Court Opinion

ID: 3049971
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:29:24.256587+00
Date Added: 2024-06-11T11:49:22.275447
License: Public Domain

FOR PUBLICATION
 UNITED STATES COURT OF APPEALS
      FOR THE NINTH CIRCUIT

NEW REGENCY PRODUCTIONS, INC., a      
California Corporation,
                                            No. 05-55224
              Petitioner-Appellant,
                v.                           D.C. No.
                                          CV-04-09951-AHM
NIPPON HERALD FILMS, INC., a
                                             OPINION
Japanese Corporation,
              Respondent-Appellee.
                                      
       Appeal from the United States District Court
           for the Central District of California
        A. Howard Matz, District Judge, Presiding

                  Argued and Submitted
         February 13, 2007—Pasadena, California

                 Filed September 4, 2007

     Before: Harry Pregerson, William A. Fletcher, and
             Marsha S. Berzon, Circuit Judges.

          Opinion by Judge William A. Fletcher

                           11357
11360          NEW REGENCY v. NIPPON HERALD

                        COUNSEL

Howard L. Horwitz, Eric G. Stockel, Kibre & Horwitz, Bev-
erly Hills, California, for the appellant.

Charles N. Shephard, Greenberg, Glusker, Fields, Claman &
Machtinger, Los Angeles, California, for the appellee.

                         OPINION

W. FLETCHER, Circuit Judge:

  This case arises from the arbitration of a contract dispute
between a film production company and a film distribution
                NEW REGENCY v. NIPPON HERALD               11361
company. The district court vacated the arbitration award
based on the neutral arbitrator’s failure to disclose that during
the arbitration, he began work as a senior executive with a
company that was negotiating with a production executive of
one of the parties to the arbitration to finance and co-produce
an important motion picture.

   We hold that vacatur by the district court for “evident par-
tiality” of the arbitrator was proper under the Federal Arbitra-
tion Act. We conclude that the lack of evidence of the
arbitrator’s actual knowledge of the ongoing negotiation does
not prevent a finding of evident partiality because, under the
circumstances of this case, the arbitrator had a duty to investi-
gate possible conflicts resulting from his new employment
and to disclose that employment to the parties. We therefore
affirm the decision of the district court.

                        I.   Background

   In May 1995, Appellant New Regency and Appellee Nip-
pon Herald entered into an agreement for Nippon Herald to
distribute in Japan five films produced by New Regency. In
June 2003, Nippon Herald sued New Regency in a Japanese
court, alleging that New Regency had violated the distribution
agreement by failing to deliver one of the five films,
“Crowded Room,” and by refusing to pay Nippon Herald
money it claimed it was owed under a cross-collateralization
provision. Several months later, the parties agreed that Nip-
pon Herald would withdraw its Japanese suit and instead arbi-
trate its claims through the American Film Marketing
Association (“AFMA”), now the International Film and Tele-
vision Alliance, a motion picture trade organization with its
own arbitration rules and panel of arbitrators.

   In November 2003, Nippon Herald and New Regency
jointly selected William J. Immerman, then a Los Angeles
attorney and executive for Crusader Entertainment, from a list
of three potential arbitrators provided by the AFMA. During
11362           NEW REGENCY v. NIPPON HERALD
the selection process, Immerman disclosed that he had previ-
ously arbitrated a case where counsel for Nippon Herald,
Charles Shephard, represented a party, and had also negoti-
ated deals “with various executives of New Regency prior to
their becoming executives at New Regency.” On February 23,
2004, after his selection, Immerman further disclosed that an
attorney at Shephard’s firm had brought suit against Crusader
Entertainment and that, although he was not representing Cru-
sader, he would likely be called as a percipient witness.

   The arbitration hearing took place on April 27, 28, and 29,
and June 1, 2, and 3, 2004. In an order dated July 19, 2004,
Immerman decided that Nippon Herald was entitled to return
of the $440,000.00 fee it had paid for the undelivered film —
a point not disputed by New Regency — plus interest. In
addition, Immerman adopted New Regency’s interpretation of
the cross-collateralization provision and awarded to New
Regency a portion of the proceeds of a recoupment pool plus
interest, subsequently determined to amount to $2,341,257.00.
Immerman’s July 19 order was supplemented twice, on Octo-
ber 4, 2004, and November 30, 2004. Immerman’s final order
was served on the parties on December 3, 2004.

