Good news for Fifth Circuit arbitrators: the Court has found few undisclosed “compromising connections” significant enough to vacate arbitrators’ awards under the Federal Arbitration Act. In fact, since the Court of Appeals’ 2008 en banc decision in Positive Software Solutions v. New Century Mortgage Corp., 76 F.3d 278 (5th Cir. 2007) (en banc)(“Positive Software II” ) set the standard, only a few Fifth Circuit decisions have hinted at the kinds of connections that would be serious for vacatur, while the vast majority have let awards stand.
The line between “significant” and “trivial” or “insubstantial” undisclosed connections is not any closer to crystal clear. It will never be, particularly where a legal standard is so factually driven. But recent cases do imply disgruntled parties to arbitration digging for undisclosed ties needn’t be the ethical arbitrator’s bane. “I got ya” isn’t the new standard. Rather, the Fifth Circuit is setting precedent against certain kinds of evident partiality arguments and showing how they will approach different kinds of connections—and those that arbitrators should be especially careful to remember and disclose.