Filed 3/15/17

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SEVEN

ECC CAPITAL CORPORATION et al.,

Plaintiffs and Appellants,

v.

MANATT, PHELPS & PHILLIPS, LLP,

Defendant and Respondent.

 B265760

 (Los Angeles County

 Super. Ct. No. BC429484)

APPEAL from judgment of the Superior Court of 

Los Angeles County, Mark Mooney, Judge. Affirmed. 

Law Office of Julie M. McCoy, Julie M. McCoy; Sall 

Spencer Callas & Krueger, Robert K. Sall, Lara A.S. Callas; 

Lane Powell and Paul George for Plaintiffs and Appellants.

Kendall Brill & Kelly, Alan Jay Weil, Corey E. Klein and 

Richard M. Simon for Defendant and Respondent.

____________________
2

INTRODUCTION

ECC Capital Corporation and its subsidiary, Performance 

Credit, LLC, formerly known as Encore Credit Corp., 

(collectively, ECC) appeal from a judgment confirming a final 

arbitration award of almost $7 million against them and in favor 

of Manatt, Phelps & Phillips, LLP (Manatt). The award was for 

attorneys’ fees, expert fees, and costs incurred by Manatt as the 

prevailing party in an arbitration of legal malpractice claims 

ECC brought against Manatt. 

ECC contends the trial court erred in confirming the 

arbitrator’s interim award denying ECC’s claims because the 

arbitrator violated mandatory disclosure rules governing 

arbitrations. ECC also contends the trial court erred in 

confirming the final award because Manatt’s engagement 

agreement was illegal, Manatt obtained the award by fraud, and 

the arbitrator limited ECC’s rights to take discovery and present 

evidence at the arbitration on the issue of Manatt’s conflict of 

interest. Because we conclude ECC’s arguments are either 

meritless or forfeited, we affirm.

FACTUAL AND PROCEDURAL BACKGROUND

A. ECC Contracts with and Then Sues Bear Stearns

In October 2006 ECC Capital and Bear Stearns Residential 

Mortgage Corporation (Bear Stearns)1 entered into an Asset 

 

1 Two other entities affiliated with Bear Stearns Residential 

Mortgage Corporation played a role in this transaction: Bear 

Stearns Mortgage Capital Corporation and EMC Mortgage 

Corporation. Except where we need to distinguish among them, 
3

Purchase Agreement (APA) providing that Bear Stearns would 

buy ECC Capital’s subprime mortgage loan origination business, 

Encore Credit Corp (Encore). The APA required Encore to 

originate a minimum average of $400 million in mortgage loans 

per month for as many months as it took the parties to close the 

transaction, a period they expected to last approximately three 

months. The APA required Bear Stearns to purchase and 

securitize the loans Encore originated during this “pre-closing 

period.” 

ECC Capital hired Latham & Watkins (Latham) as “deal 

counsel” for this transaction. ECC Capital also hired Manatt 

partner Ellen Marshall to help negotiate and draft Section 7 of 

the APA, the portion of the agreement governing Bear Stearns’ 

obligation to purchase and securitize the loans Encore originated 

during the pre-closing period. According to ECC Capital, Bear 

Stearns had agreed, and ECC Capital understood and intended, 

that Bear Stearns would purchase those loans before the 

borrowers’ first payments were due, so that Bear Stearns would 

assume all risk of early defaults. ECC Capital claimed it 

communicated its intention on this point to Marshall and, based 

 

we will refer to these three entities, collectively and 

interchangeably, as “Bear Stearns.” We will refer separately to 

another affiliated entity, Bear Stearns & Co., Inc., which is one of 

the many subsidiaries of The Bear Stearns Companies, Inc. We 

note that throughout these proceedings, and as quoted in this 

opinion, the parties and other participants have often referred to 

“Bear Stearns” or simply “Bear” without specifying the entity 

intended. 
4

on conversations with her, understood the final draft of Section 7 

reflected that intention.2

By December 2006, however, a dispute had arisen between 

ECC Capital and Bear Stearns about the timing of Bear Stearns’ 

obligation to purchase the loans Encore originated. Roque Santi, 

President of ECC Capital and Encore, felt Bear Stearns was “not 

living up to the spirit of the deal” because Bear Stearns was not 

purchasing all of the loans “promptly upon origination.” Bear 

Stearns’ position was that the APA did not obligate it to purchase

the loans before the first payments were due, but did prohibit it, 

after purchasing a loan, from requiring Encore to repurchase the 

loan in the event of an early payment default (or breach of a 

representation or warranty), as Bear Stearns had required when 

previously purchasing loans from Encore. 

 

2 Section 7 provided, in relevant part: “The parties 

further agree that an Affiliate of [Bear Stearns] shall be the 

sole lead underwriter for all securitizations relating to the 

Mortgage Loans . . . and in connection therewith, all parties 

acknowledge that such securitizations shall occur on a 

monthly basis. . . . In connection with a [delay in 

securitization by ECC Capital, ECC Capital] shall bear all 

economic risk relating to the Mortgage Loans or otherwise 

related to the proposed securitization, including, but not 

limited to, defaults, prepayments and breaches of 

representations and warranties relating thereto.” This 

quotation comes from the arbitrator’s interim award ruling, 

and the bracketed term “[Bear Stearns]” is the arbitrator’s, 

who in the ruling used “Bear Stearns” to refer, collectively, 

to Bear Stearns & Co., Inc. and Bear Stearns Residential 

Mortgage Corporation. 
5

ECC Capital and Bear Stearns ultimately closed the 

transaction contemplated by the APA on February 9, 2007.

Approximately two months later, ECC filed suit in federal court 

against Bear Stearns, seeking damages for Bear Stearns’ alleged 

breach of the APA by, among other things, not buying all of the 

loans Encore originated during the pre-closing period before the 

due dates of the loans’ first payments. The case settled in July 

2009, with ECC receiving $15 million. 

B. ECC Sues Latham and Manatt, Who Compel 

Arbitration

In January 2010 ECC filed this action in state court 

against Latham and Manatt, asserting causes of action for legal 

malpractice, breach of contract, breach of fiduciary duty, and 

breach of the implied covenant of good faith and fair dealing. 

ECC alleged that poor drafting by Latham and Manatt of Section 

7 of the APA had enabled Bear Stearns to refuse to buy loans 

promptly during the pre-closing period, forced ECC to sue Bear 

Stearns to recover ECC’s resulting losses, and weakened ECC’s 

position in that litigation, leaving ECC to settle for much less 

than the $48 million it sought. ECC also asserted Latham and 

Manatt “failed to make full written disclosure of conflicting 

interests to [ECC] and to obtain [ECC’s] informed written 

consent,” but made no specific factual allegations to support this 

assertion.

Manatt moved to compel arbitration, citing arbitration 

provisions in an April 2003 engagement agreement between 

Manatt and Encore and a January 2007 engagement agreement 

between Manatt and ECC Capital. Latham also moved to compel 

arbitration, citing an arbitration provision in a March 2005 
6

engagement agreement between Latham and ECC Capital, 

although Latham conceded it lacked a fully executed copy of that 

agreement. Latham also argued it could compel arbitration 

under ECC’s engagement agreements with Manatt because ECC 

alleged Latham acted as Manatt’s agent (and vice versa) in 

providing legal services to ECC. 

