Arrieta v. Paine, Webber, Jackson & Curtis, Inc.

• Decision Date: 22 June 1976
• Citation: 130 Cal.Rptr. 534,59 Cal.App.3d 322
• Court: California Court of Appeals Court of Appeals
• Parties: Louis John ARRIETA, Plaintiff and Appellant, v. PAINE, WEBBER, JACKSON & CURTIS, INCORPORATED, et al., Defendants and Respondents. Civ. 47529.

Page 534

130 Cal.Rptr. 534

59 Cal.App.3d 322

Louis John ARRIETA, Plaintiff and Appellant, v. PAINE, WEBBER, JACKSON & CURTIS, INCORPORATED, et al., Defendants and Respondents.

Civ. 47529.

Court of Appeal, Second District, Division 2, California.

June 22, 1976.

Hearing Denied Aug. 18, 1976.

Sherman S. Weber, Culver City, for appellant.

Stephens, Jones, LaFever & Smith, Eugene W. Bell, John F. Busetti, Michael J. Abbott, Los Angeles, for respondents.

FLEMING, Associate Justice.

During 1973 and 1974 appellant Louis John Arrieta lost substantial sums of money (assertedly, $35,000) by extensive and continuous speculation on margin in silver futures. He sued his stockbrokers, respondents Paine, Webber, Jackson & Curtis, Inc., and their account executives Sterling Clark and William C. Robbins, Jr., for negligence, fraud, breach of fiduciary duty, conversion, breach of contract, money had and received, and intentional infliction of emotional distress, alleging that respondents violated his trading instructions, executed trades without authority, churned his account, gave false reports about the silver market, and then told him to go fishing and forget his losses. The complaint prayed for general and special damages of $500,000 and exemplary damages of $1,500,000.

Respondents petitioned to compel arbitration of these charges pursuant to a clause in a customer's agreement signed by appellant:

'If any controversy arises out of this contract it shall be determined by arbitration. Such arbitration shall be in accordance with the rules, then obtaining, of the American Arbitration Association, or of the Arbitration Committee of the New York Stock Exchange as I may elect. I authorize you, if I do not make such election by registered mail addressed to you at your main office within fifteen (15) days after receipt of notification from you requesting such election, to make such election in my behalf. Any arbitration hereunder shall be before at least three arbitrators and judgment upon the award rendered by the arbitrators or a majority of them may be entered in any court, state or federal, having jurisdiction.'

Thereafter, appellant and respondents stipulated that the suit be stayed and the controversy submitted to arbitration 'in accordance with the Rules of the Arbitration Committee of the New York Stock Exchange, Inc. or the Commercial Arbitration Rules of the American Arbitration Association.'

Appellant submitted his claim to the Arbitration Board of the New York Stock Exchange, and respondent Paine, Webber counterclaimed for attorney's fees and costs. After a hearing, the Board dismissed both claims and assessed costs of $240 against respondent Paine, Webber.

Appellant petitioned the superior court to vacate the arbitration award and order new arbitration before the Commercial Committee of the American Arbitration Association. Respondents petitioned the court to confirm the arbitration award. Both petitions were submitted on affidavits, and the court denied appellant's petition and granted respondent's petition.

This appeal is from the 'judgment of confirmation of the arbitration award' and the 'order dismissing the petition to vacate the arbitration award . . . and to order arbitration before . . . the American Arbitration Association.' ¹

In support of his petition appellant offered his own affidavit and affidavits of his to attorneys which, in summary, averred the following:

