ADR Case Updates
Weinstein Tax" on Settlements; Malpractice in Mediation; Arbitrators May Not Compel Third-Parties To Produce Documents Pre-Hearing; PAGA Claims May Not Be Bifurcated; and More, 03/07/2018
"Weinstein Tax" on Settlements Related to Sexual Harassment
A new provision in the recently enacted Tax Cut and Jobs Act, which is being dubbed the "Weinstein Tax," will undoubtedly impact mediations involving a sexual harassment claim.
Internal Revenue Code 26 U.S.C. §162(q) states that: "No deduction shall be allowed under this chapter for - (1) any settlement or payment related to sexual harassment or sexual abuse if such settlement or payment is subject to a nondisclosure agreement, or (2) attorney's fees related to such a settlement or payment."
While the primary intent of the law is laudable — i.e., to prevent secret closed-door sexual harassment settlements - critics suggest the new provision did not take into consideration many factors, including those that do not favor claimants, such as an employer's disincentive to settle as well as the employee's own tax consequences. In many settlements, a company would issue a payment to the claimant's lawyer and to the claimant, then issue a Form-1099 to both the claimant and to her counsel. The claimant was permitted to deduct the amount of the counsel fees from her taxable income.
New section 162(q)'s language also gives rise to ambiguity and interpretation issues, such as:
- What is a "nondisclosure agreement" under the law? Would it include a narrowly-drawn confidentiality agreement (e.g., one which requires the redaction of the settlement amount only)?
- How will the section apply to a situation where a settlement resolves many claims, only one of which is sexual harassment? What if the confidentiality agreement specifically exempts sexual harassment claims?
- As for attorney fees, what does "attorney's fees related to such a settlement or payment" mean? Settlements are often "global," meaning they resolve all claims, without allocating specific sums to specific claims.
The law in this area is fraught with peril for counsel drafting settlement agreements and will remain unsettled until future court decisions provide more clarity.
California Law Review Commission Will Recommend Exception To Mediation Confidentiality Allowing Clients To Sue Lawyers For Malpractice Committed In Mediation
The California Legislature directed the California Law Review Commission to analyze "the relationship under current law between mediation confidentiality and attorney malpractice and other misconduct, and the purposes for, and impact of, those laws on public protection, professional ethics, attorney discipline, client rights, the willingness of parties to participate in voluntary and mandatory mediation, as well as any other issues the commission deems relevant."
The Commission has completed its study as requested by the Legislature and has approved final recommendation subject to minor editorial changes before final publication. The Commission recommends the creation of a new exception to mediation confidentiality that will, if enacted by the Legislature, allow evidence of attorney misconduct in mediation to be admissible in an action brought by a client against the attorney. The proposed new exception is designed to hold attorneys accountable for misconduct in the mediation process, while also allowing attorneys to effectively rebut meritless misconduct claims. The recommendation may be viewed at: http://www.clrc.ca.gov/pub/Printed-Reports/RECpp-K402.pdf.
FAA Does Not Grant Arbitrators Power To Compel Third-Parties To Produce Documents Prior to Hearing (9th Circuit)
In Vividus, LLC v. Express Scripts, Inc., 878 F.3d 703 (9th Cir. 2017), several plaintiffs filed suit against multiple pharmacy benefit managers, alleging antitrust violations. Certain claims were severed and ordered to be arbitrated separately based upon forum selection, as well as for arbitration clause considerations. An Arizona arbitration panel hearing certain of these claims issued a subpoena against a third-party to produce documents. The subpoena directed the third-party to produce the documents to the office of plaintiffs' counsel in Florida prior to the arbitration hearing. After the third-party did not respond to the subpoena, the plaintiffs filed a petition in federal court to enforce the subpoena. The district court denied the petition, concluding the Federal Arbitration Act (FAA) does not grant arbitrators power to compel production of documents from a third-party outside of a hearing.
Affirmed: The FAA (9 U.S.C. § 7) allows arbitrators to compel witness testimony at an arbitration hearing, and to compel such witnesses to bring relevant documents to the hearing. However, an arbitrator is not vested with the same discovery powers that courts possess. Under the FAA, arbitrators are not granted "implicit powers to order document discovery from third parties prior to a hearing." In so holding, this Ninth Circuit panel agreed with the Second, Third, and Fourth circuits. The district court's denial of the petition to enforce the subpoena was correct.
