The trial court vacated an arbitration award issued in favor of defendant United Health Centers of the San Joaquin Valley, Inc. (UHC), in a wrongful termination case brought against it by its former employee, plaintiff Jennifer Vradenburg-Haworth. The basis of the trial court's action was that the neutral arbitrator failed to comply with the mandatory disclosure requirements of Code of Civil Procedure section 1281.9
UHC hired Jennifer Vradenburg-Haworth as a part-time physician in 2005. After UHC terminated her employment in September 2010, she filed an action against UHC for retaliation and wrongful termination in violation of public policy. UHC moved to compel arbitration pursuant to an arbitration provision in Vradenburg-Haworth's employment contract. The trial court granted the motion on April 10, 2012.
UHC's counsel, Russell K. Ryan, recommended to Vradenburg-Haworth's counsel, Michael J.F. Smith, that they select either retired Judge Howard Broadman or retired Justice Nickolas Dibiaso as the arbitrator. Ryan further advised Smith that he had used both arbitrators on a number of occasions and asked Smith to let him know if he would agree to either one, or if he proposed an alternative. Eventually, Smith agreed to have Judge Broadman
The arbitration hearing was held before Judge Broadman from October 15 to October 18. The parties submitted post-arbitration briefs. On December 15, Judge Broadman issued written findings and judgment in UHC's favor. Judge Broadman found that UHC terminated Vradenburg-Haworth's position due to the company's financial distress, the impracticality of employing part-time physicians, and personnel issues within the clinic where she worked, and her termination was proper because she was an at-will employee. He found there was no basis for her claims of retaliation and wrongful termination in violation of public policy.
UHC filed a petition to confirm the arbitration award on January 4, 2013. In response, Vradenburg-Haworth asked the trial court to vacate the arbitration award pursuant to section 1285.2. on the ground that Judge Broadman failed to comply with the mandatory disclosure requirements of sections 1281.9 and 1281.85. She also asked the trial court to vacate the award pursuant to section 1286.2, subdivision (a)(4), on the ground Judge Broadman exceeded his powers when he made clear legal errors in his decision.
In Smith's declaration in support of the request to vacate, he stated that before selecting Judge Broadman as the arbitrator, he knew Judge Broadman "as a mediator" and Judge Broadman "was once agreed upon as an arbitrator in another case" which settled without a hearing. Smith declared that after Judge Broadman's appointment on May 17, he did not receive any disclosure from him as required by section 1281.9 et seq. Smith trusted Judge Broadman because of his experience as a judge and "our experience using him as a mediator." Smith further declared: "We have used him as a mediator, occasionally. When I did not receive any CCP 1281.9 disclosure from him, I trusted that this meant he had nothing to disclose."
Smith explained that after he received Judge Broadman's award, he felt his client was not given a fair hearing. He then "went looking for any disclosure from Mr. Broadman. None existed in our file. We have a very diligent file maintenance clerk in our office, who keeps all correspondence in all our cases filed carefully. She searched as well. [Smith's associate,] Mr. [John] Migliazzo, who has worked on this case from its beginning, also searched. No such letter was received in our office." Neither Smith nor Migliazzo found any disclosure from Judge Broadman, or his office, in their e-mail inboxes, and no faxed disclosure was received in the office.
Migliazzo asked Judge Broadman, in a December 28 letter and e-mail, for a complete disclosure of any prior engagements Judge Broadman may have
After receiving copies of Smith's and Migliazzo's correspondence to Judge Broadman, Ryan sent Smith and Judge Broadman an e-mail advising that Judge Broadman submitted a disclosure form in a June 28 letter, which Ryan supplemented with a July 9 letter, both of which were submitted to Smith's office. Ryan attached copies of both letters to the e-mail. Ryan also advised that during the two years before Judge Broadman's appointment as arbitrator in this case, Judge Broadman served as a mediator in two cases in which Ryan was involved, and more than two years before, both Smith and he had selected Judge Broadman as a mediator in another case, and Judge Broadman served as a special master in consolidated cases in which Ryan represented one of the parties.
