Opinion ID: 787300
Heading Depth: 3
Heading Rank: 1

Heading: Luening's expert testimony for Lucent

Text: 15 Tatung argues that under the Supreme Court's holding in Commonwealth Coatings, as well as this circuit's precedent interpreting it, an arbitration award must be vacated when one party is not informed of a material relationship between the other party and an arbitrator. Tatung claims that under this supposed rule it was Luening and Lucent's responsibility to guarantee that Tatung was informed of their relationship. According to Tatung, Lucent received copies of all correspondence between Tatung and the AAA and should thus have known that Tatung never received Luening's disclosure form. 16 Under the Federal Arbitration Act, an arbitration award should be vacated [w]here there [is] evident partiality or corruption in the arbitrators, or either of them. 9 U.S.C. § 10(a)(2). In Commonwealth Coatings, the Supreme Court held that an arbitrator's failure to disclose a material relationship with one of the parties can constitute evident partiality requiring vacatur of the award. 393 U.S. at 147-48, 89 S.Ct. 337. Along with concerns about the appearance of bias that might result from such nondisclosure, id. at 150, 89 S.Ct. 337, the Court reasoned that the arbitration process would be best served by requiring early disclosure of any significant dealings between arbitrators and parties. Id. at 151, 89 S.Ct. 337 (White, J., concurring). The judiciary should minimize its role in arbitration as judge of the arbitrator's impartiality, and a policy of early disclosure would limit the opportunities for a suspicious or disgruntled party [to] seize on [an undisclosed relationship] as a pretext for invalidating the award. Id. 17 This court has, in turn, viewed the teachings of Commonwealth Coatings pragmatically, employing a case-by-case approach in preference to dogmatic rigidity. Andros Compania Maritima, S.A. v. Marc Rich & Co., 579 F.2d 691, 700 (2d Cir.1978). [W]e have not been quick to set aside the results of an arbitration because of an arbitrator's alleged failure to disclose information. Id. In particular, we have declined to vacate awards because of undisclosed relationships where the complaining party should have known of the relationship, see Cook Indus., Inc. v. C. Itoh & Co. (America), 449 F.2d 106, 107-08 (2d Cir.1971), or could have learned of the relationship just as easily before or during the arbitration rather than after it lost its case. Andros, 579 F.2d at 702. We have also noted that a principal attraction of arbitration is the expertise of those who decide the controversy, that [e]xpertise in an industry is accompanied by exposure ... to those engaged in it, and the dividing line between innocuous and suspect relationships is not always easy to draw. Id. at 701. 18 Tatung cites no case from the Supreme Court or this court that has vacated an award for nondisclosure where the arbitrator has complied with his obligation to disclose potential sources of partiality. 3 See, e.g., Reed & Martin, Inc. v. Westinghouse Elec. Corp., 439 F.2d 1268, 1275 (2d Cir.1971) (The arbitration award cannot be set aside where an arbitrator has completely followed his obligations under the rules.). In this case, it is undisputed that Luening disclosed his work as an expert witness for Lucent to the AAA. If Tatung failed to receive Luening's disclosure form, the fault lies with the AAA and not with Luening or Lucent. The concern, noted in Commonwealth Coatings, that nondisclosure might create an appearance of bias or even be evidence of bias is simply not present in this case. There is no basis to argue that Luening and Lucent intended to hide their relationship from Tatung. 19 Furthermore, Tatung's proposed rule — that parties to an arbitration, in effect, guarantee that opposing parties obtain arbitrator disclosures 4 — would make the results of arbitration less rather than more certain and would run counter to the general policy of encouraging and supporting arbitration. See Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24-25, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991); Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). The Commonwealth Coatings requirement that any relationship be disclosed at the outset encourages conflicts over arbitrators to be dealt with early in the arbitration process and helps limit the availability of collateral attacks on arbitration awards by a disgruntled party. 393 U.S. at 151, 89 S.Ct. 337 (White, J., concurring). Tatung's proposed rule, on the other hand, encourages parties to remain ignorant of potential conflicts until after losing in arbitration. As Judge Rakoff explained, [i]nstead of rewarding diligence at the beginning of arbitration proceedings, such a result would `encourage the losing party to every arbitration to conduct a background investigation of each of the arbitrators in an effort to uncover evidence of a former relationship with the adversary.' Lucent Techs., Inc., 269 F.Supp.2d at 405 (quoting Merit Ins. v. Leatherby Ins. Co., 714 F.2d 673, 683 (7th Cir.1983)). Only after obtaining an unfavorable result would a party search for relationships between an arbitrator and an opposing party in hopes of finding a pretext for invalidating the award, Commonwealth Coatings, 393 U.S. at 151, 89 S.Ct. 337. 20 Tatung's attempt to vacate the award here demonstrates the dangers of its proposed rule. Tatung seeks to set aside an arbitration that took nearly two years to conclude. Tatung argues that it reasonably relied on its failure to receive a copy of Luening's disclosure form as evidence that no relationship existed. 5 However, there is no evidence that it so relied. Moreover, this argument was not made in any papers below and was barely mentioned in the district court at oral argument on Tatung's motion to vacate. Judge Rakoff obviously regarded the argument as unpersuasive. So do we. As the district court found, Tatung knew of the AAA rules requiring disclosure by arbitrators, must have known of the form filed by Fiorito, its party-appointed arbitrator, and knew of the AAA's disclosure form submitted by Smith and eventually forwarded to Tatung. There was no persuasive reason for Tatung to have assumed that Luening had not submitted a similar form, and Tatung could have inquired into it at any time before or during arbitration. Notably, the AAA rules strongly encourage early investigations and objections. 6 Had Tatung asked the AAA for Luening's form or asked Luening himself about any relationship with Lucent, Tatung would have undoubtedly discovered the relationship now at issue — a relationship Luening and Lucent clearly had no intention of hiding — before the arbitration began. Instead, only after losing in arbitration and losing, on grounds different from those seized upon here, on a motion to dismiss Lucent's attempt to confirm the award, did Tatung discover Luening's relationship with Lucent and seek vacatur of the award on that ground. Even then, as the district court found, Tatung chose to remain ignorant of Luening's disclosure form. Commonwealth Coatings does not require vacatur of an award under circumstances such as these, and Tatung's proposed rule would prove inimical to the purposes of arbitration. Accordingly, we affirm the district court's decision on this issue. 21