“A written agreement to submit to arbitration an existing controversy or a controversy
thereafter arising is valid, enforceable and irrevocable, save upon such grounds as exist
for the revocation of any contract.” “The statutory scheme reflects a „strong public
2 All further statutory references are to the Code of Civil Procedure unless stated otherwise.
9
policy in favor of arbitration as a speedy and relatively inexpensive means of dispute
resolution.‟ [Citation.]” (Haworth v. Superior Court (2010) 50 Cal.4th 372, 380
(Haworth).)
A party petitioning the court to compel arbitration (§ 1281.2) bears the burden of
proving by a preponderance of evidence the existence of an arbitration agreement.
A party opposing the petition bears the burden of proving by a preponderance of
evidence any fact necessary to its defense. (Rosenthal v. Great Western Fin. Securities
Corp. (1996) 14 Cal.4th 394, 413 (Rosenthal).) The trial court sits as the trier of fact for
purposes of ruling on the petition. (Engalla v. Permanente Medical Group, Inc. (1997)
15 Cal.4th 951, 972.)
The arbitration provision here unambiguously states that any dispute arising out
of the firm‟s engagement as counsel, specifically including claims of professional
negligence, is subject to binding arbitration. The last paragraph before the signature
line further states that Jones, as the undersigned, has read the agreement and
acknowledges that it is subject to binding arbitration. Plaintiffs do not argue that the
arbitration provision is inconspicuous or procedurally unconscionable in any way. Nor
do they argue that the provision is one-sided or substantively unconscionable. Instead,
they argue that Defendants had a duty to disclose and explain the significance of the
arbitration provision and the failure to satisfy such duty invalidates the arbitration
agreement. This is a claim of fraud in the execution, also known as fraud in the
inception.
10
A contract is void for fraud in the execution if the promisor was deceived as to
the nature of his or her act and did not know what he or she was signing or never
intended to enter into a contract. (Rosenthal, supra, 14 Cal.4th at p. 415.) For example,
a misrepresentation as to the character or essential terms of a proposed contract can
render the promisor‟s assent ineffective. (Id. at p. 420.) If the parties were in
a fiduciary relationship in which the defendant owed the plaintiff a duty to explain the
terms of a proposed contract between them, a breach of that duty may constitute
constructive fraud and establish fraud in the execution. (Brown v. Wells Fargo Bank,
N.A. (2008) 168 Cal.App.4th 938, 959.) The scope of a fiduciary‟s duty depends on the
particular facts. (Rosenthal, supra, at p. 425; Brown, supra, at p. 961.) The existence
and scope of a duty is a question of law for the court to decide, so our review is de novo.
(Castaneda v. Olsher (2007) 41 Cal.4th 1205, 1213.)
Desert Outdoor Advertising v. Superior Court (2011) 196 Cal.App.4th 866
(Desert Outdoor) rejected essentially the same argument asserted here in similar
circumstances. The plaintiffs in Desert Outdoor initially signed an attorney fee
agreement with no arbitration provision. When their attorney changed firms, the
plaintiffs signed a new fee agreement containing a provision requiring binding
arbitration of any dispute between the parties. The plaintiffs later sued the attorney for
legal malpractice, and the attorney successfully petitioned to compel arbitration. (Id. at
pp. 869-870.) The plaintiffs argued that the attorney had a duty to disclose and explain
the arbitration provision in the new fee agreement and that the arbitration agreement
was invalid because he failed to do so. The Court of Appeal concluded that the attorney
11
had no such duty. (Id. at pp. 873-874.) Desert Outdoor stated that the arbitration
provision was clearly set forth in the fee agreement signed by the clients, who were
knowledgeable business persons, they were advised to consult separate counsel before
signing the agreement, and the agreement was not a contract of adhesion. (Id. at
p. 874.)
Similarly here, the arbitration provision was clear and explicit. Jones had hired
Reznik and Reznik in 1992 to obtain development approvals, litigated the matter against
the city in the trial court, and then negotiated with the city for several years. She had
substantial experience with litigation and legal representation before signing the legal
services agreement with JMBM in 1997. The agreement expressly advised Jones to
consult independent counsel if she wished to be advised on the agreement, and plaintiffs
have not shown that the agreement was a contract of adhesion. We conclude that, in
these circumstances, Defendants had no duty to point out the existence of the arbitration
provision or to explain its significance, and their failure to do so does not invalidate the
arbitration contract.
