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The California Court of Appeal held that parties may legally agree to waive disclosure requirements for arbitrators under the state’s statutory scheme.
In Conkle and Olesten v. Goodrich, Goodyear & Hinds, Nos. G033972, G034063, 2006 WL 3095964 (Cal. Ct. App. Nov. 1, 2006), The Law Offices of Phillip K. Fife (Fife) objected to the enforcement of an attorney fee order, as determined through binding arbitration. Fife represented an accounting firm in post-settlement and wrap-up matters. However, after the accounting firm, Fife, and another law firm entered into a “stipulation for binding arbitration” to allocate attorney’s fees, the other law firm was awarded the entire amount of attorney’s fees.
Fife later “discovered” that the parties’ chosen neutral had previously resided over a mediation session involving the other law firm. Fife argued that had it known this information ahead of time, they never would have agreed to let the neutral oversee the attorney’s fee arbitration.
The Court, however, rejected Fife’s claim and upheld the attorney fee award, which had subsequently been confirmed as a legal judgment. Fife itself had requested that the parties waive any disclosures by the arbitrator, and this waiver had become an enforceable element of the arbitration agreement. In essence, by waiving the disclosure requirement, Fife had waived the right to information regarding the arbitrator’s past experiences.
Fife cited Azteca Construction, Inc. v. ADR Consulting, Inc., 18 Cal.Rptr. 1156 (Cal. Ct. App. 2004) for the proposition that waivers of arbitrator disclosure requirements are per se invalid. The Court rejected this interpretation, noting that Azteca dealt with an “indirect and implied waiver,” whereas the present case involved a direct, unequivocal waiver invoked by the same party who now claims to be aggrieved by it. To the contrary, there is nothing in California law that prohibits waiving arbitrator disclosures, and this sort of agreement fits within the statutory framework. Cal Civ. Proc. Code §1281.9.
On a final note, the Court outlined the policy considerations against permitting a party to circumvent unfavorable outcomes in arbitration by waiving disclosure requirements, but later complaining that the arbitrators were biased. Were Fife’s arguments accepted, a party would enjoy a “get-out-of-arbitration-result-free card” by objecting to the consequences of its own actions in waving arbitrator disclosures.
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