Roussos v. Roussos

Filed 2/16/21
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
HARRY ROUSSOS et al., B293358
Plaintiffs and (Los Angeles County
Respondents, Super. Ct. No. BS170767)
v.
THEODOSIOS ROUSSOS,
Defendant and Appellant.
APPEAL from a judgment of the Superior Court of Los
Angeles County, Gregory W. Alarcon, Judge. Reversed and
remanded with directions.
Nossaman, Jennifer L. Meeker and Maya G. Hamouie for
Defendant and Appellant.
RMO, Scott E. Rahn, Sean D. Muntz and David G. Greco
for Theocharis Roussos as Amicus Curiae on behalf of Defendant
and Appellant.
Kesselman Brantly Stockinger, S.V. Stuart Johnson and
Ryan Davis for Plaintiffs and Respondents.
Theodosios (Ted) Roussos appeals from a judgment
confirming an arbitration award removing the managing director
of two corporations, owned by Ted and his brother Harry Roussos
as cotrustees of two trusts, and appointing the director proposed
by Harry.1 Ted contends the arbitration award must be vacated
because of the arbitrator’s refusal to recuse himself after Ted
timely served his disqualification notice. Harry contends Ted
waived his right to object to the arbitrator because five years
earlier the parties had agreed the specified arbitrator would have
binding authority to arbitrate all issues. However, the arbitrator
was still a “proposed neutral arbitrator” for the present
arbitration under Code of Civil Procedure sections 1281.9 and
1281.91,2 and under section 1281.91, subdivision (b)(1), the
arbitrator was required to disqualify himself upon Ted’s timely
service of a notice of disqualification. We conclude the parties
cannot contract away California’s statutory protections for
parties to an arbitration, including mandatory disqualification of
a proposed arbitrator upon a timely demand. We reverse and
remand.3
1 Because the Roussos family members share the same last
name, we refer to them by their first names to avoid confusion.
2 Further statutory references are to the Code of Civil
Procedure.
3 Ted also contends on appeal the arbitration agreement,
entered in 2012, did not cover the parties’ 2016 disputes; the
signatures on the arbitration agreement were not properly
authenticated; and Harry and his wife Christine Roussos failed to
join indispensable parties. Because we reverse based on the
required disqualification of the arbitrator, we do not address the
other issues.
2
FACTUAL AND PROCEDURAL BACKGROUND
A. The Trusts and Business Entities
Harry and Ted are brothers and cotrustees of the S.M.B.
Investor Associates Irrevocable Trust (SMB Trust) and the O.F.
Management Irrevocable Trust (OF Trust). As cotrustees of the
two trusts, Harry and Ted had management roles and financial
interests in multiple interrelated companies (the Roussos
entities). As cotrustees of the SMB Trust, Harry and Ted held
ownership interests in Dazum Limited (Dazum), Velnor Overseas
Ltd. (Velnor), S.M.B. Management, Inc. (SMB Management), and
S.M.B. Investor Associates, L.P. (SMB LP). As cotrustees of the
OF Trust, they held ownership interests in Fenbe, Ltd. (Fenbe),
Kelroad International, Inc. (Kelroad), Liro, Inc. (Liro), and O.F.
Enterprises Ltd., L.P. (OF LP). In 2017 OF LP owned two
apartment buildings on Abbot Kinney Boulevard and Paloma
Avenue in Venice and a third apartment building in Colton. Liro
owned a vacant lot on Abbot Kinney Boulevard and an apartment
building on Ocean Front Walk in Venice.
