California Mediation and Arbitration

Arbitration, Disclosures: Arbitrator's Nondisclosure Of Involvement With LGBTQ Organization Not A Basis For Tossing Arbitration Award

The Arbitrator's Relationship With  GLAAD Was Irrelevant To The Dispute.

        The arbitration award was confirmed and affirmed on appeal in Malek Media Group LLC v. AXQG Corp.,  B299743  (12/16/20 )) (Dhanidina, Lavin, Egerton), a case in which the disgruntled appealing party sought to disqualify the arbitrator for failure to disclose his connection with GLAAD, the Gay & Lesbian Alliance Against Defamation. The appellant made the tenuous argument that the arbitrator's involvement with LGBTQ rights had to be disclosed, because a witness had accused Malek of sexual harassment, LGBTQ rights activists were feminists who assumed the woman was telling the truth, and finally, Malek was Catholic, and the Catholic Church was at odds with same-sex marriage. 

        The Court of Appeal dispatched with the non-disclosure argument, finding an affinity with LGBTQ issues to be irrelevant to the subject matter of the case. "MMG mischaracterizes the arbitration as one that primarily involved issues of sexual harassment or social justice, " explained the Court.  "The arbitration involved the dissolution of Foxtail [the LLC formed by the parties] based on the irreconcilable conflict between Malek and Gou and the numerous breaches by Malek of the Foxtail agreement, primarily, Malek’s misuse of Foxtail funds." The person claiming sexual harassment was not even a party to the case, and her testimony was only relevant to the case to the extent that it tended to show that Malek's actions subjected the LLC formed by the parties to reputational harm. Finally, the sexual harassment/reputational issue only yielded a measly $500 as part of the  arbitrator's award.

        The Court also found the  appeal to be frivolous, resulting in sanctions. A post about the sanctions aspect of the case can be found on Mike Hensley's and my California Attorney's Fees Website.

        COMMENT.  We have previously posted about Rebmann v. Rohde, 196 Cal.App.4th 1283 (2011), which is dispositive in Malek Media Group LLC v. AXQG Corp. The earlier case involved a disgruntled party in arbitration and a Jewish arbitrator. In Rebmann: "The defendant/appellant informed the trial court that if only he had 'known about his [the arbitrator's] religious affiliation, his cultural affiliation, and the dedication to keeping the memory of the Holocaust alive, I never would have allowed him to be the arbitrator in my case.' The defendant/appellant's father, and his wife's father served in the SS during WWII. Among other things, the Court of Appeal rejected the 'tacit assumption' that 'a judge who is a member of a minority cannot be fair when a case somehow related to that minority status – no matter how remote or tenuous that relationship might be – comes before that judge.'"

        Unhappy litigants have long complained that judges and arbitrators could not be fair to them because of their race, ethnicity, religion, nationality, and more recently, sexual orientation and gender identity. This was true during the period of the  Civil Rights Movement, and even more recently, a federal judge was attacked as biased, based on the claim that he was "Mexican." These types of attacks are very unlikely to succeed in a court of law. However, we note a difference in emphasis between the Rebmann case and Malek Media Group LLC. Where Rebmann rejected the assumption that a judge or arbitrator who is a member of a minority cannot be fair when a case is somehow related to minority status, Malek Media Group LLC makes the point that the arbitrator's interest in LGBTQ issues was irrelevant to the subject matter of the case. Both points are valid, but the emphasis is different.

 

Arbitration: Sanctions: N.D. Cal. District Judge Has Decided To Issue Sanctions Against Fitbit And Its Attorneys For Failure To Pursue Arbitration After Compelling It In Consumer Action

Moral Here Is To Pursue Arbitration If You Elect To Do So.

            Mike Hensley, my co-contributor on the calattorneysfees.com website, has done a recent post about N.D. Cal. U.S. District James Donato’s July 24, 2018 order in which he will be imposing yet-to-be-sought sanctions against Fitbit and its defense counsel in a consumer action. District Judge Donato decided that the defense conduct in compelling arbitration and then announcing a decision not to pursue it justified “inherent by the court” sanctions to control bad-faith litigation conduct. Mike’s full post tells it all, including the district court’s colorful passage indicating why many people, including judges, are skeptical about arbitration agreements.

Arbitration, Appealability, Fees, Estoppel, Waiver, Sanctions: Fourth Dist. Div. 3: "This Is An Appeal Borne Of Sharp Practices"

Waiver, Invited Error, And Sharp Practices Doom The Appeal.

