A variety of issues in the cases today, but particularly take a look at the scope of an arbitrator’s obligation to shield the results of prior arbitrations in which he or she may have participated.

Arbitrator Conflicts

Under Section 10(a)(2) of the Federal Arbitration Act, the court may vacate an award “where there was evident partiality or corruption in the arbitrators or either of them.” In Shenzhen Zongheng Domain Network Co., Ltd. v. Amazon.Com Services, LLC, 2024 U.S. Dist. LEXIS 81884 (S.D.N.Y. May 1, 2024), Petitioner alleged that, although the  arbitrator disclosed that she had previously heard two matters involving the Respondent, she should have disclosed that, in 2020, she entered an award in favor of Amazon in one of those cases.

Judge Rochon reaffirms her earlier decision denying vacatur and granting Amazon’s counterapplication to confirm the award.  She opines that the fact that “the arbitrator decided another arbitration in Amazon’s favor, even ‘in a similar factual context,’ is insufficient as a matter of law to establish her partiality.”  (Emphasis added).  The italicized words are important; they would seem to foreclose any factual inquiry into how the evidence that an arbitrator found convincing in the previous arbitration might have influenced his or her decision in the subject award.

The Court’s reasoning recognizes the dilemma that an arbitrator would face if Petitioner’s position were accepted. AAA arbitration proceedings are private, and “the arbitrator shall keep confidential all matters relating to the arbitration or the award,” AAA Commercial Rule 45(a). Likewise, the AAA’s Code of Ethics requires that the arbitrator maintain confidentiality. See also, College of Commercial Arbitrators, Guide to Best Practices in Commercial Arbitration, 338-9 (2017)(“The potential arbitrator must be truthful if asked whether he or she served on a case involving a particular party, a particular issue, or with other arbitrators.  The arbitrator should not disclose the results of such prior arbitrations or what transpired in the prior arbitrations.”) (Emphasis added).  There is no way that an arbitrator could both disclose the result of his or her prior service and honor the ethical requirement of confidentiality.  In short, if counsel is concerned about whether the proposed arbitrator might have a bias based on prior service, he or she should simply strike that name from any proposed list.

Waiver of the Right to Arbitrate; Timeliness of Raising Arbitration; PAGA

Britt v. Lennar Corp. 2024 U.S. Dist. LEXIS 81970 (E.D. Cal. May 6, 2024)(Sherriff, J.), addresses the elements of a litigation waiver after SCOTUS held that a court may not develop an arbitration-specific waiver doctrine, Morgan v. Sundance, Inc., 596 U.S. 411 (2022). Per Judge Sherriff, Post-Morgan, “the Ninth Circuit has clarified that the question of waiver in the arbitration context now turns on whether the party opposing arbitration and asserting waiver establishes the other party’s ‘(1) knowledge of an existing right to compel arbitration and (2) intentional acts inconsistent with that existing right,’” quoting Hill v. Xerox Business Services, LLC, 59 F. 4^th 457, 468 (9^th Cir. 2023).  In Britt, the court holds that a six-month delay in moving to compel arbitration does not constitute a waiver, where the party seeking to arbitrate moved to dismiss on the basis of arbitrability within twenty-three days of the filing of the complaint, even though that motion was not “styled as a motion to compel arbitration.” The Court distinguishes such a motion to dismiss which is addressed to arbitrability from one which would seek “judicial resolution on the key merits issue. . . .”  The filing of the latter motion, since it asks the court to resolve an issue that would normally be delegated to the arbitrator, may constitute a waiver of arbitration.

It feels like every arbitration case coming out of California raises the scope of arbitration of claims under the California Private Attorneys General Act (“PAGA).  Britt is no exception.  However, since PAGA is a California issue and “Highlights” is addressed to a broader audience, I generally do not address the PAGA question, unless there is some broader lesson to be learned. This case is not one of the latter decisions; however, those who practice in California might wish to read the case as it addresses the difference in treatment between individual and non-individual cases.

Compelling Arbitration by Non-signatories

Plaintiffs in Chubb Capital I Ltd v. New Orleans City, 2024 U.S. Dist. LEXIS 82028 (E.D. La. May 6, 2024)(Milazzo, J.), allegedly insured a group which provided architectural and engineering services in connection with the construction of an international airport. The Design Services Contract into which the professionals entered in connection with those services contained an arbitration clause; the insurance contracts issued by the plaintiffs did not. The Defendant filed a demand for arbitration arising from disputes under the Design Services Contract.  The insurers here seek an injunction against Defendants proceeding against them in that arbitration; they allege that, as they are not signatories to the Design Services Contract, they are not bound by the arbitration provision thereof.

Judge Milazzo grants the insurers’ request for a preliminary injunction.  The court walks through and rejects each of the common bases for compelling non-signatories to an arbitration provision to arbitrate nonetheless – incorporation by reference, assumption of the agreement, agency, corporate veil piercing, equitable estoppel, and status as a third-party beneficiary.  Therefore, the case is refresher as to the existence of those theories and the analysis thereof.

Upcoming Arbitration Institute

On June 6 and 7, the ABA’s Dispute Resolution Section is holding its annual Arbitration Training Institute in Atlanta.  This is one of the most comprehensive programs each year covering the issues facing arbitrators and arbitration counsel.  The panelists are among the leading names in the practice, the topics are wide-ranging, and the breakout sessions provide an opportunity to share ideas with folks who have addressed the same issues you may be facing.  You can get more information and, even better, register at Welcome – 2024 Arbitration Training Institute (americanbar.org)  I hope to meet you there.

Spring is finally coming to the Northeast – along with the March showers.  But, someone needs to tell the weatherman that it’s time to raise the temperature.

David Reif, FCIArb
Reif ADR
Dreif@reifadr.com
Reifadr.com