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Linda Gerstel Linda Gerstel

Sufficiency of arbitrator disclosures in repeat player matters have been given a renewed focus by U.S. courts, international arbitral institutions and trade organizations involved in dispute resolution. There is a growing willingness by courts to vacate arbitration awards based upon insufficient disclosures in “repeat player” cases, often implicating franchise, finance and insurance industries as well as dispute resolution trade organizations. Under the Federal Arbitration Act, courts may vacate an award “if the court finds that the rights of that party were prejudiced by … partiality of an arbitrator appointed as a neutral.” See also. CPLR 7511(b)(1)(ii). The foundation to legitimacy in arbitration, particularly with repeat players, regardless of the sophistication of a party, is disclosure.

‘Evident Partiality’

Recently, the U.S. Court of Appeals for the Ninth Circuit in Monster Energy Co. v. City Beverages (9th Cir. Oct. 22, 2019) (Monster) vacated an award based on “evident partiality.” Monster and City Beverages (CB), entered into a 20-year exclusive distributorship, which allowed Monster to terminate without cause, provided it paid a $ 2.5 million termination fee. CB argued that Washington state law prohibited franchise terminations without good cause. Monster’s agreements designated JAMS Orange County as the exclusive forum.

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