ADR

Charles Forer. Charles Forer.ADR

Editor’s note: This article describes a hypothetical situation.

It was not the first time. Bob had lost arbitration cases before. But this one was different. Bob was sure the arbitrator had a longstanding relationship with Bob’s adversary. It was bad enough, Bob believed, that there was some mutual back-scratching, business referrals and other pecuniary interests between the arbitrator and Bob’s adversary. What was worse: the arbitrator in her pre-arbitration disclosures never said a peep about these relationships.

Bob confirmed his suspicions by examining public records on the internet. These records detailed the arbitrator’s extensive business relationships with Bob’s adversary.

Bob knew his suspicions, even supplemented by his recent public record searches, would not be enough to vacate the arbitration award. Bob needed more evidence. So he pulled out his litigator’s toolbox. He moved to vacate the arbitration award and he served (by subpoena) a notice of deposition on the arbitrator. What better way to uncover and identify the arbitrator-adversary dealings and relationships?

The arbitrator and Bob’s adversary each moved to quash the subpoena. As Bob argued in his response to the motions to quash:

This proposed deposition is not a fishing expedition. The proposed limited discovery is a way—the only way!—to discover information relevant to a material issue in this vacatur motion: was there evident partiality or corruption in the arbitrator, which is a specified ground for vacating an arbitration award. See 9 U.S.C. Section 10(a)(2) (“the U.S. court in and for the district wherein the award was made may make an order vacating the award upon the application of any party to the arbitration … where there was evident partiality or corruption in the arbitrators, or either of them.”). This limited discovery will go a long way in resolving this very issue. Plus, the likely benefit of this discovery easily outweighs any burden or expense, especially because there is no other way to uncover this information.

The court was not persuaded. It granted the motion to quash the subpoena, denied Bob’s vacatur motion, and granted Bob’s adversary’s motion to confirm the arbitration award. Talk about short shrift.

Bob lamented how the court’s refusal to allow the proposed deposition was a “blot” on the arbitration process. According to Bob, thwarting the requested discovery undermined the notion that arbitration could be a fair and impartial system of private justice. “How can you ensure impartiality if you can’t follow your suspicions that bias tainted the process?”

Is Bob right? Should the court have permitted the requested deposition?

The good news for Bob: at least in some circumstances, arbitrators may be deposed regarding claims of bias or prejudice. The bad news: courts will not allow post-arbitration discovery into potential arbitrator bias unless the party seeking discovery initially presents clear evidence of impropriety. “Only nonspeculative, reasonably certain evidence of impropriety will suffice to allow post-arbitration discovery,” as in Midwest Generation EME v. Continuum Chemical, 768 F. Supp. 2d 939, 946 (N.D. Ill. 2010). Even then, a court will deny an application for discovery, no matter how limited, where the party bases its request on public information the party could have reviewed before or during the arbitration rather than after it lost.

Courts are squeamish about post-arbitration discovery because they do not want to allow the losing party, in relying on an undisclosed relationship involving the arbitrator, to turn an arbitration proceeding into a litigation by subjecting arbitrators to discovery. “A less exacting standard would render informal arbitration merely a prelude to a more cumbersome and time-consuming judicial review process by subjecting arbitrators to discovery—‘the bane of modern litigation,’” (quoting Rossetto v. Pabst Brewing, 217 F.3d 539, 542 (7th Cir. 2000)). This discovery would undercut the promise of arbitration, which is to provide expeditious and summary hearings.

Two cases illustrate this strict rule governing post-arbitration discovery.

In Midwest Generation EME v. Continuum Chemical, the losing party in a construction arbitration proceeding claimed it had “compelling evidence” that there was a concealed system of referrals and ongoing economic and business relationships between the arbitrator and counsel for the winning party. If true, the arbitration proceeding was “seriously corrupted,” and the arbitration award then should be vacated. It turned out, however, that there was lots of sizzle but no steak—the disgruntled party did not proffer “clear evidence” of impropriety and instead relied on a series of unremarkable professional relationships:

All that it has shown are a series of public, almost exclusively parallel, professional contacts involving lecturing and writing on construction related matters. These endeavors were “no secret,” and their existence … was readily discoverable to anyone who chose to look.

The court refused to allow the requested discovery.

On the other hand, the court in Estate of Equi-Med v. Ernst & Young, 2005 U.S. Dist. LEXIS 25904 (E.D. Pa. Oct. 28, 2005), allowed a post-arbitration deposition of the arbitrator. There, the party seeking the discovery presented evidence—not only from public records—of business relationships between the arbitrator and a party; between the arbitrator and the party’s counsel; and between the arbitrator and the party’s expert witness. This apparent clear evidence of impropriety was sufficient to allow post-award discovery into potential arbitrator bias.

After the deposition, however, the court refused to vacate the underlying arbitration award on sizzle-but-no-steak grounds—the permitted deposition of the arbitrator revealed only that his relationships with one of the parties were “either trivial, remote or nonexistent,” see Estate of Equi-Med v. Ernst & Young, 2006 U.S. Dist. LEXIS 45708, at *9 (E.D. Pa. June 30, 2006).

The takeaways for Bob if he ever again wants to seek post-arbitration discovery? Before barreling forward with discovery requests, he should take a deep breath and figure out how to convince the court that there are sizzle and steak reasons to warrant the proposed deposition.  Here is a nonexhaustive list Bob should have consulted before he served his ill-fated subpoena:

  • Don’t make conclusory allegations.
  • Don’t rely on speculative, uncertain or indirect evidence.
  • Back up your allegations with specific facts.
  • Don’t rely merely on the arbitrator’s nondisclosure of relationships. “What is not disclosed must have significance apart from the mere fact of nondisclosure.”
  • Don’t rely on information from public records you could have found before or during the arbitration.
  • Assure the court that the proposed deposition will not be lengthy or costly.
  • Assure the court that the proposed deposition will not seek information regarding the arbitrator’s thought processes underlying the arbitration award.

Oh—one more thing. If Bob really is concerned about bias, partiality or even corruption, Bob should do some digging and investigation before he chooses the arbitrator who will decide his client’s fate. Ferreting out improper connections will ensure that Bob’s clients get what they bargain for—a fair and expeditious hearing before an impartial decision-maker. Isn’t that what they retained Bob to do in the first place?

Charles F. Forer independently provides arbitration, mediation and all other neutral services. He is a co-chair of the Philadelphia Bar Association’s alternative dispute resolution committee and a former chair of the fee disputes committee. He is a frequent lecturer and writer on the use of ADR in a variety of settings. Contact him at 610-999-5764 and cforer@foreradr.com.