In opposing the motions, ECC did not dispute the validity 

of the engagement agreements or arbitration provisions cited by 

Manatt. Rather, ECC argued it had no enforceable arbitration 

agreement with Latham and, because ECC’s claims against 

Latham and Manatt arose out of the same transaction, the court 

should try the claims against both defendants pursuant to Code 

of Civil Procedure section 1281.2, subdivision (c),3 to avoid 

conflicting rulings on common issues of law and fact. The court 

granted the motions to compel arbitration “under the Manatt 

contract.” 

In October 2010 ECC initiated arbitration against Latham 

and Manatt before the American Arbitration Association (AAA), 

asserting the same claims it had asserted in court.4 Shortly 

before the arbitration hearing began in January 2013, ECC 

settled with Latham. 

 

3 Undesignated statutory references are to the Code of Civil 

Procedure. 

4 As ECC had alleged in its complaint, ECC alleged in its 

arbitration demand, on information and belief and without 

supporting factual allegations, “that the Manatt Respondents 

failed to make full written disclosure of conflicting interests to 

[ECC] and to obtain [ECC’s] informed written consent.” The 

arbitration demand also asked for attorneys’ fees and costs 

“pursuant to the terms of the 2007 Manatt Engagement Letter.” 
7

C. ECC Takes Discovery on Manatt’s Alleged 

Conflict of Interest

The arbitrator limited discovery to requests for production 

of documents and depositions. One category of documents ECC 

requested from Manatt was “[a]ll DOCUMENTS concerning 

[Manatt’s] COMMUNICATIONS or analysis of conflicts of 

interest concerning the representation of ECC in connection with 

the BEAR STEARNS TRANSACTION.” ECC also requested 

billing records for any legal services Manatt provided to The Bear 

Stearns Companies, Inc. and its affiliates, including Bear Stearns 

Residential Mortgage Corporation and EMC Mortgage 

Corporation, from 2004 through 2008. 

When Manatt objected to these requests, ECC sought to 

compel the production of responsive documents on the grounds 

that the documents were necessary to discover whether Manatt 

had a conflict of interest, arising from legal services provided to 

Bear Stearns when Manatt represented ECC in the sale of 

Encore, and whether Manatt had obtained conflict waivers. ECC 

cited a September 2006 email exchange among Marshall, Manatt 

partner Robert Sherman, and ECC Capital’s general counsel, 

Alanna Darling, in which Darling asked Marshall and Sherman 

to provide comments on Bear Stearns’ proposed amendments to 

an agreement relating to the transaction for the sale of Encore. 

In doing so, Darling commented, “I think you have a waiver for 

these agreements but if not, let me know.” Sherman responded 

that he was “not aware of any waiver from Bear.” Marshall 

replied, “I think we talked about getting a waiver the last time 

this came up, but because of the timing we did not do the work. 

At least that’s what I recall. I think we could get the waiver 

readily. (Rob, the best person to connect with Bear on this is 
8

[Manatt partner] Barbara Polsky.)” Darling responded, “Please 

do try to get a waiver.”5

After holding at least two hearings on these and other 

discovery issues, the arbitrator sustained Manatt’s objection to 

ECC’s request for Manatt’s billing records. And although the 

arbitrator directed Manatt to supplement its response to ECC’s 

request for communications or analyses concerning conflicts of 

interest in connection with representing ECC in its sale of 

Encore, the arbitrator ruled Manatt did not have to search 

Barbara Polsky’s emails or use her name as a search term when 

searching the email accounts of other custodians of record.6

 

5 At her deposition on January 10, 2012, Darling recalled 

that during the negotiation of the sale of Encore the “issue” of a 

conflict waiver “came up” with both Latham and Manatt because 

both firms had an attorney-client relationship with “Bear.” 

Darling stated that such an issue was “pretty standard with a 

large company like Bear, that they would be conflicted. There . . . 

would need to be a conflict waiver at some point.” 

6 The arbitrator did not state his reasons for these rulings. 

The record suggests, however, that the ruling regarding the 

search of Polsky’s email account and use of her name as a search 

term was based, at least in part, on Manatt’s assertions that (a) 

Polsky provided no legal services to ECC, (b) searching her email 

and using her name as a search term when searching other email 

accounts would generate “an enormous number” of nonresponsive 

documents and privileged communications with other Manatt 

clients, and (c) “any relevant emails between the Manatt lawyers 

who actually worked on the APA Transaction and Ms. Polsky . . . 

would be collected through searching the mailboxes of the Manatt 

lawyers who worked on the APA transaction using search terms 

relevant to the case.” 
9

When ECC later deposed Sherman, counsel questioned him 

about his September 2006 email exchange with Darling and 

Marshall, the conflict waiver referred to in the exchange, and any 

communications he may have had with Polsky concerning the 

issue. Sherman could not recall communicating with Polsky 

about such a waiver or actually seeing one, but he believed 

Manatt obtained one because Manatt was “not in the habit of 

doing work when we had a conflict without getting a waiver.” 

Counsel for ECC asked similar questions when deposing 

Marshall. When asked whether “Bear had historically been a 

client of Manatt,” Marshall answered, “From time to time,” 

including at the time of the September 2006 email exchange with 

Darling. Marshall stated she recalled Manatt sought and 

obtained a conflict waiver from ECC in connection with the sale 

of Encore to Bear Stearns. She also stated that in February 

2007, when ECC began considering litigation against Bear 

Stearns to enforce ECC’s understanding of Section 7 of the APA, 

Marshall told ECC she could not bring one of Manatt’s litigation 

partners to a meeting to discuss the issue because Manatt’s 

conflict waiver from “Bear” excluded litigation work.

ECC did not seek to depose Polsky or any other Manatt 

attorneys, though the arbitrator did not prohibit ECC from doing 

so. Nor did ECC call Polsky as a witness at the arbitration 

hearing. 

ECC designated Robert Kehr as its expert on issues of 

standard of care, professional ethics, and professional 

responsibility. When counsel for Manatt asked Kehr during his

deposition whether he was giving any opinion in the case 

regarding a conflict of interest on the part of Manatt, Kehr said 

he was not. Consistent with this answer, Kehr gave no opinion 
10

during the arbitration hearing that Manatt had any conflict of 

interest. 

D. The Arbitration Hearing and the Interim Award

The arbitration hearing was held from January 15 to 

March 1, 2013. In advance of the hearing, ECC submitted a brief 

setting forth all its contentions, including its principal contention 

that Manatt was negligent in drafting the APA because, among 

other reasons, Manatt failed to include a provision obligating 

Bear Stearns to purchase the loans Encore originated before the 

first payments on those loans were due. ECC’s brief did not 

contend Manatt had any conflict of interest or fraudulently 

induced or coerced ECC to sign the 2007 engagement agreement. 

