Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-89-02106/USCOURTS-ca10-89-02106-0/pdf.json

Parties Involved:
Robin L. Hale
Appellant
Katherine J. Hill
Appellant
The Home Insurance Company
Appellee

Document Text:

,.. 

UNITED STATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT 

THE HOME INSURANCE COMPANY, 

Petitioner-Appellee, 

) 

) 

) 

) 

ROBERT L. HOECKER 

Clerk 

v. ) No. 89-2106 

) (D.C. No. 86-180-SC) 

ROBIN L. HALE, a Minor; KATHERINE J. 

HILL, 

) (D. N.M) 

) 

) 

Respondents-Appellants. ) 

ORDER AND JUDGMENT* 

Before McKAY, BARRETT, Circuit Judges, and KANE,** District Judge. 

**Honorable John L. Kane, Senior District 

District Court for the District of 

designation. 

Judge, United States 

Colorado, sitting by 

This action began as a declaratory judgment action under 

28 u.s.c. §§ 2201-02 (Supp. IV 1986) filed by petitioner Home 

Insurance Company (Home) in the United States District Court for 

the District of New Mexico for a declaration that there was no 

coverage under the Home policy issued to the insured, Galles 

* This order and judgment has no precedential value and shall 

not be cited, or used by any court within the Tenth Circuit, 

except for purposes of establishing the doctrines of the law of 

the case, res judicata, or collateral estoppel. 10th Cir. R. 

3 6. 3. 

Appellate Case: 89-2106 Document: 01019969841 Date Filed: 05/07/1990 Page: 1 
Chevrolet Company 

respondent Robin J. 

(Galles), 

Hale. Ms. 

for the 

Hale had 

injuries sustained 

been injured in 

by 

an 

accident while a passenger in an automobile driven by Dee Ann 

West, a minor who had borrowed the car from her brother, Tom 

Leyba. Leyba had borrowed the car from his employer, Galles. 

After the declaratory judgment action had been filed in 

federal district court, Ms. Hale filed a personal injury action in 

Torrance County District Court for damages based on negligence. 

The parties eventually agreed to submit the issues raised in these 

lawsuits to arbitration. The arbitrators ruled against Ms. Hale. 

After the arbitration decision had been handed down, Ms. Hale 

discovered that both the ''neutral" arbitrator and the arbitrator 

she had chosen had either represented Home in the past or had 

previously worked for a law firm that had represented Home. 

Ms . Hale filed a motion in the federal district court to vacate 

the arbitration award, or in the alternative, to deny confirmation 

of the award due to the evident partiality of the arbitration 

panel. She filed similar motions in the Torrance County and 

Bernalillo County District Courts. 

The parties disagree as to whether they had stipulated that 

venue for the motion to vacate was properly in Bernalillo County 

and that they would either stay or dismiss the other motions to 

vacate pending in the federal district court and in the Torrance 

County court. In any event, before the federal district court was 

notified of any such stipulation, it confirmed the arbitration 

award and dismissed the case with prejudice. 

2 

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On appeal Ms. Hale argues that: l) the federal district 

court did not have jurisdiction in the declaratory judgment action 

because Galles, as the named insured, should have been joined as 

an indispensable party and aligned with Home, which joinder would 

have destroyed diversity; 2) venue to vacate the arbitration award 

was not proper in the federal district court given the provisions 

of the New Mexico Arbitration Act; 3) the parties had stipulated 

that further proceedings regarding the motion to vacate would be 

he l d in Bernalillo County District Court and that they would move 

t o dismiss or stay the actions in the other two courts; and 4) the 

fa ilure of two of the three arbitrators to disclose their prior 

aff i liatio ns with Home amounted to evident partiality mandating 

vacation of the arbitration award. 

