JAROSLAV MARIK v. MICHAEL KEELE

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Court of Appeal, Second District, California.

JAROSLAV MARIK et al., Plaintiffs and Appellants, v. MICHAEL KEELE et al., Defendants and Respondents.

B216304 & B216305

Decided: November 23, 2010

Lange & Koncius, Joseph J.M. Lange and Jeffrey A. Koncius for Plaintiffs and Appellants. Law Offices of David Burman and David B. Burman for Defendant and Respondent Michael Keele. Daniels, Fine, Israel, Schonbuch & Lebovits, Moses Lebovits and Robert P. Moore for Defendants and Respondents Peter Henman, Jerry L. Kay, Moravan Management, Inc., University Village, LLC, University Village-Phase 1A, LLC, University Village Building B, LLC, University Village Building E, University Village Building F/G and University Village Building 5.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

Plaintiffs and appellants Jaroslav Marik, M.D. and Letkov Financial Partners, LP (collectively, Marik) appeal a judgment confirming an arbitration award in favor of defendant and respondent Michael Keele (Keele) and in favor of defendants and respondents Peter Henman aka Peter Henman-Laufer, Jerry L. Kay, Moravan Management, Inc., University Village, LLC, University Village-Phase 1A, LLC, University Village Building B, LLC, University Village Building E, University Village Building F/G, and University Village Building 5 (collectively, University Village defendants).1

The essential issue presented is the failure of the arbitrator, retired Judge Robert M. Letteau, to disclose to the parties at the time of his nomination that he had been publicly admonished by the Commission on Judicial Performance (Commission) for “a troubling pattern of repeated violation of ethical duties that are fundamental to the fairness, and the perceived fairness, of the judicial process.”   The Commission determined “the existence of a pervasive pattern of bias, prejudgment, ex parte communication, and abuse of judicial authority toward parties and attorneys warrants a public admonishment.” 2

Guided by the Supreme Court's recent decision in Haworth v. Superior Court (2010) 50 Cal.4th 372 (Haworth ), which is binding on this court (Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 455), we conclude the arbitrator was not required to disclose to the parties his admonishment by the Commission.3  Therefore, the judgment is affirmed.

FACTUAL AND PROCEDURAL BACKGROUND

On March 23, 2005 and June 29, 2005, Marik filed the two instant actions, which were related, and asserted, inter alia, claims for breach of fiduciary duty, common counts, dissolution of limited liability companies, and sought damages of $3 million, as well as an accounting, declaratory relief, appointment of a receiver and injunctive relief.

On September 22, 2005, the trial court granted motions to compel arbitration in both actions, pursuant to the arbitrations provisions in the various written agreements.

After the trial court ordered the cases into arbitration, the parties nominated retired Judge Letteau to serve as arbitrator.   On February 2, 2006, pursuant to section 1281.9, Judge Letteau provided his disclosure to the parties.4  The disclosure made no mention of the Commission's May 20, 2004 decision and order imposing public admonishment on Judge Letteau for judicial misconduct.   Given the extent of the disclosure which was made, none of the parties sought to disqualify Judge Letteau.

Subsequently, the matters were arbitrated and on November 22, 2008, Judge Letteau issued his final award which found in favor of Keele and the University Village defendants.   Keele was awarded attorney fees and costs in the sum of $159,444.75.   The University Village defendants were awarded attorney fees and costs in the sum of $516,947.69.   Marik was granted a default judgment against University Village Building K, a limited liability company, in the sum of $862,153.50, consisting of Marik's $500,000 investment therein and accrued interest thereon.

On November 26, 2008, the University Village defendants filed their petition to confirm the $516,947.69 award and to reduce the award to judgment.   On February 28, 2009, Keele filed a petition to confirm the $159,444.75 award in his favor.

On March 5, 2009, Marik filed opposition to the petitions to confirm the award and a cross-petition to vacate the award in its entirety.   Marik contended vacation was required because the arbitrator failed to disclose facts which would cause a reasonable person to doubt his ability to be impartial. (§ 1281.9, subd. (a);  fn. 4, ante.)   Marik asserted the arbitrator was obligated to disclose he had been admonished by the Commission in five different matters for bias and other misconduct, and the arbitrator's history surely would have caused a person who was aware of the facts to reasonably entertain a doubt that the arbitrator would be able to be impartial and to have substantial doubt as to his capacity to be impartial.5

The supporting declaration of Marik's attorney, Joseph Lange (Lange) stated he was unaware of the arbitrator's admonishments by the Commission until late November or early December 2008, when he did a Google search on Judge Letteau.   By then, the arbitrator already had ruled in favor of Keele and the University Village defendants and had awarded them costs and attorney fees.   Lange asserted he never would have agreed to allow Judge Letteau to serve as arbitrator had he known of the judge's disciplinary history.

