Baker Marquart LLP v. Kantor ( 2018 )

Filed 4/25/18
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION TWO
BAKER MARQUART LLP, B280861
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. SS028568)
v.
JAMES R. KANTOR,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of
Los Angeles County. Gerald Rosenberg, Judge. Reversed and
remanded with directions.
Baker Marquart, Ryan G. Baker, Jaime W. Marquart and
Blake D. McCay, for Plaintiff and Appellant.
Law Offices of Robert S. Gerstein, Robert S. Gerstein; Law
Offices of Eric Y. Nishizawa and Eric Y. Nishizawa, for
Defendant and Respondent.
__________________________________________
Appellant Baker Marquart LLP represented respondent
James R. Kantor on a contingency basis in litigation that resulted
in a significant recovery for Kantor. Following the conclusion of
Baker Marquart’s representation, Kantor filed a demand for fee
arbitration in accordance with the parties’ contingency fee
agreement. In his arbitration demand, Kantor argued Baker
Marquart charged him an incorrect contingency fee because
Baker Marquart failed to complete two specified tasks. In
advance of the arbitration, however, Kantor submitted, and the
three-person arbitration panel (panel) accepted, an ex parte
“confidential arbitration brief” that Kantor did not provide or
otherwise reveal to Baker Marquart. In the confidential brief,
Kantor raised and argued additional claims not presented in his
arbitration demand. A majority of the panel ruled in Kantor’s
favor and awarded him a refund of a portion of the fees he had
paid to Baker Marquart. In its ruling, the panel majority
addressed and relied on claims Kantor raised in the confidential
brief.
Baker Marquart filed a motion in superior court to vacate
the arbitration award; and Kantor filed a motion to confirm the
award. Among other things, Baker Marquart argued
unsuccessfully that, under Code of Civil Procedure section 1286.2
(section 1286.2), the trial court was required to vacate the
arbitration award because the award was procured by
“corruption, fraud or other undue means.” (§ 1286.2,
subd. (a)(1).) In particular, Baker Marquart argued the
confidential brief was an improper ex parte communication,
relied on by the panel and to which Baker Marquart had no
adequate opportunity to respond. The trial court denied Baker
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Marquart’s motion to vacate and granted Kantor’s motion to
confirm. Baker Marquart appeals the resulting judgment.
As discussed below, we conclude the arbitration award was
procured by “undue means” as that term is used in section 1286.2
and, as a result, must be vacated.
BACKGROUND
A. Contingency Fee Agreement for Legal Services
Kantor hired Baker Marquart and another law firm
(collectively, Baker Marquart)1 to replace his former counsel who
had been representing him in litigation against his stepmother
and her accountant. In particular, Kantor sought to remove his
stepmother and the accountant as trustees on certain family
trusts of which Kantor was a beneficiary. Baker Marquart and
Kantor executed a contingency fee agreement for legal services
(fee agreement) that outlined their attorney-client relationship.
According to the fee agreement, if 100 days had passed since
execution of the fee agreement and Baker Marquart completed
nine identified “minimum tasks,” the contingency fee would
increase from 30 to 35 percent of Kantor’s “Recovery” as defined
in the agreement.
The nine identified tasks (tasks) were: (1) “Decision made
on whether to amend complaint in [the underlying lawsuit] to
add claims such as accounting and/or other malpractice claims
and, as necessary, a motion for leave to amend filed (not argued
or heard),” (2) serve written special interrogatories within a
specified timeframe, (3) serve requests for admissions within a
specified timeframe, (4) serve form interrogatories within a
1 The other law firm is not a party to this appeal. For
simplicity, and unless otherwise necessary, we refer to both firms
collectively as Baker Marquart.
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specified timeframe, (5) serve requests for documents within a
specified timeframe, (6) serve deposition notices within a
specified timeframe, (7) request documents either informally or
formally within a specified timeframe from transactional trust
counsel, (8) serve deposition subpoenas and document requests
within a specified timeframe, and (9) “Consultation with
non-testifying, consulting art appraisal expert interviewed . . . .”
The fee agreement also included an arbitration clause.
