Use of the Constructive Knowledge Standard When Evaluating "Evident Partiality" Challenges to Arbitration Awards in Florida.

• Author: Leonard, Patricia A.

"Florida courts have long acknowledged a strong public policy in favor of arbitration." (1)

It is well-settled in Florida that "[a] very high degree of conclusiveness attaches to an arbitration award." (2) The "standard of judicial review of statutory arbitration awards is extremely limited." (3) This is because without such conclusiveness, parties would be deprived of "perhaps arbitration's ultimate benefit of finality." (4)

F.S. [section]682.13(1) sets forth the limited grounds to vacate an arbitration award in Florida. (5) One of the narrow grounds for vacatur is "[e]vident partiality by an arbitrator appointed as a neutral arbitrator." (6) The Federal Arbitration Act contains a very similar basis for vacating an arbitration award: "where there was evident partiality or corruption in the arbitrators, or either of them." (7) Because Florida's Revised Arbitration Code "is modeled after the Federal Arbitration Act, federal decisions are highly persuasive" authority when interpreting the Florida Arbitration Code. (89)

The "evident partiality" ground for potential vacatur in Florida carries a high standard, which requires "something that logically would reasonably tend to tilt the decision of the arbitrator." (10) The burden on a losing party seeking to vacate an arbitration award based on evident partiality is "substantial, extending beyond the mere appearance of impropriety to something approximating clear and convincing evidence of material wrongdoing." (11)

Federal courts interpreting the Federal Arbitration Act agree with Florida's very high standard:

After arbitration is complete, judicial review of the arbitration process and of the amount of the award is narrowly limited. Indeed, because arbitration is an alternative to litigation, judicial review of arbitration decisions is among the narrowest known to the law. The Federal Arbitration Act, 9 U.S.C. [section][section]1, et seq. imposes a heavy presumption in favor of confirming arbitration awards; therefore, a court's confirmation of an arbitration award is usually routine or summary. As such, the "evident partiality" exception must be strictly construed, meaning it must be direct, definite and capable of demonstration rather than remote, uncertain and speculative. Accordingly, the mere appearance of bias or partiality is not enough to set aside an arbitration award. (12) Indeed, "[m]ere speculation is not enough to establish evident partiality...the evidence of bias must be direct, definite and capable of demonstration...as distinct from a 'mere appearance' of bias that was remote, uncertain, and speculative." (13)

Claims of Evident Partiality

Claims of evident partiality are waived if the party moving to vacate was aware of the facts giving rise to this argument during the arbitration, but failed to raise the argument during arbitration proceedings. Courts in many other jurisdictions throughout the country have held that a party waives its right to bring a post-award motion to vacate an arbitration award on the basis of evident partiality if they were aware of the facts giving rise to a claim during the arbitration proceedings, but failed to raise them during the arbitration.

Courts in Florida agree with this well-established principle of waiver of the evident partiality argument where the party was aware of the partiality during the arbitration but failed to raise the argument there. (14)

The Constructive Knowledge Standard

But even when a party moving to vacate was not actually aware of--but through reasonable diligence should have been aware of--the facts underlying a claim of an arbitrator's partiality--many courts are similarly finding waiver of the evident partiality argument. Various court decisions make it clear that a party cannot rely solely on an arbitrator's disclosures. Rather, parties are responsible for carrying out reasonably available research to determine whether any potential conflict exists. Parties must carry out such research just as diligently before the final award is entered as they would after an unfavorable award has been entered.

In fact, courts in many jurisdictions have recognized that, even in circumstances in which an arbitrator fails to disclose connections to a party or its counsel that could potentially raise a claim of evident partiality, if a party knows or has reason to know of the basis for the arbitrator's alleged bias during the arbitration, but does not raise an objection during the arbitration, the issue is waived by not raising it before an award is issued.

This constructive knowledge standard is firmly rooted in the public policy favoring arbitration as...