The Importance of Timely Arbitrator Disclosures

Posted on: Tue, 06/15/2021

By: Kelly Turner, Esq., Senior Counsel, AAA® and John Bishop, Vice President, Commercial Division, AAA

An arbitrator typically has the duty to disclose any circumstance likely to give rise to justifiable doubt as to the arbitrator’s impartiality or independence.  Arbitrators face a difficult challenge when trying to make the “perfect” disclosure, balancing the need for completeness and transparency against protecting the confidentiality of prior arbitrations and mediations and of entities not part of the current proceeding. 

In writing disclosures, arbitrators must shift their frame of reference, as disclosures should always be viewed from the perspective of the parties, not the arbitrator. What might seem insignificant to the arbitrator, who knows all the details, could be quite serious to one of the parties, who is in the dark about the matter.

In addition to drafting disclosures with the parties’ perspective in mind, arbitrators should make timely disclosures to avoid any negative perception by the parties that untimeliness might cause.  This requirement is critically important, serving to prevent situations where an otherwise innocuous supplemental disclosure becomes magnified in significance because the arbitrator did not make the disclosure at the earliest opportunity. The first questions a party will ask upon receipt of a late disclosure are “Why didn’t the arbitrator make this disclosure earlier?” and “What were they trying to hide?”

Here are two examples of untimely disclosures that resulted in arbitrators’ removal from a case. 

First, an arbitrator failed to disclose for eight months that they represented a party in a court action where one of the law firms in the arbitration was co-counsel for an opposing party in that court case. The court case was a multi-party dispute with a number of law firms, and the interaction between the arbitrator and the law firm was minimal. In its challenge to the arbitrator, however, the objecting party did not focus their arguments on the conflict itself. Instead, its argument was based on the timeliness of the disclosure, which left the party wondering why it took the arbitrator so long to disclose that involvement. Result: the arbitrator was removed from the case.

Another arbitrator was removed in a case where they did not make a supplemental disclosure. In that instance, the arbitrator had an active litigation practice in addition to their ADR practice. The arbitrator’s firm became involved in an ongoing lawsuit in which their client asserted cross claims against one of the law firms representing a party in the arbitration. What’s more, the arbitrator themselves signed pleadings asserting potential claims against the law firm. The arbitrator failed to make any disclosure about this litigation, which was raised in the arbitration by the law firm named in the cross claim. Particularly where an arbitrator has an ongoing practice beyond ADR, whether with a firm or solo, it is crucial for the arbitrator to review every new matter against their current arbitrations to determine if there are supplemental disclosures to make or, perhaps, if the new matter should be declined instead of creating a potential conflict. 

The failure to make a disclosure is one of the more serious missteps that an arbitrator can make.  As the old saying goes, “It’s often the cover-up that gets you in trouble.”  In these cases, the arbitrators’ failure to promptly disclose--or to disclose at all--connections with a law firm involved in the arbitration created a negative impression in the minds of the objecting parties.  Alternative dispute resolution is successful only when all participants have confidence in the process, and it is our shared responsibility to ensure the integrity of the proceedings. 

The cases described above were AAA-administered cases. Under the AAA Rules, arbitrators are required to make such disclosures as noted above. This disclosure obligation is echoed in Canon II of the Code of Ethics for Arbitrators in Commercial Disputes. In addition to an arbitrator’s making disclosures at the time of appointment, both the Rules and the Code continue the arbitrator’s obligation to disclose throughout the duration of the case.

These arbitrator challenges were brought to the AAA Administrative Review Council, an executive-level, administrative decision-making authority that resolves particular administrative issues that arise in the AAA’s large, complex domestic cases to ensure that these cases receive the highest level of service delivery.

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