According to the arbitration clause, the parties agreed to
arbitrate “any dispute regarding [their] respective rights and
obligations under [the] contingent fee agreement for legal
services or regarding [the attorneys’] professional services or any
other matter between” the parties. The arbitration clause
specified two different types of disputes. On the one hand, the
parties agreed that “disputes regarding the amount of the
contingent fee and costs and expenses payable by [Kantor] under
[the] contingent fee agreement for legal services will be resolved
by arbitration conducted in accordance with the rules of the
Beverly Hills Bar Association.” On the other hand, the parties
agreed that “disputes regarding all other matters, including
matters related to [the attorneys’] professional services, conflicts
of interest, and breach of fiduciary duty, will be resolved by
binding arbitration conducted in Los Angeles, California either
by ADR Services Inc. (‘ADRS’) or JAMS Inc. (‘JAMS’), as selected
by the party filing the claim, in accordance with the streamlined
rules of JAMS.”
The arbitration clause also stated the parties “agree to be
bound by the decision of the arbitrator(s) and to waive the right
to trial by judge or a jury and the right to appeal from the award
of the arbitrator(s) or any judgment or order entered on the
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arbitration award.” Further, the agreement provided “[a]ny
arbitration award shall be final, binding and conclusive upon
[Kantor], on the one hand, and [the attorneys], on the other hand,
and shall be enforceable in all courts of competent jurisdiction.”
B. Kantor’s Recovery in Litigation and Baker
Marquart’s Fees
Following Baker Marquart’s representation of Kantor,
Kantor received over $1.6 million in settlement Recovery.
Applying a 35 percent contingency rate, Baker Marquart received
close to $600,000 in fees.
C. The Fee Arbitration
1. Kantor’s Fee Arbitration Demand
Approximately one year after receiving his substantial
recovery, Kantor filed a demand for fee arbitration against Baker
Marquart (demand). In his demand, Kantor stated the
contingency fee “was not to increase above 30% until 9 specified
tasks were completed.” Kantor alleged “Attorney[s] did not
complete tasks 1 and 9.” Accordingly, Kantor claimed the
contingency fee of 35 percent was improper. He also claimed two
additional billing errors, which are not relevant to this appeal.
Other than tasks one and nine, Kantor’s demand did not mention
the remaining seven tasks listed in the fee agreement and did not
claim any of the tasks, even if performed, were performed
inadequately.2
2 In full, the relevant portion of the demand states: “The
subject attorney fee agreement (the ‘Agreement’) shows a
contingency fee structure. According to the Agreement’s terms,
the contingency fee therein was not to increase above 30% until 9
specific tasks were completed. Attorney did not complete tasks 1
and 9. In the absence of performance of all 9 specific tasks, the
Agreement explicitly provides that compensation cannot exceed
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2. Baker Marquart’s Response to Kantor’s
Demand
Prior to the arbitration, Baker Marquart submitted a
response to Kantor’s demand. In its response, Baker Marquart
addressed tasks one and nine. With respect to task number
one—whether to amend the complaint to add accounting
malpractice or other malpractice claims—Baker Marquart argued
it had thoroughly considered the issue of adding malpractice
claims against the accountant, had discussed it with Kantor, and
had decided not to amend the complaint. Baker Marquart also
submitted time records to show its attorneys had considered the
issue. With respect to task number nine—consultation with art
appraisal expert—Baker Marquart argued it had informally
consulted with art experts, but the entire issue of appraisal of
artwork was rendered moot by a trial court order made shortly
after Kantor hired Baker Marquart.
3. Kantor’s Ex Parte Confidential Brief
A couple of weeks prior to the arbitration, the chairperson
of the panel ordered the parties to submit any briefs, exhibits, or
evidence to the panel no later than December 2, 2015. When
Baker Marquart sought clarification from the panel chairperson
as to whether the parties were required to exchange those same
documents with each other, the chairperson responded, “I would
30%. Such clause was intended to assure that the client was
rendered legal services properly. Attorneys disregarded the
terms of the Agreement that Attorney drafted and assessed a
35% contingency fee, despite the failure to complete all 9 specific
tasks. 5% of the total settlement amount is significant because
the total amount of settlement recovery for which the contingency
fee was calculated is in excess of $1M.”
