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Virginia Supreme Court weighs meaning of 'evident partiality' in arbitration dispute
Summary
In oral argument in Garofalo v. DiVincenzo, counsel disputed whether an arbitrator's nondisclosure that creates an appearance of bias is enough under the Virginia Uniform Arbitration Act to vacate an award, or whether a higher showing of impairment or actual bias is required.
The Supreme Court of Virginia heard arguments in Garofalo v. DiVincenzo over what the statute’s phrase “evident partiality” requires under the Virginia Uniform Arbitration Act. Monica Munday, appellant’s counsel, told the court that evident partiality includes nondisclosure that reasonably creates an appearance of bias and urged the court to reverse the Court of Appeals and remand for application of that standard.
Munday argued the arbitration award should be vacated because the arbitrator failed to disclose two material facts: that he had served as chair of a bank board where he introduced DiVincenzo and her firm Lionsbridge, and that there was a contractual and financial relationship between DiVincenzo’s firm and a subsidiary of companies on whose boards the arbitrator served as a director and shareholder. “The arbitration award should be vacated because the arbitrator failed to disclose at least two material things,” Munday said, and she told the court the arbitrator had testified he would have disclosed the relationships if he had remembered them because they would have created an appearance of bias.
Counsel for the appellee, Matthew Fitzgerald, urged the court to affirm. Fitzgerald said the Court of Appeals applied the correct legal test and that the facts here were “innocuous in the extreme,” describing the connections as remote, years old and amounting to small sums. He told the court the trial court found the tenuous connection would not reasonably create an appearance of bias and that the trial court’s factual findings had not been assigned as error.
Justices questioned both sides about the scope of the statutory standard and whether the question is one of appearance at the selection stage or of actual impairment during proceedings. One justice asked whether substituting a hypothetical “evident potential partiality” standard would change the result and whether a broad nondisclosure rule would invite post hoc challenges based on trivial associations. Another justice noted that the arbitrator took the FINRA oath stating he knew of no relationships “which would impair me from performing my duties,” and asked whether that oath and the parties’ agreed disclosure rules should resolve the dispute; Munday responded that an oath is not a substitute for disclosure because the parties were deprived of the information when choosing arbitrators.
The argument focused on two interlocking questions: (1) whether Commonwealth Coatings and related authorities require courts to set aside awards where nondisclosure creates a reasonable appearance of partiality, and (2) whether the facts shown here—an introduction at a board meeting scripted by others and a remote, historical business relationship—are sufficiently material to meet that standard. Counsel and the bench also discussed the trial court’s credibility findings and Glasser’s testimony that, had he remembered the contacts, he would have disclosed them and likely would not have taken the case.
Munday had reserved time for rebuttal earlier in the argument but did not present additional rebuttal on the record before the bench concluded oral argument. The court took the case under advisement.