   On December 7, 2004, New Regency moved in federal dis-
trict court to confirm the final arbitration award and enter
judgment pursuant to 9 U.S.C. § 9. Nippon Herald cross-
moved to vacate the arbitration award on three grounds: (1)
Immerman had erroneously applied California rather than
Netherlands contract law, thus exceeding his authority as an
arbitrator; (2) Immerman had failed to disclose a prior work
relationship with New Regency General Counsel and arbitra-
tion witness Bill Weiner; and (3) Immerman had failed to dis-
close that in mid-July 2004, before entry of the July 19 Order,
he began his new employment as Senior Vice President and
Chief Administrative Officer of the Yari Film Group. When
Immerman began work, Yari Film Group was negotiating to
finance and co-produce “The Night Watchman,” a motion
picture developed by New Regency and produced by Alexan-
               NEW REGENCY v. NIPPON HERALD             11363
dra Milchan (“Milchan”). Milchan is a production executive
at New Regency. She is the daughter of New Regency’s prin-
cipal owner and Chief Executive Officer, Arnon Milchan.

   The district court granted Nippon Herald’s motion to vacate
the arbitration award on January 14, 2005. It concluded that
vacatur was proper because Immerman’s failure to disclose
his dealings with Yari Film Group created a reasonable
impression of partiality. The district court concluded that
Immerman’s past relation with Weiner did not support vaca-
tur. It declined to reach the question of whether Immerman
had exceeded his authority. New Regency timely appealed.
We have jurisdiction pursuant to 28 U.S.C. § 1291 and we
affirm.

                     II.   Choice of Law

   Before proceeding to the merits of the vacatur question, we
must first decide whether to apply California law or the Fed-
eral Arbitration Act (“FAA”). The district court applied Cali-
fornia law without discussion, although it indicated that it
would reach the same result under the FAA. In their initial
briefing to this court, both New Regency and Nippon Herald
argued that California law should apply, citing a single Dis-
trict of Hawaii case, Brown v. Hyatt Corp., 128 F. Supp. 2d
697, 700-01 (D. Haw. 2000), for the proposition that the FAA
does not apply to postdispute arbitration agreements. How-
ever, in supplemental briefing we ordered on this issue the
parties now agree that we should apply the FAA.

   [1] For three reasons, we agree with the parties that the
FAA, not California law, governs this postdispute arbitration
agreement. First, the plain language of the coverage provision
of the FAA, 9 U.S.C. § 2, unambiguously encompasses both
predispute and postdispute arbitration agreements. According
to that provision, the FAA covers:

    A written provision in any maritime transaction or a
    contract evidencing a transaction involving com-
11364           NEW REGENCY v. NIPPON HERALD
    merce to settle by arbitration a controversy thereafter
    arising out of such contract or transaction, or the
    refusal to perform the whole or any part thereof, or
    an agreement in writing to submit to arbitration an
    existing controversy arising out of such a contract,
    transaction, or refusal . . . .

9 U.S.C. § 2 (emphasis added). Second, we are aware of no
appellate or Supreme Court authority holding that postdispute
arbitration agreements fall outside the scope of the FAA.
Numerous courts have applied the act to such agreements.
See, e.g., Asia Pac. Indus. Corp. v. Rainforest Caf), Inc., 380
F.3d 383, 385 (8th Cir. 2004); Al-Harbi v. Citibank, N.A., 85
F.3d 680, 681-82 (D.C. Cir. 1996); Sverdrup Corp. v. WHC
Constructors, Inc., 989 F.2d 148, 149-51 (4th Cir. 1993).
Third, we have previously recognized that “there is a strong
default presumption that the Federal Arbitration Act, not state
law, supplies the rules for arbitration.” Fidelity Fed. Bank,
FSB v. Durga Ma Corp., 386 F.3d 1306, 1311 (9th Cir. 2004)
(internal quotation marks and alterations omitted); see also
Sovak v. Chugai Pharm. Co., 280 F.3d 1266, 1269 (9th Cir.
2002). No circumstance exists here that would overcome this
presumption.

  We therefore review the district court’s vacatur decision
under the FAA.