Lawrence v. Walzer & Gabrielson (1989) 207 Cal.App.3d 1501 (Lawrence) and
Powers v. Dickson, Carlson & Campillo (1997) 54 Cal.App.4th 1102 (Powers), cited by
Plaintiffs, are not on point. Lawrence concluded that an arbitration provision in
a retainer agreement was limited to fee disputes and other financial matters and did not
extend to legal malpractice claims. (Lawrence, supra, at pp. 1506-1508.) The
agreement was devoted almost exclusively to financial matters, and the trial court found
that the client did not understand that she was agreeing to submit any future malpractice
12
claims to arbitration. (Id. at pp. 1506-1507.) Lawrence stated that any uncertainty
should be resolved against the attorney as the party who caused the uncertainty to exist
(Civ. Code, § 1654), and concluded that the phrase “ „any other aspect of our
attorney-client relationship‟ ” in the arbitration provision should be interpreted as
referring only to financial matters similar to the types of financial matters specifically
referenced in the agreement. (Lawrence, supra, at pp. 1506-1507.) Here, in contrast,
the arbitration provision is clear and explicit, expressly encompasses claims of
professional negligence and is not limited to financial matters.
Powers, supra, 54 Cal.App.4th 1102, also involved an arbitration provision in
a retainer agreement. The initial retainer agreement included an arbitration provision, as
did a subsequent amendment to the agreement signed after the attorney had changed
firms. (Id. at pp. 1106-1107.) Powers stated that both arbitration provisions
unambiguously encompassed legal malpractice claims. (Id. at p. 1113, distinguishing
Lawrence, supra, 207 Cal.App.3d 1501.) Powers noted that a nonbinding, formal
advisory opinion of the State Bar‟s Standing Committee on Professional Responsibility
and Conduct stated that an attorney was ethically required to fully disclose to an
existing client the terms and consequences of an arbitration provision in a new retainer
agreement. (Id. at pp. 1113-1114.) Powers stated, however, that the arbitration
provision in the initial retainer agreement did not attempt to limit the attorney‟s liability
for legal malpractice, was not ethically improper and violated no conflict of interest
rules, and that the arbitration provision in the later amendment merely confirmed the
existing arbitration agreement. (Id. at pp. 1114-1115.) Powers therefore concluded that
13
the arbitration provision was enforceable and reversed an order denying a petition to
compel arbitration. (Id. at p. 1116.) In discussing the nonbinding advisory opinion,
Powers did not hold or suggest that an attorney has a duty to point out and explain to an
existing client an arbitration agreement in a new retainer agreement. In the
circumstances of this case, we conclude that Defendants had no such duty.
2. The Denial of the Petition to Vacate the Arbitration Award Was Error
a. Legal Framework
A proposed neutral arbitrator must timely disclose to the parties “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,” including, without limitation, specified
information.3 (§ 1281.9, subd. (a); see also Ethics Standards for Neutral Arbitrators in
Contractual Arbitration, Standard 7(d) (Ethics Standards).)4 The disclosures must be
made in writing within 10 calendar days after service of notice of the proposed
nomination or appointment. (§ 1281.9, subd. (b).) The parties have an opportunity to
disqualify the proposed neutral arbitrator based on the disclosures. (§ 1281.91,
3 “ „Neutral arbitrator‟ means an arbitrator who is (1) selected jointly by the parties or by the arbitrators selected by the parties or (2) appointed by the court when the parties or the arbitrators selected by the parties fail to select an arbitrator who was to be selected jointly by them.” (§ 1280, subd. (d).) 4 The Judicial Council adopted the Ethics Standards in 2002 as required by the Legislature (§ 1281.85, subd. (a)). Standard 7(d) states in language essentially identical to the language in section 1281.9, subdivision (a), quoted ante, the same disclosure requirement, in addition to other disclosure requirements. A neutral arbitrator must comply with the Ethics Standards, and a proposed neutral arbitrator must disclose any matters required to be disclosed under the Ethics Standards. (§§ 1281.85, subd. (a), 1281.9, subd. (a)(2).)
14
subd. (b).) If a party petitions the trial court to vacate an arbitrator‟s award and the
court finds that the arbitrator “failed to disclose within the time required for disclosure
a ground for disqualification of which the arbitrator was then aware” (§ 1286.2,
subd. (a)(6)(A)), the court must vacate the award. (§§ 1286.2, subd. (a), 1286.4,
subd. (a).) Vacation of the arbitrator‟s award is required in those circumstances, and no
prejudice need be shown. (Haworth, supra, 50 Cal.4th at p. 394.)
