Business Conflict Blog by Peter Phillips
A few months ago we posted disconcerting news of a dissatisfied party to a California arbitration who, rather than seeking to vacate the award pursuant to state or federal arbitration statutes, sued the arbitrator and the service provider, alleging that the arbitrator’s qualifications had been misrepresented on the provider’s website.
The matter went to trial and the jury found that, while it could not reach a conclusion as to the accuracy of the arbitrator’s representations, the claimant had failed to show any damage resulting from reliance on those representations, and the trial judge dismissed the claims.
A complete account of the result may be found here. The case has caused some in the profession to reassess (with caution) how they market and promote their services as neutrals. If such possible liability provokes a “cleaner” market, then perhaps some good may come of this. But it would be at a very great cost.
From time immemorial, private commercial decision-making has been a boon to merchants who did not want lengthy and legal proceedings over essentially mercantile matters. This goal is reflected in American arbitration statutes, narrowly circumscribing the bases on which an arbitration award can be subject to judicial scrutiny. The mere fact that this claim was allowed to go to trial bodes poorly for the integrity of the arbitration process. If the arbitrator’s behavior amounted to misconduct, vacatur under the statutes was available. It did not, but the arbitrator was subjected to expensive public scrutiny regardless, along with the organization through which her services were engaged. This is not good.
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