                         III.   Merits

  The FAA provides that a district court “may make an order
vacating [an] [arbitration] award upon the application of any
party to the arbitration”:

    (1) where the award was procured by corruption,
    fraud, or undue means; (2) where there was evident
    partiality or corruption in the arbitrators, or either
    of them;
                 NEW REGENCY v. NIPPON HERALD              11365
    (3) where the arbitrators were guilty of misconduct
    in refusing to postpone the hearing, upon sufficient
    cause shown, or in refusing to hear evidence perti-
    nent and material to the controversy; or of any other
    misbehavior by which the rights of any party have
    been prejudiced; or

    (4) where the arbitrators exceeded their powers, or
    so imperfectly executed them that a mutual, final,
    and definite award upon the subject matter submitted
    was not made.

9 U.S.C. § 10(a) (emphasis added).

   We review a district court’s “decision to vacate or confirm
an arbitration award” de novo. Poweragent Inc. v. Elec. Data
Sys. Corp., 358 F.3d 1187, 1193 (9th Cir. 2004). We review
its findings of fact for clear error. Coutee v. Barington Capital
Group, L.P., 336 F.3d 1128, 1132 (9th Cir. 2003).

            A.    Failure to Disclose Employment

   Nippon Herald contends that vacatur was proper because
Immerman’s failure to disclose the facts of his employment
by Yari Film Group and its negotiations with Milchan to
finance and co-produce “The Night Watchman” is sufficient
to establish “evident partiality . . . in the arbitrator[ ].” 9
U.S.C. § 10(a)(2). New Regency argues that vacatur was
improper because (1) these facts are insufficient to establish
evident partiality, and (2) there is no evidence that Immerman
had actual knowledge of Yari Film Group’s dealings with
Milchan.

                      1.   Legal Standard

  “Evident partiality” is distinct from actual bias. In Com-
monwealth Coatings Corp. v. Continental Cas. Co., 393 U.S.
145 (1968), the Supreme Court held that a party seeking to
11366            NEW REGENCY v. NIPPON HERALD
vacate an arbitration award for evident partiality need not
show that the arbitrator “was actually guilty of fraud or bias
in deciding th[e] case.” Id. at 147. Rather, the arbitrator’s fail-
ure to “disclose to the parties any dealings that might create
an impression of possible bias” is sufficient to support vaca-
tur. Id. at 149. The Court found this standard was satisfied
where a neutral arbitrator in a dispute between a contractor
and subcontractor failed to disclose that he had previously
performed consulting work worth about $12,000 for the con-
tractor. Although “there had been no dealings between them
for about a year immediately preceding the arbitration,” the
arbitrator’s past relationship with the contractor had included
irregular contacts “over a period of four of five years”and had
gone “so far as to include the rendering of services on the
very projects involved in th[e] lawsuit.” Id. at 146. While the
Court recognized “that arbitrators cannot sever all their ties
with the business world,” it emphasized that because arbitra-
tors “have completely free rein to decide the law as well as
the facts and are not subject to appellate review,” courts must
“scrupulous[ly]” “safeguard the[ir] impartiality.” Id. at 148-
49.

   [2] In Schmitz v. Zilveti, 20 F.3d 1043 (9th Cir. 1994), we
vacated an arbitration award for evident partiality where the
arbitrator’s law firm had represented the parent company of
a party “in at least nineteen cases during a period of 35
years[,] the most recent representation end[ing] approximately
21 months before [the] arbitration was submitted.” Id. at
1044. We disagreed with the district court’s conclusion that
evident partiality could not be shown because the arbitrator
“was unaware of his law firm’s conflict” during the arbitra-
tion. Id. Based on Commonwealth Coatings, we concluded
that the legal standard for evident partiality is whether there
are “facts showing a ‘reasonable impression of partiality.’ ”
Id. at 1048. We explained that this legal standard can be satis-
fied even where an arbitrator is unaware of the facts showing
a reasonable impression of partiality because the arbitrator
                 NEW REGENCY v. NIPPON HERALD               11367
“may have a duty to investigate independent of [his] . . . duty
to disclose.” Id.

   For two reasons, we concluded in Schmitz that there was a
duty to investigate. First, “parties can expect a lawyer/
arbitrator to investigate and disclose conflicts he has with
actual parties to the arbitration.” Id. Second, the code of the
arbitral body, the National Association of Securities Dealers
(“NASD”), “require[d] arbitrators to ‘make a reasonable
effort to inform themselves of any’ ‘existing or past financial,
business, [or] professional . . . . relationships [that they or
their employer, partners, or business associates may have] that
are likely to affect impartiality or might reasonably create an
appearance of partiality or bias.’ ” Id. at 1049 (alterations in
original).

