Published: September 2019
By: Laura J. Starr
An ADR Corner article entitled “Yes, the Mediator is Biased” by Kim Nutter appearing in the July/August 2018 PBCBA Bulletin piqued my interest in the topic as it relates to arbitrator and mediator selection. One benefit of ADR is typically the ability to participate in selecting the person or people (i.e., an arbitration panel), who may make the decision or recommendation in your case. While different methodology is employed by different organizations for the selection of arbitrators, parties typically have the opportunity to have some, if not substantial, involvement in the selection of their arbitrator(s). Even though mediators are typically agreed upon or appointed by the court, there is still the opportunity to have a voice in their selection and conduct research about their background as it may expose potential bias.
When selecting arbitrators and mediators, parties can (and do) rule out individuals who could be perceived as possessing a professional or personal bias based on categories such as age, gender, employment, education, political affiliation, and case history. With this said, what do litigators seek when selecting mediators and arbitrators? Do litigators hold certain biases in the selection process: are biases warranted? While writing this, I found articles and cases with points to consider.
A study by Pritchard, Adam C. “The Influence of Arbitrator Background and Representation on Arbitration Outcomes.” S. J. Choi and J. E. Fisch, co-authors. Va. L. & Bus. Rev. 9, no. 1 (2014): 43-90, discusses the effect of “repeat players” who may have an advantage by arbitrators who want to continue to be selected. The authors focus on FINRA arbitrators and identify “professional arbitrators” and “retired arbitrators” who are a large percentage of FINRA’s roster and both are perceived as potentially currying favor with brokerage firms to ensure they are repeatedly selected to serve as arbitrators. The authors reviewed cases involving pro se litigants and made a consistent finding that “representation by counsel can reduce or eliminate the effect of arbitration background on arbitration outcomes.” The “repeat players” notion is not an anomaly to the securities industry and is noted in other areas of dispute.
However, the study also recognizes: “it should be noted that, “[t]he most sought-after” arbitrators “are those who are prominent and experienced members of the specific business community in which the dispute to be arbitrated arose.” Conversely, “an arbitrator’s connections to the industry – those same connections that may furnish expertise – may also lead to claims of arbitrator bias.” International Produce v. A/S Rosshavet, 638 F.2d 548 (2d Cir. 1981)
From their study they also conclude that an arbitrator’s background is correlated with arbitration decisions. The determining background factors (is typically available to parties selecting the panel if the required arbitrator disclosures are accurate and current), include industry ties, experience as a regulator or compliance officer and status as professional or retired arbitrators (having sat on numerous panels which is typically displayed on their arbitrator background information sheet). This type of bias may not be limited to arbitrators but could also potentially apply to mediators (see Liljeberg v. Health Servs. Aquisition Corp., 486 U.S. 847, 863-4 (1988) and CEATS, Inc. v. Continental Airlines, Inc., et al 755 F.3d 1356 (Fed. Cir. 2014). Despite disclosure requirements, mediators who also wish to continue to be asked to mediate by the same attorneys, law firms and corporate entities could play favorites in subtle ways over parties they will likely not encounter again. For this reason, due diligence on your selection and disclosure requirements is critical. In some situations, parties may not be aware of relevant information pertaining to an arbitrator or mediator which could lead to future issues or further litigation. However, if contemplating a challenge to an arbitration decision (which are rarely successful and limited in grounds), beware that an appeal on the basis of alleged bias could result in sanctions – see Kathy Fowler, et. al. v. Ritz Carlton Hotel Co. LLC. (11th Cir. August 19, 2014).
For additional ADR tips and resources, go to http://www.palmbeachbar.org/adr/
 “We study the role of attorneys as arbitrators in securities arbitration. We find that arbitrators who also represent brokerage firms or brokers in other arbitrations award significantly less compensation to investor-claimants than do other arbitrators. We find no significant effect for attorney-arbitrators who represent investors or both investors and brokerage firms. The relation between representing brokerage firms and arbitration awards remains significant even when we control for political outlook. Arbitrators who donate money to Democratic political candidates award greater compensation than do arbitrators who donate to Republican candidates.” (c) 2010 by The University of Chicago; J. Choi, Stephen & Fisch, Jill & Pritchard, Adam. (2009). Attorneys as Arbitrators. The Journal of Legal Studies. 39. 109-157.
 “A recent study of consumer arbitrations before the AAA demonstrated that consumers bringing claims did win something in about 50% of the cases, but businesses that brought cases won something in more than 80% of the cases and generally won greater monetary amounts, lending credence to the claims that ” repeat player ” businesses do tend to do better in consumer-business disputes than the usual ” one-off ” consumer” (Drahozal & Zyontz, 2009). …”
Laura J. Starr is a partner at Weisman, Brodie, Starr & Margolies, P, A. with offices in Boca Raton and Lake Worth and she is on the Alternative Dispute Resolution and Judicial Relations Committee for the Palm Beach County Bar Association. She and her family reside in Lake Worth where she sits on the Planning & Zoning and C-51 City Commission Advisory Boards. The firm concentrates in the areas of Commercial/Civil/Business Litigation, Employment, Real Estate transactions and litigation, Construction disputes including Lien Law, Insurance disputes, FINRA Disputes and most other arbitration forums. The firm litigates in Federal, State and Appellate Courts.