Jurisdiction 

Proper jurisdiction is a question of law which is reviewable 

by this court de nova. Ten Mile Indus. Park v. Western Plains 

Ser v . Co rp., 810 F.2d 1518, 1524 (10th Cir. 1987). The objection 

that indispensable parties have not been joined can be made at any 

time. State Farm Mut. Auto. Ins. Co. v. Mid-Continent Casualty 

Co., 518 F.2d 292, 294 (10th Cir. 1975). General principles of 

joinder control in deciding which parties are necessary for a just 

adjudication in a declaratory judgment action, 1 id., and Rule 19 

of the Federal Rules of Civil Procedure controls the resolution of 

l Although Ms. Hale in her brief alludes to "real party in 

interest" and "case or controversy" issues, we find the question 

here to be one of joinder. 

3 

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a question of indispensability. See Provident Tradesmens Bank & 

Trust Co . v. Patterson, 390 U.S. 102, 106-07 (1968). 2 

Rule 19 of the Federal Rules of Civil Procedure provides in 

per t inent pa r t: 

(a) Persons to be Joined if Feasible. A person who 

is subject to service of process and whose joinder will 

not deprive the court of jurisdiction over the subject 

mat t er of the action shall be joined as a party in the 

acti o n if (1) in the person's absence complete relief 

cannot be accorded among those already parties, or (2) 

the person claims an interest relating to the subject of 

the action and is so situated that the disposition of 

the action in the person's absence may (i) as a 

practical matter impair or impede the person's ability 

to protect that interest or (ii) leave any of the 

perso ns already parties subject to a substantial risk of 

incurring double, multiple, or otherwise inconsistent 

obligations by reason of the claimed interest. If the 

perso n has not been so joined, the court shall order 

that the person be made a party ..•• 

(b) Determination by Court Whenever Joinder not 

Feasible. If a person as described in subdivision 

(a)(l)-(2) hereof cannot be made a party, the court 

shall determine whether in equity and good conscience 

the action should proceed among the parties before it, 

or should be dismissed, the absent person being thus 

regarded as indispensable. The factors to be considered 

by the court include: first, to what extent a judgment 

rendered in the person's absence might be prejudicial to 

the person or those already parties; second, the extent 

to which, by protective provisions in the judgment, by 

the shaping of relief, or other measures, the prejudice 

can be lessened or avoided; third, whether a judgment 

rendered in the person's absence will be adequate; 

fourth, whether the plaintiff will have an adequate 

remedy if the action is dismissed for nonjoinder. 

In o rder to be an indispensable party under Rule 19(b), one 

must first be "a person as described in subdivision (a)(l)-(2) [of 

2 Ms. Hale cites New Mexico law to support her contention that 

Galles should have been joined. We note, however, that regardless 

of New Mexico law on joinder, the effect of Galles' absence is a 

matter of federal law. Casualty Indem. Exch. v. Village of Crete, 

731 F.2d 457, 461 (7th Cir. 1984). 

4 

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... 

Rule 19]," usually referred to as a "conditionally necessary 

party." Fed. R. Civ. P. 19; see Provident Tradesmens, 390 U.S. at 

108; State Farm, 518 F.2d at 294. In order to be considered 

conditionally necessary, one must fall under one or more of the 

three categories described in Rule 19(a}. Id. It is only after a 

person is deemed to be conditionally necessary under Rule 19(a} 

that the ccurt must consider whether a person is indispensable as 

defined in Rule 19(b}. See State Farm, 518 F.2d at 294 (if the 

trial court is correct in determining that a person is not 

conditionally necessary, there is no need to apply 19(b}}. 

Rule 19(a)(l) provides that a person will be conditionally 

necessar y if in the person's absence complete relief cannot be 

accorded among those already parties. Fed. R. Civ. P. 19(a}(l}. 

In this declaratory judgment action, Home had not denied coverage 

to Galles but was simply litigating whether Ms. Hale, as a 

passenger in a borrowed automobile, was covered under the policy 

in questi o n by virtue of her reasonable expectation that the 

vehicle driven by Dee Ann West was being used with the permission 

of Galles. Ms. Hale and Home were both parties. Complete relief, 

in the form of a judgment either way on coverage, could have been 

accorded to Ms. Hale and Home without the joinder of Galles. Any 

claims that Ms. Hale may have had against Galles or the Galles' 

rights under the policy were not at issue. 

