Opinion
NOT TO BE PUBLISHED
Superior Court County No. BC 350817 of Los Angeles, Maureen Duffy-Lewis, Judge
Gregory C. Pyfrom & Associates Inc., Gregory C. Pyfrom, Anne Singer-Johnson and Ira Cohen for Defendant and Appellant.
Norton & Associates, Timothy L. Norton; Robinson, Diamant & Wolkowitz and Douglas D. Kappler for Plaintiff and Respondent.
PERREN, J.
LaRocca Inspection Service, Inc., appeals from an order vacating an arbitration award in its favor. The trial court vacated the award on the ground that the arbitrator violated the disclosure provisions of the California Arbitration Act (Code Civ. Proc., § 1280 et seq.) by failing to make a complete disclosure to respondent Brian Taylor of all the cases that he had arbitrated with LaRocca's counsel.
All statutory references are to the Code of Civil Procedure.
On appeal, LaRocca contends the trial court erred in vacating the award because the arbitrator substantially complied with the disclosure requirements and there was no evidence that the arbitrator was biased. Taylor argues that vacatur of the award was proper because the disclosure statutes are mandatory, strict compliance is required and evidence of actual bias is unnecessary. We affirm.
STATEMENT OF FACTS AND PROCEDURAL HISTORY
In 2003, Taylor hired LaRocca to perform a home inspection on a residence he wanted to purchase. LaRocca's inspection report failed to mention several areas in the home that showed water staining and water intrusion. The report found these areas "acceptable." Taylor purchased the home in reliance on LaRocca's report. Eight months later, on Christmas Eve, during the first major rainstorm to occur after Taylor moved into the house, the home leaked substantially in the areas LaRocca had found acceptable. A subsequent investigation revealed a history of water intrusion in those areas.
The inspection agreement required that any disputes arising from the inspection be arbitrated. LaRocca's counsel, Gregory Pyfrom, proposed Darryl Graver as arbitrator and Taylor agreed. Graver was an independent contractor for Judicate West. On October 31, 2006, Judicate West made a case disclosure of prior matters involving Graver and Pyfrom. The disclosure listed two cases--Meints v. Zekry and Castro v. Claybaugh. A form questionnaire signed by the arbitrator was attached to the case disclosure document. At the top of this form the following typewritten notation appears: "Arbitrator has had 5 previous matters with counsel for defendant and no prior matters with counsel for plaintiff in last five years." Taylor did not disqualify Graver.
The matter was arbitrated on March 28, 29, and April 4, 2007, and resulted in an award in LaRocca's favor on May 29, 2007. Believing that the award was partial and unfair, Taylor made a written request that Graver disclose all cases he had arbitrated involving LaRocca's counsel.
The case disclosure provided by Judicate West in response to this request differed from the initial disclosure. In addition to the two cases initially disclosed, the post-award case disclosure included three other cases that LaRocca's counsel had engaged Graver to arbitrate. Williams v. Grewal wasdecided on January 5, 2007. Graver had been hired to arbitrate Williams v. Grewal in August 2006, prior to being engaged to arbitrate Taylor v. LaRocca. That case also involved allegations that a faulty home inspection had been performed. Graver found in favor of Pyfrom's client. Fox v. Chu was decided on April 16, 2007;and Levine v. Burns was decided on June 6, 2007. Graver was appointed to serve as arbitrator in Fox v. Chu and Levine v. Burns after he was hired in the Taylor v. LaRocca matter but before he had reached a decision in that case.
Taylor filed a motion to vacate the award. The trial court granted the motion on the ground that sections 1281.9 and 1281.91 mandate that a neutral arbitrator disclose matters that he has arbitrated and that failure to do so will result in vacating the award pursuant to section 1286.2, subdivision (a)(6).
LaRocca filed a timely appeal. In his respondent's brief, Taylor requests that we sanction LaRocca for filing a frivolous appeal.
DISCUSSION
Standard of Review
We review an order vacating an arbitration award for substantial evidence to the extent the order was based on disputed factual issues. (See, e.g., Guseinov v. Burns (2006) 145 Cal.App.4th 944, 957; Reed v. Mutual Service Corp. (2003)106 Cal.App.4th 1359, 1365.) Where, as here, the order was based on undisputed facts, our review is de novo. (International Alliance of Theatrical Stage Employees, etc. v. Laughon (2004) 118 Cal.App.4th 1380, 1387.)
We note that the issue of the standard of review of an order vacating an arbitration award based on an arbitrator's purported failure to disclose grounds for disqualification is pending before the California Supreme Court in Haworth v. Superior Court, review granted September 17, 2008, S165906.