B. Harry and Christine’s Demand for Arbitration and Motion
To Compel Arbitration
On August 31, 2017 Harry and his wife Christine Roussos
demanded arbitration pursuant to a December 2012 arbitration
agreement signed by Christine, Harry (individually and on behalf
of OF LP and SMB LP), Ted (individually and on behalf of OF LP
and SMB LP), and two individuals signing on behalf of Liro,
Kelroad, Fenbe, Dazum, Velnor, and SMB Management. The
arbitration agreement provided the parties “stipulate and agree
not to contest that Judge John P. Shook will arbitrate all issues
3
with binding authority” over them. In their arbitration demand,
Harry and Christine requested the appointment of a single
director for Velnor, Dazum, Kelroad and Fenbe; a stay of any
distribution of cash or sale of assets held by Liro, OF LP, and
SMB Management; and an order requiring Sarah Daly, the
director of Liro and SMB Management, to keep Harry, Ted, and
other Roussos entities informed as to the business operations of
Liro, SMB Management, SMB LP, and OF LP. According to the
demand, the arbitrator (Judge Shook) had previously appointed
Daly to serve as the director of SMB Management and Liro, but
he did not appoint a director for Velnor, Dazum, Kelroad, or
Fenbe. The demand also alleged Daly was acting inappropriately
with respect to her role as director of SMB Management and Liro.
Harry and Christine’s demand for arbitration followed a prior
arbitration in which the arbitrator ordered partition by sale of six
properties held by OF LP, SMB LP, and Liro (the first
arbitration).4
On September 8, 2017 Harry and Christine filed a petition
to compel arbitration naming Ted, SMB LP, OF LP, SMB
Management, and Liro as respondents after they objected to the
arbitrator’s jurisdiction to resolve the dispute.5 On October 6
Harry and Christine filed a motion to compel arbitration, which
the trial court granted on March 5, 2018. The trial court ordered
the parties to “arbitrate the controversies between them,
4 The first arbitration is the subject of Ted’s appeal in
Roussos v. Roussos (Feb. 2, 2021, B293356) (nonpub. opn.).
5 Harry and Christine later dismissed SMB LP and OF LP
from the petition.
4
including the entire Petition scope, in accordance with their
agreement to arbitrate.”
C. The Arbitrator’s Disclosure and Ted’s Notice of
Disqualification
On March 13, 2018 Judge Shook served on the parties a
disclosure report that disclosed two matters in which he had
served as an arbitrator: (1) a March 2016 matter involving Ted,
Harry, Christine, and the Roussos entities; and (2) the first
arbitration involving Harry, Christine, and Ted resulting in a
September 2016 arbitration award. The cover letter to counsel
stated, “[D]isclosures are being made for the prior sixty months
pursuant to Code of Civil Procedure Sections 1281.6 and 1281.9.”
The disclosure also provided, “To further comply with CCP
section 1281.85 as adopted by the Judicial Council of California
and effective as of July 1, 2002 ARC [(Alternative Resolution
Centers)] makes the following disclosure: If selected as a neutral
arbitrator the Arbitrator selected in the instant 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. ARC will entertain
offers of permitted employment or new professional
relationships—for example, as a neutral arbitrator or mediator—
from parties or attorneys involved in this case while this case is
pending.” The letter concluded, “[I]t is the position of ARC that
the foregoing constitutes a complete and thorough disclosure.
Proceeding to hearing in this matter shall be deemed
acknowledgment of said disclosures and your acceptance of the
arbitrator.”
5
On March 22, 2018 Ted served a notice of disqualification
of Judge Shook as the arbitrator based on the disclosure report
pursuant to section 1281.91, subdivision (b). Ted asserted the
arbitrator’s prior rulings and awards, as well as his relationships
with Ted’s prior attorney and Harry and Christine’s attorney,
could affect the arbitrator’s neutrality. The arbitrator denied
Ted’s disqualification request.
D. The Arbitration Award
As part of the 2018 arbitration, Harry and Christine moved
to remove and replace Daly as the director of SMB Management
and Liro. The arbitrator had appointed Daly on June 6, 2016 to
serve as director of SMB Management and Liro upon Ted’s
nomination, but at the time of the 2018 arbitration both Harry
and Ted sought her removal and replacement. After a hearing,
on March 30, 2018 the arbitrator revoked his prior appointment
of Daly and removed her from her position as director of SMB
Management and Liro. The arbitrator set an evidentiary hearing
to consider Harry’s and Ted’s nominations of individuals to serve
as the director of the Roussos entities.
After a hearing, on May 18, 2018 the arbitrator in his final
amended award appointed David Kaplan, Harry’s choice of
director, as the acting director for all of the Roussos entities.
