17-1137-cv

Certain Underwriting Members of Lloyds of London v. Insurance Company of the Americas

United States Court of Appeals

for the Second Circuit

AUGUST TERM 2017

No. 17-1137-cv

CERTAIN UNDERWRITING MEMBERS OF LLOYDS OF LONDON, CERTAIN 

UNDERWRITING MEMBERS OF LLOYDS, LONDON SUBSCRIBING TO TREATY NO.

0272/04,

Petitioners-Appellees,

v.

STATE OF FLORIDA, DEPARTMENT OF FINANCIAL SERVICES, AS RECEIVER FOR 

INSURANCE COMPANY OF THE AMERICAS,*

Respondent-Appellant.

ARGUED: JANUARY 8, 2018

 DECIDED: JUNE 7, 2018

Before: JACOBS, RAGGI, and HALL, Circuit Judges:

Insurance Company of the Americas (“ICA”) appeals the order vacating 

the arbitral award (the “Award”) issued in a reinsurance dispute between ICA 

and Certain Underwriting Members of Lloyds of London including those 

 

* The Clerk of the Court is directed to amend the official caption to read as 

shown above. 
2

members subscribing to Treaty No. 02072/04 (the “Underwriters”). The issue on 

appeal is whether the Award is void for evident partiality under the Federal

Arbitration Act (“FAA”), 9 U.S.C. § 10(a)(2), by reason of the failure by ICA’s 

party-appointed arbitrator to disclose close relationships with former and 

current directors and employees of ICA. The district court concluded under our 

reasonable person standard that the ICA-appointed arbitrator was impermissibly 

partial to ICA. We hold that a party seeking to vacate an award under Section 

10(a)(2) must sustain a higher burden to prove evident partiality on the part of an 

arbitrator who is appointed by a party and who is expected to espouse the view 

or perspective of the appointing party. See Scandinavian Reinsurance Co. Ltd. 

v. Saint Paul Fire and Marine Ins. Co., 668 F.3d 60, 76 n.21 (2d Cir. 2012). 

The district court weighed the conduct of ICA’s party-appointed arbitrator 

under the standard governing neutral arbitrators. We therefore vacate and 

remand for the district court to reconsider under the proper standard. An 

undisclosed relationship between a party and its party-appointed arbitrator 

constitutes evident partiality, such that vacatur of the award is appropriate if: (1) 

the relationship violates the contractual requirement of disinterestedness (see

Sphere Drake Ins. v. All American Life Ins., 307 F.3d 617, 620 (7th Cir. 2002)); or 

(2) it prejudicially affects the award (see Delta Mine Holding Co. v. AFC Coal 

Properties, Inc., 280 F.3d 815, 821-22 (8th Cir. 2001)).

PHILIP J. LOREE JR., Loree & Loree, New 

York, New York, for Respondent-Appellant.

TIMOTHY W. STALKER, Weber Gallagher 

Simpson Stapleton Fires & Newby, LLP, 

Philadelphia, PA, for Petitioners-Appellees

Certain Underwriting Members Lloyds of 

London.

JOSHUA P. BROUDY, Rosenthal Lurie & 

Broudie LLC, Philadelphia, PA, for

Petitioners-Appellees Certain Underwriting 
3

Members of Lloyds, London Subscribing to 

Treaty No. 0272/04. 

DENNIS JACOBS, Circuit Judge:

Insurance Company of the Americas (“ICA”)1 appeals the order vacating 

the arbitral award (the “Award”) issued in a reinsurance dispute between ICA 

and Certain Underwriting Members of Lloyds of London including those 

members subscribing to Treaty No. 02072/04 (the “Underwriters”). The issue on 

appeal is whether the Award is void for evident partiality under the Federal

Arbitration Act (“FAA”), 9 U.S.C. § 10(a)(2), by reason of the failure by ICA’s

party-appointed arbitrator to disclose close relationships with former and 

current directors and employees of ICA. The district court concluded under our 

reasonable person standard that the ICA-appointed arbitrator was impermissibly 

partial to ICA. We hold that a party seeking to vacate an award under Section 

10(a)(2) must sustain a higher burden to prove evident partiality on the part of an 

arbitrator who is appointed by a party and who is expected to espouse the view 

or perspective of the appointing party. See Scandinavian Reinsurance Co. Ltd. 

v. Saint Paul Fire and Marine Ins. Co., 668 F.3d 60, 76 n.21 (2d Cir. 2012). 

