LAGUNA CREST ENTERPRISE, INC VS. SCINTO

Proc., § 1285.4.) If a petition to confirm an arbitration award is duly served and filed, “the court shall confirm the award as made, whether rendered in this state or another state, unless in accordance with this chapter it corrects the award and confirms it as corrected, vacates the award or dismisses the proceeding.” (Code Civ. Proc., § 1286.) If the award is confirmed, “judgment shall be entered in conformity therewith.” (Code Civ. Proc., § 1287.4.)

A response to a petition may request the court to dismiss the petition or to confirm, correct or vacate the award. (Code Civ. Proc., § 1285.2)

Code of Civil Procedure section 1286.2, subdivision (a) provides the court may vacate an award if it determines, inter alia:

(3) The rights of the party were substantially prejudiced by misconduct of a neutral arbitrator. (5) The rights of the party were substantially prejudiced by the refusal of the arbitrators to postpone the hearing upon sufficient cause being shown therefor or by the refusal of the arbitrators to hear evidence material to the controversy or by other conduct of the arbitrators contrary to the provisions of this title. (6) An arbitrator making the award either: (A) failed to disclose within the time required for disclosure a ground for disqualification of which the arbitrator was then aware; or (B) was subject to disqualification upon grounds specified in Section 1281.91 but failed upon receipt of timely demand to disqualify himself or herself as required by that provision.

“Under the California Arbitration Act, ‘[t]he scope of judicial review of arbitration awards is extremely narrow because of the strong public policy in favor of arbitration and according finality to arbitration awards.’” (Branches Neighborhood Corp. v. CalAtlantic Group, Inc. (2018) 26 Cal.App.5th 743, 750 [citations omitted].)

Duty to Disclose

Code of Civil Procedure section 1281.9, subdivision (a) provides, “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, . . .” This includes “[t]he existence of any ground specified in Section 170.1 for disqualification of a judge.”

Standard 7 of the Ethics Standards for Neutral Arbitrators in Contractual Arbitration further enumerates specific categories of relationships that must be disclosed, including relationships with any party or counsel for a party.

“The general requirement that a proposed neutral arbitrator disclose any matter that could reasonably cause a person aware of the facts to entertain a doubt that the proposed arbitrator would be impartial (§ 1281.9, subd. (a)) involves an objective test that focuses on a reasonable person’s perception of bias and does not require actual bias. ‘Impartiality’ entails the ‘absence of bias or prejudice in favor of, or against, particular parties or classes of parties, as well as maintenance of an open mind.’ ‘Judges, like all human beings, have widely varying experiences and backgrounds.

Except perhaps in extreme circumstances, those not directly related to the case or the parties do not disqualify them.’” (Mt. Holyoke Homes, L.P. v. Jeffer Mangels Butler &Mitchell, LLP (2013) 219 Cal.App.4th 1299, 1311 [cleaned up].) “‘If the impression of possible bias rule is not to emasculate the policy of the law in favor of the finality of arbitration, the impression must be a reasonable one.’ [Citation.] An arbitrator must be able to determine at the outset, with reasonable certainty, what information must be disclosed.

It is reasonable to expect that a neutral arbitrator will be able to identify, without much difficulty, the information that must be disclosed regarding the particular relationships and interests that are clearly defined in section 1281.9 and standard 7 of the Ethics Standards. It may well be more difficult for the arbitrator to determine whether a disclosure must be made under the general standard of appearance of partiality, because that standard, although objective, is not clear-cut . . . . 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. [Citation.] Such a result would undermine the finality of arbitrations without contributing to the fairness of arbitration proceedings.” (Id. at p. 1312 [citation omitted].)

Alleged Required Disclosures

LCE contends Klinger failed to disclose multiple material relationships.

Specifically, LCE contends Klinger failed to disclose she represented Jones & Associates (Lou Jones), the bond surety for Marina Landscape, Inc. (Marina), a company in which LCE’s counsel, Josef Cowan, was a one-third shareholder for approximately ten years. (Cowan Decl., ¶ 3.) LCE contends when Cowan sold his Marina shares to his brother Robert Cowan in 2004, he engaged in difficult and contentious negotiations with Lou Jones to secure his release from indemnity obligations on performance and payment bonds he had personally guaranteed. (Cowan Decl., ¶ 9.) Given Klinger’s representation of Lou Jones, LCE contends Klinger was aware of and materially involved in those contentious negotiations. (Cowan Decl., ¶ 9.)

LCE further contends Klinger failed to disclose she had known Cowan’s brother and partner in Marina, Robert, for many years through their joint service on a board or committee of the Associated General Contractors of America and through her representation of Lou Jones in connection with Marina. (Cowan Decl., ¶ 7.)

