Lawyers' Mutual Ins. Co. v. Law Offices of Diana Courteau CA2/5

Filed 9/12/14 Lawyers’ Mutual Ins. Co. v. Law Offices of Diana Courteau CA2/5
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication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 FIVE
LAWYERS’ MUTUAL INSURANCE B250158
COMPANY,
(Los Angeles County
Plaintiff and Respondent, Super. Ct. No. BS133945)
v.
LAW OFFICES OF DIANA COURTEAU
et al.,
Defendants and Appellants.
APPEAL from a judgment of the Superior Court of Los Angeles County, Michelle
R. Rosenblatt, Judge. Affirmed.
Courteau & Associates and Diana L. Courteau for Defendants and Appellants.
Musick, Peeler & Garrett, Wayne B. Littlefield, Lynn A. O’Leary and Cheryl A.
Orr for Plaintiff and Respondent.
I. INTRODUCTION
Defendants, Law Offices of Diana Courteau doing business as Courteau &
Associates, and Diana L. Courteau, appeal from a June 18, 2013 judgment. The
judgment was entered after the trial court granted the petition to confirm an arbitration
award filed by plaintiff, Lawyers’ Mutual Insurance Company. The trial court also
denied defendants’ petition to vacate the award. Defendants argue the arbitration award
should be vacated pursuant to Code of Civil Procedure1 sections 1281.9, subdivision (a)
and 1286.2, subdivision (a)(6). Defendants assert the neutral arbitrator failed to disclose
a relationship with plaintiff’s retired general counsel. They were members of 13
specialty panels of Alternative Resolution Centers, the alternative dispute resolution
provider. Defendants also contend the arbitration award should be vacated pursuant to
section 1286.2, subdivision (a)(5). Defendants argue their rights were substantially
prejudiced by the refusal to continue the arbitration hearing. We affirm the judgment.
II. BACKGROUND
A. Dispute Between The Parties
The following recitation of background matters are drawn from the petition and
arbitration award. On June 1, 2010, plaintiff issued a professional liability insurance
policy to defendants for the period June 3, 2010, to June 3, 2011. The policy’s limits of
liability were $250,000 for each claim and $750,000 in the aggregate, inclusive of claim
expenses after exhaustion of a $50,000 aggregate claim expense allowance. On July 26,
2010, defendants notified plaintiff in writing of a potential legal malpractice lawsuit by a
former client, AAA Flag & Banner Manufacturing Company, Inc. (AAA Flag). On July
30, 2010, plaintiff’s claims examiner, Birgit Sale, discussed the claim with Ms. Courteau.
1
Further statutory references are to the Code of Civil Procedure unless otherwise
indicated.
2
Ms. Sale sent a letter to Ms. Courteau stating the insurer had opened a claim file and
noting the policy limit was $250,000 per claim. On December 6, 2010, defendants
submitted an application to plaintiff seeking to increase the policy limits to $1 million per
claim and $3 million in the aggregate. On December 15, 2010, plaintiff issued amended
policy declarations with the increased policy limits. The amendment effective date was
December 15, 2010.
On February 11, 2011, after the policy with the increased policy limits was issued,
Ms. Courteau informed plaintiff that AAA Flag had filed a malpractice lawsuit. On July
29, 2011, Ms. Courteau sent plaintiff the complaint filed on January 28, 2011, in AAA
Flag & Banner Mfg. Co., Inc. v. Courteau, Los Angeles County Superior Court case
No. BC454049. In a March 3, 2011 letter to defendants, plaintiff agreed to provide a
defense, without reservation of rights, subject to a policy limit of $250,000 for the legal
malpractice claim. In an April 5, 2011 letter to plaintiff, defendants asserted the $1
million policy limit should apply to the malpractice claim. Defendants contended the
policy limits had been increased prior to the filing of the malpractice lawsuit. The
foregoing statement of facts is necessarily incomplete because defendants failed to
provide all of the exhibits attached to the petitions to compel arbitration and vacate the
award.
B. Nomination Of Arbitrators
On May 20, 2011, defendants demanded arbitration of the coverage issue. The
demand was made pursuant to the arbitration clause in the professional liability insurance
policy. The arbitration agreement provides for three arbitrators. Each party would name
a party arbitrator in writing within 10 days. The party arbitrators in turn would select the
third neutral arbitrator. On June 2, 2011, plaintiff designated Andrew Waxler as its party
arbitrator. On July 13, 2011, defendants selected Cynthia Bozzone as their party
arbitrator. The party arbitrators could not agree on the selection of the neutral arbitrator.