The district court weighed the conduct of ICA’s party-appointed arbitrator

under the standard governing neutral arbitrators. We therefore vacate and 

remand for the district court to reconsider under the proper standard. An 

undisclosed relationship between a party and its party-appointed arbitrator 

constitutes evident partiality, such that vacatur of the award is appropriate if: (1) 

the relationship violates the contractual requirement of disinterestedness (see

Sphere Drake Ins. v. All American Life Ins., 307 F.3d 617, 620 (7th Cir. 2002)); or 

(2) it prejudicially affects the award (see Delta Mine Holding Co. v. AFC Coal 

Properties, Inc., 280 F.3d 815, 821-22 (8th Cir. 2001)).

 

1Following oral argument, on January 24, 2018, the Circuit Court of Florida, Leon 

County, declared ICA insolvent and placed the company in liquidation, 

appointing Florida’s Department of Financial Services as receiver. We 

nonetheless continue to refer to appellant as ICA throughout this opinion. 
4

BACKGROUND

ICA insures workers compensation claims in the construction industry. 

The Underwriters in turn provide ICA with second and third layer reinsurance 

under a series of treaties, each of which contains an arbitration clause requiring

that disputes be adjudicated by an arbitration panel consisting of three members: 

one party-appointed arbitrator for each party, and the neutral umpire. The only 

contractual qualification is that the arbitrators “be active or retired disinterested 

executive officers of insurance or reinsurance companies or Lloyd’s London 

Underwriters.” J. App’x at 593. Each party bears the expense of its own 

arbitrator and is permitted to engage in ex parte discussion with its

party-appointed arbitrators during discovery. 

ICA requested coverage from the Underwriters under the treaties for 

claims arising out of multiple construction site injuries exceeding in total $12.5 

million. The Underwriters declined the claim, citing language in the treaties 

that (according to the Underwriters) restricts coverage to a single “loss 

occurrence” involving more than one insured. Id. at 576-77. In December 

2014, ICA demanded arbitration pursuant to the treaty. ICA appointed Alex 

Campos as its arbitrator, and the two party-appointed arbitrators selected Ben 

Hernandez as neutral umpire. 

At the May 11, 2015 organizational meeting, each arbitrator was called 

upon to disclose pre-existing or concurrent relationships with a party. ICA was

represented at the disclosure meeting by Gary Hirst, Chairman and Chief 

Investment Officer, and arbitration counsel. Campos disclaimed any 

appreciable link to ICA: 

I don’t know anyone here except for Mr. [Gary Hirst, Chairman of ICA]. I 

had some potential business dealings with him about ten years ago that 

never really materialized. He had an associate that I was trying to do a 

deal with but it never went anywhere and other than that contact I don’t 

have any other related contacts with Mr. Hirst. 

Id. at 521. Between the organizational meeting and the conclusion of the 
5

arbitration, Campos let pass several opportunities to come forward with 

additional disclosures.

As the district court found, Campos’s pre-existing and concurrent 

relationships with ICA’s representatives were considerably more extensive than 

Campos disclosed. The court emphasized undisclosed dealings between ICA 

and a human resources firm named Vensure Employee Services (“Vensure”) of

which Campos was President and CEO. Specifically, the court found that: ICA 

and Vensure operate out of the same suite in a business park in Mesa, Arizona; 

John Iorillo, a former director of ICA, was CFO of a firm that provided 

consulting services to Vensure; and Ricardo Rios, a Director of ICA, was hired as 

the CFO of Vensure in the summer of 2015. Rios testified as a witness at the 

arbitration, and Iorillo’s name was mentioned repeatedly. 

