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Benjamin, Weill & Mazer v. Kors

October 12, 2010

BENJAMIN, WEILL & MAZER, PLAINTIFF AND RESPONDENT,
v.
NANCY HURWITZ KORS, DEFENDANT AND APPELLANT.



(Contra Costa County Super. Ct. No. C07-00939) Trial Judge: Hon. Thomas M. Maddock.

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

CERTIFIED FOR PUBLICATION

The California Arbitration Act (CAA) requires that "all matters that could cause a person aware of the facts to reasonably entertain a doubt that the proposed neutral arbitrator would be able to be impartial" be timely disclosed to all parties (Code Civ. Proc., § 1281.9, subd. (a).)*fn1 The issue in this case is whether this requirement may include business relationships with persons or entities that are not parties or lawyers for parties in the subject arbitration and, if so, whether such relationships should have been disclosed by the arbitrator here.

Appellant Nancy Hurwitz Kors appeals from an order granting the petition filed by respondent law firm, Benjamin, Weill & Mazer, a professional corporation (BWM), to confirm an arbitration award, and denying her petition to vacate that award. The order must be reversed, she claims, because the chief arbitrator failed to disclose business relationships casting doubt on his ability to be impartial, as required by the CAA. (§ 1281.9, subd. (a).)

We agree that in the circumstances of this case the arbitrator's business relationships "could cause a person aware of the facts to reasonably entertain a doubt that the proposed neutral arbitrator would be able to be impartial" (§ 1281,9, subd. (a)), which is all that is necessary to create the duty to disclose them. Accordingly, we shall reverse the order appealed from.

FACTS AND PROCEDURAL HISTORY

The Arbitration

In June 2004, Kors, a psychologist who serves as a professional adoption facilitator, was sued by Alette and Robert Temple after they learned that the putative birthmother they met through Kors had feigned her pregnancy and defrauded them out of several thousand dollars. In December 2004, Kors retained BWM to represent her. Five months later, after the parties clashed over a series of discovery and other disputes, the Temples voluntarily dismissed their complaint against Kors without prejudice. Kors thereafter filed a motion for an award of $224,564.74 in legal fees and costs under Family Code section 8635, asserting that, by virtue of the dismissal, Kors was the prevailing party for purposes of that section. The trial court disagreed and denied the motion, and that ruling was affirmed by Division One of this court. (Temple v. Kors (Aug. 29, 2006, A112619) [nonpub. opn.], 2006 WL 247951.)

Kors had at that time paid BWM $227,537.75 in legal services and costs, but had failed to pay the balance of $68,986.38 she had been billed by the firm. In March 2006, BWM served on Kors a Notice of Client's Right to Arbitration under the Mandatory Fee Arbitration Act (MFAA) (Bus. & Prof. Code, § 6200 et seq.). Instead of responding to that notice, Kors applied for non-binding fee arbitration under the MFAA pursuant to rules of the Contra Costa County Bar Association (CCCBA). BWM objected on the jurisdictional ground that no attorney who provided services to the parties in the lawsuit brought by the Temples against Kors ever maintained an office in Contra Costa County, and also because Kors's fee agreement with BWM specified that any fee dispute between the parties was to be submitted to binding arbitration pursuant to the rules of the Bar Association of San Francisco (BASF). The CCCBA denied jurisdiction and BWM thereupon commenced this action.

After the action was filed, Kors requested the binding arbitration under the BASF rules specified in the parties' fee agreement. (BASF Attorney/Client Fee Dispute Program, Arbitration Rules of Procedure (rev. Apr. 30, 2007) (BASF rules).) When BWM refused--on the ground that Kors's effort to commence non-binding arbitration pursuant to the rules of the CCCBA "specifically waives any belated request for binding arbitration at this time"--Kors moved to enforce the arbitration agreement and stay BWM's action. On September 28, 2007, the trial court granted Kors's motion to compel arbitration. Concluding that Kors's refusal to respond to BWM's notice of right to arbitrate under the MFAA resulted only in a waiver of her right to non-binding arbitration under that law, and she retained her right to enforce the parties' agreement for binding contractual arbitration under the BASF's rules and procedures for the arbitration of fee disputes, the court directed the parties to promptly submit their dispute to the BASF for binding contractual arbitration pursuant to that organization's rules.*fn2

In December 2007, the BASF appointed a panel of three arbitrators, Sean M. SeLegue, Gregory S. Maple and Clement D. DeAmicis, designating SeLegue chief arbitrator.*fn3 Under BASF's rules, the chief arbitrator "shall be responsible for the conduct of the arbitration and the writing of the Arbitration Award." (BASF rule 7(D).) Also, the chief arbitrator "shall be the sole judge of the relevance of any offered evidence and the hearing procedures employed." (BASF rule 9(E).)

