Losing Party Misfires in Attempt to Show Arbitrator’s Bias

After receiving a favorable arbitration ruling, Midwest Generation EME moved to confirm its award against Continuum Chemical Corporation, which countered with a petition to vacate the award based on the “evident partiality” of one of the arbitrators.  Continuum alleged that the arbitrator, Stanley Sklar, intentionally concealed “a system of referrals and ongoing economic and professional business relationships” between himself, his former construction law practice group at Bell, Boyd & Lloyd, and the opposing counsel’s construction law practice group at Schiff Hardin LLP.

Continuum requested that it be allowed to take limited discovery of Mr. Sklar based on his affiliation with the lawyers at Schiff Hardin, contending that he violated the AAA Code of Ethics.  According to the code, Mr. Sklar has a continuing duty to disclose any circumstance or relationship likely to give rise to “justifiable doubt” as to the arbitrator’s impartiality and which might “reasonably affect impartiality or lack of independence.”  Courts have been reluctant, however, to allow post-arbitration discovery as it is often a tactic employed by losing parties who want another bite at the apple.  Thus, most jurisdictions allow vacation of arbitration awards only when there is clear evidence of arbitral impropriety or bias.

In order to support its claim of impropriety, Continuum points to the common professional involvements between Mr. Sklar and the Schiff Hardin attorneys, such as concurrent membership in the same professional associations, simultaneous participation in professional seminars, boards and committees, and collaborative authorship of books on construction law.

In denying Continuum’s Motion for Leave to Take Limited Discovery, United States Magistrate Judge Jeffrey Cole held that there was no evidence that would warrant a departure from the deeply held sentiment that post-arbitration discovery should be allowed only in exceptional circumstances.  The court found that Mr. Sklar’s participation in the above-mentioned activities did not trigger his obligation to disclose his “relationship” with the Schiff Hardin attorneys.  Given the intimacy of the group of specialists and professionals from which arbitrators are chosen and how common it is for construction lawyers to appear as arbitrators, the court refused to find that the claimed evidence was more than mere speculation, concluding that the allegations failed to support a finding that there was a reasonable probability that pecuniary interests and business referrals existed between Mr. Sklar and the Schiff Hardin attorneys.

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