LCE contends Cowan’s relationship with Robert became strained and acrimonious in the early 2000s as a result of business disputes involving a separate company owned by Robert and Cowan’s other brother, and Cowan and Robert remain estranged to this day. (Cowan Decl., ¶ 8.)

LCE contends Klinger was required to but failed to disclose her relationship with Robert and her representation of Lou Jones with respect to Marina.

Whether Disclosures Were Required

“[S]ection 1286.2, subdivision (a)(6)(A), provides for vacatur only where the arbitrator fails to disclose a ground for disqualification ‘of which the arbitrator was then aware.’” (ECC Capital Corp. v. Manatt, Phelps & Phillips, LLP (2017) 9 Cal.App.5th 885, 902.) “Section 1286.2, subdivision (a)(6)(A), requires actual awareness, not inquiry or constructive awareness.” (Id. at p. 903 [citation omitted].) Thus, an arbitrator has no duty to disclose an issue he or she was not aware of at the time of the disclosures. (Id. at pp. 902- 903.)

LCE attaches as Exhibit A to the Cowan Declaration Klinger’s Oath Form dated 1/24/24. While LCE and CCM contend these relationships were never disclosed on the Oath Form, they have not demonstrated Klinger had actual awareness of Cowan’s relationship with Marina or his brother, Robert, at the time the disclosures were made. Rather, counsel for LCE states only that Klinger mentioned these relationships while engaging in “small talk” in the afternoon portion of day 7 of the evidentiary hearing. (Cowen Decl., ¶¶ 6-7.) As such, section 1286.2 subdivision (a)(6)(A) is inapplicable. (See Rivera v. Shivers (2020) 54 Cal.App.5th 82, 94 [finding § 1286.2(a)(6)(A) did not apply where the party moving to vacate introduced no evidence the arbitrator was aware opposing counsel was the son of his former mentor prior to the arbitration].)

Moreover, LCE and CCM have not demonstrated Klinger was aware of any matter “that could reasonably cause a person aware of the facts to entertain a doubt that the proposed arbitrator would be impartial.” (Code Civ. Proc., § 1281.9, subd. (a).)

While Cowen states his negotiations with Lou Jones “were difficult and contentious,” Cowan further states,, “I do not know the extent to which Arbitrator Klinger was aware of or involved with my negotiations with Lou Jones but given her representation of Lou Jones I believe it is highly likely she was aware of the negotiations and significantly involved with them.” (Cowan Decl., ¶ 9.) Thus, LCE’s contention regarding the depth of Klinger’s knowledge of and involvement in the negotiations is not based on any evidence, but only on Cowan’s personal belief based on her representation of Lou Jones.

Similarly, while Cowan also states his relationship with Robert “became extremely strained and acrimonious and [they] remain estranged to this day” (Cowan Decl., ¶ 8), Cowan does not demonstrate Klinger was actually aware of his business disputes with his brother or the resulting strained relationship.

Given the above, the Court finds LCE and CCM have failed to demonstrate grounds for vacatur based on the arbitrator’s failure to disclose pursuant to section 1286.2, subdivision (a)(6)(A).

Timing of LCE and CCM’s Objections

A proposed neutral arbitrator can be disqualified if a party serves a notice of disqualification. Failure to move within 15 days of the arbitrator’s disclosure statement waives the right to disqualify unless the arbitrator made a material omission or material misrepresentation in his or her disclosure. (Code Civ. Proc., § 1281.91, subd. (c).)

Subdivision (c) further states, “Except as provided in subdivision (d), in no event may a notice of disqualification be given after a hearing of any contested issue of fact relating to the merits of the claim or after any ruling by the arbitrator regarding any contested matter.”

Reading subdivision (c) in isolation, “if a basis for disqualification is not discovered until after the arbitration hearing has begun, either the party learning of the basis for disqualification would have no recourse or that party would be required to await the outcome of the arbitration and, if unfavorable, raise the ground for disqualification for the first time in a petition to vacate. Neither outcome would be sensible or fair, and the second would contravene long-settled policy.” (Goodwin v. Comerica Bank, N.A. (2021) 72 Cal.App.5th 858, 869 [citation omitted].)

“For this reason the statute contains an exception to subdivision (c), provided in subdivision (d) of section 1281.91. Subdivision (d) provides, ‘If any ground specified in Section 170.1 exists, a neutral arbitrator shall disqualify himself or herself upon the demand of any party made before the conclusion of the arbitration proceeding.’” (Ibid.) Section 170.1, which identifies grounds for disqualifying a judge, applies by reference to arbitrators and applies a standard identical to the standard in section 1281.9 requiring the arbitrator 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.” (Ibid.)

