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Civil Litigation No. 03-02-00545-CV, 7/24/2003. Click here for the full text of this decision FACTS: This appeal arises from a suit by appellant Blue Cross Blue Shield of Texas (Blue Cross) against appellee James J. Juneau, an arbitrator who, as a member of an arbitration panel, rendered an award in favor of HealthCor Liquidation Trust (HealthCor) and against Blue Cross. Blue Cross brought suit to vacate the award, naming HealthCor and the individual arbitrators, including Juneau, as defendants. HealthCor removed the action to federal district court, which severed the cause of action against HealthCor and remanded the suit against the arbitrators to the state district court. Blue Cross nonsuited the other arbitrators and supplemented its original petition, alleging that Juneau failed to disclose a previous relationship that Blue Cross contends affected the arbitration process. Juneau, the only remaining defendant, filed a plea to the jurisdiction, which the district court granted. HOLDING: Affirmed. Arbitral immunity is derived from judicial immunity, which establishes that judges are absolutely immune from personal liability for judicial acts that are not performed in clear absence of all jurisdiction, regardless of how erroneous the act, or how evil the motive. Stump v. Sparkman, 435 U.S. 349 (1978). Persons whose responsibilities are “functionally comparable” to those of a judge are likewise immune from liability. Butz v. Economu, 438 U.S. 478 (1978). The 8th U.S. Circuit Court of Appeals has stated that “[l]ike judicial and quasi-judicial immunity, arbitral immunity is necessary to protect decisionmakers from undue influence, and the decision-making process from attack by dissatisfied litigants.” Olson v. National Ass’n of Sec. Dealers, 85 F.3d 381 (8th Cir. 1996). In Olson, Olson sued an arbitrator and an arbitration association for the association’s appointment of an arbitrator who had an ongoing business relationship with Olson’s employer, and adversary. The Olsoncourt held that “[b]ecause an arbitrator’s role is functionally equivalent to a judge’s role, [federal] courts of appeals have uniformly extended judicial and quasi-judicial immunity to arbitrators.” Additionally, the court concluded that such immunity extended to the arbitration association. On appeal, Olson argued that the arbitration association’s appointment of the arbitrator occurred beforethe decision-making process began and, thus, was not within the scope of the arbitral process. The court, however, held that the appointment of arbitrators was a part of the arbitral process. In Corey v. New York Stock Exchange, the 6th U.S. Circuit Court of Appeals held that an arbitral organization, acting through its arbitrators, was immune from suit. 691 F.2d 1205 (6th Cir. 1982). The Coreycourt recognized the existence of “certain persons whose special functions require a full exemption from liability for acts committed within the scope of their duties” and that the arbitrators’ duties were functionally equivalent to those of judges. The court opined that sufficient safeguards exist to protect the participants and the integrity of the arbitration proceedings, including: 1. the proceedings resembled adversarial judicial proceedings with a right to counsel and discovery; 2. the right of judicial review by a district court with the option of vacating or modifying the award; and 3. the arbitration proceeding was a voluntary means of dispute resolution. “In light of these safeguards, the risk of a wrongful act by the arbitrators is outweighed by the need for preserving the independence of their decision-making.” Various state courts have similarly held that arbitrators, acting in their official capacity, possess a quasi-judicial immunity. In support of its argument for a “functional approach” to immunity, Blue Cross cites Forrester v. White, 484 U.S. 219 (1988). However, the court believes that the rationale supporting judicial immunity offered by the Supreme Court in Forrestersupports Juneau’s argument. In Forrester, Judge White, an Illinois state judge who had the ancillary duty of hiring probation officers, was sued for discrimination under the Civil Rights Acts of 1871, after terminating a probation officer’s position. On appeal, Judge White argued that his actions were protected by judicial immunity, but the Supreme Court disagreed, holding that Judge White’s employment action was not a protected judicial function. The court opined that “immunity is justified and defined by the functionsit protects and serves, not by the person to whom it attaches.” The court stated that Judge White’s decision was an “administrative” decision and not “judicial or adjudicative.” Judge White’s action in Forresteris clearly distinguishable from Juneau’s alleged inaction. Juneau’s disclosure requirement was not an administrative act independent of the arbitration proceeding. Rather, Juneau’s disclosure requirement was a function of his position as an arbitrator. Applying the reasoning in Forrester, Juneau is immune from suit because the disclosure requirement was directly related to his function as an arbitrator. As the Supreme Court stated in Forrester, “Most judicial mistakes or wrongs are open to correction through ordinary mechanisms of review.” The civil-practice-and-remedies code provides Blue Cross with such a review mechanism. Texas Civil Practice and Remedies Code �171.098. The court believes that Texas public policy favors the extension of immunity to arbitrators. Independence of judgment and freedom from the threat of suits initiated by dissatisfied parties are essential to the success of the arbitration process. Because Texas encourages arbitration and arbitrators are essential actors in furtherance of that policy, it is appropriate that immunity be extended to arbitrators for acts within the scope of their duties. The extension of immunity to arbitrators pursuant to the parties’ private arbitration agreement is especially compelling because arbitration is the means the parties selected for disposing of controversies between them. By immunizing arbitrators and their decisions from collateral attacks, the parties’ contractual choice for arbitration is respected, yet the arbitrators are protected from suits by disgruntled parties. Arbitrators have no interest in the outcome of the dispute and should not be compelled to become parties to it. An aggrieved party alleging a due-process violation in the conduct of the proceedings, fraud, misconduct, a violation of public policy or lack of jurisdiction by arbitrators may pursue remedies against the “real” adversary through the appeal process. The court agrees with the reasoning of the Minnesota Supreme Court in finding that arbitrators should be clothed with immunity: “Failure to disclose possible conflicts of interest creates at the least an impression of bias. An impression of bias contaminates the decision making process when neutrality is essential and is not condoned by this court. Nevertheless, the court declines to permit a civil suit against the arbitrator for failure to disclose prior business or social contacts because of the court’s policy of encouraging arbitration and of protecting the independence of the decision made. Permitting civil suit for lapse in disclosure would chill the willingness of arbitrators to serve because of the difficulty of remembering all contacts, however remote, with parties to the arbitration.” L & H Airco Inc. v. Rapistan Corp., 446 N.W.2d 372, 377 (Minn. 1989). The court holds that arbitral immunity is essential to the maintenance of arbitration by contractual agreement as a viable alternative to the judicial process for the settlement of controversies and apply the doctrine here. In light of the Texas Arbitration Act’s purpose, its procedures to vacate an arbitration award, and the strong deference afforded arbitration judgments, the court holds that an application to vacate the award for an arbitrator’s alleged misrepresentation or failure to disclose a relationship is the exclusive remedy under the arbitration act. OPINION: Yeakel, J.; Law, C.J., Smith and Yeakel, JJ.

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