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expect that the parties would exchange all documents which they
intend or may introduce during the arbitration. [¶] A confidential
brief need not be given to opposing counsel.” Baker Marquart
exchanged all its documents, including its arbitration brief, with
Kantor. Although Kantor shared his exhibits and documents
with Baker Marquart, he did not share the confidential
arbitration brief he submitted to the panel (confidential brief).
Baker Marquart had no knowledge of the confidential brief until
the arbitration hearing was under way and did not see a copy of
the confidential brief until much later, when Kantor included a
copy of it with his reply brief in support of his motion to confirm
the award filed with the trial court (discussed below).
In the confidential brief, Kantor argued Baker Marquart
not only failed to complete tasks one and nine—i.e., the two tasks
he identified in his demand—but also had failed to complete the
remaining seven tasks as well. In particular, with respect to
tasks two through five, Kantor claimed that, although Baker
Marquart propounded the required discovery, “they utterly failed
to contest the boiler-plate objections that they received in
response to such” and they “never moved [to] compel further
responses.” And with respect to tasks six through eight, Kantor
stated Baker Marquart failed to move to compel responses to
deposition questions, did not properly request documents from
transactional trust counsel, and failed to serve one required
deposition subpoena. Kantor also appeared to argue for the first
time that task one required Baker Marquart to consider
amending the underlying complaint to add an “accounting” cause
of action in addition to accounting malpractice claims. Thus,
based on Baker Marquart’s alleged failure to complete all the
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nine listed tasks or any one of them, Kantor claimed the
contingency fee was improper.
4. The Arbitration Hearing
The arbitration took place on December 7, 2015. The
parties signed a “binding agreement” stating “the award will
immediately become final and binding and that a new trial may
not be requested.”
According to Baker Marquart, during the arbitration
hearing, it became apparent Kantor was urging a reduction of the
contingency fee based on Baker Marquart’s alleged failure to
complete tasks other than those addressed in the demand. Baker
Marquart objected to Kantor making new claims and arguments
at the arbitration. The panel acknowledged it had received the
confidential brief but would not allow Baker Marquart to review
it.
According to Kantor, the panel concluded the arbitration
hearing after each party confirmed it had nothing further to
argue.
5. The Arbitration Award
A few weeks after the arbitration hearing, the panel issued
its statement of decision and award in Kantor’s favor (award).
The award was a majority decision and not unanimous. In its
award, the majority stated Kantor claimed Baker Marquart
“assessed the wrong contingency fee percentage as specified in
the Fee Agreement because [Baker Marquart] did not complete
the nine specific tasks needed to increase the percentage.”
Similarly, the majority stated Kantor’s “first claim is that not all
nine tasks were completed in that they were not handled
promptly or completely.” The majority also asserted Baker
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Marquart had argued it “completed all nine tasks and [is]
entitled to the increased percentage.”
In discussing the tasks, the majority remarked that, at the
arbitration hearing, Baker Marquart “indicated that it did not
matter how well they did the nine tasks only that they did them.
Whether or not [Baker Marquart] filed timely motions or held in
depth discussions with art experts did not matter. Only that
[Baker Marquart] had done what [they] felt was sufficient.
During the representation [Kantor] did question [Baker
Marquart’s] follow-through on the tasks arguing that they had
not all been completed.”
The majority then made three findings relevant here.
First, the majority found Baker Marquart “did not properly
participate in the discovery process by filing motions to compel.”
Second, the majority found Baker Marquart “did not pursue
getting an accounting from either the accountant as the
accountant or as a trustee or from the other trustee.” And,
finally, the majority found Baker Marquart “did not pursue
claims against the accountant based on the fact that he was
bankrupt.” Based on these three findings, the majority concluded
Baker Marquart had not kept Kantor’s best interests in mind.
Specifically, the majority stated, “Attorneys have an obligation to
represent their client’s best interests. In this case it does not
appear that [Baker Marquart] kept [Kantor’s] best interests in
mind: [Baker Marquart] did not properly participate in the
discovery process by filing motions to compel; [Baker Marquart]
did not pursue getting an accounting from either the accountant
as the accountant or as a trustee or from the other trustee; and
[Baker Marquart] did not pursue claims against the accountant
based on the fact that he was bankrupt.”