The panel favored ICA’s interpretation of the treaty language, and the

Award granted ICA net damages of over $1.5 million. The Underwriters 

moved to vacate the Award on several grounds, including “evident partiality” 

on the part of Alex Campos, manifest disregard of the law, and prejudicial 

procedural misconduct. ICA cross-moved to confirm. 

 

The district court granted the motion to vacate the award and denied the 

cross-motion to confirm. Certain Underwriting Members v. Ins. Co. of Am., 

16-CV-323(VSB), 2017 WL 5508781, at *11 (S.D.N.Y. Mar. 31, 2017). Campos’s 

“undisclosed relationships” with ICA representatives were found to be 

“significant enough to demonstrate evident partiality.” Id. at *11. The district 

court “note[d] that the relationships here are far more significant, more 

numerous, and involve more financial entanglements than are present in” other 

cases from this Circuit. Id. (citing the “number and variety” of relationships 

with former ICA employees, which were “longstanding” and “ongoing at the 

time of the arbitration”). Additionally, the court was “troubl[ed]” by the 

apparent willfulness of the non-disclosures, in particular Campos’s silence

during the testimony of Ricardo Rios. Id. The court did not take issue with 

the substance of the Award, did not connect Campos’s conduct to the panel’s 

decision, and made no finding that Campos had a personal or financial interest

in the outcome of the arbitration. 
6

DISCUSSION

I

“When reviewing a district court’s decision to vacate an arbitration award, 

we review findings of fact for clear error and questions of law de novo.” 

Applied Indus. Materials Corp. v. Ovalar Makine Ticaret Ve Sanayi, A.S., 492 

F.3d 132, 136 (2d Cir. 2007). Our review of an arbitration award is “severely 

limited” in view of the strong deference courts afford to the arbitral process. 

ReliaStar Life Ins. Co. of N.Y. v. EMC Nat. Life Co., 564 F.3d 81, 85 (2d Cir. 2009)

(quoting Amicizia Societa Navegatione v. Chilean Nitrate & Iodine Sales Corp., 

274 F.2d 805, 808 (2d Cir. 1960)); see also Porzig v. Dresdner, Kleinwort, Benson, 

N. Am. LLC, 497 F.3d 133, 138 (2d Cir. 2007). A “stringent standard for vacating 

awards is a necessary corollary to the federal policy favoring arbitration.” Barry 

R. Ostrager and Mary Kay Vyskocil, MODERN REINSURANCE LAW AND PRACTICE, 

p. 598 (2014 ed.).

“Under the FAA, the validity of an award is subject to attack only on those 

grounds listed in [Section] 10, and the policy of the FAA requires that the award 

be enforced unless one of those grounds is affirmatively shown to exist.” Wall 

Street Assocs. L.P. v. Becker Paribas, Inc., 27 F.3d 845, 849 (2d Cir. 1994). We 

may vacate under Section 10 “where there was evident partiality ... in the 

arbitrator.” Morelite Const. Corp. v. New York City Dist. Council Carpenters 

Ben. Funds, 748 F.2d 79, 82 (2d Cir. 1984) (“Morelite”) (internal quotation marks 

omitted); see 9 U.S.C. § 10(a)(2). “[E]vident partiality within the meaning of 9 

U.S.C. § 10 will be found where a reasonable person would have to conclude that 

an arbitrator was partial to one party to the arbitration.” Id. at 84. The party 

challenging the award must prove the existence of evident partiality by clear and 

convincing evidence. See Nat’l Football League Mgm’t Council v. Nat’l Football 

League Players Ass’n, 820 F.3d 527, 548 (2d Cir. 2016); accord Stolt-Nielsen S.A. 

v. AnimalFeeds Int’l Corp., 559 U.S. 662, 671 (2010) (The party challenging an 

award on the basis of evident partiality “must clear a high hurdle.”). 

