In case any of us were still caught in the dopey residual throes of the holiday season-induced food coma, a California case is here to remind us that, when it comes to arbitration, neutrality is paramount – and maybe give us some new food for thought in the New Year, too.
Gray v. Chiu, 2013 WL 222279 (Cal. Ct. App. Jan. 22, 2013), a medical malpractice case, was sent to arbitration in July 2009. Shortly thereafter, the defense’s lead trial attorney, William Ginsburg, announced he was retiring from litigation to become an arbitrator. In October of that year, Ginsburg sent an email stating that he was working for ADR Services, Inc. – the dispute resolution provider (“DRPO”) that was set to administer the Gray v. Chiu case. Ginsburg was subsequently retained by the defendant as his personal counsel in the arbitration hearing, and per the parties’ “Physician–Patient Arbitration Agreement,” each side selected a party-appointed arbitrator, who in turn selected a third neutral arbitrator. In November 2009, Judge Alan Haber was chosen to fill that role.
In January and April 2010, Judge Haber sent the parties two disclosure statements, both of which listed the names of several participants for whom a conflict check was performed. However, “[o]n each occasion, Judge Haber stated that he had no significant personal relationship or other professional relationship with any party, or lawyer for a party.” Ginsburg – who was, you will recall, by his own then-recent written admission working for ADR Services, Inc. – was not named on either disclosure statement, and was not the subject of a conflict check in the case.
The arbitration hearing took place over nine days, with Ginsburg attending all hearings. Judge Haber subsequently issued a binding arbitration award for the defendant. Gray then filed a petition to vacate the arbitration award, contending that Judge Haber’s failure to disclose Ginsburg’s membership in ADR Services, Inc. violated the disclosure provisions of two state-specific rules governing arbitrator disclosure. Justice Steven Perren of the California Court of Appeal for the Second District agreed, and reversed and remanded for vacatur.
Although the duty of an arbitrator to disclose circumstances that may affect his or her neutrality is a standard rule in arbitration, nondisclosure is not in and of itself a ground for vacatur. However, nondisclosure can implicate problems of partiality, which is one of the few statutory grounds for vacatur. For example, a Georgia court will vacate an arbitration award if it finds “partiality of an arbitrator appointed as a neutral”; similarly, a federal court will vacate an award “where there was evident partiality or corruption in the arbitrators.”
There are also reasonable limits to the arbitrator’s duty to disclose, which adds another hurdle to the track between nondisclosure and vacatur. Those limits, while not specifically enumerated, have been somewhat clarified by the Supreme Court: an arbitrator should disclose “any dealing that might create an impression of possible bias” in order to avoid vacatur. Ahh, I can practically see the gray areas leaching out of that sentence.
But California’s legislature had already set out to shed light on that gray area, first passing the California Arbitration Act (“Act”), which provides judicial recourse for “serious problems” involving “fairness” in arbitration. In terms of the standard for disclosure, § 1281.9(a) requires disclosure of “all matters that could cause a person aware of the facts to reasonably entertain a doubt that the proposed neutral arbitrator would be able to be impartial.” But California went further still, and pursuant to § 1281.85 (“Ethical Standards Applicable to Neutral Arbitrators”) of the Act, the Judicial Council adopted a set of ethics standards for neutral arbitrators, known as the California Ethics Standards for Neutral Arbitrators in Contractual Arbitrations (“Ethics Standards”).
Of particular relevance here – and this is where the case gets interesting – is Ethics Standard 8, which provides, in relevant part:
“[I]n a consumer arbitration … in which a [DRPO] is coordinating, administering, or providing the arbitration services, a person who is nominated or appointed as an arbitrator . . . must disclose …: (1) Relationships between the [DRPO ]and party or lawyer in the arbitration [emphasis court’s] . . . Any significant past, present, or currently expected financial or professional relationship or affiliation between the administering [DRPO] and a party or lawyer in the arbitration. Information that must be disclosed under this standard includes: (A) A party, a lawyer in the arbitration, or a law firm with which a lawyer in the arbitration is currently associated is a member of the [DRPO].”
In other words, even if a person aware of the facts wouldn’t necessarily reasonably doubt the arbitrator’s ability to be impartial, under the additional requirements of Ethics Standard 8, Judge Haber had a per se obligation to disclose Ginsburg’s relationship with ADR Services, Inc., irrespective of any other standard (such as that set forth in § 1281.9(a) of the Act).
The questions this heightened standard gives rise to perhaps create more gray area than we had before California attempted to refine the disclosure obligation. The instant case is somewhat vague on precisely what “knowledge,” if any, Judge Haber had of Ginsburg’s membership in or involvement with ADR Services, Inc. So under California’s Ethics Rule 8, does a neutral arbitrator simply bear the burden of acquiring this information? It is admittedly conceivable that, in some smaller organizations, personal affiliations are apparent – but what of an organization like the AAA, which consists of thousands of arbitrators? The DRPO in question here, ADR Services, Inc., falls somewhere in between, with about 150 members practicing throughout California and Nevada. Is that the line? Is there a line? And should it be the responsibility of the DPRO to keep track of where it sends its arbitrators, and notify them of a potential conflict?
The court here concluded that “The plain language of Ethics Standard 8 compels the arbitrator to disclose that a lawyer in the arbitration is a member of the administering DRPO.” Although the case arguably leaves open the possibility that Judge Haber was genuinely unaware of Ginsburg’s affiliation with ADR Services, Inc., one thing is certain: Ginsburg knew about it. Although he defended himself by downplaying his role in the organization—and perhaps he really did believe it was of no import—I’m standing with the appellate court on this one. Because, at the very least, a forthcoming Ginsburg might have avoided the issue altogether. In any case, the moral of the story is, as any law student with the bar exam on the brain will probably tell you – err on the side of disclosure.