Judge Joyner’s August 1st ruling in Goldman Sachs v. Athena Venture Partners, LLC, no. 13-MC-130 (E.D. Pa.), underscored some fairly basic arbitration law: the Federal Arbitration Act requires that arbitrators fully disclose to the parties anything that might cause a reasonable person to question the arbitrator’s impartiality. In Goldman an arbitrator – who was an attorney — failed to disclose to FINRA or the parties some rather serious disciplinary actions taken against him.
Nothing new there. Going back to its 1968 decision in Commonwealth Coatings, the Supreme Court has made it clear that the FAA imposes on the arbitrator a clear duty to disclose. Indeed, an arbitrator’s failure to disclose in the Court’s view creates an inference of bias, which is one of the limited grounds under the FAA for challenging an arbitrator’s award.
Having been in the arbitration field for close to 40 years, and having taught arbitration at Fordham Law School for over 17 years, I thought I had this issue down pat. The arbitrator’s duty to disclose arises out of the FAA and the rules of the arbitration administrator. Alas, I must confess I’ve had it wrong lo these many years.
I learned last week that the duty to disclose might be Biblical in nature. On August 9th I heard a radio broadcast featuring scholar Rabbi Benjamin Yudin of Congregation Shomrei Torah of Fair Lawn, New Jersey. In analyzing the portion of the Torah (i.e., Old Testament) read August 10th in synagogues around the world, Rabbi Yudin pointed out that the first sentences require not only that individuals deciding cases must be substantively qualified, but that they must be “righteous.”
And how do we define that term? The great medieval Jewish scholar Rashi defines this as absolute, complete impartiality. And what is the specific ground in the FAA that an arbitrator violates by failing to make a disclosure? Evident partiality! Specifically, 9 U.S.C. sec. 10(a)(2) states that an arbitrator’s decision will be vacated “where there was evident partiality or corruption in the arbitrators…”
I tie this all together to mean that besides the FAA and the arbitration rules the parties are using, the Almighty wants arbitrators to make full, accurate disclosures. This should prove to be a powerful inducement for arbitrator disclosure!