Source: http://www.goetzfitz.com/an-arbitrators-failure-to-tell-all-will-it-translate-into-vacating-his-or-her-award/
Timestamp: 2019-04-22 16:46:23+00:00

Document:
This article was published in Conflict Management in The American Bar Association. Download original article.
Underlying its review of an award is the court’s expectation that prior to the evidentiary hearings, a neutral arbitrator has disclosed to the parties everything that ought to have been revealed. So as to maintain the integrity of their role in confirming or vacating awards, courts will not hesitate to inspect the record to determine whether an arbitrator acted fairly, impartially and without bias.(3) While it is rare that an arbitration award will be vacated under the Federal Arbitration Act or the various state arbitration statutes due to “corruption, fraud or other undue means”, not infrequently, courts do vacate awards when an arbitrator fails to disclose some significant aspect of his or her background and/or any prior or current dealings that reasonably might have been of interest to one or both of the parties during the arbitrator-selection process.
Article 10(2) of the Federal Arbitration Act provides fertile ground for the argument that an arbitrator’s failure to disclose certain information may require the award to be vacated.(4) It states that an arbitration award should be set aside where there an arbitrator demonstrates “evident partiality”. Almost 40 years ago in Commonwealth Coatings Corp. v. Continental Casualty Co., the U.S. Supreme Court held that an arbitrator’s failure to disclose a material relationship with one of the parties can constitute “evident partiality”.(5) Since that time, not surprisingly, myriad judges have attempted to interpret what “evident partiality” means, whether the particular facts of their case rose to that level and, in some cases, courts have broadly defined the words to encompass anything that might create the potential for bias.
(4) any other matters, relationships, or interests which they are obligated to disclose by the agreement of the parties, the rules or practices of an institution, or applicable law regulating arbitrator disclosure.
(2) an existing or past relationship with any of the parties to the agreement to arbitrate or the arbitration proceeding, their counsel or representatives, a witness, or another arbitrators.
Standards of honesty, fairness and impartiality must govern the conduct of all arbitrators in whose hands the dispute resolution process is entrusted.
Every arbitrator is required to make full disclosure of possible conflicts of interest to the parties prior to the commencement of arbitration proceedings.
An arbitrator is required to make every disclosure which reveals any relationship or transaction that the arbitrator has had which will suggest to the reasonable person that the arbitrator might be partial to one side.
In view of the technological advances in recent years, it is now possible for parties to conduct their own independent due diligence regarding an arbitrator’s background and his or her obligation to disclose. Three years ago, the losing party in an arbitration in New Jersey was successful in convincing the court to overturn the award when it demonstrated to the court that the arbitrator had once acted as the president of a condominium association. The underlying arbitration did not involve the arbitrator’s condominium, but, interestingly, it did involve a dispute over the interpretation of a transition agreement executed by a developer of condominiums and a condominium association. The arbitrator found in favor of the condominium association, yet the record established that the arbitrator had never disclosed to the parties its prior experience as president of the unrelated condominium association. The condominium developer had discovered this fact when, after receiving the award, its attorney, on a lark, decided to “Google” the arbitrator’s name. What appeared on the computer screen was a direct quote from the arbitrator commenting about the need for condominiums to initiate maintenance programs for swimming pools. A copy of the web page was attached as an exhibit to the papers supporting the order to show cause to vacate the arbitration award. As he granted the application, the judge mentioned from the bench that he viewed the arbitrator’s failure to disclose as “odorous”. And, although not particularly relevant, when the dispute was presented to a new arbitrator, he found in favor of the condominium developer.
2. Weber v. Merrill Lynch Pierce Fenner & Smith, Inc., 2006 WL 2583183 (N.D.Tex).
3. Morelite Construction Corp. v. New York City District Council Carpenters Benefit Funds, 748 F.2d 79 (2nd Cir. 1984).
5. Commonwealth Coatings Corp. v. Continental Casualty Co., supra.
6. See e.g., Lucent Technologies Inc. v. Tatung Co., 379 F.3d 24, 29 (2nd Cir. 2004).
7. Weber v. Merrill Lynch Pierce Fenner & Smith, Inc., supra.
8. As of early 2006, federal courts in the 2nd, 4th, 6th, 7th and 10th Circuits endorsed a narrower standard whereas the 5th, 9th and 11th Circuits followed the broad standard.
10. Crow Construction Company v. Jeffrey M. Brown Assoc, Inc., 264 F. Supp.2d 217 (E.D. Perm. 2003); Schmotz v. Zilveti, 20 F.3d 1043 (9th Cir. 1994).
11. Morelite Construction Corp. v. New York District Council Carpenters Benefit Fund, supra, 748 F.2d at 84.
12. Crow Construction Company v. Jeffrey M. Brown Assoc, Inc., supra. 264 F. Supp 2d at 221; Lucent Technologies Inc. v. Tatung Co., supra, 379 F.3d at 31.
13. Andersons, Inc. v. Horton Farms, Inc., 166 F.3d 308 (6th Cir. 1998).
14. N.J.S.A. 2A:23B-12(e) entitled “Vacating Award”.
15. Bar con Associates, Inc. v. Tri-County Asphalt Corporation, 86 NJ 179 (N.J. 1981).

References: v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.