Rule 19(a)(2) also requires that an entity to be joined, if 

feasible, must have an interest in the action. As long as the 

insured's primary carrier is not denying coverage to the insured 

under the terms of the policy, the insured does not have an 

5 

Appellate Case: 89-2106 Document: 01019969841 Date Filed: 05/07/1990 Page: 5 
interest in the action. See St. Paul Fire & Marine Ins. Co. v. 

Aetna Casualty & Sur. Co., 357 F.2d 315, 316 (10th Cir. 1966); 

Northwest Casualty Co. v. Kirkman, 119 F. Supp. 828, 830 (M.D.N.C. 

1954); Glens Falls Indern. Co. v. Fredericksen, 8 F.R.D. 55, 59 (D. 

Neb. 1947); Ohio Casualty Ins. Co. v. Maloney, 44 F. Supp. 312, 

314 (E.D. Pa. 1942). 

Ms. Hale argues against this result on the ground that if 

Horne were relieved in the declaratory judgment action of its duty 

to pay a judgment against Galles, Galles would be exposed to 

liability even after its insurer was dismissed. That is not the 

issue whi c h was before the district court, however. Horne was not 

arguing that it should be relieved of a duty to pay a judgment 

against Galles for a risk covered under the policy. It was simply 

arguing that the scope of its policy did not extend to litigants 

in Ms. Hale's situation. 

Contrary to Ms. Hale's argument, the catastrophic nature of 

her injuries does not change the outcome of this case. If the 

court had determined that Ms. Hale was not covered by the terms of 

the policy, presumably because she had no reasonable expectation 

that Dee Ann West was using the car with its owner's permission, 

then Home would not have had to defend Galles because the policy 

would no t have covered Ms. Hale. If, on the other hand, Ms. Hale 

were found to have had a reasonable expectation regarding 

permission, Home would have been required to defend its insured 

and to pay any judgment rendered against it. The issue of 

permission was thus central to the declaratory judgment action. 

Ms. Hale's injuries, and the risk that any finding of liability 

6 

Appellate Case: 89-2106 Document: 01019969841 Date Filed: 05/07/1990 Page: 6 
could result in damages which exceed the policy limits, do not go 

to the issue of permission. When, and if, Galles has to defend 

the personal injury action in the state court, it will then have 

to face the risk of a judgment for which it may either be totally 

uninsured or exceed its policy limits. Galles will have its day 

in court and its chance to defend against that risk. In the 

instant ~~ ic, however, the fact that Galles may eventually have to 

compensate Ms. Hale for her injuries was unrelated to whether 

Home, because of its insurance contract with Galles, had extended 

coverage to Ms. Hale. 

The theory underlying the conclusion that Galles is not an 

indispensable party for purposes of determining basic policy 

coverage also does not change because of the possibility that 

damages may exceed policy limits. If Ms. Hale were found to have 

been covered by Home's policy, Home would have had to defend and 

pay any judgment rendered against Galles. Home's maximum exposure 

would have been the maximum amount payable under its policy. 

Galles' presence in the declaratory judgment suit to determine 

coverage would not have given Galles a chance to extend the policy 

limits, somehow shielding it from the risk of excess liability. 

Galles' chance to protect itself from a claim greater than the 

policy limit lay in extending its policy limits or purchasing 

additional coverage before the accident, not in participating in 

the suit between its carrier and Ms. Hale. 

Even if Galles were held to have an interest in this action, 

it would also have to comply with either of the conditions set out 

in Rule 19(a)(2)(i) or (ii) before being considered a 

7 

Appellate Case: 89-2106 Document: 01019969841 Date Filed: 05/07/1990 Page: 7 
conditionally necessary party. See State Farm, 518 F.2d at 294. 

A person is a conditionally necessary party if he has an interest 

in the action and if disposition of the action in his absence 

impairs or impedes his ability to protect his interest. Rule 

19(a}(2)(i). As the Supreme Court stated in Provident Tradesmens 

Bank & Trust Co. v. Patterson, 390 U.S. 102 (1968), this 

determin.::.tion involves two related but distinct questions: is the 

insured benefited by a judgment in favor of the insurance company? 