Trial court may not bifurcate and compel arbitration of individual versus representative PAGA claims
In Lawson v. ZB, N.A., (2017) 18 Cal.App.5th 705, Kalethia Lawson began working as an hourly employee for California Bank & Trust (CBT), a wholly owned subsidiary of ZB. She filed a complaint against CBT and ZB, alleging wage and hour violations. Lawson alleged she was acting as a representative under the Private Attorneys General Act (PAGA), and was entitled to recover penalties imposed by the Labor Code. ZB filed a motion to compel Lawson to arbitrate the underpaid wages she asserted she, as an individual, was owed. ZB noted that Lawson had waived the right to bring either a class action or representative action against it. ZB argued that in light of that waiver, in Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, the California Supreme Court prevented her from asserting lost wage claims on behalf of other CBT employees. ZB did not ask the trial court to order arbitration of the specific $50 and $100 amounts set forth in Labor Code section 558 subdivisions (a)(1) and (a)(2), as part of the civil penalties the statute imposes for violations of the Labor Code and orders of the Industrial Welfare Commission. The trial court granted ZB's motion, and bifurcated Lawson's underpaid wage claims from her claim to the specific $50 and $100 amounts imposed by section 558. However, because Lawson was acting as a PAGA representative, the trial court ordered that the underpaid wage portion of her claim would be arbitrated as a representative claim. The trial court's order stated in pertinent part: "[T]he Court bifurcates this issue of unpaid wages and premium wages per California Labor Code Section 558 against Defendants and compels that issue to arbitration. This is a representative action. PAGA, by its very nature, is a representative statute. Therefore, the court sends the claim under Labor Code Section 558 to arbitration as a representative action." ZB filed a timely notice of appeal, as well as a petition for a writ of mandate.
Petition Granted: Under PAGA, an aggrieved employee may bring a civil action personally and on behalf of others to recover civil penalties for Labor Code violations. Iskanian held that an employee's right to bring a PAGA claim was not waivable, and PAGA was not preempted by the Federal Arbitration Act. Following Iskanian, Williams v. Superior Court (Pinkerton) (2015) 237 Cal. App. 4th 642, concluded that a PAGA claim "cannot be split into an arbitrable individual claim and a nonarbitrable representative claim." A PAGA action functions as a substitute for an action brought by the state, and underpaid wages may be recovered as civil penalties under Section 558. Here, Lawson brought her PAGA claim on behalf of the state, which did not agree to arbitrate its claim. Therefore, the trial court was directed to vacate its order bifurcating and compelling arbitration of the underpaid wages portion of Lawson's PAGA claim.
Right To Compel Arbitration Does Not Vest When Parties Agree To Be Bound By Contractual Terms And Rules Determined By A Third-Party Change
In State Farm General Insurance Company v. Watts Regulator Co., (2017) 17 Cal.App.5th 1093, a nonprofit organization (Arbitration Forums, Inc. or AF) provided arbitration services for insurers and self-insured companies who become members of AF by signing its "Property Subrogation Arbitration Agreement" (the AF arbitration agreement). Plaintiff State Farm General Insurance Company and Defendant Watts Regulator Company were members of AF that signed the AF arbitration agreement many years ago. After notice to its members in November 2014, AF changed the AF arbitration agreement, effective January 1, 2015, to exclude product liability claims from the kinds of claims subject to compulsory arbitration under the agreement. A few months later, Plaintiff filed this lawsuit, alleging subrogated product liability claims against Defendant arising from a loss that occurred in November 2012. The loss stemmed from water damage to the home of Plaintiff's insured. After Plaintiff paid on the claim, it became subrogated to seek recovery against Defendant. Defendant filed a motion to compel arbitration, contending it had a vested right, under the AF arbitration agreement in effect before January 1, 2015, to compulsory arbitration of the claim since the loss occurred when product liability claims were subject to compulsory arbitration. The trial court denied defendant's motion to compel arbitration.
Affirmed: There is no basis for any vested right to arbitration under the circumstances of this case, where the parties had agreed to be bound by contractual terms and rules determined by a third party. No legal basis existed for Defendant to apply retroactivity rules, vested rights, or accrual of claims theories. Moreover, the doctrine of judicial estoppel did not apply. Before the action was filed, AF's policy as to compulsory arbitration of product liability claims was clear. Therefore, the trial court's denial of defendant's motion to compel arbitration was correct.
