Arbitration: Evident Partiality Rulings Lead a Roundup of Four State High Court Cases (Web)
June 19, 2006
DaimlerChrysler Corp. v. Victoria, No. 2005-357, 2006 WL 1626989, *1 (N.H. June 14, 2006)(available at http://www.nh.gov/judiciary/supreme/opinions/2006/daiml065.pdf).
Petitioner DaimlerChrysler Corp. appealed to the New Hampshire Supreme Court a lower court decision that affirmed the New Hampshire New Motor Vehicle Arbitration Board's award to the respondent consumer for a defective automobile. The board, in issuing the award against the petitioner manufacturer and finding no liability on behalf of the dealer, had granted the respondent the price listed on the vehicle’s retail installment contract, which evidence showed was inaccurate. The petitioner argued that the board exceeded its powers when it: (1) adopted the vehicle’s purchase price from the retail installment contract; and (2) refused to consider evidence on the vehicle’s actual purchase price. The Court concluded that the board, which appeared as an amicus party, exceeded its powers by adopting the inflated retail installment agreement price. The Court also remanded for further proceedings on the evidence question.
In the matter of New York Cent. Mut. Fire Ins. Co. v. Aguirre, No. 72, 2006 WL 1593955 (N.Y. June 13, 2006)(available at http://www.nycourts.gov/ctapps/decisions/jun06/72mem06.pdf ).
The issue was whether the insurer's petition to stay arbitration for uninsured motorists should be upheld when the claimant failed to return completed forms--a “‘condition precedent in the policy’ for which timely disclaimer was not required.” New York’s highest court, the Court of Appeals, reversed the stay in a memorandum opinion because the insurer had delayed significantly in alerting the claimant-appellant that he was not covered.
Borst v. Allstate Ins. Co., 2006 WL 1596123, *3 (Wis. June 13, 2006)(available at http://www.wicourts.gov/sc/opinion/DisplayDocument.pdf?content=pdf&seqNo=25526).
The plaintiff’s accident claim went to an arbitration panel including an arbitrator who the plaintiff believed was partial to the defendant. The plaintiff sought to enjoin arbitration or alternatively to order the defendant to choose another arbitrator. The process went forward with the arbitrator the plaintiff believed to be partial, and an award was issued. The plaintiff appealed. Citing the 2004 Code of Ethics for Arbitrators in Commercial Disputes promulgated by the American Arbitration Association and the American Bar Association, Wisconsin’s Supreme Court adopted a presumption of neutrality for arbitrators. The Court also noted, however, that even if there was no such presumption, the parties had agreed at oral argument that their understanding of the insurance contract arbitration provision was that the entire panel was to be neutral. The Court also concluded that pre-arbitration challenges to an arbitrator are permissible. The Court held that the arbitrator had a substantial, continuing attorney/client relationship with the insurer, which led the Court to conclude that the arbitrator wasn’t impartial. It held that arbitrators should be removed, or awards vacated, “when a reasonable person would have serious doubts about the impartiality of the arbitrator.” As a result, the Court vacated the award. Finally, the Court also held, based on Wisconsin statutory law, that discovery would be limited to depositions, holding that “[a]rbitrators have no inherent authority to dictate the scope of discovery. . . .” The Court reversed an order that refused to vacate the award, and ordered a new arbitration.
McGinity v. Pawtucket Mut. Ins. Co ., No. 2005-32, 2006 WL 1596466 (R.I. June 13, 2006)(available at http://www.courts.state.ri.us/supreme/pdf-files/05-32.pdf).
Similar to Borst, McGinty deals with the issue of whether an insurer's arbitrator was impartial. The arbitrator, an attorney, also represented the insurer in other unrelated matters. The arbitration panel–the insurer’s arbitrator and a neutral–assessed the plaintiff’s damages at $45,000. A dissenting opinion, provided by the plaintiff-appointed arbitrator, assessed the damages at $636,000. A trial court found that the insurer’s relationship with its arbitrator showed “evident partiality” and vacated the award. The Rhode Island Supreme Court affirmed, focusing on state statutory and case law, and the arbitrators’ ethics code, in noting that the insurer’s arbitrator should have disclosed his position to the plaintiff and the other arbitrators. The Court, in a 4-1 opinion by Chief Justice Frank J. Williams, also discusses the sensitivity of the attorney-client relationship in determining that the arbitrator should have disclosed that he was the insurer's attorney during the proceedings. Associate Justice Francis X. Flaherty dissented, disagreeing with the majority’s case law analysis. Flaherty notes, “Tripartite arbitration is a unique, anomalous and somewhat murky world. As has been set forth in many cases, non-neutral (or party-appointed) arbitrators are expected to advocate on behalf of the party who appointed them and to do their best to present the facts to the neutral arbitrator in the light most favorable to that party.”
--Marika Maris, Summer Law Clerk, White & Case LLP