Court Rejects Arbitrator Bias For Professional Interactions
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Earlier this month, the US Court of Appeals for the 11th Circuit issued a unanimous per curiam “not for publication” opinion in Federal Deposit Insurance Corporation, as Receiver for Republic Federal Bank N.A. v. IIG Capital LLC (11th Cir. Docket No. 12-10686, August 7, 2013)(Carnes, C.J., Martin & Kravitch), succinctly rejecting an attack on an international arbitration award based on allegations of “evident partiality” under the U.S. Federal Arbitration Act arising out of contacts between the sole arbitrator and counsel for one of the parties as part of their ongoing activities in the international arbitration community.
IIG Capital appeals the district court’s confirmation and enforcement of the award resulting from arbitration between the FDIC and IIG on the ground that the sole arbitrator, Grigera Naon, failed to disclose his prior and ongoing contacts with Jose Astigarraga, counsel for the FDIC. IIG argues that it is entitled to an evidentiary hearing to determine the extent of Naon and Astigarraga’s contacts and whether the award should be vacated because of them.
The Court of Appeals dismissed that attack without oral argument, stating that the contacts were “nothing beyond the kind of professional interactions that one would expect of successful lawyers active in the specialized area.”
The appellate panel began by pointing out that “International arbitration awards such as the one in this case “are subject only to minimal standards of domestic judicial review for basic fairness and consistency with national public policy.”” Citing to University Commons-Urbana v. Universal Constructors, Inc., 304 F.3d 1331, 1340 (11th Cir. 2002), the Court of Appeals also stated, however, that “[t]he “mere appearance of bias or partiality is not enough to set aside an arbitration award,” but it is enough to require the district court to grant an evidentiary hearing.” [In light of the particular circumstances in the case, the appellate judges declined to consider whether the University Commons threshold standard for an evidentiary hearing as to allegations of arbitrator bias was applicable only to domestic arbitrations, and not to international arbitrations, as had been argued by the FDIC.]
IIG Capital based its request for an evidentiary hearing on contacts between Grigera Naon and Astigarraga arising out of the prominent role of both individuals in the international arbitration community (specifically, Astigarraga teaching in an American University Washington College of Law summer international arbitration program directed by Grigera Naon and both serving as founding members of two Latin American arbitration groups).
IIG focuses its appeal on three contacts between Naon and Astigarraga: (1) Naon, who was the director of an international arbitration program at American University, hired Astigarraga as a faculty member for the summer program, held from June 1 to June 17, 2010, (2) Naon and Astigarraga were two of the three founding members of the International Chamber of Commerce’s Latin American Arbitration Group in 2003 and may still be members, and (3) Naon and Astigarraga are founding members of the Latin American Arbitration Association, which was organized some time before November 10, 2010.
The Court of Appeals reviewed de novo each of the allegations and concluded that none of them, in the circumstances, gave rise to a serious potential for arbitrator bias. Neither the participation by Astigarraga in the AU summer program nor the involvement of the two in organizing the Latin American arbitration groups would, in the Court’s view, lead to Grigera Naon seeking to “curry favor” with Astigarraga.
The summer international arbitration program took place after the arbitration hearings were over but before the award was rendered on September 2, 2010. The district court concluded that the fact that Naon and Astigarraga participated in that program during the arbitration period reveals “nothing beyond the kind of professional interactions that one would expect of successful lawyers active in the specialized area.” We agree. In University Commons we held that an evidentiary hearing was warranted when an arbitrator and counsel participated in the same mediation, litigation, or other arbitration because an arbitrator’s “ruling in the arbitration could be seen as a way to curry favor in the other matter.” …. It is difficult to see how Naon and Astigarraga’s participation in the same summer program would lead Naon to curry favor with Astigarraga by ruling in his party’s favor. And Naon, the arbitrator, was the director of the summer program. As the party with the power to hire Astigarraga, Naon had no need to gain Astigarraga’s favor through the ruling.
Naon and Astigarraga’s contact through a professional organization in 2003, years before the arbitration began, does not warrant an evidentiary hearing under University Commons …. (holding that the arbitrator and counsel’s participation in the same arbitrations, mediations, and litigations before the arbitration began did not warrant an evidentiary hearing because “familiarity due to confluent areas of expertise does not indicate bias”). And Naon and Astigarraga’s formation of the Latin American Arbitration Association during the period of arbitration is not sufficiently similar to the contacts in University Commons to lead us to reverse the district court’s decision. That professional contact does not give Naon a motive for using his decision to curry Astigarraga’s favor.
Because FDIC v. IIG Capital is a “not for publication” decision, it has thus far received little attention in the arbitration world. The value of the opinion lies principally as yet another indicator that US Federal courts are pushing back against the use of “arbitrator bias” challenges as a means of upsetting an adverse arbitration award. The opinion illustrates that Federal courts are reluctant to accept participation in activities of the international arbitration community by arbitrator and counsel as persuasive evidence alone of possible bias. Per curiam opinions are normally issued when the result and reasoning in the appeal set no new precedents.
Read original articleTags: Grigera Naon, International Arbitration
