Vacating arbitration awards due to "evident partiality" under the federal Arbitration Act.

AuthorStalker, Timothy W.
PositionConning the Newsletters

This article originally appeared in the January 2016 Insurance and Reinsurance Committee newsletter.

ARBITRATIONS have become more commonplace in recent years. Many employment agreements, union contracts, insurance policies and reinsurance agreements require arbitration as means to resolve a dispute between the parties. The purpose of this paper is to provide an overview of one of the basis to overturn the award of an arbitrator or arbitration panel under the Federal Arbitration Act, that being the "evident partiality" of an arbitrator.

  1. Timing under the Federal Arbitration Act

    Under the Federal Arbitration Act, a party has three months from the date of the award to provide notice of motion to vacate the arbitration award for any reason. (1) In R&Q Reinsurance Co. v. American Motorist Ins. Co., (2) a Motion to Vacate was filed and served one day after the three month period. The court rejected the Motion to Vacate, finding that notice was untimely. Therefore, like any other motion or filing, it is imperative that counsel move quickly after an award is rendered in order to meet the three month deadline.

  2. Establishing Evident Partiality Following an Arbitration Award

    As a general rule, an arbitrator's decision is entitled to "great deference" and only a narrow set of circumstances warrant vacatur. The Federal Arbitration Act is clear that an award may be vacated where (1) the award was procured by corruption, fraud, or undue means or (2) where there was evident partiality or corruption in the arbitration, or either of them. (3)

    The Supreme Court addressed the meaning of "evident partiality" under 10(a)(2) in the case of Commonwealth Coatings Corp. v. Continental Casualty Co. (4) and concluded that it existed when one of the parties was a regular, though sporadic, customer of an arbitrator, who failed to disclose that fact. (5) There, although there was no evidence of actual bias on the part of the arbitrator, Justice Black stated "we can perceive no way in which the effectiveness of the arbitration process will be hampered by the simple requirement that arbitrators disclose to the parties any dealings that might create an impression of possible bias." (6) Justice White, concurring, also wrote, "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." (7)

  3. Understanding "Evident Partiality" amongst the Circuit Courts

    The Supreme Court did not articulate a clear standard for finding "evident partiality" and there have been variations across the Courts as what must be established to find "evident partiality." The majority of Courts have agreed that "evident partiality" means "an appearance of bias" standard as requiring an objective assessment of whether a reasonable person would believe an arbitrator was partial to a party to the arbitration. (8)

    In the Second Circuit, "evident partiality within the meaning of 9 U.S.C. [section]10 will be found where a reasonable person would have to...

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