Court Opinion

ID: 4177944
Source: CourtListenerOpinion
Date Created: 2017-06-15 21:08:45.837309+00
Date Added: 2024-06-11T07:47:13.937384
License: Public Domain

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                                                              Electronically Filed
                                                              Supreme Court
                                                              SCAP-16-0000588
                                                              15-JUN-2017
                                                              10:05 AM

           IN THE SUPREME COURT OF THE STATE OF HAWAII

KRISHNA NARAYAN; SHERRIE NARAYAN; VIRENDRA NATH; NANCY MAKOWSKI;
  SIMON YOO; SUMIYO SAKAGUCHI; STEPHEN XIANG PANG; FAYE WU LIU;
MASSY MEHDIPOUR, individually and as Trustee for Massy Mehdipour
  Trust dated June 21, 2006; G. NICHOLAS SMITH; TRISTINE SMITH;
    CLIFFORD W. CHAFFEE; BRADLEY CHAFFEE, individually and as
 Trustee of the Charles V. Chaffee BRC Stock Trust dated 12/1/99
 and The Clifford W. Chaffee BRC Stock Trust dated 1/4/98; GARY
       S. ANDERSON; RONALD W. LORENZ and RENEE Y. LORENZ,
                      Plaintiffs-Appellants,

                                    vs.

  ASSOCIATION OF APARTMENT OWNERS OF KAPALUA BAY CONDOMINIUM;
       CATHY ROSS; ROBERT PARSONS; and ANDREW MITCHELL,
                     Defendants-Appellees.

                            SCAP-16-0000588

       APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT
            (CAAP-16-0000588; S.P. NO. 16-1-0043 RAN)

                              JUNE 15, 2017

   RECKTENWALD, C.J., McKENNA, POLLACK, AND WILSON, JJ., AND
     CIRCUIT JUDGE KUBO, IN PLACE OF NAKAYAMA, J., RECUSED

                OPINION OF THE COURT BY McKENNA, J.
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                                I.    Introduction

          This is the third opinion in a series of recent decisions

addressing an arbitrator’s statutory disclosure requirements and

vacatur on the basis of evident partiality based on Hawaii

Revised Statutes (“HRS”) §§ 658A–12 and -23 (Supp. 2001); see

Noel Madamba Contracting LLC v. Romero, 137 Hawaii 1, 364 P.3d
518 (2015); Nordic PCL Const., Inc. v. LPIHGC, LLC, 136 Hawaii

29, 358 P.3d 1 (2015).          Nordic and Madamba established standards

for evaluating claims of evident partiality.               Here, we clarify

the scope of relationships that require disclosure.

          Krishna Narayan, Sherrie Narayan, Virendra Nath, Nancy

Makowski, Simon Yoo, Sumiyo Sakaguchi, Stephen Xiang Pang, Faye

Wu Liu, Massy Mehdipour, G. Nicholas Smith, Tristine Smith,

Clifford W. Chaffee, Bradley Chaffee, Gary S. Anderson, and

Ronald W. Lorenz (collectively, “Appellants”), appeal from an

August 15, 2016 final judgment of the Circuit Court of the First

Circuit (“circuit court”),1 based upon its findings of fact,

conclusions of law, and order confirming an arbitration award in

favor of the Respondents, Association of Apartment Owners of

Kapalua Bay Condominium, Cathy Ross, Robert Parsons, and Andrew

Mitchell (collectively, the “AOAO”).

1
          The Honorable Rhonda A. Nishimura presided.

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          This case concerns a dispute over financial issues that

arose during construction of the Kapalua Bay Condominium project

(the “Project”).        Appellants are a group of individual

condominium owners in the Kapalua Bay Condominium.               Previously,

Appellants and several other condominium owners sued the

Project’s developers and management companies regarding

financial problems that arose during construction (the

“Developer Action”).         See Narayan v. Ritz-Carlton Dev. Co.,

Inc., 135 Hawaii 327, 350 P.3d 995 (2015).2             The present matter

arose from the Appellants’ challenge of the AOAO’s vote to

convert the residential community into a hotel.               The dispute was

submitted to arbitration.          The issues on appeal relate to the

adequacy of the neutral arbitrator’s disclosures in the

arbitration.       The circuit court concluded that the undisclosed

relationships did not constitute “evident partiality” requiring

vacatur.      We affirm.

2
      At issue before this court in the Developer Action was whether the
condominium owners had entered into a valid agreement to arbitrate. This
court concluded that the condominium owners did not unambiguously assent to
arbitration and, therefore, the purported agreement to arbitrate was
unenforceable. See Narayan, 135 Hawaii at 335, 350 P.3d at 1003. On January
11, 2016, the United States Supreme Court vacated this court’s judgment and
remanded the case for further consideration in light of DIRECTV, Inc. v.
Imburgia, 136 S. Ct. 463 (2015). See Ritz-Carlton Dev. Co. v. Narayan, 136
S. Ct. 800 (2016). The parties have recently filed supplemental briefs and
the remanded action is pending disposition.

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                                   II.   Background

A.        Arbitration Proceedings

          1.   Initial Disclosures and Pre-arbitration Motions

          The matter was originally submitted to the American

Arbitration Association but, by agreement of the parties, was

referred to Dispute Prevention & Resolution, Inc. (“DPR”) on

July 24, 2014.          The parties selected the Honorable Victoria

Marks (ret.) to serve as the neutral arbitrator (the

“Arbitrator”) on August 1, 2014.3              After her selection, DPR

provided the parties with the following disclosures on her

behalf:

               I am not familiar with any of the parties.

               Both Mr. Cox and Ms. Luke appeared before me when I was on
               the bench.[4]

               I served as an arbitrator in a case where Mr. Cox
               represented one of the parties. That case was resolved
               before the arbitration hearing.

               My   husband, Robert A. Marks, is a lawyer who is Of Counsel
               at   Price Okamoto Himeno & Lum. I do not know the identity
               of   all of my husband’s clients. Similarly, I am not aware
               of   all the cases he is working on and what lawyers he may
               be   working with or opposing. I do not believe that he

3
      In some arbitrations with more than one arbitrator, arbitrators are
appointed by parties without an expectation of neutrality. It is not
uncommon in commercial arbitrations with three arbitrators for each party to
appoint one non-neutral arbitrator each; the two non-neutral arbitrators then
appoint a neutral arbitrator by agreement. See Daiichi Hawaii Real Estate
Corp. v. Lichter, 103 Hawaii 325, 343-44, 82 P.3d 411, 429-30 (2003). See
generally, Seth H. Lieberman, Something’s Rotten in the State of Party-
Appointed Arbitration: Healing ADR’s Black Eye That is “Nonneutral
Neutrals,” 5 Cardozo J. of Conflict Resol. 215 (2004) for a discussion of the
differences between neutral arbitrators and non-neutral party-appointed
arbitrators.
4
      Joachim P. Cox, Esq., represents the Appellants and Michele-Lynn Luke,
Esq., represents the AOAO.

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           currently has any cases with any of the lawyers in this
           matter. Similarly, I do not believe that he is familiar
           with any of the parties or their principals.

           I am on the Board of the following organizations: 1) The
           Mediation Center of the Pacific; 2) The Hawaii Women’s
           Legal Foundation; 3) The American Judicature Society-Hawaii
           Chapter; 4) United Cerebral Palsy Association of Hawaii;
           and 5) The Hawaii Soccer Association. The first 3
           organizations are law related and lawyers from various
           firms in Honolulu [–] large firms to solo practitioners –
           sit on these boards. In addition, the board members change
           from year-to-year.

           I am also a social golf member of MidPacific [sic] Country
           Club. I am not familiar with all of the members of this
           club.

           Counsel and the parties should inform the arbitrator and
           each other of any additional information that a reasonable
           person would consider likely to affect the impartiality of
           the arbitrator.

           I believe that I can be a fair and impartial arbitrator in
           this matter.

The parties submitted their expert disclosures and reports in

March and September 2015.       The witness lists were submitted in

October 2015.

