Arbitration & Mediation

Sixth Circuit Questions "Final" v. Non-Appealable and How "Neutral" is Your Arbitrator?

By Christopher B. Hopkins, Esq.

We pick up this Sixth Circuit federal court case since it confronts two issues for which there is nominal Florida precedent, despite the fact that these arbitration issues repeatedly occur in our fair state -- a state which lacks for little except presidential primary democrat delegates.

FINAL v. NON-APPEALABLE

Many arbitration clauses set forth that the arbitrators' decision is... "final." This has been some cause for concern since it suggests that there can be no appeal. But is that what "final" means? According to the 6th and 10th Circuits, no (our 11th Circuit actually says "no" to both terms). In Donna Uhl as PR of Estate of Lynn Uhl and Pacific Employer's Insurance Co. v. Komatsu Forklift Company, Ltd. and Komatsu Forklift, U.S.A., Inc. There, the contract said the "award shall be exclusive, final, and binding on all issues and claims." Citing to a prior 10th Circuit decision, the court held that waiver of the right to appeal must be "clear and unequivocal" and that "the use of the term 'final' would not, by itself, be enough to convey an intent to eliminate appellate rights -- but the inclusion of the word 'non-appealable' serves this purpose."

Thus, according to two federal courts, "nonappealable" is the magic word, not "final." That said, the 11th Circuit claims that even if you use both words together it is simply a compromise of general appellate rights and suggests that the parties are acknowledging the limited rights available under the FAA.

TESTING NEUTRALITY OF PARTY-SELECTED ARBITRATOR

In the 6th Circuit's Uhl case, the parties each selected an arbitrator and those arbitrators selected a third neutral. After an award of nearly $2 million dollars, the defendants complained that the arbitrator selected by the plaintiff was bias or, in the language of the Federal Arbitration Act (FAA), he showed "evident partiality." Specifically, there were questions about whether he had disclosed that he had previously been co-counsel with the plaintiff's counsel.

Citing an old US Supreme Court case, the court noted that "arbitrators are not automatically disqualified by a business relationship with the parties before them if both parties are informed of the relationship in advance or if they are unaware of the facts but the relationship is trivial." More recently, the 5th Circuit has upheld this approach which "envisions upholding awards when arbitrators fail to disclose insubstantial relationships."

The 6th Circuit took on a "reasonable person" standard where a reasonable person would be "forced" or "required" to find evident partiality (sort of a reasonable-person-plus standard). Likewise, the moving party must show facts and not "an amorphous institutional predisposition toward the other side." The string citations include awards upheld where arbitrators were formal law partners; arbitrating 6x or 20x for the defendants in the past; or serving as co-counsel on a prior case. The court also pointed out that if an arbitrator shows "antagnostic behavior" during the arbitration, the concerned party must object.

Full post as published by Florida Arbitration Law on March 18, 2008 (boomark / email).