In two decisions this week, courts consider whether arbitration awards can be vacated based on arbitrators’ decisions to exclude evidence.  In both cases, the courts affirm an arbitrator’s authority to make reasonable evidentiary decisions — excluding hearsay and denying tardy subpoena requests — as long as those decisions do not deny a party a fair hearing.

In LJL 33rd Street Assocs. LLC v Pitcairn Props. Inc., __ F.3d __, 2013 WL 3927615 (2d Cir. July 31, 2013), a dispute over the valuation of a luxury high-rise in NYC, the arbitrator excluded four exhibits.  All four contained valuations by entities or individuals who were not called as witnesses in the hearing.  The federal district court then vacated the arbitrator’s determination of value under Section 10(a)(3) of the FAA.  It reasoned that, while the exhibits were hearsay, they should have been admitted and the objections should have gone to their evidentiary weight.

The Second Circuit reversed the vacatur with instructions to confirm the award.  It noted that Section 10(a)(3) of the Federal Arbitration Act only allows vacatur of an award if arbitrators are “guilty of misconduct” in “refusing to hear evidence pertinent and material to the controversy.”  To violate that standard, excluded evidence must impair the “fundamental fairness” of the proceeding.  The court found this arbitration proceeding was fundamentally fair for two reasons.  First, there was nothing preventing the complaining party from bringing live witnesses to authenticate the documents.  And second, if the exhibits had been allowed, the other side would have been prejudiced by its inability to cross-examine the authors of those valuations.

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