The opposition papers contended the information learned about Judge Letteau pertaining to his public admonishment was entirely unrelated to the subject matter, the legal questions presented, the parties or the attorneys involved in the instant action;  the situations which led to Judge Letteau's public admonishment occurred four to five or more years prior to the filing of Marik's initial complaint;  the information was a matter of public knowledge and readily available;  the arbitrator had no duty to include the public admonishment in his disclosure statement;  and no objectively reasonable person could doubt Judge Letteau's ability to be impartial in this case.

On March 23, 2009, the matter came on for hearing.   The trial court denied Marik's cross-petition to vacate the arbitration award and granted the petitions by Keele and the University Village defendants to confirm the award.

The trial court reasoned the “one public and one private admonishment do not evidence a predisposition to decide a cause or an issue in a certain way.  [¶] The Commission determined that he committed misconduct with respect to reducing the attorney's fees awarded to the conservator's attorney in Feist and with respect to showing prejudgment on the issues of attorney's fees award[ed] to plaintiff in the Condon matter.  [¶] However, this purported misconduct [ 6 ] did not suggest that this retired judge had a predisposition against plaintiff in this matter to award attorney's fees against him.   It did not indicate a bias against plaintiffs collectively or defendants collectively.   [¶] This is an extremely experienced Los Angeles Superior Court judge,” and in his 20 years on the bench, “he probably ruled on 500 attorney's fees motions․  And we've got a criticism on two of them.  [¶] So that does not indicate to me that, just because of that admonishment, that ․ he should be disqualified in every single attorney's fees motion case․”

On April 1, 2009, the trial court entered judgment on the award.   This timely appeal followed.

CONTENTIONS

Marik contends the arbitration award cannot be confirmed, and must be vacated, because the arbitrator failed to disclose facts which would cause a reasonable person to doubt his ability to be impartial.

DISCUSSION

1. Standard of appellate review.

This appeal from the superior court's decision on an award challenged due to the arbitrator's failure to disclose his public admonishment presents a mixed question of law and fact.  (Haworth, supra, 50 Cal.4th at pp. 384-385.)   Our review is de novo.  (Id. at pp. 384-388.)

2. General principles.

a. Statutory scheme;  disclosure requirements.

The California Arbitration Act (§ 1280 et seq.) “ ‘represents a comprehensive statutory scheme regulating private arbitration in this state.’  [Citation.]  The statutory scheme reflects a ‘strong public policy in favor of arbitration as a speedy and relatively inexpensive means of dispute resolution.’   [Citation.]  ‘[I]t is the general rule that parties to a private arbitration impliedly agree that the arbitrator's decision will be both binding and final.’  [Citation.]”  (Haworth, supra, 50 Cal.4th at p. 380.)

The statutory scheme, in seeking to ensure that a neutral arbitrator “serves as an impartial decision maker, requires the arbitrator to disclose to the parties any grounds for disqualification.   Within 10 days of receiving notice of his or her nomination to serve as a neutral arbitrator, the proposed arbitrator is required, generally, to ‘disclose 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.’ ( § 1281.9, subd. (a).)  Based upon these disclosures, the parties are afforded an opportunity to disqualify the proposed neutral arbitrator. (§ 1281.91, subds.(b), (d).)  If an arbitrator ‘failed to disclose within the time required for disclosure a ground for disqualification of which the arbitrator was then aware,’ the trial court must vacate the arbitration award. (§ 1286.2, subd. (a)(6)(A).)”  (Haworth, supra, 50 Cal.4th at p. 381, italics added.)

