ADR Case Updates
Arbitral Immunity Does Not Bar Breach of Contract Claim Against Arbitrator, 07/18/06
In case you have not seen them, attached are two recent California Court of Appeal decisions. The first is Morgan Phillips, Inc., v. JAMS/Endispute, filed June 20, 2006 (2006 DJDAR 7805), where the doctrine of arbitral immunity did not bar a breach of contract claim against the arbitrator who allegedly, without justification, withdrew from the arbitration proceeding and refused to render an award.
Plaintiff sued two suppliers. The dispute was settled at mediation. Plaintiff again became dissatisfied with the suppliers' products and invoked a dispute resolution clause of the stipulation for settlement. The mediator agreed with Plaintiff and the suppliers to conduct "binding arbitration" pursuant to the terms of the settlement agreement. The arbitrator (who formerly served in the role of mediator) held an arbitration hearing, but then announced he was withdrawing and refused to render an award.
Plaintiff sued the arbitrator alleging, in part, breach of contract. The trial court sustained the arbitrator's demurrer on the basis of arbitral immunity. Reversed. Common law arbitral immunity protects arbitrators for conduct that occurs in their quasi-judicial capacity, but it does not apply if the arbitrator fails to render any decision at all. Plaintiff argued that the arbitrator's attempts to coerce it to enter an unfavorable settlement by withdrawing suddenly and without justification amounted to "complete nonperformance." Because the arbitrator's withdrawal was not prompted by ethical considerations, arbitral immunity did not bar Plaintiff's claims against the arbitrator.
The second case is Higgins v. Superior Court (Disney/ABC Television, Inc.), filed June 27, 2006 (2006 DJDAR 8328). In this writ proceeding, Petitioners were five siblings who appeared in an episode of the television program "Extreme Makeover: Home Edition." After the show's first broadcast, they were forced out of the home that was the subject of the program. They sued the television Defendants and the homeowner. The trial court granted Defendants' motion to compel arbitration.
Petition granted. The public policy of resolving disputes by arbitration does not extend to an arbitration agreement permeated by unconscionability. It was procedurally unconscionable because Petitioners were young, unsophisticated, and given only ten minutes to review and a sign a 24-page, 72-paragraph, single-spaced agreement with the arbitration clause in a nondescript paragraph. The provision was substantively unconscionable since it was one-sided. Only the television Defendants could compel arbitration and seek appellate review. Therefore, the arbitration clause was unenforceable.
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