Disclosure Statutes and Standards
Graver disclosed two cases in which LaRocca's counsel used Graver as an arbitrator. He did not disclose a third case that was pending at the time that he was retained in the instant matter nor did he disclose two additional cases in which he was retained during the pendency of the instant case. As we shall explain, Graver had a duty to disclose each of these matters.
The disclosure provisions of the California Arbitration Act apply to this case. The general duty to disclose by an arbitrator is set forth in section 1281.9, subdivision (a), requiring a proposed 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." This general duty includes the duty to disclose "[a]ny professional ... relationship the proposed neutral arbitrator... has or has had with any party to the arbitration proceeding or lawyer for a party." (§ 1281.9, subd. (a)(6).)
Pursuant to section 1281.85, the Judicial Council has adopted ethical standards for persons serving as arbitrators. (Ethics Standards for Neutral Arbitrators in Contractual Arbitration, Cal. Rules of Court.) Standard 7 provides that written disclosure must be made by the arbitrator to the parties within 10 calendar days of notice of his assignment: "(d) A person who is nominated or appointed as an arbitrator must disclose all matters that could cause a person aware of the facts to reasonably entertain a doubt that the proposed arbitrator would be able to be impartial, including... [¶] (4) Service as arbitrator for a party or lawyer for party [¶] (A) The arbitrator is serving or, within the preceding five years, has served: [¶] (i) As a neutral arbitrator in another prior or pending... case involving a party to the current arbitration or a lawyer for a party."
All references to Standards will be to the Ethics Standards for Neutral Arbitrators in Contractual Arbitration.
The duty of disclosure is a continuing one. (Std. 7, subd. (f).) "If an arbitrator subsequently becomes aware of a matter that must be disclosed under... subdivision (d)... of [Standard 7], the arbitrator must disclose that matter to the parties in writing within 10 calendar days after the arbitrator becomes aware of the matter." (Std. 7, subd. (c).)
An arbitrator's failure to timely disclose a disqualification ground is a basis for vacating an arbitration award. Section 1286.2, subd. (a)(6)(A) states: "[T]he court shall vacate the award if the court determines any of the following:... An arbitrator making the award... failed to disclose within the time required for disclosure a ground for disqualification of which the arbitrator was then aware...."
Application of the Disclosure Requirements
LaRocca admits that the Williams v. Grewal matter should have been, but was not, disclosed. Nonetheless, he argues that nondisclosure of this case was an improper basis on which to vacate the arbitration award because nondisclosure is insufficient by itself to support vacation and Taylor has not met his burden of showing actual bias or that he was prejudiced by the nondisclosure.
In support of his argument that nondisclosure of the Williams v. Grewal matter was an insufficient basis on which to vacate the award, LaRocca provided a declaration from Pyfrom stating his belief that, even if Williams v. Grewal had been disclosed, Taylor would have selected Graver because disclosure was made of two other cases in which Pyfrom and Graver were involved and that selection of a different arbitrator would not have made a difference in the outcome of the arbitration. Pyfrom also declared that while Graver had arbitrated five or six matters for him, he had no personal or social relationship with Graver. Based on these assertions, Pyfrom concludes that Graver was not biased and Taylor was not prejudiced.
LaRocca relies on section 1281.9 to support his argument that a showing of actual bias is required. Section 1281.9 requires a potential arbitrator 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).) LaRocca asserts that this language means that a violation occurs only if nondisclosure raises a "reasonable doubt" that the proposed arbitrator is or cannot be impartial. Reliance on this language is misplaced as section 1281.9, subdivision (a)(6), goes on to impose a specific duty to disclose "[a]ny professional... relationship the proposed neutral arbitrator... has or has had with any party to the arbitration proceeding or lawyer for a party." Even if we were to agree that violation of a specific duty to disclose is subject to the "reasonable doubt" standard, the test is an objective one. As we stated in Ceriale v. AMCO Ins. Co. (1996) 48 Cal.App.4th 500, 506, "[t]he question is not whether any of these people might actually be biased; the question is whether 'a person aware of the facts might reasonably entertain a doubt that the [arbitrator] would be able to be impartial' given the particular circumstances of the case."
LaRocca cites Guseinov v. Burns, supra, 145 Cal.App.4th 944, and Fininen v. Barlow (2006) 142 Cal.App.4th 185, to support his contention that nondisclosure of a prior professional relationship between his attorney and Graver did not require that the award be vacated. The cases are factually distinguishable. Guseinov involved an uncompensated volunteer mediation matter for which disclosure was not required. In Fininen, the party seeking vacatur of the award knew of the arbitrator's participation in the prior matter, was involved in the prior matter and had access to the file.
