Chapter 18 – The Appeal

Borrowing a line from Arbitrator C, well Ms. Marshall where did we leave off. Ms. Marshall: “Mr. Cr, Mr. Rote was in the middle of his cross-examination of M.” Mr. C: “Hmm.”

Prior to Arbitrator C’s Final Opinion and Award we challenged his independence given his prior failure to disclose his past and working relationship with Linda Marshall. And now after the award we were left with one more opportunity to set the arbitration aside. That was to Appeal the award to the State or Federal Court.

The most dangerous aspect of arbitration is this last step, that is the very limited opportunity one has to appeal and set aside and arbitration award. Because arbitration was intended to be an alternative to court, our State and Federal laws have evolved to provide guidelines as to what a court may review and under what circumstance and award can be set aside. An erroneous interpretation of a law in its application to the case is not sufficient to set aside or vacate an arbitration award.

As discussed, there are limited opportunities to vacate an arbitration award. Under the Federal Arbitration Act, we had essentially 4 conceptual opportunities and chose to focus on 2 of those, “evident partiality” and “arbitrator misconduct”. Once we found out about Mr. C’s prior work relationship with Marshall, it was necessary to challenge his independence just to preserve our right to appeal the award under the “evident partiality” standard. But at the same time it incites the arbitrator so that the result very often is a Mr. C who then starts setting aside very clear and convincing evidence we provided in order to find in favor of M. We knew the risk. The best of our Judges and Arbitrators have thick skins and would not use this action by us as an invitation to hurt us. But many Judges and Arbitrators are not good.

And so we Appealed asking the court to vacate the award, focusing on “evident partiality” and “arbitrator misconduct”. Facts can easily fall into both of these categories. See a discussion of these and other opportunities to appeal.DispResJ

Evident partiality is intended to cover historical relationships that may indicate or result in bias. Quoting from a Dispute Resolution Journal…”More recently, the 11th Circuit fashioned a new, but less than “bright line” test for vacating an award due to evident partiality. This test requires either an actual conflict of interest or nondisclosure of information known by the arbitrator that would lead a reasonable person to believe that a potential conflict exists. The 11th Circuit’s test was predicated on the Supreme Court’s statement in Commonwealth Coatings that courts “should be even more scrupulous to safeguard the impartiality of arbitrators than judges, since the former have completely free rein to decide the law as well as the facts.”

Again recall that when challenges Arbitrator C did recuse himself, deciding to step down from the case. But when Linda Marshall challenged his right to step down, he capitulated. Naturally him not disclosing that he had worked with Linda Marshall met this standard. there was more though. I overheard a conversation between them when C asked about her health and had heard from other Miller Nash law firm alumni that Linda had health issues. I wont disclose what they are. More importantly though I found that C opening every morning asking Marshall where we left off was a very clear indication that we no longer had an unbiased and independent arbitrator. And lets not necessarily taint that with an intent by C to be dishonest an unbiased. Let’s say instead that the issues were going to be resolved by the evidence and much of that evidence was digital forensics. Marshall would know she has an edge if she confuses the issues enough with testimony from an expert. Even though we had 7 witnesses and they had but 2 and even though their forensic expert agreed with ours, twisting the conclusions of the reports created some confusion. And in umbrella of confusion, who would C believe.

We took a position that much of the testimony was fraudulent and that Marshall put this testimony on suggests that she knew that C would be confused and he would be influenced by his pat relationship with Marshall and that’s why arbitration’s are risky. Had the award been reached in court it would have been easily overturned. C’s refusal to associate a negative inference to M for his failure to provide his computers, for reformatting a hard drive a day before he turned it over to us, for refusing to provide the email source to the spreadsheet evidence and so forth. And most importantly because M retracted in his own testimony that he had filed a criminal complaint or ever intended to.

Beyond our challenges under “evident partiality, we also appealed under the “arbitrator misconduct” standard. That standard includes an arbitrator’s refusal to postpone the hearing without sufficient cause, an arbitrator refusal to hear evidence pertinent and material to the controversy and a catch-all for any other misbehavior by which the rights of any party have been prejudiced. With respect to a refusal to hear evidence, those cases are where evidence is not permitted to be presented. What happens though when evidence is on the record and is not considered by the arbitrator. All of our evidence had to be disregarded almost in its entirety to find in favor of M. All of our forensic evidence, the reports by our independent experts, the evidence of use by M, even the reports by their forensic expert was set aside to the extent it agreed with or experts. Setting aside evidence is not the same as not hearing the evidence and it is the prerogative of the arbitrator to do so, but it is an indicator that the arbitrator is not bias and otherwise engaged in misbehavior by which our rights had been prejudiced.

Our Appeal is attached. We did not prevail. I was slightly surprised. Again the Federal Court’s interest in reviewing and setting aside an award is not significant, but the Magistrate who considered the case was well prepared and I felt like we had a fair hearing. Nonetheless I think the Judge made the wrong decision, for no other reason than C recused himself and later withdrew that recusal. There was an acknowledgement that C and Marshall had worked together. Most of the evidence provided to you in this blog was not reviewed by the Judge. We had no opportunity to get it in. The Judges hands were effectively tied and his review limited. I suspect that he would have been happy to look further into the evidence, particularly the destruction of the evidence by M, our forensic reports establishing that I had terminated M before the complaint was filed and other supporting testimony. But under the standard of review he can’t review it.

Do not arbitrate. Our motion to vacate is attached. Read on. We will break this down a bit more in subsequent posts. See our Memorandum Support The Motion to Vacate here. Memorandum Supporting Motion to Vacate Award


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