Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Arbitrators, like judges, should be immune from civil suits for acts within the scope of their duties if arbitration is to be a viable alternative to settling differences in the courts, Texas’ 3rd Court of Appeals held on July 24. In a case of first impression in Texas, the Austin appeals court said that the Texas Arbitration Act, Civil Practice and Remedies Code �� 171.001-171.098, provides procedures for vacating arbitration awards. A suit against an individual arbitrator is not contemplated by the act, the court held in Blue Cross Blue Shield of Texas v. Juneau. “Independence of judgment and freedom from the threat of lawsuits initiated by dissatisfied parties are essential to the success of the arbitration process,” Justice Lee Yeakel said in the opinion in which he was joined by Chief Justice Ken Law and Justice Bea Ann Smith. Alan S. Rau, a University of Texas School of Law professor who teaches and writes about alternative dispute resolution, says that suing an arbitrator “obviously is an end-run around the arbitration process.” Rau says he believes the reason Texas had no prior case law on arbitral immunity is that everyone took it for granted that arbitrators were immune from such suits. The 3rd Court’s opinion states that federal appeals courts and various state courts — although none in Texas — have held that arbitrators, acting in their official capacity, have immunity. In 1996, the 8th U.S. Circuit Court of Appeals ruled in Olson v. National of Association of Security Dealers that, “like judicial and quasi-judicial immunity, arbitral immunity is necessary to protect decision-makers from undue influence and the decision-making process from attack by dissatisfied litigants.” Andrew MacRae, a partner in Austin’s Hull, Henricks & MacRae and an attorney for Blue Cross, declines to comment on the 3rd Court’s decision. Mark Lane, spokesman for BCBS of Texas, says the insurance company also declines comment. In a brief filed with the 3rd Court, Blue Cross urged the court to take a “functional approach” with respect to determining whether an arbitrator’s conduct warrants absolute arbitral immunity. According to the 3rd Court’s opinion, James J. Juneau and two other arbitrators associated with the American Arbitration Association were appointed to arbitrate a dispute between Blue Cross and HealthCor Liquidation Trust. HealthCor, while in bankruptcy proceedings in 1999, sued Blue Cross in U.S. Bankruptcy Court in Dallas, alleging that Blue Cross failed to pay for contracted medical services and supplies provided to patients it insured. After the bankruptcy court dismissed Herzog v. Blue Cross Blue Shield of Texas Inc., HealthCor moved for arbitration with Blue Cross before an AAA panel, as provided in the contract between the two companies, according to the 3rd Court. Juneau said in his brief to the 3rd Court that he and the other two arbitrators were selected through the AAA Commercial Arbitration Tribunal to hear and decide the dispute. Blue Cross alleged in its brief to the 3rd Court that Juneau, who chaired the arbitration panel, failed to disclose a prior relationship with an attorney for HealthCor. Juneau, a shareholder in Juneau & Boll in Addison, Texas, had indicated in writing, before the arbitration process began, that he had nothing to disclose that might affect his impartiality. But Juneau says that during the first teleconference in the arbitration he became aware that Jeff Seckel, an attorney with whom he had been an associate at the Dallas office of Strasburger & Price during the 1980s, represented HealthCor. “I mentioned in the telephone conference that Jeff Seckel and I [had] worked for the same law firm. No one had a problem,” Juneau says. Juneau says that he and Seckel knew each other but worked in different sections located on different floors at Strasburger’s offices and did not work together. Seckel, now a shareholder in Dallas’ McGuire Craddock & Strother, says a partner in his firm had represented HealthCor in the bankruptcy proceedings. While he typically handles such cases when they go into litigation, Seckel says that the first time his name surfaced in the HealthCor/Blue Cross arbitration was at the teleconference. “I vividly remember [Juneau] disclosing at that very first conference,” Seckel says. Blue Cross alleged in its brief to the 3rd Court that it didn’t learn that Juneau and Seckel previously had worked at the same firm until after the arbitrators had made their decision and that Juneau breached his duty to disclose the relationship. In October 2001, the arbitration panel unanimously awarded HealthCor $485,852 in damages against Blue Cross; Blue Cross sued HealthCor and the three arbitrators the following month in Austin’s 353rd District Court, alleging that the award was the result of a “gross mistake” by the panel. According to the 3rd Court’s opinion, HealthCor removed Blue Cross Blue Shield v. HealthCor Liquidation Trust to U.S. District Court in Austin, and HealthCor’s claim to modify the award was severed and transferred to the bankruptcy court in Dallas. In February 2002, U.S. District Judge Sam Sparks of Austin remanded the claims against the three arbitrators to the state district court. The bankruptcy court initially upheld the arbitration award, but Blue Cross petitioned the court to alter its judgment, according to the 3rd Court’s opinion. Blue Cross alleged in its brief to the 3rd Court that it learned for the first time that Juneau and Seckel previously had worked at the same firm when Juneau was deposed in April 2002. Although Juneau says he disclosed his prior relationship with Seckel during the telephone conference, he says that he should have followed up with written notification. “I should have immediately sent out a written disclosure,” he says. Before the bankruptcy court could hold a hearing, Blue Cross and HealthCor settled their dispute for an undisclosed amount, and Blue Cross nonsuited two of the arbitrators, leaving only its claim against Juneau. Juneau filed a plea to the jurisdiction, alleging that Blue Cross’ claims were barred by the doctrine of arbitral immunity. Judge Suzanne Covington, of Austin’s 201st District Court, who presided over the case, agreed with Juneau and dismissed the claims, prompting Blue Cross’ appeal to the 3rd Court. RULES ADOPTED In arguing that a functional approach to immunity should be used, Blue Cross cited the U.S. Supreme Court’s 1988 decision in Forrester v. White, in which the high court held that an Illinois state judge was not protected by judicial immunity when he was sued for discrimination after demoting and terminating a female probation officer. The Supreme Court said that the judge’s action was an administrative decision, not a protected judicial function. In the opinion written by Justice Sandra Day O’Connor, the Supreme Court said that “immunity is justified and defined by the functions it protects and serves, not by the person to whom it attaches.” The 3rd Court said the rationale supporting judicial immunity offered by the Supreme Court in Forrester supports Juneau’s argument. “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,” Yeakel wrote for the 3rd Court. It would be difficult to get arbitrators if the court had ruled the other way, says Mike Schless, an Austin solo who chairs the Alternative Dispute Resolution Section of the State Bar of Texas. No one would want to serve as an arbitrator, if he had to insure himself against a string of suits that might follow any arbitration, he says. But Schless adds, “This opinion should not be read top side or bottom side as condoning unethical behavior of arbitrators or condoning their failure to disclose relationships.” Underlying the opinion, he says, is an ethical obligation on the part of arbitrators to disclose relationships that might affect their impartiality or give the appearance of partiality. On July 18, the Bar’s Alternative Dispute Resolution Section adopted the AAA commercial arbitration rules for members of the section. Those rules require that, before accepting an appointment, a prospective arbitrator disclose any circumstance likely to create a presumption of bias or prevent a prompt meeting with the parties. Under the rules, a party may object to the continued service of an arbitrator, and AAA must determine whether the arbitrator should be disqualified.

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.