Plaintiff Waived Vacatur Right As To Ethics Standard 12(b), But Did Not Waive Rights To Vacate Based On Arbitrator’s Failure To Make Required Disclosures Under Ethics Standard 7(d).
Here is the ending quotation before the “Disposition” paragraph in Honeycutt v. JPMorgan Chase Bank, N.A., Case No. B281982 (2d Dist., Div. 7 Aug. 2, 2018) (certified for publication; Segal, J., author; Perluss, P.J., concurring; and Feuer, J., concurring): “’That all may drink with confidence from their waters, the rivers of justice,’ whether they flow through our public or private systems of dispute resolution, ‘must not only be clean and pure, they must appear so as to all reasonable men and women.’ (U.S. v. State of Ala. (11th Cir. 1987) 828 F.2d 1532, 1552.)” (Slip Op., p. 29.)
Honeycutt concerned an employment arbitration by plaintiff/claimant against her former employer which was a defendant/respondent after employer successfully moved to compel arbitration in the filed lawsuit. In a California arbitration, an arbitrator must make certain statutorily-mandated and ethically-mandated disclosures to the parties, including Ethics Standard 7 [whether the arbitrator is serving as a neutral arbitrator in another prior or pending case involving a party to the current or a lawyer for a party] and Ethics Standard 12 [whether the arbitrator will entertain offers of employment or new professional relationships in any capacity other than as a lawyer, expert witness, or consultant from a party or a lawyer for a party, including offers to serve as a dispute resolution neutral in another case; and, if so, disclose the offer and acceptance in each case within 5 days of same].
The facts were that the arbitrator filled out the AAA disclosures, but there was a missing page where the arbitrator checked he would entertain other offers even though one of the other pages actually sent to the parties did have a handwritten explanation to the missing question that he would entertain offers to serve as a dispute resolution neutral in other cases and would evaluate any potential conflict at that time prior to accepting each offer. However, the arbitrator failed to timely disclose that during the pendency of the Honeycutt arbitration, he had been appointed to serve as an arbitrator in eight other employment cases involving counsel for Chase and two others (one being an employment case) involving Chase—with the parties only receiving four of the eight letters concerning employment cases involving counsel for Chase before the arbitration was completed. Importantly, an arbitrator has a continuing obligation to make required disclosures all along the way. After Honeycutt lost the arbitration, the AAA administrator sent the missing page and all 10 letters about the other cases involving the Honeycutt arbitrator. Honeycutt’s counsel sent AAA a disqualification demand based on the belated disclosures. AAA advised Honeycutt that the arbitrator was not disqualified, with a zero award to Honeycutt and each side ordered to bear administrative fees and arbitrator compensation/expenses “as incurred.” Honeycutt moved to vacate the award (given that arbitrator nondisclosure is a mandatory basis for vacatur under CCP § 1286.2(a)(6)(A)), but the trial judge confirmed it instead, finding sufficient disclosures and no prejudice.
The 2/7 DCA panel reversed and ordered that the award be vacated based on the arbitrator’s failure to make disclosures under Standard 7(d) [other cases involving Chase’s counsel or Chase].
With respect to the failure to make the Standard 12 disclosure, the appellate court found Honeycutt waived her right to vacate on this basis; after all, she failed to object although knowing about the missing page and knowing about the handwritten disclosure such that it was unfair for her to delay raising the issue until after she lost the arbitration.
Different matter, altogether, with respect to the Standard 7(b) nondisclosures. Even though a vacatur requires that the arbitrator has actual awareness of a ground for disqualification, the panel found he had to in light of the fact that he was a participant in the other cases. The appellate court questioned whether an arbitrator, unlike an attorney, can blame a case manager, assistant, or secretary for an arbitrator’s failure to comply with the Ethical Standards, given that the arbitrator has actual awareness of his own intent to entertain offers of employment and then to accept them—which triggered disclosure obligations. Honeycutt did not waive this right to vacate, because it was a right she did not know she had, with her counsel moving to disqualify the arbitrator well within the 15 days required to object after receiving the AAA case manager’s letter finally disclosing everything. So, the rivers of justice in this one swept the arbitration award down the river and out to sea so that an arbitration can take place before an arbitrator making all required disclosures. Honeycutt also was awarded her costs on appeal.
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