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

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State: California

Court: California Eastern District Court

Docket No: B233274

Case Date: 08/15/2012

Plaintiff: Nemecek & Cole

Defendant: Horn 7/23/12 CA2/8

Preview:Filed 7/23/12; pub. order 8/15/12 (see end of opn.)

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 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.

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Steven Horn appeals from the judgment, contending the trial court erred in confirming an 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 arbitrators 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 Nemeceks negligence was the cause of the "disastrous results" in his claim against the Hoffmans. He demanded Nemecek submit to arbitration with the 2

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 Horns 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 Horns claim. "Shocked" by the arbitrators 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 Nemeceks appellate department, Mark Schaeffer, were both members of the Los Angeles County Bar Associations Appellate Executive Committee Section; the arbitrator and Edith Matthai, Nemeceks 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 Horns petition to vacate the arbitration award and oppose Nemeceks petition to confirm the award. The trial court entered judgment in favor of Nemecek on April 5, 2011. Horn timely appealed. 3

DISCUSSION Horn challenges the trial courts 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.,

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