The Third Circuit refused to vacate an arbitrator’s award, despite allegations that she failed to disclose contributions the defendant’s parent company had made to her judicial campaign and failed to disclose that she co-taught a seminar with in-house counsel for the defendant’s parent company. Freeman v. Pittsburgh Glass Works, LLC, __ F.3d __, 2013 WL 811884 (3d Cir. March 6, 2013). In short, the court concluded that these contacts were not enough to make a reasonable person conclude the arbitrator was partial to the defendant.
In order to reach that conclusion, the Third Circuit first had to revisit the standard it would use for determining whether there was “evident partiality” sufficient to vacate an arbitration award under Section 10(a)(2) of the Federal Arbitration Act. The court had not addressed the issue for almost 20 years, but stuck with its inital formulation: “An arbitrator is evidentially partial only if a reasonable person would have to conclude that she was partial to one side.  The conclusion of bias must be ineluctable, the favorable treatment unilateral.”
The appellant, an employee who lost his age discrimination claim in arbitration, argued that the arbitrator was partial based on two facts. First, about four years before the arbitration, the arbitrator was running in a judicial election and received $4,500 in campaign funds from the employer’s parent company. The court found the campaign contributions did not establish evident partiality because: they were a matter of public record that does not require additional disclosure, the contribution from the parent company amounted to less than one percent of the total campaign contributions, and the law firm representing the employee had contributed more than five times that amount to the arbitrator during the same campaign. (In other words, if contributions were the issue, the bias should have been in the employee’s favor.) In addition, multiple state court decisions from around the country had concluded that it would “impose too great a burden on the system” if every contribution to a judicial campaign could forever disqualify the candidate from serving as an arbitrator for that donor or a related entity.
The employee’s second complaint was that the arbitrator had co-taught a seminar with the employment counsel for the parent company. There was a dispute about whether the arbitrator had disclosed that fact, but the court said even if she had not disclosed it, the teaching relationship was not “powerfully suggestive of bias.” The court affirmed the district court’s denial of the employee’s motion to vacate the arbitration award.
Putting aside disclosures, what is the real lesson to take from this case? Preserve your arguments!! The employee did not raise any issues about the arbitrator’s partiality during the course of the arbitration, even though it probably knew or should have known about the judicial contributions and co-teaching. Normally, that would give rise to a solid claim that the employee had waived any claim of partiality. However, in this case, because the employer did not make the waiver claim before the district court, and tried to raise it for the first time at the Third Circuit, the appellate court found the employer waived its waiver defense. The court explained “the doctrine of appellate waiver is not somehow exempt from itself.”