My Whole World Has Cracked And Come Tumbling Down

 

k. November 4, 2001 Mr. Haberman called Aron Gold to report the
conversation. [Dec. M. Haberman ¶¶65. Dec. Aron Gold];
l. November 4, 2001 at 2:28 p.m. Mr. Haberman called Mr. Steve Durham
to report the threatening call and to see if service to Sylmark could
continue. [Dec. M. Haberman ¶¶67-70, Exhibit 7];
m. November 4, 2001 at 2:52 p.m. Mr. Durham telephoned Arbitrator Rabbi
Union and in the call Arbitrator Rabbi Union affirmed his statements to Mr.
Haberman. ¶¶20-24, Exhibit 15];
n. November 5, 2001 Mr. Durham forwarded a letter to Sylmark requesting
that the money owed be paid to C-cubed and not the Beis Din. [Dec. Steve
Durham ¶¶26 Exhibit 8];
o. November, 2001 No other clients of C-cubed were contacted by the
Arbitrators;
p. November 6-9th, 2001 Service was cut to Sylmark. [Dec. Marc Haberman
¶¶75, Dec. 28, Exhibit 14]
q. December 14, 2001 Arbitration Award includes six newplaintiffs/creditors, improperly orders a lien "on all income" and fails to
set any grounds for the basis of the decision talking primarily about
alleged violations of non-existent orders.
3. ANALYSIS
a. Award Must Be Vacated Because Of Arbitrator Misconduct and
Overreaching of Their Authority
California Code of Civil Procedure section 1286.2 provides:
(a) Subject to Section 1286.4, the court shall vacate the award if the
court determines any of the following:

 

(1) The award was procured by corruption, fraud or other undue means.

 

(2) There was corruption in any of the arbitrators.

 

(3) The rights of the party were substantially prejudiced by
misconduct of a neutral arbitrator.

 

(4) The arbitrators exceeded their powers and the award cannot be
corrected without affecting the merits of the decision upon the controversy
submitted.

 

(5) The rights of the party were substantially prejudiced by the
refusal of the arbitrators to postpone the hearing upon sufficient cause
being shown therefor or by the refusal of the arbitrators to hear evidence
material to the controversy or by other conduct of the arbitrators contrary
to the provisions of this title.

 

(6) An arbitrator making the award either: (A) failed to disclose
within the time required for disclosure a ground for disqualification of
which the arbitrator was then aware; or (B) was subject to disqualification
upon grounds specified * * * but failed upon receipt of timely demand to
disqualify himself or herself as required by that provision. . .

 

(b) Petitions to vacate an arbitration award pursuant to Section
1285 are subject to provisions of section 128.7.

 

C.C.P. §§1286.2.

 

The Court in Betz v. Pankow (1st Dist. 1995) 31 Cal.App.4th 1503, 1508
ruled that "an award must be vacated if the court determines, inter alia,
that the rights of a party were substantially prejudiced by the misconduct
or bias of a neutral arbitrator." (Code Civ. Proc. §§1286.2, subds. (b) &
(c)."
The Betz court went further to rule that:
the established test for making this determination when a party asserts
prejudice because of an arbitrator’s conflict of interest is whether the
record reveals facts which might create an impression of possible bias. The
test is an objective one – whether such an impression is created in the eyes
of the hypothetical reasonable person. As the cases demonstrate, the test
is also fact specific. There is no bright line of demarcation for the
existence of an impression of possible bias, and each case must be
considered in light of its particular circumstances.

 

