Disclose, Disclose, Disclose
by Irene C. Warshauer

The basic rule for a neutral is to disclose anything that might create a presumption of bias.  This concept is encoded in Rule 9 of the American Arbitration Act:

            The "arbitrator shall disclose any circumstance likely to create a presumption of bias which might disqualify that arbitrator.." (emphasis added).

In determining what to disclose, the safer rule is to disclose everything and let the parties decide whether it is sufficient to challenge a neutral on the grounds of the appearance of bias. 

What about a relationship of 25 years ago? Courts have varied on the time frame, which can vitiate the need for disclosure, and there is no bright line test.

A recent New York Supreme Court decision examined the importance of disclosure and Rule 9.  Matter of Seligman v. Allstate Insurance Company , (NYLJ 2/27/03, p.28, col. 2, Skelos, J.) (" Seligman ").  In Seligman, the arbitration was governed by the Supplementary Uninsured/Underinsured Motorist Insurance Disputes rules. The arbitrator was qualified to serve as an arbitrator under those rules, the rules of the administering organization and was appointed.  Once appointed, the applicable rule provides that the arbitrator many not "have any practice or professional conduct with any firm or insurer involved in any degree with automobile insurance or negligence law."  There was no proof that arbitrator had any such contact.  The arbitration was held and an award rendered.  Thereafter, the plaintiff moved to vacate the award pursuant to CPLR 7511(b)(1) on the grounds that:

 "his right to a fair and impartial arbitration hearing was violated by reason of the fact that the respondents' failed to disclose. . .the fact that .the arbitrator employed by the American Arbitration Association, had been a long-time employees of the respondent." Seligman.

While Seligman's allegation that the arbitrator had a continuing relationship with the respondent as he was receiving a pension proved to be incorrect, the court held there was a requirement for the disclosure of the fact that the arbitrator had a 20 year employment relationship with the respondent, even though it was 25 years ago and he was terminated from that employment. 

The court based its ruling on the need to protect the integrity of the arbitral process and found that while the parties' have an obligation to investigate disqualifying acts, "the ultimate burden falls upon the one with personal knowledge." Seligman.

More specifically the court held:

            "In order to protect the integrity of the arbitral process the arbitrator and the American Arbitration Association [or any other administering body] has a duty to disclose any facts within their knowledge which might in any way support an inference of bias.  An arbitrator's failure to disclose any information that may reasonably support an inference of bias may be grounds to vacate the arbitration award so long as the relationship wan not a trivial one. [case citations omitted]" Seligman

The court held that parties and not the arbitrator determine the triviality of the relationship and that a 20 year relationship, even though it was 25 years before the arbitration, required disclosure and vacated the award.  Whether the arbitrator, who had been terminated by the respondent 25 years prior to the arbitration was biased was not at issue.

The moral of this case is to emphasize the need to disclose any relationship, no matter how trivial or distant, so as not to jeopardize the arbitration process or the award.