The Supreme Court established in Commonwealth Coatings that “an 
7

arbitrator’s failure to disclose a material relationship with one of the parties can 

constitute ‘evident partiality’ requiring vacatur of the award.” Lucent Techs. 

Inc. v. Tatung Co., 379 F.3d 24, 28 (2d Cir. 2004) (citing Commonwealth Coatings 

Corp. v. Continental Cas. Co., 393 U.S. 145 (1968)). But “Commonwealth 

Coatings does not establish a per se rule requiring vacatur of an award whenever 

an undisclosed relationship is discovered.” Id. at 30. It is “the materiality of 

the undisclosed conflict [that] drives a finding of evident partiality, not the 

failure to disclose or investigate per se.”2 National Indemnity Co. v. IRB Brasil 

Resseguros S.A., 164 F. Supp. 3d 457, 476, 478 (S.D.N.Y. 2016) (citing 

Scandinavian Reinsurance, 668 F.3d at 77 (“The nondisclosure does not by itself 

constitute evident partiality. The question is whether the facts that were not 

disclosed suggest a material conflict of interest.”) (emphasis in original)); see also

Applied Indus. Materials, 492 F.3d at 137. 

A neutral arbitrator’s relationship with a party is material if it goes “so far 

as to include the rendering of services on the very projects involved in th[e] 

lawsuit,” Commonwealth Coatings, 393 U.S. at 146, or contemporaneous 

investments that create a vested financial stake in that party. See Applied 

 2 We acknowledge the value of disclosure, transparency, and ethical conduct on 

the part of all arbitrators. See Ostrager, supra, at 535 (noting disclosure “enables 

the parties to identify potential problems at the outset and[] to avoid later claims 

of prejudice by losing parties”). Mainstream arbitral guidelines such as ARIAS 

and the American Arbitration Association require comprehensive disclosure. 

See id. at 535-36 (citing the Code of Ethics for Arbitrators in Commercial 

Disputes); ARIAS-U.S. Practical Guide to Reinsurance Arbitration Procedure, ¶ 

3.6. It would appear that Alex Campos violated these ethical codes; and future 

parties may well be wary of his participation on panels. However, it is 

well-established that such ethical violations do not compel vacatur of an 

otherwise-valid arbitration award. See Ostrager, supra, at 536 (citing Merit Ins. 

Co. v. Leatherby Ins. Co., 714 F.2d 673, 680 (7th Cir. 1983)). An arbitrator’s 

“failure to make a full disclosure may sully his reputation for candor but does not 

demonstrate evident partiality.” Sphere Drake Ins. v. All American Life Ins., 307 

F.3d 617, 622-23 (7th Cir. 2002).
8

Indus. Materials, 492 F.3d at 137-39. A reasonable person could also conclude 

that the arbitrator is unduly partial to the side of a close family relation. See

Morelite, 748 F.2d at 84.

But even with respect to neutral arbitrators, “we have not been quick to set 

aside the results of an arbitration because of an arbitrator’s alleged failure to 

disclose information.” Andros Compania Maritima, S.A. v. Marc Rich & Co., 

579 F.2d 691, 700 (2d Cir. 1978). “[W]e have declined to vacate awards because 

of undisclosed relationships where the complaining party should have known of 

the relationship, or could have learned of the relationship ‘just as easily before or 

during the arbitration rather than after it lost its case.’” Lucent Techs., 379 F.3d 

at 28 (internal quotation marks and citation omitted); see Cook Indus., Inc. v. Itoh 

& Co., 449 F.2d 106, 107-108 (2d Cir. 1971). “We have concluded in various 

factual settings that the evident-partiality standard was not satisfied because the 

undisclosed relationship at issue was ‘too insubstantial to warrant vacating the 

award.’” Scandinavian Reinsurance, 668 F.3d at 72 (citing Lucent Techs., 379 

F.3d at 30). 