Judge Broadman's three-page letter of June 28, which is addressed to both Smith and Ryan, was characterized as a disclosure statement intended to comply with sections 170.1 and 1281.9, the disclosure requirements for arbitrators mandated by standard 7 of California Rules of Court, Ethics Standards for Neutral Arbitrators in Contractual Arbitration and any other statutes, rules and standards that may require disclosures or disqualifications by arbitrators in proceedings such as the one at issue. Judge Broadman stated that he had not served as an arbitrator in any matters involving Smith or his office, or either of the parties. He had, however, served as an arbitrator in two matters involving Ryan or his law firm. For these two matters, Judge Broadman identified the case name, the attorney for each plaintiff and defendant, and the outcome, i.e., whether he ruled in favor of the plaintiff or defendant. For one matter, Judge Broadman stated the date was "[n]ot recorded," but the other matter took place in July 2007. Ryan's law firm represented the prevailing party in each arbitration. The disclosures did not include the amount of monetary damages awarded as required by section 1281.9; instead, Judge Broadman explained he does not disclose the exact amount of any awards due to his "perceived duty to maintain confidentiality," and invited the attorneys to contact either or both sides of the dispute for that information.
Due to a "previous failure on [his] part to maintain appropriate records," Judge Broadman asked the parties to advise him if they knew of any cases in which he had served as an arbitrator so he could amend the disclosure. He also stated the disclosure did not include mediations which may have been conducted with the parties' attorneys because his "system" did not "easily
Ryan's July 9 letter informed Broadman and Smith that he had received Judge Broadman's June 28 correspondence constituting his disclosure statement in the case. Ryan advised them that Judge Broadman (1) had served as an arbitrator in one case in which Ryan was involved, which settled prior to the arbitration hearing although Judge Broadman denied a summary judgment motion brought by Ryan's client and (2) had been appointed the arbitrator in another case scheduled for arbitration in September 2007, in which Ryan represented the plaintiff, which settled on the first day of the arbitration with Judge Broadman's assistance.
In Smith's declaration in support of the request to vacate, he stated that Judge Broadman should have disclosed the four matters Ryan revealed in his July 9 letter and January 2, 2013 e-mail. Smith also was aware of one engagement in which "we" retained Judge Broadman as an arbitrator, which settled before a hearing, and one mediation where "we" hired him as a mediator, which had to be rescheduled. Smith further declared that "we did not receive information that might well have caused us to disqualify [Judge] Broadman as an arbitrator," and they still did not know how many mediations Judge Broadman had conducted for Ryan or his law firm in the two years before his appointment in the present case, the amount of monetary awards involved, or whether they had discussed new or additional work while this matter was pending.
Vradenburg-Haworth argued the award must be vacated pursuant to section 1286.2, subdivision (a)(6) because Judge Broadman refused to follow the mandatory disclosure requirements of the Judicial Council's ethics standards for arbitrators, which are nonnegotiable and cannot be waived, and failed to serve her attorney with a disclosure. She asserted Judge Broadman's purported June 28 disclosure was grossly inadequate as (1) Judge Broadman admitted he does not keep accurate or appropriate records, (2) he attempted to waive his statutory compliance obligation, (3) the disclosure did not include the four matters Ryan revealed or the two matters of which Smith was aware, which were required to be disclosed, and (4) it did not disclose any discussions of prospective employment.
In support of its opposition, UHC submitted the declaration of Judge Broadman's assistant, Karen Kimball, in which she stated she mailed the disclosure statement to counsel for the parties at their respective addresses on June 28, and on or after July 9, Judge Broadman gave her a copy of Ryan's July 9 letter to file. Ryan stated in his declaration accompanying the opposition that, to his best recollection, Judge Broadman was advised he was appointed the arbitrator sometime in mid-June. Ryan further stated he received Judge Broadman's June 28 disclosure statement within a day or two of its date and he then prepared his July 9 letter, which was sent by e-mail and regular mail to both Judge Broadman and Smith. According to Ryan, at the time the disclosure statement was served "there were `no current arrangement[s] concerning prospective employment or other compensated service as a dispute resolution neutral'" between Judge Broadman and himself or his firm, or any other matter "`that could cause a person aware of the facts to reasonably entertain a doubt that the proposed neutral arbitrator would be able to be impartial.'"
