Summary of a Recent
Judicial Development in
Production Contracts

Possible Bias of Arbitrator Does Not Require Court to Vacate Award

John Pesek
National AgLaw Center Research Associate

Summary of Decision

In Winfrey v. Simmons Foods, Inc., Civ. No. 03-2237, 2006 WL 2564206 (W.D. Ark. Sept. 6, 2006), plaintiffs asked the United States District Court for the Western District of Arkansas to confirm an arbitration award against the defendant Simmons Foods, Inc., and the defendant argued for a motion to vacate the arbitration award because of the alleged bias of one of the arbitrators. The court ruled that the arbitrators were not required to be neutral.

Background

On October 24, 2003, the plaintiffs filed a complaint seeking damages for termination of an agreement to raise chickens. Id. at *1. The plaintiffs also sought damages for fraud and promissory estoppel. Id. The defendant sought a motion to compel arbitration on December 30, 2003, and on April 14, 2004, the court found that the plaintiffs and defendant had entered into an agreement to arbitrate. Id. The court ordered the parties to submit to arbitration according to their agreement. Id. On November 24, 2004, the plaintiffs filed a motion to either reopen or compel compliance with the arbitration clause, and to reconsider their order for compelling arbitration because the plaintiffs alleged that the defendant failed to comply with the arbitration agreement governing the selection of arbitrators. Id. The defendant requested that the court remove the plaintiffs' appointed arbitrator due to bias. Id. The court denied both motions and ordered the arbitration proceedings to continue. Id.

The arbitration agreement provided that each side would appoint its own arbitrator, and the two arbitrators selected would then select the third and final arbitrator. Id. The plaintiffs alleged that the defendant failed to appoint its arbitrator within the specified time and that it also breached the agreement by substituting another person as its arbitrator. Id. The defendant claimed that the plaintiffs' arbitrator should be disqualified due to bias. Id. The arbitration panel decided the case in favor of the plaintiffs and awarded $510,000 in damages, and ordered the defendant to pay the cost. Id. at *2.

Arguments

The plaintiffs argued that the court should confirm the arbitration award on four merits: 1) all three of the arbitrators were attorneys, two of whom were chosen by the defendant; 2) the award was unanimous; 3) no record was made at the proceeding upon which to review the alleged partiality; and 4) the panel found that the questionable arbitrator was fair and impartial. Id.

The defendant's sole argument was that the award should be dismissed based on the arbitrator's bias. Id.

Analysis and Holdings

The court held that the defendant's argument did not specify any rules outside of the arbitration agreement to govern disputes, and the arbitration agreement never specified that the arbitrators chosen were required to be neutral. Id. at *3. The court cited the general proposition that any ambiguity in a contract should be construed against the drafter, so the court held that the arbitrators chosen by the parties were not required to be neutral. Id. The court further held that the defendant lacked proof to show any evident partiality that had a prejudicial impact on the award; therefore, the defendant's argument failed. Id.

The case was decided on September 6, 2006.