Two Circuit Courts Demonstrate How Difficult It Is To Vacate Arbitration Awards
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In recent weeks, both the Second and Sixth Circuits showed how difficult it is to vacate arbitration awards.
The Second Circuit decision has more drama, so I’ll start there. In Kolel Beth Yechiel Mechil of Tartik-Ov, Inc. v. YLL Irrevocable Trust, __ F.3d __, 2013 WL 4609100 (2d Cir. Aug. 30, 2013), the losing party in an arbitration tried to vacate the award using both Section 10(a)(1) and 10(a)(2) of the Federal Arbitration Act — i.e., corruption and evident partiality. The dispute was over ownership of life insurance policies, and when the dispute arose, the parties agreed to arbitrate before a panel of three rabbis. Each party appointed a rabbi and the parties jointly selected the third rabbi (the only neutral arbitrator). The arbitration agreement allowed the rabbinical panel to make its decision in any way the rabbis wished. After seven unrecorded sessions, but after only one witness testified, two members of the panel issued an award in favor of the claimant.
In its effort to vacate the award, the losing party primarily alleged that the neutral arbitrator had actually been corrupt and partial. It presented testimony that the neutral arbitrator had called the winning party almost two weeks before the award was issued, indicating a ruling was coming in its favor. The district court refused to vacate the award, and the Second Circuit affirmed that decision. In analyzing whether the panel was corrupt or sufficiently partial to vacate the award, the Second Circuit held that the standard it has used for evident partiality will be used in cases of corruption as well: “Evidence of corruption must be abundantly clear in order to vacate an award.” Because there was no record of the arbitration proceedings, and the testimony about the phone call was not direct or definite evidence of bias, the law did not support vacatur.
Read original articleTags: neutral arbitrator, SECOND CIRCUIT
