63 Cal.App.5th 134
Cal. Ct. App.2021Background:
- Steven Speier, former fund manager, filed arbitration against four investment funds after his removal; the court appointed retired Judge Gail A. Andler as arbitrator and JAMS administered the arbitration.
- Arbitrator and JAMS provided prearbitration disclosures broadly stating JAMS neutrals have an economic interest in JAMS and that other neutrals may have served parties or counsel previously; the arbitrator disclosed prior matters involving the parties and counsel.
- After a nine‑day hearing the arbitrator issued a final award for the Funds: $433,117.23 in principal, $2,112,974.03 in attorneys’ fees, and $157,709.87 in costs.
- Post‑award, Speier requested (for the first time) details of the arbitrator’s ownership interest in JAMS and the number of JAMS matters involving O’Melveny & Myers; JAMS replied that owner distributions never exceeded 0.1% of revenue and provided a usage report.
- The usage report showed O’Melveny & Myers and Alston & Bird each had 245 JAMS matters in the prior five years; Speier moved to vacate the award alleging nondisclosure of the arbitrator’s JAMS ownership and the extent of JAMS’s business with O’Melveny.
- The trial court denied vacatur and confirmed the award; the Court of Appeal affirmed, applying the objective reasonable‑person disclosure standard and de novo review.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether arbitrator had to disclose her ownership interest in JAMS | Speier: ownership interest (panelist/owner) should have been disclosed because it could lead a reasonable person to doubt impartiality | Respondents: arbitrator disclosed she practiced with JAMS and that neutrals have an economic interest; owner distributions are de minimis and not tied to any party | No — de minimis owner distributions (≤0.1%) did not require further disclosure under the objective reasonable‑person test |
| Whether arbitrator/JAMS had to disclose extent of JAMS’s business with O’Melveny & Myers | Speier: nontrivial prior business between JAMS and O’Melveny could create an appearance of bias and required disclosure | Respondents: both counsel firms were repeat, sophisticated users of JAMS and had equal usage (245 matters each); no one‑sided repeat‑player issue | No — equal, non‑consumer, sophisticated parties and equal prior usage meant the information did not reasonably raise doubt about impartiality |
| Timeliness / right to disqualify after disclosures | Speier: may challenge post‑award for nondisclosures that “might” or “could” raise doubts | Respondents: statute requires a showing that an omitted disclosure would have been a ground for disqualification; challenges must be timely under §1281.91 | Held that a post‑award vacatur requires the omitted disclosure to be a legally disqualifying ground; Speier’s challenge was untimely and legally insufficient |
Key Cases Cited
- Haworth v. Superior Court, 50 Cal.4th 372 (California Supreme Court) (establishes objective reasonable‑person disclosure standard and de novo review of arbitrator disclosure issues)
- Malek Media Group, LLC v. AXQG Corp., 58 Cal.App.5th 817 (discusses objective test focusing on reasonable person’s perception of bias in arbitrator disclosure context)
- Monster Energy Co. v. City Beverages, LLC, 940 F.3d 1130 (9th Cir.) (vacatur where arbitrator’s ownership plus substantial repeat business by one party with JAMS created impression of bias)
- Advantage Medical Servs., LLC v. Hoffman, 160 Cal.App.4th 806 (arbitrator’s undisclosed relationships with insurer/Lloyd’s required disclosure; vacatur appropriate under those facts)
- Rivera v. Shivers, 54 Cal.App.5th 82 (confirms court must confirm arbitration award unless statutory vacatur grounds are established)