Pages 4 -5 of the Opinion
Unfortunately, the parties received only 10 of the 11 pages of the arbitrator's disclosure worksheet. The missing page, page five, included Question No. 27, which asked whether the arbitrator had any time constraints that would interfere with the arbitrator's ability to commence or complete the arbitration in a timely manner, and Question No. 28, which asked whether the arbitrator, during the pendency of the arbitration, would "entertain offers of employment or new professional relationships in any capacity other than as a lawyer, expert witness, or consultant from a party or a lawyer for a party, including offers to serve as a dispute resolution neutral in another case." The arbitrator answered "no" to Question No. 27 and "yes" to answer No. 28. On page six, which the parties did receive, under the heading "Please explain any ‘yes' answer to any question above and/or make any additional disclosures you believe are appropriate," the arbitrator wrote: "#28. I will entertain offers to serve as a dispute resolution in other cases. I will evaluate any potential conflict at that time prior to accepting [the] offer."
Pages 6 - 7 of the OpinionCounsel for Honeycutt was surprised she lost. On September 12, 2016 she wrote a letter to the AAA's manager of alternative dispute resolution services, stating: "It is rather stunning that [the arbitrator] found that [Honeycutt] did not meet her burden on every single cause of action given how strong the evidence was in [her] favor and the presentation of [her] case at the arbitration hearing." Counsel for Honeycutt asked the manager to identify every other case the arbitrator had accepted involving Chase and its counsel of record. Counsel also stated for the first time that she had not received all pages of the notice of appointment in July 2014 and that the copy she received was "missing a page, omitting questions 21 through 28 and their responses." Counsel wrote: "Be advised that we intend to vacate the award and request that further proceedings are stayed until I have received the requested information from your office."On September 19, 2016 the manager sent counsel for Honeycutt the missing page of the arbitrator's July 17, 2014 disclosure worksheet. The manager also sent counsel for Honeycutt 10 letters from the arbitrator's case manager stating that, during the pendency of the arbitration between Honeycutt and Chase, the arbitrator had been appointed to serve as an arbitrator in eight other employment cases involving counsel for Chase and two other cases (one of which was an employment case) involving Chase. The parties had previously received only four of the eight letters concerning employment cases involving counsel for Chase.On September 28, 2016 counsel for Honeycutt sent the manager a formal objection to the arbitrator's continuing to serve in this matter and a request for the arbitrator's "immediate disqualification." Citing relevant provisions of the Code of Civil Procedure and the Ethics Standards, counsel for Honeycutt argued, among other things, that she had not received the entire initial disclosure by the arbitrator (because of the missing page) and that the arbitrator "failed to disclose all cases that she accepted from [Chase's] counsel during the pendency of the arbitration." Specifically, counsel for Honeycutt asserted the arbitrator had failed to disclose "at least four additional cases with [Chase's] law firm since being appointed to this matter."On October 10, 2016 the manager advised counsel for Honeycutt the AAA had denied Honeycutt's request to disqualify the arbitrator. The manager wrote: "After careful consideration of the parties' contentions, the [AAA] has determined that [the arbitrator] will be reaffirmed as an arbitrator in the . . . matter."On November 15, 2016 the arbitrator issued a final award ordering Honeycutt to "take nothing on her claims," denying Chase's request for costs, and ruling the $5,240 in arbitration administrative fees and the $62,067.50 in arbitrator compensation and expenses were "to be borne as incurred."
Pages 8 - 9 of the Opinion[T]he arbitrator made all initial disclosures in a timely manner because, although the parties did not receive the worksheet page with the question and answer regarding whether the arbitrator would entertain offers from the parties or their attorneys to serve as a dispute resolution neutral in other matters, the parties did receive the page with the explanation for the arbitrator's answer, which stated the arbitrator would entertain such offers. Chase also pointed out that, because "[i]t was readily apparent that a page was missing from the disclosures when [Honeycutt] first received the initial disclosure statement," her request to disqualify the arbitrator was untimely. Chase contended Honeycutt was "well aware of the Arbitrator's intent to accept offers to serve as a neutral in other cases, including cases involving the same parties and lawyers in this case, because the Arbitrator's handwritten note on the following page alone provided [her] with all the information that she needed to assess whether disqualification was appropriate."Regarding the arbitrator's failure to disclose during the arbitration four of the eight other matters involving counsel for Chase, Chase asserted Honeycutt had not identified any mandatory disclosure the arbitrator failed to make (even though Honeycutt had identified at least four of them) and pointed to a September 23, 2016 email from the AAA manager stating she had "provided all supplemental disclosure letters showing the new cases involving the Parties/Attorneys to this matter after the initial disclosure[s] were made." Citing a former version of the Ethics Standards, Chase also argued that the arbitrator was not required to provide supplemental disclosures of other matters in which the arbitrator was serving as a dispute resolution neutral involving the same parties and lawyers.