Or, is the insured harmed by a judgment against the insurance 

company? Id. at 114. 3 Only the answer to the latter question is 

rele vant to the Rule 19(a) determination. See id •• 

Here, a determination in the declaratory judgment would not 

impair or impede Galles' ability to protect its interest. In this 

case, as in Provident Tradesmens, a judgment by the district court 

against Ms. Hale on the permission issue would have ended the 

matter favorably to Galles. See id. Alternatively, however, a 

judgment against Home on the permission issue would not have bound 

Galles, as a nonparty, and it is free to relitigate the permission 

issue in the pending state court action. Therefore, a ruling in 

the declaratory judgment action would not, under Rule 19(a)(2)(i), 

impair or impede Galles' ability to protect its own interests. 

3 While the Supreme Court made this analysis in determining the 

extent that a judgment in that case, rendered in the absence of 

the insured, might prejudice the insured pursuant to Rule 19(b), 

the analysis is also appropriate in determining whether a person 

is interested in the action as a threshold matter under Rule 

19(a). 

8 

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The other prong of Rule 19(a)(2) would deem Galles 

conditionally necessary if disposition of the action would leave 

Home or Ms. Hale subject to a substantial risk of multiple or 

otherwise inconsistent obligations because of Galles' interest. 

Ru le 19(a)(2)(ii) . Disposition of the declaratory judgment action 

woul d c ompletely and finally decide the issues as between Home and 

Ms . Hale. Ga l l es' interest is in defending itself in the personal 

inju ry s u it brought by Ms. Hale in state court. Whether Galles 

pre vails at trial or loses will not subject Home to an obligation 

inco nsistent from the one determined in the declaratory judgment 

act ion, as it would already have been decided that Ms. Hale either 

W - ~ 0- o r was not covered by the policy. Home's rights and 

obli gati ons v i s-a-vis its obligation to insure Ms. Hale as an 

add i tional 

determined. 

insured would 

Home would not 

have 

have 

already been conclusively 

inconsistent obligations 

r egarding subsequent litigation. Home either extends coverage to 

Ms . Hale and defends Galles, or it sits out of the underlying suit 

because its policy is irrelevant. Whether Galles prevails at 

trial d o e s not bear on whether Home must extend coverage to Ms. 

Hale. 

Ms . Hale's situation is simpler. Galles will either 

successfully defend in the personal injury action brought by Ms. 

Hale, or it will lose. Nothing in the outcome of that trial will 

result in Ms. Hale having to do anything that is inconsistent with 

a determination that she either is or is not covered by Galles' 

policy. We conclude, therefore, that Galles' interests will not 

be impaired or impeded by a judgment in the declaratory judgment 

9 

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acti o n and t hat there is no substantial risk of inconsistent 

obligati o ns resulting from subsequent litigation. 

The t wo cases cited by Ms. Hale in support of her position 

that Gal l es is an indispensable party are inapposite. In Home 

Fire & Marine Insurance Co. v. Schultz, 80 N.M. 517, 458 P.2d 592 

(1 9 69), the court held that the insured was an indispensable party 

ir. a d e ( Lctra t ory judgment action brought by the insurance company 

against t he insured and the injured party. The insurance company 

asked f o r a declaration that it had no duty to defend the insured 

because o f the insured's failure to cooperate. Because a judgment 

i n the case would have relieved the insurance company of its 

c o ntractual duty to defend the insured, the court held that the 

insured had to be present because the judgment may have impeded or 

impaired his ability to protect his interest in the subject 

matter. I d ., 458 P.2d at 593-94. That is not this case. Here 

the insurance company is not asking fot a declaration that it no 

longer has the duty it once had to defend its insured; it is 

asking f o r a declaration that no such duty existed in the first 

place. 

Tra velers Indemnity Co . v. Standard Accident Insurance Co., 

3 29 F.2d 329 (7th Cir. 1964), is also distinguishable. It 

invol ved a suit between a primary and secondary insurer regarding 

which company had the duty to defend the plaintiff's insured. In 

fi nding that the insured's relationship with its general liability 

insurer was a personal, contractual one, the court held that the 

plaintiff primary insurer had no right, without the insured's 

p r esence, to have the court relieve it of its duty to defend the 

10 

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insured. Id. at 331. Here, Home is not contesting its duty to 

defend; Travelers Indemnity does not apply. 

