Profession Relationships Were Too Attenuated To Justify Disqualification
Our next case is a lawsuit between a law firm and a lawyer/client over a significant amount of attorney’s fees – confirmation of the mission statement in our other blog, California Attorney’s Fees (brought to you by Mike Hensley and Marc Alexander), that attorney’s fees are often the “tail that wags the dog in litigation”. The interesting legal issue at the heart of this case is disclosure of professional relationships by an arbitrator. Nemecek & Cole v. Horn, case No. B233274 (2nd Dist. Div. 8, July 23, 2012) (Bigelow, J., author) (not for publication).
Attorney Horn was retained by the Hoffmans to represent them in a lot line dispute. That case did not go so well, and the next dispute – over fees – was between Mr. Horn and his erstwhile clients. In the dispute with the Hoffmans, Mr. Horn was represented by Nemecek & Cole (Nemecek). After a jury trial and an appeal, Mr. Horn was order to pay approximately $380,000 in attorney’s fees to the Hoffmans (settled for $250,000). Believing that the negligence of Nemecek was the cause of the “disastrous results” in his suit with the Hoffmans, Mr. Horn submitted his dispute with Nemecek to arbitration with JAMS.
Nemecek prevailed in the arbitration. The arbitrator, retired U.S. District Judge George Schiavelli, awarded $289,028.85 in attorney’s fees to Nemecek. Mind you, this all started with a lot line dispute!
Attorney Horn hired an investigator who discovered professional relationships between the arbitrator and Nemecek. Specifically, the arbitrator was a member of the appellate courts executive committee with the head of Nemecek’s appellate department; Nemecek’s expert and the arbitrator appeared together as panelists; Nemecek had appeared before the arbitrator earlier when he had been a district judge; and, the arbitrator was of counsel to a law firm that had, since its founding, provided representation in three legal malpractice actions.
Those professional relationships did not warrant disqualification of the arbitrator. The cases recognize the practicalities of the profession: lawyers and judges who have been around for a long time will know a lot of attorneys and will have served on panels and in professional organizations. Specific matters that must be disclosed, such as an arbitrator’s financial interest, the arbitrator’s knowledge of disputed facts relevant to the arbitration, and the arbitrator’s membership in any organization that practices invidious discrimination, were not at issue here.
Nor did the Court of Appeal see an abuse of discretion in the calculation of the fee award in a case that the arbitrator characterized as complex “requiring a great deal of work.”
We note that arbitrator disclosure issues tend to be fact specific. A good place to begin is Code Civ. Proc. section 1281.9, subd. (a)(1)-(6), laying out disclosure requirements. The ethics standards adopted by the Judicial Council require 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.”