E. The Trial Court’s Confirmation of the Arbitration Award
On June 6, 2018 Harry and Christine filed a petition and
motion to confirm the amended arbitration award. On June 18
Ted filed an answer to the petition, requesting the trial court
vacate the award. Ted also filed an opposition to the motion to
confirm the amended arbitration award. Ted contended the
6
award must be vacated because the arbitrator failed to disqualify
himself upon timely receipt of Ted’s notice of disqualification.
Ted also argued Harry and Christine had not authenticated the
arbitration agreement because Harry’s declaration did not aver
he saw an authorized agent of the Roussos entities sign the
arbitration agreement; the arbitration agreement only covered
the issues in dispute in 2012, not the present dispute; the
arbitrator exceeded his powers by issuing an award that went
beyond the arbitration demand (removal of Daly); and the award
was void because the two trusts were not joined as indispensable
parties.
On August 1, 2018 the trial court granted Harry and
Christine’s motion to confirm the amended arbitration award.
On August 31 the court entered judgment confirming the
amended arbitration award and ordering Ted to pay Harry and
Christine $51,289.85 in attorneys’ fees incurred to confirm the
award. Ted timely appealed.
DISCUSSION
A. The Disclosure and Disqualification Requirements of the
Arbitration Act and Ethics Standards for Neutral
Arbitrators
“The California Arbitration Act (§ 1280 et seq.) ‘represents
a comprehensive statutory scheme regulating private arbitration
in this state.’” (Haworth v. Superior Court (2010) 50 Cal.4th 372,
380; accord, Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9.)
“In 2001 the Legislature ‘significantly revised the disclosure
requirements and procedures for disqualifying arbitrators
pursuant to private or contractual arbitration’ and directed the
7
Judicial Council to adopt ethical standards for neutral
arbitrators. [Citations.] ‘The 2001 legislation arose out of a
perceived lack of rigorous ethical standards in the private
arbitration industry. Cosponsored by the Governor and the
Judicial Council, the bill sought to provide “basic measures of
consumer protection with respect to private arbitration, such as
minimum ethical standards and remedies for the arbitrator’s
failure to comply with existing disclosure requirements.”’”
(Honeycutt v. JP Morgan Chase Bank, N.A. (2018) 25 Cal.App.5th
909, 921, fn. omitted (Honeycutt); accord, Azteca Construction,
Inc. v. ADR Consulting, Inc. (2004) 121 Cal.App.4th 1156, 1162,
1165 (Azteca).)
“The statutory scheme, in seeking to ensure that a neutral
arbitrator serves as an impartial decision maker, requires the
arbitrator to disclose to the parties any grounds for
disqualification. Within 10 days of receiving notice of his or her
nomination to serve as a neutral arbitrator, the proposed
arbitrator is required, generally, to ‘disclose all matters that
could cause a person aware of the facts to reasonably entertain a
doubt that the proposed neutral arbitrator would be able to be
impartial.’ (§ 1281.9, subd. (a).)”6 (Haworth v. Superior Court,
6 Section 1281.9, subdivision (a), provides in pertinent part,
“In any arbitration pursuant to an arbitration agreement, when a
person is to serve as a neutral arbitrator, the proposed 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,
including all of the following: [¶] (1) The existence of any
ground specified in Section 170.1 for disqualification of a
judge. . . . [¶] (2) Any matters required to be disclosed by the
8
supra, 50 Cal.4th at p. 381, fn. omitted; accord, Gray v. Chiu
(2013) 212 Cal.App.4th 1355, 1361.)
