Guseinov v. Burns

• Decision Date: 15 December 2006
• Docket Number: No. B191645.,No. B188984.,B188984.,B191645.
• Parties: Gary GUSEINOV, Plaintiff and Respondent, v. Stan BURNS, Defendant and Appellant.
• Court: California Court of Appeals Court of Appeals

51 Cal.Rptr.3d 903

145 Cal.App.4th 944

Gary GUSEINOV, Plaintiff and Respondent, v. Stan BURNS, Defendant and Appellant.

No. B188984.

No. B191645.

Court of Appeal, Second District, Division 5.

December 15, 2006.

Stephan, Oringher, Richman, Theodora & Miller and Robert M. Dato, Costa Mesa, for Defendant and Appellant.

Lee & Kaufman, Martin J. Kaufman, Los Angeles; Michelman & Robinsion, Carol Boyd, Encino, and Tahereh Mahmoudian, Los Angeles, for Plaintiff and Respondent.

TURNER, P.J.

I. INTRODUCTION

Defendant, Stan Burns, appeals from a December 7, 2005 judgment and an April 13, 2006 amended judgment entered on an arbitration award in favor of plaintiff, Gary Guseinov. At issue is whether the arbitration award should have been vacated because the arbitrator failed to disclose he had served as an uncompensated mediator in another matter as part of a superior court program. In that matter, the arbitrator served as a pro bono mediator where plaintiffs attorney represented a party who has nothing to do with this case. We find there is substantial evidence no ground for disqualification exists; hence, the arbitrator had no duty to disclose his prior service as an uncompensated mediator. As a result, the trial court did not err in refusing to vacate the arbitration award because the arbitrator failed to disclose his prior service as an unpaid mediator. We affirm the judgment.

II. BACKGROUND

Plaintiff filed this action against defendant on October 10, 2003. Plaintiff asserted contract breach and tort causes of action, among others, based on a May 19, 2003 settlement agreement arising out of a failed business relationship. The May 19, 2003 settlement agreement included a clause requiring final and binding arbitration in Los Angeles, California pursuant to the American Arbitration Association's Commercial Dispute Resolution Procedures or Expedited Procedures. In a stipulation filed on December 16, 2003, the parties agreed to submit this action to arbitration. On September 12, 2005, the arbitrator awarded plaintiff more than $5 million dollars in damages. Also named as a codefendant was Synergy Ventures, Inc. doing business as Direct Synergy. The codefendant has filed a voluntary bankruptcy proceeding. The present appeal is stayed as to the codefendant.

The settlement agreement expressly stated it was to be governed by the laws of the State of California. The arbitration clause of the settlement agreement stated in pertinent part: "Arbitration. Any controversy or dispute arising out of or relating to this Agreement, or the breach thereof, shall be resolved by arbitration conducted in accordance with the Commercial Dispute Resolution Procedures of the American Arbitration Association (`AAA') and/or the expedited procedures with respect to claims under Section 2(b) [involving defendant's purchase of plaintiffs stock in the company] or any other claim for which the Expedited Procedures apply and judgment upon the award rendered by the arbitral tribunal may be entered in any court having jurisdiction thereof. The arbitration tribunal shall consist of a single arbitrator.... The place of arbitration shall be Los Angeles, California, U.S.A., unless the Parties shall have agreed to another location.... The arbitrator's final award may be entered in any court in the United States and worldwide having jurisdiction thereof. The arbitrator's final award shall be binding and shall be fully enforceable.... The Parties waive any right to appeal the arbitral award; to the extent a right to appeal may be lawfully waived. Each Party retains the right to seek judicial assistance: (i) to compel arbitration; (ii) to obtain interim measures of protection prior to or pending arbitration; (iii) to seek injunctive relief ..., and (iv) to enforce any decision of the arbitrator, including the final award. The arbitration proceedings contemplated by this Paragraph shall be as confidential and private as permitted by law[,] ... provided, however, that this confidentiality provision shall not prevent a petition to vacate or enforce an arbitral award...."

On June 16, 2004, following his selection, the arbitrator completed an American Arbitration Association "Arbitrator Disclosure Worksheet." The arbitrator therein represented among other things: he was not serving and had not served "as a dispute resolution neutral other than as an arbitrator in another pending or prior case involving a party or lawyer in the current arbitration"; he had no "professional relationship" with a lawyer for a party; and there was no "other matter that might cause a person aware of the facts to reasonably entertain a doubt that [he] would be able to be impartial."