Injured Worker May Not Be Compelled To Arbitrate Action Against U-Haul As Non-Signatory To Arbitration Agreement Signed By His Employer Under Theories Of Third-Party Beneficiary, Agency, Or Estoppel
In Jensen v. U-Haul Co. of California, (2017) 18 Cal.App.5th 295, Virgil and Glenda Jensen brought an action for personal injuries and loss of consortium against U-Haul Co. of California after Virgil was injured while driving a U-Haul truck that his employer, CTS, had rented from U-Haul. The truck blew a tire causing injuries to Virgil. The Jensens brought a tort action against U-Haul alleging it negligently maintained the vehicle. U-Haul moved to compel arbitration based upon the arbitration agreement that Virgil's supervisor had signed. The trial court denied the motion.
Affirmed: Although public-policy favors arbitration, a party may only be compelled to submit to arbitration if the party has agreed to do so in writing. Moreover, "[p]ersons are not normally bound by an agreement entered into by a corporation in which they have an interest or are employees." Nevertheless, non-signatories may be bound to arbitrate under theories of third-party beneficiary, agency, or estoppel as U-Haul asserted. However, those theories did not apply here. First there was nothing in the terms of the agreement that demonstrated any express intent to benefit a third-party. Jensen drove the truck for the benefit of CTS, not himself. Second, the mere fact that Jansen was an employee of CTS did not mean that his supervisor had implicit authority to bind him to an arbitration agreement entered between CTS and U-Haul. Finally, while non-signatories may be estopped from refusing to arbitrate, the Jensens' claim were not "dependent upon, inextricably intertwined with" the underlying contractual obligations of the agreement containing the arbitration clause because the Jensens asserted tort claims, not contractual claims. Therefore, the trial court's denial of the motion to compel arbitration was correct.
AT&T Compels Arbitration Against Putative Class Of Cell Phone Owners — Individual Arbitration Does Not Violate First Amendment (9th Circuit)
In Roberts v. AT&T Mobility LLC, 877 F.3d 833 (9th Cir. 2017), Marcus Roberts, Ashley and Kenneth Chewey, and James Krenn ("Plaintiffs") brought a putative class action against AT&T Mobility LLC ("AT&T"). They alleged that AT&T falsely advertised their mobile service plans as "unlimited" when in fact it intentionally slowed data at certain usage levels. AT&T moved to compel arbitration, and Plaintiffs opposed on First Amendment grounds (state action). The district court compelled arbitration, holding there was no state action.
Affirmed: Plaintiffs claimed there is state action whenever a party asserts a direct constitutional challenge to a permissive law under Denver Area Educational Telecommunications Consortium, Inc. v. FCC, 518 U.S. 727 (1996). Second, Plaintiffs contended that the Federal Arbitration Act ("FAA"), 9 U.S.C. § 2, including judicial interpretations of the statute, "encourages" arbitration such that AT&T's actions are attributable to the state. However, AT&T's conduct could not be construed as attributable to the state, and Denver Area did not hold otherwise. Second, AT&T is not a state actor under the "encouragement" test. The FAA merely gives AT&T the private choice to arbitrate, and does not "encourage" arbitration such that AT&T's conduct is attributable to the state. Denver Area did not broadly rule that the government is the relevant state actor whenever there is a direct constitutional challenge to a "permissive" statute, and did not support finding state action here.
Arbitration Award Should Not Be Vacated Unless It Is Completely Irrational (9th Circuit)
In Sanchez v. Elizondo, 878 F.3d 1216 (9th Cir. 2018), Robert Elizondo retained Gregory Sanchez, who was licensed as a securities broker by the Financial Industry Regulatory Authority (FINRA), to manage his investment portfolio. Believing Sanchez invested in holdings with inappropriate risk, Elizondo brought a claim against Sanchez, alleging that Sanchez had mismanaged Elizondo's portfolio. The parties executed a FINRA Arbitration Submission Agreement. Under FINRA Rule 12401, if the amount of a claim is greater than $50,000, and not more than $100,000, "the [arbitration] panel will consist of one arbitrator unless the parties agree in writing to three arbitrators." FINRA Rule 12401(b). Only "[i]f the amount of a claim is more than $100,000" should "the panel . . . consist of three arbitrators." Since Elizondo originally claimed $100,000 in compensatory damages, his case was assigned to a single arbitrator. Eleven days before the arbitration hearing was scheduled to take place, Elizondo filed a Pre-Hearing brief, in which he increased his damages claim to $125,500. Elizondo did not seek to amend his complaint, nor did Sanchez raise any objection. Since neither party had made a motion to dismiss or to amend the complaint, the arbitrator determined that he would proceed alone based on the damages claimed in the original complaint and awarded Elizondo $75,000. Sanchez brought a petition in district court to vacate the arbitration award, pursuant to 9 U.S.C. § 10. Elizondo answered and brought a countermotion to confirm the award and for attorney's fees. Sanchez raised several arguments in support of his petition to vacate the award, but the district court granted the petition on the single ground that the arbitrator had exceeded his powers when he proceeded with a single arbitrator over Sanchez's objection, and in violation of FINRA Rule 12401(c). The court denied Elizondo's countermotion to confirm the award, and it remanded the case "for further proceedings consistent with [its] Order."
