Friday, May 11, 2007

More on Arbitrator Ethics

Our anonymous attorney emailer has done some more digging, and sends the following:

Here is a very interesting article about how the American Arbitration Association/American Bar Association Code of Ethics for Arbitrators in Commercial Disputes applies to arbitration proceedings.

The article, entitled "The Revised Code of Ethics Takes Hold", was written by Eric P. Tuchmann, who is general counsel and corporate secretary of the American Arbitration Association. The article appeared in the Aug-Oct 2006 edition of the Dispute Resolution Journal.

[MORE]

Tuchmann notes that

"[T]he Code of Ethics has served as the primary source of ethical guidance for arbitrators since 1977, when it was originally drafted. While the Code did not carry the force of law, it was cited with approval in dozens of court opinions."

He then addresses changes made to the Code of Ethics in 2004, the most significant of which is that party-appointed arbitrators are to be neutral:

"The 1977 version of the Code presumed that all party-appointed arbitrators were notneutral (i.e., they could be partial to the party that appointed them). Therefore, party-appointed arbitrators could not be challenged because of partiality toward the appointing party or attorney, or a conflict of interest, no matter how direct or substantial. The parties were free to agree that party-appointed arbitrators would act as neutral arbitrators, but in the absence of such an agreement, it was presumed that the parties desired non-neutral arbitrators."

The revised Code of Ethics changed this by reversing the presumption of neutrality so that party-appointed arbitrators were presumed to act as neutral arbitrators. Consequently, they became subject to challenge based on allegation regarding their partiality or lack of independence involving any party, attorney, or witness who participates in an arbitration.

The article cites two cases from 2006 where state Supreme Courts (Wisconsin and Rhode Island) vacated arbitration awards because of a close relationship between a party-appointed arbitrator and the party that appointed him: Borst v. Allstate Insurance Co., 717 N.W.2d 42 (Wis. 2006) and McGinity v. Pawtucket Mutual Insurance Co., 899 A.2d 504 (R.I. 2006). The Wisconsin Supreme Court favorably cited the Code of Ethics and "noted in its analysis that the 'most striking difference' between the 1977 and 2004 versions of the Code of Ethics is 'the application of neutrality to all arbitrators, including party-appointed arbitrators.'" The standard the court then applied to determine partiality was "if based on the evidence that is clear, plain, and apparent, a reasonable person would have serious doubts about the impartiality of the arbitrator." The Rhode Island Supreme Court also favorably cited the Code of Ethics and "considered the 2004 amendments to the Code of Ethics to be influential." The court noted in its opinion that it was "taking into account the revised Code of Ethics."

Tuchmann concludes by stating:

Parties and advocates should be on notice that they may no longer assume that party-appointed arbitrators will act as non-neutral arbitrators who are partial to the party that appointed them, unless they explicitly agree either in their arbitration agreement or after a dispute arises. Even so, all party-appointed arbitrators must disclose all relationships likely to affect impartiality or which might create an appearance of partiality, regardless of whether they will be acting in a neutral or non-neutral capacity. If arbitrators fail to abide by these principles, they may be subject to removal. Alternatively, party-appointed arbitrators who fail to make disclosures required under the Code of Ethics may find their awards vacated under state and federal arbitration laws where an arbitrator's evident partiality has been established.

Thanks to our emailer for the research and summary!

8 comments:

swimyouidiot said...

So the USADA/AAA system was set up when non-neutrality was the norm. In 2004 the game changed. I really wonder the whole USADA/AAA set up doesn't violate the new Code of Ethics. Doesn't the mere likelihood of getting further work from USADA on future arbitration panels if you rule in their favor, impugn their partiality? Maybe that wasn't a problem before the Code of Ethics revision, but it sure seems like it is now.

swimyouidiot said...

I should have also said:

McLaren and Brunet are not independent arbitrators, they are USADA arbitrators, as shown by their trip to China in prep for the Olympics. How can that relationship not impugn their impartiality?

daniel m (a/k/a Rant) said...

Hmm. I wonder if Howard Jacobs and Maurice Suh have been following this and if so, what they might be planning.

Debby said...

Dan took the words "Maurice Suh" right out of my fingers.

Anonymous said...

swim,
Your first post makes a good point. Does anyone know how often the list is updated and what entity/group appointed who? I assume that some drop off and are replaced.
The principal post suggest that a party does not get a chance to challenge a panel member for bias until the hearing is over. In most states the only appeal from an arbitration is to the Courts. Here the appeal is still internal, to CAS, so it could be a long time and very expensive before a Judge looks at the record.
pcrosby

Anonymous said...

I don't agree that the principal post suggests that a party does not get a chance to challenge a panel member for bias until the hearing is over.

Tuchmann clearly states that arbitrators that fail to adhere to the Code of Ethics may be removed. "If arbitrators fail to abide by these principles, they may be subject to removal." The Commercial Arbitration Rules provide for the disqualification of arbitrators for partiality or lack of independence in rule R-17: "(b) Upon objection of a party to the continued service of an arbitrator, or on its own initiative, the AAA shall determine whether the arbitrator should be disqualified under the grounds set out above, and shall inform the parties of its decision, which decision shall be conclusive."

The language "objection of a party to the continued service of an arbitrator" clearly indicates that such removal could occur before the award is made.

What is clear from Tuchmann's article is that the Code of Ethics is a reference point for a number of courts in determining whether an arbitrator is partial or suffers from a lack of independence. Since Tuchmann is general counsel and corporate secretary of the American Arbitration Association, I think we can reasonably believe that the AAA considers the Code of Ethics as the benchmark for arbitrator conduct.

Under the rules, the AAA could, on its own initiative, look into the conduct of the arbitrators in these proceedings and disqualify offending arbitrators. I don't see anything in the Supplemental Procedures governing USADA proceedings that restricts that prerogative, although the Supplemental Procedures do set out a Disclosure and Challenge Procedure in rule R-19. That rule states: "Upon objection of a party to the continued service of a neutral arbitrator, the AAA shall determine whether the arbitrator should be disqualified and shall inform the parties of its decision, which shall be conclusive."

Anonymous said...

(Sean here)

Rant wonders "if Howard Jacobs and Maurice Suh have been following this" thread.


Landis' own statement said that "the Panel’s colleagues in the legal and arbitration profession will be looking to see their commitment to handing down a fair decision based on the facts and on the science as provided by both sides"... so I would hope this means yes.

Anonymous said...

Anon. 12:27
Thanks for the information. This is what I wanted, informed, specialized knowledge.
Are you aare of any instance of AAA stepping in and removing an arbitrator in response to a complaint by a party - or by a panel member?
pcrosby