Former Law Partners Sue Arbitrator and American Arbitration Association

Partners in a former Los Angeles law firm sued the arbitrator who presided over their law firm breakup and the American Arbitration Association (AAA), which provided the arbitrator for the dispute. The lawsuit was filed today, Tuesday, April 6, in Los Angeles Superior Court (Lisa Cross, et al vs. Edward J. Costello, Jr.; American Arbitration Association).

LOS ANGELES, CA (PRWEB) April 8, 2004 -- Partners in a former Los Angeles law firm sued the arbitrator who presided over their law firm breakup and the American Arbitration Association (AAA), which provided the arbitrator for the dispute. The lawsuit was filed today, Tuesday, April 6, in Los Angeles Superior Court (Lisa Cross, et al vs. Edward J. Costello, Jr.; American Arbitration Association).

Partners in the now defunct OFlaherty and Belgum are claiming that arbitrator Edward J. Costello, Jr. and AAA failed to disclose background information about Costello that would have cast doubt on Costellos ability to be a fair and impartial arbitrator in law firm breakup cases. The dispute centered around whether the majority of partners had the right to remove another partner from the firm," says Michael Brown, partner in the Pasadena law firm of Brown & Kellner, LLP and one of the attorneys representing the plaintiffs. Costello ruled that their actions were unfair and awarded the ousted partner $6 million in compensatory damages and more than $1.2 million in punitive damages. It so happened that Costello had been a plaintiff in a contentious partnership dispute in which his partners voted to remove him from the partnership. It was almost the exact same scenario, yet the parties in the OFlaherty arbitration were never made aware of these facts."

AAA provided each party of the OFlaherty partnership dispute a copy of Costellos curriculum vitae (CV). The CV did not mention Costellos tenure with Costello, Manfredi & Thorpe, the firm from which he was forced to leave. Its AAAs responsibility to ensure that arbitrator information provided to prospective clients is complete and accurate and to indicate any reasons why the arbitrator may not be appropriate for the arbitration," says Brown. AAA did not fulfill it obligation."

It is shocking that Costello agreed to preside over a partnership arbitration, where he had an identical partnership dispute years earlier," says Richard Kellner, also representing the plaintiffs. Costello and AAA represented Costello as a specialist in partnership disputes. Yet, if attorneys knew about his personal partnership lawsuit, Costello would never be chosen to arbitrate a partnership dispute." Besides Costellos lawsuit against his old firm, he was also embroiled in a dispute with Proskaeur Rose, Goetz & Mendelsohn arising from the firms refusal to make him a partner.

Unlike other states, California does not have a broad arbitrator immunity statute. Instead, arbitrators have immunity under the doctrine of quasi-judicial immunity," which only permits immunity for functions normally performed by judges." Howard v. Drapkin (2d Dist. 1990) 222 Cal.App.3d 843. Because the allegations against AAA and Costello relate to conduct prior to Costellos appointment as an arbitrator, the complaint argues they are actionable

In a rare arbitration reversal, the Second Appellate Court of Appeal vacated Costellos decision in Michael A. O'Flaherty et al. v. Stephen L. Belgum et al. (B162758, Los Angeles County Super. Ct. No BC184060, January 29, 2004). The case will proceed as if arbitration had never taken place. Unfortunately the damage has been done," says Kellner. Our clients have spent hundreds of thousands of dollars in attorneys fees, been subjected to garnishments and experienced severe medical and marital problems all directly caused by Costello being selected to arbitrate their case."

The complaint asks damages to be determined at trial, interest and punitive damages. biased
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