The arbitrator heard testimony from numerous witnesses 

and considered approximately 2,000 pages of deposition 

testimony. At no time did ECC argue or seek to present evidence 

that Manatt had a conflict of interest or induced ECC through 

any inappropriate means to sign the 2007 engagement 

agreement. In fact, during the hearing, counsel for ECC 

“expressly disavowed that [ECC] was seeking testimony to claim 

that Manatt had a conflict or breached some fiduciary duty with 

respect to conflicts.” At the conclusion of the hearing, the parties 

submitted closing briefs, and on May 14, 2013 the arbitrator 

heard closing arguments. Again, ECC made no mention of any 

conflict of interest, fraud, or coercion on the part of Manatt. 

On August 1, 2013 the arbitrator issued a 49-page interim 

arbitration award, denying all of ECC’s claims against Manatt. 

The arbitrator found ECC had not proved by a preponderance of 

the evidence that Manatt was negligent in drafting Section 7 or 

that any losses ECC may have incurred in the transaction with 
11

Bear Stearns were the fault of Manatt. The arbitrator deemed 

Manatt the prevailing party in the arbitration and directed it to 

submit an application to recover its reasonable attorneys’ fees, 

expert fees, and costs, as provided in the 2007 engagement 

agreement. 

E. ECC Requests Disqualification of the Arbitrator

On October 30, 2013, before Manatt filed its application for 

fees and costs, ECC wrote the arbitrator and AAA requesting the 

arbitrator’s disqualification from the proceeding and suggesting 

there were grounds to vacate the interim award. ECC contended 

the arbitrator failed to comply with his disclosure obligations by 

not disclosing his “role as a Panelist in a prior matter involving 

[Manatt] that took place in 2006.” ECC identified that matter as 

Tom Leykis v. Damian Macafee dba QTK Internet Name Proxy, a 

Uniform Domain Name Dispute Resolution Policy (UDRP) 

proceeding before the National Arbitration Forum in which the 

arbitrator served as a panelist and the claimant was represented 

by Jill M. Pietrini, an attorney who at that time (and until 

approximately January 2012) worked for Manatt.7 ECC stated it 

“only recently” discovered these facts and believed the arbitrator 

failed to disclose “other matters” he was statutorily required to 

disclose. In letters to AAA in October and November 2013, 

Manatt responded to ECC’s contentions and asked the arbitrator 

not to disqualify himself. 

On November 12, 2013 the arbitrator notified the parties 

by letter that he did not intend to disqualify himself. The 

arbitrator stated that, at the time he undertook the present 

 

7 UDRP proceedings, as we will discuss in more detail, 

involve disputes over the use of Internet domain names. 
12

matter in December 2010, “[he] was unaware that an attorney 

from [Manatt] had been listed as counsel in an uncontested, 

documents only domain name dispute arbitration, in which [he] 

served as an arbitrator almost five years previously.” He stated 

that since 2000 he had served approximately 450-500 times as an 

“arbitrator” in UDRP proceedings administered by the National 

Arbitration Forum, almost all of which were, like the Leykis 

matter, uncontested. 

The arbitrator explained his involvement with those 

proceedings: “These cases are documents only matters in which, 

as an arbitrator, I have no direct contact with the parties or their 

representatives. In fact, my total involvement in preparing a 

decision takes well less than one hour. When an uncontested 

matter is assigned to me, I access a web-based portal where I can 

download the documents pertaining to the matter. The 

complaining party files a complaint online, there is[]in addition a 

letter assigning the matter to an arbitrator, a staff memorandum 

proposing a resolution to the matter, and a template of the 

decision. [¶] . . . I do not add [the names of the parties or their 

representatives] to the template or give any consideration to the 

names, if any, of a party representative. . . . The staff 

memorandum proposes a resolution to all of the issues. . . . In the 

case of uncontested matters, like the Leykis case, the resolutions 

proposed in the staff memorandum are almost always adopted 

with only modest editing.” 

The arbitrator further explained: “Because of the sheer 

volume of these cases, the fact that they are uncontested, 

documents only matters, in which no consideration is given to 

any one listed as a party representative, I can state with absolute 

certainty that when I filled out the disclosure information in this 
13

case I was unaware that an attorney from the Manatt firm had 

been listed as a party representative in one of those matters. [¶] 

I do maintain an excel spreadsheet where I record contested 

arbitrations and mediations. I do not include in that excel 

spreadsheet these domain name matters because they are 

uncontested, documents only matters, where identification of a 

party, or a party representative, is completely irrelevant to the 

resolution of the dispute. So, when I did my customary due 

diligence by reviewing the excel spreadsheet, the Manatt firm did 

not appear.” 

On November 18, 2013 ECC sent a second letter to AAA, 

requesting AAA disqualify the arbitrator and vacate the interim 

award, and describing “additional pertinent evidence.” ECC 

stated that after receiving the arbitrator’s letter it searched the 

National Arbitration Forum’s online database and discovered 

that in 2002 the arbitrator was a panelist in Kevin Spacey v. 

Alberta Hot Rods, a contested proceeding in which the claimant, 

represented by Manatt, prevailed. ECC conceded the Spacey

matter was “not within the five year disclosure period,” but 

argued it was relevant to ECC’s consideration of whether to allow 

the arbitrator to serve in this case, and ECC would have 

discovered and considered it had the arbitrator disclosed the 

Leykis matter as ECC contended was required. On December 

11, 2013 AAA notified the parties it was denying ECC’s request 

to disqualify the arbitrator. 

F. The Trial Court Confirms the Interim Award

In December 2013 ECC filed a petition to vacate the 

interim award and disqualify the arbitrator, contending the 

arbitrator failed to comply with his statutory disclosure 
14

obligations. In January 2014 Manatt filed a competing petition 

to confirm the interim award. In February 2014 ECC amended 

its petition to include a request to vacate the orders compelling 

arbitration. 

In its amended petition ECC argued the court should 

vacate the orders compelling arbitration and the interim award 

because ECC’s 2007 engagement agreement with Manatt, which 

ECC referred to as “the Arbitration Agreement,”8 was procured 

by Manatt’s “fraud [and] coercion.” ECC contended the evidence 

of Manatt’s fraud and coercion emerged only during the 

arbitration hearing, when Marshall testified Section 7 of the APA 

was (in ECC’s words) “drafted to provide only a discretionary 

obligation on the part of Bear.” According to ECC, this testimony 

conflicted with Marshall’s previous statements indicating she 

shared ECC’s view that Section 7 “required Bear to purchase and 

securitize monthly all the loans originated during the pre-closing 

period.” This testimony also established, according to ECC, that 

Manatt engaged in fraud and coercion when it requested ECC to 

sign an engagement agreement in January 2007, “on the eve of” 

ECC and Bear’s closing their transaction under the APA. ECC 

 

8 ECC stated in a footnote: “Plaintiff Performance Credit 

LLC, then known as Encore Credit Corporation, had signed an 

engagement letter with Manatt in April 2003, with different 

arbitration provisions than the ECC agreement, and not calling 

for AAA arbitration. That fee agreement pertained to a different 

representation matter. The Court ordered both Performance 

Credit and ECC to AAA arbitration.” This is the only 

explanation in the record or the briefs for why the parties do not 

address what effect, if any, the 2003 engagement agreement 

between Manatt and Encore might have on the issues in this 

appeal. 
15

contended Marshall’s testimony demonstrated that, at the time 

Manatt asked ECC to sign the engagement agreement, Marshall 

knew “she had not performed the job she was specifically hired to 

do,” “was concealing her belief that Bear’s obligations were 

‘discretionary,’” and knew “a potential claim [for legal 

malpractice] would be likely.” 

