Nemecek & Cole v. Horn





















Filed 7/23/12 Nemecek & Cole v. Horn CA2/8

>

>

>

>

>

>NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

>

California Rules of Court, rule 8.1115(a), prohibits courts
and parties from citing or relying on opinions not certified for publication or
ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115>.







IN
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA



SECOND
APPELLATE DISTRICT



DIVISION
EIGHT




>

NEMECEK & COLE et al., Plaintiffs and Respondents, v. STEVEN J. HORN, Defendant and Appellant.

B233274 (Los Angeles County Super. Ct. No. LC084723)

APPEAL from a judgment of the Superior Court of href="http://www.adrservices.org/neutrals/frederick-mandabach.php">Los Angeles
County.

Frank
J. Johnson, Judge. Affirmed.



Miguel A. Muro for Defendant and
Appellant.



Murphy Pearson Bradley & Feeney,
James A. Murphy and Harlan B. Watkins; Nemecek & Cole, Frank W. Nemecek and
Mark Schaeffer for Plaintiff and Respondent.



_________________________________







Steven Horn
appeals from the judgment, contending the trial court erred in confirming an href="http://www.fearnotlaw.com/">arbitration award and awarding attorney
fees. Horn primarily contends the
arbitrator failed to disclose necessary information which would cause a
reasonable person to doubt the arbitrator’s neutrality. We affirm the judgment.

FACTS

Horn was
retained by Henry and Janelle Hoffman (the Hoffmans) to represent them in a lot
line dispute with their neighbors. After
a bench trial, an adverse judgment was entered against the Hoffmans and they
appealed the decision, retaining different counsel to represent them on
appeal. The judgment was reversed on
appeal. Horn subsequently sued the
Hoffmans for unpaid fees and the Hoffmans counter-claimed for fraud, alleging
that Horn materially misrepresented his experience in real estate matters, improperly
billed the Hoffmans and failed to timely tender a cross-complaint to their
homeowners insurance. Horn retained
Frank Nemecek and Nemecek & Cole (collectively Nemecek) to represent him in
the matter against the Hoffmans.

After
trial, the jury returned a verdict of $42,282.56 to Horn on his fee claim
against the Hoffmans and an identical amount to the Hoffmans on their fraud
action against Horn. Because the award
amounts offset each other, a judgment was entered awarding both parties “zero.” The Hoffmans moved for a new trial solely on
the issue of insufficiency of the damages award and filed a motion for attorney
fees. When the motion for new trial and
attorney fees was denied, the Hoffmans filed a motion for judgment
notwithstanding the verdict. That too
was denied. The Hoffmans appealed.

This division considered the
Hoffmans’ appeal and determined that they were entitled to attorney fees since
they were the prevailing defendants on the complaint. The matter was remanded to the trial
court to retry the issue of damages and attorney fees and costs. On remand, the trial court ordered Horn to
pay approximately $380,000 in attorney fees to the Hoffmans. While that order was on appeal, Horn settled
with the Hoffmans for $250,000.

Horn
believed Nemecek’s negligence was the cause of the “disastrous results” in his
claim against the Hoffmans. He demanded
Nemecek submit to arbitration with the Judicial Arbitration and Mediation
Service (JAMS) as specified in their retainer agreement. Nemecek filed a counter-claim against Horn
for unpaid attorney fees and costs. The
parties chose retired U.S. District Judge George Schiavelli as the
arbitrator. The arbitrator presented his
disclosure statement to the parties and Horn requested additional disclosure of
all matters in which Nemecek appeared before the Arbitrator. JAMS responded that no case was found.

The evidentiary hearing lasted five
days, with each party submitting testimony and briefing. In an extensive opinion, the arbitrator noted
that issues of credibility were very important and “found Horn’s credibility
lacking.” The arbitrator ordered the
parties to take nothing on their respective claims but allowed either party to
claim attorney fees if they wished to do so.
Both parties submitted claims for attorney fees. The arbitrator found Nemecek was entitled to
$289,028.85 in attorney fees, explaining that this was a complex case
“requiring a great deal of work.” The
arbitrator denied any offset claimed by Horn, finding that Nemecek was the
prevailing party since they were granted virtually all the relief they sought
on Horn’s claim.