The “applicable statute and standards enumerate specific matters that must be disclosed.   The arbitrator must disclose specified relationships between the arbitrator and the parties to the arbitration, including involvement in prior arbitrations, an attorney-client relationship with any attorney involved in the arbitration, and any significant personal or professional relationship with a party or an attorney involved in the arbitration. (§ 1281.9, subd. (a)(3)-(6).)   The arbitrator also must disclose ‘any ground specified in Section 170.1 for disqualification of a judge,’ as well as ‘matters required to be disclosed by the ethics standards for neutral arbitrators adopted by the Judicial Council.’ (§ 1281.9, subd. (a)(1), (2);  see Cal. Rules of Court, Ethics Stds. for Neutral Arbitrators in Contractual Arbitration (Ethics Standards).)   The Ethics Standards require the disclosure of ‘specific interests, relationships, or affiliations' and other ‘common matters that could cause a person aware of the facts to reasonably entertain a doubt that the arbitrator would be able to be impartial.’  (Ethics Stds., com. to std. 7.) Specific matters that must be disclosed include, for example, the arbitrator's financial interest in a party or the subject of the arbitration, the arbitrator's knowledge of disputed facts relevant to the arbitration, and the arbitrator's ‘membership in any organization that practices invidious discrimination on the basis of race, sex, religion, national origin, or sexual orientation.’  (Ethics Stds., std. 7(d)(13);  see id., std. 7(d)(9), (10), (12).)”  (Haworth, supra, 50 Cal.4th at p. 381.)

However, “[n]either the statute nor the Ethics Standards require that a former judge or an attorney serving as an arbitrator disclose that he or she was the subject of any form of professional discipline.   At issue here is the general requirement that the arbitrator disclose any matter that reasonably could create the appearance of partiality.”  (Haworth, supra, 50 Cal.4th at p. 381, italics added.)

b. The Haworth decision;  no requirement that arbitrator disclose his public censure.

In Haworth, “the superior court vacated an arbitration award in a case involving the claim of a female patient that her physician was negligent in performing plastic surgery on her lip.   The basis of the [superior] court's action was that the neutral arbitrator had failed to disclose a matter ‘that could cause a person aware of the facts to reasonably entertain a doubt that the ․ neutral arbitrator would be able to be impartial.’  (Code Civ. Proc., § 1281.9, subd. (a).)  The question before [the Supreme Court was] whether the neutral arbitrator, a former judge of the superior court, was required to disclose to the parties the circumstance that, 10 years earlier, he received a public censure based upon his conduct toward and statements to court employees, which together created ‘an overall courtroom environment where discussion of sex and improper ethnic and racial comments were customary.’   [Citation.]”  (Haworth, supra, 50 Cal.4th at p. 377, fn. omitted.)   Haworth concluded “the arbitrator was not required to disclose this public censure, and therefore reverse[d] the decision rendered by the Court of Appeal.”  (Ibid.)

Haworth reasoned, “nothing in the public censure would suggest to a reasonable person that Judge Gordon [the arbitrator] could not be fair to female litigants, either generally or in the context of an action such as the one now before us.   His ‘actions were taken in an ostensibly joking manner and there was no evidence of intent to cause embarrassment or injury, or to coerce, to vent anger, or to inflict shame.’  [Citation.]  The conduct that was the subject of the public censure occurred between April of 1990 and October of 1992, more than 15 years prior to the arbitration proceeding.   None of the conduct or comments for which Judge Gordon was censured involved litigants or occurred in the courtroom while court was in session.  [Citation.]  In determining the level of discipline appropriate for a particular act of judicial misconduct, ‘[o]ur role is to determine, in the individual case, the action necessary to protect the public and the reputation of the judiciary.’   [Citation.]  Had this court concluded that Judge Gordon was unable to be fair to female litigants generally, public censure - which permitted him to continue to sit as a judge - would have been an inadequate form of discipline.”   (Haworth, supra, 50 Cal.4th p. 390.)

Further, “implicit in a determination that public censure, rather than permanent removal from office, will be sufficient to protect the public is the expectation that the judge will respond to the censure by ceasing to engage in the conduct that resulted in the disciplinary action.  [Citation.]  A person aware of all the circumstances of Judge Gordon's public censure - including this court's conclusion that there was no evidence suggesting that he acted with any intent to harm or that any of his misconduct involved litigants before the court - could not reasonably entertain a doubt concerning his ability to be fair to female litigants even at the time his misconduct involving court personnel took place.   Even less so could a reasonable person conclude that Judge Gordon was unaffected by the discipline imposed and could not be fair to female litigants at the time of the arbitration proceeding - at least in the absence of any evidence of gender bias on his part in the intervening 10 years following the public censure.”  (Haworth, supra, 50 Cal.4th at pp. 390-391.)

More “specifically, the circumstances underlying the public censure would not suggest to a reasonable person that Judge Gordon's conduct and attitude toward women would cause him to favor a male physician over a female patient in a case in which the appearance of the patient who underwent cosmetic surgery instead was worsened.”  (Haworth, supra, 50 Cal.4th at p. 391.)

