Opinion ID: 658196
Heading Depth: 2
Heading Rank: 2

Heading: Arbitrator Conduct

Text: 20 Sunkist contends that the conduct of Jessie Meyers, the party-designated arbitrator chosen by Del Monte, was sufficiently inappropriate to constitute evident partiality and prejudicial misconduct in violation of Sec. 10(a)(2) and (a)(3) of the Federal Arbitration Act, 9 U.S.C. Sec. 1 et seq. Sunkist moved to vacate the arbitration award pursuant to Sec. 10 which provides that a district court may vacate an arbitral award in certain limited circumstances, including: 21 (2) Where there was evident partiality or corruption in the arbitrators, or either of them. 22 (3) Where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced. 9 U.S.C. Sec. 10(a). 23 The district court denied Sunkist's motion and confirmed the award. 24 Sunkist argues that we should impose upon a party-appointed arbitrator the burden of avoiding even the appearance of bias and that the mere possibility of bias is sufficient to justify a finding of evident partiality. See Commonwealth Coatings Corp. v. Continental Casualty Co., 393 U.S. 145, 89 S.Ct. 337, 21 L.Ed.2d 301 (1968) (Rule requiring neutral arbitrators to disclose any substantial relationships they may have with the arbitration parties is based on the premise of avoiding the appearance of bias.). The Eleventh Circuit has addressed the issue of a neutral arbitrator's conduct and found that any conduct that creates a reasonable appearance of bias warrants setting aside an arbitration award on the ground of evident partiality. See Middlesex Mutual Ins. Co. v. Levine, 675 F.2d 1197 (11th Cir.1982); Lozano v. Maryland Casualty Company, 850 F.2d 1470 (11th Cir.1988). 5 25 However, the case sub judice involves the conduct of a party-appointed arbitrator, which is easily distinguished from the above cited cases. The AAA, under whose rules the parties were contractually bound to proceed, 6 recognizes inherently different rules for neutral and nonneutral arbitrators and imposes less exacting duties and less burdensome disclosure rules upon nonneutral arbitrators. 26 Sunkist concedes that Mr. Meyers, as a party-appointed arbitrator, may be predisposed or sympathetic toward Del Monte's position. See AAA Code of Ethics for Arbitrators in Commercial Disputes, Canon VII (Party-appointed arbitrators may be predisposed towards the party who appointed them but in all other respects are obligated to act in good faith and with integrity and fairness.); see generally Lozano, 850 F.2d at 1472 (An arbitrator appointed by a party is a partisan only one step removed from the controversy and need not be impartial.) (applying Florida arbitration statute). However, the AAA does require that nonneutral arbitrators act in good faith and with integrity and fairness. See Code of Ethics for Arbitrators in Commercial Disputes, Cannon VII. 7 Consequently, Mr. Meyers conduct as a party-appointed arbitrator must be evaluated to determine whether he acted in good faith and with integrity and fairness. 27 Sunkist alleges that before the arbitration but after his appointment as Del Monte's arbitrator, Mr. Meyers assisted Del Monte in preparing its case by attending and participating in meetings with Del Monte's witnesses, that he suggested lines or areas of testimony, that he helped select one of Del Monte's consultants, and that he advised an expert witness on how to improve a chart related to the expert's testimony. Sunkist argues that in meeting with Del Monte's representatives and witnesses in preparation for the hearing, Mr. Meyers engaged in the ex parte receipt of evidence. However, none of the Del Monte representatives nor the third party witness, Mr. O'Reilly, were placed under oath before being interviewed, and none gave testimony in any sense of the word. Sunkist has made no showing that Mr. Meyers discussed any information that he received during the prehearing interviews with the other arbitrators, or that any of the arbitrators, including Mr. Meyers, based their deliberations and award on anything other than the evidence of record. Mr. Meyers' conduct is not only unobjectionable, but commonplace. E.g. Stef Shipping Corp. v. Norris Grain Co., 209 F.Supp. 249, 251 (D.C.N.Y.1962) (The fact that [a party-appointed arbitrator] consulted with his nominator prior to the arbitration hearing is not shocking. It would be unrealistic to expect a party engaged in an arbitration dispute to nominate an arbitrator without telling him what the dispute is about. It must be pointed out that there is no evidence that the award itself was based upon evidence or documents not before the arbitration panel, only that [the party-appointed arbitrator] had conferred with respondent prior to the start of the arbitration hearings.... This is not the type of irregularity which [9 U.S.C. Sec. 10] contemplates as being sufficient to vacate an otherwise valid arbitration award.) 