   We concluded that the lawyer/arbitrator in Schmitz failed to
discharge his duty to investigate because, although he had run
a conflict check on the actual parties to the arbitration, he had
failed to run a conflict check on one party’s parent company.
That check would have revealed the parent company engaged
in substantial business with the arbitrator’s law firm. Id. at
1044, 1049. Given the lawyer/arbitrator’s “constructive
knowledge and the presence of the conflict,” we concluded
that his “failure to inform the parties to the arbitration resulted
in a reasonable impression of partiality under Commonwealth
Coatings.” Id. at 1049.

                 2.   Facts Supporting Vacatur

   The key facts are largely undisputed. During the arbitrator
selection process in November 2003, the AFMA distributed
Immerman’s resume to the parties. It stated that he was
employed as a private attorney “specializing in representing
sales agents, independent producers, financiers and distribu-
tors and negotiating complex financing deals and acting as
production and distribution counsel for his clients and [a]s
Executive Vice President of Crusader Entertainment, LLC.”
11368           NEW REGENCY v. NIPPON HERALD
During the selection process, Immerman disclosed that he had
previously “negotiated deals in [his] capacity as an attorney
with various executives of New Regency prior to their becom-
ing executives at New Regency.” After he was selected,
Immerman disclosed, on February 23, 2004, that an attorney
at the law firm representing Nippon Herald had filed a lawsuit
against Crusader Entertainment, a company he had “repre-
sented as an attorney” and where he “also serve[d] as an offi-
cer of the company.” Immerman stated that he was “not
representing Crusader Entertainment in the action but in all
probability, should the action proceed further, . . . [would] be
a percipient witness since [he] did represent Crusader with
respect to the negotiation of the agreement that is the basis of
the action.”

   In October 2004, after the conclusion of the arbitration,
Immerman testified under oath in an unrelated proceeding that
he had been employed by Yari Film Group “[s]ince the mid-
dle of July.” Immerman described his position at the Yari
Film Group as “Senior executive vice president and chief
administrative officer.” He listed as among his “responsibili-
ties” “oversee[ing] the business affairs and legal department
and assist[ing] the production department and also assist[ing]
in the general administration of the company.” The district
court found that Immerman was “employ[ed] with Yari dur-
ing the pendency of the arbitration, shortly before the issuance
of the first decision,” and adverted to the possibility that
Immerman had “entered into negotiations at a much earlier
time.”

   Yari Film Group is an independent film company that, dur-
ing the relevant period, financed and distributed about 10 to
15 films per year, a number of these in partnership with other
film companies. In late July 2004, industry press reported that
Yari Film Group was in negotiations to finance a film, “The
Night Watchman,” based on a screenplay by the popular
crime novelist James Ellroy, and that Spike Lee was in talks
to be the director. The film had been developed by New
               NEW REGENCY v. NIPPON HERALD             11369
Regency and would be produced by Alexandra Milchan, a
production executive at New Regency. The press release
stated that Milchan would produce the film “outside of her
deal with Regency Enterprises.” In September, “The Night
Watchman” was one of sixteen films, in various stages of
development, being financed by Yari Film Group. In Novem-
ber, the actor Keanu Reeves was signed to star in “The Night
Watchman.” Immerman’s final arbitration order was served
on the parties in early December.

                       3.   Discussion

   [3] If the facts of Yari Film Group’s negotiations for “The
Night Watchman” had been known to Immerman prior to the
completion of the arbitration, we would have no trouble con-
cluding that his failure to disclose them to the parties would
support vacatur of the arbitration award on the ground of evi-
dent partiality. Even if Milchan was not directly representing
New Regency in negotiations with Yari Film Group, she was
an executive for New Regency and the daughter of its princi-
pal owner and chief executive officer. Indeed, Immerman
himself had considered past negotiations of deals “with vari-
ous executives of New Regency prior to their becoming exec-
utives at New Regency” significant enough to disclose them
in November 2003, during the arbitrator selection process.
(Emphasis added.) “The Night Watchman” was a significant
project. Beginning in mid-July, Immerman was a high-level
executive at Yari Film Group, responsible, by his own
account, for overseeing its business affairs and legal depart-
ment and assisting its production department. These facts
show that Immerman “ha[d] a substantial interest in a firm
which [was doing] more than trivial business” closely con-
nected to a party to the arbitration. See Commonwealth Coat-
ings, 393 U.S. at 151-52 (White, J., concurring).

