Summary of a Recent
Judicial Development in
Production Contracts

Defendant Failed to Prove Evident Impartiality, Arbitration Award Upheld

John Pesek
National AgLaw Center Research Associate

Summary of Decision

In Winfrey v. Simmons Foods, Inc., 495 F.3d 549 (8th Cir. 2007), the Eighth Circuit Court of Appeals held that the defendant failed to show any evident impartiality on the part of the plaintiffs' arbitrator; therefore, the court refused to set aside the arbitration award in favor of the plaintiffs.

Background

The plaintiffs' sued the defendant for alleged violations of the Packers and Stockyards Act, and the district court ordered that the parties submit their dispute to a panel of arbitrators as required by the arbitration clause in their contract. See id. at 550. The arbitration clause dictated that each party would choose one arbitrator, and the two arbitrators would then appoint a third arbitrator. See id. The defendant alleged that the plaintiffs' selected arbitrator should have been removed for bias, but its motion for removal was denied by the district court. See id. at 551. The arbitrators then awarded $510,000 in damages to the plaintiffs. Id. The district court confirmed the arbitration award, and the defendant appealed. See id.

Arguments

The defendant argued that the arbitration award should be overturned, because provisions in the Federal Arbitration Act (FAA) allow a court to vacate an award if one or more arbitrators had "evident partiality." See id. The defendant also argued that the plaintiffs' arbitrator's failure to disclose his relationship with the plaintiffs' created an impermissible appearance of bias, so the award should be vacated. See id. at 552.

Analysis and Holdings

The Eighth Circuit Court of Appeals explained that evident partiality cannot be the purpose of vacating an award under the FAA unless the movant can show prejudice on the part of the arbitrator. See id. at 551. In this case, the arbitrators on numerous occasions had stated that the arbitration clause did not require that the arbitrators chosen needed to be impartial. Id. Regarding the defendant's second argument, the court found that there was never a requirement that the arbitrators make any disclosures to the parties. See id. at 552. The court noted that the burden of showing the evident impartiality was on the defendant, and the court held that it failed to meet that burden and that the mere possibility of prejudice was insufficient for setting aside the award. See id. at 552-53.

The case was decided on July 19, 2007.