Originally from Dispute Resolution Journal

Preview Page

Imagine the following scenario: You have been selected to serve as an arbitrator in a business matter involving REF Partners and LVF Corporation. You review the appointment papers and check with your law firm colleagues for potential conflicts, notifying them by email that you have been asked to serve in the case and including the names of the parties, counsel, and identified witnesses. You also run a search of your emails and contacts for the names of the parties, counsel, and identified witnesses.

No potential conflict surfaces, so you complete your notice of appointment form with nothing to disclose, and the case moves forward. After you issue the award, however, the losing party’s counsel sends you a letter requesting information regarding the payments your law firm received from the parent company of the prevailing party. After you ask your billing company to send you that information, you learn that the prevailing party’s parent company is a long-term client of the firm, with billings of more than $250,000 over the last five years.

What did your partners do to check conflicts when you sent around that email? Did you receive affirmative responses from each of them that conflicts had cleared? Hmmm . . . maybe you received an out-of-office message from one partner and did not follow up? Did you resend the email to your partners to check again for conflicts midway through the case, after you learned that a parent company was involved? Was sending the email around to your partners the best way to check for firm conflicts in the first place? Most important, did you fulfill your ethical obligations to check for potential conflicts – and is your award now in jeopardy of being vacated?

The Code of Ethics for Arbitrators in Commercial Disputes, effective March 1, 2004, (the Code) provides in Canon II(B) that: “[p]ersons who are requested to accept appointment as arbitrators should make a reasonable effort to inform themselves of any interests or relationships described in [the Code].” Some Circuit courts have also found this concept to exist within the Federal Arbitration Act Section 10(a)(2), the standard of evident partiality. However, court decisions make clear that whatever the Code means by “making a reasonable effort” to inform oneself under the Code, that is a greater burden than what is required pursuant to FAA 10(a)(2). So there are two separate levels of inquiry: whether a court might vacate an award pursuant to FAA 10(a)(2), and whether an arbitrator fulfilled his or her ethical obligation pursuant to the Code.