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La Serena Properties v. Weisbach

July 15, 2010

LA SERENA PROPERTIES ET AL., PLAINTIFFS AND APPELLANTS,
v.
GERALD WEISBACH ET AL., DEFENDANTS AND RESPONDENTS.



(San Francisco City & County Super. Ct. No. 484081). Hon. Peter J. Busch.

The opinion of the court was delivered by: Ruvolo, P.J.

CERTIFIED FOR PUBLICATION

I. INTRODUCTION

Plaintiffs La Serena Properties, LLC, Casa Margaritaville, Inc., and Steven Yates (appellants) appeal from a judgment entered after the trial court sustained the demurrers of defendants Gerald Weisbach (Weisbach) and the American Arbitration Association (AAA) (respondents) without leave to amend. Appellants sued respondents for damages, as well as other relief, alleging five separate causes of action, all of which arise out of the alleged failure of arbitrator Weisbach to disclose a certain conflict of interest during the appointment process.

We agree with the trial court that the alleged claims of misconduct, no matter how pleaded, all arise out of the conflict of interest disclosure procedure that is integrally part of the arbitration process. Thus, respondents are protected from liability by the common law arbitral immunity for quasi-judicial acts. Accordingly, we affirm the judgment.

II. FACTUAL AND PROCEDURAL BACKGROUNDS

When considering an appeal from a judgment entered after the trial court sustained a demurrer without leave to amend, we "accept as true all well-pleaded facts in the complaint and give a reasonable construction to the complaint as a whole." (Animal Legal Defense Fund v. Mendes (2008) 160 Cal.App.4th 136, 140, fn. 1, citing Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) In addition, we may consider matters that are properly the subject of judicial notice, and were considered by the trial court. (Buesa v. City of Los Angeles (2009) 177 Cal.App.4th 1537, 1543.) Therefore, our factual summary is derived from the complaint, including Exhibits A through F incorporated by reference in that pleading. (Holland v. Morse Diesel Internat., Inc. (2001) 86 Cal.App.4th 1443, 1447.)*fn1

The complaint alleges that appellants entered into a construction contract and a subsequent promissory note with Merchant Builders, Inc. (MBI) in 2002, both of which included mandatory AAA arbitration provisions. Subsequently, a dispute arose between appellants and MBI, and appellants demanded arbitration under the AAA arbitration clauses contained in the contract and note. MBI refused to arbitrate, and appellants filed a motion to compel arbitration. The motion was granted.

After being compelled to go to arbitration, it is alleged that MBI's lawyers conspired among themselves to persuade appellants to accept Weisbach as the arbitrator, without disclosing that Weisbach had a longstanding "family relationship" with one of MBI's counsel, David Baskin (Baskin), in that Weisbach was the "boyfriend" of Baskin's sister. Appellants then "tentatively agreed" to Weisbach serving as the arbitrator.

A "Notice of Appointment" was sent to Weisbach by AAA, indicating that he had been selected as arbitrator. The notice included a conflicts of interest disclosure form, which AAA directed Weisbach to complete. Weisbach was informed in the notice and disclosure form that he would not be able to serve as arbitrator until the form had been duly executed and was on file with AAA. The form included the following admonition and instruction:

"It is most important that the parties have complete confidence in the arbitrator's impartiality. Therefore, please disclose any past or present relationship [sic] with the parties, their counsel, or potential witnesses, direct or indirect, whether financial, professional, social or of any other kind. This is a continuing obligation throughout your service on the case and should any additional direct or indirect contact arise during the course of the arbitration, or if there is any change at any time in the biographical information that you have provided to the AAA, it must also be disclosed. Any doubt should be resolved in favor of disclosure. If you are aware of direct or indirect contact with such individuals, please describe it below. Failure to make timely disclosure may forfeit your ability to collect compensation. The Association will call the disclosure to the attention of the parties."

Weisbach completed the form disclosing only a former association with Gerald K. Carroll, an attorney who worked with Long & Levit while Weisbach served as "of counsel" to the firm. Weisbach dated the disclosure form September 7, 2005, and signed it.

The complaint also alleges that Weisbach joined the conspiracy with MBI's counsel at "some time prior to September 12." "Hours later," on September 12, 2005, Weisbach sent an email to AAA stating that he had just received a call from Baskin informing Weisbach that Baskin was representing MBI in the dispute. Weisbach then stated: "David is a personal friend. While I do not believe that our relationship would prejudice my hearing of this matter, this relationship does present a potential conflict. Please so inform the parties and advise." A copy of the email was faxed to counsel in the case, along with a cover letter from AAA, asking that AAA be advised within 15 days if there was any objection to the appointment of Weisbach. Apparently, neither side then objected to Weisbach's service as arbitrator.

With the agreement of MBI's counsel, Weisbach did not disclose his "familial" relationship with Baskin, or the "depth and character of his relationship with the Baskin family," including the fact that he "was in a romantic relationship with Baskin's sister." Appellants claim that the partial disclosures of Weisbach's relationship with Carroll and Baskin were intended to appear as if complete disclosures had been made when the full nature of the conflict was concealed from appellants.

The arbitration commenced on March 26, 2006, and extended over 10 days. MBI was represented by Baskin and his son, Caleb Baskin. An arbitration award was issued by Weisbach on July 20, 2006, and was clarified in an amended award on September 26, 2006. The final award denied more than 20 claims made by appellants against MBI, including eight fraud claims, but awarded appellants a total of $12,336.44 for two claims. Appellants were also awarded $4,112.15 in attorney fees, and ...


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