By Leslie King O’Neal
Conflicting Cases on “Evident Partiality” Require Tea Leaf Reading
An arbitrator’s “evident partiality” toward one party is grounds to vacate an award under the Federal Arbitration Act (“FAA”)[i] But what constitutes “evident partiality” sufficient to vacate an award? The leading Supreme Court decision doesn’t provide definitive guidance, and the Federal Circuits apply different standards. The Revised Uniform Arbitration Act, adopted by 22 states and DC, defines “evident partiality” but it does not apply in all cases. Arbitrators and lawyers are left trying to read the tea leaves from the conflicting opinions on this issue.
SCOTUS and the Commonwealth Coatings Tests
The leading U.S. Supreme Court case on setting aside arbitration awards for “evident partiality” is Commonwealth Coatings Corp. v. Continental Casualty Co[ii]. There, a subcontractor sued a prime contractor and its sureties for money owed on a painting contract. The case went to arbitration. Each side selected an arbitrator, and the two wing arbitrators selected the chair, who was to be neutral.
Arbitrator’s Failure to Disclose Business Relationship Results in Vacatur
After the award, the subcontractor learned that the third arbitrator had been a consultant for the prime contractor over several years. The arbitrator did not disclose this business relationship when he was selected. The subcontractor moved to vacate the award, asserting this undisclosed business relationship showed the arbitrator was guilty of “evident partiality.” [iii]
The “Black” Test and the “White” Test
Justice Black wrote the majority opinion, vacating the award and stating the “Black test.” This requires “arbitrators disclose to the parties any dealings that might create an impression of possible bias.” Concurring with the majority, Justice White created his own test for arbitrator disclosures, stating: “where the arbitrator has a substantial interest in a firm which has done more than trivial business with a party, that fact must be disclosed.”
Lack of Unified Majority Opinion Leads to Circuit Split
Lower courts applying the Commonwealth Coatings tests have struggled with its holdings. Because there was no unified majority opinion on what constitutes “evident partiality” under the Federal Arbitration Act (FAA), there is a split among the Federal Circuit Courts this issue.[iv].
Dixon Law v. Powell —What is “Evident Partiality?”
A recent case from the D.C. Circuit dealt with an arbitrator’s non-disclosure and whether it constituted “evident partiality” requiring vacatur. Dixon Law v. Powell[v] was a legal malpractice case involving bankruptcy law. The arbitrator was a retired bankruptcy judge. She made standard disclosures at the beginning of the case about attending professional meetings and interacting with other bankruptcy lawyers and judges at these meetings. When she learned one party had engaged a retired bankruptcy judge as an expert, she orally disclosed her prior professional interactions with him. She declined to serve on a panel with the expert because of the upcoming arbitration.
Arbitrator’s Post Award Activities—No Disclosures
Months later, after issuing the merits award, but before issuing the attorneys’ fee and costs award, the arbitrator co-signed an amicus brief with other former bankruptcy judges. She learned that the expert might also co-sign the brief but made no additional disclosure regarding this. The arbitrator issued the final award.
Respondent Moves to Vacate Award
Respondent sought to vacate the award under the FAA and under the D.C. version of the RUAA.[vi] The Respondent asserted the Commonwealth Coatings “Black test” (requiring disclosure of any dealings that might “create an impression of possible bias.”) supported vacating the award. However, the judge noted that the D.C. Circuit applied a narrower standard (arbitrators have duty to disclose only “significant interests in the parties”).[vii]
Co-Signing Amicus Brief Not “Evident Partiality”
Considering the arbitrator’s prior disclosures and both the SCOTUS and the D.C. Circuit rulings on “evident partiality” the trial judge found the arbitrator’s signing the amicus brief was insufficient to support vacating the award under the federal rules or the RUAA. The judge also rejected Respondent’s claim under D.C. Code § 16-4412. There was no evidence the arbitrator and the expert discussed or collaborated on the brief. The judge stated, “The amicus brief, moreover, did not transform what was at most a trivial interest into a significant one.”