A frequent cause for an impression of possible bias is the existenceof a present or past business relationship between the arbitrator and a
party, its counsel or a witness. Such a relationship suggests a pecuniary
interest on the part of the arbitrator or that the arbitrator will place
unusual trust or confidence in the party with whom the relationship
existed, thus giving the arbitrator reason to favor the party for reasons
wholly unrelated to the merits of the arbitration.
Id at 1508-1509(emph. added & citations omitted).
In Ceriale v. Amco Ins. Co. (2nd Dist. 1996) 48 Cal.App.4th 500, 504
ruled:
the trial court may vacate an arbitration award pursuant to Code of
Civil Procedure section 1286.2. In pertinent part, section 1286.2 states
that ‘. . .the court shall vacate the award if the court determines . .
.¶¶(c) [t]he rights of the party were substantially prejudiced by misconduct
of a neutral arbitrator.
California Rules of Court, rule 1606(a) provides that "[i]t shall be the
duty of the arbitrator to determine whether any cause exists for
disqualification upon any of the grounds set forth in section 170.1 of the
Code of Civil Procedure . . ." In pertinent part, Code of Civil Procedure
section 170.1, subdivision (a)(6) provides for disqualification of a judge
when "a person aware of the facts might reasonably entertain doubt that the
judge would be able to be impartial."
Id. at 504.
In Ceriale the court vacated an arbitration award on the appearance of
possible bias merely because the arbitrator in Ceriale was an attorney for a
party in another non-binding arbitration where plaintiff’s counsel in the
Ceriale case was the arbitrator. Id. at 506. The Ceriale court reasoned
that the "decision is not a reflection on the integrity of the arbitrators
involved here. We assume they maintain the highest ethical standards.
Nonetheless, we must reverse the judgment because a reasonable person might
have an impression of possible bias under the instant facts." Id at
506-507.
In the instant case, it is undisputed that:
1. Arbitrator Rabbi Gershon Bess is the son of Mark Bess the President
of Sylmark and then largest client of respondents C-cubed [Exhibit 4, Dec.
Marc Haberman ¶¶16 & 17];
2. this relationship was not disclosed by the Arbitrators. [Dec. Marc
Haberman ¶¶16-21];
3. Sylmark owed C-cubed approximately $30,000 in October/November of
2001 and that C- cubed requested payment on October 22, 2001[Exhibit 13,
Dec. Steve Durham ¶¶5-10];
4. Without authority the Arbitrators ordered Sylmark funds to be
deposited with the Beis Din [Exhibit 6, Transcript of August 2, 2001
hearing, Exhibit 10, Feb. 3, 2002 letter of Arbitrators];
5. The Arbitrators did not require other C-cubed clients with
outstanding balances to deposit funds with them. [Dec. of Marc Haberman
¶¶76-77; Dec. Steve Durham ¶¶30-31; Dec. Asher Low ¶¶11;
6. No accounting had ever been provided regarding the Sylmark funds as
would be required in any Court ordered receivership. It is unknown if the
monies had been paid, how they been paid, when they were paid or to whom
they were paid. [Dec. Marc Haberman ¶¶87, Dec. Steve Durham ¶¶29]
7. The Arbitration Award includes six plaintiffs/creditors that were
never part of the arbitration agreement.[Exhibit 1 Arbitration Agreement &
Exhibit 3, December 14, 2001 award]; and
8. The Arbitration Award provides no basis for findings of breach offiduciary duty, but merely describes alleged violations of provisional
remedies the Arbitrators had no authority to make. [Exhibit 3 and Exhibit
6].
Based upon these facts alone which cannot be disputed, a reasonable
person would have to conclude an impression of possible bias and therefore
the Award must be vacated and reheard with new arbitrators.
b. Arbitrator Rabbi Union’s Threatening Telephone Call To Respondent Is
Misconduct and Evidences Bias and Partiality of the Arbitrators
The telephone call from the Arbitrator was an inappropriate ex-parte
communication which evidenced the bias and partiality of the Arbitrators
against Respondents. The telephone call came after C-cubed’s October 22,
2001 email requesting payment by Sylmark. Dec. Steve Durham ¶¶9 & 10 Exhibit
14. The phone records and the testimony of Marc Haberman, Steve Durham,
Asher Low and Aron Gold evidence the threat made by the arbitrators.
Mr. Haberman’s telephone records evidence an incoming call at 12:23 p.m.
on November 4, 2001. The statement does not indicate incoming calls. Dec.
Marc Haberman ¶¶52, Exhibit 7. Mr. Durham’s telephone records indicate a
telephone call to Rabbi Union at 2:52 p.m. on November 4, 2001 to the number
323-397-1018. Dec. Steve Durham ¶¶20 and Exhibit 15.