The general requirement that a proposed neutral arbitrator disclose any matter
that reasonably could 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.
(Haworth, supra, 50 Cal.4th at pp. 385-386.) “ „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.‟ [Citation.] „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.‟ ” (Id. at p. 389.)
The California Supreme Court in Haworth, supra, 50 Cal.4th 372, cautioned
against construing the governing standard too broadly. “[T]he appearance-of-partiality
„standard “must not be so broadly construed that it becomes, in effect, presumptive, so
that recusal is mandated upon the merest unsubstantiated suggestion of personal bias or
prejudice.” ‟ [Citation.] „The “reasonable person” is not someone who is
“hypersensitive or unduly suspicious,” but rather is a “well-informed, thoughtful
observer.” ‟ [Citation.] „[T]he partisan litigant emotionally involved in the controversy
15
underlying the lawsuit is not the disinterested objective observer whose doubts
concerning the judge‟s impartiality provide the governing standard.‟ [Citations.] [¶]
„An impression of possible bias in the arbitration context means that one could
reasonably form a belief that an arbitrator was biased for or against a party for
a particular reason.‟ [Citation.]” (Haworth, supra, 50 Cal.4th at p. 389.)
“ „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.” (Haworth, supra, 50 Cal.4th at pp. 394-395.)
16
b. Standard of Review
If the facts are undisputed, the question whether an arbitrator was required to
disclose a particular matter involves the application of the rule requiring disclosure to
undisputed facts. This is a mixed question of fact and law. Our review is de novo.
(Haworth, supra, 50 Cal.4th at pp. 385-386.)
c. An Objective Observer Reasonably Could Entertain a Doubt as to Judge Chernow’s Ability to Be Impartial in this Case
Some of the material facts are undisputed. Mangels is a partner in JMBM, the
law firm defendant in this action. Judge Chernow listed Mangels as a reference on his
resume, which was available on Internet at the time of the award. Plaintiffs discovered
this fact for the first time after the arbitration.
The Chernow declaration augmented these undisputed facts with additional facts
seemingly favorable to Defendants. Plaintiffs presented no conflicting evidence. We
will assume for the purpose of argument that the Chernow declaration is admissible and
that the facts stated in the declaration are undisputed. Accordingly, we will assume that
it is undisputed that Judge Chernow never discussed with Mangels the fact that he was
listed as a reference and listed him only because Mangels was a well-known and
highly-regarded litigator who was familiar with Judge Chernow‟s abilities as a neutral,
that the two have no professional relationship, and that Judge Chernow prepared the
resume approximately 10 years before issuing the arbitration award.
The question is not whether Judge Chernow actually was biased, but whether
a reasonable person aware of the facts reasonably could entertain a doubt that he could
17
be impartial in this case. (Haworth, supra, 50 Cal.4th at pp. 385-386.) We conclude
that the answer is yes. Judge Chernow had listed Mangels as a reference on a resume
that was publicly available on the Internet at the time of his selection as an arbitrator in
this matter. Judge Chernow presumably believed that Mangels had a favorable opinion
of his abilities as a neutral and would speak positively about him if asked. An objective
observer reasonably could conclude that an arbitrator listing a prominent litigator as
a reference on his resume would be reluctant to rule against the law firm in which that
attorney is a partner as a defendant in a legal malpractice action. To entertain a doubt as
to whether the arbitrator‟s interest in maintaining the attorney‟s high opinion of him
could color his judgment in these circumstances is reasonable, is by no means
hypersensitive, and requires no reliance on speculation. We believe that an objective
observer aware of the facts reasonably could entertain such a doubt.5
We reject Defendants‟ argument that because the resume was readily
discoverable on the Internet Judge Chernow had no obligation to disclose the fact that
he had listed Mangels as a reference. A party to an arbitration is not required to
investigate a proposed neutral arbitrator in order to discover information, even public
information, that the arbitrator is obligated to disclose. (Betz v. Pankow (1993)
16 Cal.App.4th 931, 937; cf. Urias v. Harris Farms, Inc. (1991) 234 Cal.App.3d 415,
425 [discussing judicial disqualification].) Instead, the obligation rests on the arbitrator
to timely make the required disclosure.
5 We do not suggest in any manner that Judge Chernow actually was biased in favor or against any party to this litigation.