VA Supreme Court Defines “Evident Partiality” under VUAA
Recently, the Virginia Supreme Court defined the standard for “evident partiality” under the Virginia Uniform Arbitration Act.[viii] Garafalo v. DiVencenzo[ix] was a FINRA[x] arbitration regarding sale of a financial services company. After the arbitration award, the losing party moved to vacate the award asserting an arbitrator’s “evident partiality” for not disclosing a prior business relationship with the other party.
Non-Disclosed Relationship
The arbitrator did not disclose that he sat on the board of a holding company for a bank and a trust company. DiVencenzo’s company provided services to the trust, and the arbitrator met the individual owner at a presentation. The relationship between the trust and DiVencenzo’s company dissolved 5 years before the arbitration and generated only $8,000 in income. There was no further interaction between the arbitrator and the company.
VA Supreme Court Defines “Evident Partiality” Under VUAA
The VA Supreme Court held, “. . . a party seeking vacatur for evident partiality under Code § 8.01-581.010(2) must show that a reasonable person, knowing all the relevant facts, would conclude that the arbitrator’s conduct signifies obvious bias against that party.” “This standard requires objective evidence of conduct inconsistent with impartiality—not necessarily proof of the arbitrator’s actual subjective bias, nor a presumption of bias from every party-arbitrator interaction.”
Takeaways:
- Courts struggle to define what constitutes arbitrator “evident partiality” under FAA §10(a)(2) after Commonwealth Coatings.
- It’s good practice for arbitrators to disclose any and all prior or current relationships with parties, counsel, or witnesses before, during and after the arbitration hearing.
- The RUAA has a clearer definition of “evident partiality” but it doesn’t apply in all cases. See prior post:
[i] 9 U.S.C.§10(a)(2) https://www.law.cornell.edu/uscode/text/9/10.
[ii] 393 U.S. 145 (1968)
[iii] The dissent noted: “Both courts below held, and petitioner concedes, that the third arbitrator was innocent of any actual partiality, or bias, or improper motive. There is no suggestion of concealment as distinguished from the innocent failure to volunteer information”.
[iv] Compare: Monster Energy Co. v. City Beverages, LLC 940 F.3d 1130 (9th Cir. 2019)(arbitrator’s failure to disclose ownership interest in JAMS & that JAMS conducted 97 prior arbitrations involving Monster Energy led to vacatur); Morelite Construction Corp. v. NY City District Council Carpenters Benefit Funds, 748 F.2d 79 (2d Cir. 1984) (father-son relationship between an arbitrator and an officer of one party to the arbitration did not rise to the level of “evident partiality”); Positive Software Solutions v. New Century Mortgage, 476 F.3d 278 (5th Cir. 2007) (neutral arbitrator’s failure to disclose he previously worked on significant, multi-year litigation as co-counsel with one of New Century’s primary law firms held a trivial past association, not supporting vacatur.)
[v](U.S. Dist. Ct, D. C September 2, 2026) (Case No: 1:2026-cv-10110) https://law.justia.com/cases/federal/district-courts/district-of-columbia/dcdce/1:2026cv01101/291017/12/
[vi]The Revised Uniform Arbitration Act, adopted in 22 states and the District of Columbia, more clearly states when an arbitrator’s failure to disclose can be grounds for vacatur. RUAA S12(e) states: “An arbitrator appointed as a neutral 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).”
[vii]Citing Republic of Argentina v. AWG Grp. LTD., 894 F.3d 327, 334 & n.2 (D.C. Cir. 2018),
[viii] VA Code § 8.01-581.010(2). It’s unclear why the court used the VUAA rather than the FAA, since most financial services would seem to involve interstate commerce, making the FAA applicable. See Allied-Bruce Terminex v. Dobson, 513 U.S.265 (1995) (FAA §2 is read broadly.) The FAA applies in state and in federal court, Moses H. Cone Memorial Hospital v. Mercury Const. Corp., 460 U.S.1 (1983)
[ix] (Record No: 2400094, VA Supreme Court, February 26, 2026) https://www.vacourts.gov/static/opinions/opnscvwp/1250094.pdf
[x]Financial Industry Regulatory Authority (“FINRA”)
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