Ex-parte communications are inappropriate in an arbitration and under
certain circumstances require vacation of an arbitration award. [A.M.
Classic Construction, Inc. v. Tri-Build Development Co. 70 Cal.App.4th 1470,
1478.]
It is clear that the threats made by Rabbi Union implicated him in
arbitrator misconduct for the benefit of one of the Rabbi’s sons and
evidences the biased state of mind of the arbitrators. The statements are
supported by undisputed facts. Accordingly, the Arbitration Award must be
vacated for arbitrator misconduct.
c. The Arbitrators Had No Authority To Grant Provisional Remedies
Arbitrators ordinarily have no power to grant preliminary or provisional
relief. See [Badgley v. Van. Upp (1993) 20 Cal.App.4th 218, 221( ruling
receivership and preliminary injunction "ordinarily unavailable in
arbitration."); Outdoor Services, Inc. Pabagold, Inc. (1986) 185 Cal.App.3d
676, 685 (ruling "Attachment is relief unavailable through arbitration . .
."); and Marsch v. Williams(1994) 23 Cal.App.4th 238, 246 (ruling Section
1281.8 does not authorize an arbitrator to appoint a receiver."]
The arbitrators own alleged interim order, in the instant action,
acknowledged that the Superior Court would have to order relief.
Specifically the Arbitrators’ July 25, 2001 letter states:
The Beis Din authorizes the enforcement of these orders through the
Superior Court of Los Angeles, and explicitly authorizes filing for
temporary protective orders and appropriate restraining orders to uphold the
terms contained herein, pending final determinations of the arbitrators.
Exhibit 2.
On August 2, 2001 plaintiff Stefansky through counsel appeared before
Honorable Dzintra Janavs, in order to simply ‘rubber stamp’ the alleged
interim order of the Arbitrators. Judge Janavs denied the relief requested
on the grounds that: 1. if the request was a confirmation hearing than
proper notice was "absolutely necessary" [Exhibit 6 p. 1 lns 22-28- p. 2
lns. 1-4]; 2. if the request was to enjoin Mr. Haberman from competing then
it was against the law [Exhibit 6 p. 2 lns. 19-27]; 3. if the request was in
the nature of a Writ of Attachment then plaintiff was in the wrong Court and
filled the wrong paper [Exhibit 6 p. 3 lns 1-4]; and 4. no irreparable harm
was shown for any preliminary injunction. [Exhibit 6 p. 3 lns 5-14].Accordingly, the relief was denied. [Exhibit 6 p. ln. 19]
California Code of Civil Procedure section 1281.8(b) permits a party to
an arbitration to seek provisional relief from the court, but a proper
showing must be made. Woolley v. Embassy Suites, Inc. (1991) 227 Cal.App.3d
1520, 1527.
Marc Haberman was never informed of the ex-parte application or its
results. [Dec. Marc Haberman ¶¶43]. It is safely assumed, however, that the
Arbitrators knew full well that the relief sought from Judge Janavs was
denied and that there was no authority for them to require turnover of
Sylmark’s funds, Marc Haberman’s personal assets or the other restrictions
they intended to impose.
The whole matter of the Sylmark funds enuring to the financial benefit
of one of the Arbitrator’s sons goes directly to the Arbitrators’ lack of
authority to require the turnover. The bias and partiality of the
Arbitrators is strewn throughout the award. The Arbitrators accuse
respondents of "a willful and flagrant violation of the law and the orders
of this Beis Din." [Exhibit p.2 last sentence]. The facts are however that
there was no provisional order requiring respondents to do anything.
Accordingly, there was no violation of law and this was known to the
arbitrators. On the first paragraph of the last page of the Award the
arbitrators also accuse respondents of violating orders of law and the Beis
Din regarding a comptroller/receiver.
The appointment of a receiver is "unique and cannot be extended to
arbitrators in the absence of legislative action." [Marsh v. Williams (4th
Dist. 1994) 23 Cal.App.4th 238, 246]
The arbitrators had no authority to demand turnover of the Sylmark
funds or the other provisional requirements and it is evident from the award
that the alleged violations of these non- existent orders formed a large
basis for their determinations.
The arbitrators overreaching of their authority is so intertwined with
the Award and their objective taint of bias and partiality mandate that the
Award be vacated.
d. Arbitrators Had No Authority To Include Six New Plaintiffs/Creditors
or Put A Lien On All Income Derived By Respondents
An award on issues not submitted to the arbitrator "exceeds the
arbitrator’s powers" [Pacific Crown Distributors v. Brotherhood of Teamsters
& Auto Truck Drivers, Local 70 (1986) 183 Cal.App.3d 1138, 1143.]