For example, past contacts do not amount to material bias. When an 

arbitrator’s “relationship with [a party] materially end[s] before [the party] 

appointed him as an arbitrator,” one “cannot say that a reasonable person would 

have to conclude that an arbitrator was partial to one party to the arbitration.” 

Lucent Techs. 379 F.3d at 31; see also Merck & Co., Inc. v. Pericor Therapeutics, 

Inc., No. 16-CV-22 (RA), 2016 WL 4491441, at *11 (S.D.N.Y. Aug. 24, 2016) 

(concluding that disclosure of a joint venture between a party and the arbitrator’s 

prior law firm was not compelled because the venture ended years before the 

arbitration). Thus an arbitrator is not disqualified from selection as the neutral 

umpire by having received compensation from one of the parties for past service 

as a party-appointed arbitrator. Nat’l Indemnity Co., 164 F. Supp. 3d at 480 

(ruling that “payment as an arbitrator in a past matter is ... insufficient to produce 

a conflict in a later matter”); see also Scandinavian Reinsurance, 668 F.3d at 73-74 

(undisclosed prior role as party-appointed arbitrator distinguishable from 

material relationships “such as a family connection or ongoing business 

arrangement with a party or its law firm—circumstances in which a reasonable 

person could reasonably infer a connection between the undisclosed outside 
9

relationship and the possibility of bias for or against a particular arbitrating 

party.”). 

In broader strokes, the FAA does not proscribe all personal or business 

relationships between arbitrators and the parties. See Lucent Techs., 379 F.3d at 

30 (co-ownership of an airplane by arbitrator and party’s representative did not

indicate evident partiality); Andros, 579 F.2d at 701 (professional relationship 

between arbitrator and party’s representative arising from prior arbitration 

service together did not indicate evident partiality); see, e.g., Merck & Co., 2016 

WL 4491441, at *8 (The FAA “does not prohibit arbitrators from having any 

personal and professional relationships with individuals who work in the 

industries in which they have expertise.”). “[T]he balance of case law in the 

Second Circuit supports the proposition that when a purported financial interest 

or financial relationship between an arbitrator and a party to arbitration is 

indirect, general[,] or tangential, courts should not vacate arbitration awards.” 

Merck & Co., 2016 WL 4491441, at *9 (internal citation and quotation marks 

omitted). 

We therefore “requir[e] a showing of something more than the mere 

‘appearance of bias’ to vacate an arbitration award,” Morelite, 748 F.2d at 83, and 

will not vacate arbitration awards for evident partiality when the party opposing 

the award “identifies no direct connection between [the arbitrator] and the 

outcome of the arbitration.” Merck & Co., 2016 WL 4491141 at *9; see also

Scandinavian Reinsurance, 668 F.3d at 78 (“possibilities” that arbitrators could be 

influenced by each other’s thinking on concurrent panels “do not establish bias”).

Judicial tolerance of relationships between arbitrators and party 

representatives reflects competing goals in partiality decisions. Complete 

candor and transparency help root out bias and fraud. But reinsurers and ceding 

insurers affirmatively seek arbitral panels with expertise. “[T]he best informed 

and most capable potential arbitrators” are repeat players with deep industry 

connections, Commonwealth Coatings, 393 U.S. at 150 (White, J., concurring), 

who will “understand the trade’s norms of doing business and the consequences 

of proposed lines of decision,” Sphere Drake Ins. v. All American Life Ins., 307 

F.3d 617, 620 (7th Cir. 2002); accord Nat’l Indemnity Co., 164 F. Supp. 3d at 480 
10

(“[S]pecialized arbitrators are likely to know one another, and repeated or 

overlapping service by the same arbitrators in different arbitrations is bound to 

occur.”). “Familiarity with a discipline often comes at the expense of complete 

impartiality,” and “specific areas tend to breed tightly knit professional 

communities.” Morelite, 748 F.2d at 83. “[T]o disqualify any arbitrator who 

had professional dealings with one of the parties (to say nothing of a social 

acquaintanceship) would make it impossible, in some circumstances, to find a 

qualified arbitrator at all.” Id.; see also Nat’l Indemnity Co., 164 F. Supp. 3d at 

479-80 (if any personal or financial relationship constituted disqualifying 

partiality, “the entire commercial arbitration system ... would be undermined”). 

