award entered following arbitration pursuant to National Basketball Association’s collective bargaining agreement
How later courts described this case
- award entered following arbitration pursuant to National Basketball Association’s collective bargaining agreement
- award entered following arbitration pursuant to National Football League’s collective bargaining agreement
- “Plaintiff does not allege that an arbitrator failed to disclose any relevant relationship . . . before the arbitration began. . . . Therefore the stricter standard governing actual bias cases applies to plaintiff's claim of partiality.”’
- noting that an arbitration award is “irrational” where arbitrator “dispense[s] his own brand of industrial justice by disregarding a specific contract provision to correct what he perceived as an injustice.”
Written by the judges who cited it.
The opinion
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:14-cv-08725-CAS(AGRx) Date November 1, 2019
Title JEFFREY I. GOLDEN v. O7-MELVENY & MYERS LLP
Present: The Honorable CHRISTINA A. SNYDER
Catherine Jeang Not Present N/A
Deputy Clerk Court Reporter / Recorder Tape No.
Attorneys Present for Plaintiffs: Attorneys Present for Defendants:
Not Present Not Present
Proceedings: (IN CHAMBERS) - PLAINTIFF’S MOTION TO VACATE FINAL
ARBITRATION AWARD (Dkt. [ 80 ], filed September 9, 2019)
DEFENDANTS’ MOTION FOR ORDER CONFIRMING
ARBITRAL AWARD (Dkt. [ 84 ], filed September 9, 2019)
I. INTRODUCTION
This dispute arises out of claims that defendant O’Melveny & Myers LLP
(“O’Melveny’”) and two of its attorneys, defendants Steven J. Olson (“Olson”) and Jorge
deNeve (“deNeve”), committed legal malpractice and breached their fiduciary duties in the
course of representing Aletheia Research and Management, Inc. (“Aletheia”). Dkt. 1
(“Compl.”). On November 10, 2014, plaintiff Jeffrey I. Golden (“Golden”), acting in his
capacity as Aletheia’s trustee in bankruptcy, filed a complaint against O’Melveny, Olson,
and deNeve, asserting claims for: (1) professional negligence (conflict of interest); (2)
breach of fiduciary duty; (3) avoidance and recovery of preferential transfers under 11
U.S.C. §§ 548 and 550; (4) avoidance and recovery of fraudulent conveyances (two-year
transfers) under 11 U.S.C. §§ 548 and 550; and (5) avoidance and recovery of fraudulent
conveyances (four-year transfers) under 11 U.S.C §§ 544 and 550 and Cal. Civ. Code §§
3439.04, 3439.05, and 3439.07.' Id.
On June 15, 2015, pursuant to the arbitration provisions contained in the engagement
agreement between O’Melveny and Aletheia, the Court compelled arbitration of Golden’s
professional negligence and breach of fiduciary duty claims. Dkt. 30. The Court stayed
Golden’s remaining claims pending the completion of arbitration. Id. The parties selected
1 The complaint also named the law firm Freedman + Taitelman, LLP (“Freedman”) as a
defendant. Id. Golden subsequently settled with Freedman, and the Court approved the
settlement on November 2, 2015, dismissing Freedman from this litigation. Dkt. 37.
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:14-cv-08725-CAS(AGRx) Date November 1, 2019
Title JEFFREY I GOLDEN v. O7MELVENY & MYERS LLP
the Hon. Gary A. Feess (“the Arbitrator”), a retired United States District Judge, to serve
as arbitrator. Dkt. 39 at 3. The parties thereafter commenced arbitration before the
Arbitrator in November 2015. Id.
Golden subsequently filed a motion before the Court on June 14, 2016, seeking
reconsideration of the Court’s order compelling arbitration of Golden’s first two claims.
Dkt. 54. On June 22, 2016, Golden also moved to disqualify Gibson, Dunn & Crutcher
LLP (“Gibson Dunn”), O’Melveny’s counsel, based primarily on an alleged conflict of
interest. Dkt. 56. On August 3, 2016, the Court denied Golden’s motion for
reconsideration and referred Golden’s motion to disqualify to the Arbitrator. Dkt. 69.
The parties’ arbitration hearing before the Arbitrator began on November 5, 2018
and concluded on November 29, 2018. Dkt. 84-4 (“Final Award”) at 5. The parties
submitted closing arguments to the Arbitrator on March 20, 2019, and the Arbitrator issued
his corrected Findings, Conclusions, and Final Award on August 22, 2019.7 Id. at 2, 5.
The Final Award concluded that Golden “has failed to carry his burden of proof on any of
his claims against” O’Melveny, Olson, or deNeve. Id. at 8.
Before the Court are the parties’ cross motions to vacate or confirm the Arbitrator’s
Final Award, which the parties filed on September 9, 2019. See Dkt. 80 (“Golden Mot.”);
Dkt. 84 (“O’Melveny Mot.”). The parties filed their respective oppositions on September
27, 2019. See Dkt. 91 (“Golden Opp.”); Dkt 94 (“O’Melveny Opp.”). The parties filed
their respective replies on October 7, 2019. See Dkt. 95 (“O’Melveny Reply”); Dkt. 96
(“Golden Reply”).
Having carefully considered the parties’ arguments, the Court finds and concludes
as follows.
? The Arbitrator originally issued an award on June 21, 2019 and subsequently issued
a corrected Final Award on August 22, 2019, which made minor corrections at the request
of O’Melveny, Olson, and deNeve. Dkt. 84-1, Declaration of Kevin S. Rosen (“Rosen
Decl.”) § 6.
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:14-cv-08725-CAS(AGRx) Date November 1, 2019
Title JEFFREY I GOLDEN v. O7MELVENY & MYERS LLP
Il. BACKGROUND
Golden asserts that O’ Melveny, Olson, and deNeve committed legal malpractice and
breached fiduciary duties while representing Aletheia. Accordingly, the Court recites the
factual and procedural background that gives rise to this dispute.*
A. Eichler and Peikin Found Aletheia in 1997
Roger Peikin (“Peikin’”), a family law attorney, and Peter Eichler (“Eichler”), an
asset manager formerly with Bear Stearns, initially became acquainted while Peikin was
Eichler’s client. Final Award at 13. After Eichler expressed his desire to Peikin to start
his own money management firm, the two subsequently formed Aletheia on July 23, 1997,
with Eichler initially owning 550 of the 1,000 issued shares and Peikin owning the
remaining 450 shares. Id. Eichler, Peikin, Jesse Felder (“Felder”), and Patricia Barnes
(“Barnes”), served as Aletheia’s initial directors. Id. Eichler would go on to serve as
Aletheia’s Chairman, Chief Executive Officer, and Chief Investment Officer, while Peikin
served as the company’s General Counsel, Chief Financial Officer (“CFO”), and Chief
Compliance Officer (“CCO”). Dkt. 85-2 at 544, Trial Exhibit 337 (“Trial Ex. 337”).
Initially, Aletheia enjoyed only a few clients. Final Award at 14. Over time,
however, Aletheia significantly increased the amount of the assets under its management.
In 2000, the firm held $99 million in assets under management—by the end of 2006, this
figure eclipsed $3.2 billion. Id.
B. Aletheia Agrees to Terms with Proctor
In early 2006, Aletheia began discussions with Proctor Investment Managers LLC
(“Proctor”) regarding a possible sale of a minority stake in Aletheia to Proctor in exchange
for Proctor agreeing to market and sell Aletheia’s investment products. Final Award at
14-16. The principals involved in these discussions on the part of Proctor include Mark
Scalzo (“Scalzo”); Mona Aboelnaga (“Aboelnaga”), Proctor’s President; and Jim Coley
(“Coley”). Id, at 15-17. Negotiations continued through October of 2006. Id. at 17.
The final agreement between the parties consisted of several interrelated
components. Id. at 18. First, pursuant to the “Selling Agreement,” Proctor received fees
3 Neither party contests the Arbitrator’s factual findings. See Golden Mot. at 4:
O’Melveny Mot. at 8. Accordingly, the Court cites to the factual findings contained in the
Final Award, unless otherwise specified.
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:14-cv-08725-CAS(AGRx) Date November 1, 2019
Title JEFFREY I GOLDEN v. O7MELVENY & MYERS LLP
in return for its use of “commercially reasonable efforts” to sell Aletheia’s products. Final
Award at 18. Second, pursuant to the “Stock Purchase Agreement,” Proctor acquired a
10% equity interest in Aletheia for $16 million. Dkt. 85-1 at 352, Trial Exhibit 117 (“Trial
Ex. 117”). Finally, the parties executed a “Side Letter Agreement” which set forth
additional duties and obligations not contained in the Selling or Stock Purchase
Agreements. Final Award at 18.
The Side Letter Agreement contains several provisions which, in part, form the bases
for Golden’s claims. For example, the Side Letter Agreement required Aletheia to increase
the size of the Board of Directors to include an “Independent Director,” who was to be a
nominee of a shareholder holding less than 25% of the company stock and who was not an
employee or officer of Aletheia, or the relative of an employee or officer. Final Award at
18. The Side Letter Agreement also imposed limits on the employee bonus pool, consisting
of: (1) a 35% cap of pre-tax, pre-bonus income related to hedge fund partnership
performance; and (2) a 20% cap on all other pre-tax, pre-bonus income such as
management fees and commissions. Id. A distribution provision required that at least 45—
50% of pre-tax, post-bonus pool earnings be paid pro rata to shareholders, minus the
payment of all quarterly business expenses. Id. at 19. After the parties closed the
transaction, Coley, Proctor’s Chief Executive Officer, was elected as Aletheia’s
Independent Director. Id.
C. Aletheia’s Relationship with Proctor Deteriorates and Litigation Ensues
Shortly after Aletheia and Proctor agreed to terms, internal problems arose at
Proctor. Final Award at 20. By February 2007, Coley contemplated leaving his position
as Proctor’s CEO. Id. at 21. At a March 2007 meeting of Aletheia’s board, Coley, while
still serving as Aletheia’s Independent Director, proposed changes to Aletheia’s
compensation structure. Id. In April of that year, Coley also spearheaded a successful
effort to amend the Selling Agreement. Id. By September 2007, however, Coley had begun
preparations to depart from Proctor. Id. at 23. During this time, Proctor failed to
significantly increase the value of the assets that Aletheia managed: of the $5.7 billion
increase in 2007 in value of assets that Aletheia managed, Proctor’s sales accounted for
slightly more than 2%. Id. at 25. Coley formally notified Eichler and Peikin of his
departure from Proctor on October 16, 2007, and Coley formally resigned from his position
on Aletheia’s board nearly a month later. Id.
Shortly after Coley’s resignation from Aletheia’s board, Eichler and Peikin began
contemplating the future of Aletheia’s agreements with Proctor, retaining the law firm
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:14-cv-08725-CAS(AGRx) Date November 1, 2019
Title JEFFREY I. GOLDEN v. O7-MELVENY & MYERS LLP
Loeb & Loeb LLP (“Loeb”), and one of its partners, Peter Selvin (“Selvin”), as legal
counsel. Final Award at 26. On December 3, 2007, Aletheia notified Proctor that Proctor
was 1n breach of the Selling Agreement. Id. Proctor responded by denying it had breached,
and, on December 18, 2007, Aletheia gave notice that it was exercising its right to terminate
the Selling Agreement because Proctor had not sufficiently cured its breaches within the
contractually-specified time period. Id. After counsel for Proctor asserted that the
termination was ineffective, Aletheia again provided notice of termination on January 4,
2008, listing additional facts that it contended supported its decision to terminate the
agreements. Id.
