Court Vacates Arbitration Award Because Party-Appointed Arbitrator Was Acting As Party’s Attorney in Unrelated Matters

The Rhode Island Supreme Court affirmed an order vacating an arbitration award because a party-appointed arbitrator failed to disclose that he had an attorney-client relationship with the party that appointed him.

In McGinity v. Pawtucket Mutual Insurance Co., No. 2005-32-APPEAL, 2006 WL 1596466 (R.I. June 13, 2006), McGinity and Pawtucket submitted a personal injury dispute to a tripartite arbitration panel consisting of two party-appointed arbitrators and a neutral arbitrator.

During the arbitration, McGinity discovered that Pawtucket’s party-appointed arbitrator was acting as Pawtucket’s attorney in ongoing, unrelated matters. McGinity demanded that the arbitrator withdraw, but the arbitrator refused and joined the neutral arbitrator in assessing McGinity’s damages at $45,000. In dissent, McGinity’s party-appointed arbitrator assessed damages at $636,000. The trial court vacated the arbitration award on the ground that there was “evident partiality” on the part of Pawtucket’s arbitrator.

On appeal, Pawtucket cited Aetna Casualty & Surety Co. v. Grabbert, 590 A.2d 88 (R.I. 1991). In Grabbert, the court reversed an order vacating an arbitration award because even though “the party-appointed arbitrator’s contingent fee gave him a direct financial interest in the award that was absolutely improper,” the moving party failed to demonstrate a causal nexus between the award and the arbitrator’s improper conduct.

The Court addressed the causal nexus requirement after concluding that Pawtucket’s arbitrator was obligated to disclose his attorney-client relationship. The Court distinguished Grabbert on the ground that the award in that case was unanimous. Moreover, the Court reasoned that “the nondisclosure of the existence of such an attorney-client relationship should give rise to a rebuttable presumption that Grabbert’s causal nexus requirement has been met.” The Court found nothing in the record to convince them that Pawtucket had rebutted the presumption.