28 Sunkist also contends that Mr. Meyers exhibited evident partiality because he prejudged critical points of the dispute between Sunkist and Del Monte in a publication called Beverage Digest, a biweekly soft-drink industry newsletter owned and published by Mr. Meyers. Sunkist points to the fact that before Mr. Meyers' appointment, he reported that external market factors were responsible for a decline in sales of Sunkist brand orange soda; a position contrary to Sunkist's claims that Del Monte's tortious conduct caused much of the decline in sales. 8 29 We fail to see how this prejudiced Sunkist or affected its right to a fair hearing. As we noted earlier, a party-appointed arbitrator is permitted, and should be expected, to be predisposed toward the nominating party's case. Several courts have recognized that entanglement with and knowledge about relative industry concerns are laudatory qualifications for those who sit as arbitrators. See Morelite Constr. Corp. v. New York City Dist. Council Carpenters Ben. Funds, 748 F.2d 79, 83 (2nd Cir.1984) ([P]arties agree to arbitrate precisely because they prefer a tribunal with expertise regarding the particular subject matter of their dispute.... Familiarity with the discipline often comes at the expense of complete impartiality.); see also Commonwealth Coatings Corp. v. Continental Casualty Co., 393 U.S. 145, 150, 89 S.Ct. 337, 340, 21 L.Ed.2d 301 (1968) (White & Marshall JJ., concurring) ([A]rbitrators are not automatically disqualified by a business relationship with the parties before them if both parties are informed of the relationship in advance.... I see no reason to disqualify the best informed and most capable arbitrators.). Mr. Meyers merely published his opinions on what was taking place within the soft drink industry. Whether he was correct or not in his opinion, it is not sufficient to disqualify him as an arbitrator. 30 Finally, Sunkist contends that Mr. Meyers breached his duty of disclosure, by failing to reveal the exact nature and extent of his communications with Del Monte before the arbitration hearings. Under Cannon II, arbitrators are required to disclose only two kinds of information: (1) any direct or indirect financial or personal interest in the outcome of the arbitration, and (2) any existing or past financial, business, professional, family, or social relationships which were likely to affect impartiality or which might reasonably create an appearance of partiality or bias. Cannon VII provides that disclosure by non-neutral arbitrators should be sufficient to describe the general nature and scope of any interest or relationship.... The record clearly shows that Mr. Meyers announced in his formal disclosure letter that he had been in contact with Del Monte's experts before the parties were notified of his appointment and that he intended to continue to communicate with them after his formal appointment. There has been no showing that Mr. Meyers had a direct financial or familial relationship with any party to the arbitration. We agree with the district court that Mr. Meyers met his obligations of disclosure according to the AAA rules. 31 A party-appointed arbitrator must consider the evidence of record in good faith and with integrity and fairness. The fact that Mr. Meyers may have been predisposed towards Del Monte's case is not sufficient to vacate the arbitration award. The evidence relied upon by Sunkist is insufficient to support a finding that Mr. Meyers acted improperly either before or during the arbitration hearing. Therefore, the district court did not abuse its discretion in denying Sunkist's motion to vacate the arbitration award. 32 For all of the foregoing reasons, the judgment of the district court is AFFIRMED.