       On September 15, 2015, one month before the arbitration

hearing started, Appellants moved to exclude the AOAO’s expert

on condominium governance, Philip Nerney, Esq. (“Nerney”).

Appellants argued, inter alia, that Nerney was providing

improper and unfounded legal conclusions on liability.             The

Arbitrator granted this motion in part and denied it in part,

and precluded Nerney from testifying regarding any party’s

intent and damages, but he was allowed to testify on condominium

governance issues.

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          2.   Arbitration Hearing

          The arbitration hearing was conducted in several sessions

from October 19, 2015 through November 12, 2015.

          The AOAO’s expert on damages, Richard Stellmacher

(“Stellmacher”), testified at the hearing.             Among other things,

Stellmacher testified that he originally visited the Project

when an attorney for the Developer Action briefly retained him.

He misidentified the attorney during his oral testimony and

subsequently submitted a declaration5 clarifying that he “had

been retained by [a]ttorney Lex Smith [(“Smith”)], on behalf of

his clients, which included certain Marriott entities, involved

in other litigation.”6         The declaration also stated that

Stellmacher “contacted Mr. Smith” to confirm that his work was

terminated shortly after he visited the property and that he was

not provided any work product related to the matter.                Over

Appellants’ hearsay objection, the Arbitrator admitted the

declaration into evidence.

5
      Stellmacher orally identified John Sopuch (“Sopuch”) of the Starn
O’Toole Marcus & Fisher law firm. Appellants moved to strike Stellmacher’s
expert opinions because his involvement with Sopuch in this matter would have
created a conflict with one of the plaintiffs named in the arbitration. The
AOAO submitted Stellmacher’s declaration in response to this motion. The
declaration clarified that Stellmacher had named Sopuch by mistake, with the
confusion caused by the fact that Sopuch hired Stellmacher’s firm in
connection with a separate matter, and that he had not been retained by
Sopuch or by the Starn O’Toole firm in connection with the Project.
6
      Smith is an attorney with the Kobayashi Sugita & Goda law firm, which
served as counsel in the Developer Action to the original developers of the
Project.

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       On January 7, 2016, the Arbitrator issued her final

arbitration award in favor of the AOAO.

       3.   Post-award Disclosure Demands

       On January 13, 2016, Appellants requested that DPR provide

updated disclosures “pursuant to DPR Arbitration Rule 9A and HRS

§ 658A-12” relating to the AOAO, counsel for the AOAO, in-house

counsel for the AOAO, and the AOAO’s witnesses and experts.              DPR

responded that it would not provide a substantive response to

Appellants’ request as “neither the applicable DPR Arbitration

Rules nor the relevant provisions of the Uniform Arbitration

Statute (HRS Chapter 658A) provide for a post arbitration award

disclosure process[.]”      On February 3, 2016, Appellants sought

additional disclosures regarding the Arbitrator’s relationship

with the Kobayashi Sugita & Goda (“KSG”) law firm.            DPR

responded once again that it would not provide a post-

arbitration disclosure.

B.     Circuit Court Proceedings

       1.   Motion to Confirm, Motion to Vacate, and Discovery

       In the meantime, the AOAO filed a special proceeding in the

circuit court to confirm the arbitration award.            Before filing

their memorandum in opposition, Appellants filed a Notice of

Taking Deposition upon Written Questions of AOAO counsel Robert

C. Kessner, Esq., and his law firm; the AOAO’s in-house counsel,

Peter Horovitz, Esq.; and the AOAO’s expert witness, Nerney.

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Appellants also filed a Notice of Taking Deposition upon Written

Questions of KSG, the law firm that briefly retained Stellmacher

for the Developer Action but did not represent the AOAO and had

no direct involvement in the arbitration proceedings.7

          Appellants also moved to vacate the award on grounds of

evident partiality due to the Arbitrator’s refusal to provide

post-award supplementary disclosures.            Appellants alleged that

the AOAO’s position had no basis in law or the applicable

bylaws, that the Arbitrator “oddly adopted [the AOAO’s]

unsupported interpretation of the law,” and that “the

Arbitrator’s findings fly in the face of the law.”               Appellants

stated that they demanded post-award disclosures because they

7
      Discovery from an arbitrator or arbitration organization pursuant to
HRS § 658A-14 (Supp. 2001) is discussed in the text, infra. With respect to
court rules governing discovery, according to Hawaii Rules of Civil Procedure
(“HRCP”) Rule 81(g) (2006), Chapter V of the HRCP relating to depositions and
discovery (HRCP Rules 26 through 37) is applicable to HRCP Rule 81(a)(5)
(2006) “[a]pplications to a circuit court under chapter 658 [sic] relating to
arbitration, and proceedings thereon prior to judgment.” Rule 81(g)(1) also
provides:

              the court may by order direct that said Chapter V shall not
              be applicable to the proceeding if the court for good cause
              finds that the application thereof would not be feasible or
              would work an injustice[.]

Although the propriety of post-award discovery is not raised as an issue on
appeal, we note that HRCP Rule 81(g)(1)allows a court to prohibit or restrict
discovery in court proceedings relating to arbitration if allowing discovery
“would work an injustice.” Cases restricting post-award discovery include
Midwest Generation EME, LLC v. Continuum Chem. Corp., 768 F. Supp. 2d 939,
943 (N.D. Ill. 2010) (“Post-award discovery is rare, and courts have been
extremely reluctant to allow it. It is often a ‘tactic’ employed by
disgruntled or suspicious parties who, having lost the arbitration, are
anxious for another go at it.”) (footnote omitted); and Provost v.
Intrafusion Holding Corp., 926 F. Supp. 2d 532, 537 n.4 (D. Del. 2013)
(“Courts have been understandably hesitant to grant extensive discovery in
cases alleging arbitrator bias where the complaining party has not presented
clear evidence of any impropriety.”).

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were “surprised” by the arbitration award, although they

acknowledged they had no reason to believe that the Arbitrator

may be partial to the AOAO during the course of the arbitration.

Yet, Appellants argued, “the Arbitrator’s disregard for the law

. . . now coupled with the Arbitrator’s refusal to provide

appropriate disclosures, calls into question whether there are

undisclosed relationships with [the AOAO], [the AOAO’s]

counselor or [the AOAO’s] witnesses which arose during the

course of the arbitration and — to a reasonable person — may

have compromised the Arbitrator’s neutrality.”               Appellants

requested that the court continue the hearing given the lack of

evidence and grant Appellants’ Motion to Compel Production of

Records from DPR (“Motion to Compel”), which had been filed

earlier.

          DPR filed a memorandum in opposition to Appellants’ Motion

to Compel, arguing that it was both procedurally and

substantively flawed.          The AOAO also filed a memorandum in

opposition, arguing that further disclosures by the Arbitrator

should not be compelled because Appellants failed to make a

prima facie showing that a ground for vacating the arbitration

award exists, in accord with HRS § 658A-14(d).8

8
          HRS § 658A-14(d)(Supp. 2001) provides:

                In a judicial, administrative, or similar proceeding, an
                arbitrator or representative of an arbitration organization
                                                                  (continued. . .)

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          Appellants filed a reply memorandum, arguing that they had

made a prima facie showing of evidence to support a motion to

vacate with regard to the KSG law firm.             Appellants argued that

the relationship rose to the level of evident partiality because

KSG had an “extensive relationship” with the Arbitrator.

Appellants argued that despite KSG’s lack of direct connection

with the parties to the case, KSG was relevant because

Stellmacher’s declaration allegedly involved “hearsay testimony”

by Smith of KSG.9        Appellants also argued that a ruling in their

favor would have “had severe repercussions to KSG’s client” in

the Developer Action, and that “a reasonable person could infer

that a defense verdict in this arbitration would help the

Arbitrator to garner KSG’s recommendation to serve in the

Developer Action, should it be ordered to arbitration. . . .”