The United States District Court for the Western District of 

Oklahoma has ably considered whether insureds, under facts very 

similar to these, are conditionally necessary (and thus 

potentially indispensable) parties under Rule 19(a). Allstate 

Ins. Co. v. Daniels, 87 F.R.D. 1 (W.D. Okla. 1978). In Daniels a 

vehicle belonging to the insureds had been involved in an accident 

while being driven by a third party. The insurance policy would 

have covered the driver if she had been a permissive user. Id. at 

2. The insurance company filed a declaratory judgment action 

under 28 u.s.c. §§ 2201-02 naming the driver and the injured 

persons as respondents, and seeking a determination that the 

policy covering its named insureds did not extend coverage to the 

driver because she was not driving the car with the permission of 

the insureds. 

One of the respondents moved for an order joining the 

insureds as indispensable parties. 

deny c ov erage to its insureds 

The insurance company did not 

and admitted that the policy in 

question covered the insureds insofar as the accident was 

c c n2ern2d. It argued that the declaratory judgment action only 

invo l ved ;;hether the driver was an insured under the company's 

policy with the car owner. 

After applying the provisions of Rule 19(a), the court 

concluded that the insureds were not conditionally necessary and 

hence not indispensable parties. Daniels, 87 F.R.D. at 3. We 

11 

Appellate Case: 89-2106 Document: 01019969841 Date Filed: 05/07/1990 Page: 11 
,. 

find the application of Rule 19(a) in Daniels to be persuasive in 

this case. 

In summary we conclude, after applying Rule 19(a), that 

complete relief could have been accorded to the parties in this 

action without the joinder of Galles; that Galles had no interest 

in the subject of this action, and even if it had such an 

interest, i t s absence from this suit would not have impaired or 

impeded its ability to protect that interest; and that there is no 

substantial risk to Ms. Hale or Home of multiple or otherwise 

inco nsistent obligations arising from Galles' interest. Galles, 

therefore, was not an indispensable party to the declaratory 

judgment action. 

Venue in federal court: 

Ms. Hale argues that, given the provisions of the New Mexico 

Uniform Arbitration Act, N.M. Stat. Ann. §§ 44-7-1 through 44-7-22 

( 1 978), venue for the motion to vacate the arbitration award was 

not properly in the federal district court, but should have been 

in Bernalillo County, as a court of the county in which the 

arbitrati o n hearing was held. 4 Our review of relevant federal law 

persuades us otherwise. 

4 N.M. Stat. Ann. § 44-7-18 (1978) provides, in pertinent part: 

An initial application shall be made to 

the court of the county in which the agreement 

provides the arbitration hearing shall be held 

or if the hearing has been held, in the county 

in which it was held. 

A party makes an "application" to the court for vacation of an 

award. Id. at § 44-7-12. "Court" means any court of competent 

jurisdiction in the state. Id. at§ 44-7-17. 

12 

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In a diversity case, matters of venue are decided in 

accordance with federal law. Pesaplastic, C.A. v. Cincinnati 

Milacron Co., 750 F.2d 1516, 1523 (11th Cir. 1985); FDIC v. 

Greenberg, 487 F.2d 9, 12 (3d Cir. 1973). Even though a federal 

court is sitting as a court of the forum state in diversity 

actions, Erwin v. Barrow, 217 F.2d 522, 524 (10th Cir. 

195~)(quoting Guaranty Trust Co. v. York, 326 U.S. 99, 108 

(1945)), federal courts are not bound by state venue laws. 

Greenberg, 487 F.2d at 12; see also Miller v. Davis, 507 F.2d 308, 

316 (6th Cir. 1974); McCoy v. Siler, 205 F.2d 498, 499 (3d Cir.), 

cert. denied, 346 U.S. 872 (1953); 15 C. Wright, A. Miller & 

E. Cooper, Federal Practice and Procedure § 3803 (2d ed. 

1986)(Wright & Miller). 