Haworth recognized, “[t]here are many reasons why a party might, reasonably or unreasonably, prefer not to have a particular arbitrator hear his or her case - including the arbitrator's prior experience, competence, and attitudes and viewpoints on a variety of matters.   The disclosure requirements, however, are intended only to ensure the impartiality of the neutral arbitrator.  (See Ethics Stds., com. to std. 7.) They are not intended to mandate disclosure of all matters that a party might wish to consider in deciding whether to oppose or accept the selection of an arbitrator.  (See, e.g., Luce, Forward, Hamilton & Scripps, LLP v. Koch [ (2008) ] 162 Cal.App.4th [720,] 734-735 [neutral arbitrator not legally required to disclose service on board of professional organization with plaintiff's counsel, even if defendants asserted they were ‘ “understandably uncomfortable” ‘ with that relationship].)   When, as here, an arbitration agreement provides the parties or the parties' representatives the authority to jointly select a neutral arbitrator, they have the opportunity to take reasonable steps to satisfy themselves that the arbitrator they agree upon is acceptable.   The type of information here at issue - a decision publicly censuring a judge, which has been published in the Official Reports of this court - is readily discoverable.”  (Haworth, supra, 50 Cal.4th at pp. 393-394, italics added.)

Haworth added, “[t]he broad interpretation of the duty to disclose urged by [the losing party] could undermine the finality of arbitration awards․  The arbitrator cannot reasonably be expected to identify and disclose all events in the arbitrator's past, including those not connected to the parties, the facts, or the issues in controversy, that conceivably might cause a party to prefer another arbitrator.   Such a broad interpretation of the appearance-of-partiality rule could subject arbitration awards to after-the-fact attacks by losing parties searching for potential disqualifying information only after an adverse decision has been made.  (Remmey v. PaineWebber, Inc. [ (4th Cir.1994) ] 32 F.3d 143, 148 [‘If this challenge were sustained, nothing would stop future parties to arbitration from obtaining allegedly disqualifying information, going through with the proceedings, and then coming forward with the information only if disappointed by the decision.’].) Such a result would undermine the finality of arbitrations without contributing to the fairness of arbitration proceedings.”  (Haworth, supra, 50 Cal.4th at pp. 394-395.)

c. Application of Haworth factors compels affirmance of the judgment.

We recognize Haworth is somewhat distinguishable.   There, the arbitrator was censured based upon his conduct toward, and statements to, court employees, not litigants, and the censured conduct did not occur while court was in session.  (Haworth, supra, 50 Cal.4th at pp. 378-379, 390.)   Here, Judge Letteau was admonished for judicial misconduct which involved litigants, specifically, in five separate litigation matters.

In Haworth, the conduct which was the subject of the public censure occurred more than 15 years prior to the arbitration proceeding.  (Haworth, supra, 50 Cal.4th at p. 390.)   Here, the time gap was much shorter.   Judge Letteau's misconduct in the various matters occurred between 1996 and 2001;  the instant arbitration commenced just five years later, in 2006.

Be that as it may, as the trial court found, the conduct for which Judge Letteau was admonished did not suggest that he had “a predisposition against [the] plaintiff in this matter to award attorney's fees against him.   It did not indicate a bias against plaintiffs collectively or defendants collectively.”   Or to paraphrase Haworth, nothing in the public admonishment would suggest to a reasonable person that Judge Letteau could not be fair to a litigant such as Marik in the context of the instant action.  (Haworth, supra, 50 Cal.4th at p. 390.)   Specifically, there was nothing therein to suggest Judge Letteau might be biased against Dr. Marik as a physician or as an investor, or that he might be partial to defendants herein, or that he was predisposed to decide any issue in a particular way.

Further, the type of information here at issue, namely, the Commission's public admonishment of Judge Letteau, was a matter of public record and readily accessible on the Commission's website, under “Public Discipline & Decisions 1961-Present.” (www.cjp.ca.gov) Thus, Marik's counsel, Lange, had the opportunity to take reasonable steps to satisfy himself that Judge Letteau was acceptable.  (Haworth, supra, 50 Cal.4th at pp. 393-394.)

