ECC Capital Corp. v. Manatt, Phelps & Phillips

A trial court may not vacate an arbitration award for the arbitrator’s failure to disclose a possible ground for disqualification unless it is shown that the arbitrator actually knew (not merely should have known) of the undisclosed ground for disqualification. The trial court correctly denied ECC’s petition to vacate an arbitration award and instead confirmed the award.  Since neither party requested a statement of decision on the petitions to vacate or confirm the arbitration award, the implied findings doctrine applies and the only issue on appeal is whether substantial evidence supports the trial court’s decision and the implied findings supporting it.  ECC claimed that the arbitrator improperly failed to disclose that he had five years earlier decided an uncontested Uniform Domain Name Resolution proceeding in which Manatt, Phelps had appeared as counsel for a party.  Under CCP 1286.2(a)(6)(A), an arbitration award should be vacated only when the arbitrator fails to disclose a ground for disqualification of which he is aware.  This allows vacatur only when the arbitrator actually knows of the ground, not when he merely should know of it.  Here, the arbitrator swore he was unaware of the prior matter, and substantial evidence supported the trial court’s implied finding that even if the arbitrator had a duty to inquire, he reasonably did not include UDR proceedings in his inquiry as there were many of them, most were extremely short, uncontested and non-binding. ECC also sought to vacate the award claiming that its contract with Manatt was illegal because Manatt had a conflict of interest at the time it undertook to represent ECC.  The decision holds that ECC waived this contention by failing to raise it—and indeed expressly not raising it—during the liability phase of the arbitration and then raising it belatedly in opposition to Manatt’s motion for a fee award.  Illegality isn’t waived by failing to plead it as an affirmative defense, but it is waived by failing to raise the issue during an arbitration to which it is a potential defense.

California Court of Appeal, Second District, Division 7 (Segal, J.); March 15, 2017; 2017 WL 999227

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