Originally from Dispute Resolution Journal

MINING

Conduct of Party-Appointed Arbitrators

The 8th Circuit upheld two arbitration awards despite claims of evident partiality and misconduct on the part of a party-appointed arbitrator.

Delta Mine Holding Company was involved in two arbitrations with AFC Coal Properties over Delta Mine’s termination of two lease agreements. The agreements provided for arbitration of disputes by a panel which included a neutral arbitrator and two party-selected arbitrators. The agreements required each arbitrator to be a mining engineer and stated that the neutral arbitrator may not be “an officer, employee or shareholder of, attorney or auditor to, or otherwise interested in” either party or the matter to be arbitrated. Delta Mine designated Alan Stagg of Stagg Engineering Services as its party arbitrator. AFC designated mining engineer Paul Jones. Stagg and Jones selected mining engineer John Wilson as the neutral arbitrator for one arbitration, and mining engineer Eugene Kitts as the neutral arbitrator for the other arbitration.

AFC moved to vacate the awards citing the fact that Delta Mine’s party arbitrator (1) failed to fully disclose an ongoing substantial relationship with Delta Mine and helped it prepare for the hearings, (2) disclosed to Delta Mine ongoing panel deliberations, and (3) communicated with Delta Mine about how to sway the arbitrators. The district court concluded that this conduct violated the Code of Ethics for Arbitrators in Commercial Disputes and vacated the awards.