When the arbitrator is biased: Part II
Arbitrators, like judges, have immunity, meaning they can’t be sued. That leaves the consumer who learns after-the-fact that an arbitrator ruled on a case despite a conflict-of-interest with no legal recourse.
When an arbitrator is selected through an organization such as the American Arbitration Association, the burden of vetting the arbitrator falls on the consumer. Although arbitrators fill out a form and their potential conflicts, it is based on the honor system. AAA does not vet its arbitrators.
How deeply must one go to vet a potential arbitrator.
The answer is: pretty deep.
The more the consumer knows about the arbitrator, the less likely they’ll learn of an after-the-fact conflict.
Google searching may not be enough. As reported in Part I, a California resident who found out too late that the arbitrator deciding his case had a potential conflict learned so by digging deeply into the arbitrators background. That included everything from looking up federal, state and local campaign contributions to checking on the employment of family members.
Finding out once an arbitration has been decided leaves two options: Let it go and chalk up the loss or go to court on the chance that a judge will agree that there was an appearance of bias.
The Eastern District of Pennsylvania, using the “appearance of bias” standard, vacated an arbitration award when two arbitrators, who were chosen from a list provided by the American Arbitration Association, failed to disclose they had been appointed as arbitrators in a different arbitration involving one of the parties.
“Regardless of whether a court considers the actual bias standard to be legitimate (this Court does not), such
a standard does not apply in cases, such as this one, where (1) the parties have some influence in selecting their arbitrators, and (2) an arbitrator failed to disclose information that may create a reasonable impression of the arbitrator’s partiality.”
One of the problems associated with an arbitrator’s decision being final is the legal fees they often award to the prevailing party. While judges rarely award legal fees, arbitrators often do, and the award can amount to tens of thousands of dollars. Only a court vacating the decision will nullify the judgement award for the legal fees.
Those contemplating arbitration should do so diligently and do due diligence. With the likelihood of a decision not being overturned by a court, arbitration can be more costly than the disputed amount that brought the parties to the arbitration table to begin with.