“Shocked” by the arbitrator’s
order, Horn decided to hire to private investigator to determine whether there
existed any undisclosed relationships between the arbitrator and Nemecek, its
counsel or its witnesses. The private
investigator discovered the following:
the arbitrator and the head of Nemecek’s appellate department, Mark
Schaeffer, were both members of the Los Angeles County Bar Association’s
Appellate Executive Committee Section; the arbitrator and Edith Matthai,
Nemecek’s expert witness in the arbitration, appeared together as panelists for
various seminars and were both members of the board of governors of the
Association of Business Trial Lawyers; the arbitrator was employed as an
attorney at the firm of Brown, White & Newhouse, which represents lawyers
in malpractice actions; and Nemecek attorneys appeared before the arbitrator
when he was a district court judge in 2006.
These undisclosed relationships formed the basis for Horn’s petition to
vacate the arbitration award and oppose Nemecek’s petition to confirm the
award. The trial court entered judgment
in favor of Nemecek on April 5, 2011.
Horn timely appealed.

>DISCUSSION

Horn
challenges the trial court’s order confirming the arbitration award on the
ground that the arbitrator failed to disclose the facts which were discovered
by the private investigator. According
to Horn, the failure to disclose would cause a person to reasonably entertain a
doubt that the arbitrator would be able to be impartial. Thus, Horn demands a new arbitration before a
“truly neutral arbitrator.” Horn also
contends the order awarding Nemecek attorney fees incurred in connection with
their petition to confirm the arbitration award was excessive and an abuse of
discretion. We find no basis to reverse
the arbitration award or the attorney fees award.

I. Failure to Disclose

The
California Arbitration Act (Code Civ. Proc., § 1280 et seq.) “represents a
comprehensive statutory scheme regulating private arbitration in this
state.” (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9.) Under the statutory scheme, a proposed
neutral arbitrator must disclose to the parties within 10 days of being chosen
“all matters that could cause a person aware of the facts to reasonably
entertain a doubt that the proposed neutral arbitrator would be able to be
impartial[.]” (Code Civ. Proc., §
1281.9, subd. (a)-(b).) These
disclosures include: (1) “any ground
specified in Section 170.1 for disqualification of a judge[;]” (2) “matters
required to be disclosed by the ethics standards for neutral arbitrators
adopted by the Judicial Council[;]” (3) any prior or pending arbitration in
which the proposed arbitrator served as a party arbitrator for any party or
their lawyer; (4) any prior or pending arbitration in which the proposed
arbitrator served as a neutral arbitrator for any party or their lawyer; (5)
any attorney-client relationship with any party or attorney involved in the
arbitration; (6) “[a]ny professional or significant personal relationship the
proposed neutral arbitrator or his or her spouse or minor child living in the
household has or has had with any party to the arbitration proceeding or lawyer
for a party.” (§ 1281.9, subd.
(a)(1)–(6).) The ethics standards
adopted by the Judicial Council require the disclosure of “specific interests,
relationships, or affiliations” and other “common matters that could cause a
person aware of the facts to reasonably entertain a doubt that the arbitrator
would be able to be impartial.” (Cal.
Rules of Court, Ethics Stds. for Neutral Arbitrators in Contractual Arbitration
(Ethics Stds, com. to std. 7.) Specific
matters that must be disclosed include, for example, the arbitrator’s financial
interest in a party or the subject of the arbitration, the arbitrator’s
knowledge of disputed facts relevant to the arbitration, and the arbitrator’s
“membership in any organization that practices invidious discrimination on the
basis of race, sex, religion, national origin, or sexual orientation.” (Ethics Stds., std. 7(d)(13); see >Id., stds. 7(d)(9), (10), (12).)

Based upon
these disclosures, the parties are afforded an opportunity to disqualify the
proposed neutral arbitrator. (Code Civ.
Proc., § 1281.91, subds. (b)(1), (d).)
If an arbitrator “failed to disclose within the time required for
disclosure a ground for disqualification of which the arbitrator was then
aware,” the trial court must vacate the arbitration award. (§ 1286.2, subd. (a)(6)(A).)

The disclosure requirements were intended
to ensure the impartiality of the arbitrator, not to mandate disclosure of “all
matters that a party might wish to consider in deciding whether to oppose or
accept the selection of an arbitrator.”
(Haworth v. Superior Court (2010)> 50 Cal.4th 372, 393.) We are mindful that “ ‘ “ordinary and
insubstantial business dealings” ’ arising from participation in the
business or legal community do not necessarily require disclosure.” (Luce,
Forward, Hamilton & Scripps, LLP v. Koch (2008) 162 Cal.App.4th 720,
733 (Koch), quoting >Guseinov v. Burns (2006) 145 Cal.App.4th
944, 959.) Indeed, arbitrators “cannot
sever all their ties [to] the business world.”
(Ceriale v. AMCO Ins. Co.
(1996) 48 Cal.App.4th 500, 505.)
“Because arbitrators are selected for their familiarity with the type of
business dispute involved, they are not expected to be entirely without
business contacts in the particular field.”
(Ray Wilson Co. v. Anaheim
Memorial Hospital Assn. (1985) 166 Cal.App.3d 1081, 1087–1088, disapproved
of on another ground in Moncharsh v.
Heily & Blase, supra, 3 Cal.4th at pp. 27-28.) To the extent these relationships are
substantial and involve financial considerations creating an impression of
possible bias, they must be disclosed.
Like the Supreme Court, “[w]e 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.”
(Commonwealth Corp. v. >Casualty Co. (1968) 393 U.S. 145, 149.)