II

The principles and circumstances that counsel tolerance of certain 

undisclosed relationships between arbitrator and litigant are even more 

indulgent of party-appointed arbitrators, who are expected to serve as de facto

advocates. “[I]n the main party-appointed arbitrators are supposed to be 

advocates.” Sphere Drake, 307 F.3d at 620; see generally Ostrager, supra at 

538-39.3 The ethos of neutrality that informs the selection of a neutral arbitrator 

to a tripartite panel does not animate the selection and qualification of arbitrators 

appointed by the parties. See Instituto de Resseguros do Brasil v. First State Ins. 

Co., 577 N.Y.S.2d 287 (1st Dept. 1991) (a party-appointed arbitrator is “not 

expected to be neutral in the same sense as a judge or arbitral umpire”); Astoria 

Medical Grp. v. Health Ins. Plan of Greater N.Y., 227 N.Y.S.2d 401, 404 (1962) 

(“[T]here has grown a common acceptance of the fact that the party-designated 

 

3 In Floradsynth, Inc. v. Pickholz, 750 F.2d 171 (2d Cir. 1984), we were 

confronted with another tripartite arbitration panel and observed that the “two 

[party-appointed arbitrators] were not to act merely as partisan advocates 

directing argument to a third [arbitrator] who would act as umpire” and that the 

arrangement instead suggested “the three arbitrators were intended to serve and 

act as one board.” Id. at 173. However, that observation was dictum only, see 

id. at 174-74; see also Scandinavian Reinsurance, 668 F.3d at 76 n.21 (noting that 

Florasynth only “suggest[ed]” party-appointed arbitrators not act as advocates), 

and we therefore are not bound by that language today. 
11

arbitrators are not and cannot be ‘neutral,’ at least in the sense that the third 

arbitrator or a judge is.”). 

Of equal importance, arbitration is a creature of contract, and courts must 

hold parties to their bargain. ICA and the Underwriters have chosen a tripartite 

panel with party-appointed arbitrators who are “relieved of all judicial 

formalities and may abstain from following the strict rules of law.” J. App’x at 

593. “[P]arties are free to choose for themselves to what lengths they will go in 

quest of impartiality,” including the various degrees of partiality that inhere in 

the party-appointment feature. Sphere Drake, 307 F.3d at 622 (noting that the 

impartiality protections of Section 10(a)(2) may be altered or waived by mutual 

consent); see also Volt Information Sciences, Inc. v. Board of Trustees of Leland 

Stanford Junior Univ., 489 U.S. 468, 478-79 (1989) (emphasizing how “parties are 

generally free to structure their arbitration agreements as they see fit,” including 

“specify[ing] by contract the rules under which the arbitration will be 

conducted”); Nat’l Football League Mgm’t Council, 820 F.3d at 548 (“parties to [] 

arbitration can ask for no more impartiality than inheres in the method they have 

chosen”).

Many of our sister circuits have therefore held that the disclosure

requirements for neutral arbitrators “do[] not extend to party-appointed 

arbitrators.” Winfrey v. Simmons Foods, Inc., 495 F.3d 549, 552 (8th Cir. 2007); 

accord Nationwide Mut. Ins. Co. v. Home Ins. Co., 429 F.3d 640, 645 (6th Cir. 

