Source: https://law.marquette.edu/facultyblog/2011/07/07/arbitrator%E2%80%99s-social-life-overturns-award/
Timestamp: 2019-04-21 06:16:50+00:00

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In Dallas last week, a court overturned a $22 million (!) arbitration decision because the arbitrator had failed to disclose that he had socialized with one of the lawyers.
The ruling involves a partnership dispute arbitrated in 2007-08 by JAMS arbitrator Robert Faulkner. The winning party in the dispute was represented by Brett Johnson, a partner at Fish & Richardson.
Faulkner disclosed that he had presided over an arbitration involving Fish & Richardson, but he did not reveal any social contacts with Johnson. The contacts included the Mavericks game, several private meals, and Johnson’s Christmas gift of a wine basket to Faulkner and the arbitrator’s wife, according to the appellate court ruling.
The court concluded the two men had a “direct, personal, professional, social and business relationship” that should have been disclosed because it might give rise to a “reasonable impression” that Faulkner would be partial to Johnson.
Although the lawyer claimed that the minor socializing was the same as with any lawyer, judge, or arbitrator, the court did not view it that way. The parties have not yet decided if they are going to appeal. Hat Tip and much appreciation to Susan Franck for sending this along.
This is very interesting especially in light of the HBO documentary Hot Coffee, which comments on how arbitration is taking people out of the courtroom and encroaching on the constitution.
This is very interesting. Frankly, I am a little shocked that this information was never disclosed, though if it had been, the arbitrator likely could have convinced the parties, with little effort, that he could have remained objective. In fact, he may have been truly impartial, but the appearance of impropriety in this instance is fairly shocking, if for no other reason than simply the lack of disclosure.
It prompted me to reopen my “Selected Standards on Professional Responsibility” text, and to do some web searching. Clearly, the conflict here is relevant to the rules regarding conflict of interest, third-party neutrals, etc.
I also found some interesting information on Duties of Counsel Regarding Arbitrator Conflicts of Interest.
I believe that this information supports the overturning of the ruling, and my initial surprise that the arbitrator should have, and probably could have, disclosed the information without having to be removed from the dispute. In addition, it seems that Attorney Johnson also should have disclosed the relationship. It is yet one more example of the slippery slope of professional responsibility. It highlights that we should probably always err on the side of caution when making these types of judgment calls.
The most interesting takeaway from the Texas court’s decision in this case is that shows how the judiciary is more concerned with protecting the arbitration process’s legitimacy than its outcomes’ legitimacy.
Several courts have adopted the rule that courts cannot annul arbitration awards because of arbitrators’ factual or legal mistakes. Bull HN Information Systems, Inc. v. Hutson, 229 F.3d 321 (1st Cir. 2000); Flexible Mfg. Systems Pty. Ltd. v. Super Products Corp, 86 F.3d 96 (7th Cir. 1996); San Martine Compania De Navegacion, S. A. v. Saguenay Terminals Limited, 293 F.2d 796 (9th Cir. 1961). Even if an arbitrator obviously “gets it wrong,” the courts are generally committed to leaving that wrong result alone.
Thus, the main concern for courts is not getting the right legal or factual result, but maintaining parties’ faith in an (ideally) unbiased process that helps relieve caseloads around the country. The periodic interactions between arbitrator and counsel in this case were spread over a period of many years. They were not terribly close. However, the court sent a message: A reasonable person would conclude that such a relationship could influence an arbitrator’s decision, and that fact must allow for judicial annulment of arbitration awards in order to keep the arbitration process pure.
Note: While Texas has not directly adopted it, the “reasonable person” standard invoked in this decision is very similar to that in §12(a) of the Revised Uniform Arbitration Act (an arbitrator must disclose to all parties “any known facts that a reasonable person would consider likely to affect the impartiality of the arbitrator.”) The Court draws its version of this standard from Burlington N. R.R. Co. v. TUCO Inc., 960 S.W.2d 629, 636 (Tex. 1997).
Upon studying Arbitration in your ADR course, Professor Schneider, this case strikes me as a departure from the central holding of the Supreme Court’s ruling Commonwealth Coatings Corp. v. Continental Cas. Co., 393 U.S. 145, 147–48. In that case, the arbitrator maintained a business relationship with one of the parties and failed to give the other party even an “intimation” of this bias. The Court, and the Revised Uniform Arbitration Act provisions identified by Mr. Joseph Birdsall, suggests that an arbitrator may have a professional relationship with one of the parties so long as that relationship is disclosed. Indeed, the Court in Commonwealth Coatings emphasized the secretive nature of the arbitrator’s business relationship, which greatly influenced its decision to find this behavior improper and vacate the award under the United States Arbitration Act § 10.
This case though is not a situation of a hidden bias to the extent observed in Commonwealth Coatings. My view is perhaps sparked by the small, tight-knit legal community we experience in Milwaukee. In this community, it would not seem odd to attend basketball game with a fellow attorney or send wine to attorney’s wife. So, the reasonable attorney (or arbitrator in this case) would likely not deem this to create a bias. Rather, this sort of social interaction is common among attorneys and industry professionals who are often most capable of arbitrating these matters. As such, reasonable attorneys know that other attorneys attend games and dinner with their fellow practitioners.

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