This page contains entries under the topic: "Ethics" | Main
Arbitral immunity? Not for refusing to issue award
June 21, 2006 by Ross Runkel at LawMemo
"If an arbitrator withdraws from an arbitration proceeding for no stated ethical reason following evidence and argument, and offers to continue mediation efforts but refuses to render an arbitration award, does the doctrine of arbitral immunity protect the arbitrator from suit?"
That's how the court phrased the issue in Morgan Phillips v. JAMS/ENDISPUTE (California Ct App 06/20/2006).
The answer, of course, is "No." No immunity from suit.
The claim against the arbitrator was this: An arbitrator provided by JAMS/ENDISPUTE held a hearing as an arbitrator, and then tried to mediate the case. The arbitrator refused to issue an arbitration award, and instead said he was willing to mediate, and tried to coerce one of the parties into an unfavorable settlement.
The claim against JAMS/ENDISPUTE was this: JAMS advertises that it "employs" arbitrators who make timely and cost-effective decisions, and JAMS failed to disclose that its arbitrators "secretly retain the right" to abandon the arbitration "for no lawful reason" without rendering an award.
Please be clear that these are claims made in Morgan Phillips' court complaint, and these claims have not been proved.
California common law provides arbitrators with immunity from suit as to conduct in their "quasi-judicial" capacity. However, there is no immunity for a claim of breach of contract by failing to make a decision at all. Therefore, the arbitral immunity doctrine does not protect the arbitrator from suit.
As for the claim against JAMS, it boiled down to a simple claim of a violation of a statute regulating unfair competition and misleading advertising. Therefore, the claim against JAMS/ENDISPUTE is not barred.
Thanks to Workplace Prof Blog for finding this case - Arbitrator’s Early Withdrawal Leaves Parties Unsatisfied.
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Arbitrator's non-disclosure was OK
February 11, 2006 by Ross Runkel at LawMemo
Must an arbitrator disclose that he is on a permanent panel?
The City of North Las Vegas and the North Las Vegas Police Officers Association selected an arbitrator under FMCS rules. The arbitrator did not disclose that he was on a permanent panel under the collective bargaining agreement between the Las Vegas Metropolitan Police Department and the Las Vegas Metropolitan Police Department.
The losing parties in the arbitrations sued to vacate the awards, the trial court did vacate the awards, but the Nevada Supreme Court reversed. Thomas v. City of North Las Vegas (Nevada 02/09/2006).
FMCS rules govern. The parties agreed to arbitrate under FMCS Rules. Therefore, the court used the FMCS disclosure rules and did not apply the state statute on arbitrators' disclosure obligations. The FMCS uses the Code of Professional Responsibility for Arbitrators of Labor-Management Disputes (originally a joint effort of the National Academy of Arbitrators (NAA), American Arbitration Association (AAA), and FMCS).
http://www.naarb.org/code.html
National Academy of Arbitrators Opinion. The court relied on a 1991 Advisory Opinion promulgated by the NAA. In that case an arbitrator was hearing a case between an employer and Union A, and the arbitrator did not disclose that the arbitrator regularly served as an expedited arbitrator in cases between the same employer and Union B. The NAA opinion held that disclosure was not required. Quoting NAA Opinion 22:
Previous or current service as a neutral arbitrator for a particular employer and/or union is not a relationship requiring disclosure under the Code. Absent some personal relationship or other special circumstance mandating disclosure, such service is not a "circumstance ... which might reasonably raise a question as to the arbitrator's impartiality.
My view:
- Certainly the correct outcome.
- Extremely interesting that the court cited Chevron U.S.A. v. Natural Resources Defense Council, 467 US 837 (1984) (courts give deference to administrative agencies' interpretations of statutes), and said that the NAA's "Opinion 22 is the equivalent of an agency interpretation of the FMCS guidelines." Wow, they gave Chevron deference to the opinion of a non-profit private organization.
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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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Want to change California's arbitrator ethics rules?
November 13, 2005 by Ross Runkel at LawMemo
Now is the time to sit down and think hard about proposed changes to California's Ethics Standards for Neutral Arbitrators in Contractual Arbitration.
The California Judicial Council is soliciting comments on any and all aspects of the Standards.
The staff has recommended one change - exempting arbitrators serving in proceedings governed by rules of securities industry self-regulating bodies and approved by the Securities Exchange Commission. Recent cases in the Ninth Circuit and the California Supreme Court have held that the California Rules are preempted in such cases, so a rule change by California will simply spell out the current reality.
However, there just might be one or two other provisions that need to be addressed.
Deadline for comments: Friday, January 20, 2006.
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NASD rules preempt state ethics rules for arbitrators
May 23, 2005 by Ross Runkel at LawMemo
The California Supreme Court says the National Association of Securities Dealers (NASD) rules preempt California's "Ethics Standards For Neutral Arbitrators in Contractual Arbitration," and all of the California ethics rules are preempted. Jevne v. Superior Court (California 05/23/2005).
This case was between a brokerage and a customer, and will have an impact on employee-employer arbitrations conducted by the NASD.
California and the NASD both have rules requiring disclosures by neutral arbitrators, and California's are more extensive and complex. Both California and the NASD have rules under which arbitrators can be disqualified.
The NASD rules were specifically approved by the Securities Exchange Commission, which gave them the force of federal law and ultimately the power of the federal government to preempt state law.
The court identified four types of possible preemption: (1) where the federal statute expressly preempts (not here), (2) where the federal statute occupies a whole field of law (not here), (3) where it is actually impossible to comply with both federal and state law requirements (not here), and (4) where the state law could prevent or impair accomplishment of the purposes and objectives of the federal law (Bingo, that's it).
The logic: NASD is regulated by the Securities Exchange Commission (SEC), which is created by the Securities Exchange Act (SEA). SEA's objectives: fair dealing and investor protection. All NASD rules are reviewed and approved by the SEC, so they have the force of law. SEC's opinion is that California's rules have three negative effects on NASD arbitrations: (1) increased administrative costs, (2) reduction of the number of available arbitrators (because many are unwilling to comply), and (3) reduction of nationwide uniformity of NASD arbitrations.
Other California ethics rules could not be severed, said the court, so the whole works was preempted.
My view: We got the same result from the 9th Circuit in Credit Suisse v. Grunwald (9th Cir 03/01/2005), although the reasoning was a little different. [See blog]
Now the question is whether there is any possibility that the outcome will be different for employment arbitrations conducted by NASD. It seems the outcome would be the same.
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