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Thus, the majority determined Baker Marquart’s fees and
costs “were excessive because [Baker Marquart] did not complete
the nine tasks in a competent and timely manner as provided for
in section 7 of the Fee Agreement. The Arbitration [majority]
finds that a contingency fee of 30% is appropriate.” The majority
awarded Kantor a refund of $105,027.73.
D. Baker Marquart’s Petition to Vacate, and Kantor’s
Motion to Confirm, the Award
Following receipt of the award, Baker Marquart filed a
petition to vacate the award or, in the alternative, to correct the
award, and Kantor filed a motion to confirm the award. In
support of his motion to confirm, Kantor included a letter his
counsel sent to Baker Marquart on the day the parties were to
exchange their arbitration documents. Kantor’s counsel wrote to
explain his belief that the Beverly Hills Bar Association’s Rules of
Procedure for Fee Arbitrations, under which the arbitration was
proceeding, did not require the parties to exchange documents.
In an apparent effort to ease Baker Marquart’s concern at not
having all documents Kantor might submit to the panel, Kantor’s
counsel stated “[y]ou have possession of the entire file for the
matter, and thereby have the advantage of possession of all
documents that could be relevant, here. All of the documents
that are [Kantor’s] exhibits are from the file, and your reply to
[Kantor’s] demand for arbitration indicates that you are well
aware of the issues, here.”
In connection with his reply brief in support of his motion
to confirm the award, Kantor produced a copy of the confidential
brief. This was the first time Baker Marquart saw and was able
to review the confidential brief. Baker Marquart filed a surreply
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in an attempt to respond to the issues disclosed in the
confidential brief.
E. Trial Court Order Denying Baker Marquart’s Motion
to Vacate the Award and Granting Kantor’s Motion
to Confirm the Award; Judgment
On October 4, 2016, the trial court held a hearing on Baker
Marquart’s petition to vacate the award and Kantor’s motion to
confirm the award. At the hearing, the court recited its tentative
ruling which was to deny Baker Marquart’s motion to vacate and
to grant Kantor’s motion to confirm. The court stated, Baker
Marquart “fails to show that [Kantor’s] filing of a brief with the
arbitrators prejudiced it. Looking at the arbitration award, it
clearly reflects that it was based on the issues set forth in the
arbitration claim, specifically, that [Baker Marquart] failed to
perform tasks and that these tasks were the guarantee that legal
services would be properly provided. The arbitration panel based
its decision on [Baker Marquart’s] failure to, quote, ‘properly
participate in the discovery process by filing motions to compel;
[Baker Marquart] did not pursue getting an accounting from
either the accountant as the accountant or as a trustee or from
the other trustee; and [Baker Marquart] did not pursue claims
against the accountant based on the fact that he was bankrupt.’ ”
On January 5, 2017, the trial court entered judgment in
favor of Kantor, confirming the award. Baker Marquart
appealed.
DISCUSSION
A. Standard of Review
“We subject the trial court’s rulings and the underlying
award to different standards of review. To the extent the trial
court made findings of fact in confirming the award, we affirm
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the findings if they are supported by substantial evidence.
[Citation.] To the extent the trial court resolved questions of law
on undisputed facts, we review the trial court’s rulings de novo.”
(Cooper v. Lavely & Singer Professional Corp. (2014)
230 Cal. App. 4th 1, 11–12 (Cooper); SWAB Financial, LLC v.
E*Trade Securities, LLC (2007) 150 Cal. App. 4th 1181, 1198
(SWAB Financial).)
B. Baker Marquart did not waive its right to appeal.
As an initial matter, Kantor argues Baker Marquart
waived its right to appeal the trial court’s order. We disagree.
