Chapter 11 - § 11.7 • REFUSAL, RESIGNATION, AND REPLACEMENT OF THE ARBITRATOR

• Jurisdiction: Colorado

§ 11.7 • REFUSAL, RESIGNATION, AND REPLACEMENT OF THE ARBITRATOR

§ 11.7.1—Prior To The Hearing

The FAA does not have a provision directly dealing with resignation of an arbitrator. Section 5, Appointment of Arbitrators, is applicable not only to initial appointment, but also when the agreement does not provide for filling a vacancy, or the method fails. "The court shall designate and appoint an arbitrator . . . who shall act under the said agreement with the same force and effect as if he or they had been specifically named therein. . . ."⁵⁸ The CUAA, C.R.S. § 13-22-205 (2003), is similar to FAA § 5 and the CRUAA, C.R.S. § 13-22-211 (2016).

Dow Corning Corp. v. Safety National Casualty Corp.⁵⁹ involved Safety's party-appointed arbitrator's resignation prior to the hearing. Dow Corning asserted that the resignation terminated the panel's authority to hear the dispute. Instead, the remaining two arbitrators ruled that Safety should appoint a substitute arbitrator, since it was Safety's appointed arbitrator who resigned. Instead of filing a motion under FAA § 5 challenging the ruling, Dow Corning agreed to proceed, but with a reservation of rights to thereafter challenge the panel's authority. The Eight Circuit viewed this procedure by Dow Corning "as a transparent attempt to preserve a threshold procedural issue in case Dow Corning eventually lost the arbitration on the merits."⁶⁰

The court acknowledged the general rule that where one member of a three-person arbitration panel dies before the rendering of an award, and the arbitration agreement does not anticipate that circumstance, the arbitration must commence anew with a new panel. However, there are exceptions to the rule, e.g. , when the vacancy occurred prior to the substantive hearing and the substitute participated fully in the hearing, the panel's deliberations, and the preparation of the panel's decision. Here, the court found:

• The remaining arbitrators made a reasonable decision to allow the party to choose its substitute party-appointed arbitrator, the method of selecting party arbitrators prescribed in the agreement to arbitrate;
• Commencing anew would be to the advantage of one party and to the disadvantage of the other;⁶¹ and
• A vacancy may be filled in the manner prescribed in the agreement to arbitrate.

Here, the court was authorized by FAA § 5 to construe the arbitration agreement to resolve the vacancy issue in the event the arbitration agreement did not provide a method for doing so. Dow failed to file an FAA § 5 motion challenging the ruling.

In Reddam v. KPMG LLP,⁶² the arbitration clause involved provided that "[a]ny arbitration under this agreement shall be determined pursuant to the rules then in effect of the National Association of Security Dealers, Inc., as the undersigned you may elect."⁶³ The National Association of Security Dealers (NASD) refused to take jurisdiction over the arbitration because no named party was a member or associated with the NASD. While the context of the discussion was under 9 U.S.C. § 205, the court considered whether that refusal by the NASD meant that the claims were no longer subject to arbitration, because the NASD had declined to proceed.

The court noted that whether the NASD refusal to conduct the arbitration meant that the issues could not be arbitrated raised two preliminary questions: "First, did the agreement amount to a choice of forum clause? Second, if it did, did the refusal of that forum to conduct the arbitration mean that no arbitration at all could go forward — that is, was the choice of forum...