Section 1281.91, subdivision (b), provides, “(1) If the
proposed neutral arbitrator complies with Section 1281.9, the
proposed neutral arbitrator shall be disqualified on the basis of
the disclosure statement after any party entitled to receive the
disclosure serves a notice of disqualification within 15 calendar
days after service of the disclosure statement. [¶] (2) A party
shall have the right to disqualify one court-appointed arbitrator
without cause in any single arbitration, and may petition the
court to disqualify a subsequent appointee only upon a showing of
cause.” As the Court of Appeal explained in Azteca, supra,
121 Cal.App.4th at page 1163, the disqualification provision
“confers on both parties the unqualified right to remove a
proposed arbitrator based on any disclosure required by law
which could affect his or her neutrality. [Citation.] There is no
good faith or good cause requirement for the exercise of this right,
nor is there a limit on the number of proposed neutrals who may
be disqualified in this manner. [Citation.] As long as the
objection is based on a required disclosure, a party’s right to
remove the proposed neutral by giving timely notice is absolute.”
(Fn. omitted; accord, Luce, Forward, Hamilton & Scripps, LLP v.
ethics standards for neutral arbitrators adopted by the Judicial
Council pursuant to this chapter. . . . [¶] . . . [¶] (4) The names
of the parties to all prior or pending noncollective bargaining
cases involving any party to the arbitration or lawyer for a party
for which the proposed neutral arbitrator served or is serving as
neutral arbitrator, and the results of each case arbitrated to
conclusion, including the date of the arbitration award,
identification of the prevailing party, the names of the parties’
attorneys and the amount of monetary damages awarded, if any.”
9
Koch (2008) 162 Cal.App.4th 720, 729 (Luce).) “[A party’s]
demand for disqualification of a proposed neutral arbitrator
therefore ha[s] the same practical effect as a timely peremptory
challenge to a superior court judge under section 170.6—
disqualification is automatic, the disqualified judge loses
jurisdiction over the case and any subsequent orders or
judgments made by him or her are void.” (Azteca, at pp. 1169-
1170.) However, “disqualification based on a disclosure is an
absolute right only when the disclosure is legally required.”
(Luce, at p. 735.)
Neutral arbitrators (proposed or serving) are also required
to comply with the ethics standards for neutral arbitrators
adopted by the Judicial Council. (§ 1281.85, subdivision (a); see
Cal. Ethics Standards for Neutral Arbitrators in Contractual
Arbitration (Ethics Standards).) Further, section 1281.85,
subdivision (c), provides that “[t]he ethics requirements and
standards of this chapter are nonnegotiable and shall not be
waived.” The Judicial Council adopted the ethics standards in
2002, explaining the purpose of the standards: “For arbitration
to be effective there must be broad public confidence in the
integrity and fairness of the process. Arbitrators are responsible
to the parties, the other participants, and the public for
conducting themselves in accordance with these standards so as
to merit that confidence.” (Ethics Standards, std. 1(b).) Standard
2(a)(1)(A) and (B) clarifies that the standards apply to arbitrators
selected by the parties or appointed by the court.
Ethics Standards, standard 7(d) requires a “proposed
arbitrator or arbitrator” to “disclose all matters that could cause
a person aware of the facts to reasonably entertain a doubt that
the arbitrator would be able to be impartial.” Standard 7(d)
10
includes as examples of required disclosures a family, “significant
personal,” or attorney-client relationship with a party or lawyer
in the arbitration; a financial or other interest in the outcome of
the arbitration; prior service as an arbitrator for a party or
lawyer; and knowledge of “disputed evidentiary facts concerning
the proceeding.” (Std. 7(d)(2)-(4), (7), (11)-(13).) Standard 7(e)
requires the arbitrator to disclose other matters relating to
professional discipline and the arbitrator’s inability to conduct
and complete the arbitration in a timely manner.
Although the mandatory disqualification provisions of
section 1281.91, subdivision (b)(1), apply only to a “proposed
neutral arbitrator,” any neutral arbitrator (proposed or serving)
“shall disqualify himself or herself upon the demand of any party
made before the conclusion of the arbitration proceeding” if any
ground for disqualification in section 170.1 exists. (§ 1281.91,
subd. (d).) Section 170.1, in turn, provides specific grounds for
disqualification for a judge (and thus an arbitrator), including
personal knowledge of disputed evidentiary facts concerning the
proceeding, specified relationships with parties or lawyers in the
proceeding, or a financial interest in the subject matter of the
proceeding. (§ 170.1, subd. (a)(1)(A), (3)(A), (4)-(5).) Further,
section 170.1, subdivision (a)(6)(A), provides for disqualification if
“(i) The judge believes his or her recusal would further the
interests of justice. [¶] (ii) The judge believes there is a
substantial doubt as to his or her capacity to be impartial. [¶]
[Or,] (iii) A person aware of the facts might reasonably entertain
a doubt that the judge would be able to be impartial.” The trial
court must vacate an arbitration award if the arbitrator “was
subject to disqualification upon grounds specified in Section
1281.91 but failed upon receipt of timely demand to disqualify
11
himself or herself as required by that provision.” (§ 1286.2, subd.
