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A Publication of the Georgia Office of Dispute Resolution

CaseWatch for Arbitrators: Failure-to-Disclose Challenges to Arbitration Awards

Earlier this year the Georgia Court of Appeals rejected a petition to vacate an arbitration award where the petitioner claimed that the arbitrator did not adequately disclose prior associations with the parties.  The case is Phan v. Andre & Blaustein LLP, A10A2155 (03/25/11).

The parties in Phan consented to resolve a fee dispute through binding arbitration in accordance with the Georgia Arbitration Code (GAC).  The arbitrator awarded for the defendant law firm.  When the award was filed for confirmation, the claimant moved the superior court to vacate the award by alleging that the arbitrator failed to disclose these prior associations: the arbitrator had previously filed a lawsuit against one of the lawyers in the defendant firm on behalf of a client; the arbitrator had performed some of the same services as were in dispute in the arbitration; and the arbitrator had been a partner in the same firm as another lawyer-witness who filed an affidavit in the arbitration.  The trial court denied the motion to vacate and confirmed the award.

To determine the applicable ethical standards in the case, the Georgia Court of Appeals court noted an arbitrator’s obligation to disclose “potential conflicts” in the arbitration provider rules. The court also cited the standard set forth in the Code of Judicial Conduct that an arbitrator be required to “disqualify [himself] in any proceeding in which [his] impartiality might reasonably be questioned.”  The court also quoted the GAC provisions to vacate an award in O.C.G.A. Section 9-9-13(b):

”As to the degree of partiality required in order to vacate the award, it has been held sufficient that the relationship between the arbitrator[] and one of the parties is of such a nature as to give clear grounds for suspicion of their proceedings and render it unlikely that they constituted the fair and impartial tribunal to which the other party is entitled.”

Unfortunately for the claimant, the appeals court found was no evidence in the record to support his allegations.  “. . . the Appellants have cited this court to no competent evidence of the alleged prior associations.”  The appeals court noted also that the provider rules upon which the appellant relied were not placed into evidence.  Further, the court added, “the Appellants have not cited any authority that the arbitrator fell within the ambit of the Code of Judicial Conduct.”  Given these circumstances, the court concluded there was no merit to the “contention that the superior court erred in denying their application to vacate the arbitration award.”  The appeals court confirmed the finding of the superior court and upheld the award.  However, the court did vacate the confirmation order and judgment and remanded the case only so the lower court could clarify its order as to the proper award amount.

The Phan decision highlights the strict requirements for challenging arbitration awards in Georgia.  Contrast the outcome in Phan with that of a more recent case from Texas, in which an intermediate appellate court vacated a multi-million dollar award due to what it called the arbitrator’s “alarming” failure to disclose. 

In June 2011, the 5th Court of Appeals in Dallas vacated and remanded a $22 million arbitration award after finding the arbitrator failed to disclose that a lawyer representing a party in the dispute had given him a ticket to an NBA basketball game and a wine basket, and had paid for expensive meals, among other things – together valued at more than $1,000 – over several years.

"The record in this case reflects substantial evidence of a personal, social, and professional relationship” between the arbitrator and the lawyer in the case, the court said.  The arbitrator "failed to make any effort to reflect on the interests, contacts, and relationship he enjoyed for many years" with the lawyer “in order to assure the appellants of his impartiality and to safeguard the integrity of the arbitration process.”  Moreover, the court found that there was "undisputed evidence” that the arbitrator and the lawyer “acted as ‘strangers’ when they introduced themselves to each other at the arbitration.

"It is beyond any question that an arbitrator has a duty of disclosure. Such a duty is predicated upon the enormous power, responsibility, and discretion vested in the arbitrator and the very limited judicial review of the arbitrator's decisions," wrote the court.

The case is Robert C. Karlseng, et al. v. H. Jonathan Cooke, No. 05-09-01002-CV, Court of Appeals Fifth District of Texas at Dallas.



John Allgood is of counsel at Ford & Harrison.  For more than 20 years he has arbitrated and mediated cases in commercial, employment, construction and securities law, as well as in real estate and anti-trust matters.  An adjunct professor of ADR at Emory University School of Law, he was a member of the U.S. Olympic Committee panel of arbitrators during the 1996 and 1998 Olympic Games.

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