing court is not required to make an independent, unassisted study of
25
the record in search of error or grounds to support the judgment. . . . [E]very brief should
contain a legal argument with citation of authorities on the points made. If none is furnished
on a particular point, the court may treat it as waived, and pass it without consideration.‘
[Citation.]‖ (McComber v. Wells (1999) 72 Cal.App.4th 512, 522–523.) In any event, our
review of the record indicates that in spite of her medical condition, plaintiff failed to present
evidence to establish that she did not know her monies were in stocks, or that her professed
ignorance of the contents of her UBS portfolio was only dispelled when she attempted to
move to Merrill Lynch and she was unable to liquidate her portfolio.
B. Dismissal Under FINRA Rules, rule 12504(b)
Plaintiff argues that FINRA Rules, rule 12504(b), the rule under which UBS moved to
dismiss the arbitration, is unconstitutionally vague and ambiguous because it does not provide
notice of the standards that must be met in order to avoid or defeat such a motion. We
disagree.
FINRA Rules, rule 12504(b) provides only that a motion to dismiss may be made.
However, the FINRA Arbitrator‘s Guide provides that the ―respondent may ask the Panel to
dismiss the claim on the grounds that the claimant failed to prove the allegations in the
statement of claim or failed to prove a right to recovery.‖ (FINRA 2013 Arbitrator‘s Guide at
p. 39.) The Guide also provides that the evidence shall be viewed in the light most favorable
to the claimant. (Ibid.) These standards track those applied to a motion for nonsuit under
section 581c, which also must be made on a noticed motion. Under section 581c, the test is
whether plaintiff has presented a prima facie case, namely, whether the evidence introduced is
sufficient to support a verdict for plaintiff on appeal. ―A nonsuit in a jury case . . . may be
granted only when disregarding conflicting evidence, giving to the plaintiffs‘ evidence all the
value to which it is legally entitled, and indulging every legitimate inference that may be
drawn from the evidence in the plaintiffs‘ favor, it can be said that there is no evidence to
support a jury verdict in their favor.‖ (Elmore v. American Motors Corp. (1969) 70 Cal.2d
578, 583; County of Kern v. Sparks (2007) 149 Cal.App.4th 11, 16.) Thus, FINRA Rules,
rule 12504(b) providing for a dismissal of an arbitration where the claimant has failed to make
26
out a prima facie entitlement to relief after the claimant‘s presentation of his or her case-in-
chief is not unconstitutionally vague.
C. Bias of Arbitrators
Plaintiff requests that if we reverse and remand, that we order a jury trial because she
cannot get a fair hearing in front of the FINRA arbitrators. She contends that after the
conclusion of the arbitration, she initiated an investigation into the FINRA arbitrators and
FINRA administration by the Securities Exchange Commission, the Civil Rights Division of
the Office of the United States Attorney, and the California Office of the Attorney General
and the Office of the Los Angeles County District Attorney. Due to these investigations, it
―stretch[es] credulity beyond the breaking point‖ to believe that the FINRA arbitrators would
be neutral.
―‗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.‘ [Citation.]‖ (Haworth v. Superior Court (2010) 50 Cal.4th 372, 389.) Section
1281.91, subdivision (d) provides that if any ground specified in section 170.1 for
disqualification of a judge, including on grounds of bias or prejudice toward a party,
section 170.1, subdivision (a)(6)(B) exists, ―a neutral arbitrator shall disqualify himself or
herself upon the demand of any party made before the conclusion of the arbitration
proceeding.‖ ―The standard for disqualification under subdivision (a)(6)(C) of section 170.1
is objective. [Citation.] Thus, an award may be vacated if ‗ . . . the record reveals facts which
might create an impression of possible bias in the eyes of the hypothetical, reasonable person.
[Citation.]‘ [Citation.] Actual bias is not required. [Citation.] ‗Where the average person
could well entertain doubt whether the [adjudicator] was impartial, appellate courts are not
required to speculate whether the bias was actual or merely apparent, or whether the result
would have been the same if the evidence had been impartially considered and the matter
dispassionately decided [citations], but should reverse the judgment and remand the matter to
a different [adjudicator] for a new [hearing] on all issues. [Citation.]‘ [Citation.]‖ (Roitz v.
Coldwell Banker Residential Brokerage Co. (1998) 62 Cal.App.4th 716, 723.) When
27
reviewing a charge of bias, we do not use the litigants‘ necessarily partisan views as the
applicable frame of reference. Rather, potential bias and prejudice must clearly be established
and ―statutes authorizing disqualification of a judge on grounds of bias must be applied with
restraint. [Citation.] ‗Bias or prejudice consists of a ―mental attitude or disposition of the
judge towards [or against] a party to the litigation. . . .‖‘ [Citation.] Neither strained relations
between a judge and an attorney for a party nor ‗[e]xpressions of opinion uttered by a judge, in
what he conceived to be a discharge of his official duties, are . . . evidence of bias or
prejudice. [Citation.]‘ [Citation.]‖ (Roitz, at p. 724.)
Here, aside from plaintiff‘s subjective views, the record reflects no bias or potential
bias. UBS presented evidence the arbitration panel made effort to accommodate plaintiff‘s
special needs, including providing her with a room in which to view the proceedings and
permitting her to present testimony through her declaration. Plaintiff‘s counsel‘s belief the
panel exhibited ―unctuous deference‖ to UBS‘s counsel is not sufficient to establish that the
Panel‘s ruling was made on an improper basis. Plaintiff fails to specify what evidence the
arbitrators stated they would not read, or how such evidence was essential to plaintiff‘s case;
rather, she makes conclusory allegations that fail to develop her claim of bias. Finally, to the
extent plaintiff complains about future events in front of another FINRA arbitration panel,
such argument is mooted by our affirmance of the judgment.
DISPOSITION
The judgment is affirmed. The parties are to bear their own costs on appeal.
NOT TO BE PUBLISHED.
JOHNSON, J.
We concur:
ROTHSCHILD, Acting P. J.
CHANEY, J.
28