(a)(6)(B).) “‘On its face, the statute leaves no room for discretion.
If a statutory ground for vacating the award exists, the trial court
must vacate the award.’” (Honeycutt, supra, 25 Cal.App.5th at
pp. 924-925; accord, Luce, supra, 162 Cal.App.4th at p. 730.)
B. Standard of Review
“‘“On appeal from an order confirming an arbitration
award, we review the trial court’s order (not the arbitration
award) under a de novo standard. [Citations.] To the extent that
the trial court’s ruling rests upon a determination of disputed
factual issues, we apply the substantial evidence test to those
issues.”’” (ECC Capital Corp. v. Manatt, Phelps & Phillips, LLP
(2017) 9 Cal.App.5th 885, 900; accord, Douglass v. Serenivision,
Inc. (2018) 20 Cal.App.5th 376, 386; see Haworth v. Superior
Court, supra, 50 Cal.4th at p. 383 [reviewing de novo whether
trial court properly vacated arbitration award based on
arbitrator’s failure to disclose certain circumstances].) We also
review de novo “legal issue[s] involving statutory construction
and the ascertainment of legislative intent.” (Azteca, supra,
121 Cal.App.4th at p. 1164.)
C. The Award Must Be Vacated Based on the Arbitrator’s
Failure To Disqualify Himself Upon Ted’s Timely Demand
As discussed, on March 13, 2018 Judge Shook disclosed two
arbitrations in March and September 2016 involving the parties
and their lawyers in which Judge Shook was the neutral
arbitrator, pursuant to section 1281.9, subdivision (a). Ted
timely served his notice of disqualification based on the
disclosures on March 22, 2018—nine days after service of the
12
disclosure report. Harry and Christine contend in their
supplemental briefing7 that Judge Shook was not required to
make disclosures under section 1281.9, subdivision (a), and Ted
did not have a right to disqualify Judge Shook under section
1281.91, subdivision (b)(1), because both provisions apply only to
a “proposed neutral arbitrator.” Harry and Christine assert
Judge Shook was the appointed arbitrator, not a “proposed”
arbitrator because the parties had agreed in their 2012
arbitration agreement that Judge Shook would arbitrate “all
issues” arising among the parties. Ted responds that even
though the parties agreed in 2012 that Judge Shook would serve
as the arbitrator and he had presided over the first arbitration,
he still was “proposed” for purposes of this arbitration because he
could have declined the engagement or become unavailable, or
matters could have arisen since the initial agreement that would
have affected his impartiality.
We agree with Ted that Judge Shook was a “proposed
neutral arbitrator” subject to the disclosure and disqualification
requirements of sections 1281.9 and 1281.91. As the cover letter
to his disclosure report made clear, the disclosures were made to
the parties to confirm their acceptance of Judge Shook as the
arbitrator. The letter provided, for example, that Judge Shook
would entertain and accept offers of employment with the parties
and attorneys while the arbitration was pending “[i]f selected as
a neutral arbitrator.” Similarly, the letter concluded that if the
parties proceeded to the scheduled hearing, that would “be
7 On January 8, 2021 we requested the parties provide
supplemental briefing on whether Judge Shook was a “proposed
neutral arbitrator” pursuant to section 1281.91, subdivision
(b)(1). The parties filed supplemental briefs on January 18.
13
deemed acknowledgment of . . . your acceptance of the
arbitrator.”