Loeb and Selvin jointly represented Aletheia, Eichler, and Peikin, investigating
potential claims against Proctor including breach of contract, fraud, breach of fiduciary
duty, and rescission. Final Award at 28. On January 25, 2008, Proctor filed suit against
Aletheia, Eichler, and Peikin in New York state court. Id. at 175. On January 29, 2008,
however, the parties entered into a litigation standstill agreement, and Proctor agreed to
dismiss the suit while it and Aletheia pursued a business resolution. Trial Ex. 337 at 548;
Final Award at 28. Negotiations proved fruitless, and Loeb and Selvin, acting as Aletheia’s
counsel, filed a declaratory relief action (“the California Proctor Litigation”) against
Proctor on February 4, 2010, in the Superior Court of the State of California for the County
of Los Angeles. Dkt 85-1 at 6, Trial Exhibit 3 (“Tal Ex. 3”).
In response, Proctor again filed suit against Aletheia, Eichler, Peikin, and others in
New York State Court (“the New York Proctor Litigation”) on February 16, 2010. Dkt.
85-1 at 11, Tral Exhibit 4 (“Trial Ex. 4”). The gravamen of Proctor’s complaint in the
New York Proctor Litigation was that Eichler and Peikin took tens of millions of dollars in
excessive compensation from Aletheia while Aletheia’s directors sat idly by. Golden Mot.
at 2.
D. The Boskovich Litigation
While Aletheia’s dispute with Proctor was pending, Joseph Boskovich, a former
Aletheia salesman, brought a wrongful termination suit against Aletheia, Eichler, and
Peikin on September 17, 2008. Trial Ex. 337 at 546. In response, Aletheia asserted
counterclaims for misappropriation of trade secrets against Boskovich and other former
employees related to these former employees’ competing asset management business.
Final Award at 29. Loeb and Selvin initially represented Aletheia, Eichler, and Peikin
jointly in this litigation (“Boskovich Litigation”). Id. at 9.
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:14-cv-08725-CAS(AGRx) Date November 1, 2019
Title JEFFREY I. GOLDEN v. O7-MELVENY & MYERS LLP
E. The Securities and Exchange Commission Investigation
The Securities and Exchange Commission (“SEC”) began investigating Aletheia in
February 2009. Trial Ex. 337 at 543-44. Loeb and Selvin initially represented Aletheia,
Eichler, and Peikin jointly in this investigation. Id. at 544; Final Award at 9. Because of
a potential conflict between Eichler and Peikin regarding a Chinese currency transaction,
however, Eichler and Peikin retained separate counsel. Final Award at 30. On November
5, 2009, Eichler replaced Loeb as counsel in the SEC investigation with O'Melveny. Trial
Ex. 337 at 545. Meanwhile, Peikin retained the law firm Shartsis Friese LLP (“Shartsis”).
Id. By January 2010, Aletheia had replaced Loeb with O’Melveny as its counsel in the
SEC investigation. Id.
The SEC investigated allegations that Aletheia was misreporting returns for its
various funds, possibly constituting fraud. Final Award at 108. Olson and deNeve were
particularly active in the SEC investigation, ultimately persuading the SEC to turn its
attention from a fraud inquiry into “a less threatening, but still important, books and records
inquiry|.}” Id. Eichler and Aletheia ultimately reached a settlement with the SEC. Trial
Ex. 337 at 560.
F. Aletheia Retains O’Melveny to Provide Additional Legal Services
Aletheia first retained O’Melveny to represent it in the SEC investigation on January
26, 2010. Trial Ex. 337 at 545. The January 26, 2010 engagement letter provided that
O’Melveny would represent Aletheia, Eichler, Barnes, and other individuals in the then-
pending SEC investigation and to ensure “compliance with federal securities laws and
regulations and the rules of the self regulatory organizations to which [Aletheia] is a
member.” Dkt. 17-2 (“Initial Engagement Letter’) at 2. The agreement made clear that
O’Melveny “do[es]| not represent and will not be representing Roger Peikin.” Id. at 3. The
nature and scope of O’Melveny’s representation of Eichler and Aletheia expanded over
time, however.
1. Aleitheia Retains O’Melveny in the Boskovich Litigation
In February 2010, O’Melveny began providing legal services to Aletheia regarding
the Boskovich Litigation. Trial Ex. 337 at 547. Indeed, O’Melveny engaged in strategy
sessions with Aletheia, Eichler, Peikin, and Loeb, their counsel of record in the Boskovich
Litigation. Id. On March 2, 2010, O'Melveny formally appeared in the Boskovich
Litigation when Loeb filed a notice formally associating O’Melveny as co-counsel. Id.
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:14-cv-08725-CAS(AGRx) Date November 1, 2019
Title JEFFREY I GOLDEN v. O7MELVENY & MYERS LLP
2. Aletheia and Eichler Retain O’Melveny in the Proctor Disputes
Aletheia and Eichler approached O’ Melveny in February 2010 about the prospect of
replacing Loeb as their counsel in the California and New York Proctor Litigation. Ex.
337 at 548. By July 13, 2010, O'Melveny had been retained to represent Aletheia, Eichler,
and Barnes in the California and New York Proctor Litigations. Dkt. 17-4 (“July 13, 2010
Engagement Letter”) at 2. As such, O’Melveny replaced Loeb and Selvin as counsel in
these cases. Trial Ex. 337 at 548-49.
During this time, Peikin also approached O’Melveny about the possibility that the
firm might represent him too. Although Peikin was not a party in the California Proctor
Litigation, Peikin requested that O’Melveny represent him in the New York Proctor
Litigation, in which he was a party. Trial Ex. 337 at 549. In February 2010, Peikin was
replaced as CCO but retained his CFO and General Counsel positions. Id. at 550. In April
2010, O’Melveny presented Peikin with a proposed engagement letter, and although Peikin
did not sign the letter, O'Melveny continued to represent Peikin in the New York Proctor
Litigation, first entering an appearance on Peikin’s behalf on April 8, 2010. Id. at □□□□□□□
Friese, Peikin’s personal counsel, remained engaged in the New York Proctor Litigation
on Peikin’s behalf. Id. at 549.
3. O’Melveny Prepares a First Amended Complaint in the California
Proctor Litigation
After substituting for Loeb and Selvin as counsel in the California Proctor Litigation,
O’Melveny began preparations for filing an amended complaint in that case. Trial Ex. 337
at 550. In connection with that work, O’Melveny conducted a detailed factual
investigation, reviewing documents and interviewing witnesses. Final Award at 38-39.
O’Melveny also conducted legal research regarding available causes of action arising under
California law, potential remedies, the possibility of seeking attorneys’ fees, and additional
issues regarding personal jurisdiction and venue. Id. O’Melveny’s records indicate that
between March and April of 2010, its attorneys worked more than 250 hours on the two
Proctor cases alone. Id. at 39-40. On April 16, 2010, O’Melveny filed a first amended
complaint against Proctor in the California Proctor Litigation, asserting, inter alia, claims
for fraud, unfair competition, breach of contract, breach of the implied covenant of good
faith and fair dealing, and false advertising. Trial Ex. 337 at 551.
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:14-cv-08725-CAS(AGRx) Date November 1, 2019
Title JEFFREY I GOLDEN v. O7MELVENY & MYERS LLP
4. O’Melveny Obtains Dismissal of the Boskovich Litigation and the
New York Proctor Litigation
O’Melveny continued to defend the Boskovich and New York Proctor cases on
behalf of Aletheia, Peikin, and Eichler. Aletheia participated in mediation in the Boskovich
Litigation, the parties reached a confidential settlement on August 6, 2010, and the court
dismissed that action on September 8, 2010. Trial Ex. 337 at 558. Olson played a large
role in resolving the case, and Aletheia’s insurers largely funded the settlement. Final
Award at 53 n.18. Additionally, the court dismissed the New York Proctor Litigation in
favor of Aletheia, Eichler, and Peikin on the basis of forum non conveniens. Tnial Ex. 337
at 558.
5. Peikin Departs Aletheia, and O’Melveny Defeats Peikin’s
Disqualification Bids
As early as February 2010, Friese, Peikin’s personal counsel, contemplated the
possibility that Peikin might step down from one or more of his roles at Aletheia. Trial Ex.
337 at 566. That month, Peikin was replaced as Aletheia’s CCO. Id. at 550. On June 18,
2010, Peikin was removed as Aletheia’s CFO. Id. at 556. Shortly before O’Melveny
obtained dismissals of the Boskovich and New York Proctor cases, Friese substituted in as
Peikin’s counsel in these cases. Id. Peikin was later terminated from his position as
Aletheia’s General Counsel on July 6, 2011. Id. at 557.
Peikin thereafter attempted to disqualify O’Melveny from jointly representing
Aletheia and Eichler in the Proctor cases, the Boskovich Litigation, and “in all corporate,
transactional, and regulatory matters, including those in which Peikin or his interests are in
any way involved.” Trial Ex. 337 at 557. Accordingly, Peikin commenced a lawsuit
seeking an injunction “restraining [O’Melveny] from representing Eichler and Aletheia”
based on allegations that O’Melveny breached its fiduciary duties of loyalty and
confidentiality to Peikin. Id. For months, Peikin made no efforts to prosecute this suit. Id.
at 558.
Proctor filed a cross-complaint in the California Proctor Litigation on January 18,
2011, naming Peikin as a cross-defendant. Id. Peikin dismissed his own injunctive relief
suit on January 31, 2011. Id. However, at a February 28, 2011 status conference in the
California Proctor Litigation, Peikin indicated that he intended to renew his efforts to
disqualify O’Melveny. Id. at 558-60. After Peikin moved to disqualify O’Melveny in the
California Proctor Litigation, the court in that case denied Peikin’s motion on July 18,
2011. Dkt. 85-2, Trial Exhibit 173 (“Trial Ex. 173”) at 420. In doing so, the court found
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:14-cv-08725-CAS(AGRx) Date November 1, 2019
Title JEFFREY I GOLDEN v. O7MELVENY & MYERS LLP
that “there is not a ‘substantial relationship’ between O’Melveny & Myers’ current
representation of Aletheia and Eichler and its prior representation of Peikin to warrant
disqualification.” Trial Ex. 173 at 444.
6. Subsequent Developments in the California Proctor Litigation
O’Melveny continued to represent Aletheia, Eichler, and others in the California
Proctor Litigation. Proctor demurred to the first amended complaint that O’Melveny filed
in that case, and on September 22, 2010, the court overruled, in part, and sustained, in part,
Proctor’s demurrer. Final Award at 52, 180. In particular, the court sustained Proctor’s
demurrer to two of Aletheia’s securities and unfair competition causes of action but
overruled the demurrer in all other respects. Id. at 52. Aletheia filed a second amended
complaint on January 18, 2011, and on June 2, 2011, the Court overruled the demurrers to
Aletheia’s second amended complaint filed by Proctor’s corporate affiliates. Id. at 53, 183,
194.
In 2011, Proctor amended its complaint in the California Proctor Litigation to add
claims against Barnes, a founding director of Aletheia, and Bruce Lee, who had became
Aletheia’s Independent Director. Final Award at 69. The gravamen of these claims was
that these director’s “failure to assure that Aletheia performed its contractual [obligations]
to Proctor (and no one else) constituted a breach of their fiduciary duties as directors.” Id.
at 71 (emphasis in original). Barnes and Lee, represented by O’Melveny, demurred to
Proctor’s fiduciary breach claims on the grounds that Proctor had brought claims for direct
relief that could only be asserted derivatively. Id. at 69-70. On August 30, 2011, the court
overruled the demurrer to the extent that Proctor was suing to enforce its own rights and
not suing for the benefit of Aletheia as a corporation. Id. at 72, 147.
