Fee Award Vacated Over Arbitrator's Perceived Conflict

, The National Law Journal

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A state appeals court has vacated a $453,100 award for Jeffer, Mangels, Butler & Mitchell in a legal malpractice case after finding that the arbitrator failed to disclose that he once listed name partner Robert Mangels on his resume.

The 2d District Court of Appeal found on Tuesday that former Los Angeles County Superior Court Judge Eli Chernow should have disclosed the potential conflict, which "reasonably could cause an objective observer to doubt his impartiality as an arbitrator."

"An objective observer reasonably could conclude that an arbitrator listing a prominent litigator as a reference on his resume would be reluctant to rule against the law firm in which that attorney is a partner as a defendant in a legal malpractice action," the panel concluded.

Timothy McGonigle, a solo practitioner in Los Angeles who represents the plaintiff, praised the decision, even though it left uncertain how his client, who planned to pursue a new arbitration against Jeffer Mangels, would recover costs and fees for the first proceeding.

"The significance of the opinion is it gives further clarification to what the obligations are of a proposed arbitrator to disclose all facts that would give a reasonable person a doubt that the arbitrator could be impartial," he said. "In this case, Judge Chernow never advised the parties that he had utilized one of the partners at the defendant firm as a reference."

Timothy Reuben, managing principal and chief executive officer at Reuben Raucher & Blum in Los Angeles, who represents Los Angeles-based Jeffer Mangels and individual defendant John Bowman, a former partner at the firm, said: "We are disappointed with the Court of Appeals decision. We believe that the Court of Appeals has created an unreasonable standard for arbitrator disclosures by its opinion, and we are considering our alternatives, including a petition to the California Supreme Court."

The plaintiff, Darla Jones, and her late husband retained Bowman in 1992 to represent them in a proposed real estate development. When Bowman joined Jeffer Mangels in 1997, Jones signed a retention agreement that included an arbitration provision.

When approval for that development fell apart, Jones sued Jeffer Mangels and Bowman, now a partner at Los Angeles-based Elkins Kalt Weintraub Reuben Gartside. She alleged that they failed to timely challenge a California Coastal Commission denial of permitting on the development.

Chernow, selected by both parties, found last year that Jones wasn't entitled to damages and that Jeffer Mangels should receive about $18,100 in unpaid legal fees and $435,000 in fees and costs. Before ruling, Chernow had disclosed that Jeffer Mangels had represented a party in mediation before him within the past five years, and that he had known partner Benjamin Reznik for many years, but he concluded that neither would impair his ability to fairly rule in the case.

Later, Jones discovered on the Internet that Chernow had once listed Mangels, co-chairman of the litigation group at Jeffer Mangels, as a reference. She moved to vacate the award.

Chernow, in response, had submitted a declaration admitting that he listed Mangels on the resume, which was 10 years old, only because he was a well-known litigator familiar with his skills as an arbitrator.

Los Angeles Superior Court Judge Michael Linfield affirmed the arbitration award, finding that "it is clear that the parties have virtually no relationship beyond Mangels having appeared before Judge Chernow in the past," according to the panel's opinion. Linfield later awarded Jeffer Mangels more than $43,700 in additional fees.

"The question is not whether Judge Chernow actually was biased, but whether a reasonable person aware of the facts reasonably could entertain a doubt that he could be impartial in this case," the panel wrote, reversing Linfield's opinion. "We conclude that the answer is yes."

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