Angela represents a claimant in an Ad Hoc arbitration. The arbitration clause incorporates the Commercial Rules of the American Arbitration Association. It's been eight weeks since Angela made a motion asking the arbitrator to clarify her client's discovery rights and in particular whether or not claimant could conduct multiple depositions. Angela has spoken to her adversary and asked if she would support a joint inquiry about the status of the motion. She refused. What can and should Angela do?

Both the Federal Arbitration Act, 9 U.S.C. §§1-16 (FAA) and the CPLR (Article 75) allow for review of an arbitrators conduct once an award has issued.  See 9 U.S.C. §10 and 75 CPLR §7511. Both make provision for the appointment of an arbitrator if the parties have failed to do so, or a vacancy occurs. The FAA doesn't speak to what might happen if an arbitrator “fails to act.” The CPLR allows removal for a failure to act and courts cite an “inherit power to disqualify an arbitrator before an award has been rendered. Astoria Medical Group v. Health Ins. Plan, 11 N.Y.2d 128, 132 (1962)

An Ad Hoc

An Ad Hoc puts initial responsibility for procedural matters in the hands of the parties while drafting the arbitration clause. What they leave out can come back to punish the parties. Once underway, the administration rests solely with the arbitrator, who, for the most part, operates almost without judicial supervision. The FAA allows judicial intervention at the beginning of the process (see §§2, 3 and 4), and after the award (see §10). While underway, the statute only allows for judicial intervention to fill vacancies and make appointments where parties can't agree on a replacement. See §5. “[I]t is well established that a district court cannot entertain an attack upon the qualifications or partiality of arbitrators until after the conclusion of the arbitration and the rendition of an award.” Michaels v. Mariforum Shipping, S.A., 624 F.2d 411, 414 n.4 (2d Cir. 1980). “[A] prime objective of arbitration law is to permit a just and expeditious result with a minimum of judicial interference … . Any other rule might spawn endless applications and indefinite delay.” Marc Rich & Co. A.G. v. Transmarine Seaways Corp., 443 F. Supp. 386, 387-88 (S.D.N.Y. 1978).

While federal court intervention isn't impossible, it is rare. Some courts will intervene before the process is under way if shown evidence a selected arbitrator has engaged in conduct deemed the “product of evident partiality …” (Metropolitan Property & Casualty Ins. Co., v. J.C. Penney Casualty Ins. Co., 780 F. Supp. 885, 892 (D. Ct. of Conn. 1991)) or where “it seems senseless to require both parties to “submit to a prolonged, costly proceeding … [when] this unfair burden can readily be avoided upon proof … of bias and collusion” (Gaer Brothers v. Mott, 144 Conn. 303, 309 (1957)). Other courts have disqualified an arbitrator upon a showing the appointment wasn't made in accordance with the terms of the arbitration clause. Lobo & Co. v. Plymouth Navigating Co. of Monrovia, 187 F. Supp. 859 (S.D.N.Y. 1960). The mere fact that a party-selected arbitrator is not “neutral” is not grounds per se for disqualification. Metropolitan, 780 F. Supp. 885.

New York courts “have inherent power to disqualify an arbitrator before an award has been rendered.” Astoria Medical Group, 11 N.Y.2d 128. Courts can act only upon a showing “there exists a real possibility that justice will result.” Matter of Lipschultz, 304 N.Y. 58, 64 (1952). The mere appearance of bias isn't grounds (Rabinowitz v. Olewski, 100 A.D. 2d 539, 540 (1984)) and there must be a showing of misconduct (Weisz v. Weisz, 39 Misc.3d 1223(A), (Sup. Ct. Kings Cnty. 2004)).

Unless Angela can fashion a petition showing real misconduct or a prolonged refusal to act, her best bet is to either wait or gently nudge the arbitrator.

Institutional Administration

In New York, the “big four” facilitators are the American Arbitration Association (AAA), JAMS, International Institute for Conflict Prevention & Resolution (CPR), and FINRA. This discussion is limited to these organizations and to AAA Commercial Rules, the JAMS Comprehensive Arbitration Rules, the CPR 2013 Administered Arbitration Rules, and the FINRA Customer Rules. The AAA and CPR have the most comprehensive and transparent rules whereas JAMS and FINRA rules are opaque and arguably less user friendly. All provide for an arbitrator assisted by a case manager. All but FINRA have rules allowing an appeal on the merits to another arbitrator.