7. O’Melveny’s Corporate Governance and Compliance Work
As noted, O’Melveny’s representation of Aletheia and Eichler extended beyond the
Boskovich and Proctor cases. As O’Melveny worked to resolve the SEC’s investigation,
it recommended that Aletheia and Eichler retain the services of FTI Consulting, a third-
party consulting firm, “to conduct an independent review and evaluation of Aletheia’s
corporate governance and compliance procedures.” Final Award at 109. In 2010, FTI
began an investigation into Aletheia’s operations, ultimately preparing comprehensive
findings and recommendations by late July 2010. Id. at 110. As of May 11, 2011, Aletheia
had implemented many of these recommendations, including creation of a compliance
committee and corporate restructuring such that employees reported to their respective
senior officers rather than directly to Eichler. Id. In agreeing to close its investigation into
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:14-cv-08725-CAS(AGRx) Date November 1, 2019
Title JEFFREY I GOLDEN v. O7MELVENY & MYERS LLP
Aletheia, Eichler, and Peikin, the SEC specifically noted that “Aletheia hired an
independent consultant . . . to evaluate its compliance practices and procedures, and
Aletheia is implementing its recommendations.” Final Award at 111 (internal citation
omitted).
8. Olson and deNeve Join Aletheia as Officers
In 2011, Olson and deNeve left O'Melveny to assume management positions at
Aletheia. Final Award at 9-10, 121. In April 2011, Olson became Aletheia’s President
and Chief Legal Officer, while deNeve became Aletheia’s Senior Vice President and
General Counsel. Compl. § 44. Olson resigned from Aletheia in January 2012, later
rejoining O’Melveny in August 2013. 749. In September 2012, deNeve resigned from
Aletheia and immediately rejoined O’Melveny. Id. § 53.
G. Aletheia Replaces O’Melveny in January 2012
Throughout the course of the California Proctor Litigation, O'Melveny pursued
possible settlement options on Aletheia’s behalf. Final Award at 53-54. Discussions
continued through 2011, at which point Proctor and Aletheia reached an impasse. Id. at
55. Proctor proposed the creation of a limited liability company that would permanently
receive revenue from Aletheia, further insisting that any settlement of the Proctor Litigation
between Proctor and Aletheia also include resolution of Peikin’s claims. Id. Once the
parties failed to settle the case, O’Melveny conferred with Aletheia and Eichler regarding
the costs of O’Melveny continuing as litigation counsel, and O’Melveny recommended
that Aletheia substitute less expensive counsel for O’Melveny. Id. Freedman thereafter
replaced O’Melveny in January 2012. Id.; Dkt. 85-2 at 529.
H. = Aletheia’s Subsequent Financial Troubles, Bankruptcy Petition, and
Resolution of the Proctor Litigation
After replacing O’Melveny as counsel, and while the California Proctor Litigation
was ongoing, Aletheia filed for bankruptcy on November 11, 2012, in the United States
Bankruptcy Court for the Central District of California. Final Award at 11. In December
2012, Golden was appointed Aletheia’s bankruptcy trustee. Id. He thereafter negotiated a
settlement with Proctor on behalf of Aletheia, granting Proctor “an allowed, non-
subordinated, non-priority, general unsecured claim against the Aletheia estate in an
amount equal to the greater of $21,775,000 or 60% of the total pool of non-subordinated,
non-priority, general unsecured claims finally allowed|.|” Id. (emphasis in Final Award)
(internal citation omitted). The Bankruptcy Court thereafter approved the settlement on
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:14-cv-08725-CAS(AGRx) Date November 1, 2019
Title JEFFREY I GOLDEN v. O7MELVENY & MYERS LLP
May 5, 2014. See Inre Aletheia Research & Mgmt., Inc., No. 2:12-bk-47718-BR (Bankr.
C.D. Cal. May 5, 2014, Dkt. 598). Golden, acting on behalf of Aletheia, thereafter
commenced this action on November 10, 2014. See Compl.
I. Arbitration Proceedings
On June 15, 2015, the Court compelled arbitration of Golden’s professional
negligence and breach of fiduciary duty claims against O’Melveny, Olson, and deNeve.
Dkt. 30. Golden subsequently filed an arbitration demand, attaching and designating the
complaint in this case as his Statement of Claims. Rosen Decl. 2. Golden subsequently
filed a revised Statement of Claims on September 25, 2015. Id. 3. The parties thereafter
engaged in substantial discovery efforts and motion practice before the Arbitrator.
On June 22, 2016, Golden moved to disqualify Gibson Dunn as O’Melveny’s counsel
based on allegations that Gibson Dunn had previously represented Aletheia in connection
with the California Proctor Litigation. Dkt 81, Declaration of Jerrold L. Bregman
(“Bregman Decl.”) § 12. The Arbitrator denied Golden’s motion to disqualify Gibson
Dunn on November 22, 2016, determining that Gibson Dunn had previously represented
O’Melveny, not Aletheia, as O’Melveny sought “advice and assistance” in responding to
Peikin’s various efforts to disqualify O’Melveny during the California Proctor Litigation.
Dkt. 81-1, Exhibit 10 (“Ex. 10”) at 423, 445.
On February 23, 2017, Golden moved for summary disposition of his claims against
O’Melveny, contending that the claims present questions of law based on uncontested
material facts. Bregman Decl. § 10. O’Melveny filed an opposition on March 10, 2017,
seeking to stay proceedings on the motion to allow it to conduct discovery. Id. § 11.
Golden filed a reply on March 24, 2017. Id. On April 11, 2017, the Arbitrator granted
O’Melveny’s request to take discovery. Dkt. 81-1, Exhibit 7 (“Ex. 7”) at 357.
On July 24, 2017, the Arbitrator disclosed to the parties that his son, then a student
in law school, was seeking employment as a summer associate with a number of law firms
including O’Melveny and Gibson Dunn. Dkt. 81-1, Exhibit 11 (“Ex. 11”) at 447. In
making this disclosure, the Arbitrator noted that “[1i]f either of counsel has any question or
comment regarding these matters,” they should “feel free to email me or to bring them up
during the conference call on August 2.” Id. Golden responded by letter on July 25, 2017,
requesting that the Arbitrator recuse himself. Bregman Decl. § 13. O’Melveny opposed
Golden’s request in its own letter dated July 28, 2017, contending that “your son’s
hypothetical employment at either Gibson Dunn or O’Melveny & Myers 1s not a valid basis
for your disqualification.” Dkt. 81-1, Exhibit 13 (“Ex. 13”) at 452. O’Melveny’s
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:14-cv-08725-CAS(AGRx) Date November 1, 2019
Title JEFFREY I. GOLDEN v. O7-MELVENY & MYERS LLP
opposition noted that, “given [Golden]’s position—notwithstanding O’Melveny’s
strenuous objection to it—O’Melveny has resolved that it will not offer employment to
your son. Gibson Dunn will not do so either.” Ex. 13 at 454. On August 1, 2017, Golden
responded that the “unilateral action [of O’ Melveny and Gibson Dunn] in terminating Your
Honor’s son’s employment prospects at their law firms, even before interviewing him],]
... was a tactical maneuver to negatively inflame Your Honor’s passions against [Golden]
. creat[ing] a greater apparent conflict and basis for partiality than previously existed.”
Dkt 81-1, Exhibit 14 (“Ex. 14”) at 456. On August 28, 2017, the Arbitrator denied
Golden’s recusal motion, finding that the firms’ decisions not to consider the Arbitrator’s
son for employment had mooted any basis for recusal, and noting that the Arbitrator did
not “hold a grudge against either party—|Golden] for raising the issue and [O’Melveny]
for not holding to its insistence that [Golden]’s position was unfounded|.|” Dkt. 81-1,
Exhibit 16 (“Ex. 16”) at 470—71.
On August 17, 2018, Golden brought a second motion for summary disposition.
Bregman Decl. §/ 16. The Arbitrator denied this motion on October 18, 2018, finding that
“the litigation record shows, at the very least, that the conflict question cannot be resolved
in favor of [Golden] based on the face of” Proctor’s complaint in the New York Proctor
Litigation and Proctor’s cross-complaint in the California Proctor Litigation. Dkt. 81-1,
Exhibit 25 (“Ex. 25”) at 648.
O’Melveny proffered John Spiegel as its expert witness on the legal standard of care
owed to clients. Rosen Decl. { 14. Golden thereafter moved to disqualify the Arbitrator
based on an alleged pre-existing relationship between Spiegel and the Arbitrator. Id. The
Arbitrator denied the disqualification motion on September 17, 2018, finding that although
he and Spiegel both participated in the Christopher Commission’s investigation into the
Los Angeles Police Department, “there was nothing at all about Mr. Spiegel’s role in that
project that could have any bearing on any issue in this case, including the evaluation of
any testimony that he may have to offer.” Dkt. 84-10 at 3.
The Arbitration Hearing began on November 5, 2018 and concluded on November
29, 2018, spanning twelve days of proceedings. Final Award at 5. The parties presented
closing arguments to the Arbitrator on March 20, 2019. Id. After closing argument but
before issuing the Final Award, the Arbitrator notified Golden and O’Melveny that the
parties in another case in which Gibson Dunn was counsel had requested the appointment
of the Arbitrator. Dkt. 81-1, Exhibit 26 (“Ex. 26”) at 650. The Arbitrator subsequently
issued his corrected Final Award on August 22, 2019, giving rise to the present motions.
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:14-cv-08725-CAS(AGRx) Date November 1, 2019
Title JEFFREY I GOLDEN v. O7MELVENY & MYERS LLP
Il. LEGAL STANDARD
The Federal Arbitration Act (“FAA”) embodies a strong federal policy favoring
arbitration. Samson v. NAMA Holdings, LLC, 637 F.3d 915, 923 (9th Cir. 2011). Asa
result, “judicial review of an arbitrator’s decision is both limited and highly deferential.”
Barnes v. Logan, 122 F.3d 820, 821 (9th Cir. 1997) (internal citation and quotation marks
omitted). Indeed, a district court may set aside an arbitrator’s decision “only in very
unusual circumstances.” First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 942
(1995).
Section 9 of the Federal Arbitration Act requires a district court to confirm an
arbitration award unless “the award is vacated, modified, or corrected|.|” 9 U.S.C. § 9.
Section 10 of the FAA “provides the exclusive means by which a court reviewing an
arbitration award under the FAA may grant vacatur of a final arbitration award|.|” Biller
v. Toyota Motor Corp., 668 F.3d 655, 664 (9th Cir. 2012). Pursuant to Section 10, a district
court may vacate an arbitration award:
(1) where the award was procured by corruption, fraud, or undue means;
(2) where there was evident partiality or corruption in the arbitrators, or either of
them;
(3) where the arbitrators were guilty of misconduct in refusing to postpone the
hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and
material to the controversy; or of any other misbehavior by which the rights of any
party have been prejudiced; or
(4) where the arbitrators exceeded their powers, or so imperfectly executed them that
a mutual, final, and definite award upon the subject matter submitted was not made.
9 U.S.C. § 10(a). “If the Court finds no basis to vacate, modify, or correct the arbitration
award, the Court must confirm the award.” Voltage Pictures, LLC v. Gulf Film, LLC, No.