Appellant wanted to submit his claim to the American Arbitration Association but he could not pay the $7,000 filing fee required by the substantial size of his claim ($1,316,282.50). Respondents' attorney promised that if he submitted his claim to the Arbitration Board of the New York Stock Exchange, Inc., respondents would advance the $120 filing fee when appellant submitted his claim to the Board, however, respondents refused to pay the filing fee and appellant had to borrow the $120. The Board sent appellant the names of the five arbitrators but appellant had no right to select the arbitrators nd no knowledge of their backgrounds, occupations, or connections. He was prohibited from inquiring into those facts. One arbitrator did not receive notice of the hearing or background materials, he arrived two hours late dressed in gardening clothes, thus degrading the proceedings, and did not appear to understand the proceedings. A court reporter transcribed the arbitration proceedings. Appellant presented 90 percent of the testimony, respondents only 10 percent; his evidence was overwhelming, theirs insubstantial. Respondents' attorney vilified appellant, repeatedly calling him a liar and other epithets. Appellant objected, but the arbitrators allowed the attorney to continue. This contemptible conduct destroyed the fairness of the proceedings and unduly influenced the arbitrators' decision. The arbitration assistant said he had never experienced such conduct by counsel in any of his arbitration proceedings. The proceedings were adjourned and continued for a month because the arbitrator who arrived late had another appointment. Before the second hearing day, appellant learned of a recent court decision which would require respondents to pay any arbitration filing fees. In light of this decision and the conduct of the attorney for respondents on the first hearing day, appellant requested the proceedings be postponed so he could seek arbitration before the American Arbitration Association. The arbitration assistant said he would refund appellant's $120 filing fee but would not postpone the proceedings. The hearing on the second day lasted only two hours. The arbitrators left for home shortly after the hearing, signifying they did not deliberate on appellant's claim and had come with a preconceived verdict against him.

In opposition to appellant's affidavits, respondents offered the affidavits of their own attorneys and representatives of the Arbitration Board. Counsel for respondents in pre-arbitration proceedings declared that he never promised that respondents would pay the arbitration filing fee. Counsel for respondents at the arbitration proceeding declared that he 'openly questioned (appellant's) honesty and truthfulness during the course of the proceedings in view of the fact that (appellant's) testimony at times was inconsistent with prior testimony and also inconsistent with his written claims.' He rejected 'as false and inaccurate the allegations and accusations made by (appellant).' The arbitration assistant on the first hearing day declared that he told appellant's attorney, 'I have assisted at other arbitration proceedings where (respondents' counsel) has appeared as counsel, and I don't ever remember him getting as upset as he was today.' The arbitration assistant on the second hearing day declared that prior to the arbitration appellant was notified:

"The parties and counsel are warned that no communication with the arbitrators pertaining to these proceedings or to the controversy is permitted except through the Arbitration Director. Should either party believe an arbitrator disqualified for any cause, he should notify the Arbitration Director at once."

The arbitration rules provide for distribution of information on each arbitrator on request of a party but appellant never inquired about the arbitrators. Appellant has received a refund of his $120 filing fee. In the opinion of both arbitration assistants, the arbitrator who arrived late and counsel for respondents conducted themselves properly throughout the proceedings.

Appellant's first contention is that respondents obtained the arbitration award by corruption, fraud, and undue means. (Code Civ.Proc. § 1286.2, subd. (a).) Appellant argues that by calling appellant a liar counsel for respondents turned the arbitration into a 'Star Chamber' proceedings and 'successfully intimated to the arbitration panel that it should dismiss appellant's claim, which it did. For two members of the panel were stockbrokers who were given a message by . . . counsel of the securities industry, to corrupt, influence and induce the other three members of the panel to dismiss appellant's claim in arbitration.'

We reject this contention. We do not condone appeals to passion and prejudice by counsel, but 'accusations of misconduct of counsel read out of context frequently exaggerate its seriousness.' (Love v. Wolf, 226 Cal.App.2d 378, 385, 38 Cal.Rptr. 183, 186.) '(I)t is only the record as a whole, and not specific phrases out of context, that can reveal the nature and effect of such tactics.' (Sabella v. Southern Pac. Co., 70 Cal.2d 311, 318, 74 Cal.Rptr. 534, 537, 449 P.2d 750, 753.) Appellant fails to present the whole record for consideration by the court. He does not even cite the specific portions of the record to which he objects. This was a hearing before five arbitrators who, in the usual case, counsel be expected to ignore the irrelevant antics of counsel. Appellant's unsupported conclusions on the conduct of the arbitrators in decision-making are, on the basis of the record before the court, the product of overfertile imagination.

Appellant's second contention is that he established sufficient cause to justify a postponement of the arbitration. (Code Civ.Proc. § 1286.2, subd. (e).) He argues respondents induced him to submit to arbitration before the Stock Exchange Board on a false promise to pay the $120...