As the proposed neutral arbitrator, Judge Shook was
legally required to make the disclosures set forth in his disclosure
report, and Ted had an absolute right to disqualify him without
cause. (Luce, supra, 162 Cal.App.4th at p. 735; Azteca, supra,
121 Cal.App.4th at p. 1163; see § 1281.91, subd. (b)(1).) But
despite Ted’s notice of disqualification, the arbitrator refused to
disqualify himself. The trial court was therefore required to
vacate the award under section 1286.2, subdivision (a)(6)(B),
because the arbitrator “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.”
Harry and Christine contend the trial court properly
confirmed the arbitration award because Ted stipulated in the
arbitration agreement for Judge Shook to serve as the arbitrator
and “not to contest that Judge John P. Shook will arbitrate all
issues with binding authority,” so Ted could not withdraw his
consent simply because the arbitrator ruled against him. But the
parties to an arbitration agreement cannot contract away their
statutory right to disqualify an arbitrator pursuant to section
1281.91. (Azteca, supra, 131 Cal.App.4th at p. 1160.)
The Court of Appeal’s opinion in Azteca is instructive.
There, the parties agreed to private arbitration pursuant to
construction industry dispute resolution procedures that
provided, upon receiving an objection to an arbitrator, the
American Arbitration Association (AAA) would make a conclusive
determination whether to disqualify the arbitrator. (Azteca,
supra, 121 Cal.App.4th at p. 1160.) Plaintiff Azteca
14
Construction, Inc., demanded disqualification of the proposed
arbitrator pursuant to section 1281.91, but the AAA decided
there was no good cause for the disqualification and affirmed the
appointment of the arbitrator. The trial court denied Azteca’s
motion to vacate the arbitration award, finding Azteca had
waived its right to disqualify the arbitrator by agreeing to the
AAA rules. (Azteca, at p. 1162.) The Court of Appeal reversed,
explaining, “While the parties may be free to contract among
themselves for alternative methods of dispute resolution, such
contracts would be valueless without the state’s blessing.
Because it imbues private arbitration with legal vitality by
sanctioning judicial enforcement of awards, the state retains
ultimate control over the ‘structural aspect[s] of the arbitration’
process. [Citation.] The critical subject of arbitrator neutrality is
a structural aspect of the arbitration and falls within the
Legislature’s supreme authority. [¶] Finally, the neutrality of
the arbitrator is of such crucial importance that the Legislature
cannot have intended that its regulation be delegable to the
unfettered discretion of a private business.” (Id. at pp. 1167-
1168.) “Only by adherence to the Act’s prophylactic remedies can
the parties have confidence that neutrality has not taken a back
seat to expediency.” (Id. at p. 1168.)
We agree with the reasoning in Azteca. Although federal
and state law favor enforcement of valid arbitration agreements
(Armendariz v. Foundation Health Psychcare Services, Inc. (2000)
24 Cal.4th 83, 97), the California Supreme Court has emphasized
that certain “‘minimum levels of integrity’ [must] be achieved if
the [arbitration] arrangement in question is to pass judicial
muster” (Graham v. Scissor-Tail, Inc. (1981) 28 Cal.3d 807, 825;
accord, Armendariz, at p. 103; see Honeycutt, supra,
15
25 Cal.App.5th at p. 931 [“The public deserves and needs to know
that the system of private justice that has taken over large
portions of California law produces fair and just results from
neutral decision makers.”]). As discussed, section 1281.9 is
designed to ensure the neutrality of the arbitrator by enabling a
party to disqualify the arbitrator for failure to make a required
disclosure or based on the disclosures. It is true, as argued by
Harry and Christine, that Ted agreed Judge Shook would serve
as the arbitrator, and nothing in the disclosure revealed
information not previously known to Ted (that is, that Judge
Shook was the arbitrator in the two previous matters). But
section 1281.91 makes clear the arbitrator “shall” be disqualified
upon the timely service of a notice of disqualification based on the
disclosure statement, without requiring a showing of good cause.