Appellants also alleged that Nerney, the AOAO’s expert witness,

(continued. . .)
            is not competent to testify, and shall not be required to
            produce records as to any statement, conduct, decision, or
            ruling occurring during the arbitration proceeding, to the
            same extent as a judge of a court of this State acting in a
            judicial capacity. This subsection does not apply:
            ....
            (2) [t]o a hearing on a motion to vacate an award under
            section 658A-23(a)(1) or (2) if the movant establishes
            prima facie that a ground for vacating the award exists.

(Emphasis added.)
9
      Stellmacher’s declaration stated that his “firm records” showed that he
was retained by Smith, and that he then contacted Smith to confirm that his
work was shortly terminated after his visit to the property. Appellants
claimed that when this testimony from Mr. Stellmacher and Mr. Smith was
admitted, “KSG became . . . a witness.”

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had evaded service and had not yet responded to written

deposition questions regarding a potential relationship with the

Arbitrator, yet because he “is an attorney, and condominium

governing documents often contain arbitration clauses, it is

reasonably plausible to anticipate that Mr. Nerney had or has a

professional relationship that should have been disclosed.”

       Nerney was thereafter deposed upon written interrogatories.

Nerney testified that the Arbitrator served as a mediator or

arbitrator on two cases in which he appeared as an attorney.

First, he testified that in 2013, he represented a party in a

matter in which the Arbitrator was selected as an arbitrator.

Second, he testified that on April 9, 2015, he represented an

association of apartment owners regarding a request for a

reasonable accommodation in a half-day mediation with the

Arbitrator, but the matter was ultimately not resolved by

mediation.

       Appellants then moved to compel the Arbitrator to respond

to the deposition upon written questions pursuant to a showing

of prima facie evidence.       The circuit court granted Appellants’

motion, and the Arbitrator was deposed upon written questions.

She testified, among other things, that she found in favor of

Nerney’s client on a summary judgment motion in a prior

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arbitration,10 and that Stellmacher had testified as a witness in

a prior arbitration at some point in time between January 1,

2011 and July 24, 2014.

           2.   Supplemental Memorandum in Support of Appellants’
                Motion to Vacate

           After months of discovery, Appellants submitted a

supplemental memorandum in support of their Motion to Vacate.

Appellants asserted that the Arbitrator had failed to comply

with the disclosure requirements of HRS § 658A-12(b) by failing

to disclose facts learned by the Arbitrator after accepting

appointment that a reasonable person would consider likely to

affect the impartiality of the Arbitrator.              Appellants claimed

that the following disclosures were not provided:

                (1) the Arbitrator recently presided over an arbitration
                involving [the AOAO’s] damages expert;

                (2) [The AOAO’s] expert on condominium governance, Philip
                Nerney, Esq. —- on whom the Arbitrator primarily relied in
                rendering her award —- had a mediation before the
                Arbitrator while the above-captioned matter was pending and
                a prior arbitration in which the Arbitrator found in Mr.
                Nerney’s client’s favor on a motion for summary judgment;
                and

                (3) the law firm of a hearsay witness had an extensive
                relationship with the Arbitrator, including at least two
                mediations during the pendency of this arbitration and two
                referrals to the Arbitrator.

Following the completion of briefing, the court held a hearing

on the motion to confirm the arbitration award and the motion to

vacate.         The circuit court found in favor of the AOAO, denied
10
      The Arbitrator testified that Nerney was counsel to a party in a matter
in which she presided as an arbitrator at some point between January 1, 2011
and July 24, 2014.

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the motion to vacate, and granted the motion to confirm the

arbitration award.    The court found that the Arbitrator complied

with her duty to make a “reasonable inquiry” into possible

conflicts and that none of the relationships challenged by

Appellants rose to a level that would require disclosure.               The

court’s relevant conclusions were as follows:

                8. At the outset, the Arbitrator complied with her
          duty to make a “reasonable inquiry” upon being informed of
          the parties’ proposed witnesses (lay and expert) in
          September and October, 2015, prior to commencement of the
          arbitration proceedings. In other words, as it pertains to
          Stellmacher, the KSG law firm, and Mr. Nerney, none of
          these “relationships” or “facts” are such “that a
          reasonable person would consider likely to affect [the
          Arbitrator’s] impartiality,” necessitating their
          disclosure.

                9. None of these “facts” or “relationships” rise to
          the level of “evident partiality.” Compare with Madamba,
          where the court held that failure by the arbitrator during
          the pendency of the arbitration proceedings to disclose his
          prospective relationship with the Cades Schutte law firm
          (counsel for respondent Romero) where there existed a
          “concrete possibility” that the Cades Schutte law firm
          would be handling his personal retirement accounts,
          constituted undisclosed facts showing a “reasonable
          impression of partiality,” sufficient to support vacatur.

                10. The facts are undisputed that as between the
          Arbitrator and Stellmacher, the only association or dealing
          was that of Stellmacher having testified as a witness in a
          prior arbitration, for which [the Arbitrator] served as the
          arbitrator at some point in time between January 1, 2011
          and July 24, 2014. Moreover, as noted by the Madamba
          court, in adopting Justice Black’s reasoning in
          Commonwealth Coatings Corp. v. Continental Casualty Co.,
          393 U.S. 145, 89 S. Ct. 337, 21 L.Ed.2d. 301 (1968), it
          would be incumbent upon the arbitrator to disclose to the
          parties any dealings that might create an impression of
          possible bias. The association between the Arbitrator and
          Stellmacher was not substantive in nature. The dealings
          between the Arbitrator and Stellmacher do not create an
          impression of possible bias.

                11. The facts are undisputed that as between the
          Arbitrator and the KSG law firm, their association occurred
          sometime between January 1, 2011 and January 7, 2016, as
          [the Arbitrator] had been selected as an arbitrator on five
          (5) matters in which the KSG law firm represented a party

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            and also served as a mediator on three (3) matters in which
            the KSG law firm represented a party. The association
            between the Arbitrator and the KSG law firm was not
            substantive in nature. The dealings between the Arbitrator
            and the KSG law firm do not create an impression of
            possible bias.

                  12. The facts are undisputed that 1) as between the
            Arbitrator and Mr. Nerney, their association occurred when
            Mr. Nerney appeared as counsel for a party before the
            Arbitrator sometime prior to July 25, 2014 (more than two
            years before the subject arbitration) and the arbitration
            was decided on a summary judgment motion in favor of Mr.
            Nerney’s client, and 2) sometime in or around April 9,
            2015, Mr. Nerney represented an apartment association
            (owner requested reasonable accommodation) in a half-day
            mediation before the Arbitrator but was not successful.
            The association between the Arbitrator and Mr. Nerney was
            not substantive in nature. The dealings between the
            Arbitrator and Mr. Nerney do not create an impression of
            possible bias.

The circuit court then entered final judgment.

C.     The Appeal and Application for Transfer

       Appellants appealed from the circuit court’s final judgment

confirming the arbitration award.         Appellants raised the

following four points of error on appeal:

            A. The Circuit Court erred in concluding, as a matter of
            law that under HRS section 658A-12(b), the Arbitrator need
            not disclose any ongoing or past instances in which she
            served as a neutral and (1) a non-attorney witness appeared
            before her in another matter, or (2) attorney witnesses,
            one of whom appeared as an expert witness in the subject
            arbitration and the other of whom was a hearsay lay
            witness, retained her services on behalf of a client in
            other matters.

            B. The Circuit Court erred in finding that the
            Arbitrator’s service as an arbitrator in 2013 in a matter
            in which Mr. Nerney represented a party occurred “more than
            two years before the subject arbitration,” given that the
            parties initiated the subject arbitration on July 24, 2014.

            C. The Circuit Court impermissibly raised the standard for
            evident partiality for nondisclosures by (1) focusing on
            the “substantive nature” of the relationships in
            determining whether it creates a reasonable impression of
            bias, even though the Hawaii Supreme Court has rejected a
            standard that evaluates the substantiality of a
            relationship or interest as being overly narrow and (2)

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            separately finding that the relationships do not “rise[] to
            the level of evident partiality” after determining that the
            relationships at issue need not be disclosed.

