Disclosure Of Extent Of JAMS's "Business Relationship" With O'Melveny & Myers And Arbitrator's Ownership Interest In JAMS Were At Issue.
A former investment fund manager sued the investment funds and successfully compelled arbitration. Steven M. Speier v. The Advantage Fund, LLC, et al. G059216 (4/3 4/19/21) (Fybel, Bedsworth, Goethals). JAMS and the arbitrator made boilerplate CYA disclosures (as in Monster Energy Co. v. City Beverages, LLC), stating the neutral had an economic interest in the overall financial success of JAMS, and that the parties should assume one or more of the JAMS neutrals had arbitrated or mediated other dispute resolution proceedings with the parties, counsel, or insurers. The arbitrator further disclosed she had served as an arbitrator in other matters involving a party, lawyer for a party, or law firm for a party to the current arbitration. JAMS provided reports showing matters involving the arbitrator and Speier, Speier's arbitration counsel, and the Funds' arbitration counsel, O'Melveny & Myers. Unhappy with the outcome of the arbitration, Speier moved to vacate the award.
The Court of Appeal affirmed the judgment, concluding that a reasonable person aware of the facts would not entertain a doubt that the arbitrator could be impartial. Justice Fybel had to distinguish Monster Energy, as well as an opinion he earlier authored in Advantage Medical Services, LLC v. Hoffman.
Monster Energy. First, Monster Energy is a federal case that did not rely on California statute, Ethical Standards, or case law. Second, unlike the Monster Energy case, Speier, the party complaining about disclosures, not the Fund, had moved to arbitrate. And the repeat player in Monster Energy had been the party that wrote JAMS into its arbitration provisions, whereas in Speier, the repeat player was a law firm. Third, O'Melveny & Myers and Alston & Bird, the big law firms that appeared at the arbitration, had each had 245 matters with JAMS, which rather leveled the playing field.
Your blogger posted about Monster Energy on 10/23/19, and wrote an article about it for the Daily Journal, "9th Circuit arbitrator disclosure ruling: In search of a solution to a problem it's unable to solve."
Advantage Medical Services, LLC v. Hoffman. Speier relied on this case to argue that, even if the arbitrator was not aware of her ownership interest in JAMS or JAMS' business history with O'Melveny & Myers, she wasn't excused from disclosing it. Advantage was a case in which the arbitrator allowed plaintiff's request to permit its insurance representative to attend the arbitration, without requiring the plaintiff to disclose to the defendants or the arbitrator the identity of the representative or the insurer. However, the arbitrator and his law firm's relationship with the insurer was such that Justice Fybel explained that the arbitrator had a duty to inquire and to disclose, because a person with knowledge of the relationships could reasonably doubt the impartiality of the arbitrator. But Speier was a different case, because even if a party knew about the arbitrator's small financial interest or O'Melveny & Myers' many matters, under the circumstances here, it would not have made any difference.
COMMENT: This case demonstrates how fact-specific disclosure issues can be. This case also demonstrates that Monster Energy need not be persuasive in state court whenever its facts can be readily distinguished. Finally, Justice Fybel, who authored the Speier and the Advantage opinions, is a co-author of the Cal. Jud. Conduct Handbook. Justice Fybel is thoroughly cognizant of the important of disqualification and disclosure issues to the integrity of decisions and the decision-making process.
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