SIDE BAR: As best I understand the Superior Court's rationale, AAA had a robust protocol governing the disclosure of conflicts (or matters that could raise the perception of same). In discharging the arbitration forum's policy of providing the parties with full disclosure of potential and actual conflicts by all proposed arbitrators, a disclosure page got lost and was never transmitted. That page contained information that a reasonable party might have deemed rose to the level of a conflict -- or that party might have wanted to inquire as to the specifics of the perceived conflict. As it turns out, some facts had the appearance of a conflict to the extent that a proposed arbitrator wound up adjudicating several matters involving the employer/respondent's outside law firm that was also defending that same client in the AAA arbitration. Notwithstanding those issues, the Superior Court seems to have concluded something akin to no-harm-no-foul because whatever wound up not having been timely disclosed didn't appear to pose a material conflict in the court's apparent determination.What's the point of AAA's rigorous conflict disclosure process? If, when tested under fire, it didn't actually work as promised, then the failure is okay because it wouldn't have mattered even if it had worked? If my aunt were a man she'd be my uncle? As a lawyer, I sort of get where the court may have been coming from but I still wince. As a person who might need to resort to arbitration, I find the court's decision shocking and preposterous. There's an old line about "you get what you pay for." Parties in AAA arbitration pay for the full panoply of that organization's purported fairplay, disclosures, and competency. It's not a baseball game where a 300 average may get you into the Hall of Fame. AAA doesn't get to bat 300 or even 500 and continue to earn the right to offer so-called alternative dispute resolution. Sorry, but the Superior Court hasn't provided a compelling ruling in my opinion. Bill Singer
[T]he arbitrator did not disclose the four other matters involving counsel for Chase in which the arbitrator served as a dispute resolution neutral until after the arbitrator had completed the arbitration hearing and issued an interim award (and the arbitrator never disclosed any offers of employment to serve as a neutral). A party cannot waive a right she does not know she has. . .
The arbitrator disclosure rules are strict and unforgiving. And for good reason. Although dispute resolution provider organizations may be in the business of justice, they are still in business. The public deserves and needs to know that the system of private justice that has taken over large portions of California law produces fair and just results from neutral decisionmakers. (See Gray v. Chiu, supra, 212 Cal.App.4th at p. 1366 [while the rule under section 1286.2 requiring the court to vacate the award "seems harsh, it is necessary to preserve the integrity of the arbitration process"]; Advantage Medical Services, LLC v. Hoffman (2008) 160 Cal.App.4th 806, 822 ["‘neutrality of the arbitrator [was of] . . . crucial importance'" to the Legislature]; Azteca, supra, 121 Cal.App.4th at p. 1168 ("[o]nly by adherence to the [Arbitration] Act's prophylactic remedies can the parties have confidence that neutrality has not taken a back seat to expediency"].) Although the disclosure rules the arbitrator violated here may seem technical, they are part of the Legislature's effort to ensure that private arbitrations are not only fair, but appear fair. (See Ceriale v. AMCO Ins. Co. (1996) 48 Cal.App.4th 500, 504 [arbitration award may be vacated where "the record reveals facts which might create an impression of possible bias in the eyes of the hypothetical, reasonable person"].) "That all may drink with confidence from their waters, the rivers of justice," whether they flow through our public or private systems of dispute resolution, "must not only be clean and pure, they must appear so to all reasonable men and women." (U.S. v. State of Ala. (11th Cir. 1987) 828 F.2d 1532, 1552.)