   [4] New Regency argues on appeal that evident partiality
cannot be established because the evidence does not establish
that Immerman had actual knowledge of the facts he failed to
11370           NEW REGENCY v. NIPPON HERALD
disclose. This argument is contrary to Schmitz, where we held
that an arbitrator’s lack of actual knowledge of the presence
of a conflict does not excuse non-disclosure where the arbitra-
tor had a duty to investigate, and thus had constructive knowl-
edge of, the conflict. 20 F.3d at 1048. While we did not hold
in Schmitz that arbitrators have a duty to investigate potential
conflicts in all cases, we concluded that such a duty did exist
where an arbitrator’s firm represented the parent corporation
of one of the parties and the procedures of the arbitral body
required arbitrators to make a reasonable effort to inform
themselves of potential conflicts. Id. at 1048-49; cf. Al-Harbi,
85 F.3d at 682-83 (finding no evident partiality based on fact
that, unbeknownst to arbitrator, his “former law firm” repre-
sented a party to the arbitration on unrelated matters and dis-
tinguishing Schmitz on the ground that in the present case “the
alleged evident partiality arises not from a representation by
any firm with which the arbitrator was connected at the time
of the arbitration” (emphasis in original)).

    [5] Other courts of appeals have agreed with our holding in
Schmitz that evidence of an arbitrator’s actual knowledge of
undisclosed facts is not always necessary to establish evident
partiality. In Applied Indus. Materials Corp. v. Ovalar Makine
Ticaret Ve Sanayi, A.S., ___ F.3d ___, No. 06-3297-CV, 2007
WL 1964955 (2d Cir. July 9, 2007), the Second Circuit held
that an arbitration award could be vacated for evident partial-
ity where one of three arbitrators, the chairperson, president,
and CEO of a “multi-billion dollar company with 50 offices
in 30 countries,” “fail[ed] to either investigate what he knew
to be a potential business relationship between his corpora-
tion” and a parent company of a party “or inform them that
he had walled himself off from learning more.” Id. at *1. The
court began with the proposition that where “[a]n arbitrator
. . . knows of a material relationship with a party and fails to
disclose it,” “[a] reasonable person would have to conclude”
that the arbitrator was evidently partial. Id. at *4. But because
the record did not show “the nature and timing of the arbitra-
tor’s knowledge” of the relationship between his company
                 NEW REGENCY v. NIPPON HERALD               11371
and the parent company of the party, the court’s analysis did
not end there. Id. It noted that Justice White had stated in con-
currence in Commonwealth Coatings that “ ‘arbitrators are not
automatically disqualified by a business relationship with the
parties before them if both parties are informed of the rela-
tionship in advance, or if they are unaware of the facts but the
relationship is trivial.’ ” Id. (quoting Commonwealth Coat-
ings, 393 U.S. at 150 (White, J., concurring)) (emphasis in
original). While declining to impose on arbitrators a “free-
standing duty to investigate,” the court read Justice White’s
statement to require that “where an arbitrator has reason to
believe that a nontrivial conflict of interest might exist,” the
arbitrator must either investigate the circumstance or disclose
his or her intention not to investigate. Id. at *4-5. Otherwise,
parties might be “misled into believing that no nontrivial con-
flict exists.” Id. at *4.

   The Second Circuit in Applied Industrial Materials cited
the Fourth Circuit’s opinion in ANR Coal Co., v. Cogentrix of
North Carolina, Inc., 173 F.3d 493 (4th Cir. 1999). There the
court stated that “if an arbitrator fails to investigate facts that
come to light after the award, and those facts are not trivial,
the aggrieved party may use this information to demonstrate
evident partiality under 9 U.S.C. § 10(a)(2).” Id. at 499 n.4.
The court declined to recognize that an arbitrator has a gen-
eral duty to investigate, but suggested that should the arbitra-
tor fail to perform due diligence in identifying conflicts, an
undiscovered, “not trivial” conflict may result in vacatur. Id.