3
On September 29, 2011, plaintiff filed a petition to have the trial court nominate
the neutral arbitrator pursuant to section 1281.6. On December 8, 2011, plaintiff’s
petition was granted. The parties were ordered to submit a list of up to five candidates,
along with a description of their prior and existing relationship with each proposed
arbitrator. Then at a hearing, the trial court would designate five nominees to serve as the
third arbitrator from the lists submitted by the parties. If the parties could not agree on
the third arbitrator, the trial court would hold another hearing to select one of the five
nominees as the neutral arbitrator.
Defendants submitted a list of five proposed arbitrators to the trial court.
Defendants proposed Retired Court of Appeal Associate Justice Daniel A. Curry as the
first of five candidates. Plaintiff proposed five other candidates but did not propose
Retired Justice Curry. Defendants objected to all of plaintiff’s candidates including
Retired Court of Appeal Justice John Zebrowski and Superior Court Judge Robert W.
Thomas. Defendants objected even though they also had proposed Retired Justice
Zebrowski and Judge Thomas. The trial court nominated four of the five candidates
proposed by defendants, including Retired Justice Curry. Defendants objected to four of
the five proposed arbitrators. They stated they did not have a “firm objection” to Retired
Justice Curry. At a January 20, 2012 hearing, the trial court designated Retired Justice
Curry as the neutral arbitrator.
C. Arbitration
On January 11, 2013, defendants filed a motion seeking to rescind the appointment
of the arbitrators and to stay the arbitration. Defendants challenged the arbitration
panel’s decision to: curtail written discovery; limit defendants to one deposition; and
preclude defendants from calling any witnesses at the January 25, 2013 arbitration
hearing.
On January 25, 2013, the arbitration hearing proceeded before Retired Justice
Curry and plaintiff’s party arbitrator, Mr. Waxler, which was permitted under the
4
arbitration agreement. Defendants and their party arbitrator, Ms. Bozzone, did not attend
the arbitration hearing. Defendants also did not submit an arbitration brief.
On February 4, 2013, after the arbitration hearing was concluded, Ms. Bozzone,
defendants’ arbitrator, sent the following e-mail to Retired Justice Curry: “I
unequivocally informed the [Alternative Resolution Centers] ‘confirmation’ secretary
that I would be unable to appear, regardless of Ms. Courteau’s pending motion, because
my mother was in ICU (in fact, I was standing in the ICU when I took her call that
morning) - it’s a pity that she apparently failed to communicate anything to anyone.
However, I believe it was reasonable of me to presume that such information would have
been passed on to you, and that my communication with the [Alternative Resolution
Centers’] secretary reaffirmed my earlier [e-mail] to you advising that she was in the
hospital.” Retired Justice Curry responded on February 4, 2013, to Ms. Bozzone’s e-
mail: “I will not agree that we were informed before the Arbitration hearing that
[M]s. Bozzone was not appearing because she was unable to appear. [¶] She and
[M]s. Courteau decl[i]ned to appear. Neither requested a continuance. [¶] Ms. Courteau
did not file an Arbitration brief. They practice law out of the same office.”
On February 19, 2013, the arbitration panel issued its findings and award. The
arbitration award found in favor of plaintiff, “The Arbitration Panel finds that [plaintiff’s]
coverage obligation under the Policy with respect to the Malpractice Lawsuit is limited to
$250,000, inclusive of Claim Expenses after exhaustion of the $50,000 aggregate Claim
Expense Allowance.” Plaintiff was awarded arbitration costs of $13,410.
Ms. Bozzone, who did not attend the arbitration hearing, dissented from the award.
Ms. Bozzone’s dissent states in part: “I dissent from both the hearing going forward
without my participation and that of Ms. Courteau, and from the outcome set forth in the
proposed Final Award. [¶] The panel was made aware prior to the January 25 hearing
that I would not be in attendance at the hearing because there was pending before the
Superior Court a motion brought by Courteau concerning the scope of the arbitration
hearing and requesting a stay. Further, on or about the morning of January 23 I made
[Alternative Resolution Centers] aware (through its confirmation secretary) that I could
5
not attend the January 25 arbitration hearing for the additional reason that my elderly
mother was in ICU. The panel received copies of Courteau’s aforementioned motion
well before the January 25 hearing.”
