Betz v. Pankow

16 Cal. App. 4th 931, 20 Cal. Rptr. 2d 841
California Court of Appeal·Decided June 18, 1993·No. A055091·Published·Cited by 69 cases

Opinion

16 Cal.App.4th 931 (1993)
20 Cal. Rptr.2d 841

HEIDE V. BETZ, Plaintiff and Appellant,
v.
CHARLES J. PANKOW, Defendant and Respondent.

Docket No. A055091.

Court of Appeals of California, First District, Division Five.

June 18, 1993.

*935 COUNSEL

James Duryea, Jr., for Plaintiff and Appellant.

Nossaman, Guthner, Knox & Elliott, Kurt W. Melchior and Claude M. Stern for Defendant and Respondent.

OPINION

HANING, J.

Appellant Heide V. Betz appeals an order denying her motion to vacate a judgment confirming an arbitration award in favor of respondent Charles J. Pankow, and imposing sanctions against her attorney. She contends the court erred in determining it was without jurisdiction to decide the motion on its merits while the judgment was pending on appeal.

FACTS AND PROCEDURAL HISTORY

An arbitration award issued in favor of respondent in a dispute over dissolution of a partnership. The trial court denied appellant's motion to vacate the award, which motion was based on separate grounds not relevant to this appeal, and granted respondent's petition to confirm. Judgment ultimately issued confirming the award, from which appellant timely appealed. While the appeal was pending, appellant moved to vacate the judgment on the ground that shortly after its entry, but during pendency of the appeal, she learned that one of the arbitrators had recently retired as a partner in the law firm which, during several years prior to the arbitration, represented three business entities owned or controlled by respondent.[1] The award was signed by only two arbitrators of a three-person panel — the challenged arbitrator and one other. The third arbitrator refused to sign the award for unrelated reasons. The trial court denied the motion on the ground that it lacked jurisdiction to entertain it due to the pendency of the appeal from the judgment confirming the award. The court also imposed sanctions *936 of $5,000 on appellant's counsel for filing a frivolous motion. (Code Civ. Proc., § 128.5.)[2]

DISCUSSION

The principal issues are whether the trial court had jurisdiction to vacate the judgment pending on appeal and, if not, whether appellant has a remedy.

Pursuant to section 1286.2, an arbitration award can be vacated if (a) it was procured by corruption, fraud or other undue means, (b) there was corruption in any of the arbitrators, or (c) the rights of a party were substantially prejudiced by misconduct of a neutral arbitrator. The arbitrator in question here was selected by the tribunal and is considered neutral. (See, e.g., Tate v. Saratoga Savings & Loan Assn. (1989) 216 Cal. App.3d 843, 851-852 [265 Cal. Rptr. 440].)

(1a) The standard for vacating arbitration awards for bias by a neutral arbitrator is the "impression of possible bias test" formulated in Commonwealth Corp. v. Casualty Co. (1968) 393 U.S. 145 [21 L.Ed.2d 301, 89 S.Ct. 337]. An arbitrator's failure to disclose any matter which might create an impression of possible bias is grounds for vacating the award. (See, e.g., Cobler v. Stanley, Barber, Southard, Brown & Associates (1990) 217 Cal. App.3d 518, 527 [265 Cal. Rptr. 868]; Banwait v. Hernandez (1988) 205 Cal. App.3d 823, 826-828 [252 Cal. Rptr. 647]; Johnston v. Security Ins. Co. (1970) 6 Cal. App.3d 839, 841-843 [86 Cal. Rptr. 133].) It is an objective test, requiring a reasonable impression. (Banwait v. Hernandez, supra, at p. 829.) Commonwealth and the California cases applying the test have found an impression of possible bias on the basis of an existing or prior business relationship with one of the parties or their attorneys. (See, e.g., Banwait v. Hernandez, supra, at p. 827.) (2a) In this case it is alleged that one of the arbitrators was a partner in the law firm that represented several business entities in which respondent was an owner, principal or partner, and that this relationship was not disclosed to appellant. This clearly presents an impression of possible bias. (1b) The courts must "be even more scrupulous to safeguard the impartiality of arbitrators than judges, since the former have completely free rein to decide the law as well as the facts and are not subject to appellate review." (Commonwealth Corp. v. Casualty Co., supra, at p. 149 [21 L.Ed.2d at pp. 304-305]; see also Banwait v. Hernandez, supra, 205 Cal. App.3d 823; Gonzales v. Interinsurance Exchange (1978) 84 Cal. App.3d 58 [148 Cal. Rptr. 282]; Wheeler v. St. Joseph Hospital (1976) 63 Cal. App.3d 345 [133 Cal. Rptr. 775, 84 A.L.R.3d 343]; San Luis Obispo Bay Properties, *937 Inc. v. Pacific Gas & Elec. Co. (1972) 28 Cal. App.3d 556 [104 Cal. Rptr. 733]; Johnston v. Security Ins. Co., supra, 6 Cal. App.3d 839.)

(2b) Respondent concedes that the arbitrator in question was a partner in the law firm that represented him, but contends that appellant did not act with reasonable diligence in discovering those facts because they had long been matters of public record. This claim was addressed and rejected in Urias v. Harris Farms, Inc. (1991) 234 Cal. App.3d 415 [285 Cal. Rptr. 659], in which the Court of Appeal held: "[W]e find no authority requiring a party or his counsel to investigate to ascertain a judge's former clients. Rather, the responsibility lies with the judge, especially when he is recently appointed to the bench, to disclose to the parties that a party to the proceeding was a client of his former law firm." (Id., at p. 425.)

Likewise, we find no duty on the part of a party or the party's counsel to investigate an arbitrator's former clients. While those facts may have been a matter of public record, respondent has not alleged that such representation was a matter of common knowledge. Further, although they may be a matter of public record, the facts bearing on disqualification are not related to the merits of the controversy, and the parties cannot reasonably be expected to launch a tedious search through every courthouse in the state in pursuit of information which is required to be disclosed. Consequently, the record does not support respondent's claim that appellant failed to use reasonable diligence in discovering the facts bearing on disqualification.

Nevertheless, the fact that the challenged arbitrator may have been subject to disqualification does not resolve the jurisdictional issue. (3) Appellant's contention that the trial court had jurisdiction under section 1008, subdivision (b) to vacate the judgment after the notice of appeal had been filed is incorrect.[3] Section 1008 is directed to interim rulings. (Magallanes v. Superior Court (1985) 167 Cal. App.3d 878, 882 [213 Cal. Rptr. 547].) Thus, a motion for reconsideration may only be considered before final judgment is entered and while the case is still pending in the trial court. (Eddy v. Sharp (1988) 199 Cal. App.3d 858, 863, fn. 3 [245 Cal. Rptr. 211]; Magallanes v. *938 Superior Court, supra, at p. 882; Graham v. Hansen (1982) 128 Cal. App.3d 965, 970-971 [180 Cal. Rptr. 604].) Because appellant is attempting to vacate a judgment, rather than an interim ruling, section 1008 relief is unavailable.

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Betz v. Pankow, 16 Cal. App. 4th 931, 20 Cal. Rptr. 2d 841 (Cal. Ct. App. 1993).

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