   In Olson v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 51
F.3d 157 (8th Cir. 1995), the Eighth Circuit reversed the dis-
trict court’s order confirming an arbitration award because the
arbitrator had failed to disclose his job title and that his
employer had “ongoing business relationships” with one of
the parties. Id. at 158. Although the arbitrator “was not per-
sonally involved in” those relationships, the court wrote that
“as a high ranking officer,” he had “a substantial interest” in
his firm, which “did more than trivial business” with the
11372           NEW REGENCY v. NIPPON HERALD
party. Id. at 159. The court did not discuss whether the arbi-
trator had any actual knowledge of his firm’s dealings with
the party.

   We are aware of only one court of appeals that has adopted
a per se rule that a finding of evident partiality is precluded
by an arbitrator’s lack of “actual knowledge of the informa-
tion upon which [an] alleged ‘conflict’ was founded.” Gia-
nelli Money Purchase Plan & Trust v. ADM Investor Servs.,
Inc., 146 F.3d 1309, 1313 (11th Cir. 1998). In Gianelli, the
Eleventh Circuit disapproved of our decision in Schmitz. But
even if we were persuaded that Schmitz was wrongly decided,
we would be bound to follow it as the law of our circuit.

   [6] For a number of reasons we conclude, in the circum-
stances of this case, that Immerman had a duty to investigate
potential conflicts when he accepted a high-level executive
position at Yari Film Group while the arbitration was ongo-
ing. First, the parties could reasonably have expected Immer-
man to investigate potential conflicts when, during the
pendency of the arbitration, he took a job, the duties of which
included overseeing the legal department of another film com-
pany. Schmitz, 20 F.3d at 1048. We believe that his decision
to accept a new high-level executive job at a company in the
same industry as the parties during the arbitration is precisely
the type of situation “where an arbitrator has reason to believe
that a nontrivial conflict of interest might exist” and should
investigate to determine the existence of potential conflicts.
See Applied Indus. Materials Corp., ___ F.3d at ___, 2007
WL 1964955 at *4.

   [7] Second, the disclosure provisions of the AFMA’s arbi-
tral rules impose on Immerman a duty to investigate and dis-
close conflicts. See Schmitz, 20 F.3d at 1049. Section 6.5 of
the AFMA Rules for International Arbitration (2002) provides
that “[a] prospective arbitrator shall disclose to the Arbitral
Agent and the parties in connection with such arbitrator’s pos-
sible appointment as arbitrator any circumstances likely to
                NEW REGENCY v. NIPPON HERALD               11373
give rise to justifiable doubt as to the arbitrator’s impartiality
or independence as to the parties or the matter in dispute in
accordance with the procedural law of the jurisdiction of the
place of the arbitration, or, if none is specified, then the laws
of the State of California.” California Code of Civil Procedure
§ 1297.121 requires arbitrators in international arbitrations,
see id. §§ 1297.11, 1297.13, to “make a disclosure to the par-
ties of any information which might cause their impartiality
to be questioned.” This obligation is ongoing “[f]rom the time
of appointment and throughout the arbitral proceedings.” Id.
§ 1297.123. While this language does not “expressly pro-
vide[ ] that the arbitrator must ‘investigate’ whether he has
any of the questionable relationships and/or interests, . . . [it]
necessarily implicates a duty to investigate whether instances
of potential conflict exist.” HSMV Corp. v. ADI Ltd., 72 F.
Supp. 2d 1122, 1129 (C.D. Cal. 1999), disapproved on other
grounds in Fidelity Fed. Bank, 386 F.3d at 1313.

   We also note that Canon I(C) of the American Arbitration
Association and American Bar Association Code of Ethics for
Arbitrators in Commercial Disputes (2004) states that “[a]fter
accepting appointment and while serving as an arbitrator, a
person should avoid entering into any business, professional,
or personal relationship, or acquiring any financial or personal
interest, which is likely to affect impartiality or which might
reasonably create the appearance of partiality.” Canon II(B)
of the code also provides that arbitrators have an ongoing duty
to “make a reasonable effort to inform themselves of any
interests or relationships” subject to disclosure. General Stan-
dard 7(c) of the International Bar Association Guidelines on
Conflicts of Interest in International Arbitration (2004) states
that “[a]n arbitrator is under a duty to make reasonable
enquiries to investigate any potential conflict of interest, as
well as any facts or circumstances that may cause his or her
impartiality or independence to be questioned.” The standard
continues: “Failure to disclose a potential conflict is not
excused by lack of knowledge if the arbitrator makes no rea-
sonable attempt to investigate.”
11374           NEW REGENCY v. NIPPON HERALD
   Although these sources are not binding authority and do not
have the force of law, when considered along with an attor-
ney’s traditional duty to avoid conflicts of interest, they rein-
force our holding in Schmitz that “a reasonable impression of
partiality can form when an actual conflict of interest exists
and the lawyer has constructive knowledge of it. That the law-
yer forgot to run a conflict check . . . is not an excuse.” 20
F.3d at 1048 (citations omitted); see also Commonwealth
Coatings, 393 U.S. at 149 (treating the AAA rules as persua-
sive authority).