            D. The Circuit Court erred in finding that the Arbitrator
            made a “reasonable inquiry” into whether any relationships
            or interactions with the parties’ witnesses needed to be
            disclosed, given that the Arbitrator admitted – during post
            arbitration discovery – that until recently, she did not
            maintain a list of the witnesses that appeared before her
            and that, with respect to at least one witness, discovery
            of his prior appearance before her required “considerable
            research” after-the-fact.

       This court accepted a transfer of this case from the

Intermediate Court of Appeals (“ICA”).

                         III. Questions on Appeal

       The points of error raised by Appellants are reframed and

addressed in this decision as follows:

            1. Whether the “substantive nature” of a relationship is
            relevant to a determination that facts would demonstrate a
            reasonable impression of partiality.

            2.   Whether an arbitrator has a duty to disclose:

                   A. Prior occasions in which a person appearing on a
                   witness list appeared before the arbitrator as a lay
                   or expert witness in unrelated matters.

                   B. Prior dealings with a law firm not involved in
                   the present arbitration, where the law firm
                   previously retained an expert witness appearing on a
                   witness list.

                   C. Prior dealings with a person appearing on a
                   witness list where that person served as party
                   counsel before the arbitrator in a prior arbitration
                   or mediation.

            3. Whether it was clearly erroneous for the circuit court
            to conclude that such undisclosed relationships did not
            create a reasonable impression of partiality.

                         IV.   Standards of Review

       Judicial review of an arbitration award is limited to the

statutory grounds for confirmation, vacatur, modification, and

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correction.    See HRS § 658A-28(a)(3)-(5) (Supp. 2001).           Review

of a motion to vacate an arbitration award “does not involve

review of an arbitrator’s findings of fact or conclusions of

law.”   Nordic, 136 Hawaii at 42, 358 P.3d at 14.          “Rather, it

involves review of a circuit court’s factual findings and

conclusions of law as to whether the statutorily outlined

grounds for vacatur exist.”       Id.

       We review a circuit court’s findings of fact under the

clearly erroneous standard.       Madamba, 137 Hawaii at 8, 364 P.3d

at 525.   A finding of fact is clearly erroneous when either “the

record lacks substantial evidence to support the finding,” or,

evidence exists to support the finding, but we are left with

“the definite and firm conviction in reviewing the entire

evidence that a mistake has been committed.”           Id. (quoting

Nordic, 136 Hawaii at 41, 358 P.3d at 13).          We review a circuit

court’s conclusions of law de novo under the right/wrong

standard.   Nordic, 136 Hawaii at 41, 358 P.3d at 13 (quoting

Daiichi, 103 Hawaii at 336, 82 P.3d at 422).          Where a conclusion

of law presents a mixed question of law and fact, we review this

conclusion under the clearly erroneous standard.            Madamba, 137

Hawaii at 8, 364 P.3d at 525 (citing Estate of Klink ex rel.

Klink v. State, 113 Hawaii 332, 351, 152 P.3d 504, 523 (2007)).

A mixed question of law and fact is a conclusion “dependent upon

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the facts and circumstances of the particular case.”                 Price v.

Zoning Bd. of Appeals, 77 Hawaii 168, 172, 883 P.2d 629, 633

(1994).

           We review a circuit court’s rulings on a motion to vacate

for evident partiality under the “clearly erroneous standard”

where the court’s challenged conclusion was based on “a mixed

question of law and fact.”             Madamba, 137 Hawaii at 9, 364 P.3d

at 526.        In this case, we review the court’s conclusion that the

arbitrator’s contacts with the AOAO’s witnesses and an unrelated

law firm would not give a reasonable person the impression of

partiality.

                                  V.    Discussion

A.         Standards for Vacatur under HRS § 658A-23(a)(2)

           Judicial review of a motion to vacate an arbitration award

“is confined to the strictest possible limits.”                Nordic, 136

Hawaii at 41, 358 P.3d at 13 (quoting Daiichi, 103 Hawaii at

337, 82 P.3d at 423).          An arbitration award may be vacated only

upon the grounds specified in HRS § 658A-23.11              Pursuant to HRS

11
      HRS § 658A-23(a) outlines the grounds for vacatur of an arbitration
award as follows:

                Vacating award. (a) Upon motion to the court by a party
                to an arbitration proceeding, the court shall vacate an
                award made in the arbitration proceeding if:

                     (1)   The award was procured by corruption, fraud, or
                     other undue means;
                     (2)   There was:
                                                                 (continued. . .)

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§ 658A-23(a)(2)(A), the court must vacate an arbitration award

if there was evident partiality by an arbitrator appointed to

serve as a neutral.      Madamba, 137 Hawaii at 3, 364 P.3d at 520.

Evident partiality may be found in two situations: when an

arbitrator fails to make necessary disclosures to the parties,

or when additional facts show actual bias or improper motive,

even if the arbitrator makes the necessary disclosures.             See

Valrose Maui, Inc. v. Maclyn Morris, Inc., 105 F. Supp. 2d 1118,

1124 (D. Haw. 2000); see also Schmitz v. Zilveti, 20 F.3d 1043,

1045-47 (9th Cir. 1994) (distinguishing the evident partiality

standards applied in “nondisclosure” cases and “actual bias”

cases).   This court’s recent decisions in Nordic and Madamba

(continued. . .)
                        (A) Evident partiality by an arbitrator
                        appointed as a neutral arbitrator;
                        (B) Corruption by an arbitrator; or
                        (C) Misconduct by an arbitrator prejudicing
                        the rights of a party to the arbitration
                        proceeding;
            (3) An arbitrator refused to postpone the hearing upon
            showing of sufficient cause for postponement, refused to
            consider evidence material to the controversy, or otherwise
            conducted the hearing contrary to section 658A-15, so as to
            prejudice substantially the rights of a party to the
            arbitration proceeding;
            (4) An arbitrator exceeded the arbitrator’s powers;
            (5) There was no agreement to arbitrate, unless the person
            participated in the arbitration proceeding without raising
            the objection under section 658A-15(c) not later than the
            beginning of the arbitration hearing; or
            (6) The arbitration was conducted without proper notice of
            the initiation of an arbitration as required in section
            658A-9 so as to prejudice substantially the rights of a
            party to the arbitration proceeding.

            . . . .

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have addressed the evident partiality standard in nondisclosure

cases.

           In a nondisclosure case, evident partiality is found where

“undisclosed facts demonstrate a reasonable impression of

partiality.”        Madamba, 137 Hawaii at 10, 364 P.3d at 527

(quoting Nordic, 136 Hawaii at 51, 358 P.3d at 23).                Under this

standard, a finding of evident partiality “is not dependent on a

showing that the arbitrator was actually biased, but instead

stems from the nondisclosure itself.”             Id. (emphasis added).

The evident partiality standard for nondisclosure cases thus

reflects the latter part of the rule that “any tribunal

permitted by law to try cases and controversies not only must be

unbiased but also must avoid even the appearance of bias.”

Commonwealth Coatings, 393 U.S. at 150 (emphasis added).12

           In Nordic, we analyzed the relationship between “evident

partiality” and the statutory disclosure requirements found in

HRS § 658A-12 (Supp. 2001), which codify an arbitrator’s duty to

12
      In both actual bias and nondisclosure cases, facts necessarily exist
that create a “reasonable impression of partiality.” In nondisclosure cases,
the fact that these facts were not disclosed is enough to find evident
partiality. In “actual bias” cases, where the fact of nondisclosure is not
present, parties must prove specific facts, beyond those disclosed,
indicating bias. Thus, if an arbitrator meets the disclosure requirement,
the party seeking to establish evident partiality faces a higher burden of
proof. See Woods v. Saturn Distrib. Corp., 78 F.3d 424, 427 (9th Cir. 1996)
(distinguishing the burden of proof in nondisclosure cases as at a lower
threshold than actual bias cases).