D. Parties’ Petitions
On April 2, 2013, plaintiff filed a petition to confirm the arbitration award. On
April 24, 2013, defendants filed their petition to vacate the arbitration award and
opposition to plaintiff’s petition to confirm. Defendants argued the arbitration award
must be vacated under sections 1286.2, subdivision (a) and 1281.9, subdivision (a). The
basis of defendants’ position was that Retired Justice Curry failed to disclose a
relationship with Jerold S. Sherman. Both Retired Justice Curry and Mr. Sherman are
arbitrators affiliated with Alternative Resolution Centers and are listed together on 13
specialty panels. Mr. Sherman was plaintiff’s senior vice-president and general counsel
for 12 years before retiring in 2005. In addition, plaintiff’s attorney, Wayne B.
Littlefield, endorsed Mr. Sherman on a Web site profile maintained by Alternative
Resolution Centers. Ms. Courteau states in her declaration: “I would never have
accepted that the arbitration have taken place with Curry, at [Alternative Resolution
Centers], where [plaintiff’s] past Senior Vice President/General Counsel, Jerold Sherman,
was present, working for [Alternative Resolution Centers], and interacting with other
members at [Alternative Resolution Centers]. I absolutely believe Curry should have
disclosed to Courteau, Curry’s professional/personal relationship with Sherman. Curry
and [Alternative Resolution Centers] must have known that disclosing Sherman would
have caused Courteau to have reasonable doubts as to the impartiality of Curry,
especially where Curry shared 13 Specialty Panels with Sherman.”
Defendants also contended the arbitration award should be vacated under section
1286.2, subdivision (a)(5). Defendants argued their rights were substantially prejudiced
by Retired Justice Curry’s refusal to postpone the arbitration hearing. Defendants
asserted three days before the January 25 hearing, Ms. Bozzone informed Retired Justice
6
Curry and Mr. Waxler that her mother was in a hospital in the intensive care unit.
Ms. Bozzone’s declaration states: “My 88-year-old mother was a patient in the ICU of
Little Company of Mary Hospital between January 20 and January 25, 2013. I apprised
my co-arbitrators of this fact by [e-mail] on January 22, 2013. On or about January 23,
2013, while I was present in the ICU, I was called by an [Alternative Resolution Centers]
receptionist to confirm my attendance at the January 25, 2013 arbitration. I specifically
told the [Alternative Resolution Centers] individual who called me from [Alternative
Resolution Centers] that my mother was in the hospital’s ICU and that I would be unable
to attend the January 25 arbitration. Because I am an only child and my mother’s only
living relative, it was imperative that I be present and available at the hospital during this
period.”
On May 14, 2013, plaintiff filed an opposition to defendants’ petition to vacate
and reply brief in support of its petition to confirm the arbitration award. Plaintiff argued
Retired Justice Curry made all appropriate disclosures and there was no basis for
defendants’ suggestion he was biased against them. In addition, plaintiff argued
defendants and Ms. Bozzone never requested a continuance of the arbitration hearing.
Ms. Bozzone’s January 22, 2013 e-mail to Retired Justice Curry and Mr. Waxler states:
“Ms. Courteau has a motion pending before the Superior Court, a copy of which you
should both have received. I believe it would [be] entirely inappropriate to proceed with
the arbitration hearing in Ms. Courteau’s absence; moreover, as a party arbitrator retained
by Ms. Courteau, it would be inappropriate for me to appear at the January 25 hearing. I
do not believe Ms. Courteau intends to appear on January 25 due to the pending motion.
However, you may wish to confirm this. [¶] I should have communicated this position
by this weekend, and I am sorry for the delay, but my mother has been in ICU at Little
Company of Mary since Saturday Night and my mind has been elsewhere.”