ECC also argued the court should vacate the interim award 

and the orders to compel arbitration because the 2007 

engagement agreement was “illegal.” ECC argued the agreement 

was illegal because Manatt had an undisclosed conflict of interest 

arising from its dual representation of ECC and “Bear,” for which 

Manatt had not obtained a written waiver from ECC. 

On March 12, 2014 the trial court denied ECC’s amended 

petition. The court also granted Manatt’s petition to confirm the 

interim award. 

G. The Arbitrator Issues His Final Award 

In March 2014 Manatt presented the arbitrator with its 

application for more than $8 million in attorneys’ fees, expert 

fees, and costs as the prevailing party in the arbitration. ECC 

opposed the application on several grounds, including that the 

2007 engagement agreement under which Manatt sought fees 

and costs was unenforceable because Manatt committed ethical 

violations in obtaining it. ECC again contended Manatt had an 

undisclosed conflict of interest. 

In January 2015 the arbitrator issued his final award, 

granting Manatt’s application for attorneys’ fees, expert fees, and 

costs in the amount of $6,982,621. In his 23-page ruling, the 

arbitrator discussed at length ECC’s contention that the 2007 

engagement agreement was unenforceable. The arbitrator 
16

rejected that contention because there was no evidence Manatt 

had a conflict of interest, ECC had forfeited the argument by

failing to raise it during the arbitration hearing, and ECC had 

sought to enforce the terms of the 2007 engagement agreement 

when it requested attorneys’ fees, expert fees, and costs in its 

arbitration demand. 

In concluding Manatt had no conflict of interest, the 

arbitrator noted Marshall had submitted a declaration to the 

effect that “Manatt never represented any of the companies 

affiliated with [Bear Stearns & Co., Inc.] involved in the APA: 

[Bear Stearns Residential Mortgage Corporation], EMC 

[Mortgage Corporation], and Bear Stearns Mortgage Capital 

Corporation,” but that “Manatt did represent previously [Bear 

Stearns & Co., Inc.] in unrelated matters.” The arbitrator stated 

that, because of the importance of these facts to the issues ECC 

raised, he had directed counsel for Manatt to conduct further 

inquiry, and after consulting with Manatt’s managing partner, 

counsel for Manatt had sent an email to the arbitrator and 

counsel for ECC stating the following: 

“‘During the period 1987-89, but not thereafter, Manatt 

represented an entity named Bear Stearns Mortgage Capital, 

which apparently was one of the many Bear subsidiaries. The 

counterparty to the repo agreement in the APA transaction was 

an entity named Bear Stearns Mortgage Capital Corp. We do not 

yet know if the two entities are the same entity with a name 

change, or different entities. I have also been informed that 

Manatt represented PMG Securities Corporation (not a Bear 

entity) in an NASD arbitration in which another Bear affiliate, 

Bear Stearns Securities Corp., was a co-defendant. I am 

informed that PMG Securities Corporation indemnified Bear 
17

Stearns Securities Corp. and that Manatt appeared in the 

arbitration as counsel for both.’” 

“Thus,” the arbitrator observed, “counsel for Manatt 

acknowledged that Ms. Marshall’s declaration was false.”9 The 

arbitrator then noted he had asked the parties during the 

hearing on Manatt’s application for attorneys’ fees “whether they 

believed further investigation and/or an evidentiary hearing was 

necessary to establish the precise nature of Manatt’s prior 

representation of any Bear Stearns affiliated entity. Counsel for 

the parties stated they were satisfied with the record as it stood, 

taking into account this most recent communication from 

Manatt’s counsel.” 

The arbitrator concluded, “Although it appears Manatt 

previously had an attorney client relationship with [Bear Stearns 

& Co., Inc.] and Bear Stearns Mortgage Capital (potentially the 

same entity as one of the parties engaged in the negotiation of 

the APA), no such relationships existed in 2006 when Manatt 

represented ECC in drafting portions of the APA. To the extent 

there are unknown issues regarding the nature of these 

relationships or the reason why Manatt obtained a waiver letter 

from Bear Stearns, the gap in the evidence was caused by the 

delay on the part of ECC in raising its allegations of unethical 

conduct.” (Fns. omitted.)

The arbitrator also rejected ECC’s argument that Manatt’s 

agreement not to represent ECC in litigation relating to the APA 

constituted a conflict. The arbitrator noted that, in response to 

 

9 This appears to be an overstatement. The email from 

counsel for Manatt leaves open the possibility Marshall was 

correct in stating Manatt never represented any of the three Bear 

Stearns entities involved with the APA. 
18

the September 2006 email exchange in which Darling requested 

that Sherman and Marshall “[p]lease do try to get a waiver,” 

Manatt prepared a conflict waiver letter that a senior managing 

director of Bear Stearns & Co., Inc. subsequently signed.10 It 

was this conflict waiver letter to which Marshall was referring

when in January 2007, in response to a request from ECC that 

she bring a litigator to a meeting to discuss disputes over the 

APA, Marshall wrote: “I took a look at the conflict waiver letter 

that we got from Bear Stearns, and it specifically excludes 

representation in a litigation.” The arbitrator concluded the 

conflict waiver letter thus “amounted to a ‘relationship’ with 

[Bear Stearns & Co., Inc.] which apparently extended to [Bear 

Stearns Residential Mortgage Corporation] wherein Manatt 

agreed not to engage in any litigation relating to the APA.” 

The arbitrator determined this “relationship,” however, did 

not constitute a conflict of interest because there was no evidence 

it materially and adversely affected Manatt’s representation of 

ECC or ECC’s interests. The arbitrator noted the 2007 

engagement agreement between ECC and Manatt defined the 

“matter” for which ECC was retaining Manatt as “general 

corporate advice” and all the evidence in the arbitration “showed 

that Manatt’s role was limited to drafting and negotiating 

selected portions of the APA documentation.” In addition, the 

arbitrator observed, ECC “promptly retained extremely 

 

10 The arbitrator noted the letter was not part of the record of 

the proceeding because counsel for Manatt contended it was 

privileged, and “Manatt has not been able to identify anyone with 

the current holder of the privilege, JP Morgan Chase, to 

authorize release of the letter.” 
19

competent counsel” to represent it in litigation with Bear 

Stearns. 

H. The Trial Court Confirms the Final Award

On February 24, 2015 ECC and Manatt filed respective 

petitions to vacate and confirm the final arbitration award. ECC 

argued the trial court should vacate the final award under 

section 1286.2, subdivision (a), because, among other reasons, the 

arbitrator exceeded his powers by awarding fees and costs 

pursuant to an illegal agreement, the final award was procured 

by “fraud, coercion and/or undue means,” and the arbitrator 

failed to disclose a ground for disqualification of which he was 

aware. 

On March 23, 2015 the trial court denied ECC’s petition to 

vacate the final award and granted Manatt’s petition to confirm 

it. Neither party requested a statement of decision. On July 13, 

2015 the trial court entered judgment in favor of Manatt and 

against ECC in the amount of $6,982,621. ECC timely appealed. 