The only cases in which a federal court may apply local venue 

laws are those actions which are strictly of a local, as opposed 

to a transitory, nature. Wright & Miller at § 3822. Actions 

involving title to land are sometimes considered to be local 

actions, but even with land title questions, the law of this 

circuit is broad enough to place venue in a federal court under 

the proper circumstances. 

In Erwin v. Barrow, 217 F.2d 522 (10th Cir. 1954), this court 

considered whether venue was proper in the federal district court 

where the suit involved Oklahoma real estate and an Oklahoma 

statute provided that actions for the recovery of real estate be 

brought in the county in which the real estate was located. Id. 

at 525. Reasoning that "a federal court exercising federal 

diversity jurisdiction is merely another court of the state where 

13 

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• 

it sits," and that the counties where the land was located were 

all embraced within the same federal district, this court 

concluded that venue was proper in the federal court. Id. at 

525-26. 

Under the reasoning of Erwin, the United States District 

Court for the District of New Mexico is "merely another court of 

the state" o f New Mexico. Because Bernalillo County, as every 

county in New Mexico, is embraced within the single federal 

district, venue was proper in the federal court. 

No argument has been made that venue is somehow inappropriate 

because the parties do not fall within the general venue 

pr ov isi o ns of 28 U.S.C. § 1391 (1982). The argument here is 

simply that the venue specified in New Mexico's Arbitration Act 

somehow supersedes the federal venue statutes. "A state cannot by 

legislati o n modify or repeal a Congressional statute on the venue 

of feder ~l courts." McCoy, 205 F.2d at 499. Thus, even if the 

New Mexico Arbitration Act provided that federal jurisdiction was 

improper in this case, such provision would be invalid. For this 

reason and that stated above, the New Mexico Arbitration Act's 

provision for venue in the county courts in which the arbitration 

occurred does not make venue in the federal district court 

improper. 

Stipulation regarding venue: 

On appeal Ms. Hale argues that the parties had stipulated 

that any motion to vacate the arbitration award should be ruled on 

by the Bernalillo County District Court and that the motions to 

vacate which were pending in the Torrance County District Court 

14 -· 

Appellate Case: 89-2106 Document: 01019969841 Date Filed: 05/07/1990 Page: 14 
and the federal district court were to be stayed or dismissed. 

The district court found that no such stipulation was ever agreed 

to oy the parties. Since this is a finding of fact, it will be 

overturned by this court only if clearly erroneous. 

Fed. R. Civ. P . 52(a); see Anderson v. City of Bessemer City, 470 

U.S. 564, 573 (1985). Under the clearly erroneous standard, 

re versa l is required only if review of the record leaves the 

reviewing court with a definite and firm conviction that a mistake 

has been made. Amoco Prod. Co. v. Western Slope Gas Co., 754 F.2d 

303 , 300 (1 0th Cir. 1985). 

In finding no stipulation regarding venue for the motion to 

vacate, the district court reviewed correspondence between the 

parties and determined that at the time of the last communication 

regarding this issue, the question of the binding effect of a 

state court decision on the motion to vacate was still 

ou tstanding. In response to Horne's suggestion that the decision 

in the s tate court would be binding in the other two forums, Ms. 

Hale's c ouns el responded: 

Referring to your letter of November 17, 1988, I do 

agree that it was our understanding that we should place 

the Federal Court Claim and the Torrance County Claim in 

abatement. I do not recall any discussion, at all, of 

dismissing any of the claims, or any discussion of what 

we may do with those claims pending the resolution of 

the pending Motion to Vacate the Arbitration Award. 

I am, frankly, unaware of what I will do with 

two claims at a later date, except that it 

obligation to protect the interest of my client as 

as possible. 

those 

is my 

much 

No further correspondence on the matter occurred. The court was 

never made aware that the parties did not desire a ruling on the 

motion to vacate. Accordingly, we affirm the district court's 

15 

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• 

finding that no stipulation existed between the parties regarding 

the venue for the Motion to Vacate. 

