Court Opinion

ID: 9457412
Source: CourtListenerOpinion
Date Created: 2023-08-04 20:20:58.701193+00
Date Added: 2024-06-11T17:31:43.685753
License: Public Domain

OAKES, Circuit Judge
(dissenting):
I dissent with deference and not without reluctance. Appellant Cook moved to vacate an arbitration award to appel-lee Itoh. The case was decided below on the basis of conflicting and ambiguous affidavits, with no evidence taken.
Section 8 of the Grain Arbitration Rules of the New York Produce Exchange required that
No person shall serve as an arbitrator in any arbitration if he has any financial or personal interest in the result of the arbitration, unless the parties waive such disqualification in writing. No such waiver was signed here. The only grain member of the Arbitration Committee of that Exchange was an employee of Cargill Incorporated. Cargill’s group of foreign companies known as the “Tradax Companies” sold approximately $50,000,000 of soya beans and feed grains in 1969 to appellee Itoh, a major Japanese grain importer. It now appears that Itoh is Cargill’s most important grain customer in Japan. The arbitrator personally handles, according to appellant’s affidavits, 95 per cent of his company’s sales to Japan. Those affidavits aver that his performance is judged by Cargill on the basis of those sales. The arbitrator’s own affidavit in opposition to the motion states that
I have no connection with, and no interest in the operations of any company or subsidiary related to Cargill Inc. While the Tradax Companies may have done business with Itoh of Japan, such business is outside the sphere of my responsibilities. *109At the very least, it seems to me, this raises an issue of fact which should be resolved by the taking of testimony, cross examination and findings below.
Beyond this, if we were to take the averments of the affidavits in the light most favorable to the appellant, the arbitrator, although he was but one of a committee of four, would appear to have had a “personal” interest under § 8 of the Grain Arbitration Rules, which required his disqualification in the absence, as here, of a written waiver. This is essentially the same rule — that an award should be set aside for an arbitrator’s undisclosed pecuniary interest —that the Supreme Court read into the Federal Act, 9 U.S.C. §§ 1-14, in Commonwealth Coatings Corp. v. Continental Casualty Co., 393 U.S. 145, 89 S.Ct. 337, 21 L.Ed.2d 301 (1968), while pointing out that courts
should, if anything, be even more scrupulous to safeguard the impartiality of arbitrators than judges, since the former have completely free rein to decide the law as well as the facts and are not subject to appellate review. 393 U.S. at 149, 89 S.Ct. at 339.
The majority and appellee rely upon Garfield & Co. v. Wiest, 432 F.2d 849 (2d Cir. 1970), where the court held there was a waiver in advance by all member firms of the New York Stock Exchange of objections to arbitrators based on their dealings through specialists, at least as regards dealings in the ordinary course of Exchange business. 432 F.2d at 853-854. From this, the majority says, it follows that, since here Cook was aware that Cargill did business with Itoh and that the arbitrator in question was employed by Cargill, Cook must be deemed to have waived any disqualification. See also Ilios Shipping & Trading Corp., S. A. v. American Anthracite & Bituminous Coal Corp., 148 F.Supp. 698, 700 (S.D.N.Y.), aff’d per curiam, 245 F.2d 873 (2d Cir. 1957).
This view does not, I suggest, do justice to § 8 of the Grain Arbitration Rules, the U. S. Arbitration Act (9 U.S. C. § 10) authorizing the court to vacate an award where there is “evident partiality” on the arbitrator’s part, the decision in Commonwealth Coatings, supra, or the parties in this case.
How are the parties to know in advance whether to waive unless there is full disclosure? How are they to know whether there are transactions “out of the ordinary course of business” unless pending transactions are disclosed? Even at this stage of the proceedings no one has any precise knowledge what matters were pending between Cargill/Tradax and Itoh and at the time of the arbitration. Commodity transactions, the affidavits tell us, generally are secret. “If arbitrators err on the side of disclosure, as they should,” according to Mr. Justice White,1 the salutary rule espouséd by the majority may then be invoked against a party seeking the courts’ aid to set aside an award.
But here, even though the arbitrator filed an affidavit with the court in support of the award, the affidavit falls far short of disclosing just what is his relation with Itoh. He says, “While the Tradax Companies may have done business with Itoh of Japan, such business is outside the sphere of my responsibilities.” Here surely is an unresolved question of fact. I see no reason for the courts to write arbitrators a blank check, so to speak, of nondisclosure.
I would reverse and remand with instructions to the trial court to make findings as to the extent of the relationship between the arbitrator and Itoh and whether that relationship involved, at the time of the arbitration, dealings that were undisclosed and so substantial or so “out of the ordinary course of business” as to have required, in fairness to the parties, disclosure or disqualification. While the burden of proof should *110rest on the party making the claim of partiality, Saxis Steamship Co. v. Multi-facs International Traders, Inc., 375 F. 2d 577, 582 (2d Cir. 1967), the court is under an obligation to scan the record, to ascertain the facts, see Ballantine Books, Inc. v. Capital Distributing Co., 302 F.2d 17 (2d Cir. 1962), which are here wholly in the air.
In short, I would not turn the doctrine of waiver restated in Garfield, supra, into a carte blanche for the nondisclosure decried in Commonwealth Coatings, supra.

. Joined by Marshall, J., concurring in Commonwealth, Coatings Corp. v. Continental Casualty Co., 393 U.S. 145, 150-152, 89 S.Ct. 337, 21 L.Ed.2d 301 (1968).