DISCUSSION

ECC argues the trial court erred in confirming the interim 

award because the arbitrator violated mandatory disclosure 

rules. ECC also contends the trial court erred in confirming the 

final award because the arbitrator exceeded his powers by 

enforcing an illegal agreement, Manatt procured the final award 

by fraud or undue means, and the arbitrator refused to allow 

ECC to take discovery and present evidence relating to Manatt’s 

alleged conflict of interest. 
20

A. Standard of Review

Judicial review of an arbitration award is ordinarily limited 

to the statutory grounds for vacating an award under section 

1286.2 and correcting an award under section 1286.6. 

(Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 12-13; Sunline 

Transit Agency v. Amalgamated Transit Union, Local 1277 (2010) 

189 Cal.App.4th 292, 303.) “In relatively rare instances the court 

may also vacate or correct an arbitration award, ‘[w]here 

“according finality to the arbitrator’s decision would be 

incompatible with the protection of a statutory right” or where 

the award contravenes “an explicit legislative expression of public 

policy.”’” (Sunline Transit Agency, at p. 303; see Singerlewak 

LLP v. Gantman (2015) 241 Cal.App.4th 610, 615-617.) 

“‘On appeal from an order confirming an arbitration award, 

we review the trial court’s order (not the arbitration award) 

under a de novo standard. [Citations.] To the extent that the 

trial court’s ruling rests upon a determination of disputed factual 

issues, we apply the substantial evidence test to those issues.’” 

(Toal v. Tardif (2009) 178 Cal.App.4th 1208, 1217; accord, 

Condon v. Daland Nissan, Inc. (2016) 6 Cal.App.5th 263, 267; see 

Sunline Transit Agency, supra, 189 Cal.App.4th at p. 303 [“‘“the 

general rule [is] that ‘an arbitrator’s decision cannot be reviewed 

for errors of fact or law’”’”].) “[T]he question whether the 

arbitrator exceeded his powers and thus whether we should 

vacate his award on that basis is generally reviewed on appeal de 

novo.” (Richey v. AutoNation, Inc. (2015) 60 Cal.4th 909, 918, fn. 

1.)

Although there is a split of authority on whether a 

statement of decision is required on a petition to confirm an 
21

arbitration award when a party requests one,

11 courts uniformly 

hold that a statement of decision is not required when there is no 

such request. (See Carbajal v. CWPSC, Inc. (2016) 245 

Cal.App.4th 227, 237 [“[w]hen a trial court denies a motion to 

compel arbitration, a party may request the court to provide a 

statement of decision explaining the factual and legal basis for its 

decision,” but “[n]o statement of decision is required if the parties 

fail to request one”]; Agri-Systems, Inc. v. Foster Poultry Farms

(2008) 168 Cal.App.4th 1128, 1134 [trial court confirming an 

arbitration award “has no obligation to prepare a statement of 

decision unless a party requests one”].) Where, as here, neither 

side asked for, and the trial court did not issue, a statement of 

decision, “the appellate court will infer the trial court made 

implied factual findings favorable to the prevailing party on all 

issues necessary to support the judgment, including the omitted 

or ambiguously resolved issues. [Citations.] The appellate court 

then reviews the implied factual findings under the substantial 

evidence standard.” (Fladeboe v. American Isuzu Motors Inc.

(2007) 150 Cal.App.4th 42, 60; see In re Marriage of Arceneaux

(1990) 51 Cal.3d 1130, 1133-1135; Agri-Systems, Inc., at p. 1135

[applying the rule to an order confirming an arbitration award].) 

 

11 Compare Rebmann v. Rohde (2011) 196 Cal.App.4th 1283, 

1294 [a statement of decision is not required for an order 

granting or denying a petition to confirm an arbitration award] 

with Metis Development LLC v. Bohacek (2011) 200 Cal.App.4th 

679, 687 [“the Legislature intended to require the trial court to 

issue a statement of decision, upon proper request under section 

632, when denying a petition to compel arbitration”].
22

B. ECC Did Not Establish the Arbitrator Violated 

Mandatory Disclosure Rules

Section 1286.2, subdivision (a)(6)(A), provides the court 

must vacate an arbitration award if the arbitrator “failed to 

disclose within the time required for disclosure a ground for 

disqualification of which the arbitrator was then aware.” (See 

Haworth v. Superior Court (2010) 50 Cal.4th 372, 394 [under 

section 1286.2, subdivision (a)(6), “an arbitrator’s failure to make 

a required disclosure requires vacation of the award, without a 

showing of prejudice”].) Specifically, as relevant here, “[w]ithin 

10 days of receiving notice of his or her nomination to serve as a 

neutral arbitrator, the proposed arbitrator is required, generally, 

to ‘disclose all matters that could cause a person aware of the 

facts to reasonably entertain a doubt that the proposed neutral 

arbitrator would be able to be impartial.’” (Haworth, at p. 381, 

quoting § 1281.9, subd. (a); accord, United Health Centers of 

San Joaquin Valley, Inc. v. Superior Court (2014) 229 

Cal.App.4th 63, 75; see § 1281.9, subds. (a), (b).) 

Section 1281.9, subdivision (a), enumerates specific matters 

the arbitrator must disclose. (See Haworth, supra, 50 Cal.4th at 

p. 381; United Health Centers, supra, 229 Cal.App.4th at p. 75.) 

Subdivision (a)(4) of that section requires disclosure of “[t]he 

names of the parties to all prior or pending noncollective 

bargaining cases involving any party to the arbitration or lawyer 

for a party for which the proposed neutral arbitrator served or is 

serving as neutral arbitrator, and the results of each case 

arbitrated to conclusion, including the date of the arbitration 

award, identification of the prevailing party, the names of the 

parties’ attorneys and the amount of monetary damages awarded, 

if any.” “Prior cases” in this description means “noncollective 
23

bargaining cases in which an arbitration award was rendered 

within five years prior to the date of the proposed nomination or 

appointment.” (Id., subd. (d).) “Lawyer for a party” means “any 

lawyer or law firm currently associated in the practice of law 

with the lawyer hired to represent a party.” (Id., subd. (c).) 

To similar effect, subdivision (a)(2) of section 1281.9 

requires the arbitrator to disclose “[a]ny matters required to be 

disclosed by the ethics standards for neutral arbitrators adopted 

by the Judicial Council pursuant to this chapter.” Those Ethics 

Standards require an arbitrator to disclose whether he or she “is 

serving or, within the preceding five years, has served . . . [a]s a 

neutral arbitrator in another prior or pending noncollective 

bargaining case involving a party to the current arbitration or a 

lawyer for a party.” (Ethics Standards, std. 7(d)(4)(A)(i); see 

United Health Centers, supra, 229 Cal.App.4th at p. 76, fn. 4.) 

ECC contends the Leykis matter—the UDRP proceeding in 

which the arbitrator participated within the previous five years 

and a Manatt lawyer represented the claimant—was a prior 

noncollective bargaining case that section 1281.9, subdivisions 

(a)(2) and (a)(4), required him to disclose within 10 days of his 

proposed appointment to serve as arbitrator in this case. 

Because he failed to do so, ECC argues, the trial court erred in 

not vacating the interim award pursuant to section 1286.2, 

subdivision (a)(6)(A). 

