Arbitrator selection is likely the single most important, outcome determinative decision you make when proceeding to arbitration. You can have both the law and facts on your side, but if you don’t have the arbitrator on your side, you can lose. In fact, an arbitrator can render a decision against your client based on a misapplication or misunderstanding of the law, and there is little chance you can do anything about it. For example, under the Federal Arbitration Act (under which most arbitrations fall), there are only four reasons a disgruntled party may appeal an award by an arbitrator: the award was procured by corruption, fraud, or undue means; there was evident partiality or corruption by the arbitrators; there was arbitral misconduct, such as refusal to hear material evidence; or the arbitrators exceeded their powers, or so imperfectly executed their powers that they failed to render a mutual, final and definite award. Some courts, including the U.S. Court of Appeals for the Third Circuit, have also recognized additional, nonstatutory bases upon which a reviewing court may vacate an arbitrator’s award under the FAA. See generally Tanoma Mining v. Local Union, No. 1269, 896 F.2d 745, 749 (3d Cir. 1990) (recognizing that an award may be set aside if it displays “manifest disregard for the law”). It should be noted, however, that the Second Circuit analyzed all cases in its circuit which sought to reverse an arbitration award under the “manifest disregard for the law” standard – only 4 of the 48 cases before it were successful. See Duferco International Steel Trading v. T. Klaveness Shipping A/S, 333 F.3d 383, 389 (2d Cir. 2003). All this is to say, with little ability to overturn an arbitrator’s award, it is critical that you select an arbitrator right for your case and client.
Is Three Really a Magic Number?
Before getting to the nitty gritty of who to select as an arbitrator, you may first be faced with the decision of how many: do you want a single arbitrator hearing your matter, or do you desire a panel of three arbitrators. In some instances, the arbitration clause is silent on this issue, and the rules of a particular arbitration provider (e.g., AAA or JAMS) may dictate this issue. In other instances, the number of arbitrators may be mandated in the arbitration provision itself. Regardless, it is important to remember that in most instances, you can always agree with your adversary post-arbitration initiation to a number of arbitrators that is contrary to the rules or terms of the contract.
