CDRC'S SECOND COMMENTS TO ETHICAL STANDARDS
September 4, 2002
Via Email and Fax
Ms. Romunda Price
Judicial Council
455 Golden Gate Avenue
San Francisco, CA 94102
Re: Comments to Ethics Standards for Neutral Arbitrators in Contractual Arbitration
Dear Ms. Price:
Thank you for the opportunity to once again comment on the Ethics Standards for Neutral Arbitrators in Contractual Arbitration. I am writing these comments as President of California Dispute Resolution Council (CDRC), an organization composed of mediators, arbitrators, other ADR professionals and providers. Over the last eight years, CDRC developed and refined dispute resolution principles and standards of practice that demand fairness and impartiality in all aspects of a proceeding including full disclosure of any conflicts by the neutral. We support the efforts of the Judicial Council to insure the integrity and fairness of contractual arbitration proceedings. However, as we noted in our last commentary, (see CDRC letter to Judicial Council of February 22, 2002) pressure to comply with the legislative mandate to adopt standards by July 1, 2002 resulted in an inadequate period of time to draft and review language. As a result, we believe there will continue to be uncertainty about implementation of these comprehensive standards as adopted. In the two months since the Standards first came into effect, there has been considerable confusion requiring clarification. Therefore, we urge the Judicial Council to put in place a mechanism for the correction and refinement of language and meaning of the Standards once they have been in effect for a longer period of time at a minimum. As experience with the Standards provides a better understanding of their impact, CDRC recommends that the Council reopen a comment period January 1, 2003 with a deadline several months thereafter. Although shortened from 37 pages, the Standards still comprise 25 pages of text rules and commentary. Because of the detail, some arbitrators have wondered whether disclosure is required if not specifically noted. For example, there is language about requiring disclosure of any facts or belief regarding impartiality. We believe there should be a criterion of materiality. The test for materiality of a disclosure or action could be that used by a court when faced with a challenge to vacate an award for non-compliance with the Standards. Disclosures could be limited to those which enable parties to make knowledgeable appointment of arbitrators and arbitration providers, which could affect or influence the outcome of a case, or which would give the arbitrator a direct or indirect financial or personal interest in the outcome of the arbitration. Reference could also be made to the Revised Uniform Arbitration Act (2000), which has now been adopted in several states and is pending adoption in several others. The RUAA was the product of more three years of nationwide analysis, debate and revision. It requires disclosure of known facts a reasonable person would consider likely to affect the impartiality of the arbitrator (Section 12 (a). Furthermore, an arbitrator who does not disclose a known, direct and material interest in the outcome of the arbitration proceeding or a known, existing and substantial relationship with a party is presumed to act with evident partiality under Section 23(a)(2) which then provides authority to vacate the award. The presumption of evident partiality is another way of expressing the consequence for a material non-disclosure. The Standards lack this clarity and, as written, permit challenge of the finality of arbitration awards for immaterial non-disclosures.
The Standards were drafted on the premise that arbitrators should be subject to the same ethical standards and practices as judges. While this notion has an apparent appeal, it is problematic in its application. Judges are either appointed or elected, have fulltime caseloads that are assigned by third parties, are subject to oversight by the Judicial Council, and are subject to discipline for malfeasance. An arbitrator, on the other hand, is chosen by both attorneys and parties (and could be dismissed by them acting jointly), as often as not serves only part-time, is not subject to oversight from any self-regulatory council, and rather than being subject to discipline may be personally liable if an inadvertent non-disclosure causes the arbitration award to be vacated and subsequent claims by the parties for costs result. Judges are never exposed to this kind of personal liability. Arbitrators have a legitimate concern that an unintended consequence of these Standards will be personal civil claims against them by losing parties for inconsequential failure to disclose non-material information. These claims could be motivated for harassment, intimidation or just for monetary purposes. Therefore, CDRC asks that the Judicial Council make clear the intent of the Standards is to disqualify an arbitrator and/or vacate an award for non-compliance and not to give license to losing parties for civil claims against the arbitrator.
CDRC circulated to its members the proposed and final versions of the Standards for comment. The following is a partial list of their comments and questions. We have also provided recommendations where appropriate.
1. The definition of “conclusion of the arbitration” in Standard 2 (c) does not include the possibility of settlement before an arbitration award is made. We recommend the definition include “when the case settles before the arbitration award is made.”