18-cv-00696-VAP-SK, 2018 WL 2110937, at *5 (C.D. Cal. Apr. 17, 2018) (internal
citation omitted). “Confirmation is required even in the face of erroneous findings of fact
or misinterpretations of law.” Daniels v. Painter, No. 16-cv-3782-RSWL-E, 2018 WL
3486999, at *3 (C.D. Cal. July 16, 2018) (internal punctuation omitted) (citing French v.
Merrill Lynch, Pierce, Fenner & Smith, Inc., 784 F.2d 902, 906 (9th Cir. 1986)).
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:14-cv-08725-CAS(AGRx) Date November 1, 2019
Title JEFFREY I GOLDEN v. O7MELVENY & MYERS LLP
IV. DISCUSSION
A. Enforcing the Final Award Does Not Violate Public Policy
Golden seeks vacatur of the Final Award on the grounds that enforcing it “would
result in the violation of an explicit, clearly applicable and well defined public policy|.”
Golden Mot. at 9. In particular, Golden asserts that enforcing the award would violate
California’s public policy against “an attorney contract that has as its object conduct
constituting a violation of the Rules of Professional Conduct|.|” Id. at 11.
1. The Public Policy Exception in Commercial Cases
As a preliminary matter, O’Melveny contends that “[t|here is no public policy
exception under the FAA.”4 O’Melveny Opp. at 11. n.3. Because the Court ultimately
concludes that, to the extent that any public policy exception exists, the exception does not
require vacatur of the Final Award, the Court need not reach this question to resolve the
parties’ motions.
In Stead Motors of Walnut Creek v. Auto. Machinists Lodge No. 1173, Int'l Ass’n
of Machinists & Aerospace Workers, the Ninth Circuit recognized that “a court need not,
[and] in fact cannot, enforce an [arbitration] award which violates public policy.” 886 F.2d
1200, 1209 (9th Cir. 1989) (en banc). In that case, the Ninth Circuit considered whether
an arbitration award, subject to judicial review pursuant to Section 301 of the Labor
4 O’Melveny also argues that, to the extent a public policy exception exists, Golden
“never raised the issue of illegality with the Arbitrator and therefore waived it.”
O’Melveny Opp. at 11 (emphasis in original). The cases that O’Melveny relies on are
inapposite, however, because they consider whether, in the first instance, a court or the
arbitrator must decide whether a contract containing an arbitration provision is illegal, and
thus whether the dispute is subject to arbitration. See, e.g., Buckeye Check Cashing, Inc.
v. Cardegna, 546 U.S. 440, 449 (2006) (“regardless of whether the challenge is brought in
federal or state court, a challenge to the validity of the contract as a whole, and not
specifically to the arbitration clause, must go to the arbitrator.”). Here, Golden’s challenge
is not that the dispute was erroneously sent to arbitration because the Engagement Letters
containing the arbitration provisions are illegal as void against public policy. Instead,
Golden’s challenge is that enforcing the Arbitrator’s Final Award would contravene public
policy because doing so would allow O’Melveny to retain funds earned during a conflicted
representation. Golden Mot. at 16. Accordingly, the Court concludes that Golden has not
waived his public policy argument.
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:14-cv-08725-CAS(AGRx) Date November 1, 2019
Title JEFFREY I GOLDEN v. O7MELVENY & MYERS LLP
Management Relations Act (“LMRA”), 29 U.S.C. § 185, should be vacated on the basis
that the award requiring an employee’s reinstatement violated public policy. Id. at 1212.
Courts have since primarily applied this “public policy exception” in those cases where a
party seeks vacatur, pursuant to the LMR4, of an award entered following arbitration of a
labor dispute. See, e.g., Aramark Facility Servs. v. Serv. Employees Int’] Union, Local
1877, AFL CIO, 530 F.3d 817, 823 (9th Cir. 2008) (award entered following arbitration
pursuant to union’s collective bargaining agreement); Matthews v. Nat’] Football League
Council, 688 F.3d 1107, 1111 (9th Cir. 2012) (award entered following arbitration
pursuant to National Football League’s collective bargaining agreement); Sprewell v.
Golden State Warriors, 266 F.3d 979, 987 (9th Cir. 2001) (award entered following
arbitration pursuant to National Basketball Association’s collective bargaining agreement).
The Court observes that Golden seeks vacatur of the Final Award pursuant to a
different statutory scheme, the FAA. Although most of the cases considering the public
policy exception arise in the context of arbitration decisions made reviewable by the
LMRA, the Ninth Circuit has considered the exception in the context of arbitration
decisions subject to judicial review under the FAA. See, e.g., U.S. Life Ins. Co. v. Ins.
Comm of California, 160 F. App’x 559, 563 (9th Cir. 2005): Lagstein_v. Certain
Underwriters at Lloyd’s, London, 607 F.3d 634, 641 n.4 (9th Cir. 2010). The Ninth Circuit
has done so where a party sought vacatur of an award issued following the arbitration of
legal malpractice claims. See DeMartini v. Johns, 693 F. App’x 534, 537 (9th Cir. 2017)
(affirming denial of attorneys’ motion to vacate arbitration award on public policy grounds
where arbitrator entered award in favor of former client, attorneys alleged that former client
had perjured himself, and attorneys contended that enforcing the award would therefore
violate public policy against perjury).
In Hall Street Associates. L.L.C. v. Mattel, Inc., however, the United States Supreme
Court held that “§§ 10 and 11 respectively provide the FAA’s exclusive grounds for
expedited vacatur and modification.” 552 U.S. 576, 584 (2008) (emphasis added). And,
in the context of construing another judicially-created exception to the FAA, the “wholly
groundless” exception, the Supreme Court recently noted, with respect to Section 10
specifically, that “Congress designed the [Federal Arbitration] Act in a specific way, and
it is not our proper role to redesign the statute.” Henry Schein, Inc. v. Archer & White
Sales, Inc., 139 S. Ct. 524, 530 (2019).
But, given the absence of controlling authority “suggesting that the judicially-
created public policy defense is unavailable” in the Ninth Circuit in cases where an
arbitration decision is subject to judicial review pursuant to the FAA, the Court proceeds
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:14-cv-08725-CAS(AGRx) Date November 1, 2019
Title JEFFREY I GOLDEN v. O7MELVENY & MYERS LLP
to evaluate Golden’s challenge, on public policy grounds, of the Final Award. See
Immersion Corp. v. Sony Computer Entm’t Am. LLC, 188 F. Supp. 3d 960, 969 (N_D. Cal.
2016) (noting majority of caselaw applying public policy exception in LMRA context but
considering public policy challenge in FAA context because “[t]he court is not aware of
any [contrary] authority in this circuit[.|’”). To prevail on his public policy challenge of the
Final Award, Golden must demonstrate that: “(1) an explicit, well defined, and dominant
policy exists and (2) that the policy is one that specifically militates against the relief
ordered by the arbitrator.” Fund Raising, Inc. v. Alaskans for Clean Water, Inc., No. 2:09-
cv-04106-AHM-VBK, 2012 WL 2456255, at *2 (C_D. Cal. June 26, 2012). Construing
these factors, the Court determines that enforcing the Final Award would not violate public
policy.
2. California’s Public Policy Against Conflicted Representations
To vacate the Final Award on public policy grounds, Golden must first point to the
existence of “a public policy that is ‘explicit, ‘well-defined,’ and ‘dominant’ as
‘ascertained by reference to the laws and legal precedents and not from general
considerations of proposed public interest.’” S. California Gas Co. v. Util. Workers Union
of Am., Local 132, AFL-CIO, 265 F.3d 787, 794-95 (9th Cir. 2001) (internal citation
omitted). Here, Golden identifies the relevant public policy as “the lawyers’ duty of
undivided loyalty, enshrined in Rule 3-310(C), which bars undisclosed/unwaived conflicts
of interest.” Golden Mot. at 4.
During the course of O’Melveny’s representation, California Rule of Professional
Conduct 3-310(C) was in effect. The Rule provided that an attorney shall not, without the
informed written consent of each client:
(1) Accept representation of more than one client in a matter in which the interests
of the clients potentially conflict; or
5 On November 1, 2018, California adopted new rules of professional conduct, which
include both renumbering and substantive changes, and Rule 1.7 now encompasses the
obligations previously set forth in Rule 3-310(C) regarding conflicts of interest between
current clients. See Cal. R. Prof. Cond. 1.7. The parties agree that the previous standards,
as set forth in Rule 3-310, govern this dispute. Golden Mot. at 4; O’Melveny Opp. at 13
n.5.
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:14-cv-08725-CAS(AGRx) Date November 1, 2019
Title JEFFREY I GOLDEN v. O7MELVENY & MYERS LLP
(2) Accept or continue representation of more than one client in a matter in which
the interests of the clients actually conflict; or
(3) Represent a client in a matter and at the same time in a separate matter accept as
a client a person or entity whose interest in the first matter is adverse to the client in
the first matter.
United States for Use & Benefit of Bergelectric Corp. v. Sauer, Inc., No. 5:18-cv-00612-
EJD, 2018 WL 6619981, at *2 (N.D. Cal. Dec. 18, 2018). Moreover, the Rules of
Professional Conduct constitute “the set of binding rules governing the ethical practice of
law in the State of California.” Sheppard, Mullin, Richter & Hampton, LLP v. J-M Mfg.
Co., 6 Cal. 5th 59, 73 (2018). The California Supreme Court has recognized that, although
“questions of public policy are primarily for the legislative department to determine, . . . a
contract or transaction may be found contrary to public policy even if the Legislature has
not yet spoken to the issue.” Id. (internal citation and quotation marks omitted). As such,
the Rules of Professional Conduct “are not only ethical standards to guide the conduct of
members of the bar; but they also serve as an expression of public policy to protect the
public.” Id. at 74 (internal citation omitted). Accordingly, “[i]t follows that an attorney
contract that has as its object conduct constituting a violation of the Rules of Professional
Conduct is contrary to the public policy of this state and is therefore unenforceable.” Id.
In light of the California Supreme Court’s recognition that the Rules of Professional
Conduct represent an “expression of public policy” and that an attorney retainer agreement
which violates these Rules violates this public policy, the Court finds that Golden has
sufficiently identified a relevant public policy as the basis for his public policy challenge
to the Final Award. See Aramark, 530 F.3d at 824 (finding party seeking vacatur had
sufficiently identified existence of public policy based on statute, “its implementing
regulations, and Supreme Court case law interpreting it.”’).
3. Public Policy Does Not Strongly Militate Against Enforcement
With respect to the second prong, Golden contends that “California’s public policy
prohibiting undisclosed and unwaivable/unwaived conflicts of interest militates against
the relief adjudged by the Final Award, which allows O’Melveny to retain all of its fees
from or on behalf of Aletheia for the Proctor Litigation|.|” Golden Mot. at 16. In response,
O’Melveny contends that Golden may not “us[e] the public policy exception to bootstrap
a merits review” and that “[t]he evidence conclusively established there was no actual or
potential conflict in O’Melveny’s joint representation of Aletheia and Eichler in the Proctor
Litigation[.]” O’Melveny Opp. at 12-13.
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:14-cv-08725-CAS(AGRx) Date November 1, 2019
Title JEFFREY I GOLDEN v. O7MELVENY & MYERS LLP
To satisfy the public policy exception’s second prong, the Court “must find that the
relief ordered by the arbitrator is contrary to a well-defined and dominant public policy.”