The Arbitration Agreement sets forth the parties to the Arbitration.
The Arbitration Agreement states:
We, the undersigned, hereby agree to submit to binding arbitration the
following controversy: A comprehensive settlement of all claims and
cross-claims between Rocky Stefansky v. M. Haberman and Ccube Solutions &
Ccube India.
Exhibit 1.
The Arbitration Award however includes six other plaintiffs including
Rabbi Meir Silver, Rabbi Reuven Silver, Euro Factors New Zealand, The
Stefansky Family Limited Partnership, Super Reliable Management, and Rafi
Katz. Exhibit 3.
It is clear that the arbitrators exceeded their authority by including
alleged claims of six other creditors. The only claims to be considered as
set forth by the Arbitration Agreement is that of Rocky Stefansky.
There is no way to determine what part of the award, if any, goes to Mr.
Stefansky or the other six plaintiffs. In addition, the inclusion of these
plaintiffs evidences the bias and partiality of these arbitrators inconformity with their threats made on November 4, 2001.
The award also exceeds the powers of these arbitrators by including at
paragraph 15 an award of:
"a lien on all income derived from the customers and accounts
receivable of the abovementioned businesses and their successors, assignees,
and affiliates.
Exhibit 3 p. 3 ¶¶15.
The arbitrators have no authority to grant such a lien. They have
failed to consider codified exemptions for attachment orders and the
enforcement of judgments is solely the province of the Courts. [See Hall,
Goodhue, Haisley & Barker, Inc. v. Marconi Conference Ctr. Bd (1996) 41
Cal.App.4th 1551, 1555 vacating an amendment to judgment to add judgment
debtor as alter ego; Jordan-Lyon Productions, Inc. v. Cineplex Odeon Corp.
(1994) 29 Cal.App.4th 1459, 1467-1468.]
Since the arbitrators exceeded their authority by including new
plaintiffs/creditors and imposing a lien, the Award must be vacated,
because it cannot be corrected without affecting the merits of the decision.
e. The Award Should Be Vacated and Reheard With New Arbitrators
"Where the average person could well entertain doubt whether the
[adjudicator] was impartial, appellate courts are not required to speculate
whether the bias was actual or merely apparent, or wether the result would
have dispassionately decided [citations], but should reverse the judgment
and remand the matter to a different [adjudicator] for a new [hearing] on
all issues. [Citations]" [Roitz v. Coldwell Banker Residential Brokerage Co.
(2nd Dist. 1998) 62 Cal.App.4th 716.]
The arbitrators misconduct and overreaching of their authority requires
this Court to vacate the award pursuant to California Code of Civil
Procedure section 1286.2. A reasonably objective person reviewing the facts
would conclude that the award was procured by corruption of the arbitrators
which substantially prejudiced the Respondents.
4. IN THE ALTERNATIVE THE COURT SHOULD CORRECT THE AWARD
California Code of Civil Procedure section 1286.8 provides that unless
the court vacates the award it shall correct the award if the arbitrators
exceeded their powers but the award may be corrected without affecting the
merits of the decision upon the controversy submitted.
Although, it is unclear how the award could be corrected with the
inclusion of six new plaintiffs/creditors this Court should not confirm the
award with these extra Plaintiffs/creditors contained in the Award or the
including of a lien in the order which is the sole domain of the court.
5. CONCLUSION
Based upon the forgoing, the Petition to Confirm Arbitration Award
should be vacated.
There are sufficient facts, many of which are indisputable, that evidence
that a reasonable person would determine a possible if not likely bias and
partiality of the arbitrators. This bias and partiality is clearly seen
within the arbitration award itself where new plaintiffs are included and
it is unclear who is owed what. The lengthy decision in the award regarding
alleged violations of orders that did not exist, and the failure to mention
the Sylmark funds allegedly held by the Arbitrators evidence substantial
prejudice to Respondents.

Accordingly, the Award should be vacated and set for rehearing in front
of new arbitrators, or in the alternative the award should be corrected to
exclude new plaintiffs/creditors and remove the order for a lien.
DATED: FEBRUARY 18, 2002

 

TUCHMAN & ASSOCIATES

AVIV L. TUCHMAN
LOREN N. COHEN
Attorneys for Respondents and Defendants
MARC HABERMAN, C-CUBED SOLUTIONS, Inc. a
Delaware Corporation, C- CUBED PRIVATE SOLUTIONS LIMITED, a business entity
formed in India