ADR

Editor's note: This article describes a hypothetical situation.

Enough is enough. It was one thing for the appointed arbitrator in Bob's recent arbitration to have a longstanding business relationship with the lawyer representing Bob's adversary. It was another thing when the arbitrator belatedly disclosed the longstanding relationship several months after appointment. Bob hated to do it, but the situation called for—screamed out for—plan “B.” Bob filed a motion to disqualify the arbitrator. The arbitrator promptly denied the motion in a terse order: “I do not believe any conflict exists that precludes me from serving as a neutral arbitrator in this proceeding.” Bob thought he heard a snort somewhere in the order. Maybe it was his imagination.

Having started on the arbitrator-disqualification road and having started the process of (unintentionally) aggravating the arbitrator, Bob concluded he now had no practical choice. He had to go to court to seek to disqualify the arbitrator.

Bob proceeded carefully and with an eye toward the future. For starters, he argued “cover up”— that the court must disqualify the arbitrator for failing to make complete and timely disclosure of the alleged disqualifying conflict of interest.

Bob next argued that the concealed business relationship undermined the arbitrator's ability to act fairly and impartially. So that he could have an immediate appeal to the Superior Court if he lost, Bob requested an “injunction”—a word he used again and again in his supporting brief.

The trial court denied Bob's petition to “enjoin” the arbitrator from continuing to serve. The court concluded that “a reasonable person would not question the arbitrator's ability to be impartial.”

Bob knew the court's order denying his petition to enjoin was not a final order under Rule 341(b) of the Pennsylvania Rules of Appellate Procedure, which provides generally that “an appeal may be taken as of right from any final order of a government unit or trial court.” The order did not “dispose of all claims and of all parties,” Pa. R. App. P. 341(b)(1) (defining “final order”).

As far as Bob was concerned, however, that did not end the matter. Bob was certain the trial court's order denying the requested injunction was appealable under Rule 311(a)(4) of the Pennsylvania Rules of Appellate Procedure. That rule expressly permits an appeal as of right “taken from an order granting, continuing, modifying, refusing or dissolving injunctions or refusing to dissolve or modify injunctions.”

From Bob's standpoint, allowing an immediate interlocutory appeal ensured an efficient and cost-effective arbitration proceeding. Otherwise, he and his client would have to suffer through an entire arbitration proceeding in front of a partial arbitrator; await a final award; and then seek to vacate the award due to partiality—only to start all over, before a brand-new arbitrator, if the vacatur petition were successful. It was exhausting merely to contemplate, let alone undergo, the rigors, costs and time of this drawn-out process.

For readers of Superior Court advance sheets, it should come as no surprise that the court quashed Bob's interlocutory appeal. The Superior Court recently held, in Haviland v. Kline & Specter, 2018 Pa. Super. LEXIS 253 (Pa. Super. March 22, 2018), that “an order denying a motion seeking recusal of an arbitrator … is not a final order or an interlocutory order appealable as of right or a collateral order.”

The Superior Court gave two reasons for this holding. First, a petition seeking arbitrator recusal is analogous to a petition seeking judge recusal; and courts “routinely” have held that an order denying recusal of a judge is not appealable because “appeals from such orders are premature.” Second, Section 7320 of the Uniform Arbitration Act specifies allowable appeals in arbitration matters, and “nowhere” states that “an appellant may appeal an order denying a motion or petition seeking the recusal or disqualification of an arbitrator.”

These reasons were not satisfactory to Bob. Forcing a party to arbitrate before an arbitrator—unlike a judge who is a public servant—means the party must incur sometimes substantial fees to pay a partial and even biased decisionmaker. Result: the party could be forced to settle under unfavorable terms because it could not afford to pay its legal expenses and the arbitration fees. “Too much salt in the wound,” muttered Bob.

Bob's argument makes sense—until we consider the consequences. Those consequences include opening the door to arbitrator-recusal petitions, followed by appeals as of right to trial courts and then appellate courts. The drafters of the Uniform Arbitration Act understood that liberally allowing such interlocutory appeals would undermine the promise of arbitration as a streamlined way to resolve disputes. Permitting these appeals would encourage delay tactics and obstruction that would increase arbitration costs. This might similarly force a party to settle on unfavorable terms. So the drafters limited interlocutory appeals to ensure parties could expeditiously arbitrate, see 42 Pa. Cons. Stat. Ann. Section 7320. (In fact, Bob got a bonus when the trial court considered his disqualification motion on the merits; most courts would refuse even to consider such a motion until the end of the arbitration proceeding.)

But what about the plain language of Rule 311(a)(4)? That rule specifically permits an appeal “taken from an order … refusing … injunctions …” Remember—Bob had thought ahead by filing a petition to enjoin the arbitrator from continuing to serve. Hadn't the court “refused” the requested injunction? Nope. As the court in Haviland v. Kline & Specter noted, “for purposes of considering timeliness of appeals, we must look beyond the title to consider the contents and substance of the motion in order to characterize it,” Haviland v. Kline & Specter, P.C., 2018 Pa. Super. LEXIS 253, *11 (citations omitted). The court concluded that a petition seeking arbitrator recusal is nothing more than a request for an “order” compelling disqualification or recusal of an arbitrator. That is not an injunction.

This explanation did not satisfy Bob. He was tempted to say it smacked of “circular reasoning.” But he restrained himself. His somewhat temperate Superior Court brief instead relied on elementary principles and asserted a nip-it-in-the-bud argument:

An injunction is a court order. The order restrains a person from starting or continuing an action that threatens or invades the legal rights of someone else. Appellant sought an order to prevent a biased arbitrator from conducting an arbitration where there was evident partiality. Under the Uniform Arbitration Act, “the court shall vacate an award where there was evident partiality by an arbitrator appointed as a neutral,” 42 Pa. Cons. Stat. Ann. Section 7314(a)(1)(ii). What gives?

Maybe Bob overthought his predicament. If he had realized an interlocutory appeal was a nonstarter, he could have considered a different and possibly successful route—an interlocutory appeal by permission under Rule 312. Granted, a Rule 312 appeal is extraordinary and difficult to obtain. But even the court in Haviland v. Kline & Specter recognized this potential appellate route: “We also note that the appellant did not seek an appeal pursuant to Pennsylvania Rule of Appellate Procedure 312, which governs interlocutory appeals by permission.” Was it too much for Bob to consider this type of appeal?

Charles F. Forer independently provides arbitration, mediation and all other neutral services. He is a former chair of both the Philadelphia Bar Association's alternative dispute resolution committee and fee disputes committee. He is a frequent lecturer and writer on the use of ADR in a variety of settings. Contact him at 610-999-5764 and c[email protected].