Fund Raising, 2012 WL 2456255, at *3 (emphasis in original). For example, in Aramark,
the Ninth Circuit considered whether an arbitrator’s order requiring that an employer
reinstate employees it terminated for suspicion of violating immigration law contravened
public policy against hiring undocumented workers. 530 F.3d at 831-832. Similarly, in
United Food & Commercial Workers Int’] Union, Local 588 v. Foster Poultry Farms, the
Ninth Circuit considered whether an arbitrator’s order requiring that an employer reinstate
drivers it discharged for failing drug tests violated public policy where United States
Department of Transportation regulations merely “articulate[d] a “well defined and
dominant’ public policy prohibiting employees who test positive for drug use from driving
commercial motor vehicles.” 74 F.3d 169, 174-75 (9th Cir. 1995) (emphasis in original).
In evaluating a request for vacatur on public policy grounds, “[t]he court must focus on the
award itself, not the behavior or conduct of the party in question.” S. California Gas Co.,
265 F.3d at 795.
Here, Golden contends that “the Final Award ignores and violates the public policy
embedded in Rule 3-310(C) as it has been universally interpreted and enforced in
California[.]” Golden Mot. at 5. Golden asserts that vacatur is appropriate because “‘the
relief adjudged by the Final Award . . . rejects claims for O’Melveny’s per se breach of the
duty of loyalty arising from its conflicted representation based on the fallacious finding of
no conflict.” Id. at 16. To the extent that Golden’s challenge is premised on the
Arbitrator’s purported misapplication of California’s public policy regarding attorney
conflicts of interest, Golden’s challenge is based on his disagreement with the Arbitrator’s
findings and conclusions regarding the absence of a violation of the rule governing
conflicts of interest, and thus sounds in the “manifest disregard” exception to the FAA, not
the public policy exception. See Fund Raising, 2012 WL 2456255, at *4 (finding that
public policy exception did not apply because, “where, as here, the challenge to an
arbitration award is to the legal reasoning employed by the arbitrator—as opposed to the
relief ordered by the arbitrator—the manifest disregard standard applies.”): □□□ □□□□
Aramark, 530 F.3d at 823 (“In reviewing an arbitral award for possible violations of public
policy a court is not authorized to revisit or question the fact-finding or the reasoning which
produced the award.”) (emphasis added and internal punctuation omitted) (citing Int’] Bhd.
of Elec. Workers, Local 97 v. Niagra Mohawk Power Corp., 143 F.3d 704, 716 (2d
Cir.1998)).
Golden’s contention that the Final Award contravenes public policy against
conflicted representations because it “allows O’Melveny to retain all of its fees from or on
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:14-cv-08725-CAS(AGRx) Date November 1, 2019
Title JEFFREY I GOLDEN v. O7MELVENY & MYERS LLP
behalf of Aletheia for the Proctor Litigation” likewise assumes that the Arbitrator’s award
misapplied California law. Golden Mot. at 16. Golden’s argument appears to be that
because the Final Award concluded O’ Melveny was not conflicted, O’Melveny is therefore
free to retain any payments it received from Aletheia during the course of its representation,
which vitiates California’s policy against conflicted representations because O’Melveny’s
representation was conflicted. However, even assuming that O’Melveny was conflicted in
its representation of Aletheia, California’s public policy against conflicted representations
does not “specifically militate” against the Final Award.° In Sheppard Mullin, a case on
which Golden principally relies, the California Supreme Court noted “that California law
does not establish a bright-line rule barring all compensation for services performed subject
to an improperly waived conflict of interest, no matter the circumstances surrounding the
violation.” 6 Cal. 5th at 89. Thus, because California law does not categorically bar
compensation for legal services performed during a conflicted representation, the Court
cannot say that enforcing the Final Award and allowing O’Melveny to retain fees earned
during an allegedly conflicted representation violates public policy. See Foster Poultry
Farms, 74 F.3d at 174 (“Because the DOT regulations do not make it illegal to reinstate
employees who test positive for drug use, it cannot be said that the DOT regulations
specifically militate against the relief ordered by the arbitrator in this case.”) (emphasis in
original) (internal citation and punctuation omitted). But, more importantly, Golden’s
public policy arguments are premised on challenges to the Arbitrator’s decision finding
that there was no conflict and his conclusion that there was no violation of the Rules of
Professional Conduct. These challenges, made in the guise of arguments regarding public
policy, are, as explained below, impermissible challenges to the Arbitrator’s findings of
fact and conclusions of law as erroneous.
B. ‘The Final Award Does Not Manifestly Disregard California Law
Golden also asserts that “the Final Award should be vacated for its manifest
disregard of the law.” Golden Mot. at 5. “The manifest disregard exception requires
something beyond and different from a mere error in the law or failure on the part of the
6 The Final Award concludes that “[b]ecause [Golden] failed to prove any of his
claims against Respondents or to prove that any of his claims caused injury and damage,
the Arbitrator need not and does not reach |the| issue of collectability and disgorgement.”
Final Award at 129 (emphases added).
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:14-cv-08725-CAS(AGRx) Date November 1, 2019
Title JEFFREY I GOLDEN v. O7MELVENY & MYERS LLP
arbitrators to understand and apply the law.”” Collins v. D.R. Horton, Inc., 505 F.3d 874,
879 (9th Cir. 2007) (internal citation omitted). Indeed, the exception imposes “a very
stringent standard.” Bear, Stearns & Co. v. Buehler, 432 F. Supp. 2d 1024, 1026 □□□□□
Cal. 2000) (internal citation and quotation marks omitted). “To vacate an arbitration award
on this ground, it must be clear from the record that the arbitrator[] recognized the
applicable law and then ignored it.” Lagstein, 607 F.3d at 641 (internal citation and
punctuation omitted). Golden identifies three bases which he asserts establish that the
Arbitrator manifestly disregarded California law. The Court addresses each in turn.
1. The Final Award’s Application of California Law on Conflicts of
Interest
Golden first asserts that the Arbitrator “recognized the applicable law that a conflict
of interest requires disclosure and, if subject to waiver, informed written consent, but
ignored that law.” Golden Mot. at 17. The crux of Golden’s claim is that O’Melveny
breached its fiduciary duty to Aletheia by engaging in the joint representation of Aletheia,
Eichler, Peikin, and other Aletheia directors in the Proctor Litigation, despite Proctor’s
allegations that: (1) Eichler and Peikin injured Aletheia by taking excessive compensation;
and (2) and these other directors likewise harmed Aletheia by failing to take action to
redress that excessive compensation. Id. at 1-3. Therefore, according to Golden,
O’Melveny’s joint representation “created an actual conflict of interest between the co-
defendants because it meant that O’Melveny was representing both the looters (Eichler and
Peikin) and the looted (Aletheia).”* Final Award at 63. Golden further contends that, in
7 In Hall, the United States Supreme Court held that “§§ 10 and 11 respectively
provide the FAA’s exclusive grounds for expedited vacatur and modification.” 552 □□□
at 584. The Ninth Circuit has held, however, that the Supreme Court’s decision in Hall
does not displace the “manifest disregard” exception because the exception “is shorthand
for a statutory ground under the FAA, specifically 9 U.S.C. § 10(a)(4), which states that
the court may vacate ‘where the arbitrators exceeded their powers.’” Comedy Club, Inc.
v. Improv W. Assocs., 553 F.3d 1277, 1290 (9th Cir. 2009).
8 During oral argument, Golden urged that O’Melveny’s concurrent representation of
Eichler and Peikin presents a conflict of interest more egregious than that in State Comp.
Ins. Fund v. Drobot, 192 F. Supp. 3d 1080 (C.D. Cal. 2016). In that case, a law firm
represented an insurer in its civil action against medical providers who allegedly defrauded
the insurer. Drobot, 192 F. Supp. 3d at 1090. At the same time, the law firm also
represented one of the accused providers in the provider’s criminal proceeding.
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:14-cv-08725-CAS(AGRx) Date November 1, 2019
Title JEFFREY I GOLDEN v. O7MELVENY & MYERS LLP
determining that there was no conflict, the Arbitrator manifestly disregarded the applicable
law because, “[i|nstead of focusing on the substance of the allegations (harm to the
corporation at the hands of [Eichler, Peikin, and the directors]),” the Arbitrator “improperly
focused on the form of the action (direct), thus limiting conflicts solely to derivative claims
denominated as such and rendering the allegations irrelevant in contravention of settled
law.” Golden Mot. at 18.
To determine whether the Arbitrator manifestly disregarded the law, the Court first
must look to the law that the Arbitrator applied. For the purposes of identifying whether a
conflict of interest exists between a corporation and its officers or directors, the Arbitrator
first distinguished between derivative and non-derivative suits. Final Award at 64-80. The
Arbitrator noted that in a derivative suit, “recovery is sought for the corporation from the
alleged faithless officer co-defendants, which puts their interests in conflict even though
both are named as defendants in the case.” Id. at 65 (emphasis in original). Thus, “where
a shareholder plaintiff sues derivatively, joint representation of the corporation and
officer/directors accused of malfeasance is barred because the corporation is necessarily
seeking a recovery from those officers/directors.” Id. Golden does not appear to contend
that the Arbitrator manifestly disregarded the law by initially focusing on the distinction
between derivative and direct suits as the starting point for determining whether
O’Melveny engaged in an actual conflict.? See Forrest v. Baeza, 58 Cal. App. 4th 65, 74
Drobot, 192 F. Supp. at 1086. The defendants in the civil action subsequently filed a third-
party complaint seeking indemnity from other parties, including the accused provider. Id.
at 1085. The court held that “the duty of loyalty is improperly and impermissibly
compromised when one law firm represents—at the same time, in the same litigation, in
the same courthouse—a criminal and his victim.” Id. at 1084. That case, which involves
the simultaneous representation, by one law firm, of the accused provider in a criminal case
and the victim plaintiff in a related civil case, where the accused provider is also a third-
party defendant, does not control. In a civil shareholder action like this one, the proper
inquiry, for conflict of interest purposes, is whether the shareholder’s claims are direct,
derivative, or derivative in nature. And, as the Court ultimately concludes, the Arbitrator
did not “manifestly disregard” the law in conducting this inquiry.
9 See also La Jolla Cove Motel & Hotel Apartments, Inc. v. Superior Court, 121 Cal.
App. 4th 773, 785-86 (2004) (“where a shareholder has filed an action questioning its
management or the actions of individual officers or directors, such as in a shareholder
derivative or the instant dissolution action, corporate counsel cannot represent both the
corporation and the officers, directors or shareholders with which the corporation has a
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:14-cv-08725-CAS(AGRx) Date November 1, 2019
Title JEFFREY I GOLDEN v. O7MELVENY & MYERS LLP
(1997) (“Current case law clearly forbids dual representation of a corporation and directors
in a shareholder derivative suit, at least where, as here, the directors are alleged to have
committed fraud.”’).
Instead, Golden contends that the Arbitrator disregarded caselaw “that the
proscriptions [against joint representation] applicable in derivative actions apply with equal
force in shareholder direct actions that contain a//egations that are derivative in nature . . .
even when the relief sought is not on behalf of the corporation.” Golden Mot. at □□□□□
(emphases added). Put differently, Golden asserts that the Final Award runs afoul of
California law because “[e]ven if no derivative lawsuit was filed, joint representation may
be prohibited where the shareholder’s claim is derivative in nature—e.g., harm to the
corporation is alleged.” Id. at 12 (citing Paul W. Vapnek, et al., Rutter Group Cal. Prac.