According to Lange's declaration below, it was not until late November or early December 2008 that he learned of Judge Letteau's problems with the Commission.7  Lange asserted he discovered this material shortly after the issuance of the final arbitration award on November 22, 2008.   This is precisely what Haworth anticipated.   To reiterate, “a broad interpretation of the appearance-of-partiality rule could subject arbitration awards to after-the-fact attacks by losing parties searching for potential disqualifying information only after an adverse decision has been made.  (Remmey v. PaineWebber, Inc., supra, 32 F.3d 143, 148 [‘If this challenge were sustained, nothing would stop future parties to arbitration from obtaining allegedly disqualifying information, going through with the proceedings, and then coming forward with the information only if disappointed by the decision.’].) Such a result would undermine the finality of arbitrations without contributing to the fairness of arbitration proceedings.”  (Haworth, supra, 50 Cal.4th at pp. 394-395.)

For all these reasons, we conclude the trial court properly refused to vacate the arbitration award and instead, confirmed the award.8

DISPOSITION

The judgment confirming the arbitration award is affirmed.   The parties shall bear their respective costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

We concur:

FOOTNOTES

FN1. A judgment confirming an arbitration award is appealable.  (Code Civ. Proc., § 1287.4, § 1294, subd. (d), § 1294.2.)All further statutory references are to the Code of Civil Procedure, unless otherwise specified..  FN1. A judgment confirming an arbitration award is appealable.  (Code Civ. Proc., § 1287.4, § 1294, subd. (d), § 1294.2.)All further statutory references are to the Code of Civil Procedure, unless otherwise specified.

FN2. On May 20, 2004, in a decision and order imposing public admonishment, the Commission found that “Judge Letteau engaged in misconduct while presiding over two matters between 1998 and 2000:  an attorney's motion for fees in the Conservatorship of Feist, and the court trial in Condon v. Mazza.  ․ [¶] The commission further found that Judge Letteau's misconduct in the Feist and Condon v. Mazza matters was similar to conduct between 1996 and 2001 in three other matters for which the judge was privately admonished in 2002.   Accordingly, the commission concluded that Judge Letteau's misconduct warrants this notice of intended public admonishment.”.  FN2. On May 20, 2004, in a decision and order imposing public admonishment, the Commission found that “Judge Letteau engaged in misconduct while presiding over two matters between 1998 and 2000:  an attorney's motion for fees in the Conservatorship of Feist, and the court trial in Condon v. Mazza.  ․ [¶] The commission further found that Judge Letteau's misconduct in the Feist and Condon v. Mazza matters was similar to conduct between 1996 and 2001 in three other matters for which the judge was privately admonished in 2002.   Accordingly, the commission concluded that Judge Letteau's misconduct warrants this notice of intended public admonishment.”

FN3. At the request of this court, the parties filed supplemental letter briefs addressing the impact of Haworth on the instant case..  FN3. At the request of this court, the parties filed supplemental letter briefs addressing the impact of Haworth on the instant case.

FN4. Section 1281.9 provides in relevant part:  “(a) In any arbitration pursuant to an arbitration agreement, when a person is to serve as a neutral arbitrator, the proposed neutral arbitrator shall disclose 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․”.  FN4. Section 1281.9 provides in relevant part:  “(a) In any arbitration pursuant to an arbitration agreement, when a person is to serve as a neutral arbitrator, the proposed neutral arbitrator shall disclose 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․”

FN5. The California Ethics Standards for Neutral Arbitrators in Contractual Arbitration (Ethics Standards), adopted by the Judicial Council, require the arbitrator “to inform parties about matters that could cause a person aware of the facts to reasonably entertain a doubt that the proposed arbitrator would be able to be impartial.”  (Ethics Stds., com. to std. 7.).  FN5. The California Ethics Standards for Neutral Arbitrators in Contractual Arbitration (Ethics Standards), adopted by the Judicial Council, require the arbitrator “to inform parties about matters that could cause a person aware of the facts to reasonably entertain a doubt that the proposed arbitrator would be able to be impartial.”  (Ethics Stds., com. to std. 7.)

FN6. Contrary to the trial court's characterization of Judge Letteau's activity as “purported” misconduct, it was actual misconduct, as determined by the Commission..  FN6. Contrary to the trial court's characterization of Judge Letteau's activity as “purported” misconduct, it was actual misconduct, as determined by the Commission.

FN7. Marik does not contend this information could not have been discovered earlier..  FN7. Marik does not contend this information could not have been discovered earlier.

FN8. In the wake of the Haworth decision, any expansion of an arbitrator's disclosure requirements is a matter for the Legislature..  FN8. In the wake of the Haworth decision, any expansion of an arbitrator's disclosure requirements is a matter for the Legislature.

CROSKEY, J. ALDRICH, J.