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In upholding a unanimous arbitration award in favor of a group of poultry growers, the Eighth Circuit Court of Appeals explained that party-appointed arbitrators need not be neutral. However, as the Court noted, “evident partiality” may be a basis for vacating an arbitration award if the alleged bias of a party-appointed arbitrator had a prejudicial impact on the award.
In Winfrey v. Simmons Food, Inc., 495 F.3d 549 (8th Cir. 2007), a group of poultry growers (the Growers) sued Simmons Food (Simmons) for damages under the Packers and Stockyards Act. The district court ordered the parties to submit the dispute to arbitration in accordance with an arbitration clause in their contract.
The arbitration agreement called for a tripartite arbitration panel consisting of (1) two party-appointed arbitrators and (2) a “neutral” arbitrator chosen by the two party-appointed arbitrators. The Growers appointed J. Dudley Butler as their party-appointed arbitrator.
Nine months later, Simmons objected that Butler was biased and sought a court order removing him from the arbitration panel. The court referred the matter to the arbitration panel, which in turn concluded that the arbitration agreement did not require party-appointed arbitrators to be neutral. The arbitration proceeded, and after a hearing, the arbitration panel unanimously awarded the Growers $510,000 in damages.
Simmons filed a motion to vacate the award based on Butler’s alleged bias. The district court denied that motion and confirmed the award.
On appeal, the Court cited Eight Circuit precedent for the following rule: “Where an agreement entitles the parties to select interested arbitrators, ‘evident partiality’ cannot serve as a basis for vacating an award under [the FAA] absent a showing of prejudice.” The Court applied that rule in this case because it agreed with the arbitration panel’s conclusion that the arbitration agreement did not require the party-appointed arbitrators to be neutral.
In applying that rule, the Court held that “evident partiality” was not a basis for vacatur because Simmons did not present any evidence that Butler’s alleged bias “deceived or misled the other two arbitrators, prejudiced Simmons’s ability to present its case, or in any way affected the award to which the arbitrators agreed unanimously.”
Simmons also challenged the award based on Butler’s nondisclosure of his relationship with the Growers. In rejecting this challenge, the Court explained that “[t]he requirement that neutral arbitrators make disclosures does not extend to party-appointed arbitrators.”
Even though the common law duty of disclosure does not necessarily apply to party-appointed arbitrators, the rules of arbitration may still require party-appointed arbitrators to make disclosures regarding their background and relationship with the parties. For example, Rule 23(B) of the National Arbitration Forum Code of Procedure requires all arbitrators – party-appointed or otherwise – to provide a resume and disclose any circumstances that create a conflict of interest or appearance of bias.
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