2. Does the “member of the arbitrator’s extended family” include stepchildren who do not reside in the arbitrator’s household? An arbitrator may have a closer relationship with stepchildren than with other relatives identified in Family Code 297. Standard 2 (n). It is unclear whether an arbitrator needs to check conflicts with stepchildren.
3. Who determines “if an arbitrator is not able to properly perceive the evidence or properly conduct the proceedings because of a permanent or temporary physical impairment…”? Standard 7 (c) (1). How can the arbitrator determine if s/he is so impaired? We recommend this obligation be dropped or clarified to require disclosure by the arbitrator only if the arbitrator “believes” he or she is unable to go forward because of an impairment.
4. The obligation in Standard 7 regarding extended family relationships states “an arbitrator will be deemed to have complied with the obligation to inform himself or herself of and to disclose relationship involving his or her extended family and former spouse (emphasis added)….” Arbitrators with former spouses find this provision incredible. When there is no financial relationship between former spouses, there is generally little contact and little inclination to establish contact. Why is the Judicial Council imposing this condition? We recommend “former spouse” be dropped unless there is a financial relationship with the arbitrator.
5. How is the term “favor” to be construed in Standard 9? Could a favor be an act of kindness or something that provides substantial personal benefit? We believe the term is too vague and recommend the term should be dropped or defined.
6. Who determines whether the arbitrator conducted the arbitration fairly or whether the arbitrator was swayed by partisan interests as provided in Standard 11? CDRC believes this is a general invitation for the losing party to sue. We recommend that a party must show it was substantially prejudiced before it can invoke this Standard.
7. These standards do not apply to arbitrations arising out of public or private sector labor-relations laws. Standard 3 (b)(2)(H). However, if a labor arbitrator is appointed in a civil employment case having lawyers and law firms who have appeared before him or her in one or more previous labor arbitrations, it is unclear whether or not disclosures must be made. We request clarification.
8. Section 7(d)(3) is confusing. It appears to say an arbitrator is not required to disclose offers of employment from a party or lawyer in the arbitration in commercial cases but must do so as required by Section 10 (d) in consumer cases. If this is the meaning, we request clearer language.
9. We recommend the Judicial Council make available information about computer conflicts checks software to aid in the proper disclosure of prior arbitration and mediation cases. We also recommend the Judicial Council provide a checklist to aid arbitrators in their disclosure requirements.
10. We recommend there be some exclusion for disclosure for arbitrators who volunteer their time for courts in judge pro tem positions or as pro bono arbitrators or mediators in court-connected programs. There are occasions where a pro bono neutral will hear hundreds of cases in a short period of time and keeping track of parties and attorneys might cause them to either give up arbitration or the pro bono activities. The Courts will then feel the burden.
Arbitrators continue to feel frustrated by the requirement that only arbitrators must supply information about the relationships of lawyers, associated lawyers, law firms who have some connection with the case, while attorneys have no obligation to make any disclosure. It has been the experience of one CDRC member that law firms representing parties have not complied with his request for names of attorneys in the firm in order to enable him to make required disclosures of any relationship he or his family may have with the attorneys. Another arbitrator is perplexed on how to comply with the same disclosure requirement when his son, daughter, son-in-law and daughter in-law work for four different law firms that employ, in the aggregate, something like 2,500 lawyers on any given day.
The Judicial Council response to CDRC’s request to require attorneys to make disclosures has been that it is only empowered by the Legislature to regulate arbitrators. We believe this response is insufficient considering that the Council was able to extend its power by including information about arbitration providers not contemplated by the legislature when SB 475 was before the legislature. Surely there must be a way for the Judicial Council to make it clear, either in the Standards or in the comments to the Standards, that attorneys to the arbitration “should make a reasonable and good faith effort to ascertain the existence of connections to the arbitrator of which he or she may aware”. Furthermore, if attorneys refuse to make such an effort when requested by the arbitrator, they should be precluded from challenging the award or suing the arbitrator on the basis of non-disclosure of conflict information the lawyers could have provided.
Finally, more than one of our members is concerned with the title of these requirements. “Ethical Standards” seems to communicate something aspirational. But these are mandatory ethical rules with substantial consequences. We recommend changing to “Ethical Rules for Neutral Arbitrators in Contractual Arbitrations.”
The longer these Standards are in effect, the more practical questions and concerns are likely to arise. We recommend that the Judicial Council establish a procedure for receiving ongoing input about practice problems and have a continuing process to deal with the need for possible revision of the Standards.
Sincerely,
Ruth V. Glick
President