2005) (alleged business and social contacts between arbitrator and party counsel 

did not warrant a finding of evident partiality, “particularly where, as here, the 

complaint of evident partiality concerns a party appointed, as opposed to 

neutral, arbitrator”); Sunkist Soft Drinks, Inc. v. Sunkist Growers, Inc., 10 F.3d 

753, 759 (11th Cir. 1993) (distinguishing between party-appointed and neutral 

arbitrators); Lozano v. Maryland Cas. Co., 850 F.2d 1470, 1472 (11th Cir. 1988)

(same). Some courts have gone so far as to suggest that when parties contract to 

allow selection of their own arbitrators, the FAA’s evident partiality rules do not 

apply. Sphere Drake, 307 F.3d at 622 (“To the extent that an agreement entitles 

parties to select interested (even beholden) arbitrators, [Section] 10(a)(2) has no 

role to play.”). 
12

The Second Circuit has not had occasion to decide the standard for a 

Section 10(a)(2) evident partiality challenge to a party-appointed arbitrator. In 

Scandinavian Reinsurance, we acknowledged that the issue remained 

unresolved; but we reserved decision on “whether the FAA imposes a 

heightened burden of proving evident partiality in cases in which the allegedly 

biased arbitrator was party-appointed” because the arbitrator in that case had 

made sufficient disclosures even under the more relaxed standard for neutrals. 

668 F.3d at 76 n.21. Here the question is squarely and unavoidably presented

because the district court’s sound findings on Campos’s improprieties are 

substantial under the traditional Morelite test.4 Moreover, the district court

expressly declined ICA’s invitation to apply a heightened burden for the 

Underwriters’ evident partiality challenge in view of Campos’s role as a 

party-appointed arbitrator, and ruled that “Campos’s conduct must be 

considered under the same evident partiality standard as is required in all 

arbitrations.” Certain Underwriting Members v. Ins. Co. of the Am., 2017 WL 

5508781, at *11.

We respectfully part ways with the district court, and instead join the 

circuits that distinguish between party-appointed and neutral arbitrators in 

considering evident partiality. This distinction is salient in the reinsurance

industry, where an arbitrator’s professional acuity is valued over stringent

impartiality. It also meshes with our case law and takes into account the FAA, 

 

4 The district court was disturbed by Campos’s lack of candor, but also by the 

length and number of his connections. Not all of them are significant. Even 

holding Campos to the standard of a neutral arbitrator, the relationships between 

his company, Vensure, and John Iorillo, Robert Morely, and Benton Morely are 

likely too remote, indirect, and removed in time from the arbitration to be 

material. See Lucent Techs., 379 F.3d at 31; Scandinavian Reinsurance, 668 F.3d 

at 72, 74. And the presence of two insurance agencies within the same Arizona 

business park does not reach the level of clear partiality. See Merck, 2016 WL 

4491141, at *10. Campos’s on-going relationship with Ricardo Rios is more 

direct, intimate, and more closely proximate to the arbitration; Rios also offered 

testimony before the panel. Rios’s credibility (in which Campos may have been 

invested) could have been material to the Award. 
13

which restricts “evident partiality” as opposed to “partiality” or “appearance of 

bias.” 9 U.S.C. § 10(a)(2); Morelite, 748 F.2d at 83-84 (requiring “something 

more than the mere ‘appearance of bias’ to vacate an arbitration award”); Sphere 

Drake, 307 F.3d at 621 (“only evident partiality, not appearances or risks, spoils an 

award”). Expecting of party-appointed arbitrators the same level of 

institutional impartiality applicable to neutrals would impair the process of

self-governing dispute resolution. 

That said, a party-appointed arbitrator is still subject to some baseline 

limits to partiality. We decline to catalogue all “material relationship[s]” that 

may bear upon the service of a party-appointed arbitrator. Lucent Techs., 379 

F.3d at 28.5 But it can be said that an undisclosed relationship is material if it 

violates the arbitration agreement. See Sphere Drake, 307 F.3d at 622. In this 

case, the qualification in the contract is “disinterested,” which would be breached 

if the party-appointed arbitrator had a personal or financial stake in the outcome 

of the arbitration. See, e.g., Trustmark Ins. Co. v. John Hancock Life Ins. Co., 

631 F.3d 869, 872-73 (7th Cir. 2011) (determining “disinterested,” as used in 

arbitration agreement, “means lacking a financial or other personal stake in the 

outcome”); see also ARIAS-U.S. Practical Guide to Reinsurance Arbitration 

Procedure, ¶ 2.3 (rev. ed. 2004) (“[A]rbitration clauses requiring ‘disinterested’ 

