NEUTRAL'S TESTIMONY AT ARBITRATION PERMITTED
by Irene C. Warshauer

In a recent New York Appellate Division decision, Matter of Meehan v. Nassau Community College , reported in the New York Law Journal (June 12, 1998, at p. 25), an appellate court held that a partisan arbitrator's personal knowledge of disputed facts in an arbitration matter, and the arbitrator's testimony as a witness, are not grounds to vacate the award.

The court distinguished arbitration from court proceedings, where judges must disqualify themselves if they have knowledge of the dispute. It held that the "practical reality" is that a party-designated arbitrator, in this case one of three on the arbitration panel, may be partial. The court also held that under New York civil practice rules-see CPLR 7511(b)(1)-- an award can be vacated only when the arbitrator's conduct amounts to "corruption, fraud or misconduct."

The opinion states that it is "established that an arbitrator's having personal knowledge of the subject of controversy does not constitute misconduct in and of itself." The decision would not appear to be authority for a neutral arbitrator to have knowledge of the facts or to testify. While it certainly seems unusual for an arbitrator to testify at a hearing before himself, in New York's Second Department, at least, it is not grounds for vacating the arbitrator's award.

Another opinion in the case, reinstating the arbitration awards after a lower court vacated them based on new evidence, and which discounted the defendant's public policy argument, was released the same day and is available at 1998 W.L. 301683 (June 8, 1998).

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In Montes v. Shearson Lehman Bros. , 128 F.3d 1456 (11th Cir. 1997), the 11th U.S. Circuit Court of Appeals held late last year that an arbitration award may be challenged on appeal on the grounds that the arbitrator "manifestly disregarded" the law and did not apply the law to the facts. The court's standard is that an arbitrator's award may be vacated for manifest disregard of the law.

The case involved whether an employee was entitled to overtime pay. Shearson had argued that the plaintiff was an administrator and, accordingly, was not entitled to overtime pay; its arbitration counsel had argued that there was no requirement for the arbitrator to follow the law but rather that the arbitrator should "do what is right and just and equitable in this case."

The circuit court was most troubled by counsel's advocacy that the law should not apply and adopted the standard that an arbitrator can not manifestly disregard the law. The court stressed that the opinion should be read narrowly and does not mean that the arbitrator has to get the law right. Reversal will not be granted for a mere misinterpretation of the law, but only for a "clear disregard of the law." The decision is to be narrowly limited to "unusual facts" such as a "blatant appeal to disregard the law," the opinion said.

1. From 16 Alternatives 103(July/August 1998).  Published by the CPR Institute for Dispute Resolution and Wiley Periodicals Inc., a Wiley Company, at Jossey-Bass.  Copyright © 1998 by the CPR Institute for Dispute Resolution.  For subscription information, contact Jossey Bass customer service at 888.378.2537 or E-mail jsubs@josseybass.com.

2. The author is of counsel to New York's Fried Epstein LLC and is a member of Alternatives' editorial board.