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Mar 16, 2020

Federal Ninth Circuit Creates New Obligation for Arbitrator Disclosing Potential Bias

By: Moris Davidovitz

The Ninth Circuit recently held that an arbitrator with Judicial Arbitration and Mediation Service (JAMS) had an obligation to disclose to the arbitration parties the arbitrator’s ownership interest in JAMS, and the failure to so disclose required the Court to vacate the arbitration award on grounds of evident partiality.  Monster Energy Co. v. City Beverages, L.L.C., 940 F.3d 1130 (9th Cir. 2019).

Because the JAMS arbitrator did not disclose his ownership in JAMS, and because one of the litigants (Monster) frequently used JAMS’s services, the circuit court ruled that the arbitrator’s decision in favor of that litigant was suspect.  The court imposed not only a requirement that the arbitrator disclose his ownership interest in the company, but also disclose the amount of the business the service receives from the litigants.  

Inasmuch as it is reported that a substantial number of JAMS arbitrators have an ownership interest in JAMS, and that some clients of JAMS are frequent users, that arbitration service and perhaps other similar services frequently would need to make such further disclosures.  The extent of those necessary disclosures was not, however, detailed by the court.

JAMS filed a brief supporting a motion for rehearing en banc, which the Court denied.  It appears a petition for writ of certiorari to the U.S. Supreme Court is being contemplated.