Even in the Ninth Circuit, Courts Should Not Intervene Mid-Arbitration
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It is generally accepted that courts may only engage in the very front and very back end of an arbitration. At the outset, courts may determine whether the parties agreed to arbitrate the dispute, and at the end, courts may determine if the arbitration met the basic fairness requirements of the Federal Arbitration Act. However, in a 1973 case the Ninth Circuit had indicated there may be some “extreme” circumstances where mid-arbitration intervention was appropriate. This week, the Ninth Circuit reversed a district court’s attempt to characterize an arbitration as one of those “extreme” cases and nearly disavowed its 1973 ruling creating the loophole.
In Sussex v. U.S. Dist. Ct. for D. Nevada, __ F.3d __, 2015 WL 327558 (9th Cir. Jan. 27, 2015), the underlying issue was whether the arbitrator had a disqualifying conflict of interest. A single arbitrator was hearing three similar actions by condominium owners against the developer. During the course of his service, the arbitrator founded a company to invest in “high-value, high-probability legal claims.” The arbitrator did not disclose that investment activity, but the developer discovered it and moved the AAA to disqualify the arbitrator. The AAA denied the developer’s request after the arbitrator said his investment company was “dormant”.
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