As part of the opposition to the petition to vacate, plaintiff submitted the January
20, 2012 disclosure letter from Alternative Resolution Centers on behalf of Retired
Justice Curry. The disclosure letter disclosed one prior matter each with plaintiff and
defendants. Additionally, the disclosure letter states: “[Alternative Resolution Centers]
7
is additionally requesting the judge to search his/her records to ascertain whether the
attorneys or parties have compensated the judge directly during the past sixty months in
any matter heard outside this office or in an independent forum. [Alternative Resolution
Centers] is further asking said judge to forward any supplemental disclosures to your
offices. [¶] To further comply with [Code of Civil Procedure] section 1281.85 as
adopted by the Judicial Council of California and effective as of July 1, 2002 [Alternative
Resolution Centers] makes the following disclosure: If selected as a neutral arbitrator [,]
the Arbitrator selected in the instance matter will entertain and accept offers of permitted
employment or new professional relationships from parties, attorneys, or law firms
involved in a case while this case is pending. [¶] [Alternative Resolution Centers] will
endeavor to inquire of all neutrals if there are relationships with any of the attorneys,
parties or carriers, etc. that would impair their ability to decide the matter in a completely
fair and impartial way. [Alternative Resolution Centers] is additionally requesting all
attorneys to the instant action advise this office if there are any disclosures they feel
might affect the impartiality of the neutral.”
Plaintiff also submitted the declaration of Retired Justice Curry in opposition to
defendants’ petition to vacate the arbitration award. Retired Justice Curry states: “I have
never met and do not know Jerold Sherman, Esq. Prior to Ms. Courteau mentioning
Mr. Sherman’s name, I was unaware Mr. Sherman was affiliated with [Alternative
Resolution Centers] or that Mr. Sherman had served as the general counsel of [plaintiff].
Such information would not have been [] relevant to my role as the third neutral arbitrator
in the coverage arbitration between [plaintiff] and Ms. Courteau, and would not have
impacted my impartiality. [¶] I have no interest in and derive no financial benefit from
any matter handled by Mr. Sherman, and Mr. Sherman has no interest in and derives no
financial benefit from any matter handled by me. I have no ownership or financial
interest in [Alternative Resolution Centers]. [¶] Per [Alternative Resolution Centers’]
regular practice, the disclosures made at the inception of the arbitration stated that I
would entertain and accept offers of continued employment from the parties or their
counsel. While the arbitration was pending, I was retained as mediator in one matter in
8
which Ms. Courteau was counsel and two matters in which Musick, Peeler & Garrett was
counsel. [¶] Neither Ms. Courteau nor her appointed party arbitrator, Cynthia Bozzone,
requested a postponement of the Arbitration scheduled for January 25, 2013 due to
Ms. Bozzone’s mother’s illness. Ms. Bozzone mentioned that her mother had been in the
hospital only after she and Ms. Courteau had indicated that they did not plan to attend the
Arbitration.”
E. Trial Court Ruling
On May 24, 2013, the trial court granted plaintiff’s petition to confirm and denied
defendants’ petition to vacate the arbitration award. The trial court adopted its lengthy
tentative ruling as the final order after oral argument. The trial court rejected defendants’
argument that the arbitration award should be vacated because Retired Justice Curry
failed to disclose an alleged significant personal and professional relationship with
Mr. Sherman. The trial court found defendants presented no evidence that Retired Justice
Curry had a personal relationship with Mr. Sherman. The trial court ruled Retired Justice
Curry was not required to disclose that Alternative Resolution Centers employed
someone who was previously an employee of plaintiff. The trial court ruled: “[T]he
facts are that Sherman and [Retired Justice Curry] work at [Alternative Resolution
Centers] and are on some of the same specialty panels. There is no evidence that [Retired
Justice Curry] had any type of a relationship with Sherman either when Sherman worked
for [plaintiff] or since he has been at [Alternative Resolution Centers]. There is no
evidence that [Retired Justice Curry] knew Sherman. There is no evidence that even if he
knew Sherman in a professional capacity that he would know he was formerly with
[plaintiff] or that he had a relationship of some sort with Littlefield, an attorney at
Musick, Peeler (but not the attorney at the Arbitration.)”
