Betz v. Pankow, No. A052194

• Decision Date: 18 June 1993
• Docket Number: No. A052194
• Citation: 20 Cal.Rptr.2d 834,16 Cal.App.4th 919
• Parties: Heide V. BETZ, Plaintiff and Appellant, v. Charles J. PANKOW, Defendant and Respondent.
• Court: California Court of Appeals Court of Appeals

Page 834

20 Cal.Rptr.2d 834

16 Cal.App.4th 919

Heide V. BETZ, Plaintiff and Appellant, v. Charles J. PANKOW, Defendant and Respondent.

No. A052194.

Court of Appeal, First District, Division 5, California.

June 18, 1993.

As Modified on Denial of Rehearing July 1, 1993.

Margolin, Arguimbau & Battson, Ephriam Margolin, San Francisco, De Goff and Sherman, Victoria J. De Goff, Berkeley, for plaintiff and appellant.

Nossaman, Guthner, Knox & Elliott, Kurt W. Melchior, Claude M. Stern, San Francisco, for defendant and respondent.

Elizabeth Bader, Chair, Amicus Curiae Committee, Queen's Bench, Law Offices of Elizabeth Bader, Moira Buxbaum, President HANING, Associate Justice.

Queen's Bench, Stiller & Buxbaum, San Francisco, amici curiae in support of appellant.

Appellant Heide V. Betz appeals the denial of her petition to vacate an arbitration award in favor of respondent Charles J. Pankow. She contends the award by two male members of a three-person arbitration panel was improperly influenced by gender bias against her and in favor of respondent. We conclude the record supports the trial court's conclusion that appellant has not sustained her contention, and affirm.

FACTS AND PROCEDURAL HISTORY

Appellant and respondent were the sole members of a partnership organized for the purpose of "ownership and operation of property." Their written partnership agreement provided that upon termination of the partnership, either partner could purchase the interest of the other at a price equal to the selling partner's "original contribution to the partnership." It further provided that any dispute arising thereunder would be resolved by arbitration under the auspices of the American Arbitration Association (AAA).

When the parties decided to dissolve the partnership but were unable to agree on the manner of dissolution, the dispute was submitted to a panel of three arbitrators selected by the AAA, consisting of two males and one female. After approximately 42 days of hearing, the male panelists rendered an award in favor of respondent. The female panelist neither signed the award nor issued a dissenting opinion. However, approximately one month after the award, she executed a declaration expressing her opinion that the male panelists engaged in a consideration of matters outside the record that "introduced elements of bias and unfairness going to the issues of contractual intent, undue influence, and appropriate relief." Based on this declaration appellant petitioned the trial court to vacate the award on numerous grounds, including gender bias. Respondent petitioned for confirmation. Following the filing of further declarations by all the arbitrators, the matter was argued and submitted to the trial court without a request for a statement of decision. The trial court denied appellant's petition to vacate, and confirmed the award, from which this appeal ensued.

DISCUSSION

Appellant's sole claim on appeal is her contention that the arbitration award was influenced by gender bias against her and in favor of respondent. Although appellant and amici argue forcefully against gender bias, we emphasize that this appeal is not about whether gender bias is a valid ground for vacating the award. Respondent agrees that decisions biased by discriminatory considerations of race, ethnicity or gender are not tolerated by the adjudicatory process, whether in the courts or in alternative forums for dispute resolution. Given the strong public policy against discrimination on the basis of race, ethnic origin, gender, etc. (see, e.g., Civ.Code, § 51 et seq.; Gov.Code, § 12920), appellant's right to a hearing free from such bias is not in dispute. ¹ The issue here is whether appellant has demonstrated by this record that the trial court erred in refusing to vacate the award. There is a presumption favoring the validity of the award, and appellant bears the burden of establishing her claim of invalidity. (National Marble Co. v. Bricklayers & Allied Craftsmen (1986) 184 Cal.App.3d 1057, 1066, 229 Cal.Rptr. 653; Walter v. National Indem. Co. (1970) 3 Cal.App.3d 630, 633, 83 Cal.Rptr. 803.)

The grounds for vacating an arbitration award are statutorily limited. Code of Civil Procedure section 1286.2 provides, in relevant part, that an award shall be vacated only if (a) it was procured by corruption, fraud or other undue means, (b) there was corruption in any of the arbitrators, or (c) the rights of a party were substantially prejudiced by misconduct of a neutral arbitrator. Since the arbitrators in this case were all selected by the AAA rather than the parties, all three are considered neutral. ² The decision to confirm or vacate an arbitration award lies with the trial court. (Code Civ.Proc., §§ 1285-1287.6; see City of Oakland v. United Public Employees (1986) 179 Cal.App.3d 356, 363-364, 224 Cal.Rptr. 523.)

