Ethics in Brief

Ethics in Brief is designed to present ethical issues that practitioners might well face on a daily basis. It is a service of the Legal Ethics Committee of the San Diego County Bar Association for SDCBA members.


Arbitrator Required Disclosures:  Failure to Disclose Potential Bias Results in Vacating of Award

What can compromise a neutral arbitrator’s impartiality? The Second District Court of Appeal’s ruling in Mt. Holyoke Homes, LP v. Jeffer Mangels Butler & Mitchell, LLP (2013) 2013 WL 5321158, 2013 Cal. App. Lexis 765, should give pause for thought to neutral arbitrators and attorneys.

Dissatisfied with a mutually agreed upon neutral arbitrator’s final award finding for defendant law firm in a legal malpractice case, one of the plaintiffs searched the Internet for evidence of possible arbitrator bias.  She found a 10 year old resume on the Internet site of the Academy of Distinguished Neutrals where the arbitrator had listed a partner in the defendant law firm as the first of three references; the resume had not been disclosed when the parties agreed to accept the arbitrator.  Plaintiffs promptly filed a petition to vacate the award; defendants opposed the petition and filed their own petition to confirm the award.

The trial court confirmed the award, stating it was clear that no relationship existed between the arbitrator and referenced named partner, other than the partner had appeared before the arbitrator when the arbitrator was a judge in the past.  The arbitrator stated he had not discussed using the partner as a reference with the partner. The trial court found the information was not required to be disclosed by the Code of Civil Procedure section 1281.9(a)(6) and a person familiar with the facts would not be led to doubt the impartiality of the arbitrator.

The Second District Court of Appeal disagreed, noting a proposed arbitrator must disclose pertinent information as required in the Code of Civil Procedure section 1281.9(a) and the Ethics Standards for Neutral Arbitrators in Contractual Arbitration, Standard 7(d).The arbitrator’s failure to disclose such information requires the award to be vacated, and no prejudice need be shown, according to the California Supreme Court case Haworth v. Superior Court (2010) 50 Cal.4th 372, 389.

 Haworth set forth the appearance-of-impartiality standard while cautioning against an overly broad interpretation:

The ’reasonable person’ is not someone who is ‘hypersensitive or unduly suspicious,’                    but rather is a ‘well-informed, thoughtful observer’ (U.S. v. Holland (9th Cir. 2008) 519 F.3d 909, 913) . . .the partisan litigant emotionally involved in the controversy underlying the lawsuit is not the disinterested objective observer whose doubts concerning the judge’s impartiality provide the governing standard. . .(United Farm Workers v. Superior Court, (1985) 170 Cal. App. 3d 97 at p. 106, fn. 6.)  ‘An impression of possible bias in the arbitration context means that one could reasonably form a belief that an arbitrator was biased for or against a party for a particular reason’ (Betz v. Pankow, (1995) 31 Cal. App. 4th 1503, 1511.) (Haworth, supra, 50 Cal.4th at p. 389.)*7  

Utilizing this standard, the Court of Appeal concluded a reasonable person aware of the facts could reasonably doubt the arbitrator’s impartiality.  The resume listing the defendant law partner as a reference was publicly available; the arbitrator presumably believed the partner had a favorable opinion of his abilities and the arbitrator could be reluctant to rule against the partner’s law firm in a legal malpractice case. The arbitrator’s interest in maintaining the partner’s high opinion of the arbitrator could lead to a reasonable doubt as to whether the arbitrator could be impartial which is neither hypersensitive nor speculative, according to the Court, and could lead an objective observer to reasonably doubt his impartiality.

In addition, the Court concluded the plaintiff had no obligation to investigate publicly available information the arbitrator is required to timely disclose; it is the arbitrator’s duty alone.  No evidence was found the plaintiff know of the information prior to the arbitration.

-- Peggy S. Onstott

**No portion of this summary is intended to constitute legal advice. Be sure to perform independent research and analysis. Any views expressed are those of the author only and not of the SDCBA or its Legal Ethics Committee.**