In addition, the trial court denied defendants’ petition to vacate the arbitration
award under section 1286.2, subdivision (a)(5). The trial court found defendants and
their party arbitrator never requested a continuance of the arbitration hearing. The trial
9
court stated: “A later claim that the failure to attend is due to Bozzone’s family
emergency is disingenuous. The Court does not question the fact that Bozzone had a
family emergency for which a reasonable continuance could have been granted had that
request been made. However, there was no reason for the neutral to postpone the
arbitration without a request from Bozzone following the January 22 [e-mail] in which
Bozzone stated that she would not be attending due to Courteau not attending. Despite a
discrepancy in the evidence whether Bozzone spoke to a secretary the day before the
arbitration, there is no evidence whatsoever that Bozzone or Courteau requested from
[Retired Justice Curry] a continuance of the arbitration. Given that the arbitration
provision of the policy signed by the parties reflects that a decision and award could be
rendered by two of the three arbitrators, the decision of Courteau’s party arbitrator not to
[formally] request a postponement and the decision of Courteau herself not to attend the
arbitration and not to request a postponement was risky. Nevertheless it was the risk that
Courteau took. The Court finds that this is not a situation in which the party arbitrator
sought a postponement of the arbitration due to her family emergency, which would have
warranted a postponement. Instead, it was a decision akin to a boycott of the
proceedings.”
III. DISCUSSION
A. Arbitrator’s Disclosure Obligations
Section 1286.2, subdivision (a)(6) states: “Subject to Section 1286.4, the court
shall vacate the award if the court determines any of the following: . . . [¶] (6) An
arbitrator making the award either: (A) failed to disclose within the time required for
disclosure a ground for disqualification of which the arbitrator was then aware; or (B)
was subject to disqualification upon grounds specified in Section 1281.91 but failed upon
receipt of timely demand to disqualify himself or herself as required by that
provision. . . .” Section 1281.9, subdivision (a) provides, “In any arbitration pursuant to
an arbitration agreement, when a person is to serve as a neutral arbitrator, the proposed
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neutral arbitrator shall 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 . . . .”
In Haworth v. Superior Court (2010) 50 Cal.4th 372, 381 (Haworth), our Supreme
Court explained: “The applicable statute and standards enumerate specific matters that
must be disclosed. The arbitrator must disclose specified relationships between the
arbitrator and the parties to the arbitration, including involvement in prior arbitrations, an
attorney-client relationship with any [party or] attorney involved in the arbitration, and
any significant personal or professional relationship with a party or an attorney involved
in the arbitration. (§ 1281.9, subd. (a)(3)-(6).) The arbitrator also must disclose ‘any
ground specified in Section 170.1 for disqualification of a judge,’ as well as ‘matters
required to be disclosed by the ethics standards for neutral arbitrators adopted by the
Judicial Council.’ (§ 1281.9, subd. (a)(1)-(2); see Cal. Rules of Court, Ethics Stds. for
Neutral Arbitrators in Contractual Arbitration (Ethics Standards).) 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.’ (Ethics Stds., com. to std. 7.)
Specific matters that must be discloses include, for example, the arbitrator’s financial
interest in a party or the subject of the arbitration, the arbitrator’s knowledge of disputed
facts relevant to the arbitration, and the arbitrator’s ‘membership in any organization that
practices invidious discrimination on the basis of race, sex, religion, national origin, or
sexual orientation.’ (Ethics Stds., std. 7(d)(13); see id., std. 7(d)(9), (10), (12).)”
(Accord, Nemecek & Cole v. Horn (2012) 208 Cal.App.4th 641, 646 (Nemecek).)
The disclosure requirements are intended only to ensure the arbitrator’s
impartiality. (Haworth, supra, 50 Cal.4th at p. 393; Nemecek, supra, 208 Cal.App.4th at
p. 646.) Our Supreme Court stated, “They are not intended to mandate disclosure of all
matters a party might wish to consider in deciding whether to oppose or accept the
selection of an arbitrator.” (Haworth, supra, 50 Cal.4th at p. 393; Nemecek, supra, 208
Cal.App.4th at p. 646.) An arbitrator’s alleged failure to disclose is a mixed question of
11
law and fact that is subject to de novo review. (Haworth, supra, 50 Cal.4th at pp. 384-
386; Mt. Holyoke Homes, L.P. v. Jeffer Mangels Butler & Mitchell, LLP (2013) 219
Cal.App.4th 1299, 1312.)
Defendants contend the trial court erred by not vacating the arbitration award
under section 1286.2, subdivision (a)(6). Defendants argue: under section 1281.9,
subdivision (a), Alternative Resolution Centers should have disclosed that it employed
Mr. Sherman, plaintiff’s retired senior vice-president and general counsel; Mr. Sherman
shared 13 specialty panels with Retired Justice Curry; Mr. Littlefield, plaintiff’s coverage
counsel, knew Mr. Sherman; this occurred when Mr. Sherman was the plaintiff’s general
counsel; Mr. Littlefield is directly involved in the arbitration proceedings; and Mr.
