Arbitration Insight No. 16

APPEARANCE-OF-PARTIALITY DISCLOSURES BY ARBITRATORS

Two very recent cases discuss the parameters of an arbitrator’s obligation to disclose “matters that could cause a person aware of the facts to reasonably entertain a doubt that the … neutral arbitrator would be able to be impartial.” (Code of Civil Procedure section 1281.9, subdivision (a).) Haworth v. Superior Court (2010) 50 Cal.4th 372 is important because it holds that the above appearance-of-partiality standard concerning arbitrator recusal should not be broader than the same standard applicable to judicial recusal. Benjamin, Weill & Mazer v. Kors (2010) A125732 (BW&M), decided just last week, is more fact specific, holding that part-time lawyer-arbitrators should disclose their legal involvement in business interests that are similar to the facts of the matter to be arbitrated.

In Haworth, the trial court vacated an arbitration award for a doctor involving  a female patient’s claim that the doctor had been negligent in performing plastic surgery to her lip because the arbitrator, a retired judge, had failed to disclose that, 10 years earlier, he had been publicly censured for making statements to court employees, which created “an overall courtroom environment where discussion of sex and improper ethnic and racial comments were customary.” The Supreme Court held that the arbitrator was not required to disclose the censure because nothing in its background facts would suggest to a reasonable person that the retired judge could not be fair to female litigants. Moreover, “None of the conduct or comments for which (the) judge … was censured involved litigants or occurred in the courtroom while court was in session.” (Id. at p. 390.) And, “Unlike cases in which evidence of gender bias has required disqualification of a judge, the subject matter of this arbitration was not such that the circumstance of gender was material, or that gender stereotyping was likely to enter into the decision made by the arbitrators.” (Id. at p. 391.)

In finding that a reasonable person would not entertain a doubt about the former judge’s impartiality as an arbitrator, Haworth acknowledged that, while some of the policies applicable to judicial disclosure may differ from those applicable to arbitrator disclosure, “we find no reason to interpret the appearance-of-partiality rule more broadly in the context of arbitrator disclosure than in the context of judicial recusal … It may be appropriate for an arbitrator to resolve doubts in favor of disclosure, but the arbitrator has no legal duty to do so.” (Id. at p. 393.) “The disclosure requirements … are intended only to ensure the impartiality of the neutral arbitrator. (Citation.) They are not intended to mandate disclosure of all matters that a party might wish to consider in deciding whether to oppose or accept the selection of an arbitrator.” (Ibid.)

Presciently, Haworth also provided that “The arbitrator cannot reasonably be expected to identify and disclose all events in the arbitrator’s past, including those not connected to the parties, the facts, or the issues in controversy, that conceivably might cause a party to prefer another arbitrator. Such a broad interpretation of the appearance-of-partiality rule could subject arbitration awards to after-the-fact attacks by losing parties searching for potential disqualifying information only after an adverse decision has been made. …. Such a result would undermine the finality of arbitrations without contributing to the fairness of arbitration proceedings.” (Id. at pp. 394-395.)

Two months later, BW&M attempts to carve out an exception to Haworth’s holding that arbitrator disclosures need not include facts not connected to the parties or the issues in controversy. In BW&M, the chief arbitrator in a three-person panel, which awarded a law firm its legal fees against a former client, had not disclosed that he was representing a large law firm in a case before the California Supreme Court involving an attorney fee dispute and was representing another major law firm in an action for attorney malpractice and related torts. The appellate court reversed the trial court’s order confirming the award and ordered that it be vacated because these non-disclosures concerned “matters that could cause a person aware of the facts to reasonably entertain a doubt that [the arbitrator] would be able to be impartial.”

BW&M distinguished Haworth because, it reasoned, the arbitrator’s non-disclosures of concurrent business interests similar to the parties’ interests could never occur in judicial matters, as they do private arbitration. Thus, it held that arbitrators must disclose their ties to the business world “to the extent these relationships are substantial and involve financial considerations creating an impression of possible bias …” What BW&M fails to recognize is that sitting judges, although not practicing law, may also have commercial ties, such as stock ownership or an interest in a business, that may be both substantial and factually similar to the cases before them but, under present appearance-of-partiality standards, need not be disclosed. Therefore, upon analysis, BW&M’s stated need for more disclosures in arbitrations than in the courts does not stand up to scrutiny.  

Judge Michael D. Marcus (Ret.)
ADR Services, Inc.
1900 Avenue of the Stars, Suite 250
Los Angeles, California 90067
(310) 201-0010

Copyright Michael D. Marcus, October 2010

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