LaRocca cites Casden Park La Brea Retail LLC v. Ross Dress For Less, Inc. (2008) 162 Cal.App.4th 468, for the proposition that an arbitration award should not be vacated absent a showing of "scienter" on the part of an arbitrator who fails to make a full disclosure. The case is inapposite. In that case, the court held a neutral arbitrator on a three-member panel had no duty to disclose a coworker's business relationships with tenant and arbitrator chosen by tenant where neutral arbitrator was unaware of coworker's transactions. Here, of course, we are dealing with an arbitrator's direct relationship with the attorney for a party.
LaRocca also argues that Taylor waived the relevant disclosure provisions because he did not object to the initial case disclosure within 15 days as provided in section 1281.91, subdivision (b)(1). The argument is disingenuous. That provision applies only to a case disclosure provided prior to selection of an arbitrator. A failure to challenge an arbitrator under this provision does not waive a party's right to challenge an arbitrator subsequent to the arbitration where, as here, the party had no reason to know of the existence of the nondisclosed matter. (Ovitz v. Schulman (2005) 133 Cal.App.4th 830, 847.) LaRocca fails to explain how Taylor could have objected at that time when the information had not been disclosed.
At oral argument, LaRocca's counsel cited Dornbirer v. Kaiser Foundation Health Plan, Inc. (2008) 166 Cal.App.4th 831. In that case, an arbitrator disclosed that he had arbitrated prior cases involving defendant and its attorney and defendant failed to make further inquiry or challenge the arbitrator prior to arbitration. The court held sufficient information was disclosed to notify the plaintiff of the arbitrator's prior involvement in cases involving the defendant and its attorney. The appellate court upheld an order denying defendant's motion to vacate. Dornbirer is not applicable here. The only indication that Graver had arbitrated five additional cases involving LaRocca's attorney was a notation on the case disclosure attachment that "Arbitrator has had 5 previous matters with counsel for defendant." In contrast, the information the arbitrator disclosed in Dornbirer was contained in a letter the arbitrator sent to counsel disclosing he had presided over 15 matters and was currently presiding over an additional matter. Here, the information on the case disclosure attachment was insufficient to place the burden on Taylor to make further inquiry.
Graver was required to disclose his involvement in the Williams v. Grewal case pursuant to section 1286.2, subdivision (a)(6)(A) and Standard 7, subdivision (d). Therefore, the trial court was required to vacate the award. (See Ovitz v. Schulman, supra, 133 Cal.App.4th at p. 845 ["On its face, the statute [§ 1286.2, subd. (a)(6)(A)] leaves no room for discretion. If a statutory ground for vacating the award exists, the trial court must vacate the award"]; accord, International Alliance of Theatrical Stage Employees, etc. v. Laughon, supra, 118 Cal.App.4th at p. 1386.)
With respect to Fox v. Chu and Levine v. Burns, LaRocca argues that disclosure was not required under an exception provided in Standard 7, subdivision (b)(2) and Standard 12, subdivision (b) because these matters were concluded after LaRocca v. Taylor was heard. Further discussion of whether belated disclosure of the Fox v. Chu and Levine v. Burns matters violated relevant statutes and standards is unnecessary as vacatur of the award was mandatory based on nondisclosure of the Williams v. Grewal arbitration. We note, however, that the record does not contain an "arbitration agreement" between the parties as referenced in Standard 12, subdivision (b). The only mention that the arbitrator would accept other offers of employment involving the same attorneys or parties is contained in a pro forma letter sent by Judicate West to the parties' attorneys after they had agreed to use Graver. We doubt that this letter constitutes an "arbitration agreement" as contemplated by Standard 12.
Standard 7, subdivision (b)(2) states: "If an arbitrator has disclosed to the parties in an arbitration that he or she will entertain offers of employment or of professional relationships from a party or lawyer for a party while the arbitration is pending as required by subdivision (b) of standard 12, the arbitrator is not required to disclose to the parties in that arbitration any such offer from a party or lawyer for a party that he or she subsequently receives or accepts while that arbitration is pending." Standard 12, subdivision (b) provides that the arbitrator must disclose in the arbitration agreement, while the arbitration is pending, whether he will entertain offers of employment to be an arbitrator in another case.
The order is affirmed. Respondent shall recover costs. Sanctions against appellant are denied. (See California Teachers Ass'n. v. State of California (1999) 20 Cal.4th 327, 340 [sanctions not warranted unless appeal was prosecuted for improper motive or is indisputably without merit].)
We concur: GILBERT, P.J., YEGAN, J.