Ryan was surprised to see Migliazzo's December 28 correspondence because he knew Judge Broadman had mailed a disclosure statement in June. He followed up with his January 2, 2013 e-mail, attaching a copy of the disclosure statement and his July 9 correspondence. Ryan reviewed his files to see if any information was missing and noted there were two mediations he was involved in within the past two years with Judge Broadman, which he revealed in his e-mail to Smith.
After oral argument on the petitions, the trial court took the matter under submission. On June 14, 2013, it issued a written ruling granting the motion to vacate and denying the petition to confirm. The trial court found that the omission of information in Judge Broadman's disclosure statement, including
In so finding, the trial court rejected UHC's contention that any right to vacate the award had been waived since Smith was aware of the relationship between Judge Broadman and Ryan and his firm before the arbitration hearing, yet did nothing until after the award was made. The trial court refused to follow the case UHC relied on, Dornbirer, supra, 166 Cal.App.4th 831, in which the appellate court held that the statutory scheme does not require an arbitration award be vacated when the arbitrator has disclosed the grounds for disqualification generally, but has not provided all of the specific details required by section 1281.9, and the parties nevertheless agreed to proceed with the arbitration. (Dornbirer, supra, 166 Cal.App.4th at p. 846.) The trial court determined the Dornbirer decision violated the rules of statutory construction and was contrary to section 1281.85(c), which provides that the ethics requirements and standards applicable to arbitrators "are nonnegotiable and shall not be waived." The trial court did not make any factual findings and declined to address the other issues presented by the parties as they were moot.
UHC petitioned this court for a writ of mandate. We issued an alternative writ directing the trial court to either vacate its order granting the petition to vacate the arbitration award and issue an order denying the petition, or show cause why the required relief should not issue. The superior court reviewed and reconsidered its ruling, but declined to vacate or reverse it.
UHC contends the trial court erred in finding that Judge Broadman's failure to comply with the statutory disclosure requirements compelled vacatur of the arbitration award because an arbitrator's failure to comply does not automatically require vacating the arbitration award. Instead, UHC argues, the court must consider whether the party seeking to vacate the award was aware of, or knew about, the deficiencies in the arbitrator's disclosure, but waited to inquire further or challenge the arbitrator until after the award was issued. UHC contends that in this case Smith knew Ryan and his firm had prior engagements with Judge Broadman before the arbitration was held, yet did nothing, and Smith's failure to act precludes vacation of the award on the ground of nondisclosure.
Where the material facts are undisputed, the trial court's determination whether an arbitrator failed to make required disclosures is reviewed de novo. (Haworth, supra, 50 Cal.4th at pp. 383, 388).) Where the facts are disputed, "`[w]e must accept the trial court's resolution of disputed facts when supported by substantial evidence; we must presume the court found every fact and drew every permissible inference necessary to support its judgment, and defer to its determination of credibility of the witnesses and the weight of the evidence.'" (Fininen v. Barlow (2006) 142 Cal.App.4th 185, 189-190 [47 Cal.Rptr.3d 687] (Fininen).) This standard applies to judgments based on affidavits or declarations, as well as judgments based on oral testimony. (Fininen, supra, 142 Cal.App.4th at p. 189.)
Section 1281.9, subdivision (a) provides a list of potentially disqualifying information to which the parties are entitled. For example, the arbitrator must disclose "any ground specified in Section 170.1 for disqualification of a judge," as well as "matters required to be disclosed by the ethics standards
Here, Vradenburg-Haworth asserts Judge Broadman's failure to disclose the amount of the arbitration awards and any mediations he conducted with the parties' attorneys, along with his statement that further disclosure of mediations is "waived" if a party does not request complete disclosure, rendered the June 28 disclosure statutorily deficient. She asserts that, as a result, she did not have access to sufficient information to have been able to
In Dornbirer, the arbitrator in a dispute between a patient and her medical provider (Kaiser) disclosed his prior participation in several matters involving Kaiser and its legal counsel. The disclosure statement omitted multiple pieces of information required under section 1281.9, including the number of times the arbitrator had presided over arbitrations in which Kaiser was a party, as well as the dates, results, and names of all attorneys involved in those arbitrations. The patient did not make further inquiry into these omissions, nor did she serve a disqualification notice or demand pursuant to section 1281.91. (Dornbirer, supra, 166 Cal.App.4th at pp. 836-837.)