Although Kantor correctly notes that a waiver of the right
to appeal must be “ ‘clear and express’ ” (Cooper, supra,
230 Cal.App.4th at p. 19), he incorrectly asserts the arbitration
clause here “provides that all arbitrations between the parties
are binding.” As noted above, the arbitration clause states all
disputes other than those related to fees shall be “binding.” With
respect to fee disputes, the parties agreed to arbitrate those
disputes in accordance with the arbitration rules of the Beverly
Hills Bar Association. And, as Kantor concedes, those rules
provide that a fee arbitration is not binding unless, after a fee
dispute arises, the parties agree to binding arbitration.
Here, prior to the fee arbitration, Kantor and Baker
Marquart eventually agreed the fee arbitration would be
“binding” as that term is used in the Beverly Hills Bar
Association arbitration rules. Those rules state that, although a
“binding” arbitration award precludes a party from seeking a
retrial in court, a party may nonetheless challenge the binding
award under limited circumstances. Indeed, the panel confirmed
this in its cover letter to the award, where it stated: “This Award
is rendered as a Binding Award. A Binding Award may be
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appealed only upon very limited grounds as set forth in the Code
of Civil Procedure, § 1284 and § 1285 et seq.”
In light of the above, Kantor has not and cannot show the
required “ ‘clear and express’ ” waiver of the right to appeal.
(Cooper, supra, 230 Cal.App.4th at p. 19.) Accordingly, we turn
to the merits of Baker Marquart’s appeal.
C. The award must be vacated.
1. Applicable Law
“As a general rule, the merits of an arbitrator’s decision are
not subject to judicial review.” (SWAB Financial, supra,
150 Cal.App.4th at p. 1195.) As our Supreme Court has
explained, “it is the general rule that, ‘The merits of the
controversy between the parties [to an arbitration agreement] are
not subject to judicial review.’ [Citations.] More specifically,
courts will not review the validity of the arbitrator’s reasoning.
[Citations.] Further, a court may not review the sufficiency of the
evidence supporting an arbitrator’s award. [Citations.] [¶]
Thus, it is the general rule that, with narrow exceptions, an
arbitrator’s decision cannot be reviewed for errors of fact or law.”
(Moncharsh v. Heily & Blase (1992) 3 Cal. 4th 1, 11 (Moncharsh).)
There are statutory exceptions, however, to this general “no
review” rule. Relevant here, section 1286.2 requires a court to
vacate an arbitration award if the court determines the award
“was procured by corruption, fraud or other undue means.”
(§ 1286.2, subd. (a)(1).) Although section 1286.2 does not define
“undue means,” courts have addressed the meaning of that term
as used in section 1286.2. For example, “[i]mproper ex parte
communications between an arbitrator and a litigant can serve as
a basis for a corruption, fraud or other undue means finding.”
(Comerica Bank v. Howsam (2012) 208 Cal. App. 4th 790, 825.)
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And as we explained in Maaso v. Signer (2012) 203 Cal. App. 4th
362 (Maaso), “the court in Pour Le Bebe, Inc. v. Guess? Inc. (2003)
112 Cal. App. 4th 810 [5 Cal. Rptr. 3d 442] (Pour Le Bebe) concluded
that ‘[i]f the Legislature intended to permit an arbitration award
to be vacated whenever the prevailing party engages in tactics
that might in any way seem unfair, it would not have used the
specific examples of fraud and corruption to describe the type of
“undue means” it had in mind.’ [Citation.] The Pour Le Bebe
court noted that the California Law Revision Commission stated
in 1960 that ‘ “[i]t has been held that any conduct which amounts
to fraud or which deprives either party of a fair and impartial
hearing to his substantial prejudice may be ground for setting
aside the award.” ’ [Citation.] The court commented that this
statement bore ‘a strong resemblance to the long-standing
description of extrinsic fraud.’ [Citation.] Citing 8 Witkin,
California Procedure (4th ed. 1997) Attack on Judgment in Trial
Court, section 223, page 727, the court continued that the
‘essential characteristic [of extrinsic fraud] is that it has the
effect of preventing a fair adversary hearing, the aggrieved party
being deliberately kept in ignorance of the action or proceeding,
or in some other way fraudulently prevented from presenting his
claim or defense.’ ” (Maaso, at pp. 371–372.) “ ‘Extrinsic’ fraud is
that conduct which ‘results in depriving either of the parties of a
fair and impartial hearing to their substantial prejudice.’ ”
(Pacific Crown Distributors v. Brotherhood of Teamsters (1986)
183 Cal. App. 3d 1138, 1147.)
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2. The trial court erred in confirming an
arbitration award that took into consideration
claims not made in the arbitration demand and
to which Baker Marquart was not given an
adequate or meaningful opportunity to
respond.