As Manatt points out, however, section 1286.2, subdivision 

(a)(6)(A), provides for vacatur only where the arbitrator fails to 

disclose a ground for disqualification “of which the arbitrator was 

then aware.” Casden Park La Brea Retail LLC v. Ross Dress For 

Less, Inc. (2008) 162 Cal.App.4th 468 illustrates this knowledge 

requirement. After the trial court in that case vacated an 
24

arbitration award because the court found the neutral arbitrator 

improperly failed to disclose business dealings between his 

employer and a party (and that party’s arbitrator), the Court of 

Appeal reversed. (Id. at p. 470.) Acknowledging section 1281.9, 

subdivision (a)(6), required disclosure of “‘[a]ny professional or 

significant personal relationship the proposed neutral arbitrator 

. . . has or has had with any party to the arbitration proceeding,’” 

the court in Casden nevertheless held vacating the arbitration 

award under section 1286.2, subdivision (a)(6), was improper 

because the arbitrator did not know of the business dealings 

when he made his disclosures. (Casden, at pp. 476-477.) The 

court explained: “[A]n arbitration award may be vacated only 

upon a finding that a neutral arbitrator failed to disclose a 

ground for disqualification ‘of which the arbitrator was then 

aware’ [citation], and this requirement of scienter is a deliberate 

expression of the Legislature’s intent to prevent the undoing of 

an arbitration award based upon an arbitrator’s unknowing 

failure to disclose information.” (Id. at p. 477.) Because no one 

disputed the arbitrator was unaware of the business dealings, the 

court observed, “it follows that [the arbitrator] had no duty to 

disclose those transactions.” (Id. at pp. 477-478.) 

The parties here similarly do not dispute that at the time of 

his disclosures the arbitrator was not aware a former Manatt 

lawyer had participated in the Leykis UDRP matter. As the 

arbitrator stated in his letter responding to ECC’s request that 

he disqualify himself: “[L]et me state unequivocally that at the 

time I undertook this matter in December 2010 I was unaware 

that an attorney from [Manatt] had been listed as counsel in [the 

Lyekis matter]. The letter I received from [ECC] was the first, 

and only time, I became aware that an attorney from Manatt had 
25

been listed as a party representative in [that] matter.” Because 

the arbitrator was not aware a former Manatt lawyer 

participated in the Leykis UDRP proceeding, his failure to 

disclose that matter is not a ground for vacating the interim 

award under section 1286.2, subdivision (a)(6)(A). 

ECC argues that, although the arbitrator may not have 

been aware a Manatt lawyer participated in the Leykis UDRP 

proceeding, he should have been aware, and therefore his failure 

to disclose the matter requires vacating the interim award. As 

ECC puts it: “An arbitrator cannot render himself ‘unaware’ of 

arbitrations he is required to disclose by failing to inform himself 

before making disclosures.” ECC points to what the court in 

Advantage Medical Services, LLC v. Hoffman (2008) 160 

Cal.App.4th 806 referred to as a “duty of inquiry” imposed by the 

Ethics Standards. (Id. at p. 819.) The court in Advantage

Medical Services noted: “Standard 9(a) of the Standards clearly 

states: ‘A person who is nominated or appointed as an arbitrator 

must make a reasonable effort to inform himself or herself of 

matters that must be disclosed under standards 7 and 8.’”

12 (Id.

at p. 818.) ECC argues these authorities required the arbitrator 

to inform himself of the Leykis matter by reviewing the UDRP 

proceedings in which he participated, and ECC contends his 

failure to do so (and resulting failure to discover and disclose the 

Leykis matter) requires vacatur. 

There are two problems with ECC’s argument, one legal 

and one factual. As a legal matter, ECC does not explain how the 

arbitrator’s failure to disclose a ground for disqualification of 

which the arbitrator was not aware but reasonably should have 

 

12 The only disclosure requirement under standards 7 and 8 

that ECC identifies as applicable is standard 7(d)(4)(A). 
26

been requires vacating an award under section 1286.2, 

subdivision (a)(6)(A), when that statute requires vacating an 

award only when an arbitrator fails to disclose a ground for 

disqualification of which he or she was actually aware. Section 

1286.2, subdivision (a)(6)(A), requires actual awareness, not 

inquiry or constructive awareness. (See Knight et al., Cal. 

Practice Guide: Alternative Dispute Resolution (The Rutter 

Group 2016) ¶ 7:50 [“[t]he arbitrator’s duty to investigate for 

conflicts is narrower than the duty to disclose known conflicts”].) 

As a factual matter, because the trial court did not issue a 

statement of decision, we must presume the court found the 

arbitrator made a reasonable effort to inform himself of matters 

he was required to disclose and therefore it was not unreasonable

for him to exclude the UDRP proceedings from his pre-disclosure 

review. 

That implied factual finding is supported by substantial 

evidence. The arbitrator explained it was not his practice to 

include the UDRP proceedings in his review because of the 

nature and number of those proceedings, and he stated this 

practice comported with his “understanding of [his] ethical duties 

and disclosure obligations under California law.” Manatt 

submitted declarations from three people with relevant 

experience and expertise who concurred with the arbitrator’s 

approach. One of those, David E. Sorkin, a panelist in 

approximately 400 UDRP proceedings and an arbitrator in 

approximately 90 private contractual arbitrations, is a law 

professor whose scholarship focuses on “Internet law, UDRP 

mandatory administrative proceedings[,] and arbitration laws 

and practices.” Sorkin explained that any person contesting 

another person’s Internet domain name registration can initiate 
27

a UDRP proceeding. He then highlighted what he considered 

important differences between such a proceeding and those 

proceedings an arbitrator would normally recognize as 

“arbitrations” subject to the disclosure requirements under 

section 1281.9 and the Ethics Standards. For example, UDRP 

rules refer to UDRP proceedings as “mandatory administrative 

proceedings,” not “arbitrations,” and refer to the people who 

decide such disputes as “panelists,” not “arbitrators.” UDRP 

proceedings are non-binding, in that “[e]ither side can file a court 

action at any time, before, during or after a decision.” And UDRP 

proceedings “typically involve no in-person or telephonic 

hearings, no witnesses, no discovery, and no contact with the 

panelist.” Given these characteristics, Sorkin opined, “it would 

be reasonable for an arbitrator to believe that serving as a 

panelist in a UDRP mandatory administrative proceeding would 

not trigger a required arbitration disclosure under California’s 

Ethics Standards or [section] 1281.9.” The other two expert 

declarations on this subject included similar statements. 