Guide. Prof. Resp. § 4:93.1 (Sept. 2017 Update)). As such, Golden argues that the
Arbitrator erred by declining to find that Proctor’s claims were derivative in nature since
“the Proctor Looting Allegations alleged harm to Aletheia, as the corporation is considered
the true victim in claims of excess compensation” and because “there clearly was a ripe
dispute over the control of the corporation and whether Lee was properly appointed as a
director.” Golden Mot. at 12-13. The Final Award “disregard|s] the factual allegations
made by Proctor (the substance) and focus|ed] exclusively on the relief sought by Proctor,
concluding that the Proctor Looting Allegations did not give rise to a conflict . . . because
Proctor pursued recovery only for itself despite its allegations of harm to Aletheia.” Id. at
17.
Golden’s “derivative in nature” argument relies on the premises that “the factual
allegations of the Proctor complaints control the analysis, that those allegations show that
the Proctor [complaints] alleged harm to the corporation, and that the interests of Aletheia
and Eichler were therefore adverse.” Final Award at 66 (emphases added). In support of
this argument, Golden points to the California Court of Appeal’s opinions in Gong v. REG
Oil, Inc., 166 Cal. App. 4th 209 (2018), Havasu Lakeshore Investments, LLC v. Fleming,
217 Cal. App. 4th 770 (2013), M’Guinness v. Johnson, 243 Cal. App. 4th 602 (2015), and
Coldren v. Hart, King & Coldren, Inc., 239 Cal. App. 4th 237 (2015). See Mot. at 17. In
conflict of interest.”); accord Mark L. Tuft, et al., Rutter Group Cal. Prac. Guide. Prof.
Resp. § 4:92.3 (Dec. 2018 Update) (“An attorney may not concurrently represent the
corporation (or other business entity) and an individual officer, director or shareholder in
litigation where a conflict between their interests exists (even with consent), such as in
shareholder derivative lawsuits.) (emphasis added).
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:14-cv-08725-CAS(AGRx) Date November 1, 2019
Title JEFFREY I GOLDEN v. O7MELVENY & MYERS LLP
rejecting Golden’s contentions that the Proctor allegations were “derivative in nature”
sufficient to create an actual and inherent conflict between Aletheia and Eichler, the
Arbitrator considered (and distinguished) three of these cases:
GK GK
Gong involved a motion to disqualify counsel in phase 2 of a case where the
corporation and its majority shareholder were jointly represented in phase 1.
Because the court did not look to the pleadings at all until after the case had been
partially tried, it does not support the proposition that adversity can be assessed on
the basis of a complaint’s factual allegations.
ck ook
In Coldren, a former partner sued his former law firm and one of its partners for
damages allegedly arising out of the termination of his relationship with the firm.
.. . In words that could have been written for this case, the appellate court wrote:
... ‘[attorney] sued both [law firm] and [partner|—directly, not derivatively—on
essentially the same claims. He is seeking over $8 million in damages against both.
[Partner|’s interest 1s perfectly aligned with [law firm]’s interest in seeing
[attorney]’s claims defeated.
ROGGE
Havasu Lakeshore . . . conducted a similar analysis and reached a similar result.
... It held that there was no actual conflict because unlike Gong, the dispute did not
involve a derivative claim, a dissolution claim, or their substantive equivalent.
Final Award at 67-69 (emphases in original).
In light of the foregoing, the Court cannot say that the Arbitrator’s conclusion that
cases demonstrate that the question of conflict is to be determined not simply on a
review of the factual allegations of the pleadings, but on the claims presented and the relief
sought” constitutes a manifest disregard of the law. Final Award at 69. Here, even if the
allegations in Proctor’s complaints described claims that were derivative in nature, the
relief Proctor was seeking was not. Indeed, Proctor repeatedly made clear that it sought
relief on behalf of itself, not on behalf of Aletheia. Cf. Grosset v. Wenaas, 42 Cal. 4th
1100, 1114 (2008) (“If successful, a derivative claim will accrue to the direct benefit of the
corporation and not to the stockholder who litigated it.”). For example, Proctor
acknowledged that its claims were “direct because we’ve always alleged harm to and a
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:14-cv-08725-CAS(AGRx) Date November 1, 2019
Title JEFFREY I. GOLDEN v. O7-MELVENY & MYERS LLP
recovery for Proctor, not harm to the corporation and a recovery by the corporation.” Id.
at 72 (citing Trial Exhibit 1147). During the hearing on the demurrers to Proctor’s first
amended complaint, counsel for Proctor expressly reiterated that:
Proctor is not saying in its complaint anywhere the company has suffered harm.
Recover money into the company. Proctor is not saying there was excessive fees
paid out and compensation paid out, and that money should flow back into Aletheia
because Aletheia would be a stronger, better company.
Final Award at 75 (citing Trial Exhibit 1147) (emphases added).
On these facts, and given Proctor’s own representations that any relief would flow
to Proctor, rather than Aletheia, the Arbitrator did not reach any conclusions that
demonstrate an error of law, let alone manifest disregard of the law. See Coldren, 239 Cal.
App. 4th at 246-47 (rejecting plaintiff's contention that his suit was a derivative action
because plaintiff “seeks $8 million in damages from HKC. Ifhe prevails, the damages will
not go to the benefit of HKC; quite to the contrary, HKC will have to pay the damages to
[plaintiff]. [Plaintiffs] lawsuit is not a derivative suit in any sense.”). Moreover, Golden’s
allegation that the Arbitrator misapplied these cases is insufficient so as to require vacatur
pursuant to the manifest disregard standard. See Laughlin v. VMWare, Inc., No. 5:11-cv-
00530-EJD, 2012 WL 6652487, at *5 (N.D. Cal. Dec. 20, 2012) (“Even if the arbitrator
erroneously applied or misunderstood the relevant law, that would not be enough to
constitute a ‘manifest disregard of the law’ such that the arbitrator exceeded her
decisionmaking authority.”’): cf. Brayton Purcell LLP v. Recordon & Recordon, No. C-04-
4995 EMC, 2007 WL 420122, at *2 (N.D. Cal. Feb. 6, 2007) (“If an arbitrator, for example,
stated the law, acknowledged that he was rendering a decision contrary to the law, and said
that he was doing so because he thought the law unfair, that would be an instance of
‘manifest disregard.’”) (citing Lincoln Nat’! Life Ins. Co. v. Payne, 374 F.3d 672, 674 (8th
Cir.2004)) (emphasis added).
An additional point bears mention. Golden urges that “Gong should be read for the
narrow proposition that where a plaintiff’s allegations are essentially derivative in nature,
the failure to label them as such may still prohibit dual representation of the corporation
and defendant shareholder|.|” Golden Mot. at 11 (emphases in original) (citing Coldren,
239 Cal. App. 4th at 251). Even assuming, arguendo, that Golden’s statement of the law,
that a pleading’s allegations control whether claims are “derivative in nature” sufficient to
create an actual conflict, is correct, the Court cannot say that the Arbitrator’s findings and
conclusions that Proctor’s claims were not derivative in nature constitutes a manifest
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:14-cv-08725-CAS(AGRx) Date November 1, 2019
Title JEFFREY I GOLDEN v. O7MELVENY & MYERS LLP
disregard of the law. Golden points to: (1) allegations in Proctor’s complaint in the New
York Proctor Litigation that “Aletheia Management, Eichler, and Pekein have all breached
their fiduciary duties to Proctor IM and all other non-employee minority shareholders”;
and (2) allegations in Proctor’s complaint challenging the election of Bruce Lee as
Aletheia’s Independent director that “this action will also benefit all other minority
shareholders of Aletheia[.|” Golden Reply at 15 n.5.; Trial Ex. 4 at 17; Dkt. 85-1, Trial
Exhibit 9 (“Trial Ex. 9”) at 94. For one, a suit which seeks recovery on behalf of minority
shareholders for harm to these shareholders, rather than the corporation as a whole, is a
direct suit. See Jones v. H. F. Ahmanson & Co., 1 Cal. 3d 93, 107, 460 P.2d 464, 470
(1969) (finding that securities action was direct suit because “[i]t is clear from the
stipulated facts and plaintiff's allegations that she does not seek to recover on behalf of the
corporation for injury done to the corporation by defendants. . . . Thus, the gravamen of
her cause of action is injury to herself and the other minority shareholders.”).
Moreover, as the Arbitrator recognized, the various Proctor pleadings contain
inconsistent allegations. For example, Proctor’s cross-complaint against Aletheia in the
California Proctor Litigation, filed on January 18, 2011, contained the allegation that “[t|he
injury that resulted from Eichler’s and Pekin’s breaches of fiduciary duty is to Proctor IM,
not to Aletheia as a corporate entity. As a result, the breach of fiduciary duty claims
asserted herein are direct claims of Proctor IM and not derivative claims.” Dkt. 85-1, Trial
Exhibit 27 (“Trial Ex. 27”) at 216 (emphases added). The Ninth Circuit has held that “[i}n
some circumstances, . . . legally dispositive facts are so firmly established that an arbitrator
cannot fail to recognize them without manifestly disregarding the law.” Coutee v.
Barington Capital Grp., L.P., 336 F.3d 1128, 1133 (9th Cir. 2003). The Proctor pleadings
which, despite Golden’s assertions, at least in part disclaim any derivative theory, do not
present such circumstances.
2. The Final Award’s Application of California Law on Duty of
Disclosure
Golden also contends that the Final Award manifestly disregards California law in a
second respect. According to Golden, “the Final Award... disregards . . . settled California
law that the client, not the attorney, is the master of all substantive determinations,
mandating O’Melveny make full disclosure of material information—such as Aletheia’s
rights to recoup the excess compensation—with its failure to do so tantamount to
constructive fraud.” Golden Mot. at 5. The crux of Golden’s claim is that the Arbitrator
erred in declining to find that O’Melveny breached the duty of disclosure by failing to
advise of its potential right to seek recovery from Eichler, Peikin, and other allegedly
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:14-cv-08725-CAS(AGRx) Date November 1, 2019
Title JEFFREY I GOLDEN v. O7MELVENY & MYERS LLP
malfeasant directors in light of Proctor’s allegations that these individuals engaged in
wrongdoing. Id. at 18-21.
The Arbitrator considered and rejected Golden’s argument that O’Melveny’s alleged
omissions give rise to a claim for breach of the duty of disclosure, concluding that “[t|he
issues raised by [Golden] are more properly analyzed under the duty to advise and the duty
to alert.” Final Award at 95. Accordingly, the Arbitrator proceeded to analyze Golden’s
claims in the context of both these duties. See id. at 96-104. With respect to the duty to
advise, the Arbitrator concluded that “O’Melveny had no duty to advise Aletheia regarding
claims that could be brought against Eichler and Peikin, whether those claims should be
brought, or how the representation would be affected if in fact Aletheia determined to bring
such claims or on any other matters outside the scope of the retention,” but that in any
event, “the evidence . . . shows that Aletheia’s senior management . . . received advice
regarding Aletheia’s potential claims against Eichler and Peikin.” Id. at 98-99 (emphasis
in original). As to the duty to alert, the Arbitrator concluded that “it is not clear that a duty
to alert had arisen” but that “it is not necessary to reach this issue because Aletheia was in
fact alerted to the existence of the claims of excessive compensation and the potential
consequences arising from those claims.” Id. at 99.