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disclose facts that may create an appearance of bias.              In

relevant part, this standard provides:

            § 658A-12 Disclosure by arbitrator. (a) Before accepting
            appointment, an individual who is requested to serve as an
            arbitrator, after making a reasonable inquiry, shall
            disclose to all parties to the agreement to arbitrate and
            arbitration proceeding and to any other arbitrators any
            known facts that a reasonable person would consider likely
            to affect the impartiality of the arbitrator in the
            arbitration proceeding, including:

            (1) A financial or personal interest in the outcome of the
            arbitration proceeding; and

            (2) An existing or past relationship with any of the
            parties to the agreement to arbitrate or the arbitration
            proceeding, their counsel or representatives, a witness, or
            another arbitrator.

            (b) An arbitrator has a continuing obligation to disclose
            to all parties to the agreement to arbitrate and
            arbitration proceeding and to any other arbitrators any
            facts that the arbitrator learns after accepting
            appointment which a reasonable person would consider likely
            to affect the impartiality of the arbitrator.

HRS § 658A-12(a)-(b) (emphases added).

       Pursuant to HRS §§ 658A-12(a) and (b), “arbitrators must at

the outset disclose, then continually disclose throughout the

course of an arbitration proceeding, any known facts that a

reasonable person would consider likely to affect the

arbitrator’s impartiality.”        Nordic, 136 Hawaii at 47, 358 P.3d

at 19.    Phrased in other ways, an arbitrator must disclose facts

that reasonably “create an impression of possible bias,”

Commonwealth Coatings, 393 U.S. at 149, or that demonstrate a

“reasonable impression of partiality.”           Schmitz, 20 F.3d at 1046

(citation omitted).

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       In addition to codifying the arbitrator’s disclosure

obligations, HRS § 658A-12(a) provides that “an arbitrator must

make a reasonable inquiry before accepting appointment” as to

any potential conflicts that must be disclosed.            Nordic, 136

Hawaii at 45, 358 P.3d at 17.       In Nordic, we cited the

Commentary to the Uniform Arbitration Act (“UAA”) (2001)

(hereinafter “Commentary”) to further explain this standard.

The Commentary stated that the extent of an arbitrator’s inquiry

into potential conflicts “may depend upon the circumstances of

the situation and the custom in a particular industry.”             136

Hawaii at 45, 358 P.3d at 17 (quoting Nat’l Conference of

Comm’rs on Unif. State Laws, Uniform Arbitration Act (Last

Revisions Completed Year 2000) 48 (Dec. 13, 2000),

http://www.uniformlaws.org/shared/docs/arbitration/arbitration_f

inal_00.pdf).

       An arbitrator’s duty to disclose “known facts” thus relates

to facts already known or discovered upon reasonable inquiry.

“[W]hat constitutes a reasonable inquiry varies depending on the

circumstances, and whether the duty of reasonable inquiry has

been violated is a question of fact.”         Nordic, 136 Hawaii at 45,
358 P.3d at 17.     If an arbitrator violates the duty of

reasonable inquiry and thus fails to acquire “known” facts that

would otherwise need to be disclosed, such would result in the

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same outcome as when an arbitrator knows such facts but fails to

disclose them.     Thus, an arbitrator’s lack of knowledge of

specific facts is only a defense for nondisclosure if the

arbitrator had conducted a reasonable inquiry.

       In Nordic, construing prior case law, we determined that a

neutral arbitrator’s violation of statutory disclosure

requirements under HRS § 658A-12(a) or (b) “constitutes ‘evident

partiality’ as a matter of law.”          136 Hawaii at 50, 358 P.3d at

22.    We rejected the notion that after determining that an

arbitrator failed to meet disclosure obligations, “there must

also be a separate finding that the arbitrator acted with

‘evident partiality’ or bias before an award can be vacated.”

Id.    We do not require a separate finding regarding actual bias

because our case law recognizes evident partiality not only

“when there is actual bias on the part of the arbitrator, but

also when undisclosed facts demonstrate a ‘reasonable impression

of partiality.’”     136 Hawaii at 51, 358 P.3d at 23 (quoting

Daiichi, 103 Hawaii at 339-40, 82 P.3d at 425-26).

       Since HRS § 658A-12 “explicitly adopted a requirement to

disclose facts a reasonable person would find likely to affect

an arbitrator’s impartiality,” and evident partiality under HRS

§ 658A-23 exists “when undisclosed facts demonstrate a

reasonable impression of partiality,” we found that a failure to

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meet the disclosure obligations under § 658A-12 constituted

“evident partiality” as a matter of law under § 658A-23(a)(2).

Nordic, 136 Hawaii at 51, 358 P.3d at 23.13

           In Madamba, we held that a finding of evident partiality

based on a violation of HRS § 658A-12(a) or (b) by a neutral

arbitrator requires the court to vacate the arbitration award

pursuant to HRS § 658A-23(a)(2)(A).             137 Hawaii at 16, 364 P.3d

at 533.       We recognized the permissive language of HRS § 658A-

12(d) but found the following:

               The function of the ‘may’ language . . . is to provide
               reference to the different circumstances that require
               vacatur under HRS § 658A-23(a)(2), i.e., a neutral
               arbitrator’s evident partiality, and any arbitrator’s
               corruption or misconduct. For example, if a non-neutral
               arbitrator fails to make a disclosure required under HRS
               § 658A-12(a) or (b), although the award would not be
               vacated based on evident partiality — as evident partiality
               only applies to neutral arbitrators — it could be vacated
               based on the corruption and misconduct provisions in HRS
               § 658A-23(a)(2).

13
      Compare HRS § 658A-12(e), which provides that “[a]n arbitrator
appointed as a neutral arbitrator who does not disclose a known, direct, and
material interest in the outcome of the arbitration proceeding or a known,
existing, and substantial relationship with a party is presumed to act with
evident partiality under section 658A-23(b)(2).” In Nordic, we did not hold
that non-disclosure of facts a reasonable person would find likely to affect
an arbitrator’s impartiality would require immediate vacatur of the
arbitration award. We cited HRS § 658A-12(d), which provides that “[i]f the
arbitrator did not disclose a fact as required by subsection (a) or (b), upon
timely objection by a party, the court under section 658A-23(a)(2) may vacate
an award.” 136 Hawaii at 53, 358 P.3d at 25 (emphasis in original). This
standard was viewed as being “permissive in nature” and granting courts
“wider latitude in deciding whether to vacate an award” for failure to meet
the disclosure requirements. Id. (citing Commentary, supra, at 50). We thus
stated that the circuit court “has discretion under HRS § 658A-12(d) to
decide whether or not to grant the motion to vacate.” Id. Our opinion in
Madamba clarified this on the basis of statutory language in HRS § 658A-
23(a)(2) as applied to an arbitrator appointed as a neutral arbitrator.
Madamba, 137 Hawaii at 16, 364 P.3d at 533.

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Id.    (citation and footnote omitted).       We also noted that the

Commentary “takes into account the fact that jurisdictions have

developed different views regarding what constitutes evident

partiality,” so the standard for evident partiality due to

nondisclosure will differ among jurisdictions that have adopted

the UAA.   137 Hawaii at 16 n.20, 364 P.3d at 533 n.20.            “[O]ur

standard for evident partiality based on a failure to disclose

is equivalent to the standard laid out in HRS § 658A-12’s

disclosure provisions.      Accordingly, in this context, once

evident partiality [as to a neutral arbitrator] is established,

the arbitration award must be vacated.”          Id.

       Based on the standards outlined in Nordic and clarified in

Madamba, an arbitrator’s compliance with the disclosure

requirements set forth in §§ 658A-12(a) and (b) is paramount to

the validity of an arbitration award.         See Kay v. Kaiser Found.

Health Plan, Inc., 119 Hawaii 219, 229, 194 P.3d 1181, 1191

(App. 2008) (framing the disclosure obligation as “the sine qua

non” of our review).      In this case, we clarify the scope of the

arbitrator’s disclosure requirements as well as contextualize

the reasonable person standard in light of the undisclosed facts

revealed through post-award discovery.