            Justice Ikola grabs the reader by the lapels in the opening lines of Diaz v. Professional Community Management, Inc., G053909 (4/3 certified for pub. 11/8/17) (Ikola, O'Leary, Aronson):  "A 'sharp practice' is defined as a 'dealing in which advantage is taken or sought unscrupulously. . . . This is an appeal borne of sharp practices."  The unsettling feeling that one side is about to get slammed is thoroughly reenforced by the Justice's choice of words in the first four pages of a 32 page slip opinion:  efforts by a party to "spin that ruling", "invited error", "bad faith", "specious", "deliberately designed to obscure," "machinations," "patently unfair manner", "frivolous appeal", "we were most disturbed."  One need hardly read further, but I did, because the case involved arbitration.

            So what so exercised the ire of the appellate justice?  Defendant/appellant PCM "unilaterally orchestrated the issuance of an appealable order" 11 days before trial, by filing an ex parte application to shorten time to hear its motion to compel arbitration, knowing the trial judge would deny it -- the case had been pending for 1 1/2 years, defendant had pleaded it had a right to arbitrate as an affirmative defense, defendant had done nothing to perfect that right earlier, and there was no justification for a last moment application to shorten time.  Denial of an ex parte application to shorten time, however, would not have generated an appealable order.  So defendant immediately submitted an order to the trial judge, inconsistent with the ex parte application and the minute order, burying within the proposed order that the judge was also denying the motion to compel arbitration -- a motion that was never heard, and that was still on calendar.  The judge signed the order, probably without realizing that he was being played, and the order denying a motion to compel arbitration became the springboard for an appeal and a stay. 

            Defendant lost its appeal because "PCM invited the trial court's alleged error when it proposed the court issue the very ruling it now challenges on appeal.  By doing that, PCM won the battle -- it got the court to issue the appealable order it sought, prior to trial -- but it lost the war.  A party that invites the court to commit error is estopped from challenging that error on appeal."

            For good measure, the Court also concluded that the order denying PCM's motion to compel arbitration should have be affirmed on the merits, given that the litigation conduct and delay of defendant was inconsistent with a sincere desire to arbitrate.

            One final twist involved the fact that a motion to compel arbitration was involved.  Appellant argued that the Court of Appeal could not act as a factfinder in the first instance and decide the issue of waiver, when the issue of waiver had not been presented below.  And in fact, the Court of Appeal could have sent the case back to the trial court, though given the "sharp practices" sussed out by the Court, such an outcome would seem pretty unfair.  In order to make any factual ruling on its own, the Court of Appeal had to get around Cal. Code of Civ. Proc., section 909, which provides in part, "In all cases where trial by jury is not a matter of right or where trial by jury has been waived, the reviewing court may make factual determinations contrary to or in addition to those made by the trial court. "  But as the Court of Appeal explained, the purpose of section 909 "is to preserve the parties' right to have a jury act as finder of fact in matters where that right applies."  And a petition to compel arbitration "is in essence a suit in equity to compel specific performance of a contract."  So no right to a jury to decide that limited issue, and  problem solved.

            COMMENT:  One could conclude that if the goal of defendant was to delay, then defendant succeeded.  The trial was scheduled to begin April 11,  2016.  The unpublished appellate opinion was filed October 17, 2017.  And there will be 40 days for the remittitur.  And the trial judge will need to reset the trial.  But at what cost?  Appellant, its law firm and two of its attorneys are ordered, jointly and severally, to pay the court $8,5000, and to pay to Diaz an amount "equal to the reasonable value of services performed by his attorney in  preparing for the trial . . . and in responding to this appeal, but not to include pretrial services which need not be repeated."  And there is the additional reputational cost of being slammed for "sharp practices."

               

Arbitration/Sanctions: Sixth District Holds CCP 128.7 Sanctions Are Unavailable In Arbitration Where Attorney Has Not “Presented” Pleading To Court

Trial Court’s Order Denying Sanctions Under CCP 128.7 Is Affirmed

     In Optimal Markets, Inc. v. Salant, Case No. H038571 (6th Dist. Nov. 26, 2013) (unpublished), the Court explains:  “There is no authority supporting the position that a superior court, after a matter has been stayed and ordered to binding arbitration, may impose section 128.7 sanctions for an attorney’s prosecution of a client’s meritless claim before the arbitrator.”  Thus, the trial court did not err here, where the matter had been stayed and ordered to binding arbitration, in denying section 128.7 sanctions for matters presented to the arbitrator, but not to the trial court.