A North Dakota federal district court concluded that an arbitrator's commercial interest in the dispute created evident partiality and prevented him from serving as an arbitrator.

In Superior Grains, Inc. v. Palouse Empire Marketing, Inc., No. 4:07-MC-11, 2008 WL 151253 (D. N.D. Jan. 11, 2008), Superior entered intro a contract with Palouse under which Palouse would purchase a large amount of split peas and lentils from Superior.

After a dispute between the parties, Palouse contracted with another supplier, Premier Pulses to supply the split peas and lentils. Premier subcontracted with Agricore United to supply a portion of the lentils to Palouse.

As members of the United States Pea & Lentil Trade Association (USPLTA), Superior and Palouse agreed to arbitrate their dispute. Under the USPLTA rules, each party chose one arbitrator and the two arbitrators chose a third arbitrator.

Superior chose Larry White, and Palouse chose Dirk Boettcher. White and Boettcher selected Paul Lambert as the third arbitrator. During the post-argument deliberations, Boettcher informed the other arbitrators that he was employed by Agricore and that Agricore had supplied lentils to Premier.

White was concerned that Boettcher should not be serving as an arbitrator because White did not believe Boettcher could remain impartial. The panel found in favor of Palouse and ordered Superior to pay damages to Palouse.

After Superior learned of Boettcher's involvement in the lentil contract, it appealed to the USPLTA Appeal Committee. The Committee affirmed the panel's decision on the basis that Boettcher's involvement was harmless to the award.

Superior filed a motion in this Court to vacate the arbitration award and argued that Boettcher was evidently partial. The Court noted that under the Federal Arbitration Act (FAA) it may vacate an arbitration award where there was evident partiality or corruption in the arbitrators, or either.

The Court noted that under the USLPTA rules, persons commercially interested in the dispute cannot serve as arbitrators. Boettcher's relationship was directly related to the dispute being arbitrated. Thus, the Court determined that the nature of this relationship prohibited Boettcher from serving as an arbitrator.

The Court emphasized that it did not believe that either arbitrator had any ill will or conspiratorial mind. However, Boettcher's relationship to the dispute still met the standard for evident partiality. The Court granted Superior's motion to vacate the award because Superior has the right to present its case to an impartial arbitration panel.