SW Legal studies in Business

Courts May Not Intervene in Arbitration Where Attorney and Arbitrator Misconduct Alleged
Description

Appeals court held that a claim of misconduct in arbitration, because an attorney for the opposing side and the arbitrator failed to reveal a professional relationship, did not give grounds for court intervention. The party would have to appeal the issue to the arbitration association.

Topic Alternate Dispute Resolution
Key Words

Arbitration; Improper Behavior; Sanctions

C A S E   S U M M A R Y
Facts

Positive Software Solutions sued New Century Mortgage for infringing on software licensed to New Century. Camina was attorney for New Century. The district court ordered the case to arbitration in accordance with the parties’ contract. During arbitration, Camina advised New Century. Later, based on a motion filed by Positive, the district court vacated the award by the arbitrator because the arbitrator failed to disclose his professional relationship with Camina. The appeals court reversed the decision of the district court and remanded the matter. During that time, New Century declared bankruptcy. While in bankruptcy, the parties settled the dispute and the case was closed. Afterwards, Positive moved for sanctions against Camina for not having revealed her relationship to the arbitrator. The district court ordered Camina to pay Positive $10,000. She appealed.

Decision

Reversed. The district court lacked the authority to impose sanctions on the attorney for conduct that took place in connection with arbitration. Even if the court ordered the arbitration pursuant to a contract, the matter was not before the court. Courts may compel arbitration but cannot interfere in the arbitration proceeding. Under the rules of the American Arbitration Association, the plaintiff, Positive, could ask the Association to re-open the proceedings to request sanctions.

Citation

Positive Software Solutions v. New Century Mortgage, ---F.3d--- (2010 WL 3530013, 5th Cir., 2010)

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