Baker Marquart asserts the trial court’s order confirming
the award must be reversed because the award was based on
issues and claims Kantor raised in the confidential brief and not
in the demand. As a result of having no true opportunity to
respond to the new claims raised in the confidential brief, Baker
Marquart argues the award was procured by “undue means”
under section 1286.2 and must be vacated. We agree.
Because the relevant facts are not in dispute, we review the
trial court’s ruling de novo. (Cooper, supra, 230 Cal.App.4th at
p. 12.) The relevant facts are as follows: In his demand for fee
arbitration, Kantor identified two tasks he claimed Baker
Marquart failed to complete (specifically, tasks one and nine);
Baker Marquart received a copy of the demand; Baker Marquart
responded to the demand claiming it had substantially completed
the identified tasks one and nine; prior to the arbitration,
Kantor’s counsel wrote to Baker Marquart stating “your reply to
[Kantor’s] demand for arbitration indicates that you are well
aware of the issues, here;” prior to the arbitration, Kantor also
submitted a confidential brief to the panel, in which he claimed
the contingency fee rate should be reduced because Baker
Marquart failed to complete all of the tasks and failed to pursue
an accounting, which was not one of the listed tasks; despite its
objections, Baker Marquart did not receive a copy of the
confidential brief until long-after the arbitration had concluded
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and the panel had issued the award; at the arbitration, the
parties discussed issues that touched on tasks two through eight
as well as the issue of an accounting and the panel permitted the
parties to present argument until they stated they were finished;
the award references claims and issues Kantor raised in the
confidential brief.
Based on these facts, we conclude the award was procured
by “undue means” as that term is used in section 1286.2 and,
therefore, must be vacated. As we have previously held, “ ‘[A]
fundamentally fair hearing requires . . . notice, opportunity to be
heard and to present relevant and material evidence and
argument before the decision makers . . . .’ [Citations.] ‘The
arbitrator . . . must give each of the parties to the dispute an
adequate opportunity to present its evidence and arguments.’ ”
(Maaso, supra, 203 Cal.App.4th at pp. 372–373, fn. omitted.) In
Maaso, this division concurred with the trial court there that an
ex parte communication with an arbitrator before the arbitration
had concluded constituted “undue means” for purposes of section
1286.2. (Maaso, supra, at pp. 366, 373–375.) We explained,
“ex parte communication between a party’s representative
(whether counsel or party arbitrator) and a neutral arbitrator is
not part and parcel of the business of litigation.” (Id. at p. 373.)
Similar to Maaso, Baker Marquart did not have “ ‘an
adequate opportunity to present its evidence and arguments.’ ”
(Maaso, supra, 203 Cal.App.4th at p. 373.) Throughout the
arbitration, Baker Marquart was operating under its belief that
Kantor’s position was as stated in his demand—namely, the
contingency fee rate should be reduced because Baker Marquart
failed to complete tasks one and nine. This was a reasonable
belief. After all, not only is that how Kantor framed the issue,
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Kantor never sought leave to amend his demand or otherwise
alerted Baker Marquart that his demand was enlarged to include
all the tasks and the issue of an accounting. Indeed, to the
contrary, Kantor’s counsel reassured Baker Marquart in writing
that Baker Marquart’s response to Kantor’s demand (which
addressed only tasks one and nine) “indicates that you are well
aware of the issues, here.” Thus, not surprisingly, Baker
Marquart prepared and focused its defense on tasks one and
nine.
