Want A Postponement? Gotta Ask For It
An arbitrator’s failure to timely disclose a basis for disqualification and an arbitrator’s failure to grant a reasonable continuance in the proceedings may be grounds for vacating an arbitration award. Both issues were at play in Lawyers’ Mutual Insurance Company v. Law Offices of Diana Courteau, Case No. B250158 (2/5 Sept. 12, 2014) (Turner, Kriegler, Mink) (unpublished), a case involving a policy limits dispute between a law firm and its malpractice carrier.
As is sometimes the case with a three arbitrator panel, each side here picked a party arbitrator, but the two party arbitrators could not agree on the selection of the neutral arbitrator. The trial court designated Retired Justice Daniel A. Curry as the “neutral arbitrator.”
The law firm and its party arbitrator, Cynthia Bozzone, did not attend the arbitration. Ms. Bozzone’s aged mother was in an ICU at the time, and Ms. Bozzone notified the arbitral organization, Alternative Resolution Centers (ARC), of this fact.
ARC’s rules permitted the arbitration to go forward with two arbitrators, and go forward it did. Unsurprisingly, considering that the law firm and its party arbitrator did not attend the arbitration, the arbitration did not go well for the law firm, and the award favoring the carrier’s policy interpretation was confirmed as a judgment by the trial court. (But note: The Court of Appeal briefly comments that defendants failed to demonstrate prejudice – i.e., that “they had any chance of prevailing in the arbitration had there been a continuance.”).
Two additional facts, before we turn to the Court of Appeal decision: (1) Retired Justice Curry belonged to 13 specialty panels of ARC, along with attorney Jerold S. Sherman, the former senior vice-president and general counsel for 12 years, before retiring in 2005, of plaintiff Lawyers’ Mutual Insurance Company; (2) Mr. Sherman received an on-line endorsement from the insurance carrier’s coverage counsel, Mr. Littlefield.
The law firm argued that the award should be vacated pursuant to CCP sections 1281.9(a) and 1286.2(a) (6) for the arbitrator’s failure to disclose the relationship between ARC and Mr. Sherman. The Court of Appeal, however, rejected this argument, based on the facts of record. Mr. Sherman was not a party or an attorney in the arbitration. Furthermore, Retired Justice Curry did not know Mr. Sherman. Also, Retired Justice Curry’s compensation was not dependent on any matter handled by Mr. Sherman, and vice versa. Justice Curry also declared that he did not know Mr. Sherman was connected with ARC, or that Mr. Sherman had served as general counsel of plaintiff until Ms. Courteau mentioned his name. On the facts of this case, the Court of Appeal concluded that Retired Justice Curry did not need to disclose that Mr. Sherman is an arbitrator affiliated with ARC.
The Court distinguished Gray v. Chui, 212 Cal.App.4th 1355 (2013), holding that the neutral arbitrator violated Ethics Standard 8(b)(1)(a) by failing to disclose that one of the party’s attorneys worked for ADR, Services, Inc., the dispute resolution provider administering the arbitration. In the instant case, however, Mr. Sherman was neither a party nor an attorney in the arbitration.
That leaves the “failure” of the arbitrator here to postpone the arbitration hearing (CCP section 1286.2(a)(5)), upon receipt by ARC of the information that Ms. Bozzone’s mother was in an ICU. “No doubt, Ms. Bozzone had good cause for postponement of the hearing,” explained the Court of Appeal, adding: “But neither defendants nor Ms., Bozzone requested a continuance of the hearing from Retired Justice Curry.
PRACTICE TIP: Do your independent investigation of arbitrators’ backgrounds, exercise strikes, and state objections as early as possible. See my May 29, 2014 post on Post-Arbitral Award Investigation of Bias. Also, if you have a basis for seeking a postponement of an arbitral hearing, ask for it expressly, and in writing, so as to make a record.