B.    Framework for Evaluating Nondisclosure Claims

       As established in Nordic, an arbitrator’s failure to

disclose facts as required under HRS § 658A-12(a) or (b)

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constitutes evident partiality as a matter of law, and pursuant

to Madamba, the circuit court does not have discretion to

determine whether to vacate an award once evident partiality is

established as to a neutral arbitrator.          However, the circuit

court plays an essential fact-finding role in determining

whether the party challenging the award has met its “burden of

proving facts which would establish a reasonable impression of

partiality,” Nordic, 136 Hawaii at 51, 358 P.3d at 24, which

constitutes “evident partiality.”         The “fundamental standard” of

the disclosure obligation “is an objective one: disclosure is

required of facts that a reasonable person would consider likely

to affect the arbitrator’s impartiality in the arbitration

proceeding.”    136 Hawaii at 47, 358 P.3d at 19 (quoting

Commentary at 47-48).      It is thus the circuit court’s role to

determine whether the undisclosed facts meet this objective

standard.

       Although we do not venture to pre-determine a set of

relationships that will automatically require disclosure, we

recognize that patterns have emerged.         Such patterns may be

traced to the United States Supreme Court’s seminal decision in

Commonwealth Coatings, 393 U.S. 145.         In that case, a party to

the arbitration was one of the arbitrator’s long-time customers

in his construction consulting business. 393 U.S. at 146.       The

Court found that this business relationship required disclosure,

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and that its nondisclosure constituted evident partiality

warranting vacatur of the arbitration award. 393 U.S. at 150.

       Justice White and Justice Marshall concurred in the

judgment but clarified that “arbitrators are not automatically

disqualified by a business relationship with the parties before

them if both parties are informed of the relationship in

advance, or if they are unaware of the facts but the

relationship is trivial.” 393 U.S. at 150 (White, J.,

concurring).    Although other jurisdictions have interpreted it

otherwise, Justice White’s concurrence did not contradict or

limit the principle adopted by the Court that a failure to

fulfill disclosure obligations would result in a finding of

evident partiality warranting vacatur.          See Schmitz, 20 F.3d at

1045.    Justice White’s concurrence thus did not reject the

majority’s evident partiality standard, but clarified its

parameters — namely, that “more than trivial” relationships

“must be disclosed.”      Commonwealth Coatings, 393 U.S. at 152.

This standard is aligned with HRS § 658A-12(a), which does not

require the disclosure of de minimis interests or relationships,

see Nordic, 136 Hawaii at 47, 358 P.3d at 19 (quoting Commentary

at 47-48), and Ninth Circuit case law, which does not require

the disclosure of “long past, attenuated, or insubstantial

connections between a party and an arbitrator.”            New Regency

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Prods., Inc. v. Nippon Herald Films, Inc., 501 F.3d 1101, 1110

(9th Cir. 2007).14

           Patterns emerging in case law have evolved through court

efforts to identify undisclosed relationships that are “more

than trivial” and thus require vacatur due to evident

partiality, and those that are “too insubstantial to warrant

vacating an award.”          Commonwealth Coatings, 393 U.S. at 152

(White, J., concurring) (emphasis added).              Courts will weigh

factors in a case-by-case approach to determine how a reasonable

person would objectively perceive the relationship and its

potential impact on the arbitration proceeding.                In Madamba, for

14
      We note that there is a split of opinion regarding the meaning and the
weight of Justice White’s concurrence in Commonwealth Coatings, where many
jurisdictions characterize Justice Black’s majority opinion as a “plurality
opinion” and see a conflict between this opinion and Justice White’s
concurrence. See, e.g., Nationwide Mut. Ins. Co. v. Home Ins. Co., 429 F.3d
640, 644 n.5 (6th Cir. 2005) (stating that “a majority of” the Commonwealth
Coatings Court “did not endorse the ‘appearance of bias’ standard set forth
in the plurality opinion”); Morelite Constr. Corp. v. N.Y. City Dist. Council
Carpenters Benefit Funds, 748 F.2d 79, 83 n.3 (2d Cir. 1984) (stating that
the two opinions are “impossible to reconcile”). We disagree with this
characterization of Justice White’s concurring opinion. Justice White,
joined by Justice Marshall, specifically stated that he was “glad to join”
the Court’s “majority opinion” and sought only to make “additional remarks.”
Commonwealth Coatings, 393 U.S. at 150, 151 n.* (White, J., concurring).
“Among these additional remarks, Justice White said that arbitrators are not
held to the partiality standard applicable to judges and that ‘trivial’ or
‘remote’ relationships need not be disclosed.” Schmitz, 20 F.3d at 1045.
Justice White’s concurrence does not mention the “appearance of bias”
standard or imply that it is inappropriate, and both opinions emphasize the
need for an arbitrator’s full disclosure. Commonwealth Coatings, 393 U.S. at
151. Thus, Justice White did not reject the majority’s standard, but more
specifically defined the parameters of the disclosure requirement. We stated
in Madamba that we follow “Justice Black’s reasoning,” in contrast with
courts that apply “a more stringent definition of evident partiality” based
on Justice White’s concurrence. 137 Hawaii at 10 n.15, 364 P.3d at 527 n.15.
We clarify here that our adoption of “Justice Black’s reasoning” does not
mean we must reject Justice White’s concurrence, as we interpret the
concurrence as complementary to, rather than conflicting with, the majority
opinion.

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example, this court analyzed the “substantive nature” of the

relationship at issue to determine whether it would give a

reasonable impression of partiality.         137 Hawaii at 13, 364 P.3d

at 530.     See also In Re Sussex, 781 F.3d 1065, 1074-75 (9th Cir.

2015) (discussing the “substantive” nature of the arbitrator’s

interest).     Determining whether a relationship is “substantive”

may involve the consideration of several factors, including but

not limited to the directness of the connection (or the degrees

of separation) between the arbitrator and either party, as well

as the type of connection or activity at issue, and its timing

relative to the arbitration proceedings.

       1.   Connection between the Arbitrator and a Party

       As a threshold matter, any analysis of arbitrator

disclosure requirements is undergirded by the timing issues

further expounded in subsection (3) below.          This is a necessary

corollary consideration of the requirement that the undisclosed

relationship between the arbitrator and a party be one that a

reasonable person would consider likely to affect the

arbitrator’s impartiality.       The more direct an undisclosed

connection between the arbitrator and a party, the more likely

that it will create a reasonable impression of partiality.               As

such, a current direct relationship between an arbitrator and “a

party, its counsel, principal, or agent” will almost always

require disclosure.      Valrose, 105 F. Supp. 2d at 1124.

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       For example, in Valrose, the United States District Court

for the District of Hawaii vacated an arbitration award where

the arbitrator failed to disclose an ex parte discussion with

one of the party’s counsel about serving as a mediator in an

unrelated case. 105 F. Supp. 2d at 1120, 1125.         Given the

arbitrator’s direct interaction with a party attorney about a

matter that would result in a pecuniary benefit to the

arbitrator, the court found that the nondisclosure of this

discussion — and nondisclosure of the arbitrator’s eventual

appointment as a mediator in the matter — “was clearly a serious

failing” and required vacatur of the award. 105 F. Supp. 2d at

1124.

       Disclosure is also typically required when there is a

recent or current relationship between an arbitrator’s law firm

or business and a party, its counsel, principal, or agent.               See,

e.g., New Regency, 501 F.3d 1101 (vacating an arbitration award

where the arbitrator, who was an executive for a film company,

did not disclose that her company was in negotiations with an

executive of one of the parties to finance and co-produce a

movie); Schmitz, 20 F.3d 1043 (vacating an arbitration award

where the arbitrator did not disclose that his law firm

represented the parent corporation of a party).            Disclosure may

also be required even when it is the arbitrator’s employer that

has the relationship.      See Olson v. Merrill Lynch, Pierce,

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Fenner & Smith, Inc., 51 F.3d 157 (8th Cir. 1995) (vacating an

award where an arbitrator disclosed that he was an employee of a

company, but did not disclose his high-ranking position or the

fact that the company had an ongoing business relationship with

one of the parties).