ECC cites no authority suggesting the arbitrator’s 

understanding of his disclosure obligation was unreasonable. In 

fact, ECC suggests whether a UDRP proceeding is, as it contends, 

an “arbitration” subject to mandatory disclosure under section 

1281.9, subdivision (a)(4), and the Ethics Standards, is an issue 

of first impression in California. That ECC has found cases 

where arbitrators and some federal courts outside California may 

have referred to UDRP proceedings as “arbitrations,” without 

addressing and analyzing whether that label is appropriate, is 

not dispositive. (See, e.g., Storey v. Cello Holdings, L.L.C. (2d 

Cir. 2003) 347 F.3d 370, 381, 393; Retail Services, Inc. v. Freebies 

Pub. (E.D.Va. 2003) 247 F.Supp.2d 822, 825; see also Borikas v. 
28

Alameda Unified School District (2013) 214 Cal.App.4th 135, 164, 

fn. 34 [“a case is not authority for a proposition it does not 

address”].) Moreover, although there are no cases addressing 

whether a UDRP proceeding is an “arbitration” subject to 

disclosure under the provisions of the California Arbitration Act 

(§ 1280 et seq.), federal cases addressing whether a UDRP 

proceeding is an “arbitration” under the Federal Arbitration Act 

(9 U.S.C. § 1 et seq.) have concluded it is not. (See Dluhos v. 

Strasberg (3d Cir. 2003) 321 F.3d 365, 370-373; Parisi v. 

Netlearning, Inc. (E.D.Va. 2001) 139 F.Supp.2d 745, 751-753; see 

also Speidel, ICANN Domain Name Dispute Resolution, the 

Revised Uniform Arbitration Act, and the Limitations of Modern 

Arbitration Law (2002) 6 J. Small & Emerging Bus. L. 167, 171-

172 [“the UDRP is not an arbitration within the scope of 

American statutory arbitration law, whether that law is found in 

international treaties, the FAA, or state arbitration law”], fns. 

omitted.) 

Finally, ECC suggests the arbitrator should have disclosed, 

at a minimum, that he had participated in numerous UDRP 

proceedings that he did not review for required disclosures, so 

that the parties could have undertaken their own review of and 

investigation into those matters. That might have been a better 

arbitrator disclosure practice. But ECC cites no authority for 

vacating an arbitration award on that ground. The trial court did 

not err when it denied ECC’s petition to vacate the interim award 

based on the arbitrator’s alleged failure to make mandatory 

disclosures. 
29

C. ECC Forfeited Its Argument the 2007 

Engagement Agreement Was Illegal

Section 1286.2, subdivision (a)(4), requires a court to vacate 

an arbitration award if it determines “[t]he arbitrators exceeded 

their powers and the award cannot be corrected without affecting 

the merits of the decision upon the controversy submitted.” ECC 

contends the trial court erred in refusing to vacate the final 

award because, in making the award, the arbitrator exceeded his 

powers and violated a well-defined public policy by “enforcing an 

illegal agreement.” Specifically, ECC argues that, in awarding 

fees and costs under the 2007 engagement agreement, the 

arbitrator gave effect to a contract that was illegal because 

Manatt procured it in violation of Rules 3-310(B) and 3-310(C) of 

the Rules of Professional Conduct and section 6106 of the 

Business & Professions Code. 

Rule 3-310(B) of the Rules of Professional Conduct 

prohibits a lawyer from, among other things, accepting or 

continuing “representation of a client without providing written 

disclosure to the client where . . . [the lawyer] has a legal, 

business, financial, professional, or personal relationship with a 

party or witness in the same matter.” (Rules Prof. Conduct, rule 

3-310(B)(1).) ECC contends Manatt violated this rule because it 

represented ECC without providing written disclosure that 

“Manatt had entered into a ‘legal, business . . . or professional 

relationship’ with Bear in 2006 when it contractually committed 

that it would not represent ECC in litigation.” 

Rule 3-310(C) of the Rules of Professional Conduct provides 

that a lawyer must not, “without the informed written consent of 

each client[,] . . . [a]ccept representation of more than one client 

in a matter in which the interests of the clients potentially 
30

conflict” or “[a]ccept or continue representation of more than one 

client in a matter in which the interests of the clients actually 

conflict.” (Rules Prof. Conduct, rule 3-310(C)(1)-(2).) ECC 

contends Manatt violated these provisions by failing to obtain 

ECC’s informed written consent to Manatt’s “dual 

representation” of ECC and “Bear.” 

ECC also contends Manatt’s violation of these Rules of 

Professional Conduct “means that the [2007 engagement 

agreement] was obtained in violation of Business & Professions 

Code Section 6106.” That section provides, in relevant part, that 

a lawyer’s “commission of any act involving moral turpitude, 

dishonesty or corruption . . . constitutes a cause for disbarment or 

suspension.” (Bus. & Prof. Code, § 6106.) 

We agree with Manatt, the arbitrator, and the trial court 

that ECC forfeited these arguments by failing to raise them 

earlier in the proceedings. Cummings v. Future Nissan (2005) 

128 Cal.App.4th 321 is instructive. In that case, the appellant 

received a favorable result at the first level of a “two-tiered” 

arbitration proceeding, but had that result reversed at the 

second, “review” level. (Id. at p. 323.) After the trial court 

confirmed the final award, the appellant urged the Court of 

Appeal to vacate it on the ground the arbitration provision in her 

employment contract was unconscionable and therefore 

unenforceable, an argument she had raised for the first time only 

after losing at the review level of the arbitration. (Id. at pp. 323, 

327.) The court in Cummings held the appellant forfeited the 

argument because she failed to raise it in her opposition to the 

motion to compel arbitration. (Id. at pp. 329-330.) The court 

explained: “The forfeiture rule exists to avoid the waste of scarce 

dispute resolution resources, and to thwart game-playing 
31

litigants who would conceal an ace up their sleeves for use in the 

event of an adverse outcome. . . . Those who are aware of a basis 

for finding the arbitration process invalid must raise it at the 

outset or as soon as they learn of it so that prompt judicial 

resolution may take place before wasting the time of the 

adjudicator(s) and the parties. . . . . [A] party who knowingly 

participates in the arbitration process without disclosing a 

ground for declaring it invalid is properly cast into the outer 

darkness of forfeiture.” (Id. at pp. 328-329, fns. omitted.) 

In reaching its conclusion, the court in Cummings cited 

Moncharsh, supra, 3 Cal.4th 1: “Moncharsh held that if a party 

believes the entire contractual agreement or a provision for 

arbitration is illegal, it must oppose arbitration on this basis 

before participating in the process or forfeit the claim.” 

(Cummings, supra, 128 Cal.App.4th at p. 328.) As the Supreme 

Court stated in Moncharsh, “we cannot permit a party to sit on 

his rights, content in the knowledge that should he suffer an 

adverse decision, he could then raise the illegality issue in a 

motion to vacate the arbitrator’s award. A contrary rule would 

condone a level of ‘procedural gamesmanship’ that we have 

condemned as ‘undermining the advantages of arbitration.’” 

(Moncharsh, at p. 30; see Reed v. Mutual Service Corp. (2003) 106 

Cal.App.4th 1359, 1372-1373 [“[a]ny claim of illegality must be 

raised before the arbitrator or it is deemed waived” because “[a] 

contrary rule might tempt a party to ‘play games’ with the 

arbitration and not raise the issue of illegality until and unless it 

lost”]; see also Mitchel v. City of Santa Rosa (N.D.Cal. 2010) 695 

F.Supp.2d 1001, 1007 [under Moncharsh “a plaintiff who argues 

that a fee-splitting provision in an arbitration agreement is 
32

illegal and in violation of public policy must raise that argument 

before the arbitration panel or risk waiver of the claim”].) 

