58 Cal.App.5th 817
Cal. Ct. App.2020Background
- AXQG and Malek Media Group (MMG) formed Foxtail Entertainment, LLC; Anita Gou (AXQG) and Matthew Malek (MMG) were co-owners under an LLC agreement.
- Malek repeatedly withdrew Foxtail funds without consent, entered side deals depriving Foxtail of interests, and sent sexually explicit texts to a prospective employee; Gou sought to end the business relationship.
- AXQG demanded arbitration before JAMS; parties selected Ambassador David Huebner (Ret.) as arbitrator; a seven-day hearing produced a 96-page final award for AXQG (breach of agreement and fiduciary duty), authority to wind down Foxtail, and fees/costs to AXQG.
- After the award, MMG discovered the arbitrator had been a founding board member and chief counsel of GLAAD and moved in court to vacate the award alleging nondisclosure (bias) and refusal to hear material evidence; AXQG sought confirmation and sanctions against MMG.
- The trial court confirmed the award; the Court of Appeal affirmed, denied MMG’s judicial notice requests, rejected vacatur arguments, and imposed monetary sanctions on MMG and its counsel for a frivolous appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether arbitrator was required to disclose prior GLAAD affiliation (§1281.9/§1286.2(a)(6)) | Arbitrator’s past GLAAD role and social‑justice stances required disclosure because a reasonable person would doubt impartiality given Malek’s Catholic background and sexual‑harassment-related facts | Affiliation unrelated to core commercial dispute (misappropriation, dissolution). A reasonable, well‑informed observer would not reasonably doubt impartiality; disclosure not required | Disclosure not required; no appearance‑of‑partiality under objective test; vacatur denied |
| Whether arbitrator refused to hear material evidence (§1286.2(a)(5)) | Arbitrator excluded Stephen Epacs, curtailed cross‑exam of Salafia, and ignored authenticity issues of an email chain, causing substantial prejudice | Record shows no preserved exclusion of Epacs; cross‑examination continued; arbitrator considered the email issue and found MMG’s spoliation/fabrication claims unsupported and immaterial | No refusal to hear material evidence; no substantial prejudice shown; vacatur denied |
| Requests for judicial notice of #MeToo, GLAAD materials, arbitrator’s tweets, JAMS rules, transcript excerpts | Materials show connection among arbitrator, GLAAD, #MeToo and bias against Catholic male, warranting notice | Requests are irrelevant, lack authentication, or improperly offered for truth; social movements and press releases not proper subjects of judicial notice | Requests denied as irrelevant or improper uses of judicial notice |
| Whether sanctions are warranted for frivolous appeal (§907; appellate rules) | MMG appealed in good faith | Appeal objectively and subjectively frivolous: lacked legal/factual basis, manufactured conspiracy theories, violated briefing rules; counsel had obligation not to pursue | Appeal frivolous; sanctions imposed joint and several: $46,000 to AXQG and $10,000 to court; counsel ordered to report to State Bar |
Key Cases Cited
- Haworth v. Superior Court, 50 Cal.4th 372 (explains limited judicial review of arbitration awards and the objective appearance‑of‑partiality test)
- Moncharsh v. Heily & Blase, 3 Cal.4th 1 (describes statutory grounds for vacating arbitration awards)
- Rebmann v. Rohde, 196 Cal.App.4th 1283 (arbitrator need not disclose unrelated personal affiliations)
- Mt. Holyoke Homes, L.P. v. Jeffer Mangels Butler & Mitchell, LLP, 219 Cal.App.4th 1299 (applies objective test for arbitrator disclosure obligations)
- Epic Medical Management, LLC v. Paquette, 244 Cal.App.4th 504 (prejudice/materiality analysis when arbitrator excludes evidence)
- In re Marriage of Flaherty, 31 Cal.3d 637 (standards for imposing sanctions for frivolous appeals)
- In re Marriage of Schnabel, 30 Cal.App.4th 747 (sanctions against counsel and party for frivolous appellate practice)