Kantor argues Baker Marquart had an adequate
opportunity at the arbitration hearing to address the remaining
tasks because the exhibits exchanged before the arbitration
hearing suggested other tasks would be discussed, the
confidential brief was based on the exchanged exhibits, the
parties did discuss other tasks at the arbitration, and the panel
allowed the parties to argue as long as they wanted. This misses
the mark. Assuming Baker Marquart had all the documents
before it and was permitted to address points made at the
hearing, that does not make up for the fact that, going into the
arbitration hearing and through no fault of its own, Baker
Marquart was unaware the contingency rate might be reduced
based on its alleged failure to perform any task other than tasks
one and nine. Kantor’s ex parte confidential brief gave him an
unfair advantage at the arbitration because, as a result of that
brief, he and the panel were prepared to consider and to argue all
the tasks as well as the issue of an accounting. Under the facts of
this case, we conclude Baker Marquart had no meaningful or
adequate opportunity to respond to the new claims Kantor raised
for the first time in its confidential brief. This is neither fair nor
proper.
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In addition, and despite Kantor’s position to the contrary,
we conclude Baker Marquart was prejudiced by its inability to
respond to Kantor’s claims raised in the confidential brief.
(Maaso, supra, 203 Cal.App.4th at pp. 371–372.) The award
clearly references claims that were not put at issue by the
demand, but rather were raised in the confidential brief. For
example, the award states repeatedly that Kantor claimed Baker
Marquart failed to complete any of the tasks, when in the
demand Kantor claimed Baker Marquart failed to complete only
tasks one and nine. The award also specifically found Baker
Marquart “did not properly participate in the discovery process
by filing motions to compel” and “did not pursue getting an
accounting,” which are references to tasks and issues beyond
tasks one and nine. Further, Baker Marquart explains in detail
the additional evidence and argument it would have presented
had it been on notice of the claims at issue. Although we do not
decide the strength or validity of Baker Marquart’s proffered
evidence or argument, it is sufficient to note Baker Marquart
would have acted differently had it known what claims were at
issue.
Kantor argues that, even if it was error for the panel to
consider claims based on any task or issue outside of tasks one
and nine, the award is nonetheless valid because it is also based
on Baker Marquart’s failure to complete tasks one and nine. We
disagree. As stated, task one concerned Baker Marquart’s
decision whether to move to amend the underlying complaint to
add a cause of action for accounting malpractice or other
malpractice claims. Although the award states Baker Marquart
failed to “pursue getting an accounting” and failed to “pursue
claims against the accountant based on the fact that he was
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bankrupt,” that is not what task one contemplated. In fact, it
was in the confidential brief where Kantor first mentioned Baker
Marquart’s alleged failure to pursue an accounting. Similarly,
the plain language of the award reveals it was not based on any
failure of Baker Marquart to complete task nine, which required
Baker Marquart to consult with a non-testifying art appraisal
expert. Finally, it is beyond dispute that the panel considered
and relied on the confidential brief. To the extent it is difficult to
decipher which specific task or issue the panel considered when
making each of its findings, we conclude that the submission of
and reliance on the ex parte confidential brief corrupted the
arbitration proceeding and resulting award such that the entire
award must be vacated.
To be clear, in concluding the trial court erred, we are not
reviewing the merits of the panel majority’s findings of fact or
conclusions of law, nor are we considering the sufficiency of the
evidence to support the majority’s decision. (Moncharsh, supra,
3 Cal.4th at p. 11.) Rather, we have determined the arbitration—
specifically Kantor’s submission of, and the majority’s reliance
on, an ex parte confidential brief that raised issues not known to
Baker Marquart—was fundamentally unfair such that the award
was procured by “undue means.” (§ 1286.2, subd. (a)(1).) “[A]n
ex parte communication between a party[’s representative] and
the neutral arbitrator while the outcome of the case is still under
consideration undermines the fairness and integrity of the
arbitration process.” (Maaso, supra, 203 Cal.App.4th at p. 375.)
Because we conclude the award was procured by undue
means and must be vacated, we need not and do not reach Baker
Marquart’s remaining arguments on appeal.
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DISPOSITION
The judgment is reversed and remanded with directions
that the trial court enter a new and different order vacating the
award. Baker Marquart is awarded its costs on appeal.
CERTIFIED FOR PUBLICATION.
LUI, P. J.
We concur:
ASHMANN-GERST, J.
CHAVEZ, J.
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