Evident partiality of arbitrators: 

After the arbitrators' decision was handed down, Ms. Hale 

discovered that both the neutral arbitrator and the arbitrator she 

had selected had prior ties to Home. Mr. Allen, the neutral 

ar b itratGr , had worked at a law firm which had represented Home 

from 1973 through 1985. He himself had not represented Home 

directly, however, and except for a 1973 matter, the balance of 

the firm's contacts with Home occurred while Mr. Allen was serving 

as a state court judge, and was not actively affiliated with the 

firm. Si11ce 1985, Mr. Allen's firm, which he has rejoined, has on 

two occasions represented clients adverse to Home. In his 

affidavit, Mr. Allen also testified that he had no. knowledge of 

his firm's prior representation of Home, although the firm's usual 

check to screen for conflicts with Home was not done in this case. 

Mr. Query, the arbitrator selected by Ms. Hale, had been 

employed fr om 1975 through 1977 (eleven years before the 

arbitrati o n at issue here) by a law firm that had also represented 

Home. In his deposition testimony, Mr. Query indicated that he 

pcssibly could have represented Home while so employed. 

Mr. Query's other contact with Home stemmed from his 

representation of one of Ms. Hale's attorneys in a legal 

malpractice action for which Home was the malpractice carrier. 

Mr. Query represented the attorney against Home to demand a 

defense and coverage for the suit. After Home accepted the 

defense o f the suit, it paid Mr. Query for his work up to that 

16 

Appellate Case: 89-2106 Document: 01019969841 Date Filed: 05/07/1990 Page: 16 
time, but did not ultimately retain Mr. Query to represent the 

attorney in the underlying malpractice action. 

An arbitrator must disclose "any dealings that might create 

an impression of possible bias." Commonwealth Coatings Corp. v. 

Continental Casualty Co., 393 U.S. 145, 149 (1968). This is so 

even where there is no evidence of fraud or actual bias on the 

part ot the arbitrator. See id. at 147-48. However, 

disqualification of an arbitrator is not required where disclosure 

is not made because the arbitrator was "unaware of the facts but 

the relationship is trivial." Id. at 150 (White, J., concurring). 

An arbitrator cannot be expected to provide an entire life 

history, id. at 151, but "where the arbitrator has a substantial 

interest in a firm which has done more than trivial business with 

a party, that fact must be disclosed." Id. at 151-52. 

This court, in applying the dictates of Commonwealth 

Coatings, has held that an arbitration award will not be set aside 

on the gr o und of evident impartiality absent a showing of bias or 

interest that is "direct, definite and capable of demonstration 

rather than remote, uncertain, or speculative." Ormsbee Dev. Co. 

v. Grace, 668 F.2d 1140, 1147 (10th Cir.), cert. denied, 459 U.S. 

838 (1982). 5 An arbitration award cannot be upset absent 

exceptional circumstances, Fizer v. Safeway Stores, Inc., 586 F.2d 

182, 184 (10th Cir. 1978), and the burden of proof is on the one 

desiring to set aside the award. Wright Lumber Co. v. Herron, 199 

F.2d 446, 448 (10th Cir. 1952), 

5 The New Mexico Supreme Court has 

identified by this court in Ormsbee. 

420, 773 P.2d 732, 734 (1989). 

17 

also approved the test 

Melton v. Lyon, 108 N.M. 

Appellate Case: 89-2106 Document: 01019969841 Date Filed: 05/07/1990 Page: 17 
I 

Applying these legal standards, we find that Ms. Hale has 

failed to prove the evident impartiality of the two arbitrators. 

The contacts complained of here are not the clear evidence of 

impropriety demanded by Ormsbee, but are, instead, remote, 

uncertain and speculative. The district court obviously exercised 

the "great caution" required of it when it considered whether to 

set aside an arbitration award, Foster v. Turley, 808 F.2d 38, 42 

(10th Cir. 1986), and it did not err in refusing to do so. 

The judgment of the United States District Court for the 

District o f New Mexico is AFFIRMED. 

ENTERED FOR THE COURT 

PER CURIAM 

18 

Appellate Case: 89-2106 Document: 01019969841 Date Filed: 05/07/1990 Page: 18