Reversed and remanded: 9 U.S.C. § 10 provides that a district court may vacate an arbitration award "where the arbitrators exceeded their powers," a very "high standard for vacatur." "It is not enough for petitioners to show that the panel committed an error — or even a serious error. 'It is only when [an] arbitrator strays from interpretation and application of the agreement and effectively "dispense[s] his own brand of industrial justice" that his decision may be unenforceable.'" The Ninth Circuit has held "that arbitrators 'exceed their powers' in this regard not when they merely interpret or apply the governing law incorrectly, but when the award is 'completely irrational." Here, the district court identified no authority supporting its vacatur. The arbitrator did not exhibit a manifest disregard of the law nor was the award completely irrational. Therefore, the district court's order granting vacatur was reversed and the matter remanded.
FAA Preempts Montana Law Under Federal Maritime Law Regarding Insurance Contract Insuring Yacht - Reverse Preemption Under McCarron-Ferguson Act Inapplicable (9th Circuit)
In Galilea v. AGSC Marine Ins. Co., 879 F.3d 1052 (9th Cir. 2018), a Nevada LLC (Galilea) submitted a signed insurance application for its yacht to an agent for insurance underwriters (Pantaenius). The application included an arbitration provision governed by the laws of the state of New York. The actual policy that was issued contained differing choice-of-law provisions adding Federal Maritime Law (FML), as well as different language describing forum selection provisions and the scope of disputes. Galilea later submitted a claim for damages to the yacht after it ran ashore in Panama. Pantaenius' underwriters refused to pay, initiated arbitration proceedings in New York, and moved to compel arbitration in New York district court. The owners of Galilea, residence of Montana, alleged 12 causes of action against the defendants in Montana district court. The court found the arbitration clause under the policy (not the application) was relevant, and FML and the Federal Arbitration Act (9 U.S.C. § 1 et seq.) applied. The underwriters' motion to compel arbitration on two matters was granted, and their motion to compel on the remaining causes of action was denied.
Affirmed in part in reversed in part: Under La Reunion Francaise SA v. Barnes, 247 F. 3d 1022 (9th Cir. 2001), "policies that ensure maritime interests against maritime risks are contracts subject to admiralty jurisdiction and to Federal Maritime Law." Wilburn Boat Co. v. Fireman's Fund In's. Co., 348 U.S. 310 (1955), held that, in a maritime insurance policy, such a contract falls within federal jurisdiction under the Admiralty Clause of the Constitution. Here, the FAA specifically applied to maritime transactions. Further, Montana law did not preempt the FML under the McCarran-Ferguson Act (15 U.S.C. § 1012) with respect to arbitration of consumer insurance disputes. Under the FAA, the arbitration provision was enforceable. Nor did Montana law preclude application of FML under M/S Bremen v. Zapata Off-Shore Co. 407 U.S. 1 (1972) regarding the forum selection clause. Finally, in light of arbitration rules incorporated into the policy by sophisticated parties, gateway issues of arbitrability were delegated to an arbitrator, not the court. Therefore, the matter was remanded to the district court to grant the underwriters' motion to compel arbitration in its entirety.
