Opinion ID: 2453821
Heading Depth: 2
Heading Rank: 1

Heading: Arbitrator Disclosure

Text: Credit Suisse first argues that we should vacate the award because arbitrator Duval provided incomplete and inaccurate disclosures to the parties before they selected him for the arbitration panel. Specifically, Credit Suisse contends that, [w]hile Duval has served extensively and almost exclusively as a professional claimant-side expert witness [that is, as a witness for customers arbitrating against financial firms], his disclosure report omitted all but a brief reference to his claimant-side experience and instead misleadingly stated that he worked for `both sides.' Credit Suisse further contends that Duval chose not to disclose that he had served as a claimant-side expert witness on an issue very similar to the one that would determine the arbitration. As we have previously noted, [a] party moving to vacate an arbitration award has the burden of proof, and the showing required to avoid confirmation is very high. D.H. Blair & Co. v. Gottdiener, 462 F.3d 95, 110 (2d Cir.2006). Credit Suisse has not met this burden. Following issuance of an arbitration award, § 9 of the Federal Arbitration Act (FAA) provides that a party may apply to a district court for an order confirming the award, and thereupon the court must grant such an order unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of this title. 9 U.S.C. § 9. Section 10 of the FAA, in turn, lists grounds for vacating an order, see Hall Street Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 582, 128 S.Ct. 1396, 170 L.Ed.2d 254 (2008), including, most relevantly to this argument, evident partiality or corruption in the arbitrators and other misbehavior by which the rights of any party have been prejudiced. 9 U.S.C. § 10(a)(2), (3). During arbitration, Credit Suisse invoked the first of these provisions, complaining that Duval's incomplete disclosure demonstrated evident partiality. Cf. 9 U.S.C. § 10(a)(2); Commonwealth Coatings Corp. v. Cont'l Cas. Co., 393 U.S. 145, 147, 89 S.Ct. 337, 21 L.Ed.2d 301 (1968). Before the district court and this Court, however, Credit Suisse maintains the same objection but shifts to a more novel theory, disclaiming evident partiality and instead relying on the FAA's catch-all for other misbehavior by which the rights of any party have been prejudiced. 9 U.S.C. § 10(a)(3). Credit Suisse does not cite any cases, nor are we aware of any, that have addressed claims of insufficient disclosure under the other misbehavior prong. There is a reason for Credit Suisse's switch: as it now acknowledges, the decisions under § 10(a)(2)'s evident partiality provision have addresse[d] non-disclosure only of facts bearing on partiality  namely, a relationship with a party, a lawyer, or another arbitrator. Credit Suisse's contention, however, is that Duval failed to disclose (and, in fact, affirmatively misrepresented) facts bearing not on partiality but on an alleged predisposition. No one alleges that Duval concealed any relationship with one of the parties, whether financial, familial, or otherwise. Rather, Credit Suisse argues that Duval's experience as an expert for claimants either colored his outlook in their favor or demonstrates that his outlook was already so colored and that, either way, Credit Suisse was entitled to know about that experience before selecting him as an arbitrator. Credit Suisse contends that Duval's disclosure report misled Credit Suisse about his experience in violation of the FINRA Rules, thereby entitling Credit Suisse to vacate the award for other misbehavior under § 10(a)(3). ST responds that Duval did not violate the FINRA rules and that, even if he had, § 10(a)(3) is not available for violations of arbitration rules or for failure to disclose generally. We may reject Credit Suisse's claim without diving too deeply into these difficult legal waters. Close consideration turns up very little factual support for Credit Suisse's claim of improper disclosuretoo little to vacate the award under any conceivable legal standard. Duval's Arbitrator Disclosure Report describes a twenty-two-year career in finance, primarily with Merrill Lynch, and explains that he now works as an arbitrator and is also a Litigation Consultant and an expert witness having represented both sides. A section of the report entitled Disclosure/Conflict Information lists a variety of information, including banks with which Duval maintains an account, securities licenses he holds, and the like. In relevant part, it repeats Duval's statement that he has worked as an expert and consultant for both sides and provides two specific examples of such work, one where he was an expert or consultant for Wachovia Securities and one where he testified against the same company. Credit Suisse argues that Duval should have disclosed more