Horn contends the arbitrator was
required, but failed, to disclose four facts: (1) his professional relationship
with Mark Schaeffer; (2) his professional relationship with Edith Matthai; (3)
Nemecek’s appearance before him while he was a district court judge; and (4)
his work for Brown, White & Newhouse.
We address each of these disclosures below. Because we are presented with a mixed question
of fact and law, we review de novo the trial court’s order confirming the arbitration
award. (Haworth v. Superior Court, supra, 50 Cal.4th at pp. 383, 385.)

A. Relationship with Mark
Schaeffer

Schaeffer is the head of Nemecek’s
appellate department and testified at the arbitration. During his testimony, Schaeffer admitted he was
a member of the appellate courts section executive committee of the Los Angeles
County Bar Association. The appellate
committee is comprised of 186 members (as of December 2010) and meets regularly
to provide continuing legal education and networking opportunities. The private investigator discovered that the
arbitrator was also a member of the appellate courts section executive
committee. Horn contends the arbitrator
should have disclosed his involvement with the appellate committee when
Schaeffer testified he was a member.
Horn contends it is particularly notable that the arbitrator had to
weigh Schaeffer’s credibility against Horn’s with respect to appellate matters
while they were both members of an appellate committee. We conclude the arbitrator’s
participation in a group comprised of 186 members, of which Schaeffer was one,
does not require disclosure.href="#_ftn1"
name="_ftnref1" title="">[1]

In reaching this decision, we are
guided by Koch, supra, 162
Cal.App.4th at page 733. There, an
arbitrator disclosed that he had served on the board of the Business Trial
Lawyers Association with a witness and an attorney in the case. The board was typically composed of three
dozen members out of the 500- to 700-member association. The arbitrator also disclosed that he was on
the board of the American Inns of Court with another attorney in the case. (Id.
at p. 726.) The arbitrator explained,
“ ‘[w]e are not talking about a social relationship. I have never been in his home, nor he in
mine. We have participated in
professional boards together. . . . We are not
talking about close personal friendships or any kind of business
relationships. We are talking about the
fact that I have been actively involved in the legal community for over 30
years, Mr. Steiner over 40. Any time
you’re talking with lawyers or judges who have been around that long, they know
each other.’ ” (>Ibid.)


On appeal, the court held there was
no requirement that those affiliations be disclosed, particularly where the
contact was “slight or attenuated.”
There was no indication the arbitrator had a personal relationship, or
close friendship, with either the witness or the attorney. There was also no indication of any business
relationship between or among them. (>Koch, supra, at p. 734.) (See also
Michael v. Aetna Life & Casualty Ins. Co. (2001) 88 Cal.App.4th 925,
939-940 [“Membership in a professional organization does not provide a credible
basis for inferring an impression of bias.”]; Ray Wilson Co. v. Anaheim Memorial Hospital Assn. (1985) 166
Cal.App.3d 1081, 1087-1088 [“The fact that an arbitrator and a party to the
arbitration are members of the same professional organization ‘is in itself
hardly a credible basis for inferring even an impression of bias.’ ”]; >San Luis Obispo Bay Properties, Inc. v.
Pacific Gas & Elec. Co., (1972) 28 Cal.App.3d 556, 567 [no disclosure
required where arbitrator and party’s appraiser belonged to the same
professional organization].)

As in Koch, the arbitrator’s membership with Schaeffer in the appellate
committee of the county bar association is too “slight or attenuated” to
require disclosure. There is no
indication of any personal or other professional relationship between
them. The arbitrator was not
required to disclose his “relationship” with Schaeffer.

