Disclosure and Disqualification Standards for Neutral Arbitrators: How Far to Cast the Net and What Is Sufficient to Vacate Award

Article excerpt


Since the U.S. Supreme Court's decision in Gilmer v. Interstate/Johnson Lane Corp.,1 increasingly more employers require as a term of employment that the prospective or current employee agree to arbitrate any dispute, claim, or controversy arising between the employer and employee.2 Thus, claims of discrimination and retaliation under Title VII of the 1964 Civil Rights Act,3 the Age Discrimination in Employment Act,4 the Americans with Disabilities Act,5 the Family Medical Leave Act,6 and disputes concerning other federal, state, and local employment statutes and common law are increasingly decided by arbitrators. Further, written employment agreements frequently contain arbitration provisions. The selection of the arbitrator is an essential component in the process of creating a fair and impartial forum for the resolution of workplace disputes. In the selection of the arbitrator and throughout the arbitral process, neutral arbitrators are required to make disclosures of information that might raise an appearance of, or an actual conflict of, interest.7

Disclosures should be made before the appointment of an arbitrator, and arbitrators generally remain under a continuing obligation to make any disclosures concerning possible conflicts of interest that come to the arbitrator's attention after his or her appointment. Rules and ethics standards vary concerning the extent of such disclosures. For example, the American Arbitration Association's Code of Ethics for Arbitrators in Commercial Disputes requires any person requested to serve as an arbitrator to disclose any direct or indirect financial or personal interest in the outcome of the arbitration, and existing or past financial, business, professional, or personal relationships with any of the parties, prospective witnesses, lawyers, or other arbitrators; they must also disclose any such relationships involving their families or household members.8 The California Ethics Standards for Neutral Arbitrators in Contractual Arbitration ("California Standards") are probably the most expansive and far reaching.9 If an arbitrator fails to make a required disclosure, the California Standards provide for mandatory and automatic disqualification of the arbitrator once a party serves a timely notice of disqualification.10 Disclosure requirements are expressly mandated by statute.11 In contrast, other ethics rules allow for discretion in determining whether a prospective arbitrator should be removed.12

Despite these ethics standards, the determination of vacatur depends on whether an arbitrator's nondisclosure or allegedly deficient disclosure satisfies the statutory scheme under which an arbitration award is being challenged, which in the United States is most likely the Federal Arbitration Act ("FAA").13

This paper examines the disclosure rules and the interpretation of these rules by federal courts and proposes a less onerous standard. The majority of the courts and codes adopt a reasonableness standard to determine whether evident partiality exists that requires disqualification of the arbitrator. One important issue examined is whether the courts uniformly apply the reasonableness standard. Another issue of great concern to the parties engaged in arbitrations and the arbitrators is whether the code requirements are realistic or too onerous and difficult to meet, leading to increased arbitration expenses and delay.14

Part I reviews the U.S. Supreme Court's plurality opinion laying a shaky foundation for a disclosure and disqualification standard. Part II places the issue in the context of courts giving great deference to the decisions of arbitrators and the general presumption in favor of upholding arbitration awards where challenged. Part III examines the FAA and federal decisional law interpretation of the "evident partiality" standard first articulated by the Supreme Court in disclosure cases. Part IV reviews how the courts address the arbitrator's lack of knowledge of an undisclosed conflict. …