NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

ASHMANN-GERST, J.

Sun Led Design Supply, Inc. (Sun Led), Xiaoping Wang (Wang) and Weirong Fang (Fang) (collectively referred to as the Sun Led parties) appeal from an order granting the petition of respondent Baoliang Wang (Jack) to vacate an arbitration award of $192,286 in attorney fees and costs.

We affirm.

FACTS

The underlying dispute

Jack was employed at Sun Led in various capacities, and eventually became chief executive officer and chief financial officer. In addition, Jack owned 22 percent of Sun Led's stock. His employment was terminated based on allegations that he breached his duties by, inter alia, self-dealing, diverting income from Sun Led and having interests in three competing companies. Afterwards, Wang and Fang dissolved Sun Led and disposed of its assets.

Jack sued the Sun Led parties. He asserted claims that included accounting, conversion, breach of contract, intentional infliction of emotional distress, breach of shareholder's agreement, violation of sections 201 and 203 of the Labor Code, constructive trust, and defamation. The Sun Led parties cross-complained for declaratory relief, breach of fiduciary duty, constructive fraud, breach of contract, conversion, intentional interference with prospective economic advantage, negligent interference with prospective economic advantage, defamation, unfair competition in violation of Business and Professions Code section 17200 et seq., and negligence. On the eve of trial, the parties stipulated that they would submit their claims to binding arbitration. They selected Honorable Robert J. Polis (Ret.) to handle the proceedings.

The prearbitration conversation between counsel

Jack's attorney, Kenneth Gross (Gross), spoke to attorney William Cummings (Cummings) 10 days prior to arbitration. Cummings identified himself as corporate counsel for Sun Led and Fang and explained that he was assisting with some corporate matters. When Cummings said that he had heard that Judge Polis was the arbitrator, Gross confirmed it. Cummings proceeded to say that he had clerked for Judge Polis1 and thought that he was a great guy. Gross reviewed Cumming's attorney profile, saw that he had been practicing law for 10 years and assumed that he must have clerked for Judge Polis that many years ago.

The arbitration

When the parties convened for arbitration, Gross represented Jack and attorney Robert Crook (Crook) represented the Sun Led parties. Cummings was not in attendance.

As a preliminary matter, Gross presented Judge Polis with a letter that had recently been written by Cummings. The letter was purportedly related to corporate issues, including the interpretation of the parties' shareholder agreement. When Judge Polis looked at the letter, he asked if Cummings was an older guy or younger guy. Everyone responded that he was younger. Judge Polis replied that he knows Cummings's father and that Cummings is a good guy. Everyone agreed that he was a good guy and nothing else was said about the matter.

The arbitration lasted two and a half days.

Judge Polis issued a notice of intended award in which he concluded that none of the parties were entitled to recover damages.

Both sides claimed that they prevailed. And each side requested attorney fees. The notice of intended award instructed them to prepare and exchange briefs in support of their positions, and then to meet and confer in a serious attempt to resolve the issues. In the absence of a resolution, the parties were required to submit motions for attorney fees and costs to Judge Polis.

Gross served Jack's motion for attorney fees and costs and attached the relevant billing records. When the Sun Led parties' served their competing motion, billing records were absent. Gross complained that if he could not see the billing records, he could not challenge them. In response, Crook said that it was not his practice to provide opposing counsel with billing records in attorney fee motions because they are protected by the attorney-client privilege.

In an e-mail, Crook asked Judge Polis for guidance as to whether the billing records should be disclosed to the opposing side. Crook explained that he normally submits billing records in camera. Judge Polis e-mailed back. He said he was out of the country and instructed everyone to "freeze." He added that he would offer some guidance when he returned.

Judge Polis did not offer the parties any guidance when he returned from his trip. Thus, they could not settle the prevailing party and attorney fee issues. The parties then submitted their motions to Judge Polis for final determination. The Sun Led parties filed a notice of lodging exhibits for in camera review. The exhibits included billing records for attorney Vincent Lin, Crook and Cummings. Judge Polis reviewed those billing records in camera and awarded the Sun Led parties $179,841 in attorney fees and $12,445 in costs.

The competing petitions; the order vacating the arbitration award

The Sun Led parties filed an ex parte application to confirm the arbitration award for attorney fees and costs. Jack petitioned to vacate the award on the following grounds: (1) Pursuant to Code of Civil Procedure section 1281.85,2 Judge Polis was subject to the ethics standards for arbitration adopted by the Judicial Council. Standard 14 prohibits an arbitrator from considering ex parte communications or other communications made to the arbitrator outside the presence of all of the parties concerning a pending arbitration. Judge Polis violated Standard 14 when he considered the billing records in camera and outside the presence of Jack and his attorney, Gross. Jack was substantially prejudiced. Thus, the arbitration award must be vacated under section 1286.2, subdivision (a)(3) due to Judge Polis's misconduct. (2) Under section 1282.2, subdivisions (d) and (g), parties to an arbitration are entitled to be heard, present evidence and meet the evidence the arbitrator intends to rely on. Judge Polis denied Jack his rights under section 1282.2, subdivisions (d) and (g) by reviewing the billing records submitted to him in camera. As a result, the arbitration award must be vacated under section 1286.2, subdivision (a)(5) because Judge Polis substantially prejudiced Jack's rights by refusing to hear evidence material to the controversy or by conduct contrary to the provisions of the California Arbitration Act (CAA). (3) Finally, the arbitration award must be vacated because Jude Polis did not make a timely disclosure of his relationship with Cummings.3

The trial court denied the petition to confirm and granted the petition to vacate based on all the grounds stated by Jack.