Our function as an appellate court is to review the trial court proceedings. In this regard, the applicable standards of appellate review of a judgment based on affidavits or declarations are the same as for a judgment following oral testimony: We must accept the trial court's resolution of disputed facts when supported by substantial evidence; we must presume the court found every fact and drew every permissible inference necessary to support its judgment, and defer to its determination of credibility of the witnesses and the weight of the evidence. (Griffith Co. v. San Diego Col. for Women (1955) 45 Cal.2d 501, 289 P.2d 476.)

Appellant contends the standard for disqualification of an arbitrator for bias is the same as that set forth for disqualification of judges in Code of Civil Procedure section 170.1, subdivision (a)(6)(C), which provides that a judge is disqualified if "a person aware of the facts might reasonably entertain a doubt that the judge would be able to be impartial." The predecessor of this statute (former Code Civ.Proc., § 170, subd. (5)) has been held to apply also to administrative hearing officers (Andrews v. Agricultural Labor Relations Bd. (1981) 28 Cal.3d 781, 793-794, 171 Cal.Rptr. 590, 623 P.2d 151; Gray v. City of Gustine (1990) 224 Cal.App.3d 621, 632, 273 Cal.Rptr. 730), but no reported decisions have held it applicable to arbitrators. Respondent relies on the "impression of possible bias" test established by case law for challenges of arbitration awards on grounds of bias resulting from conflicts of interest.

The California cases upon which respondent relies, and which discuss the standard for vacating arbitration awards on grounds of bias by a neutral arbitrator declare that the test is whether the record reveals facts which might create an impression of possible bias. (See, e.g., Cobler v. Stanley, Barber, Southard, Brown & Associates (1990) 217 Cal.App.3d 518, 527, 265 Cal.Rptr. 868; Banwait v. Hernandez (1988) 205 Cal.App.3d 823, 826-828, 252 Cal.Rptr. 647; Ray Wilson Co. v. Anaheim Memorial Hospital Assn. (1985) 166 Cal.App.3d 1081, 1087, 213 Cal.Rptr. 62; Figi v. New Hampshire Ins. Co. (1980) 108 Cal.App.3d 772, 775, 166 Cal.Rptr. 774; Gonzales v. Interinsurance Exchange (1978) 84 Cal.App.3d 58, 64, 148 Cal.Rptr. 282; Wheeler v. St. Joseph Hospital (1976) 63 Cal.App.3d 345, 371-372, 133 Cal.Rptr. 775; San Luis Obispo Bay Properties, Inc. v. Pacific Gas & Elec. Co. (1972) 28 Cal.App.3d 556, 567, 104 Cal.Rptr. 733; Johnston v. Security Ins. Co. (1970) 6 Cal.App.3d 839, 841-843, 86 Cal.Rptr. 133.) This test is objective, requiring a reasonable impression. (Banwait v. Hernandez, supra, 205 Cal.App.3d 823, 829, 252 Cal.Rptr. 647.) This standard was first applied in the Johnston case, which noted the virtually identical language of Code of Civil Procedure, section 1286.2 and its federal counterpart in section 10 (9 U.S.C. § 10) of the United States Arbitration Act, and adopted the federal standard announced by the United States Supreme Court in Commonwealth Corp. v. Casualty Co. (1968) 393 U.S. 145, 89 S.Ct. 337, 21 L.Ed.2d 301.

In Commonwealth, an award was vacated after it was revealed that a neutral arbitrator in a construction dispute had an undisclosed ongoing business relationship with one of the parties, and had been retained as an engineering consultant for one of the construction projects involved in the dispute being arbitrated. The high court focused on the appearance of bias, concluding the existence of actual bias was unnecessary to its decision. It reasoned that "any tribunal permitted by law to try cases and controversies not only must be unbiased but also must avoid even the appearance of bias. We cannot believe that it was the purpose of Congress to authorize litigants to submit their cases and controversies to arbitration boards that might reasonably be thought biased against one litigant and favorable to another." (Commonwealth Corp. v. Casualty Co., supra, 393 U.S. at p. 150, 89 S.Ct. [16 Cal.App.4th 925] at p. 340.) "We can perceive no way in which the effectiveness of the arbitration process will be hampered by the simple requirement that arbitrators disclose to the parties any dealings that might create an impression of possible bias." (Id., at p. 149, 89 S.Ct. at p. 339.)

The majority opinion in Commonwealth was by six justices, among whom were Justices White and Marshall. Justice White also wrote a concurring opinion in which he was joined by Justice Marshall, and which stated that the court was not holding that arbitrators were held to the "standards of judicial decorum" of judges insofar as their professional relationships were concerned. "[A]rbitrators are not automatically disqualified by a business relationship with the parties before them if both parties are informed of the relationship in advance, or if they are unaware of the facts but the relationship is trivial." (Commonwealth Corp. v. Casualty Co., supra, 393 U.S. at p. 150, 89 S.Ct. at p. 340.)

Justice White's concurring opinion in Commonwealth emphasizes that the court was considering claims involving...