Littlefield endorsed Mr. Sherman in Alternative Resolution Centers’ promotional
materials.
Relying on Gray v. Chui (2013) 212 Cal.App.4th 1355, 1362-1363 (Gray),
defendants argue Alternative Resolution Centers and Retired Justice Curry were required
to disclose their relationship with Mr. Sherman. In addition, defendants argue,
Alternative Resolution Centers and Retired Justice Curry should have disclosed
Mr. Sherman’s relationship with Mr. Littlefield. Before explaining why defendants’
arguments are without merit, we set forth the facts in Gray in some detail.
In Gray, the late William Ginsburg, counsel for a doctor, affiliated with a dispute
resolution provider organization, ADR Services, Inc. Mr. Ginsburg continued to
represent the doctor throughout all of the arbitration proceedings conducted before ADR
Services, Inc. Mr. Ginsburg affiliated with ADR Services, Inc. after arbitration
proceedings commenced against the doctor but before the arbitration hearing. (Gray,
supra, 212 Cal.App.4th at pp. 1360-1361.) Mr. Ginsburg began providing arbitration
services through ADR Services, Inc. in March 2010 but, as noted, continued to serve as
counsel for the doctor in the arbitration matter. (Id., at pp. 1359-1360.) The neutral
arbitrator, Retired Judge Alan Haber, was affiliated with ADR Services, Inc., which
provided arbitration services to the parties. (Ibid.) In January and April 2010, Retired
Judge Haber sent the parties disclosure statements indicating he had no significant
12
personal or professional relationship with any of the parties or litigants. (Id. at p. 1360.)
In February 2011, Retired Judge Haber issued a binding arbitration award for defendants.
(Ibid.) Plaintiff filed a petition to vacate the arbitration award based on Retired Judge
Haber’s failure to disclose that Mr. Ginsburg was an employee of ADR Services, Inc.
(Ibid.)
Retired Judge Haber submitted a declaration which denied the existence of any
social relationship with Mr. Ginsburg. (Gray, supra, 212 Cal.App.4th at p. 1361.)
Retired Judge Haber learned Mr. Ginsburg would be working with ADR Services, Inc. in
the middle of 2010. (Ibid.) At one point in the opinion, the Court of Appeal described
the interactions between Retired Judge Haber and Mr. Ginsburg: “Judge Haber
occasionally saw Ginsburg at the Century City office of ADR, when they exchanged
greetings, with little or no conversation. On one occasion before the arbitration,
Ginsburg told Judge Haber that he would ‘participate with Doctor Chiu’ in the
arbitration. Judge Haber ‘made certain that [he did] not discuss any matters involving the
Gray’ case with Ginsburg.” (Id. at p. 1361.)
The Court of Appeal held the arbitration award should have been vacated based on
Retired Judge Haber’s failure to disclose Mr. Ginsburg’s ADR, Services, Inc.
membership. (Gray, supra, 212 Cal.App.4th at pp. 1365-1366.) The Court of Appeal
held Retired Judge Haber did not comply with Standard 8 of the Ethics Standards for
Neutral Arbitrators in Contractual Arbitration (Ethics Standard). The Court of Appeal
held under Ethics Standard 8, Retired Judge Haber was required to disclose that
Mr. Ginsburg, a lawyer representing a party in the arbitration, was a member of ADR
Services, Inc. (Id. at p. 1364.)
Gray is distinguishable from the present case. In Gray, the Court of Appeal held
Retired Judge Haber failed to comply with Ethics Standard 8. Ethics Standard 8,
subdivision (b)(1)(A) provides in relevant part: “‘[I]n a consumer arbitration . . . in
which a [dispute resolution provider organization] is coordinating, administering, or
providing the arbitration services, a person who is nominated or appointed as an
arbitrator . . . must disclose . . . : [¶] (1) Relationships between the [dispute resolution
13
provider organization] and party or lawyer in the arbitration [¶] Any significant past,
present, or currently expected financial or professional relationship or affiliation between
the administering [dispute resolution provider organization] and a party or lawyer in the
arbitration. Information that must be disclosed under this standard includes: [¶] (A) A
party, a lawyer in the arbitration, or a law firm in which a lawyer in the arbitration is
currently associated is a member of the [dispute resolution provider organization].”
