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News : Failure To Timely Disclose Cause For Arbitrator Disqualification Can Be Costly
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FAILURE TO TIMELY DISCLOSE CAUSE FOR ARBITRATOR DISQUALIFICATION CAN BE COSTLY
All litigants in an arbitrated matter can suffer severe financial consequences if the Arbitrator fails to timely disclose possible cause for disqualification. Alan G. Saler of Dispute Eradication Services discusses one such recent case, and various steps which could have been taken to avoid this costly oversight, in an article authored by him as follows: "On October 26, 2005, Division Four of the Second Appellate District, issued an opinion in an employment termination case entitled Michael S. Ovitz, et al. v. Catherine E. Schulman. The decision demonstrates how critically important it is for an arbitrator to timely and comprehensively disclose potential grounds for disqualification. The parties selected Retired Justice Campbell Lucas as the arbitrator. The arbitration hearing consumed twenty-three days, during which twenty-one witnesses testified in person, and another seventeen by declaration. The parties introduced several hundred exhibits. At the hearing's conclusion, Justice Lucas awarded the prevailing parties, Michael Ovitz, Artists Production Group, LLC., and five other business entities approximately $1.5 million in compensatory damages, and almost $1.9 million in attorney's fees and costs. Shortly after Justice Lucas issued his tentative ruling, the American Arbitration Association provided counsel with a letter in which Justice Lucas sought to ‘clarify' that he had simultaneously heard two arbitrations involving the law firm that represented Ovitz and the other prevailing parties. He wrote in his letter that he had made a ‘complete disclosure' in both cases, but that he was prepared to remove himself from the second case and waive his fee for that matter if the parties wished. The victorious parties petitioned the trial court to confirm the arbitration award. Relying on Code of Civil Procedure § 1286.2(a)(6)(A), Judge Dau denied their petition and granted the cross-petition to vacate the award. Acknowledging Judge Dau's ‘thoughtful, detailed written ruling,' the Court of Appeal affirmed. The panel based its decision on Justice Lucas' inadvertent failure to disclose that he had accepted an assignment as an arbitrator in another matter in which one of the parties was represented by one of the firms participating in the Ovitz v. Schulman arbitration proceeding. The Court agreed with the trial court that the arbitrator's disclosure worksheet did not comply with Standard 12(b). It also held that Schulman did not waive her right to challenge the arbitrator, even though she had not moved to disqualify within 15 calendar days, as required by the governing statute. While the disclosure requirements are the arbitrator's responsibility, as this decision demonstrates, the financial consequences of an inadequate failure to disclose can be devastating for the parties who will have spent in many cases exorbitant sums of money only to find themselves back at square one. Attempting to keep an understandably disgruntled client at bay by pointing to the arbitrator's lack of diligence is not likely to keep them in the fold. How can you avoid this predicament? Len Levy, a colleague of mine who frequently serves as an arbitrator recommends taking the following precautions, which I too wholeheartedly endorse: 1. Determine whether the disclosure form the arbitrator submits discloses an intent to entertain other offers of employment from the parties or their lawyers; 2. If it does not, consider requesting the arbitrator provide the parties with a list of those matters he or she is currently arbitrating. This will help you to determine whether one of your clients, or members of your firm, is involved in a proceeding with that arbitrator. 3. Before you retain an arbitrator determine whether any member of your firm or your client, currently has any arbitration, mediation, or discovery reference pending with the proposed neutral and, if so, what that neutral's Arbitrator Disclosure Statement reveals regarding entertaining future offers of employment." This article has been brought to your attention by Shawn Elliott of the Firm's Sherman Oak's office. Mr. Elliott focuses his practice on all phases of civil litigation, including arbitration and trial work. He also represents a variety of clients in matters related to Transportation Law and Insurance and Business Law. Should you wish to speak with Mr. Elliott about how the Firm can assist with your litigation needs, please contact him at (818) 205-9955. http:// |
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