After the arbitrator ruled in Kaiser's favor, the patient petitioned the superior court to vacate the award pursuant to section 1286.2. On appeal from the denial of her petition, the patient argued that any information required to be disclosed pursuant to section 1281.9 constitutes a "ground for disqualification" which the arbitrator must disclose in order to avoid mandatory vacatur under section 1286.2, subdivision (a)(6)(A). (Dornbirer, supra, 166 Cal.App.4th at p. 842.) Kaiser responded that this interpretation of the law "would have absurd results, in that a party could successfully move to have any arbitration award vacated if an arbitrator failed to disclose the amount of a single prior award or failed to provide the name of a single attorney involved in a prior arbitration." (Ibid.) The appellate court agreed with Kaiser.
In so holding, the appellate court observed that its interpretation of the statute gave effect to section 1281.91, subdivision (c), "which states that a party waives the right to disqualify a proposed neutral arbitrator if that party fails to meet the time requirements set forth in that section. The exception to this waiver applies only if the proposed arbitrator made a material omission or material misrepresentation in his or her disclosure. (§ 1281.91, subd. (c).) Interpreting section 1286.2 to permit a party to vacate an arbitration award at the conclusion of the arbitration based on an arbitrator's failure to disclose details such as the dates of prior arbitrations or the awards in prior arbitrations when that party knew about those prior arbitrations and did not request additional information or move to disqualify the arbitrator would undermine the purpose of the time limitations imposed in subdivision (c) of section 1281.91. The waiver provision would have no effect because a party could simply wait until the arbitration was over and then move to vacate the award, despite having failed to move to disqualify the proposed arbitrator before the arbitration commenced." (Dornbirer, supra, 166 Cal.App.4th at pp. 845-846.)
The court concluded that because the patient consented to proceed with the arbitration despite being aware of the deficiencies in the arbitrator's disclosure, pursuant to subdivision (c) of section 1281.91 she waived her right to disqualify the arbitrator and could not challenge the arbitration award on the ground his failure to provide the dates, outcomes and names of other attorneys involved in his prior Kaiser arbitrations constitutes a ground for disqualification. (Dornbirer, supra, 166 Cal.App.4th at p. 846.) As the court explained, "[b]y failing to raise this issue earlier, [the patient] waived the right to disqualify [the arbitrator] based on an inadequate disclosure that did not amount to a material omission or misrepresentation." (Ibid.)
In this proceeding, Vradenburg-Haworth contends that Dornbirer has been overruled by section 1281.85(c), which was added in 2010 by Assembly Bill No. 1090 (2009-2010 Reg. Sess.), after Dornbirer was decided. (Stats. 2009, ch. 133, § 1, eff. Jan. 1, 2010.) She asserts that section 1281.85(c) and subsequent case law "unequivocally eliminated any possibility of `waiver.'" The resolution of this issue turns on the type of "waiver" prohibited by section 1281.85(c), which is an issue of statutory construction.
The Dornbirer case used the word "waiver" in the sense of a forfeiture of a right resulting from failure to perform an act. As we have explained, the court held that, by consenting to proceed with the arbitration despite being aware of the deficiencies in the arbitrator's disclosure, the patient "waived" her right to disqualify the arbitrator on the basis of the inadequate disclosure. (Dornbirer, supra, 166 Cal.App.4th at p. 846.) Thus, the court determined that by failing to perform certain acts permitted by statute, namely by failing to serve a
The legislative history of section 1281.85(c), however, reflects that the term "waived" in that subdivision is used in a different way, as the subdivision was enacted to prohibit contractual waivers of the statutory right to disqualify an arbitrator, not forfeitures of rights resulting from the failure to perform an act.
