The Second District affirms dismissal of the American Arbitration Association from a suit based upon the common-law doctrine of arbitral immunity.
Hugo Quakenbush was employed by the Schwab firm as a securities broker. When his intimate relationship with Shanel Stasz came to an acrimonious end, Quakenbush filed an action in San Francisco County Superior Court to obtain a restraining order against Stasz. Stasz threatened to file a counter suit and embarrass Quakenbush by making public statements about him, Charles Schwab, and the Schwab firm.
Stasz and Quakenbush entered into a settlement agreement that included a confidentiality provision and a provision prohibiting either party from contacting the other. The agreement also included an arbitration provision, providing all disputes would be resolved before the American Arbitration Association (AAA).
After the execution of the settlement agreement Stasz contacted Quakenbush, demanded more compensation and sent letters to the Schwab firm discussing Quakenbush and the settlement agreement.
Quakenbush initiated arbitration proceedings alleging violations of the no contact and confidentiality provisions of the settlement agreement. Stasz counter claimed seeking specific enforcement of the settlement agreement. Quakenbush filed an application for an order restraining Stasz from committing further violations of the settlement agreement. While the application was pending, Stasz sent Quakenbush’s counsel a letter threatening another lawsuit unless she was paid further compensation attaching a copy of the proposed complaint.
Over Stasz’s objection the arbitrator concluded that the claims asserted in the draft complaint were arbitratable and that some of the allegations violated the confidentiality provisions of the settlement agreement. Thereafter, the arbitrator ordered Stasz to comply with the no contact and confidentiality terms of the agreement.
Stasz subsequently filed an action in Los Angeles Superior Court and brought a motion to excise the arbitration provision from the agreement as unconscionable. The denial of this motion was affirmed on appeal.
Stasz then filed a second action against Quakenbush (Stasz II) based upon the same allegations in the draft complaint which the arbitrator had ordered arbitratable. Quackenbush’s motion to compel arbitration was granted and Stasz II was stayed pending the outcome of the arbitration.
Stasz then filed a third lawsuit (Stasz III) against Quackenbush’s attorneys, Charles Schwab, the Schwab firm, and AAA. AAA demurred to the complaint arguing that as the organization sponsoring the arbitration it was immune from liability under California common law. The trial court sustained the demurrer without leave to amend.
In affirming the trial court, the Court of Appeal noted that California courts have extended arbitral immunity to organizations that sponsor arbitrations. California common law clearly provided immunity for these sponsoring organizations. As a practical matter, an arbitrator’s immunity would be illusory unless it extended to the sponsoring organization.
Comment: This case reinforces the protection for arbitrators by extending it to their sponsoring organizations. As more practitioners offer mediation and arbitration services, this decision offers a degree of protection for those activities.