Although the panel heard the matter on September 4, 2008, it did not issue its decision until February 25, 2009, 175 days later. The panel found "that the total amount of fee and/or costs which should have been charged in this matter is $303,579.34, of which the client has paid $227,537.75, for a net amount of $76,041.59 in unpaid fees and costs." (Fn. omitted.)*fn4 Kors was also directed to pay $26,245.80 in accrued interest, so that the total award to BWM was in the amount of $102, 287.39. Together with the previously paid $227,537.75, the total cost to Kors of BWM's representation was $329,825.14 plus accruing interest on the unpaid portion. Although the 20-page arbitration award acknowledged Kors's timely complaints that the aggressive strategy BWM devised was costing more than she was able to pay, and she was afraid to tell the partner of the firm representing her that he "was on the wrong course," because she feared " 'he would go ballistic,' " the award nevertheless concluded that "while the overall total of BWM's fee claim does indeed seem high, the fees are not out of character with the stakes or the complexity of the legal and factual issues. . . . Dr. Kors persisted in her quest against the Temples even as BWM warned Dr. Kors that she was digging herself in deeper with no guarantee of a fee recovery from the Temples."

On February 25, 2009, BASF mailed Kors the award together with a notice that she had 100 days within which to request that the award be vacated or corrected, as required by section 1288.2.

Trial Court Proceedings

On March 13, 2009, BWM filed a petition in the pending superior court action to confirm the award. On April 1, BWM submitted a proposed judgment confirming the award, representing that Kors had not responded and the time within which she was required to do so had expired. (See § 1290.6.) After disallowing Kors's response, the court signed the judgment, which was thereafter entered. However, on May 22, the court vacated the judgment on the ground that BWM had failed to serve Kors notice of a hearing on its petition to confirm, as required by section 1290.4.

The parties filed briefs on BWM's renewed petition to confirm and Kors's request to vacate or correct the award. Though she also raised other issues,*fn5 Kors's request to vacate rested primarily on the chief arbitrator's asserted failure to disclose "matters that could cause a person aware of the facts to reasonably entertain a doubt that the proposed neutral arbitrator would be able to be impartial," as required by section 1281.9.*fn6 Kors also relied upon section 1286.2, subdivision (a)(6)(A), which, as material, provides that "the court shall vacate the award if the court determines [that] [¶] . . . [¶] (6) An arbitrator making the award . . . (A) failed to disclose within the time required for disclosure a ground for disqualification of which the arbitrator was then aware . . . ."

Kors's nondisclosure claim is based upon information her counsel obtained shortly after issuance of the arbitration award. In April 2009, while reading the recent opinion of the Supreme Court in Schatz v. Allen Matkins Leck Gamble & Mallory LLP (2009) 45 Cal.4th 557 (Schatz), Kors's counsel "fortuitously" noticed that SeLegue, the chief arbitrator, was counsel for the defendant law firm in Schatz, which was challenging the denial of its petition to compel arbitration of a fee dispute with a client. Making further inquiry, Kors's counsel learned that SeLegue had been counsel in Schatz for that law firm since at least February 2006, and had filed a brief in the Supreme Court shortly before his appointment as chief arbitrator in this case. Shortly after he filed that brief, nine prominent law firms entered the case as amici curiae in behalf of SeLegue's client. SeLegue personally argued the case in the Supreme Court six days after he presided over the arbitration hearing in this case. Kors's counsel also learned that during December 2008, while he was writing the award in this case, SeLegue filed petitions for writs of mandate in behalf of another large law firm, DLA Piper US, LLP, in an action against it for attorney malpractice and related torts.

As an exhibit to her request to vacate the arbitration award, Kors produced a description of SeLegue's legal practice set forth on his law firm's webpage. The description states, among other things, that "[a]ttorneys who face charges of misconduct . . . often turn to Mr. SeLegue and his colleagues," and that "[h]is business litigation background and extensive experience with the unique issues and dynamics involved in claims against lawyers ...


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