U.S. Supreme Court Declines to Hear Evident Partiality Claim Following FINRA Arbitration

The United States Supreme Court has refused to consider what constitutes an arbitrator’s obligation to disclose arguably relevant information pursuant to the “evident partiality” test included in the Federal Arbitration Act.  In Stone v. Bear, Stearns & Co., No. 12-2827 (3d. Cir., October 29, 2013), an investor, Stone, sued the investment company of Bear, Stearns over millions of dollars in investment losses.  A three-member FINRA panel considered Stone’s case and unanimously ruled in favor of the investment firm.  Following arbitration, Stone asked a district court to vacate the arbitral award because he felt one of the arbitrators omitted relevant information from her biography.  In rejecting Stone’s claim, the district court said the statutory grounds for vacating an arbitral award require “egregious departures from the parties’ agreed-upon arbitration. Hall St. Assocs. v. Mattel, Inc., 552 U.S. 576, 586, 128 S.Ct. 1396, 170 L.Ed.2d 254 (2008).”  According to the trial court, the omission at issue did not rise to such a level.   In an unpublished opinion, the Third Circuit affirmed the district court’s holding.  Stone next sought certiorari with the U.S. Supreme Court.

According to Stone, the question presented to the high court was:

Issue: (1) Whether an arbitrator’s failure to disclose facts creating a reasonable impression of partiality warrants vacating an arbitration award pursuant to 9 U.S.C. § 10(a)(2), or whether an arbitration award should stand despite an arbitrator’s failure to disclose conflicts of interest unless a reasonable person would have to conclude that the arbitrator was partial to one party to the arbitration; and (2) whether a party waives a challenge to an arbitrator’s failure to disclose conflicts of interest only if it knows of the conflicts and fails to raise them during the arbitration, or whether a party waives such a challenge unless it fully investigates the arbitrator’s undisclosed conflicts, and objects to the arbitrator’s participation, during the arbitration.

On May 19^th, the Supreme Court issued an order denying certiorari in the case.