Michael Ovitz will not be able to collect a $3.6 million arbitration award against Cathy Schulman, former president of his film company, because the arbitrator did not disclose a conflict of interest,

(The Hollywood Reporter) -- Michael Ovitz will not be able to collect a $3.6 million arbitration award against Cathy Schulman, former president of his film company, because the arbitrator did not disclose a conflict of interest, a state court has ruled.

Los Angeles Superior Court Judge Ralph Dau ruled Oct. 13 that arbitrator Campbell Lucas should have told Schulman's attorneys that he had been hired to arbitrate an unrelated case for Ovitz's attorneys.

As a result, Dau said the matter may have to be re-arbitrated if it is not settled.

"The court's order vacating the award nullifies the entire arbitration -- it's as if it never happened -- and any contrary interpretation is simply wrong as a matter of California law," Schulman's attorney Randy Sunshine said. "Cathy Schulman is delighted with the ruling, and she is looking forward to moving ahead with her career."

Ovitz's representatives said the decision has nothing to do with the underlying merits of their arbitration victory and feel Dau erred in not confirming the award.

"The judge acknowledged that his decision was appropriate for appellate review, and we look forward to the day when that occurs," an Ovitz spokesman said.

Schulman started a two-year employment contract with the film company, a joint venture between Ovitz's Artists Production Group and Studio Canal, in July 2000. After resigning in January 2002, Schulman was accused of breaching a binding settlement agreement and engaging in conduct designed to harm Ovitz's company.

Schulman struck back in October 2002 with a lawsuit against Ovitz, APG and Studio Canal for wrongful termination and other wrongful conduct. She claimed Ovitz fired her for disclosing that APG was allegedly stealing from Studio Canal's parent Vivendi by using personnel and resources that were not related to their joint venture.

The two sides agreed to arbitrate in April 2003.

On July 9, Lucas, a retired California appellate court judge, ruled in favor of Ovitz, awarding him $1.5 million in damages and another $2.1 million in attorneys' fees and costs.

Schulman immediately challenged the award on the grounds of Lucas' alleged conflict of interest.

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