(Gray, supra, 212 Cal.App.4th at p. 1363.)
Nothing in section 1281.9, subdivision (a) or the Ethics Standards required Retired
Justice Curry in 2012 and 2013 to disclose that Mr. Sherman is an arbitrator affiliated
with Alternative Resolution Centers. Mr. Sherman stopped working for plaintiff in 2005.
Mr. Sherman is not a party or lawyer involved in the arbitration. Mr. Sherman is
endorsed by plaintiff’s coverage counsel, Mr. Littlefield. However, there is no evidence
Mr. Sherman, who had not worked for plaintiff since 2005, had any involvement in the
arbitration proceedings. It is undisputed Retired Justice Curry, the neutral arbitrator,
never knew or had even met Mr. Sherman. Retired Justice Curry was unaware
Mr. Sherman was affiliated with Alternative Resolution Centers. Retired Justice Curry
had no knowledge Mr. Sherman had served as plaintiff’s general counsel. This issue was
first brought to Retired Justice Curry’s attention during the enforcement proceedings in
the trial court. Retired Justice Curry had no ownership or financial interest in Alternative
Resolution Centers and derived no financial benefit from any matter handled by
Mr. Sherman.
Defendants argue the failure to disclose the relationship with Mr. Sherman could
cause a person aware of the facts to reasonably entertain a doubt that Retired Justice
Curry would be impartial. Determination as to a neutral arbitrator’s impartiality is based
on an objective reasonable person standard. Our Supreme Court explained: “[T]he
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.’” [Citations.] ‘The “reasonable person” is not
someone who is “hypersensitive or unduly suspicious,” but rather is a “well-informed,
14
thoughtful observer.”’ [Citations.] ‘[T]he partisan litigant emotionally involved in the
controversy underlying the lawsuit is not the disinterested objective observer 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.” [Citation.]’” (Haworth, supra, 50 Cal.4th at p. 389; see Wechsler v.
Superior Court (2014) 224 Cal.App.4th 384, 389.) Here, an objective observer would not
find Retired Justice Curry was biased for or against a party for a particular reason.
Retired Justice Curry had no personal or professional relationship with Mr. Sherman who
was not involved in the arbitration. Retired Justice Curry and Mr. Sherman had never
met or communicated in any way. And Mr. Sherman stopped working for plaintiff over
one-half a decade before the dispute between the parties developed. This is an entirely
different situation than was present in Gray. Neither Retired Justice Curry nor
Alternative Resolution Centers was required to disclose that Mr. Sherman is a member of
that dispute resolution provider organization. (See Haworth, supra, 50 Cal.4th at p. 391;
Mt. Holyoke Homes, L.P. v. Jeff Mangels Butler & Mitchell, LLP, supra, 219 Cal.App.4th
at p. 1311.)
B. Postponement Of Arbitration Hearing
Section 1286.2, subdivision (a)(5) states: “Subject to Section 1286.4, the court
shall vacate the award if the court determines any of the following: . . . [¶] (5) The
rights of the party were substantially prejudiced by the refusal of the arbitrators to
postpone the hearing upon sufficient cause being shown therefor or by the refusal of the
arbitrators to hear evidence material to the controversy or by other conduct of the
arbitrators contrary to the provisions of this title.” Section 1286.2, subdivision (a)(5) is a
safety valve that permits a court to intercede when an arbitrator has prevented a party
from fairly presenting its case. (SWAB Financial, LLC v. E*Trade Securities, LLC
(2007) 150 Cal.App.4th 1181, 1196 (SWAB Financial, LLC); Hall v. Superior Court
15
(1993) 18 Cal.App.4th 427, 439.) Here defendants must prove the arbitrators abused
their discretion in refusing to continue the arbitration and that prejudice resulted. (SWAB
Financial, LLC, supra, 150 Cal.App.4th at p. 1198.) We review the trial court’s order de
novo where the facts are undisputed. (SWAB Financial, LLC, supra, 150 Cal.App.4th at
p. 1196; Malek v. Blue Cross of California (2004) 121 Cal.App.4th 44, 55.) To the extent
the trial court’s ruling rests upon a determination of disputed facts, we apply the
substantial evidence test. (SWAB Financial, LLC, supra, 150 Cal.App.4th at p. 1196;
Malek v. Blue Cross of California, supra, 121 Cal.App.4th 44 at pp. 55-56.)