of his work as an expert for claimants (that is, customers) than his disclosure report reflected. During the arbitration, Duval mentioned offhand that he had testified a lot in cases as an expert. Credit Suisse says this remark led it to investigate Duval's background and to learn that Duval had stated, in 2005, that he had testified more than twenty-five times as an expert, only once or twice for respondents [that is, financial institutions] and the balance for claimants. Attacking Duval's experience as one-sided, Credit Suisse argues that Duval misled it when he described his experience as representing both sides and listed only one representation on each side. Credit Suisse's characterization of Duval's experience, however, is incomplete. When Credit Suisse asked him to recuse himself in the middle of a day of hearings, Duval responded that Credit Suisse's figures were underreported and that he had had numerous cases where [he] was retained by [a] respondent, but [that had] settled. They didn't make it to a hearing. He further elaborated that a respondent firm recently hired [him] to do a mediation, and that he was under retainer by a large . . . wire house at present, and . . . probably will testify for them. Credit Suisse's briefs largely ignore this explanation, instead focusing wholly on the 2005 statement, which is both less complete (because it describes only times Duval testified and does not include other expert or consulting work) and less up to date (because it does not include Duval's experience in the three years between 2005 and the arbitration in this case). Given the very high showing necessary to vacate an award, D.H. Blair, 462 F.3d at 110, we would expect Credit Suisse to present more evidence to support its contentions about Duval's background. It appears, however, that Credit Suisse never asked Duval for an accounting of his experience, either before or during the arbitration or during the district court proceedings. Although we have limited the availability of discovery regarding the completeness of an arbitrator's disclosures, we have not forbidden it altogether. See Andros Compania Maritima, S.A. v. Marc Rich & Co., 579 F.2d 691, 702 (2d Cir.1978); Sanko S.S. Co. v. Cook Indus., Inc., 495 F.2d 1260, 1263 (2d Cir.1973); see also Hoeft v. MVL Group, Inc., 343 F.3d 57, 66-67 (2d Cir.2003) (stating in dicta that arbitrators may be deposed on issue of bias), overruled on other grounds by Hall Street Assocs., 552 U.S. 576, 128 S.Ct. 1396. That Credit Suisse made no further inquiries in either forum is telling. [4] The lack of evidence means we cannot know exactly how much work Duval did or for whom. But that was Credit Suisse's burden to show, and it has failed to carry it. At the very least, even if we assume that Duval has worked for many more claimants than respondents, his work for numerous respondents and his ability to cite two respondents employing him at the time of the 2008 arbitration belie Credit Suisse's contention that he served . . . almost exclusively as a professional claimant-side expert witness. With this understanding of the record, we see no ground upon which to vacate the award because of Duval's disclosures. Even if we assume several hotly contested legal issues in Credit Suisse's favorthat the other misbehavior clause in 9 U.S.C. § 10(a)(3) extends to insufficient disclosure, that violation of the FINRA rules necessarily constitutes such other misbehavior, and that a one-sided employment history demonstrates a predisposition that must be disclosed under that provision or some otherCredit Suisse's claim still fails. Credit Suisse has not shown that Duval's experience was one-sided. Failure to disclose Duval's full experience thus could not have been misbehavior of any sort, much less the other misbehavior that would trigger § 10(a)(3). Moreover, Credit Suisse cites no FINRA rule that Duval's disclosures violate. In fact, it specifically disclaims any contention that FINRA Rule 12405(a)which governs arbitrator disclosuresby itself required disclosure of details about Duval's expert engagements. The wisdom of this conclusion is confirmed both by FINRA's own explications of its rules and by its application of those rules in this case. A FINRA publication, under the heading Arbitrator Tip: Disclosure and Acting as an Expert, suggests that all arbitrators who act as experts includeat a minimuma sentence (filling in the appropriate type of party) in their background paragraph such as: `I have been an expert witness for (customers/brokerage firms/brokers, or associated persons).' Duval included exactly this sort of statement here, accurately describing himself as a Litigation Consultant and an expert witness having represented both sides. The same publication states that [a]rbitrators may also wish to provide an estimate of the number of times they