This timely appeal followed.

STANDARD OF REVIEW

If the facts are undisputed, we review the propriety of an order vacating an arbitration award without any regard for what transpired at the trial court level. Rather, we concern ourselves only with the merits of the motion to vacate and what happened at arbitration. On the other hand, if the facts are disputed, we must determine whether the trial court's factual findings are supported by substantial evidence. If the answer is yes, we will then independently apply the law to the facts after resolving all evidentiary conflicts in favor of the respondent. (SWAB Financial, LLC v. E*Trade Securities, LLC (2007) 150 Cal.App.4th 1181, 1198.)

DISCUSSION

Nothing is more fundamental to our legal system than the idea that a legal proceeding is unfair if a party is denied the opportunity to know the evidence against him and respond to it. We easily conclude that the arbitrator's in camera review of billing records was inimical to justice. Thus, as we discuss below, the trial court was required to vacate the arbitration award.

A trial court has a statutory mandate to vacate an arbitration award if the rights of a party were substantially prejudiced because: (1) the arbitrator engaged in misconduct; (2) the arbitrator refused to hear evidence material to the controversy; or (3) the arbitrator otherwise engaged in conduct contrary to the provisions of the CAA. (§ 1286.2, subds. (a)(3) & (a)(5).)

The record establishes that the arbitrator engaged in misconduct. Section 1281.85 of the CAA requires an arbitrator to comply with the ethics standards for arbitrators adopted by the Judicial Council. In subdivision (a), Standard 14 provides that an "arbitrator may not initiate, permit, or consider any ex parte communications or consider other communications made to the arbitrator outside the presence of all the parties concerning a pending or impending arbitration." (Cal. Rules of Court, Ethics Stds. for Neutral Arbitrators in Contractual Arbitration, std. 14(b).) When the arbitrator considered evidence not disclosed to Jack, he violated section 1281.85 by failing to comply with his ethics obligations under Standard 14.

The Sun Led parties contend that "Judge Polis's decision not to permit Jack to review privileged documents—even if wrong as a matter of law—is not reviewable and is insufficient to deprive Jack of a `fundamentally fair' hearing." For legal support, they rely on Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 10-11 (Moncharsh). Their reliance is misplaced. While it is true that Moncharsh teaches that courts will not review the validity of the arbitrator's reasoning with respect to the merits of the controversy and the arbitration award (id. at p. 11), it does not prevent review of the arbitrator's conduct. Nor does it negate the power of courts to review a fundamentally unfair procedure. As to the second point, we reject the notion that the procedure was fair. According to the Sun Led parties, Jack cannot "deny that he received adequate notice and the opportunity to present evidence and argument." Nothing could be further from the truth. Jack was deprived of the opportunity to present argument and evidence regarding the sufficiency of the billing records to support the request for attorney fees and eventual award.

Though not argued directly, the Sun Led parties imply that an in camera procedure was properly employed by Judge Polis because the billing records were protected by the attorney-client privilege. They fail to appreciate that the privileges is not absolute. Case law establishes that once they used the billing records as proof in connection with their request for attorney fees, the attorney-client privilege was impliedly waived. (Chicago Title Ins. Co. v. Superior Court (1985) 174 Cal.App.3d 1142, 1149.) Any other rule would be absurd because it would permit the injustice of secret evidence. It is true, as the Sun Led parties point out, that in camera proceedings are often utilized in courthouses all across the state. But in those instances, the trial courts are merely deciding whether to grant discovery or quash subpoenas that seek documents claimed by an adversary to be privileged, confidential, proprietary, etc. Trial courts should never use that evidence to decide the merits of a case.

We perceive additional problems.

Under the CAA, the parties are entitled "to be heard, to present evidence and to cross-examine witnesses appearing at the hearing." (§ 1282.2, subd. (d).) If an arbitrator "intends to base an award upon information not obtained at the hearing, he shall disclose the information to all parties to the arbitration and give the parties an opportunity to meet it." (§ 1282.2, subd. (g).) The arbitrator's conduct was directly contrary to both of these statutory provisions.

The next prong of the analysis requires us to determine whether Jack suffered substantial prejudice. He did.

A court can intercede "`when an arbitrator has prevented a party from fairly presenting its case.' [Citation.]" (Burlage v. Superior Court (2009) 178 Cal.App.4th 524, 529.) In other words, if a party is prevented from fairly presenting its case, then substantial prejudice is shown. Because Jack was denied an opportunity to respond to the evidence submitted in support of the motion for attorney fees, it is safe to say that vacatur is mandatory.

All other issues are moot.

DISPOSITION

The order is affirmed.

Jack shall recover his costs on appeal.

BOREN, P. J. and CHAVEZ, J., concurs.