On April 7th, the U.S. Supreme Court denied American General Life Insurance Company’s petition for writ of certiorari to the U.S. Court of Appeals for the Seventh Circuit. On October 9, 2002, the Seventh Circuit reversed a controversial May 17, 2002 Illinois federal district court ruling vacating an arbitration award on the basis of "evident partiality" of the reinsurer's party-appointed arbitrator because he had failed to disclose fully a prior attorney-client relationship four years earlier with a subsidiary of the appointing reinsurer.
Comparing the disclosure requirements governing federal court judges with those applicable to arbitrators under the Federal Arbitration Act's ("FAA") "evident partiality" standard, the Seventh Circuit held that party-appointed arbitrators cannot be held to a higher disclosure duty than federal judges. The degree of disclosure demanded of a partisan party-appointed arbitrator, who is supposed to be advocate and not a neutral, is even more circumscribed under the FAA, and a failure to disclose fully an attorney-client relationship in a prior unrelated proceeding did not violate the "evident partiality" standard and thus spoil the award.
For summaries of the Seventh Circuit and Illinois federal district court opinions, please refer to my prior case notes, which may be found on my Web site at http://www.gassco.com.
All American Life Insurance Co. v. Sphere Drake Insurance Limited, No. 02-1168, 2003 U.S. LEXIS 2742, 71 U.S.L.W. 3638 (Apr. 7, 2003)