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CaseWatch for Arbitrators: Charges that an arbitrator was biased, had exceeded her powers, and had failed to receive evidence were roundly dismissed as meritless and wasteful of judicial resources by a district court and a federal appeals court this year. The appeals court emphasized its displeasure with the case by awarding the respondent, Ritz-Carlton Hotel Company, LLC, double its costs against claimants and claimants’ counsel. In this case, claimants challenged the arbitrator’s impartiality soon after the arbitrator was appointed by the American Arbitration Association. They presented as evidence of bias the fact that the respondent’s parent company, Marriott, advertised on the arbitrator’s firm’s website. AAA denied claimants’ request to remove the arbitrator. Claimants again raised bias allegations after the arbitrator denied claimants’ duplicative discovery motions and other procedural requests. After the claimants missed a filing deadline on motion for summary judgment, the arbitrator declined to accept claimants’ late filing, and the district court denied claimants’ motion to remand the case, the arbitrator issued an award in favor of the respondent, including costs and attorney fees. Claimants’ counsel then filed a demand de novo with the district court asking for a trial by jury. The court ruled that the request was frivolous and denied it. When next the respondent filed to confirm the arbitration award, the claimants sought inter alia vacatur based on “evident partiality” of the arbitrator. A federal magistrate recommended that the motion to confirm be granted and the motion to vacate be denied. The magistrate found that the factual descriptions and arguments related to claimants’ petition to vacate were “inaccurate.” In adopting the magistrate’s report and recommendations, the district court cautioned claimants’ counsel not to file documents that were a “waste of judicial resources.” The claimants appealed to the 11th Circuit Court of Appeals. Noting that judicial review of arbitration decisions is among the narrowest in the law, the Court of Appeals held that the arbitrator was not evidently partial. Kathy Fowler et al. v. Ritz-Carlton Hotel Co. LLC, case number 14-11197 (11th Cir. August 19, 2014). The court dismissed the bias claim based on the allegation that Marriott advertised on the arbitrator’s firm’s website, as well as the claim that the arbitrator had failed to accept the summary judgment response filed late, had denied discovery requests and had applied an incorrect summary judgment standard. Relying on the its 1998 decision in Gianelli Money Purchase Plan & Trust v. ADM Investor Servs., Inc., 146 F.3d 1309, 1312 (11th Cir. 1998), the court held that evident partiality applies only when either: (1) an actual conflict exists, or (2) the arbitrator knows of, but fails to disclose, information that would lead a reasonable person to believe that a potential conflict exists. Any alleged partiality must be direct, definite and capable of demonstration rather than remote, uncertain and speculative.” Id. In this instance, the court said the claimants’ allegations were “remote, uncertain and speculative” because the allegations neither alleged nor presented evidence that the arbitrator knew of the advertisement on one page of her firm’s website. The court said that the ad, which appeared among those of other hotels on the website, was presumably for the information of firm visitors and was not direct and definite evidence of partiality. In a footnote in its ruling, the court addressed claimants’ later charge that the arbitrator had failed to investigate potential conflicts. The court stated that the it follows the standard adopted in the Second Circuit and set forth in Applied Indus. Materials Corp. v. Ovalar Makine Ticaret Ve Sanayi, A.S.492 F.3d 132, 138 (2d Cir. 2007) that a failure to investigate a potential conflict is not sufficient to establish evident partiality. Further, the court dismissed the other allegations of bias as being based on the claimants’ disagreement with the arbitrator’s adverse rulings against claimants during the arbitration. “[W]e do not review the substance of an arbitrator’s judgment,” the court wrote. Similarly, the court rejected the claim that the arbitrator failed to receive evidence and such rejection was an independent vacatur ground under § 10(a)(3) of the FAA. The court concluded that vacatur on this ground must show that the arbitrator’s action was “in bad faith or so gross as to amount to affirmative misconduct” (citation omitted). Finally, to the claim that the arbitrator’s award of attorney fees and costs “exceeded” the power of the arbitrator under § 10 (a)(4), the court responded that the arbitration agreement included the arbitrator’s authority to award whatever remedies are allowed by law and that the AAA rules permitting an award of attorney fees and costs (Rule 23) were incorporated into the arbitration agreement. The court wrote:
The court added that the challenge to the arbitrator’s award offered meritless allegations of arbitrator bias and that it was considering sanctions against the claimants for the filing baseless arguments. On October 22, 2014, the court, pursuant to Federal Rule of Appellate Procedure 38, awarded double costs against the claimants and their counsel.
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