A Recent Case on Arbitrator Bias in California

In the recent case of FCM investments, LLC v. Grove Pham, LLC, 2023 WL 682682, a noteworthy decision emerged from the Court of Appeals of California, Fourth District, Division One, on October 17, 2023. The judgment vacated a previous arbitration award, shedding light on the critical issue of arbitrator bias and its implications in California’s arbitration law.  

Case Overview: 
FCM investments, LLC brought a case against Grove Pham, LLC et al., that eventually went to arbitration. The arbitration award was vacated due to misconduct by the arbitrator, who disbelieved the testimony of the defendant's primary witness because she had requested an interpreter, despite having conducted sophisticated business dealings in the US for many years. The arbitrator’s credibility finding was based on unacceptable misconceptions about English proficiency and language acquisition, which created a reasonable impression of possible bias sufficient to vacate the award  

Arbitrator Bias and California Law: 
California law provides a framework for parties to challenge arbitration awards if there is evidence of arbitrator bias or other misconduct. According to the Code of Civil Procedure, Section 1285, any party to an arbitration where an award has been made may petition the court to confirm, correct, or vacate the award. A Practice Note under the California Arbitration Act (CAA) elaborates on how to vacate or correct an arbitral award in the California state courts, discussing procedural considerations and grounds to challenge the award.  

In Betz v. Pankow 16 Cal.App.4th 919 (1993), the California Court of Appeal established the "impression of possible bias test," which arises from an arbitrator's failure to disclose any matter that might create such an impression. Rule 3.828 of the 2023 California Rules of Court further stipulates that a party can move to vacate a judgment on an arbitration award within six months of its entry, especially if the arbitrator was subject to a disqualification not disclosed before the hearing.  

Applicable Scenarios  

The Language Proficiency Scenario: In an arbitration where a party is a non-native English speaker, suppose an arbitrator questions their credibility based on their request for an interpreter. Drawing from the FCM Investments decision, such an act could be seen as bias, potentially leading to the vacating of an arbitration award if it suggests that the arbitrator harbored preconceived notions about language proficiency and credibility.  

The Non-Disclosure Scenario: Imagine an arbitrator has a past business relationship with one of the parties but fails to disclose this. Based on the standards set by the Betz v. Pankow case and Rule 3.828 of the 2023 California Rules of Court, such nondisclosure could lead to a vacated award if discovered, as it creates an impression of possible bias.  

The Social Media Scenario: An arbitrator makes public comments on social media that exhibit a clear opinion about a case's subject matter or the parties involved before the arbitration concludes. This could be grounds for vacating the award under the impression of possible bias test, as it undermines the arbitrator's impartiality.  

The Delayed Revelation Scenario: After an arbitration award is made, it comes to light that the arbitrator had undisclosed financial interests that could be affected by the outcome. This revelation could result in a party petitioning to vacate the award within six months, as per the 2023 California Rules of Court, due to the arbitrator’s potential bias.  

The Cultural Misunderstanding Scenario: Suppose an arbitrator discounts the credibility of a witness because of their cultural practices or mannerisms during testimony, which the arbitrator is unfamiliar with or misinterprets. Drawing from the FCM Investments case, such conduct could be considered biased and might lead to the award being vacated for failing to maintain arbitrator impartiality.  

Implications 

FCM Investments underscores the importance of impartiality and proper conduct by arbitrators to ensure fair arbitration proceedings. It also highlights one avenue available for parties in California to challenge arbitration awards, contributing to a broader discourse on ensuring justice and equity in arbitration processes. This case further reinforces the necessity for arbitrators to adhere to the highest standards of fairness and impartiality to uphold the integrity of the arbitration process.