These principles apply with equal if not greater force in 

this case. Not only did ECC not oppose the motions to compel 

arbitration on the ground the 2007 engagement agreement was 

illegal or otherwise unenforceable, ECC gave every indication 

going into the arbitration hearing it was abandoning its previous 

assertion that Manatt had an undisclosed conflict of interest, and 

during the hearing ECC represented it was not going to present 

any evidence to establish what it now claims as the basis of its 

illegality argument. This procedural gamesmanship, as the 

arbitrator noted, deprived Manatt of the opportunity “during the 

evidentiary portion of this arbitration to make a record on this 

issue or retain its own expert on the issue of conflict of interest.” 

ECC maintains “a claim that a contract is illegal is never

waived.” Not according to the Supreme Court, which in 

Moncharsh stated: “We thus hold that unless a party is claiming 

(i) the entire contract is illegal, or (ii) the arbitration agreement 

itself is illegal, he or she need not raise the illegality question 

prior to participating in the arbitration process, so long as the 

issue is raised before the arbitrator. Failure to raise the claim 

before the arbitrator, however, waives the claim for any future 

judicial review.” (Moncharsh, supra, 3 Cal.4th at p. 31; see id. at 

pp. 29-31.) In fact, as the Supreme Court has also stated, “the 

maxim that the illegality of a contract . . . is never waived” 

appears to concern “the procedural issue whether a defense is 

waived by failure to assert it in a timely fashion once a lawsuit 

has commenced,” and “it is not clear that all issues of illegality in 

a contract fall within the unwaivable category.” (Styne v. Stevens

(2001) 26 Cal.4th 42, 54, fn. 5; see Yoo v. Robi (2005) 126 
33

Cal.App.4th 1089, 1103 [“there may be some exceptions to the 

rule of unwaivablility”].) 

The cases ECC cites are distinguishable for that reason: 

They concern a failure to raise the illegality of a contract as an 

affirmative defense to a suit on the contract. (See, e.g., Fewel & 

Dawes v. Pratt (1941) 17 Cal.2d 85, 92; Yoo v. Robi, supra, 126 

Cal.App.4th at p. 1103 [“a defense of illegality based on public 

policy is not waived by the defendant’s failure to include it as an 

affirmative defense in the answer to the complaint”]; In re 

Guardianship of Prieto’s Estate (1966) 243 Cal.App.2d 79, 86.) As 

one court explained: “This rule [of non-waiver] applies because, 

unlike other affirmative defenses which may be waived if not 

pled, ‘when the evidence shows that the plaintiff in substance 

seeks to enforce an illegal contract or recover compensation for an 

illegal act, the court has both the power and duty to ascertain the 

true facts in order that it may not unwittingly lend its assistance 

to the consummation or encouragement of what public policy 

forbids.’” (Yoo, at p. 1103, fn. omitted.) 

In stark contrast, in this case it was ECC that sued on a 

contract, lost, and only then argued illegality in an attempt to 

avoid paying fees and costs, despite the fact it was aware of the 

facts offered in support of that argument from the outset of the 

case. Such tactics were not present in the cases ECC cites, and, if 

permitted to succeed here, would severely “‘undermin[e] the 

advantages of arbitration.’” (Moncharsh, supra, 3 Cal.4th at p. 

30.) Under these circumstances, we are not “unwittingly lend[ing 

our] assistance to the consummation or encouragement of what 

public policy forbids.” (Yoo v. Robi, supra, 126 Cal.App.4th at p.

1103.) 
34

D. ECC Did Not Establish Manatt Procured the Final 

Award by Fraud or Undue Means

ECC also argues the trial court should have vacated the 

final award under section 1286.2, subdivision (a)(1), which 

requires vacatur when an award “was procured by corruption, 

fraud or other undue means.” ECC suggests Manatt procured the 

award by fraud or undue means “because Ellen Marshall’s 

perjured testimony that no conflict of interests existed had a 

‘substantial impact’ on the arbitrator’s decision.” The “perjured 

testimony” to which ECC refers is the declaration from Marshall 

that the arbitrator, in his ruling, stated Manatt acknowledged 

was “false.” 

This argument fails for two reasons. First, the arbitrator 

gave multiple, alternative grounds for rejecting ECC’s contention 

the 2007 engagement agreement was unenforceable. One of 

those grounds was that ECC forfeited the argument, a conclusion 

with which we concur. In determining whether “perjured 

evidence or evidence procured by undue means” affected an 

arbitration award, we must presume the arbitrator “‘took a 

permissible route to the award where one exists.’” (Pour Le Bebe, 

Inc. v. Guess? Inc. (2003) 112 Cal.App.4th 810, 833.) 

Second, the arbitrator did not rely at any point on that 

portion of Marshall’s declaration the arbitrator said Manatt 

acknowledged was “false.” What counsel for Manatt’s email 

suggested may have been false was Marshall’s statement that 

Manatt had never represented the three affiliated entities 

involved in the APA transaction: Bear Stearns Residential 

Mortgage Corporation, Bear Stearns Mortgage Capital 

Corporation, and EMC Mortgage Corporation. Counsel for 

Manatt’s email acknowledged the possibility that Manatt had 
35

represented one of those entities—Bear Stearns Mortgage 

Capital Corporation—from 1987 to 1989. From this the 

arbitrator concluded Manatt had not represented any of the three 

affiliated entities involved in the APA transaction during the 

time it represented ECC, and the arbitrator rejected aspects of 

ECC’s conflict-of-interest argument on that basis (among others). 

The arbitrator’s ruling did not rely on Marshall’s statement that 

Manatt had never represented Bear Stearns Mortgage Capital 

Corporation. 

E. ECC Did Not Establish the Arbitrator Improperly 

Refused To Hear Evidence

Finally, ECC perfunctorily contends the arbitrator’s 

“refusal to allow ECC to obtain discovery and present evidence on 

the nature and extent of Manatt’s relationship with Bear” 

required the trial court to vacate the final award under section 

1286.2, subdivision (a)(5), which authorizes a court to vacate an 

arbitration award when “[t]he rights of the party were 

substantially prejudiced . . . by the refusal of the arbitrators to 

hear evidence material to the controversy.” ECC cites Burlage v. 

Superior Court (2009) 178 Cal.App.4th 524, 529 for its statement 

that section 1286.2, subdivision (a)(5), is “‘a safety valve in 

private arbitration that permits a court to intercede when an 

arbitrator has prevented a party from fairly presenting its case.’” 

(Burlage, at p. 529.) 

This argument, too, fails. ECC string-cites to places in the 

record where the arbitrator ruled adversely to it in disputes over 

discovery requests or on objections concerning testimony, but 

ECC does not even attempt to explain how those rulings were 

unfair. The record shows ECC had a full and fair opportunity to 
36

pursue its initial allegation that Manatt had an undisclosed 

conflict of interest, eventually abandoned that claim, and thereby 

incurred appropriate limitations on its ability to pursue the 

claim. There was no unfairness in that. 

DISPOSITION

The judgment is affirmed. Manatt is to recover its costs on 

appeal. 

SEGAL, J.

We concur:

ZELON, Acting P. J.

SMALL, J.*

 

*Judge of the Los Angeles Superior Court, assigned by the 

Chief Justice pursuant to article VI, section 6 of the California 

Constitution.