After explaining that the bill does not involve the more controversial issue of whether parties should even be compelled to waive their legal rights by
The Azteca case referenced in the legislative history of section 1281.85(c), which Vradenburg-Haworth asserts supports her position, involved the resolution of a conflict between the rules of the American Arbitration Association (AAA) and section 1281.91, subdivision (b), which permits a party uncomfortable with a proposed arbitrator's disclosures to disqualify the arbitrator within 15 days after receipt of the disclosure statement. (Azteca Construction, Inc. v. ADR Consulting, Inc., supra, 121 Cal.App.4th at p. 1160 (Azteca).) The plaintiff demanded arbitration pursuant to a provision in the parties' written contract which compelled arbitration through AAA and its rules, one of which provided that if a party objected to a neutral arbitrator's continued service, AAA would determine whether the arbitrator should be disqualified. (Id. at pp. 1160-1161.) After the proposed arbitrator served a disclosure statement in compliance with section 1281.9, the plaintiff timely demanded disqualification of the proposed arbitrator. AAA, however, determined there was no good cause for disqualification and affirmed the appointment. The arbitration proceeded to its conclusion, which resulted in an award to the defendant. (Azteca, supra, 121 Cal.App.4th at p. 1161.) The plaintiff filed a petition to vacate the award, claiming the arbitrator was required to disqualify himself on timely receipt of its objection under section 1281.91, subdivisions (b)(1) and (d). The trial court denied the petition, finding the plaintiff waived the statutory disqualification right by agreeing to AAA arbitration. (Azteca, supra, 121 Cal.App.4th at p. 1162.)
The Court of Appeal reversed, holding that "[t]he provisions for arbitrator disqualification established by the California Legislature may not be waived or superseded by private contract," therefore the arbitrator's refusal to disqualify himself following the plaintiff's timely demand rendered the award subject to vacatur. (Azteca, supra, 121 Cal.App.4th at p. 1160.) In so holding, the appellate court rejected the defendant's argument that the AAA rule took precedence over the statutory scheme based on freedom of contract principles, namely that the parties voluntarily contracted to limit their statutory disqualification rights and were free, under Civil Code section 3513,
The court instead determined the AAA rule must yield to the disqualification scheme of sections 1281.9 and 1281.91 because (1) Civil Code section 3513 also provides that "`a law established for a public reason cannot be contravened by a private agreement,'" and the pertinent statutes were enacted primarily for a public purpose; (2) "[t]he critical subject of arbitrator neutrality is a structural aspect of the arbitration and falls within the Legislature's supreme authority"; and (3) an arbitrator's neutrality "is of such crucial importance that the Legislature cannot have intended that its regulation be delegable to the unfettered discretion of a private business." (Azteca, supra, 121 Cal.App.4th at pp. 1166-1168, italics omitted.) Accordingly, the court concluded that the plaintiff could not, by agreeing to submit to arbitration before the AAA, waive its statutory rights to disqualify an arbitrator under the methods set forth in sections 1281.9 and 1281.91. (Azteca, supra, 121 Cal.App.4th at p. 1168.)
Vradenburg-Haworth also asserts existing case law, specifically Gray v. Chiu (2013) 212 Cal.App.4th 1355 [151 Cal.Rptr.3d 791] (Gray) and Mt. Holyoke Homes, L.P v. Jeffer Mangels Butler & Mitchell, LLP (2013) 219 Cal.App.4th 1299 [162 Cal.Rptr.3d 597] (Mt. Holyoke) requires vacatur. In Gray, an arbitrator failed to comply with a requirement of the Ethics Standards that he disclose that the attorney for one of the defendants in a malpractice case worked for the same dispute resolution provider organization (DRPO). (Gray, supra, 212 Cal.App.4th at p. 1358.) The nine-day arbitration took place at the DRPO office, where hallways and meeting areas displayed posters with photographs and names of panel members, including the attorney, brochures throughout the office included the attorney's name and biographical information and, according to the attorney's declaration, he saw the plaintiff's counsel reviewing these brochures during the arbitration. (Id. at
The appellate court held the arbitrator was compelled to disclose that the attorney was a member of the DRPO and his failure to do so required vacatur of the award under section 1286.2, subdivision (a)(6). (Gray, supra, 212 Cal.App.4th at pp. 1364-1365, 1366.) In so holding, the court rejected the defendant's argument that the plaintiff waived the right to seek vacatur based on the arbitrator's failure to disclose because the plaintiff knew or should have known of the attorney's membership from the posters and brochures present where the arbitration took place. (Id. at pp. 1365-1366.) The court based its rejection on two grounds: (1) section 1281.85(c) prohibits waiver of the Ethics Standards, and (2) the Ethics Standards require an arbitrator to make timely disclosure, i.e., within 10 days after the arbitrator becomes aware of the matter, yet the evidence of the attorney's membership did not surface until long after the arbitrator became aware of the information. (Gray, supra, 212 Cal.App.4th at p. 1366.)
