Arbitral Immunity Doesn’t Apply to Arbitrator Who Refuses to Issue an Award Without Good Cause

An arbitrator who withdraws from a case for no stated ethical reason after hearing evidence and argument is not protected by arbitral immunity because the failure to render an award is not integral to the arbitration process.

In Morgan Phillips, Inc. v. JAMS/Endispute, L.L.C., No. B183934, 2006 WL 1681344 (Cal. Ct. App. Jun 20, 2006), Morgan Phillips, a retailer, sued JAMS and its arbitrator John Bates, alleging that Bates suddenly, and with no lawful justification, withdrew as arbitrator and refused to issue a decision in an arbitration between the company and one of its suppliers. In the trial court, Bates and JAMS successfully argued that they were immune from suit under the doctrine of arbitral immunity.

On appeal, the Court acknowledged that the reach of arbitral immunity was quite broad. Not only does arbitral immunity protect arbitrators from liability for conduct in their quasi-judicial capacity, including bias or prejudice in rendering decisions, but it also protects an arbitrator’s failure to act when a lawful reason, such as an apparent conflict, prevents an arbitrator from issuing an award. The Court recognized that such broad immunity was necessary to prevent “vexatious litigation” and promote “principled and fearless decision-making.”

Even with such broad immunity, however, arbitrators are not immune when they breach a contractual obligation by failing to issue a decision at all, the Court concluded. As the Court explained, failure to issue an award, without lawful justification, is not integral to the arbitration process. In fact, it is a breakdown of the process. Moreover, if a judge were to exhibit such behavior, parties could petition for an extraordinary writ compelling the judge to issue a decision. As an equivalent remedy against an arbitrator, parties are allowed to file a civil suit for specific performance or damages.

The Court emphasized that it was not suggesting that parties could litigate an arbitrator’s stated ethical grounds for recusal. But because Morgan Phillips alleged that Bates provided no reason for his withdrawal, the Court rejected the immunity argument and remanded the case to proceed in the trial court.