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Thomas Kinkade Co. v. White - 711 F.3d 719 (6th Cir. 2013)

Rule:

The Federal Arbitration Act authorizes federal courts to vacate arbitration awards on certain specified grounds. 9 U.S.C.S. § 10. Among those grounds is evident partiality or corruption in the arbitrators. § 10(a)(2). To establish evident partiality, the challenging party must show that a reasonable person would have to conclude that an arbitrator was partial to one party to the arbitration. This standard requires a showing greater than an appearance of bias, but less than actual bias; and to meet it, a party must establish specific facts that indicate improper motives on the part of the arbitrator.

Facts:

Mark Kowalsky was a purportedly neutral arbitrator in a dispute between the Thomas Kinkade Company and Nancy and David White. Nearly five years and nearly 50 hearing days into their arbitration, however, Kowalsky announced to Kinkade that its adversary, David White, and the Whites' advocate on the arbitration panel, Mayer Morganroth, had each hired Kowalsky's firm for engagements that were likely to be substantial. Kinkade objected, to no avail. A series of irregularities in the arbitration followed, all of which favored the Whites. Kowalsky eventually entered a $1.4 million award in the Whites' favor. Kinkade filed a motion to vacate the final award and the district court vacated the award on grounds of Kowalsky's "evident partiality." The Whites appealed.

Issue:

Did the arbitrator show evident partiality?

Answer:

Yes.

Conclusion:

The court found that Thomas Kinkade Company showed a motive for the arbitrator to favor Nancy and David White and multiple, concrete actions in which he appeared actually to favor them. As to the motive, nearly five years into the arbitration, and in the space of eight weeks, the purportedly neutral arbitrator's law firm was hired by one party's arbitrator-advocate and then again by that same party for engagements that by all appearances would have been substantial. The arbitrator gave Nancy and David White a second and then a third chance to bolster the proofs for their claims. He allowed Nancy and David White to rely upon 8,800 documents they had deliberately and wrongfully withheld for more than four years. He denied Thomas Kinkade Company any relief on a straightforward breach-of-contract claim that was virtually uncontested during the hearings. The arbitrator failed to offer any response to serious objections that Thomas Kinkade Company raised to his decisions as an arbitrator. And the arbitrator awarded Nancy and David White nearly $500,000 in attorneys' fees after the plain terms of the interim award indicated that defendants' request for fees had been denied. The evidence was more than sufficient to show the arbitrator's evident partiality. The district court's judgment was affirmed.

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