Party "Clearly And Unmistakably Consents" To Arbitrator's Jurisdiction By Appearing At Prehearing Notices And Moving For Opposing Party To Post Bond And May Not Rescind Consent After Motion Denied
In Douglass v. Serenivision, Inc., (2018) 20 Cal.App.5th 376, Vivera, a company that sold diet pills and other health and beauty products online, signed an Adverting Insertion Order with Pinnacle Dream Media, doing business as Serenivision, Inc., for internet advertising services. The Insertion Order incorporated a Master Advertiser Agreement that included an arbitration clause and personal guarantee, which was accepted by Vivera and reflected the printed name and signature of plaintiff Clayton Douglass. After nonpayment, Serenivision filed a demand for arbitration against Vivera and Douglas seeking an unpaid balance of $816,530. Douglass appeared at a preliminary hearing before the arbitrator, at which time he reaffirmed he was "appear[ing] voluntarily and submit[ting] to the jurisdiction of this Arbitrator." Douglass wrote a letter to the arbitrator: (1) relaying his prior statements to Serenivision that he would voluntarily participate in the arbitration only if Serenivision posted a bond; (2) informing the arbitrator that Serenivision had refused to post a bond; and (3) stating that "[a] bond is necessary for this action to proceed or for this tribunal to exercise jurisdiction." The arbitrator construed the letter as an expedited request for an order requiring Serenivision to post a bond, and denied that motion a week later. Subsequently, Douglass wrote the arbitrator a letter "terminat[ing] his voluntary appearance" before the arbitrator and proclaiming he would make no further appearances in the arbitration proceedings. True to his word, Douglass did not appear at the evidentiary hearing a week later. The arbitrator allowed Serenivision to present its case, and then issued an award against Douglas for $1,755,050.34. The trial court confirmed the award.
Affirmed: There is a "strong presumption that courts should determine the jurisdiction of arbitrators." (Sandquist v. Lebo Automotive, Inc. (2016) 1 Cal.5th 233, 249. Parties may nevertheless agree to let an arbitrator decide his or her own jurisdiction, at least if their agreement to do so is "'clear and unmistakabl[e].'" (Howsam v. Dean Witter Reynolds, Inc. (2002) 537 U.S. 79, 83. Here, Douglass clearly and unmistakably consented to have an arbitrator decide his own jurisdiction when he did not object to the arbitrator's jurisdiction in his answer to the arbitration petition, informed the arbitrator that he was "voluntarily" "submit[ing]" to the arbitrator's jurisdiction, appeared at multiple prehearing conferences, formally asked the arbitrator to impose a bond requirement on Serenivision, and only after the arbitrator denied his request, told the arbitrator that his submission to jurisdiction was conditional on obtaining that bond. On those facts, the trial court correctly concluded that such conduct constituted clear and unmistakable consent to allow the arbitrator to decide the issue of his own jurisdiction. Further, Douglass' challenge to the arbitrator's jurisdiction was untimely. Accordingly, the trial court's ruling confirming the arbitrator's award was correct.
Because FAA Does Not Apply To Transportation Workers, Employment Agreement Purportedly Waiving Class Actions Unenforceable Under California Law
In Muro v. Cornerstone Staffing Solutions, Inc., (2018) 20 Cal.App.5th 784, Plaintiff Tony Muro entered into an employment contract with defendant Cornerstone Staffing Solutions, Inc. The contract included a provision requiring that all disputes arising out of Muro's employment with Cornerstone be resolved by arbitration. It also incorporated a class action waiver provision. Muro filed a putative class action and alleged various Labor Code violations. Cornerstone moved to compel arbitration and sought dismissal of the class claims. Relying heavily on Garrido v. Air Liquide Industrial, U.S. LP (2015) 241 Cal.App.4th 833, the trial court concluded the contract was exempted from the operation of the Federal Arbitration Act (FAA; 9 U.S.C. § 1 et seq.) and was instead governed by California law. It further determined that the California Supreme Court's decision in Gentry v. Superior Court (2007) 42 Cal.4th 443 (overruled on other grounds in Iskanian v. CLS Transportation, Los Angeles, LLC [2014] 59 Cal.4th 348) continued to provide the relevant framework for evaluating whether the class waiver provision in the contract was enforceable under California law. After applying Gentry to the record here, the trial court found the class waiver provision of the contract unenforceable and denied the motion to compel arbitration.
Affirmed: Under California law, the Plaintiff had the burden to show the class action waiver was invalid by making a showing of the four factors in Gentry: (1) "the modest size of the potential individual recovery"; (2) "the potential for retaliation against members of the class"; (3) "the fact that absent members of the class may be ill informed about their rights"; and (4) "other real world obstacles to the vindication of class members' rights ... through individual arbitration." Gentry held that a trial court may decline to enforce a class action waiver if it concludes, based on these factors, that class arbitration is "likely to be a significantly more effective practical means of vindicating the rights of affected employees than individual litigation or arbitration," and that there would be a "less comprehensive enforcement" of the applicable laws if the class action device is disallowed. Id. at 463. Substantial evidence supported each Gentry factor. Thus, the trial court did not abuse its broad discretion by finding the class waiver constituted an unlawful exculpatory clause and properly denied Cornerstone's petition to compel arbitration.