At the first meeting of the attorneys in this matter, on or about August 12, 2004, the arbitrator asked plaintiffs counsel, Martin J. Kaufman, if they had previously met. Mr. Kaufman stated the arbitrator had earlier served as a volunteer superior court mediator in an unrelated matter. In that unrelated lawsuit, Mr. Kaufman had represented a party. The arbitrator did not recall the prior mediation. The attorneys representing defendant at that time acknowledged the disclosure, agreed to the arbitrator, and did not make an immediate effort to secure disqualification. Mr. Kaufman subsequently declared: "Neither I, nor this office has ever employed [the arbitrator] nor remunerated him in any way for any services. Neither I, nor any person in [this] office have had or currently have any professional or personal relationship with the arbitrator of any kind, nor has he served as an arbitrator in any cases they have litigated. There has been no attorney-client relationship between [the arbitrator] and myself nor with [plaintiff]."

On or about May 20, 2005, during the arbitration, defendant filed a motion to disqualify Mr. Kaufman as plaintiffs counsel. In support of the disqualification motion filed with the arbitrator, plaintiff declared: "I arrived and entered the arbitration hearing room in the morning of May 12, 2005. Neither of my attorneys were present. The only one else in the room was [Mr. Kaufman]. [Mr. Kaufman] said to me: `I know I shouldn't be talking to you directly without Rod here, but we can speak with Rod about this later.' [Mr. Kaufman] then asked me questions regarding my evaluation of the case and settlement position, and tried to persuade me to change my settlement position. [Mr. Kaufman] then told me that he wanted to speak with me further about it later in the day, and didn't want my attorney ... to be present." At another place in his declaration, defendant related: "Earlier during the evidentiary hearing, in my presence, while never having been sworn and testified, [Mr. Kaufman] interrupted the taking of testimony, and stated that [the corporate codefendant] had emailed a virus to his office and damaged his computer. The [arbitrator stated he took the accusation serious[ly], and if true, he would take actions to deal with it." In support of defendant's motion to vacate the arbitration award filed in the trial court, he declared: "On [May 20, 2005], [Mr. Kaufman] testified under oath ... in response to a question posed ... by [the arbitrator], that [the arbitrator] should believe [Mr. Kaufman] rather than [plaintiff] ... because of [the] prior relationship between [the arbitrator] and [Mr. Kaufman]." An attorney for defendant, Rod Rummelsburg, declared: "During the evidentiary hearing on Friday, May 20, 2005, attorney-witness Mr. Kaufman indicated that [the arbitrator] knew Mr. Kaufman prior to the instant arbitration in an apparent attempt to bolster Mr. Kaufman's credibility. At that point, [the arbitrator] orally disclosed and admitted that he had served as a mediator in a prior mediation where Mr. Kaufman represented one of the parties. This was the first time that I was made aware of any such prior relationship between Mr. Kaufman and [the arbitrator]."

The arbitrator denied the motion to disqualify Mr. Kaufman. As set forth in the arbitration award, the arbitrator concluded the accusations were for the State Bar to consider: "During the evidentiary hearing, at the end of the day on May 17, 2005, counsel for [defendant] served a previously prepared motion to disqualify [plaintiffs] counsel, for dismissal of the [plaintiffs] claims and for other sanctions, on the alleged ground that [plaintiffs] counsel had initiated unauthorized settlement conversations with [defendant]. Significantly, that motion was not served until counsel and the parties actually had engaged in extended but unsuccessful settlement discussions over a period of several days. After hearing argument, the Arbitrator denied the [defendant's] motion on the principal ground that the [defendant's] accusation was a matter for the State Bar to consider rather than a basis for the type of relief requested by [defendant]." Later, the award states, "Accordingly, although [defendant] and [plaintiffs] counsel Martin Kaufman offered different versions of the interaction that allegedly occurred, the Arbitrator found no need to resolve the `swearing match' between them."

Just prior to closing argument on June 3, 2005, defendant sought to disqualify the arbitrator by serving a notice of disqualification. This was the second disqualification request. The first disqualification request sought to disqualify Mr. Kaufman as plaintiffs counsel. The second request sought to disqualify the mediator. The mediator requested briefing as to the disqualification request by June 10, 2005. The parties proceeded with closing argument. In a June 6, 2005 letter to counsel, the arbitrator stated: "[Defendant's] pleading focuses on a `pro bono' mediation that I handled as the mediator on September 23, 2003, in which [plaintiffs] counsel Martin Kaufman represented one of the parties. The mediation lasted approximately two-and-a-half hours, and resulted in full agreement by the parties. This was one of many dozens of `pro bono' mediations that...