In Mt. Holyoke, the arbitrator of a legal malpractice action failed to disclose that he listed a partner of the defendant law firm as a reference on his resume, which was available on the Internet at the time of the arbitration award. The plaintiff, however, did not discover this fact until after the arbitration. (Mt. Holyoke, supra, 219 Cal.App.4th at p. 1312.) The appellate court held the arbitrator was required to disclose the information and disagreed with the defendants' contention that vacatur was precluded because the plaintiff had constructive knowledge of the information since it was readily discoverable on the Internet. (Id. at p. 1313.) The court explained that a party to an arbitration is not required to investigate a proposed neutral arbitrator to discover information the arbitrator is required to disclose; instead, it is the arbitrator's obligation to timely disclose. (Ibid.)
The court recognized that an arbitrator's failure to disclose would not justify vacating an award if (1) "the party challenging the award had actual knowledge of the information yet failed to timely seek disqualification," or (2) "the arbitrator disclosed information or a party had actual knowledge of information putting the party on notice of a ground for disqualification, yet the party failed to inquire further ...," citing Dornbirer. Fininen and Britz. (Mt. Holyoke, supra, 219 Cal.App.4th at pp. 1313-1314.) The court, however, distinguished its case from these situations, as it was undisputed the plaintiff did not discover the resume until after the arbitration and there was no indication she previously had actual knowledge of information that would have put her on inquiry notice of the undisclosed fact. (Ibid.)
The petition for writ of mandate is granted. This court's alternative writ of mandate, filed December 11, 2013, is discharged. Let a peremptory writ of mandate issue directing the respondent superior court to vacate its June 14,
Kane, J., and Detjen, J., concurred.
"(b)(1) If the proposed neutral arbitrator complies with Section 1281.9, the proposed neutral arbitrator shall be disqualified on the basis of the disclosure statement after any party entitled to receive the disclosure serves a notice of disqualification within 15 calendar days after service of the disclosure statement.
"(2) A party shall have the right to disqualify one court-appointed arbitrator without cause in any single arbitration, and may petition the court to disqualify a subsequent appointee only upon a showing of cause.
"(c) The right of a party to disqualify a proposed neutral arbitrator pursuant to this section shall be waived if the party fails to serve the notice pursuant to the times set forth in this section, unless the proposed nominee or appointee makes a material omission or material misrepresentation in his or her disclosure. Except as provided in subdivision (d), in no event may a notice of disqualification be given after a hearing of any contested issue of fact relating to the merits of the claim or after any ruling by the arbitrator regarding any contested matter. Nothing in this subdivision shall limit the right of a party to vacate an award pursuant to Section 1286.2, or to disqualify an arbitrator pursuant to any other law or statute.
"(d) If any ground specified in Section 170.1 exists, a neutral arbitrator shall disqualify himself or herself upon the demand of any party made before the conclusion of the arbitration proceeding. However, this subdivision does not apply to arbitration proceedings conducted under a collective bargaining agreement between employers and employees or their respective representatives."
Ethics Standard 10(a) adds that an arbitrator is also disqualified where a party serves a notice of disqualification (1) after service of notice of the prepared nomination or (2) after the party becomes aware that an arbitrator made a material omission or misrepresentation in his or her disclosure. (Ethics Standards, std. 10(a)(3) & (4).)