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A federal court in California allowed a party to engage in post-arbitration discovery to gather information supporting its claim that an arbitral award of attorney fees was procured by fraud because the information sought was not discoverable at the time of the arbitration hearing.
In Thomas Kinkade Co. v. Hazlewood, No. C 06 7034 MHP, 2007 WL 217384 (N.D. Cal. Jan. 25, 2007), an arbitration panel issued an award in Hazlewood's favor. The award included $900,000 in attorney fees, which Thomas Kinkade Co. challenged as procured by fraud.
During arbitration, Thomas Kinkade Co. conducted discovery relating to the billing practices of Hazlewood's attorneys in order to prevent an award of attorney fees in Hazelwood's favor. Based on this discovery, the arbitration panel held that the attorney's billing practices were unreliable; however, the panel awarded a reduced amount of attorney fees.
Thomas Kinkade Co. requested additional discovery to support its motion to reverse the arbitration panel's award of attorney fees because its counsel learned of certain former employees of the Hazlewood's attorney's law firm that might have additional information relating to the alleged fraudulent billing practices.
The Court granted this request, noting that additional discovery in post-arbitration judicial proceedings is appropriate "only in limited circumstances, where relevant and necessary to the determination of an issue raised [by the application for additional discovery]." Frere v. Orthfix, Inc., No. 99CIV.4049(RMB)(MHD), 00CIV.1968(RMB)(MHD), 2000 WL 1789641 (S.D.N.Y. Dec. 6, 2000).
The Court noted that Thomas Kinkade Co. sought discovery relating to specific instances of fraud that were not considered by the arbitration panel. Additionally, this information was not discoverable during arbitration because Hazlewood's counsel allegedly concealed the identities of the former employees, a fact which, according to Thomas Kinkade Co., would be revealed through the discovery process.
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