The AAA Commercial Rules provide a standard for removal:

R-18. (a) Any arbitrator shall be impartial and independent and shall perform his or her duties with diligence and in good faith, and shall be subject to disqualification for:

i. partiality or lack of independence,

ii. inability or refusal to perform his or her duties with diligence and in good faith, and

iii. any grounds for disqualification provided by applicable law.

Party complaints can be filed with the case manager at any time up until the issuance of an award and are resolved by Administrative Review. If the arbitrator is allowed to remain, he/she is usually not told of the source for the complaint.

CPR has applicable rules (Rule 7.5) and a detailed Protocol allowing replacement if there is “justifiable doubt regarding that arbitrator's independence or impartiality …” See Protocol §1(a). Decisions are made by a designated CPR Challenge Officer. Disclosures to the challenged arbitrator depend on the details surrounding the original selection, or designation of the challenged arbitrator. A formal removal procedure is prescribed. CPR Rule 5.4.

JAMS Rule 15(i), Comprehensive Arbitration Rules, allows challenges for cause at any time. Cause is determined taking “into account the materiality of the facts and any prejudice to the Parties.” The Rule is silent as to who at JAMS makes the determination. There is no prescribed procedure once a complaint is filed.

FINRA rules allow for the removal beginning before the start of the first hearing session. Rule 12407. The Director has the authority to remove on his or her own motion or at the request of a party. If the removal is prior to the first hearing session, removal is based on a finding of a conflict of interest or bias. If the request is made by a party the Director can act if it is reasonable to infer bias, a lack of impartiality, or any interest in the outcome of the arbitration. The interest or bias must be definite and capable of reasonable demonstration, rather than remote or speculative.

If the removal request is made after the first hearing session has commenced (Rule 12407(b)), the Director can remove an arbitrator “only on information required to be disclosed under Rule 12405 not previously known by the parties.” Rule 12405 identifies the disclosures required of any arbitrator.

There is no defined procedure for removal and no restriction barring FINRA from disclosing to the arbitrator who filed the complaint.

If Angela had opted for an administrated format and selected one with rules clearly defining a standard addressing the inability or refusal of an arbitrator to perform duties, her remedy is to contact and work with the case manager.

Using Law and/or Administrators to Deal With the Difficult Arbitrator

Ad Hoc

• Draft a detailed arbitration clause and consider a provision for an appeal to another arbitrator using the AAA, JAMS or CPR rules. Insist on a transcript.

• Carefully vet arbitrator candidates.

• Once underway, try to have all parties agree to the removal.

• Seek judicial intervention in a New York state court.

Institutional Administration

• When deciding on a facilitator, carefully review and compare the controlling rules.

• Draft an arbitration clause incorporating the rules of a facilitator and include the right to an appeal using that facilitators appellate procedures or if voluntarily using FINRA, specify the appellate rules of another facilitator.

• Insist on a transcript

• Ask the case manager for informal assistance.

• File a complaint.

• Seek judicial intervention in a New York State court.

Background of Arbitrator Candidates

Must the arbitrator be a lawyer, a former judge or a lay person with deep knowledge of the factual issues in the case? Each type has advantages and disadvantages. If the case is a law case, perhaps it is best to select either a lawyer or a former judge. Some lawyers are reluctant to select a former judge on grounds that many judges can't let go of the formalities prestige of court room style litigation. In a fact case, some lawyers are reluctant to select anyone lacking a deep knowledge of the factual issues in the case. Whatever the background, all candidates have one thing in common: They are human and fallible. Take nothing for granted. Select with great care.

Conclusion

Removing an arbitrator is hard, but not impossible. Planning for the eventuality of having to remove is a must. Use great care when selecting a format. If administered, review and compare the administrator rules. No matter the format, try to get references when selecting a candidate. Know what each person's track record is. Ask all candidates for a redacted copy of a reasoned award they filed in a similar case. If seeking judicial involvement, completely document the misbehavior of the arbitrator.

Paul Bennett Marrow is an attorney/arbitrator. He teaches Domestic Arbitration at New York Law School. He can be reached at [email protected].