Hospital May Not Compel Arbitration Of Wrongful Death Claim Brought By Decedent's Heir Since Elder Abuse Act Not Subject To Arbitration Requirements Of MICRA
In Avila v. Southern California Specialty Care, Inc., (2018) 20 Cal.App.5th 835, Antonio Avila executed California's statutory power of attorney form, naming his son, Alex, as his agent. Antonio, age 87, was transferred from another facility to Kindred, a long-term acute care hospital, suffering from various conditions, including sepsis and chronic renal failure. The next day, after Antonio had begun receiving care, Alex was presented with a document entitled "Voluntary Alternative Dispute Resolution (ADR) Agreement" (the agreement). Alex signed the agreement on Antonio's behalf. Antonio died within five days of admission as a result of Kindred's neglect. A complaint was filed on behalf of Antonio, and by Alex individually for wrongful death. Kindred moved to compel arbitration. The trial court ruled that Alex's individual claim for wrongful death was not subject to arbitration. The court further exercised its discretion under Code of Civil Procedure section 1281.2(c) and refused to enforce the arbitration agreement as to the remaining claims due to the risk of inconsistent judgments.
Affirmed: Initially, the appellate court found that the agreement was governed by California law and not the FAA because there was no mention of the FAA in the agreement. Next, the court considered whether the wrongful death claim was in essence one for professional negligence as defined by California's Medical Compensation Reform Act (MICRA) which created requirements for arbitration agreements of those disputes under Code of Civil Procedure section 1295 (Arbitration of Medical Malpractice). In Ruiz v. Podolsky, (2010) 50 Cal.4th 838, 849, the California Supreme Court carved out an exception to the general rule that arbitration agreements must be the subject of consent rather than compulsion and held that section 1295 permitted patients who consented to arbitration to bind their heirs in actions for wrongful death. Construing the allegations in the complaint, the appellate court found that Ruiz's holding did not apply. Third, the court considered the applicability of the agreement to Alex. The court found that there was no evidence that when Alex signed the agreement as his father's agent, he had any intent to waive his right to a jury trial for any personal claims. Finally, the court of appeal found that the trial court did not abuse its discretion in staying the survivorship claims as compelling arbitration of those claims would risk conflicting rulings when the wrongful death claims involved the same set of operative facts.
Because Appraisal Process In Insurance Loss Dispute Is A "Limited Form of Arbitration," Appraiser's Declaration Inadmissible Unless To Determine Whether Award Procured By Fraud Or Other Undue Means
In Khorsand v. Liberty Mutual Fire Insurance Co., (2018) 20 Cal.App.5th 1028, Plaintiffs were homeowners insured under a home insurance policy issued by Liberty Mutual Fire Insurance Company. Liberty and Plaintiffs disagreed about the loss estimates of water-damage claims and invoked an appraisal procedure under Insurance Code § 2071(a). The appraisal was conducted by each party's appraiser, plus a third "umpire" appraiser selected by the two parties. This appraisal process is form of limited arbitration. Plaintiffs' appraiser did not agree with the final appraisal award. Plaintiffs moved to vacate the award alleging fraud and submitted a declaration by their appraiser. Liberty objected on admissibility grounds under Evidence Code § 703.5, because an arbitrator is not competent to testify. The trial court admitted the declaration, but denied Plaintiffs' motion to vacate the award.
Affirmed: To vacate an appraisal award under Code of Civil Procedure § 1286.2(a), it must have been obtained by "corruption, fraud, or other undue means, or that the arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted." Pursuant to Evidence Code § 703.5, an arbitrator is not competent to testify unless the testimony relates to corruption or bias. Only a portion of the appraiser's declaration related to Plaintiffs' fraud allegation. That section was admissible under Cobler v. Stanley, Barber, Southard, Brown & Associates (1990) 217 Cal.App.3d 518, 528. The rest of the declaration was inadmissible and should not have been admitted into evidence by the trial court. Nevertheless, the trial court's decision to affirm the appraisal award was correct.
California opinions are posted at: click here, and the Ninth Circuit opinion at: click here.
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