Thus, to obtain an arbitrator’s disqualification, a party is “required to ‘object ‘at the earliest practicable opportunity after discovery of the facts constituting the ground for disqualification’’, and in compliance with the more specific obligation under ethics standard 10(a)(4) to serve a notice of disqualification ‘within 15 days after becoming aware of the omission or misrepresentation’ in the arbitrator’s disclosure statement.” (Id. at p. 870.) By failing to do so, a party “forfeit[s] the right to demand disqualification when it subsequently learn[s] of the arbitrator’s adverse fee award.” (Ibid.)

While Code of Civil Procedure section 1281.91, subdivision (c) provides that same subdivision shall not “limit the right of a party to vacate an award pursuant to Section 1286.2” this does not mean forfeiting a right to disqualify does not prevent vacatur of the award. (See Cox v. Bonni (2021) 30 Cal.App.5th 287, 308.) “In stating that the provisions of section 1281.91 do not limit a party’s right to vacate an award under section 1286.2, it cannot have been the intent of the Legislature thereby to permit a party to hold a known ground for disqualification in reserve, ready to play as a trump card once the award issued.” (Ibid.)

Counsel for LCE became aware of the alleged conflict on 3/5/25 during the afternoon portion of day 7 of the 8-day evidentiary hearing. (Cowen Decl., ¶¶ 6-7.)

Chapwood contends LCE did not raise any objection during the remainder of the hearing (concluding on 4/3/25), including in any closing briefs and reply briefs, but instead informed counsel for Chapwood on 10/17/25 (after the arbitrator’s amended final award was issued) regarding the alleged disclosure issue. (Abeltin Reply Decl. (to CCM) at 1:10-14 (ROA 385.)

Cowen states in his declaration, “I did not raise the undisclosed facts with Arbitrator Klinger or ask her to disqualify herself because doing so would have placed an enormous burden on LCE and would have prejudiced LCE in terms of being able to assert its claims and defenses in the arbitration because LCE, I am informed and believe, did not have the resources to fund additional expenses, which would have been substantial if LCE had to arbitrate the matter with a different arbitrator. Stuck between the proverbial rock and a hard place, it was my opinion that the best course of action would be for LCE to complete the arbitration and hope that Arbitrator Klinger would render a fair and balanced decision.” (Cowen Decl., ¶ 12.)

Cowen further states, “Arbitrator Klinger issued her award on September 10, 2025, and I was shocked to see that she awarded Chapwood $632,995 on its claims against LCE, and nothing on LCE’s claims against Chapwood.” (Cowen Decl., ¶ 13.)

It was only after this adverse decision had been made that counsel for LCE then raised this issue of the arbitrator’s disclosures.

According to Goodwin, LCE was “required to “object ‘at the earliest practicable opportunity after discovery of the facts constituting the ground for disqualification’, and in compliance with the more specific obligation under ethics standard 10(a)(4) to serve a notice of disqualification ‘within 15 days after becoming aware of the omission or misrepresentation’ in the arbitrator’s disclosure statement. (72 Cal.App.5th at p. 870.) As LCE did not do so, it forfeited the right to demand disqualification when it subsequently learned of the arbitrator’s adverse fee award.

Alternatively, CCM contends Cowen did not raise this issue with counsel for CCM until 2/12/26. (Callon Decl., ¶¶ 2, 3.) CCM then filed its amended response seeking vacatur on 2/23/26.

Even if CCM’s objection was timely, however, CCM’s contentions as to Klinger’s conduct fail to demonstrate grounds for vacatur for the reasons discussed above.

Substantial Prejudice

LCE also seeks to vacate the award pursuant to Code of Civil Procedure section 1286.2, subdivisions (a)(3) and (a)(5), which mandate vacatur where “[t]he rights of the party were substantially prejudiced by misconduct of a neutral arbitrator” or where “[t]he rights of the party were substantially prejudiced by the refusal of the arbitrators . . . to hear evidence material to the controversy or by other conduct of the arbitrators contrary to the provisions of this title,” respectively.

LCE contends that while all three parties sought to admit deposition transcript excerpts into evidence, Klinger granted Chapwood and CCM’s requests without condition but required LCE to either substantially reduce the deposition transcript portions it sought to admit or pay $5,000. (Resp. at 11:20-25.)

Specifically, in a 4/11/25 email Klinger stated:

Mr. Cowan:

You have added approximately 575 pages of deposition transcript to the record. Assuming 330 pages of deposition transcript typically comes to 8 hours or 42 pages per hour, 575 pages would translate out to 13.5 hours. Now, I know that I can read a deposition transcript faster than what it takes to take a deposition, but, nonetheless, we are talking about at least an additional 10 hours of my time. So, the option is to add another $5,000 to the deposit for my arbitration fees or reduce your designation substantially.

