60 Cal.App.5th 962
Cal. Ct. App.2021Background
- Harry and Ted Roussos are brothers and cotrustees of two interrelated family trusts that own multiple corporate entities; intra-family disputes arose over corporate management and directors.
- In December 2012 the parties signed an arbitration agreement stating Judge John P. Shook “will arbitrate all issues with binding authority.”
- In 2017 Harry and his wife Christine demanded arbitration (seeking removal/replacement of directors and other relief); the trial court compelled arbitration under the 2012 agreement.
- Judge Shook served a disclosure stating he previously arbitrated two matters involving the parties and their counsel; nine days later (within the statutory 15-day window) Ted served a notice of disqualification under CCP §§ 1281.9 and 1281.91.
- The arbitrator refused to disqualify himself, proceeded, and issued an award appointing Harry’s nominee as director; the trial court confirmed the award and Ted appealed.
- The Court of Appeal held Judge Shook was a “proposed neutral arbitrator,” that Ted’s timely disqualification demand required mandatory disqualification, and reversed and remanded with directions to vacate the award.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Judge Shook was a “proposed neutral arbitrator” subject to mandatory disclosure and disqualification under CCP §1281.9 and §1281.91 | Judge Shook was already appointed by the parties via the 2012 agreement; he was not merely a proposed arbitrator | Even though previously agreed, Judge Shook remained a proposed neutral for this arbitration and thus subject to statutory disclosure and a party’s 15‑day disqualification right | Judge Shook was a proposed neutral arbitrator; the statutory disclosure/disqualification rules applied |
| Whether a party may be forced to accept an arbitrator by prior contractual stipulation and thereby lose the statutory right to disqualify a proposed arbitrator | The 2012 agreement (stipulating Judge Shook would decide "all issues") precludes later disqualification objections and waives the right | Parties cannot contract away the mandatory statutory protections (including timely disqualification) under the California Arbitration Act and Judicial Council ethics standards | Parties cannot contract away these statutory protections; the disqualification right is nonwaivable and mandatory when timely asserted |
| Whether the trial court had discretion to confirm the award despite the arbitrator’s failure to disqualify after a timely demand | Trial court has discretion and prior case law (Fininen, Dornbirer) allows evaluation of disclosure materiality and consent | Where a proposed arbitrator is subject to §1281.91(b)(1), timely notice mandates disqualification and vacatur; cases cited by plaintiffs are distinguishable | Vacatur is mandatory under §1286.2(a)(6)(B) when an arbitrator subject to §1281.91 fails to disqualify after a timely demand; prior cases were distinguishable on facts (waiver/untimeliness/incomplete disclosures after arbitration) |
Key Cases Cited
- Azteca Construction, Inc. v. ADR Consulting, Inc., 121 Cal.App.4th 1156 (statutory disqualification right is absolute; parties cannot contract away neutrality protections)
- Luce, Forward, Hamilton & Scripps, LLP v. Koch, 162 Cal.App.4th 720 (disqualification based on required disclosure is an absolute right only when disclosure is legally required)
- Haworth v. Superior Court, 50 Cal.4th 372 (describing disclosure duties of proposed neutral arbitrators under CCP §1281.9)
- Honeycutt v. JP Morgan Chase Bank, N.A., 25 Cal.App.5th 909 (explaining statutory scheme and mandatory remedies for arbitrator nondisclosure)
- Fininen v. Barlow, 142 Cal.App.4th 185 (distinguished: waiver/consent and post‑award objections to incomplete disclosure justify denial of vacatur)
- Dornbirer v. Kaiser Foundation Health Plan, Inc., 166 Cal.App.4th 831 (distinguished: plaintiff consented despite incomplete disclosures and objected only after unfavorable award)
- Moncharsh v. Heily & Blase, 3 Cal.4th 1 (background on judicial oversight and enforcement of private arbitration)