Tuesday, October 07, 2008

About conflicts

In the long-running and excellent discussion about the legal merits of the Landis Federal Filing, we have a recent comment by DR pointing to what he thinks is Landis' best claim:

In my view his strongest argument is based upon the failure of the arbitrator he chose to disclose potential conflicts.

See if you can wade through this:
http://caselaw.findlaw.com/data2/circs/9th/0555224P.pdf

Or if that puts you to sleep, just jump to the last couple of paragraphs.

Those last few paragraphs say,

[9] Under these circumstances, Immerman had a duty when he accepted the new job at Yari Film Group to investigate the possible conflicts that might arise from his new employment. However, even though Immerman breached his duty to investigate, vacatur is only appropriate if the conflict left undis-closed was real, see Schmitz, 20 F.3d at 1049, and “not trivial.” ANR Coal Co., Inc., 173 F.3d at 499 n.4. Understandably, courts have rejected claims of evident partiality based on long past, attenuated, or insubstantial connections between a party and an arbitrator. See, e.g., Positive Software Solutions, Inc. v. New Century Mortgage Corp., 476 F.3d 278, 284 (5th Cir. 2007) (en banc) (collecting cases). As Justice White explained in his concurrence in Commonwealth Coatings, it would be unrealistic to expect an arbitrator to “provide the parties with his complete and unexpurgated business biography.” Commonwealth Coatings, 393 U.S. at 151 (White, J., concurring).

[10] The conflict alleged by Nippon Herald is real and nontrivial. “The Night Watchman” negotiation was not distant in time, but rather ongoing during the arbitration. Nor was the connection between Yari Film Group and New Regency attenuated. Even if Milchan was not directly representing New Regency in the negotiations, she had substantial ties to the company as an executive of the company and the daughter of its principal owner and chief executive officer. Although the record does not allow us to place a dollar value on “The Night Watchman,” taking into account the high-profile nature of the film project itself, and the size of Yari Film Group’s business, we cannot conclude that the negotiation was unimportant to Yari Film Group.

[11] Under these circumstances, we hold that Immerman had a duty, when he accepted the new job at Yari Film Group during the arbitration, to investigate the possible conflicts that might arise from his new employment. We hold further, in light of that duty, that Immerman’s failure to disclose facts that show a reasonable impression of partiality is sufficient to support vacatur, notwithstanding the lack of evidence of his actual knowledge of those facts.

While we are cognizant of the public interest in efficient and final arbitration, we believe that a rule encouraging “arbitrators [to] err on the side of disclosure” is consistent with that interest. Id. at 152. As Justice White explained in Commonwealth Coatings, the “arbitration process functions best” where early and full arbitrator disclosure fosters “an amicable and trusting atmosphere” conducive to “voluntary compliance with the decree.” Id. at 151.

Conclusion

For the foregoing reasons, we hold that the district court did not err in vacating the arbitration award on the ground of evident partiality.

7 comments:

beeble said...

I'm all for ripping these clowns a new one any place Floyd, etc. can find an opening but isn't this day 1 of law school?

If Floyd's allegations are found to be true isn't this fiducial misconduct or does that not apply because we're talking about "arbitrators" and not an actual judicial proceeding?

I really can't believe these guys would be stupid enough to not realize and know whether their positions would be a major conflict of interest but maybe they are.

We can only hope...

Russ said...

beeble,

Perhaps, not that stupid directly. Maybe they are distracted from avoidance of the stupids by the impressions from on high of power, position, might and right.

Russ

Larry said...

With the usual caveat about not being an expert, not having done the full legal research, etc., etc.

Based on what I've read, the cited case (New Regency v. Nippon Films) represents established law. In New Regency, an arbitrator had accepted employment during the case with a company that was negotiating with New Regency to provide financing and co-production of a motion picture. The court had no problem finding that this employment showed "evident partiality" on the part of the arbitrator.

I don't think that New Regency is in any sense controversial. I think it's clear that if an arbitrator has a financial relationship with one of the parties, then this relationship must be disclosed to both parties. This is the case even where the arbitrator is not aware of the relationship, but could have discovered the relationship if he'd done a reasonable investigation.

The Landis case differs from New Regency, in that Landis does not allege any undisclosed financial or other relationship between an arbitrator and USADA. Instead, Landis' argument is based on undisclosed relationships between the various arbitrators, and between the arbitrators and counsel for USADA.

Moreover, the relationships that are the focus of the Landis case are not classic financial relationships. It's not a question where an arbitrator has a direct financial stake in a client. It's more of the "revolving door" kind of bias, where arbitrators and lawyers for ADAs tend to rotate positions. I have not seen any case that found arbitrator bias based on a "revolving door".

Clearly, the "revolving door" creates a serious potential for bias, as Prof. Straubel has argued. But I have not seen this potential recognized in the case law.

m said...

Larry,

You're on a roll.

Especially this:

"The Landis case differs from New Regency, in that Landis does not allege any undisclosed financial or other relationship between an arbitrator and USADA."

"Moreover, the relationships that are the focus of the Landis case are not classic financial relationships. It's not a question where an arbitrator has a direct financial stake in a client."

As an aside Paullson ruled in favor of an athlete in Landaluce, and against the alleged indirect institutional interests of his client the IOC. I wonder who the the attorneys and co-arbitrators were on that case. Did he have the same professional connections with them, as Landis is saying he had with Young in his case.

Larry said...

M, please understand, I agree with Prof. Straubel that the "revolving door" DOES amount to institutional bias, and that it should be eliminated. I just haven't seen a case under the FAA where an arbitration was vacated based on "revolving door" bias, and I suspect that "revolving door" bias exists in most areas of commercial arbitration. I think that the "revolving door" should be eliminated, perhaps by legislation, perhaps by a change in the rules of the AAA.

You are right that Paulsson is not an automatic vote against the athlete. In Landaluce, his fellow arbitrators were Olivier Carrard from Geneva and Jose Juan Pinto from Barcelona. The prosecuting agency in Landluce was the UCI, represented by Philippe Verbiest from Belgium. CAS has a sortable web page where you can look up cases (through 2003 I think) and easily find where Paulsson appeared as an attorney or an arbitrator - see CAS List. Based on a quick look at the list, I cannot find any cases showing that Paulsson had a pre-existing relationship with the other persons involved in the Landaluce case. (By the way, this CAS list is new -- it was not something that Landis could have reviewed during his CAS case.)

m said...

Larry,

"M, please understand, I agree with Prof. Straubel that the "revolving door" DOES amount to institutional bias, and that it should be eliminated."

I know that. It gives me pause also, but I haven't spent time thinking about a better alternative.

I suspect that similar institutional biases play out in employer/employee arbitration, as well as other arenas involving economically powerful actors on only one side of the arbitration.

Larry said...

M, I think the best solution would be to bar CAS arbitrators from representing clients before the CAS. Moreover, I'd propose that a person who wanted to be removed from the CAS arbitrator list would have to wait some minimum period before being able to represent a client before the CAS. This is similar to the rules binding on ex-government employees who seek to represent clients in proceedings involving their former government agency employer.

You might note that Prof. Straubel's proposed solution is more radical: he would purge the CAS arbitrator list of all persons with current or recent ties to athletes or ADAs (actually, he referred to the "Olympic Movement" rather than to anti-doping agencies, but the Olympic Movement was the focus of his article).

Agreed that the "revolving door" at the heart of the Landis complaint exists elsewhere in the realm of commercial arbitration.