California Court of Appeals, Second District, Third Division
MT. HOLYOKE HOMES, L.P., et al., Plaintiffs and Appellants,
JEFFER MANGELS BUTLER & MITCHELL, LLP et al., Defendants and Respondents.
APPEAL from a judgment of the Superior Court of Los Angeles County, No. BC430142 Zaven V. Sinanian and Michael P. Linfield, Judges.
Timothy D. McGonigle for Plaintiffs and Appellants.
Reuben Raucher & Blum, Timothy D. Reuben, Stephen L. Raucher and K. Cannon Brooks for Defendants and Respondents.
CROSKEY, Acting P. J.
Mt. Holyoke Homes, L.P. (MHH), and Darla Jones (collectively Plaintiffs) challenge the granting of a motion to compel arbitration and the denial of their motion to vacate the arbitration award in a legal malpractice action against Jeffer Mangels Butler & Mitchell, LLP (JMBM) and John Bowman (Defendants). They contend (1) an arbitration provision in the parties’ legal services agreement is unenforceable because it was not adequately disclosed or explained to them; (2) the arbitrator failed to timely disclose his prior relationship with a partner in JMBM, so the award must be vacated; and (3) the trial court erred by overruling their objections to the arbitrator’s declaration filed in opposition to their petition to vacate the award.
We conclude that the arbitration agreement is enforceable and the trial court properly compelled arbitration. We also conclude that the fact that the arbitrator had listed a partner in JMBM as a reference on his resume reasonably could cause an objective observer to doubt his impartiality as an arbitrator, and his failure to timely disclose that fact compels the conclusion that the arbitration award must be vacated. We therefore will reverse the judgment with directions to vacate the arbitration award.
FACTUAL AND PROCEDURAL BACKGROUND
1. Factual Background
Jones and her late husband formed MHH for the purpose of developing real property in Pacific Palisades. They retained Reznik and Reznik in 1992 to represent them in connection with an application for subdivision of the property. Their legal services agreement contained no provision requiring the arbitration of disputes. John Bowman was the attorney primarily responsible for handling the matter. Benjamin Reznik was another attorney with the same firm.
Benjamin Reznik and Bowman joined JMBM in 1997. Jones signed a legal services agreement with JMBM in October 1997. Paragraph 11 of the agreement stated in bold capital letters:
“ARBITRATION AND WAIVER OF JURY TRIAL. ANY DISPUTE BASED UPON OR ARISING OUT OF OUR ENGAGEMENT, THIS LETTER AGREEMENT AND/OR THE PERFORMANCE OR FAILURE TO PERFORM SERVICES (INCLUDING, WITHOUT LIMIT, CLAIMS OF BREACH OF DUTY OR PROFESSIONAL NEGLIGENCE) SHALL BE SUBJECT TO BINDING ARBITRATION TO BE HELD IN LOS ANGELES OR SAN FRANCISCO COUNTY, CALIFORNIA (WHICHEVER COUNTY IS THE ONE IN WHICH THE FIRM’S OFFICE IS LOCATED WHICH PERFORMED MORE OF THE SERVICES IN QUESTION) BEFORE A RETIRED CALIFORNIA SUPERIOR COURT JUDGE. JUDGMENT ON THE ARBITRATOR’S AWARD SHALL BE FINAL AND BINDING, AND MAY BE ENTERED IN ANY COMPETENT COURT. AS A PRACTICAL MATTER, BY AGREEING TO ARBITRATE ALL PARTIES ARE WAIVING JURY TRIAL.”
Paragraph 13 of the legal services agreement with JMBM stated, in part, “We are not advising you with respect to this letter because we would have a conflict of interest in doing so. If you wish advice, you should consult independent counsel of your choice.” The agreement also provided that the prevailing party in any arbitration or litigation was entitled to recover its attorney fees, expert fees and costs. The agreement stated above the signature line for Jones:
“The undersigned has read and understood this agreement. The undersigned acknowledges that this letter agreement is subject to binding arbitration as provided in Paragraph 11 above. The foregoing accurately sets forth all the terms of your engagement, and is approved and accepted on OCT 20, 1997.”
The City of Los Angeles denied an application for a preliminary parcel map and a coastal development permit in April 1992. MHH and the Joneses filed a petition for writ of mandate in the trial court challenging the denial. The court granted the petition and issued a peremptory writ of mandate in December 1993 directing the city to vacate its decision and reconsider the application. After extensive negotiations, MHH agreed to reduce the scope of development and accept conditions of approval, and the city approved the revised proposal in April 1999.
A neighbor appealed the city’s approval to the California Coastal Commission (Commission). The Commission scheduled a public hearing for July 13, 1999, to determine whether the appeal presented a substantial issue. The city failed to provide the administrative record of its proceedings to the Commission by that date. On the date of the hearing, the Commission opened and continued the hearing without determining whether the appeal presented a substantial issue. JMBM obtained the record and provided it to the Commission by March 29, 2000. The Commission held a hearing on May 9, 2000, in which it determined that the appeal presented a substantial issue and therefore should proceed. The Commission reviewed the subdivision application de novo and denied the application on June 11, 2003.
MHH and the Joneses filed a petition for writ of mandate in the trial court in July 2003 challenging the Commission’s decision. They argued for the first time that the Commission lost jurisdiction to decide the matter when it failed to find that the appeal presented a substantial issue within 49 days after the appeal was filed with the Commission. The court granted the petition on that ground and issued a peremptory writ of mandate in November 2006 ordering the Commission to set aside its disapproval of a parcel map and a coastal development permit and dismiss the appeal.
The Commission appealed the trial court’s decision to the Court of Appeal. Division Seven of the Second Appellate District held that after litigating the matter to completion before the Commission without challenging its jurisdiction, MHH and Jones were estopped from challenging the Commission’s jurisdiction. The Court of Appeal therefore reversed the judgment by the trial court, leaving the Commission’s denial of the ...