Arbitrator's Failure to Disclose Prior Working Relationship with Party's Counsel Leads to Vacatur of AAA Award
Go and catch a falling star,
Get with child a mandrake root,
Tell me where all past years are,
Or who cleft the devil's foot,
Teach me to hear mermaids singing,
Or to keep off envy's stinging,
And find what wind serves to advance an honest mind.
John Donne
Like the person “true and fair” that John Donne seeks in his “Song”, successful motions to vacate arbitration awards are rare. When they are successful, they invariably are based on arbitrator bias. Indeed, given the informalities and lack of review inherent in the arbitration process, if the parties cannot trust that the neutral deciding the case is “true and fair,” the entire process seems fundamentally unfair. The Fifth Circuit Court of Appeals affirmed this fundamental policy in Positive Software Solutions, Inc. v. New Century Mortgage Corp. , No. 04-11432 (11th Cir. January 11, 2006). In that case, the sole arbitrator in a AAA arbitration failed to disclose that he and his law firm had acted as co-counsel with the counsel for the successful arbitration party in patent litigation that lasted 7 years. The losing party discovered this fact after the arbitration by conducting a computer investigation of the arbitrator. (It is unclear why this investigation was not conducted beforehand, and why there were no consequences for the failure to do so before the arbitration.) The Court determined that the failure to disclose these facts might create a reasonable impression of the arbitrator’s partiality. Thus, the Court vacated the award based on Section 10(a)(2) of the Federal Arbitration Act for “evident partiality.”