>B.
Relationship with Edith Matthai

Horn also contends the arbitrator
should have disclosed his “prior long standing professional relationship” with
Edith Matthai, who served as an expert witness for Nemecek in the
arbitration. The arbitrator had previously
served on the litigation executive committee and the executive board of the Los
Angeles County Bar Association while Matthai was its president. Matthai and the arbitrator served as
panelists in a seminar put on for the Association of Business Trial
Lawyers. Also, James Robie,href="#_ftn2" name="_ftnref2" title="">[2]
Matthai’s law partner and husband, and the arbitrator were both members of the
Los Angeles County Bar Association litigation section. “Based upon these facts, [according to Horn]
it is no stretch to believe that if the Arbitrator and Matthai shared a presence
on at least one panel, had known each other over the course of years, and the
Arbitrator had worked with Matthai’s husband and law partner Robie, then they
had a personal relationship and mutual professional respect. Such may reasonably be deduced from the
facts.”

We disagree. As explained in Koch and the cases cited above, the arbitrator’s participation in
the same panels or bar association committees does not provide a credible basis
for inferring an impression of bias.
From these facts, it is an unreasonable stretch of the imagination to
assume that the arbitrator had a relationship with Matthai that required
disclosure.

C. Law Firm Employment

We similarly reject Horn’s
contention that the arbitrator should have disclosed his employment at a law
firm. The arbitrator is of counsel at
Brown, White & Newhouse (BWN), a private law firm that has represented
clients in the area of legal malpractice defense. Relying on Benjamin, Weill & Mazer v. Kors (2011) 195 Cal.App.4th 40 (>Benjamin), Horn contends that the
arbitrator’s undisclosed defense of attorneys in legal malpractice actions is a
basis for vacating the arbitration award in this case. In Benjamin,
the court held that an objective person could reasonably question the
impartiality of an arbitrator in a dispute over legal fees who, at the time of
the arbitration, was engaged primarily in the defense of attorneys and law
firms in cases involving professional responsibility and was actively
representing a law firm in a case before the California Supreme Court involving
a dispute over legal fees. (>Id. at p. 72.)

This matter is nothing like the >Benjamin case. Nemecek presented a declaration by BWN’s
founding partner and general counsel, who stated that BWN handles criminal
defense and civil litigation. “Since its
founding, BWN has represented plaintiffs in two legal malpractice cases and a
defendant in one other. That does not
count two matters in which BWN has defended itself against legal malpractice
allegations. [The arbitrator] has not
worked on any legal malpractice matter for BWN.” Unlike in Benjamin,
there is no indication BWN, or the arbitrator in particular, devotes its
practice to legal malpractice defense.
No impression of bias can be inferred from the fact that BWN represented
clients in three malpractice matters and defended itself in another two,
particularly when the arbitrator was not involved in any of those matters.

D. Prior Appearance By Nemecek

In an
argument that borders on frivolous, Horn suggests that the arbitrator should
have disclosed that Nemecek attorneys previously appeared before him in one
case while he was on the district court bench.
Implying he was deceived, Horn states that “[t]he arbitrator and JAMS
expressly denied that [Nemecek] had any cases before him as judge in response
to that specific inquiry by Horn.” Horn
misstates the facts. JAMS and the
arbitrator, as required under the section 1281.9, disclosed that Nemecek had
never appeared before the arbitrator in any arbitration. Neither JAMS nor the arbitrator made any
representations about his time on the bench.
In any case, there is no requirement that an arbitrator disclose that
attorneys appeared before the arbitrator in one case during his four years as a
district court judge.

II. Attorney
Fee Award

Horn also
challenges the trial court’s award of attorney fees incurred in connection with
the petition to confirm the arbitration
award. We review the trial
court’s determination of attorney fees
for abuse of discretion. (>PLCM Group, Inc. v. Drexler (2000) 22
Cal.4th 1084, 1096.) We find no such
abuse here.

When Horn
presented his claim, Nemecek referred it to Lawyers Mutual Insurance Company
(Lawyers Mutual), its insurer, which contracted with Murphy, Pearson, Bradley
& Feeney (Murphy) to provide the defense.
In Nemecek’s motion for attorney fees, it presented Murphy’s billing
statements and a declaration from Harlan Watkins, Nemecek’s primary defense counsel
in the arbitration. Watkins stated that
he had been practicing in California since 1995 with a focus on malpractice
litigation. Watkins presented a general
schedule and pay table for attorneys put out by the Department of Justice,
called the Laffey Matrix. Based on the
Laffey Matrix, Watkins urged the court to adopt an hourly rate of $419.43 per
hour for his work for a total of $45,759.81 in attorney fees. Watkins did not state what his actual hourly
rate in the matter was. In opposition,
Horn presented the declaration of Joel Mark, an expert regarding billing and
fee disputes and Horn’s expert witness in the arbitration. Mark reviewed Murphy’s billing statements and
concluded that Murphy billed Lawyers Mutual between $100 to $215 per hour for
attorney services in the arbitration.
The trial court awarded Nemecek $42,207.31 in reasonable attorney fees
and costs.

