arbitration-arbitrator conflict of interest-

Court reverses arbitration award where arbiter failed to make required disclosures

June 16, 2015  //  By:   //  Arbitration, Consumer News  //  No Comment

by Carol Thompson

The Supreme Court of Alabama recently reversed an arbitration award after it found that one of the arbitrators had failed to disclose a potential conflict of interest.

The case involved a dispute between a not-for-profit corporation administering a self-insured group workers’ compensation fund and their investment advisor and broker-dealer. Although there was a panel of three arbitrators, the court found that one had failed to disclose the potential conflict, hence, reversing the award.

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The arbitrator was a vice president and partner in a financial-services firm that had served as a co-underwriter with the advisors on 36 equity and debt issuances, had been codefendants with the advisors in a number of lawsuits, was represented by the same counsel as the advisors, and had involvement with the investment product alleged in this lawsuit.

This was enough to constitute a “reasonable impression of partiality” even though the arbiter claimed that he did not know about the relationship on behalf of his firm.

The court ruling states, “The obligation to disclose interests, relationships, or circumstances that might preclude an arbitrator from rendering an objective and impartial determination…[it] is a continuing duty that requires an arbitrator who accepts appointment to an arbitration proceeding to disclose, at any stage of the proceeding, any such interests, relationships, or circumstances that arise, or are recalled or discovered.”

It continues, “… the arbitrator’s duty to disclose is continuous and imperative. Disclosure includes any relationship, experience and background information that may affect –- or even appear to affect –- the arbitrator’s ability to be impartial and the parties’ belief that the arbitrator will be able to render a fair decision. When making disclosures, arbitrators should consider all aspects of their professional and personal lives and disclose all ties between the arbitrator, the parties and the matter in dispute, no matter how remote they may seem. If you need to think about whether a disclosure is appropriate, then it is: make the disclosure.”

The case, Municipal Workers Compensation Fund, Inc. v. bMorgan Keegan & Company, Inc., and Morgan Asset Management, Inc. ca be found here.

Image: Flickr/Juriyrus

About the Author :

Carol Thompson is a veteran investigative reporter residing in central New York. She spent 23 years with a local newspaper, The Valley News, before leaving for the Syracuse New Times, and now, VNN. Thompson has won dozens of first-place awards for investigative reporting and was the 2006 recipient of the Syracuse Press Club’s prestigious Selwyn Kershaw Professional Standards Award. Thompson’s reporting has resulted in the arrest of public officials and has prompted policy changes. She uncovered two money laundering schemes that traveled the globe and resulted in the indictments of several developers.