18
An arbitrator‟s failure to make a required disclosure presumably would not
justify vacating the arbitrator‟s award if the party challenging the award had actual
knowledge of the information yet failed to timely seek disqualification.6 (See Kaiser
Foundation Hospitals, Inc. v. Superior Court (1993) 19 Cal.App.4th 513, 517.) Courts
have also held that if the arbitrator disclosed information or a party had actual
knowledge of information putting the party on notice of a ground for disqualification,
yet the party failed to inquire further, the arbitrator‟s failure to provide additional
information regarding the same matter does not justify vacating the award. (Dornbirer
v. Kaiser Foundation Health Plan, Inc. (2008) 166 Cal.App.4th 831, 842; Fininen v.
Barlow (2006) 142 Cal.App.4th 185, 190-191; Britz, Inc. v. Alfa-Laval Food & Dairy
Co. (1995) 34 Cal.App.4th 1085, 1096-1097.) Here, however, it is undisputed that
Jones did not discover until after the arbitration that Judge Chernow had listed Mangels
as a reference on his resume, and there is no indication that she previously had actual
knowledge of information that would have put her on inquiry notice of that undisclosed
fact.
The holding in Haworth, supra, 50 Cal.4th 372, is distinguishable. Haworth
involved an action by a female patient against a male doctor who had performed
cosmetic surgery on her, allegedly without her consent and negligently. The neutral
arbitrator, a former judge, failed to disclose that ten years earlier he had received
6 Haworth, supra, 50 Cal.4th at page 394, footnote 15, declined to decide the impact on a motion to vacate an arbitration award of a party‟s actual or constructive knowledge, prior to the arbitration, of a ground for disqualification.
19
a public censure for inappropriate conduct toward court employees involving sexually
suggestive comments, comments demeaning to women and an ethnic slur. (Id. at
pp. 378-379.) Haworth concluded, “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. . . . Judge Gordon‟s public censure simply provides no reasonable basis
for a belief that he would be inclined to favor one party over the other in the present
proceedings. [¶] Unlike cases in which evidence of gender bias has required
disqualification of a judge, the subject matter of this arbitration was not such that the
circumstance of gender was material, or that gender stereotyping was likely to enter into
the decision made by the arbitrators.” (Id. at p. 391.) It was in this context, after noting
the lack of connection between the undisclosed fact and the subject matter of the
arbitration, that Haworth cautioned against construing the appearance-of-partiality
standard too broadly. (Id. at pp. 385-386.)
Here, in contrast, the connection between the undisclosed fact of the arbitrator‟s
naming an attorney as a reference on his resume and the subject matter of the
arbitration, a legal malpractice action against the law firm in which the same attorney is
a partner, is sufficiently close that a person reasonably could entertain a doubt that the
arbitrator could be impartial. We conclude that Judge Chernow was required to disclose
the fact that he had listed Mangels as a reference on his resume. Judge Chernow did not
state in his declaration that at the time of his required disclosures he was not aware that
20
he had listed Mangels as a reference on his resume, and there appears to be no
reasonable dispute that he was aware of that fact at that time. His failure to timely
disclose this ground for disqualification of which he was then aware compels the
vacation of the arbitrator‟s award. (§ 1286.2, subd. (a)(6)A).) In light of our
conclusion, we need not decide whether the Chernow declaration was admissible.
DISPOSITION
The judgment is reversed with directions to the trial court to vacate the
arbitration award and conduct further proceedings consistent with the views expressed
in this opinion. Plaintiffs are entitled to recover their costs on appeal.
CERTIFIED FOR PUBLICATION
CROSKEY, Acting P. J.
WE CONCUR:
KITCHING, J.
ALDRICH, J.
21
AI Brief
AI-generated · verify before citing
Holding. The court held that an arbitration award must be vacated because the arbitrator failed to timely disclose that he had listed a partner of the defendant law firm as a professional reference on his resume, creating a reasonable doubt as to his impartiality.
Issues
Whether an attorney has a duty to disclose and explain an arbitration provision in a new legal services agreement to an existing client.
Whether an arbitrator's failure to disclose that a partner of the defendant law firm was listed as a reference on his resume requires vacating the arbitration award.
Disposition. reversed
Quotations verified verbatim against the opinion
“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”
“the arbitration provision is clear and explicit, expressly encompasses claims of professional negligence and is not limited to financial matters.”
“Vacation of the arbitrator‟s award is required in those circumstances, and no prejudice need be shown.”