The record therefore does not support Golden’s contention that the Arbitrator
reached his determinations based on erroneous expert testimony that “the disclosure
obligation does not arise if the lawyer himself determines the client would not take action
based on the disclosure.” Golden Mot. at 20. To the contrary, the Arbitrator concluded
that O’Melveny satisfied the duties to advise and alert, assuming these duties ever arose in
the first place. The Arbitrator did so by relying on documentary evidence and deNeve’s
hearing testimony, both relating primarily to the period during which deNeve had left
O’Melveny to serve as Aletheia’s General Counsel. Final Award at 99-104. The
Arbitrator specifically determined that “the excessive compensation issue . . . was
repeatedly discussed with Aletheia’s senior management, its directors including the outside
director, and even with ... shareholders who attended the [August 2011 Aletheia firm]
retreat.” Id. at 103-04. The manifest disregard exception does not authorize the Court to
re-weigh this evidence. See Coutee, 336 F.3d at 1134 (declining to vacate on manifest
disregard basis because “[t]he arbitrators considered this factual dispute and resolved it in
favor of [non-movants]. We have no authority to re-weigh the evidence . . . [and] cannot
conclude that the arbitrators manifestly disregarded the law[.]”). Accordingly, based on
the Arbitrator’s determinations that these duties were met, the Court declines to vacate the
Final Award for manifest disregard of the law concerning the duties to advise and alert.
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:14-cv-08725-CAS(AGRx) Date November 1, 2019
Title JEFFREY I GOLDEN v. O7MELVENY & MYERS LLP
3. The Final Award’s Application of California Law on Causation
Golden contends that the Arbitrator manifestly disregarded the applicable law on
causation because he “failed to decide whether Aletheia would have likely prevailed if
Aletheia had sought to recover the more than $47 million of excessive compensation the
Co-Founders paid themselves and others without Board approval.”!° Golden Reply at 21—
22. According to Golden, the Arbitrator “instead created his own test of whether Aletheia
would have sought the money back[.|” Id. at 22.
The record does not support Golden’s arguments. To prevail on a claim for legal
malpractice, a plaintiff must establish “(1) the duty of the attorney to use such skill,
prudence, and diligence as members of his or her profession commonly possess and
exercise; (2) a breach of that duty; (3) a proximate causal connection between the breach
and the resulting injury; and (4) actual loss or damage resulting from the attorney’s
negligence.” Coscia v. McKenna & Cuneo, 25 Cal. 4th 1194, 1199 (2001). A successful
claim for breach of fiduciary duty requires: “(1) existence of a fiduciary duty; (2) breach
of the fiduciary duty: and (3) damage proximately caused by the breach.” Stanley v.
Richmond, 35 Cal. App. 4th 1070, 1086 (1995). Having determined that O’Melveny
breached neither its duty of care nor its duty of loyalty, and insofar as Golden’s professional
negligence and breach of fiduciary duty claims are concerned, the Arbitrator was therefore
not required to decide “whether Aletheia would have likely prevailed” on any hypothetical
excess compensation claims against Peikin or Eichler.
Nonetheless, contrary to Golden’s assertion, the Arbitrator did conclude that “[e]ven
if [Golden] had met his burden of showing either professional negligence or breach of
fiduciary duty, his claim would fail because he has not proved that anything O’ Melveny
did or failed to do caused damage to Aletheia.”!! Final Award at 89. The Arbitrator
10 Generally, “[i]t is improper for a moving party to introduce new facts or different
legal arguments in the reply brief than those presented in the moving papers.” U.S. ex rel.
Giles v. Sardie, 191 F. Supp. 2d 1117, 1127 (C.D. Cal. 2000). However, the Court will
consider Golden’s argument because Golden also raises it in his opposition to O’Melveny’s
motion to confirm. See Golden Opp. at 16-19; Golden Reply at 21-23.
During the arbitration proceedings, Golden argued that different standards of
causation applied to his claims for legal malpractice and breach of fiduciary duty: the
“substantial factor” test in breach of fiduciary duty cases, and the “but for, trial within a
trial” test in professional negligence cases. See Final Award at 89. The Arbitrator
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:14-cv-08725-CAS(AGRx) Date November 1, 2019
Title JEFFREY I GOLDEN v. O7MELVENY & MYERS LLP
expressly determined that “it is far from clear that a suit to recover Eichler’s (or Peikin’s)
compensation would have been successful at all[.]” Id. at 81. On this point, the Arbitrator
heard testimony from both parties, ultimately concluding that “the record supports a finding
that [Golden] has failed to prove causation as to either his malpractice or breach of
fiduciary duty claim.” Id. at 94. That Golden disagrees with this finding, based on the
evidence presented, is not a proper basis for vacatur pursuant to the “manifest disregard”
standard. See Glob. Bldg. Prod. Ltd. v. Chemco, Inc., No. C12-1017 RSM, 2012 WL
5183629, at *7 (W.D. Wash. Oct. 18, 2012) (“Where, as here, an arbitrator recognizes the
law, directly addresses its applicability, and finds that the facts do not establish a violation
of the law, the Court finds that there no evidence of a manifest disregard of the law.”).
C. The Final Award Is Not Irrational
Golden requests that the Court vacate the Final Award on the grounds that □□□ is
irrational in light of the law and uncontroverted facts and therefore resulted in the
Arbitrator exceeding his authority.” Golden Mot. at 2. According to Golden, the Final
Award is irrational because of “its failure to recognize the legally dispositive facts, namely,
that the Engagement Agreements contemplated joint representation of Aletheia together
with its alleged looters|,] the Co-Founders, and that the Proctor Looting Allegations
sounded in harm to Aletheia.” Golden Reply at 23.
Vacatur is appropriate where an arbitration award is “completely irrational.”
Comedy Club, 553 F.3d at 1288. “This standard is extremely narrow and is satisfied only
where the arbitration decision fails to draw its essence from the agreement.” Bosack v.
Soward, 586 F.3d 1096, 1106 (9th Cir. 2009) (internal punctuation and citations omitted).
“An award draws [its] essence from the parties’ agreement if the award ‘is derived from
the agreement, viewed in light of the agreement’s language and context, as well as other
indications of the parties’ intentions.’” Tutor Perini Bldg. Corp. v. S. California Dist.
considered and rejected these arguments. See id. at 89-94. To the extent that Golden
renews that challenge here as the basis for his “manifest disregard” argument, see Golden
Reply at 21 n.11, the Court rejects this contention as contrary to the law governing judicial
review of arbitration proceedings. See Biller, 668 F.3d at 668 n.7. (“Our precedent is quite
clear that manifest disregard of the law for the purposes of the FAA occurs only where
there is evidence that the arbitrator knew the law but ignored it nonetheless. . . . Here,
perhaps the arbitrator misunderstood the law and misapplied it, but we cannot conclude
that the arbitrator ignored the law.”’).
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:14-cv-08725-CAS(AGRx) Date November 1, 2019
Title JEFFREY I. GOLDEN v. O7-MELVENY & MYERS LLP
Council of Laborers, 373 F. Supp. 3d 1309, 1320 (C.D. Cal. 2019) (citing Bosack, 586
F.3d at 1106). “Under this standard of review, the district court does not assess the
‘rightness or wrongness’ of the arbitrator’s contract interpretation.” Mike Rose’s Auto
Body, Inc. v. Applied Underwriters Captive Risk Assurance Co., Inc., 389 F. Supp. 3d 687,
694 (N.D. Cal. 2019).
O’Melveny contends that Golden misconstrues the “completely irrational” standard.
O’Melveny Opp. at 20. The Court agrees. “Under the “completely irrational” doctrine,
the question is whether the award is ‘irrational’ with respect to the contract, not whether
the panel’s findings of fact are correct or internally consistent.” Bosack, 586 F.3d at 1106.
Thus, “the ‘completely irrational’ standard generally applies in the context of an
arbitrator’s contract interpretation.” Donnelly v. Jewel of Kahana, LLC, No. CIV. 12-
00347 HG-KSC, 2013 WL 1337134, at *12 (D. Haw. Mar. 28, 2013) (emphasis added);
see also Aspic Eng’g & Constr. Co. v. ECC Centcom Constructors LLC, 913 F.3d 1162,
1167 (9th Cir. 2019) (noting that an arbitration award is “irrational” where arbitrator
“dispense[s] his own brand of industrial justice by disregarding a specific contract
provision to correct what he perceived as an injustice.”). Golden does not point to a
contractual provision that he contends the Arbitrator erred in construing. Instead, Golden
asserts that “the mountain of evidence of O’Melveny’s recognition of the actual conflict”
between Aletheia, Peikin, and Eichler “demonstrate|s] the obviousness of the conflict and
the resulting irrationality of the Final Award in light of the facts[.]” Golden Mot. at 22.
However, “[c]learly erroneous findings of fact or contradictory findings of fact do not
render a decision completely irrational.” Elem Indian Colony of Pomo Indians v. Pac. Dev.
Partners X, LLC, No. C 09-1044 CRB, 2010 WL 2035331, at *2 (N.D. Cal. May 19, 2010).
Accordingly, Golden has failed to show the Final Award is “completely irrational” so as to
require vacatur.'?
2 In support of his irrationality argument, Golden cites the Ninth Circuit’s decisions
in Coutee and American Postal. Golden Reply at 23. Both these cases, however, involve
the manifest disregard exception, not the completely irrational exception. See Coutee, 336
F.3d 1133 (“In some circumstances, however, legally dispositive facts are so firmly
established that an arbitrator cannot fail to recognize them without manifestly disregarding
the law.”); Am. Postal Workers Union AFL-CIO v. U.S. Postal Serv., 682 F.2d 1280, 1284
(9th Cir. 1982) (“We believe that a conclusion that Murphy did not strike would constitute
manifest disregard of the law.”). The Court has already determined that the Arbitrator did
not manifestly disregard the law.
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:14-cv-08725-CAS(AGRx) Date November 1, 2019
Title JEFFREY I GOLDEN v. O7MELVENY & MYERS LLP
D. Golden Has Not Demonstrated Evident Partiality
Golden additionally seeks vacatur of the Final Award on the basis of arbitrator bias.
The FAA permits vacatur “where there was evident partiality or corruption in the
arbitrators, or either of them|.|” 9 U.S.C. § 10(a)(2). “The party challenging the arbitration
decision has the burden of showing partiality.” Woods v. Saturn Distribution Corp., 78
F.3d 424, 427 (9th Cir. 1996). The standard used to determine whether “evident partiality”
exists differs depending on whether the case is one of “nondisclosure” or “actual bias.”
Rosenhaus v. Jackson, No. 2:14-cv-03154-MWF-JCG, 2016 WL 4592180, at *4 (C.D. Cal.
Feb. 26, 2016). In a nondisclosure case, all that 1s required is a “reasonable impression of
bias . . . because the integrity of the process by which arbitrators are chosen is at issue|.|”
Woods, 78 F.3d at 427. In actual bias cases, however, “the integrity of the arbitrator’s
decision is directly at issue . . . [and] the party alleging evident partiality . .. must establish
specific facts which indicate improper motives.” Id. (internal citations omitted). Golden
contends that “[t]he instances of evident bias are numerous|.]” See generally Golden Mot.
at 23-25. The Court addresses each in turn.
1. Potential Employment of the Arbitrator’s Son
Golden asserts that vacatur of the Final Award is warranted because the Arbitrator
“made up his mind against [Golden’s] case on the basis of bias after O’Melveny and its
counsel, [Gibson Dunn], barred [his] son from employment while he was preparing [for]
on-campus interviews with both firms, blaming their decisions on” Golden. Golden Mot.
at 6. The Court finds this argument unavailing.