   [8] Third, the parties could have reasonably expected
Immerman to disclose his new employment at Yari Film
Group based on his prior pattern of conduct in the arbitration.
As New Regency itself noted in its response to Nippon Her-
ald’s petition to vacate the award at the district court, in addi-
tion to disclosing that he had negotiated deals with executives
of New Regency prior to their becoming executives there,
“[t]he Arbitrator also provided a detailed biography with a
comprehensive employment history.” New Regency used
these disclosures to argue that vacatur was improper because
the arbitrator’s disclosure of his past employment history and
business dealings placed the onus on Nippon Herald to make
further inquiries. Yet it is not reasonable to expect Nippon
Herald to investigate potential conflicts with Yari Film Group
when Immerman never revealed he had taken a high-level
executive job at that company. In fact, it is precisely against
the background of previously disclosed information that
Immerman’s failure to disclose his new position might have
“misled” Nippon Herald “into believing that no nontrivial
conflict exist[ed].” Applied Indus. Materials Corp., ___ F.3d
at ___, 2007 WL 1964955, at *4.

   [9] Under these circumstances, Immerman had a duty when
he accepted the new job at Yari Film Group to investigate the
possible conflicts that might arise from his new employment.
However, even though Immerman breached his duty to inves-
tigate, vacatur is only appropriate if the conflict left undis-
                NEW REGENCY v. NIPPON HERALD               11375
closed was real, see Schmitz, 20 F.3d at 1049, and “not
trivial.” ANR Coal Co., Inc., 173 F.3d at 499 n.4. Understand-
ably, courts have rejected claims of evident partiality based on
long past, attenuated, or insubstantial connections between a
party and an arbitrator. See, e.g., Positive Software Solutions,
Inc. v. New Century Mortgage Corp., 476 F.3d 278, 284 (5th
Cir. 2007) (en banc) (collecting cases). As Justice White
explained in his concurrence in Commonwealth Coatings, it
would be unrealistic to expect an arbitrator to “provide the
parties with his complete and unexpurgated business biogra-
phy.” Commonwealth Coatings, 393 U.S. at 151 (White, J.,
concurring).

   [10] The conflict alleged by Nippon Herald is real and non-
trivial. “The Night Watchman” negotiation was not distant in
time, but rather ongoing during the arbitration. Nor was the
connection between Yari Film Group and New Regency
attenuated. Even if Milchan was not directly representing
New Regency in the negotiations, she had substantial ties to
the company as an executive of the company and the daughter
of its principal owner and chief executive officer. Although
the record does not allow us to place a dollar value on “The
Night Watchman,” taking into account the high-profile nature
of the film project itself, and the size of Yari Film Group’s
business, we cannot conclude that the negotiation was unim-
portant to Yari Film Group.

   [11] Under these circumstances, we hold that Immerman
had a duty, when he accepted the new job at Yari Film Group
during the arbitration, to investigate the possible conflicts that
might arise from his new employment. We hold further, in
light of that duty, that Immerman’s failure to disclose facts
that show a reasonable impression of partiality is sufficient to
support vacatur, notwithstanding the lack of evidence of his
actual knowledge of those facts.

  While we are cognizant of the public interest in efficient
and final arbitration, we believe that a rule encouraging “arbi-
11376            NEW REGENCY v. NIPPON HERALD
trators [to] err on the side of disclosure” is consistent with that
interest. Id. at 152. As Justice White explained in Common-
wealth Coatings, the “arbitration process functions best”
where early and full arbitrator disclosure fosters “an amicable
and trusting atmosphere” conducive to “voluntary compliance
with the decree.” Id. at 151.

                           Conclusion

  For the foregoing reasons, we hold that the district court
did not err in vacating the arbitration award on the ground of
evident partiality.

  AFFIRMED.