 

5 Several tests have been proposed for neutrals. See Sanford Home for Adults 

v. Local 6, IFHP, 665 F. Supp. 312, 320 (S.D.N.Y. 1987) (proposing a three-part test 

for evaluating the partiality of an arbitrator: “(1) the financial interest the 

arbitrator has in the proceeding; (2) the directness of the alleged relationship 

between the arbitrator and a party to the arbitration proceeding; and (3) the 

timing of the relationship with respect to the arbitration proceeding”); see also

Scandinavian Reinsurance Co., 668 F.3d at 74 (citing with approval a four-factor 

test from ANR Coal Co. v. Cogentrix of N.C., Inc., 173 F.3d 493, 500 (4th Cir. 

1999)). However, these tests are designed to evaluate the partiality of a neutral. 

See ANR Coal Co., 173 F.3d at 497 (ANR alleged that the neutral arbitrator 

selected as umpire was partial to Cogentrix); Vigorito v. UBS PaineWebber, Inc., 

477 F. Supp. 2d 481, 486-87 (D. Conn. 2007) (applying the Sanford Home factors to 

an arbitrator appointed through the random assignment “list selection” method). 

So we are not relying upon them as exhaustive or outcome-definitive here. 
14

arbitrators ... mean that arbitrators may have no financial interest in the 

arbitration outcome and are not under any party’s control.”).

An undisclosed fact is also material, and therefore warrants vacatur, if the 

party opposing the award can show that the party-appointed arbitrator’s 

partiality had a prejudicial effect on the award. See Delta Mine Holding Co. v. 

AFC Coal Props., Inc., 280 F.3d 815, 821 (8th Cir. 2001) (“[W]here the parties have 

expressly agreed to select partial party arbitrators, the award should be 

confirmed unless the objecting party proves that the arbitrator’s partiality 

prejudicially affected the award.”); Nationwide Mut. Ins. Co., 429 F.3d at 649 

(instructing that undisclosed social or business contacts must be related “to the 

subject matter of the litigation before the arbitrator” to be material); see also

Commonwealth Coatings, 393 U.S. at 146 (“the relationship even went so far as 

to include the rendering of services on the very projects involved in th[e] 

lawsuit.”). In the absence of a clear showing that an undisclosed relationship

(or the non-disclosure itself) influenced the arbitral proceedings or infected an 

otherwise-valid award, that award should not be set aside even if a reasonable 

person (or court) could speculate or infer bias. See Merck & Co., 2016 WL

4491141 at *9 (party opposing the award must “identif[y] [a] direct connection 

between [the arbitrator] and the outcome of the arbitration”); accord

Scandinavian Reinsurance, 668 F.3d at 78 (“possibilities” that arbitrators could be 

influenced by each other’s thinking on concurrent panels “do not establish bias”). 

We vacate and remand for the district court to determine whether the 

Underwriters have shown by clear and convincing evidence that the failure to 

disclose by party-appointed arbitrator Campos either violates the qualification of 

disinterestedness or had a prejudicial impact on the award. At the district 

court’s discretion, this undertaking may necessitate additional proceedings. Cf. 

Sanko S.S. Co. v. Cook Indus., 495 F.2d 1260, 1265 (2d Cir. 1973) (remanding for 

the district court to give full consideration to further evidence bearing upon an

arbitrator’s undisclosed business relationships). The district court did not 

consider the Underwriters’ challenges as to manifest disregard of the law and 

prejudicial procedural misconduct; nor do we.
15

CONCLUSION

For the foregoing reasons, we hereby VACATE the judgment of the 

district court and REMAND for further proceedings consistent with this opinion.