Did the arbitrator exceed her power in Stormy Daniels case?

THE NEUTRAL CORNER

"It's the little details that are vital." -- John Wooden

At this time of year, I am always reminded of this quote from the Wizard of Westwood. Unfortunately, I failed to turn in my bracket for this year's NCAA Men's Basketball Championship Tournament. So, for my March Madness adventure, I decide to plunge down the rabbit hole that is Stephanie Clifford, aka Stormy Daniels, aka Peggy Peterson's legal battle with Donald J. Trump aka (maybe) David Dennison. Until now, I've tried hard to avoid anything having to do with this sordid affair. Now that I am into it, however, it's apparent that one could design an entire law school curriculum based only on the legal issues involved in this case. My focus here will be limited to the validity of the temporary restraining order issued by a local arbitrator barring Clifford from talking about her alleged sexual relationship with the president. I argue below that lack of attention to detail opens the door to voiding the gag order.

The settlement agreement at issue is attached to the complaint in case BC 696598 filed in Los Angeles Superior Court on March 6, 2018. The agreement appears to have been executed on Oct. 26, 2016.

Section 5.2 of this agreement is the dispute resolution clause providing disputes are required to be resolved by binding arbitration before "JAMS ENDISPUTE ("JAMS") pursuant to JAMS Comprehensive Arbitration Rules and Procedures ... or before ACTION DISPUTE RESOLUTION SERVICES (ADRS) pursuant to ADRS Rules."

The temporary restraining order (which the Whitehouse refers to as a "win in arbitration") was issued on Feb. 27, 2018 by Hon. Jacqueline A. Conner (Ret.) - Emergency Arbitrator. This proceeding, however, was not "before ACTION DISPUTE RESOLUTION SERVICES" as required by the settlement agreement. Instead, claimant made an emergency application to "ADR Services, Inc." According to the temporary restraining order, claimant made the application pursuant to Rule 24 of the ADR Services' arbitration rules and ADR Services appointed the arbitrator.

Is ADR Service an acronym for Action Dispute Resolution Services? Not according to the California secretary of state. ADR Services filed its articles of incorporation on July 7, 2003. ADR Services filed its annual statement of information on July 26, 2016. This would have been the operative statement at the time the parties executed the settlement agreement. Simply put, whether or not ADR Services used to be called Action Dispute Resolution Services prior to 2003 (perhaps a reader can shed light on this question), at the time of the settlement agreement and the time claimant applied for the temporary restraining order, the organization was officially ADR Services. Thus, I would argue the arbitrator was without jurisdiction to issue the temporary restraining order because the proceeding was not before JAMS or Action Dispute Resolution Services.

Is this a form over substance argument? I hardly think so. The arbitrator found "that the Settlement Agreement expressly authorizes issuance of an ex parte restraining order without the requirement of advance notice to Ms. Peterson in the event she has breached or threatened to breach the confidentiality obligations ... in the Settlement Agreement." The order was issued in secret and without notice to Clifford or her counsel. Although the markedly one-sided settlement agreement does not require notice, Rule 24 requires the appointed arbitrator to disclose any ground likely to affect her impartiality. Was that done? If so, presumably Clifford or her counsel would have known something was afoot. Rule 24 requires the arbitrator to "notify the parties, no later than two (2) business days following the appointment, of the schedule and manner in which the emergency application will be considered." The proceeding is supposed to occur in a manner "calculated to provide all parties with reasonable opportunity to be heard." What notice, if any, did ADR Services provide to Clifford or her counsel? The temporary restraining order answers none of these questions.

California Code of Civil Procedure Section 1286.2 provides the exclusive grounds for vacating an arbitration award as follows:

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

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

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

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

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

(6) An arbitrator making the award either: (A) failed to disclose within the time required for disclosure a ground for disqualification of which the arbitrator was then aware; or (B) was subject to disqualification upon grounds specified in Section 1281.91but failed upon receipt of timely demand to disqualify himself or herself as required by that provision. The Federal Arbitration Act spells out similar grounds, which have been described as "grudgingly narrow" 9 U.S.C. Section 10(a); Eljer Mfg. Inc. v. Kowin Dev. Corp., 14 F.3d 1250, 1253 (7th Cir. 1994).

Although grounds for vacating an arbitration award are few and the burden is hard to meet, Clifford would seem to have a good argument that the arbitrator "exceeded her power" by issuing an award in the first place because she was appointed by ADR Services, not JAMS or Action Dispute Resolution Services as the parties' agreement required. 9 U.S.C. Section 10(a)(4). And, if the arbitrator issued the award without complying with Rule 24 -- she arguably engaged in "misbehavior by which the rights of any party had been prejudiced." 9 U.S.C. Section 10(a)(3). Either way, based on the information currently available in the public domain, the order appears voidable whether or not Clifford ultimately prevails on her claim that the settlement agreement is void because David Dennison didn't sign it.

The Neutral Corner is a monthly column discussing recent cases or topics of interest from a neutral's perspective.