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Nondisclosure results in vacated arbitration award
January 13, 2006 by Ross Runkel at LawMemo
Oops. After an arbitrator issued an award, the losing party discovered that seven years earlier he and his former law firm were co-counsel in a lengthy litigation with one of the law firms and counsel in the current arbitration.
The 5th Circuit held that the arbitrator was required to disclose these facts "because it might have created an impression of possible bias," and failure to disclose justified vacating the arbitration award. Positive Software Solutions v. New Century Mortgage (5th Cir 01/11/2006).
The court based its decision on the "evident partiality" language in Section 10 of the Federal Arbitration Act (FAA), and on a number of court decisions from the Supreme Court and other Circuits.
In addition, there was no "waiver" of objection because the losing party did not discover the situation until after the award was issued.
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