Defendants argue the trial court erred by not vacating the arbitration award under
section 1286.2, subdivision (a)(5). Defendants contend: their rights were substantially
prejudiced by Retired Justice Curry’s refusal to postpone the arbitration hearing; the trial
court erred in finding the arbitration hearing could only be postponed by written request;
they did not have to request for a continuance in writing because Retired Justice Curry
had decreed that the arbitration would be informal; and the trial court erred by not finding
there was sufficient cause for postponing the arbitration hearing.
The trial court did not err by denying defendants’ petition to vacate the arbitration
award under section 1286.2, subdivision (a)(5). Defendants and Ms. Bozzone did not
request a postponement of the arbitration hearing. As noted, Ms. Bozzone’s January 22,
2013 e-mail to Retired Justice Curry and Mr. Waxler states: “Ms. Courteau has a motion
pending before the Superior Court, a copy of which you should both have received. I
believe it would [be] entirely inappropriate to proceed with the arbitration hearing in
Ms. Courteau’s absence; moreover, as a party arbitrator retained by Ms. Courteau, it
would be inappropriate for me to appear at the January 25 hearing. I do not believe
Ms. Courteau intends to appear on January 25 due to the pending motion. However, you
may wish to confirm this. [¶] I should have communicated this position by this
weekend, and I am sorry for the delay, but my mother has been in ICU at Little Company
of Mary since Saturday Night and my mind has been elsewhere.” Ms. Bozzone’s January
22, 2013 e-mail indicates defendants and she did not intend to attend the arbitration
hearing. However, as previously explained, Retired Justice Curry stated: “Neither
16
Ms. Courteau nor her appointed party arbitrator, Cynthia Bozzone, requested a
postponement of the Arbitration scheduled for January 25, 2013 due to Ms. Bozzone’s
mother’s illness. Ms. Bozzone mentioned that her mother was in the hospital only after
she and Ms. Courteau had indicated they did not plan to attend the Arbitration.”
No doubt, Ms. Bozzone had good cause for postponement of the hearing.
Ms. Bozzone’s mother was hospitalized. But neither defendants nor Ms. Bozzone
requested a continuance of the hearing from Retired Justice Curry. There is no merit to
defendants’ argument the trial court erred in requiring that their continuance request be in
writing. There is no evidence defendants made any oral or written request. There is no
evidence defendants ever contacted the arbitrators and requested the arbitration hearing
be postponed. It is impossible for an arbitrator to abuse discretion when she or he is not
asked to make the challenged decision. Moreover, defendants did not appear at the
arbitration hearing to request a postponement. Retired Justice Curry did not abuse his
discretion by going forward with the arbitration hearing because defendants and
Ms. Bozzone never requested a postponement. The trial court properluy ruled no abuse
of discretion occurred.
Two brief final comments are in order. First, defendants have failed to
demonstrate they were prejudiced because the arbitration hearing was not continued.
(Manson v. Wilcox (1903) 140 Cal. 206, 208-209; SWAB Financial, LLC v. E*Trade
Securities, LLC, supra, 150 Cal.App.4th at p. 1198; Cothron v. Interinsurance Exchange
(1980) 103 Cal.App.3d 853, 860-861.) Defendants have failed to demonstrate they had
any chance of prevailing in the arbitration had there been a continuance. Second, we
need not address the question of whether all of defendants’ claims have been forfeited
because they chose not to appear at the arbitration. (See A/S Ganger Rolf v. Zeeland
Transportation, Ltd. (S.D.N.Y. 1961) 191 F.Supp. 359, 363; Comerica Bank v. Howsam
(2012) 208 Cal.App.4th 790, 826.)
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IV. DISPOSITION
The judgment is affirmed. Plaintiff, Lawyers’ Mutual Insurance Company, shall
recover its appeal costs from defendants, Law Offices of Diana Courteau, doing business
as Courteau & Associates, and Diana L. Courteau.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
TURNER, P. J.
We concur:
KRIEGLER, J.
MINK, J.*
*
Retired judge of the Los Angeles Superior Court, assigned by the Chief Justice
pursuant to article VI, section 6 of the California Constitution.
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