acted as an expert for customers, registered representatives or broker-dealers. (Emphasis added.) But it does not say they must do so. It is no surprise, therefore, that FINRA's Director of Arbitration found no reason to remove Duval from the panel after review[ing] Credit Suisse's allegations. Credit Suisse makes two arguments in response. First, it argues that Duval's disclosure report was not just incomplete but affirmatively misleading because it included two engagements as an expert witnessone for Wachovia Securities, one against itand no others. Credit Suisse admits this disclosure was factually true, but alleges that it was aimed to create a false appearance of neutrality. As discussed above, however, Credit Suisse has failed to show that Duval's experience was sufficiently one-sided to cast doubt on that appearance. Second, Credit Suisse points to the FINRA arbitrator application form, which includes some questions about prior expert work, and argues that Duval failed in his disclosure obligations (or otherwise committed misbehavior) by failing to include all his prior expert service on that application. That application form, however, is not a document prepared with reference to any particular matter. Rather, it is the initial form that potential arbitrators must file to get on the FINRA roster of candidates. Moreover, Credit Suisse does not provide a copy of the form actually executed by Duval; it provides only a blank copy of the form, without connecting the dots between that form and Duval's disclosures. Specifically, Credit Suisse provides no evidence (a) that the form it cites is the source of the information in the arbitrator's disclosure report provided to the parties by FINRA; (b) that, if it is the source of the disclosure report, every bit of information provided by a potential arbitrator in that form ends up on the report, rather than only a selection of information that the arbitrator or FINRA administrators think relevant; or (c) that the form it cites, which dates from November 2008, contains the same questions that were asked when Duval applied to be an arbitrator before FINRA even existed, or even when Duval's disclosure form was released to the parties at least several months before the date of the application form Credit Suisse provides. Lacking all these facts, we cannot infer that Duval failed to meet any disclosure obligations. Finally, Credit Suisse adds another twist to its improper-disclosure case, arguing that Duval should have alerted Credit Suisse that he had previously testified as an expert on legal issues similar to some of those at issue in this case. This argument suffers from evidentiary deficiencies similar to those of Credit Suisse's other arguments: Credit Suisse provides only nine pages of testimony, without context about the case or about Duval's testimony. The testimony Credit Suisse cites involves a customer's duty to read a prospectus. This issue may relate to a legal issue here, involving whether ST should have read both the trade confirmations it received by email and the account statements it received in hard copy. But without context it is hard to evaluate the relevance of Duval's prior testimony. More fundamentally, the major premise of Credit Suisse's attack on Duval's non-disclosure of his prior testimony fails. There is no contention here that Duval had any prior knowledge of, or misconception about, the facts of this case. Credit Suisse's argument, rather, is that his testimony suggests he had pre-existing views about potentially relevant propositions of law. However, [a] judge's lack of predisposition regarding the relevant legal issues in a case has never been thought a necessary component of equal justice, and with good reason. For one thing, it is virtually impossible to find a judge who does not have preconceptions about the law. Repub. Party of Minn. v. White, 536 U.S. 765, 777, 122 S.Ct. 2528, 153 L.Ed.2d 694 (2002). This is all the more true for arbitrators, [t]he most sought-after of whom are those who are prominent and experienced members of the specific business community in which the dispute to be arbitrated arose. Int'l Produce, Inc. v. A/S Rosshavet, 638 F.2d 548, 552 (2d Cir.1981). Arbitrator Duval played that very role on this panel, as the non-public arbitrator specifically chosen for his industry connection. [5] See FINRA Rule 12100(p). It would be strange if such an arbitrator were forced to search the record of all prior testimony for any statement that mighthowever tangentiallyrelate to any of the many legal issues that might arise in any given case. A party might like to know that information when shopping for arbitrators, but its absence cannot form a ground for vacating an arbitral award. The rule for which Credit Suisse contends finds no support in the text of the FAA or the case law, and we reject it.