       The more “attenuated” and less direct the connections

between a party and an arbitrator, the less likely it will be

that the relationship will require disclosure, even if those

relationships are current.       New Regency, 501 F.3d at 1110.          In

United States Wrestling Fed’n v. Wrestling Div. of AAU, Inc., a

party sought vacatur because an arbitrator did not disclose that

his law firm had a relationship with Northwestern University.

605 F.2d 313, 315-16 (7th Cir. 1979).         Northwestern was neither

a party to the arbitration nor directly related to one of the

parties, but instead was one of the 860 other members of the

NCAA, a founder of one of the parties to the arbitration. 605
F.2d at 315.    This “tenuous chain” was too “remote, uncertain,

and speculative to require the arbitration award to be set

aside.” 605 F.2d at 320.

       2.   Type of Connection or Activity

       Certain types of relationships will also weigh more heavily

toward disclosure than others.        In Madamba, we recognized that

attorney-client relationships carry “heightened import.”             137

Hawaii at 14, 364 P.3d at 531.       Such recent, current, or

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prospective relationships will almost always require disclosure.

See id. (requiring disclosure of an arbitrator’s prospective

attorney-client relationship with one of the party counsel’s law

firms, despite the fact that the arbitrator did not plan to

interact with the firm “besides paying legal bills”); Beebe Med.

Ctr., Inc. v. InSight Health Servs. Corp., 751 A.2d 426, 431

(Del. Ch. 1999) (requiring disclosure of an attorney-client

relationship between the arbitrator and the law firm

representing a party); Schmitz, 20 F.3d at 1049 (requiring

disclosure of an attorney-client relationship between the

arbitrator’s law firm and a party’s parent company); HSMV Corp

v. ADI Ltd., 72 F. Supp. 2d 1122, 1130 (C.D. Cal. 1999)

(requiring disclosure of an attorney-client relationship between

an arbitrator’s law firm and a party’s owner); Houston Vill.

Builders, Inc. v. Falbaum, 105 S.W.3d 28, 34 (Tex. App. 2003)

(requiring disclosure of an attorney-client relationship between

the arbitrator and a trade association of which parties to the

arbitration were members); but see Peabody v. Rotan Mosle, Inc.,

677 F. Supp. 1135, 1138 (M.D. Fla. 1987) (not requiring

disclosure of attorney-client relationship between the

arbitrator’s former law partner’s brother and an expert witness,

as this relationship was “thrice removed” from the arbitrator

and thus too attenuated).

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           Business relationships and financial dealings will also

tend to weigh in favor of disclosure, depending on the weight of

other considerations, including the regularity and recency of

the dealings, the length of the relationship, and the extent of

pecuniary interest involved.             The best-known example of the kind

of business relationship requiring disclosure is in the seminal

case, Commonwealth Coatings, 393 U.S. 145.               As noted in this

case, a party to the arbitration was one of the arbitrator’s

regular customers in his construction consulting business.                    In

weighing the import of this relationship, the Court acknowledged

that it was “in a sense sporadic in that the arbitrator’s

services were used only from time to time at irregular

intervals,” and that “there had been no dealings between them

for about a year immediately preceding the arbitration.” 393
U.S. at 146.            “Nevertheless, the [party’s] patronage was

repeated and significant, involving fees of about $12,000[15]

over a period of four or five years,” and it involved “the

rendering of services on the very projects involved in this

lawsuit.”         Id.     The Court found that these dealings “might

create an impression of possible bias” and would thus require

disclosure. 393 U.S. at 149.

           Where the relationship involves an exchange of money or

other consideration, it is likely to require disclosure,
15
           Adjusted for inflation, this would amount to over $85,000 today.

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particularly if the exchange was recent or ongoing during the

arbitration.     See, e.g., Britz, Inc. v. Alfa-Laval Food & Dairy

Co., 40 Cal. Rptr. 2d 700, 707 (Cal. App. 1995).             In Britz, the

arbitrator failed to disclose that he was employed by one of the

party counsel’s law firms as an expert witness in a separate

matter.    Id.   Nondisclosure of this fact was sufficient to

warrant vacatur for evident partiality, as it established “a

current monetary connection.”         Id.    Similar circumstances were

present in Wheeler v. St. Joseph Hosp., where the court vacated

an award because an arbitrator failed to disclose that he served

as an expert witness for a party attorney’s law firm during the

pendency of the arbitration.        133 Cal. Rptr. 775 (Cal. App.

1976).

       Even if the relationship does not involve financial

benefits flowing to the arbitrator, certain exchanges could

nonetheless be reasonably perceived as a means for one party to

gain favor.      In Kay, the arbitrator did not disclose that she

had directly solicited and received a $450 donation from one of

the parties on behalf of a non-profit medical association during

the pendency of the arbitration.           119 Hawaii 219, 194 P.3d 1181.

The ICA noted that there was no evidence that the arbitrator

received a direct financial benefit from her work, but that it

was “a significant professional activity that brought her public

recognition and enhanced her reputation in the medical

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profession.”     119 Hawaii at 229-30, 194 P.3d at 1191-92.              The

ICA thus held that the arbitrator needed to disclose that she

solicited and received money from the party during the

arbitration, regardless of the charitable purposes of her

activities.     119 Hawaii at 230, 194 P.3d at 1192.

        In accord with this principle, a relationship is less

likely to create a reasonable impression of partiality if it was

one in which “[t]here was nothing that one could do to curry

favor with the other.”       Apusento Garden (Guam) Inc. v. Superior

Court of Guam, 94 F.3d 1346, 1352 (9th Cir. 1996) (quoting

Lozano v. Maryland Cas. Co., 850 F.2d 1470 (11th Cir. 1988),

cert. denied, 489 U.S. 1018 (1989)).          In Apusento, for example,

the arbitrator and a party’s expert witness were limited

partners in a partnership that owned an apartment complex in

Hawaii. 94 F.3d at 1348.     The court characterized the

arbitrator and expert witness as “passive investors in a limited

partnership” which “was unrelated to the subject of the

arbitration.” 94 F.3d at 1353.      According to the court, this

type of financial relationship did not require disclosure,

particularly because it was not the kind where either person

could “curry favor” with the other.          Id.

        This situation was paralleled in Lozano, where a neutral

arbitrator and a party-appointed arbitrator were both investors

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in two limited partnerships. 850 F.2d at 1471.       Although each

partnership respectively consisted of seven and nine limited

partners, neither the neutral arbitrator nor the party-appointed

arbitrator had control over the partnership activities.                  The

court compared this financial relationship with “two individuals

buying the same issue of corporate stock or investing in the

same mutual fund” and did not require disclosure.                Id.16

           3.   Timing of the Connection or Activity

           Finally, as noted in the previous sections, relationships

that are not “distant in time, but rather ongoing during the

arbitration” will weigh most heavily in favor of disclosure,

while relationships that are “long past” will not.                New Regency,
501 F.3d at 1110; see Lagstein v. Certain Underwriters at

Lloyd’s, London, 607 F.3d 634, 646 (9th Cir. 2010) (rejecting

the need for disclosure of a relationship between a neutral and

party-appointed arbitrator where the connection “occurred more

than a decade before the arbitration”).

16
      In some circumstances, personal and familial relationships may also be
necessary to disclose. In Morelite, one of the parties to the arbitration
was a local union, and the arbitrator failed to disclose that his father was
the vice-president of the international union to which the local union
belonged. 748 F.2d at 81. The court found that this relationship required
disclosure based on its “strong feeling that sons are more often than not
loyal to their fathers, partial to their fathers, and biased on behalf of
their fathers.” 748 F.2d at 84. In other cases, however, familial
relationships have not required disclosure. See Ruhe v. Masimo Corp., 640
Fed. App’x 685 (9th Cir. 2016) (reversing a finding that a “reasonable
impression of bias” existed where an arbitrator’s brother represented a
competitor to one of the parties and had suffered two contentious litigation
losses to that party).