Contending the amount awarded was
more than double the amount actually incurred, Horn claims the trial court
abused its discretion. In short, Horn
urges us to cap the attorney fee award to that which was actually
incurred. We decline to do so.

Here, the retainer agreement
between Nemecek and Horn specified that the “prevailing party in the
arbitration and any ancillary proceeding shall recover reasonable attorney’s
fees.” Civil Code section 1717 provides
in part: “Reasonable attorney’s fees
shall be fixed by the court, . . . and shall be an element of the costs of
suit.” “ ‘The reasonable market value
of the attorney’s services is the measure of a reasonable hourly rate. [Citations.]
This standard applies regardless of whether the attorneys claiming fees
charge nothing for their services, charge at below-market or discounted rates,
represent the client on a straight contingent fee basis, or are in-house
counsel. [Citations.]’ ” (Chacon
v. Litke (2010) 181 Cal.App.4th 1234, 1260.) The amount to be awarded as attorney’s fees
is left to the sound discretion of the trial court, which is in the best
position to evaluate the services rendered by an attorney in his
courtroom. (Vella v. Hudgins (1984) 151 Cal.App.3d 515, 522.)

Cases have affirmed an award of
attorney fees that were not “actually incurred.” In PLCM
Group, Inc. v. Drexler, supra, 22 Cal.4th at pages 1094-1095, for example,
the Supreme Court held that attorney fees may be recovered under Civil Code
section 1717 for the work of in-house counsel.
The court expressly held the trial court was not required to use a
“cost-plus approach,” namely a calculation of the actual salary, costs and
overhead of in-house counsel, and could instead use market value to determine
reasonable attorney fees. (>PLCM Group, Inc. v. Drexler, supra, at
pp. 1096-1097; see also Lolley v.
Campbell (2002) 28 Cal.4th 367, 371[rejecting contention that attorney
fees “incurred,” under a Labor Code provision, means only fees a litigant
actually pays or becomes liable to pay from his own assets; court could award
fees to employee who could not afford counsel and was represented by Labor
Commissioner].)

Given this authority, we are not
persuaded by Horn’s argument that the rate billed by Murphy represents the
maximum reasonable hourly rate. Indeed,
the case cited by Horn for this proposition, Vella v. Hudgins, supra, 151 Cal.App.3d at page 520, acknowledges
that “the trend of the cases, however, is toward the conclusion that a trial
court may consider the terms of the parties’ contract, along with other
factors, but that the terms of the contract do not compel any particular
award.” (Id. at p. 520.) Neither do
we accept a rule that requires a trial
court to limit its fee award to the amount incurred in all circumstances except
under “unique factual circumstances” such as pro bono cases, contingency fee
cases and representation by in-house counsel.
None of the cases cited limit their holding to such “unique factual
circumstances.” Additionally, there is
no support for Horn’s argument that Nemecek cannot be reimbursed for attorney
fees which were not actually paid.
Indeed, this argument runs counter to the authority discussed above.
Horn’s reliance on Richards v. Sequoia
Ins. Co. (2011) 195 Cal.App.4th 431 for this argument is misplaced as that
case involved an insurance bad faith claim.
There, the trial court held the plaintiffs failed to show economic loss
such as attorney fees incurred to secure the benefits due under an insurance
policy. (Id. at p. 438.) That case
did not involve a contractual attorney fee provision.

We also reject Horn’s contention
that the attorney fee request should have been denied because the fees were
paid by Lawyers Mutual rather than Nemecek itself. (Staples
v. Hoefke (1987) 189 Cal.App.3d 1397, 1410 [“Plaintiffs were not entitled
to avoid their contractual obligation to pay reasonable attorney fees based on
the fortuitous circumstance that they sued a defendant who obtained insurance
coverage providing a defense.”].)

Finally, we do not accept Horn’s
argument that the lodestar amount calculated by the trial court was not
reasonable and should be reversed. As
stated above, the trial court used the reasonable rates in the local community
as a basis for its award. It was also
presented with Murphy’s time records and billing statements to show the work
done. That Murphy could have provided
more detailed billing records and the precise amount it was paid for its
services does not render the trial court’s determination an abuse of
discretion.

DISPOSITION

The judgment is affirmed. Respondent to recover its costs on appeal.





BIGELOW, P. J.

We concur:



RUBIN,
J. >






SORTINO, J.href="#_ftn3" name="_ftnref3" title="">*