18 The parties disagree as to which standard applies in this case. In his motion seeking
vacatur, Golden cites the standard for nondisclosure cases. See Golden Mot. at 21. In his
reply, however, Golden notes that he “was unaware of any of the specific facts recited in
the Motion at the time the Arbitrator was selected; indeed, such facts had not yet occurred.”
Golden Reply at 23 (emphasis added). Because the events which allegedly establish the
Arbitrator’s bias occurred after the parties had selected the Arbitrator, the integrity of the
process for choosing him is not at issue, and the Court therefore concludes that the standard
for actual bias cases applies here. See Nordahl Dev. Corp. v. Salomon Smith Barney, 309
F. Supp. 2d 1257, 1266-67 (D. Or. 2004) (“Plaintiff does not allege that an arbitrator failed
to disclose any relevant relationship . . . before the arbitration began. . . . Therefore the
stricter standard governing actual bias cases applies to plaintiff's claim of partiality.”’).
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:14-cv-08725-CAS(AGRx) Date November 1, 2019
Title JEFFREY I. GOLDEN v. O7-MELVENY & MYERS LLP
Golden does not dispute that neither O’Melveny, a party in the arbitration, nor its
counsel, Gibson Dunn, ever employed the Arbitrator’s son. To the contrary, after the
Arbitrator disclosed to the parties that his son, then a law student, was seeking employment
with a number of law firms including Gibson Dunn and O’Melveny, and after Golden
raised the issue of possible bias, both Gibson and O’Melveny decided that, out of an
abundance of caution, neither would extend an offer of employment to the Arbitrator’ son.
Ex. 13 at 454. Golden contends that the firms’ decision to eliminate the possibility of an
appearance of impartiality by declining to consider the Arbitrator’s son for employment
served to exacerbate the possibility of bias because, “[i]n turn, the Arbitrator refused to
recuse himself.” Golden Mot. at 24. The Court finds this argument unpersuasive. See
Union Carbide Corp. v. U.S. Cutting Serv., Inc., 782 F.2d 710, 713-16 (7th Cir. 1986)
(affirming denial of recusal where movant contended that judge “may be harboring a
grudge” where movant originally moved to disqualify judge for holding stock in party and,
in response, judge sold stock to eliminate conflict); see also Charles A. Wright & Arthur
R. Miller, 13D Fed. Prac. & Proc. Juris. § 3542 (3d ed.) (“A litigant cannot force
disqualification by attacking the judge and claiming that the attacks must have caused the
judge to be biased against him.”).
Nor would the actual hiring of the Arbitrator’s son by either O’Melveny, a party, or
Gibson Dunn, O’Melveny’s counsel, have necessarily required the Arbitrator’s recusal
pursuant to either of the two federal statutes governing recusal of judicial officers, 28
U.S.C. § 144 or 28 U.S.C. § 455(a). See Datagate, Inc. v. Hewlett-Packard Co., 941 F.2d
864, 871 (9th Cir. 1991) (“an employment relationship between a judge’s child and a party
to the suit has not generally been held to merit per se disqualification.”); U.S. □□□□
Weinberger v. Equifax, Inc., 557 F.2d 456, 463-64 (Sth Cir. 1977) (recusal not required
where judge’s son was an associate of the law firm representing defendant and son did not
actively participate in the case). Because the standard for determining partiality for
arbitrators is more stringent than that for judges, Golden therefore fails to establish the
“evident partiality” required for vacatur. See Schmitz v. Zilveti, 20 F.3d 1043, 1047 (9th
Cir. 1994) (noting differences in standards): see also Transportes Coal Sea de Venezuela
C.A. v. SMT Shipmanagement & Transp. Ltd., No. 05-cv-9029-KMK, 2007 WL 62715,
at *4 (S_D.N_Y. Jan. 9, 2007) (“an arbitrator may not be deemed partial stmply because he
presides over an arbitration in which one party employs an arbitrator’s family member’s
law firm’).
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:14-cv-08725-CAS(AGRx) Date November 1, 2019
Title JEFFREY I GOLDEN v. O7MELVENY & MYERS LLP
2. The Arbitrator’s Retention in an Unrelated Matter
Golden argues that vacatur 1s warranted on the basis of arbitrator bias because
“Gibson [Dunn] . . . hired the Arbitrator on a new $20 million litigation matter after closing
arguments were made in the instant case and while the Arbitrator was deliberating.”
Golden Mot. at 25. Golden contends that this constitutes “evidence that the Arbitrator
would benefit from deciding in favor of Gibson [Dunn]” since by doing so, the Arbitrator
“could expect to receive additional work.” Golden Reply at 24. The Court disagrees. See
Cologne Reinsurance (Barbados), Ltd., No. CIV. 1:CV-98-0678, 2009 WL
3818626, at *10 (M.D. Pa. Nov. 13, 2009) (“there is no evident partiality from an
arbitrator’s accepting a position as an umpire in another, unrelated arbitration while the
current arbitration is still ongoing, even if that position . . . is . . . in an arbitration where
one of the parties is an affiliate of a party to the current arbitration.”). Accordingly,
Golden’s mere allegation of bias, based on the selection of the Arbitrator as arbitrator in
an unrelated matter involving Gibson Dunn, O’Melveny’s counsel, which the Arbitrator
disclosed, does not require vacatur.
3. Other Rulings Adverse to Golden Do Not Establish Bias
Golden contends that a number of the Arbitrator’s adverse rulings during the course
of the arbitration demonstrate evident partiality. Golden Mot. at 23-25. In particular,
Golden points to the Arbitrator’s rulings: (1) finding that there O’Melveny’s representation
of Aletheia, Eichler, and Peikin was not conflicted, notwithstanding the court’s
determinations in the California Proctor Litigation; (2) granting O’Melveny’s request to
stay consideration of Golden’s summary disposition motion while O’Melveny took
discovery; and (3) denying Golden’s request to amend his discovery responses. Golden
Mot. at 23—25. The Court notes that “repeated rulings against one party to the arbitration
will not establish bias absent some evidence of improper motivation.” Sheet Metal
Workers Int’] Ass’n Local Union No. 420 v. Kinney Air Conditioning Co., 756 F.2d 742,
746 (9th Cir. 1985). Here, Golden has provided no evidence of improper motivation, and
his identification of various adverse rulings is insufficient to require vacatur. Voltage,
2018 WL 2110937, at *8 (“it is evident from the Arbitration Award . . . that the Arbitrator
considered the arguments and evidence presented by both sides . . . [t|hat the Arbitrator
tuled in favor of Petitioners on all these issues is insufficient to establish evident
partiality.”’); Div 15 Tech v. Sheet Metal Workers’ Int’] Ass’n, Local 104, No. C 10-05309
JSW, 2011 WL 13244832, at *3 (N_D. Cal. Mar. 14, 2011) (‘It is insufficient as a matter
of law to allege bias based on unfavorable rulings in this and tangential incidents.”’).
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:14-cv-08725-CAS(AGRx) Date November 1, 2019
Title JEFFREY I GOLDEN v. O7MELVENY & MYERS LLP
4. Language in the Final Award
During oral argument, Golden suggested that language in the Final Award
demonstrates arbitrator bias. For example, Golden points to the Arbitrator’s statement that
Golden’s settlement with Proctor on behalf of Aletheia “allowed [Golden] to avoid the
fight with Proctor, which had proved a tenacious adversary over the years, and opened a
path to a potentially deeper pocket - O’Melveny & Myers — through the present action for
malpractice and breach of fiduciary duty.” Final Award at 11. This language does not
demonstrate the requisite evident partiality required for vacatur. See Plastic Recovery
Techs., Co. v. Samson, No. 11 C 2643, 2011 WL 3205305, at *4 (N_D. Ill. July 28, 2011)
(rejecting “claim that the language used in the Arbitration Award demonstrates the
arbitrator’s bias” requiring vacatur where arbitrator stated that plaintiffs “consistently
demonstrated nothing short of contempt for this process” and that “their bad faith
demonstrated a lack of respect for their contractual commitment, the arbitral process, and
the other participants in that process.”); accord Nowak v. Pennsylvania Prof’1 Soccer, LLC,
156 F. Supp. 3d 641, 647 (E.D. Pa. 2016) (“We do not find [the arbitrator’s] word choice
constitutes evidence of impermissible bias to support vacatur.”).
E. O’Melveny’s Motion to Confirm the Final Award
O’Melveny seeks an order from the Court confirming the Final Award. See
generally O’Melveny Mot. The Court “‘must’ confirm an arbitration award ‘unless’ it is
vacated, modified, or corrected|.|” Hall, 552 U.S. at 582. Golden does not contend that
the Final Award should be modified or corrected. Instead, Golden opposes O’Melveny’s
motion to confirm the Final Award based on several of the same arguments he contends
require vacatur, namely that: enforcement of the Final Award violates public policy; that
the Arbitrator disregarded the applicable law in determining whether a plaintiffs claims
are derivative in nature; that the Arbitrator misapplied the law on causation; and that the
Arbitrator demonstrated evident partiality. See Golden Opp. at 11-25. The Court has
rejected these arguments, determining they are insufficient to require vacatur.
Golden raises an additional argument in his opposition to O’Melveny’s motion to
confirm that he did not assert in his own motion to vacate. He suggests that the Arbitrator
erred in allowing two of O’Melveny’s experts, John Marshall and John Spiegel, to testify.
Therefore, according to Golden, “the Final Award was informed by impermissible and
baseless opinions and conclusions, which further supports its vacatur.” Golden Opp. at 22.
Golden does not, however, specify which provision of Section 9 of the FAA forms the
basis for his request for vacatur on this basis.
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES — GENERAL ‘O’
No. 2:14-cv-08725-CAS(AGRx) Date November 1, 2019
Title JEFFREY I GOLDEN v. O7MELVENY & MYERS LLP
Under Section 10(a)(3), a court may vacate an arbitration decision “where the
arbitrators were guilty of misconduct .. . in refusing to hear evidence pertinent and material
to the controversy|.|” 9 U.S.C. § 10 (a)(3) (emphasis added). Here, Golden’s complaint
is that the Arbitrator erroneously admitted testimony, not that the Arbitrator refused to hear
testimony. See Schoenduve Corp. v. Lucent Techs., Inc., No. C03-03523 RMW, 2004 WL
5573951, at *9 (N.D. Cal. Feb. 27, 2004) (declining to vacate award where party seeking
vacatur “fails to point to any evidence that the arbitrator actually refused to hear.”)
(emphasis in original). Regardless of whether the Court construes Golden’s argument as
falling within the confines of Section 10(a)(3) or another exception, the Ninth Circuit has
made clear that “[a|rbitrators enjoy wide discretion to require the exchange of evidence,
and to admit or exclude evidence, how and when they see fit.” U.S. Life Ins. Co. v.
Superior Nat. Ins. Co., 591 F.3d 1167, 1175 (9th Cir. 2010) (internal citation and quotation
marks omitted). Accordingly, the Court declines to vacate the Final Award on the basis of
the Arbitrator’s decisions to admit the testimony of O’Melveny’s experts.
The Court concludes that there is no basis to vacate, modify, or correct the Final
Award. Accordingly, confirmation of the Final Award is appropriate. See Voltage, 2018
WL 2110937, at *5 (“Ifthe Court finds no basis to vacate, modify, or correct the arbitration
award, the Court must confirm the award.’’).
V. CONCLUSION
For the foregoing reasons, the Court DENIES Golden’s motion to vacate the Final
Award and GRANTS O’Melveny’s motion to confirm the Final Award.
IT IS SO ORDERED.
00 : 00
Initials of Preparer CMJ