Please advise your thoughts.

I would also like to hear from the other parties on this subject. (Cowan Decl., ¶ 14, Ex. B (ROA 364).)

After the parties provided further feedback, Klinger ultimately decided to require LCE “either deposit an additional $5,000 or substantially reduce the deposition designations to something reasonable.” (Cowan Decl., ¶ 14, Ex. B (ROA 364).)

As an initial matter, the $5,000 was not a fee for admitting documents into evidence, but as stated by Klinger, fees for her services as an arbitrator. As she explained, the additional pages added by LCE would take at least an additional ten hours of her time, which would result in an additional $5,000 to the deposit for her arbitration fees.

While LCE cites to Rule 57(b) of the AAA’s Construction Industry Arbitration Rules and Mediation Procedures, that rule refers to expenses of the arbitrator and not the arbitrator’s fees.

Moreover, even if Klinger’s actions constituted misconduct or an effective refusal to hear evidence, LCE has not sufficiently demonstrated substantial prejudice.

LCE contends as it lacked the financial resources to pay the $5,000, it was compelled to substantially reduce its evidentiary submission and deposition transcript excerpts it had identified as material to its claims and defenses were never placed before the arbitrator. (Cowan Decl., ¶ 14.) LCE contends this constituted “substantial prejudice” as set forth in sections 1286.2, subdivisions (a)(3) and (a)(5).

Mere disappointment with an arbitrator’s decision is not sufficient to prove substantial prejudice. (See Taheri Law Group, A.P.C. v. Sorokurs (2009) 176 Cal.App.4th 956, 964.) “To find substantial prejudice, the court must accept, for purposes of analysis, the arbitrator’s legal theory and conclude that the arbitrator might well have made a different award had the evidence been allowed.” (Hall v. Superior Court (1993) 18 Cal.App.4th 427, 439.)

LCE contends only “[d]eposition transcript excerpts that LCE had identified as material to its claims and defenses were never placed before the arbitrator.” (Resp. at 12:22-23.) LCE does not identify the nature of those excerpts, what issues they addressed, how they were material to its claims and defenses, or why they were necessary for the arbitrator’s analysis of the case. As such, based only on LCE’s conclusory statement that the excerpts were “material,” the Court is unable to determine whether the “arbitrator might well have made a different award had the evidence been allowed.”

Accordingly, the Court finds LCE has not demonstrated the arbitrator’s conduct resulted in substantial prejudice to LCE pursuant to section 1286.2, subdivisions (a)(3) and s (a)(5).

Judgment re: Mechanic’s Lien

In addition to requesting the Court confirm the arbitrator’s award and enter judgment accordingly, Chapwood also seeks a judgment that no mechanics lien exists based on the arbitrator’s amended final award awarding nothing to LCE on its counter-claim against Chapwood. (Abeltin Decl., Ex. E (ROA 352).)

Neither LCE nor CCM address this issue in their response.

Code of Civil Procedure section 1286 provides, “If a petition or response under this chapter is duly served and filed, the court shall confirm the award as made, whether rendered in this state or another state, unless in accordance with this chapter it corrects the award and confirms it as corrected, vacates the award or dismisses the proceeding.”

Thus, “[o]nce a petition to confirm an award is filed, the superior court has only four courses of conduct: to confirm the award, to correct and confirm it, to vacate it, or to dismiss the petition. The trial court is empowered to correct or vacate the award, or dismiss the petition, upon the grounds set out in the pertinent statutes; ‘[o]therwise courts may not interfere with arbitration awards.’” (Cooper v. Lavely & Singer Professional Corp. (2014) 230 Cal.App.4th 1, 11 [cleaned up].)

If the arbitrator’s award is confirmed, “judgment shall be entered in conformity therewith.” (Code Civ. Proc., § 1287.4.)

In requesting the Court enter a judgment that a mechanic’s lien on the subject property does not exist, Chapwood is requesting the Court enter an additional term of the judgment which it is not empowered to do pursuant to section 1286. Nor would such a judgment be in conformity with the arbitrator’s final award pursuant to section 1287.4. As such, the Court declines to enter judgment regarding the mechanic’s lien in connection with a confirmation of the arbitrator’s award. The Court GRANTS Defendant/Cross-complainant Chapwood, L.P.’s Petition to Confirm Arbitration Award and Request Entry of Judgment.

The Court ORDERS Chapwood, L.P to submit a revised proposed judgment.