22 Cal.App.5th 729
Cal. Ct. App.2018Background
- Kantor hired Baker Marquart LLP on a contingency fee agreement that increased the fee from 30% to 35% if nine specified "minimum tasks" were completed within 100 days; the agreement included a fee-arbitration clause under Beverly Hills Bar Association rules.
- After a >$1.6M settlement, Baker Marquart received ~35% (~$600k). Kantor demanded fee arbitration claiming only tasks 1 and 9 were not completed, so the 35% was improper.
- Baker Marquart responded addressing tasks 1 and 9 and produced time records and other documents; parties were ordered to submit briefs and exhibits before arbitration.
- Kantor submitted an ex parte "confidential arbitration brief" to the arbitration panel, raising for the first time failures as to all nine tasks and additional issues (e.g., failure to pursue an accounting); he did not provide this brief to Baker Marquart and reassured Baker Marquart by letter that it had possession of relevant documents.
- The three-member panel (majority) relied on issues in the confidential brief, found Baker Marquart failed to perform several tasks (including discovery and pursuing an accounting), awarded a refund and rendered a binding award; Baker Marquart only discovered the confidential brief later when filed in court.
- Trial court confirmed the award; this appeal challenges confirmation on the ground the award was procured by "undue means" due to the ex parte confidential brief and lack of meaningful opportunity to respond.
Issues
| Issue | Plaintiff's Argument (Baker Marquart) | Defendant's Argument (Kantor) | Held |
|---|---|---|---|
| Whether the arbitration award must be vacated because it was procured by "undue means" (§ 1286.2(a)(1)) via Kantor's ex parte confidential brief | Kantor submitted a confidential brief raising new claims not in his demand; Baker Marquart had no adequate opportunity to respond, depriving it of a fair hearing — award must be vacated | Kantor argued (1) Baker Marquart had the file and exhibits so could respond at the hearing; (2) the award rests on issues in the demand (tasks 1 and 9) so any error was harmless; and (3) Baker Marquart waived objections | Reversed: the award was procured by "undue means." The panel relied on issues first raised in the ex parte brief; Baker Marquart lacked meaningful notice and opportunity to respond, so the award must be vacated and remanded to the trial court to enter an order vacating the award. |
Key Cases Cited
- Moncharsh v. Heily & Blase, 3 Cal.4th 1 (1992) (arbitration awards generally not reviewable on merits; limited statutory exceptions apply)
- Maaso v. Signer, 203 Cal.App.4th 362 (2012) (ex parte communications with arbitrators can constitute "undue means" and require vacatur when they deprive a party of a fair hearing)
- Pour Le Bebe, Inc. v. Guess? Inc., 112 Cal.App.4th 810 (2003) (discussing limits of vacatur for unfair tactics and relation to extrinsic fraud)
- Pacific Crown Distributors v. Brotherhood of Teamsters, 183 Cal.App.3d 1138 (1986) (extrinsic fraud defined as conduct that deprives a party of a fair and impartial hearing)
- Comerica Bank v. Howsam, 208 Cal.App.4th 790 (2012) (improper ex parte communications may constitute corruption, fraud, or other undue means)
- SWAB Financial, LLC v. E*Trade Securities, LLC, 150 Cal.App.4th 1181 (2007) (standard for reviewing arbitration-related rulings)
- Cooper v. Lavely & Singer Professional Corp., 230 Cal.App.4th 1 (2014) (clarifying waiver of appellate rights and standards of review for arbitration confirmation/vacatur)