Eliminating wild expectations with disclosure
By Diane Karpman
It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness. . . . Charles Dickens, A Tale of Two Cities (1859)
This is a tale of two cases involving the duty of disclosure by arbitrators. But first, let’s consider the essence of disclosure, which is inherent in many of our rules and can ameliorate what might otherwise be a serious ethics violation.
Beyond the requirements of our rules, it’s always a good rule of thumb that if a client would be surprised to hear information at a subsequent time, disclose before that happens. Disclosure is not a panacea for everything, but many ethics issues are based on the expectations of the clients. Disclosure eliminates those wild expectations that can get lawyers into trouble.
Two recent cases involving arbitrators raise disclosure concepts. Some experts suggest that the enhanced disclosure requirement represents a sea change, that the sky is falling and that the world as we know it is about to end. Remember, historic disclosure standards in arbitrations require the disclosure of specific interests, relationships or affiliations and other “common matters that could cause a person aware of the facts to reasonably entertain a doubt that the arbitrator would be impartial.” Code Civ. Proc. §1281.9 subd. (a).
In Haworth v. Superior Court (2010) 50 Cal. 4th 372, the California Supreme Court declined to find that an arbitrator’s failure to disclose circumstances that resulted in a public censure 10 years earlier could justify vacating an award in a botched plastic surgery case. The censure involved repeated, overt and demeaning sexual comments made regarding female staff in chambers. Requiring disclosure in this circumstance would place an unreasonable burden on the neutral arbitrator. “The arbitrator cannot reasonably be expected to identify and disclose all events in the arbitrator’s past, including those not connected to the parties, the facts or the issues in controversy, that conceivably might cause a party to prefer another arbitrator.” (pg. 376)
An overly broad interpretation of the disclosure rules, could “subject arbitration awards to after-the-fact attacks by losing parties, yet that is precisely what happened in the other highly controversial case.” (pg. 394)
In Benjamin, Weill & Mazur v. Kors (2010) 89 Cal App. 126, the losing party successfully sought to have the arbitration award vacated because the chief arbitrator failed to disclose his current business relationships, casting doubt on his ability to be impartial.
What did he fail to disclose? The chief arbitrator failed to disclose that he regularly represented large law firms in fee disputes, that he was (at the time of the arbitration) representing a large law firm in a fee arbitration case at the California Supreme Court, and the fact that he regularly represented law firms, which was touted on his firm’s website. No actual bias was suggested. However, the appellate court accepted the idea that a party was entitled to know if an attorney regularly represented lawyers when litigating against lawyers in conjunction with fees.
One author complained that the suggestion that lawyers who regularly represent other lawyers may be biased — and that bias should be disclosed to litigants — is “denigrating” to the profession. Commentators have suggested that this is tantamount to suggesting that criminal prosecutors may have a bias against criminal defendants, or that plaintiff's lawyers might be biased against insurance carriers or big corporations. Let’s face it, these are not totally alien thoughts to members of the profession.
The decision resulted in a flurry of posts on the ethics community listserv (closed online discussion groups where ethics folks kibitz), and outraged articles have appeared in the legal media. But wait a minute! What’s really going on here? All that the case is suggesting is that a litigant has a right to know, to receive disclosure of factors that could suggest that an adjudicator could have an economic bias. Democracy is not going to end because litigants are entitled to greater transparency. Let’s get over this age of foolishness, and celebrate a wonderful holiday season.
• Ethics expert Diane Karpman can be reached at 310-887-3900 or at karpethics@aol.com.