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       Prospective or future relationships will weigh in favor of

disclosure where there is a “concrete possibility” of such a

relationship.       Madamba, 137 Hawaii at 12, 13, 364 P.3d at 529,

530 (citing Sussex, 781 F.3d at 1074).          Concrete possibilities

of a future relationship have been demonstrated through evidence

of negotiations, communications, or other facts showing that

steps were taken to further the potential relationship during

the course of the arbitration.        See Madamba, 137 Hawaii at 15,
364 P.3d at 532 (noting that the party’s law firm had received

the arbitrator’s files during the course of the arbitration);

New Regency, 501 F.3d at 1110 (acknowledging that the

negotiations were ongoing throughout the arbitration); Valrose,
105 F. Supp. 2d at 1124 (concerning discussions between the

arbitrator and party counsel about mediating in an unrelated

action).

       Unless a party can show a “concrete possibility” of such a

relationship occurring through direct evidence, allegations of

future interests or relationships are often too contingent and

speculative to require disclosure.         See Sussex, 781 F.3d at

1074-75.    In Sussex, the arbitrator did not disclose to the

parties that he had started an investment firm for litigation

financing.    Id.     One party seeking his removal successfully

argued to the district court that this suggested that the

arbitrator had a financial interest in the outcome, “because a

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victory and large financial award for Sussex would help [the

arbitrator] promote his company, which was designed to generate

profits from funding large, potentially profitable litigations.”
781 F.3d at 1070.     The Ninth Circuit rejected this “theory”

based on its “speculative nature,” noting that the arbitrator

did not have a relationship with either party, and his potential

ability to profit from the award “can best be described as

‘attenuated’ and ‘insubstantial.’” 781 F.3d at 1074-75 (quoting

New Regency, 501 F.3d at 1110).

C.     Application of Disclosure Standards to This Case

       1.   The Arbitrator’s Connection with Stellmacher

       We first analyze Appellants’ contention that the circuit

court erred in concluding that the Arbitrator did not need to

disclose “ongoing or past instances in which she served as a

neutral and . . . a non-attorney witness appeared before her in

another matter.”     Under the applicable standards of review, we

hold that it was not clearly erroneous for the circuit court to

find that the Arbitrator’s connection with Stellmacher did not

give a reasonable impression of partiality.

       The mere fact that an arbitrator has observed a witness in

a prior proceeding and therefore may have “had an opportunity to

evaluate the person and form an opinion as to the person’s

credibility[,]” without more, is not a “relationship” that

requires disclosure.      Thus, it was not clearly erroneous for the

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circuit court to conclude that the Arbitrator’s undisclosed

“relationship” with Stellmacher did not constitute evident

partiality.

           2.   The Arbitrator’s Connection with KSG

           We next address Appellants’ contention that the circuit

court erred in concluding that the Arbitrator did not need to

disclose “ongoing or past instances in which she served as a

neutral and . . . attorney witnesses, one of whom appeared as an

expert witness in the subject arbitration and the other of whom

was a hearsay lay witness, retained her services on behalf of a

client in other matters.”           At the outset, we note that

Appellants’ claim of error focuses not on the Arbitrator’s

relationship with the alleged “hearsay witness,” Smith, but

Smith’s law firm, KSG, which had retained the Arbitrator in

other unrelated matters.17

           Under the applicable standard of review, we hold that it

was not clearly erroneous for the circuit court to conclude that

the Arbitrator’s relationship with KSG did not constitute

evident partiality.          Appellants argued that the Arbitrator

needed to disclose her relationship with KSG because:
17
      As noted earlier, Smith’s only connection to the arbitration was
through Stellmacher’s post-arbitration declaration summarizing his
conversation with Smith regarding who had retained him in the Developer
action, which confirmed that Stellmacher’s assignment on behalf of the
Developer had been terminated shortly after he visited the Property and that
he had received no work product or other documents from Smith or KSG. Smith
was not a witness in the arbitration proceeding and it is unclear how
Appellants’ allegations make him a “hearsay witness.”

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            (1) KSG is representing certain of the original developer
            entities that are adverse to [Appellants] in the Developer
            Action; (2) the Arbitrator relied on Mr. Smith’s[ —- a KSG
            attorney’s -- ]hearsay testimony in rejecting [Appellants’]
            request for Mr. Stellmacher’s entire file. . . and (3)
            defendants in the Developer Action have continued to press
            for arbitration, appealing the Hawaii Supreme Court’s
            ruling that the arbitration clause is unenforceable to the
            United States Supreme Court.

       Appellants claimed that the “most disconcerting” aspect of

the Arbitrator’s nondisclosures regarding KSG was the status of

the Developer Action.      According to Appellants, “the

Arbitrator’s decision, had it been appropriately in

[Appellants’] favor, may have had repercussions to KSG’s client

in the ‘still ongoing’ Developer Action inasmuch as [Appellants]

here challenged the settlement agreement between KSG’s clients

and [the AOAO].”     According to Appellants, the relationship

between the Arbitrator and KSG would allow a reasonable person

to “infer that a defense verdict in this arbitration would help

the Arbitrator to garner KSG’s recommendation to serve in the

Developer Action, should it be ordered to arbitration, i.e.,

that there is a ‘reasonable impression of partiality.’”

       The Arbitrator’s employment by KSG in unrelated matters

does not have a sufficient nexus to this arbitration to require

a holding that the circuit court clearly erred.            There is no

actual direct connection between KSG and the parties, counsel,

witnesses, and Arbitrator in this arbitration.           In addition, KSG

represents the Developer in the separate Developer Action, which

is adverse to Appellants, but the theory that a positive outcome

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for the AOAO would lead to a future appointment for the

Arbitrator in the Developer Action is “contingent, attenuated,

and merely potential.”      Sussex, 781 F.3d at 1075.        The same

could be said with respect to Appellants if the Arbitrator had

ruled in their favor.

       Under the facts presented, we hold that the circuit court

did not clearly err in ruling that the Arbitrator’s duty of

disclosure did not include her retention by KSG in other

matters.    Vacatur cannot be required “simply because an

arbitrator failed to disclose a matter of some interest to a

party.”    Lagstein, 607 F.3d at 646.

       3. The Arbitrator’s Connection with Nerney

       Finally, we address whether it was clearly erroneous for

the circuit court to conclude that there was no reasonable

impression of partiality arising from the Arbitrator’s

connections with Nerney, an expert witness in this arbitration

who served as party counsel before the Arbitrator in an

unrelated half-day mediation in 2015 and an unrelated

arbitration in 2013.      Appellants argue that an objective

observer may reasonably believe that the Arbitrator, seeing a

potential for future business with Mr. Nerney as both an

attorney and expert witness, may have been inclined to favor Mr.

Nerney by ruling in the AOAO’s favor and adopting Mr. Nerney’s

legal rationale.

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       Appellants argue that the Arbitrator’s relationship with a

witness must be disclosed, in part, because “these types of

disclosures are no different than those asked of potential

jurors in voir dire to determine potential biases.”            The mere

fact that Nerney, an expert witness in this case, had been an

attorney in two cases where he appeared before the Arbitrator,

without more, is not a “relationship” that creates a reasonable

impression of partiality.       It was therefore not clearly

erroneous for the circuit court to conclude that the

Arbitrator’s undisclosed contacts with Nerney did not give a

reasonable impression of partiality.

                             VI.   Conclusion

       Because the circuit court did not clearly err in holding

that the Arbitrator’s undisclosed connections with Stellmacher,

KSG, and Nerney did not constitute evident partiality, we affirm

the circuit court’s final judgment.

Joachim P. Cox,                    /s/ Mark E. Recktenwald
Robert K. Fricke, and
Kamala S. Haake                    /s/ Sabrina S. McKenna
for appellants
                                   /s/ Richard W. Pollack
Michele-Lynn E. Luke
for appellees                      /s/ Michael D. Wilson

                                   /s/ Edward H. Kubo, Jr.

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