Under Harry and Christine’s reading of section 1281.91,
once the parties agreed not to contest Judge Shook serving as the
arbitrator, the parties would be limited in their ability to object to
Judge Shook based on any changed circumstances since the
parties had stipulated to the arbitration agreement in December
2012. For example, Judge Shook could have accepted repeat
referrals from the attorneys for one side of the dispute with the
opposing party having limited recourse despite the possible
impact of the referrals on his neutrality.8 This would be contrary
8 Ted could still have challenged Judge Shook based on any
ground for disqualification under section 170.1 (applicable to
proposed and serving arbitrators). The acceptance of repeat
referrals could fall within section 170.1, subdivision (a)(6)(A)(iii)
(“[a] person aware of the facts might reasonably entertain a doubt
that the judge would be able to be impartial”), but this provision
would not provide the certainty of disqualification afforded by the
16
to the intent of the Legislature in enacting section 1281.9 and
1281.91 “to inform and protect participants in arbitration, and to
promote public confidence in the arbitration process.” (Ethics
Standards, std. 1(a); see Azteca, supra, 121 Cal.App.4th at
p. 1167.)
Harry and Christine’s reliance on Fininen v. Barlow (2006)
142 Cal.App.4th 185, 190-191 (Fininen) and Dornbirer v. Kaiser
Foundation Health Plan, Inc. (2008) 166 Cal.App.4th 831, 846
(Dornbirer) to argue the trial court has discretion whether to
vacate an arbitration award under section 1286.2, subdivision
(a)(6), is misplaced. In Fininen, the arbitrator disclosed he had
previously mediated a construction collection dispute involving
appellant Mark Barlow, but the arbitrator failed to provide any
specifics of the prior mediation. (Fininen, at p. 188.) Following
the disclosures, Barlow and the opposing party waived any
potential conflicts. (Ibid.) The Court of Appeal affirmed the trial
court’s denial of Barlow’s motion to vacate the arbitration award
because Barlow was a party to the nondisclosed case on which he
had access to his own file, consented to proceed with the
arbitration based on the incomplete information, and waited until
after the arbitrator ruled against him to object to the arbitrator.
(Id. at p. 190.) On these facts the court concluded it would be
“absurd to construe section 1286.2, subdivision (a)(6) to require
that the arbitration award be vacated based on an incomplete or
untimely disclosure.” (Id. at pp. 190-191.)
mandatory disqualification provision of section 1281.91,
subdivision (b)(1). We are not suggesting Judge Shook took any
actions that created an actual conflict or affected his impartiality,
only that Ted had a right to disqualify him based on the
disclosure statement.
17
Similarly, in Dornbirer, an arbitrator disclosed numerous
prior arbitrations involving defendant Kaiser Permanente or its
counsel, but the arbitrator’s disclosure did not contain complete
information on the details of the arbitrations, including the dates,
the names of the attorneys, and the specifics of the award.
(Dornbirer, supra, 166 Cal.App.4th at pp. 840-841.) The Court of
Appeal concluded the incomplete disclosures under section 1281.9
did not support vacatur because the plaintiff was on notice prior
to the arbitration of the missing information but consented to the
arbitration and failed to raise an objection until after the
arbitrator ruled in favor of Kaiser. (Dornbirer, at p. 846.) The
Court of Appeal explained the plaintiff’s remedy for the
arbitrator’s “failure to meet the statutory disclosure
requirements was to disqualify him on that basis before the
arbitration commenced, not after the arbitration was over.”
(Ibid.)
Unlike the appellants in Fininen and Dornbirer, Ted served
a timely disqualification notice before commencement of the
arbitration. Further, both cases concerned the materiality of
incomplete disclosures under section 1281.91, subdivision (a), for
purposes of disqualification, not the absolute right to
disqualification under section 1281.91, subdivision (b)(1) and (2),
under which a party has a right to disqualify an arbitrator
without cause one time in a single arbitration. Ted properly
exercised his right to disqualify the arbitrator.
DISPOSITION
The judgment is reversed and remanded with directions for
the trial court to vacate its order granting the petition to confirm
18
the arbitration award, and to enter a new order vacating the
award. Ted Roussos is to recover his costs on appeal.
FEUER, J.
We concur:
PERLUSS, P. J.
SEGAL, J.
19