DowCorning Corp. v. Safety Natl Casualty ( 2003 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 02-2048
___________
In re Arbitration Between Dow *
Corning Corporation, *
*
Petitioner - Appellant, *
* Appeal from the United States
v. * District Court for the
* Eastern District of Missouri.
Safety National Casualty Corporation, *
*
Respondent - Appellee. *
___________
Submitted: January 13, 2003
Filed: July 9, 2003
___________
Before LOKEN,* FAGG, and MORRIS SHEPPARD ARNOLD, Circuit Judges.
___________
LOKEN, Chief Judge.
Safety National Casualty Corporation (Safety) issued three “excess umbrella”
liability insurance policies to Dow Corning Corporation (Dow Corning) covering the
period December 1, 1983 to December 1, 1984. The policies included a mandatory
arbitration provision. Many years later, Safety denied coverage for claims by
consumers that silicon breast implants manufactured by Dow Corning caused them
*
The Honorable James B. Loken became Chief Judge of the United States
Court of Appeals for the Eighth Circuit on April 1, 2003.
to suffer autoimmune disease. In June 1998, Dow Corning commenced arbitration
of the coverage dispute. The critical issue was when coverage arose under the
policies for autoimmune disease injuries.
Dow Corning and Safety could not amicably select the three-member panel of
arbitrators required by the arbitration clause in the policies. Safety moved to compel
arbitration under section 4 of the Federal Arbitration Act (FAA), 9 U.S.C. § 4,
seeking to resolve Dow Corning’s objection to Safety’s party-arbitrator. Dow
Corning responded with a cross-motion under section 5 of the FAA, asking the
district court to appoint the neutral member of the three-member panel. The district
court denied both motions. We affirmed, remanding with directions that the parties
“select an umpire and get on with the arbitration of their coverage dispute.” Dow
Corning Corp. v. Safety Nat’l Cas. Corp., 205 F.3d 1345 (8th Cir. 2000) (table).
After a hearing in July 2001, the panel issued a 2:1 decision in favor of Safety
on the coverage issue, declaring its decision to be binding on the parties. Dow
Corning filed a motion to vacate the award under section 10 of the FAA, 9 U.S.C.
§ 10. The district court denied the motion. Dow Corning appeals, arguing that the
award should be vacated under section 10(a)(4) because the arbitrators exceeded their
authority when they declared their decision binding and allowed the pre-hearing
appointment of a substitute arbitrator; and that the award should be vacated under
section § 10(a)(2) because of the neutral umpire’s evident partiality. We modify the
district court’s judgment to reflect our conclusion that the arbitrators’ award is non-
binding and otherwise affirm.
I. The Binding Arbitration Issue
Arbitration usually results in a final determination that is binding on the parties
to the underlying dispute, but the parties may instead agree to non-binding arbitration,
in which case the arbitrators’ decision is likely to be a precursor to further litigation
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on the merits of the dispute. The distinction is significant. “Mandatory arbitration
prior to resort to a court is a different concept from mandatory arbitration precluding
resort to a court.” Orlando v. Interstate Container Corp., 100 F.3d 296, 300 (3rd Cir.
1996) (concluding that a collective bargaining agreement called for mandatory but
not binding arbitration).
If contracting parties agree to binding arbitration, if their agreement is within
the reach of the FAA, and if they “have agreed that a judgment of the court shall be
entered upon the award made pursuant to the arbitration,” then a federal court asked
to confirm the award “must grant such an order unless the award is vacated, modified,
or corrected as prescribed in sections 10 and 11.” 9 U.S.C. § 9. But in this case,
Safety did not ask the district court to confirm the award under section 9, so we need
not decide whether the arbitration agreement contained the judgment-entering
recitation required by section 9. See PVI, Inc. v. Ratiopharm GMbH, 135 F.3d 1252(8th Cir. 1998). However, Safety did ask the arbitrators to declare their decision
binding, and they did so over Dow Corning’s objection. Dow Corning moved to
vacate the award under section 10(a)(4), arguing the panel exceeded its authority in
purporting to render a binding decision. The district court agreed that the decision
was binding, and Dow Corning appeals that ruling.
1. As this is a question of the contracting parties’ intent, we begin with the
terms of the arbitration clause in the insurance policies. Parties intending binding
arbitration should say so explicitly in the agreement to arbitrate, either by providing
that the arbitration award will be “final and binding,” or words to that effect, or by
incorporating by reference the rules of the American Arbitration Association or a
similar arbitral body that expressly provide for binding arbitration. See, e.g.,
Rainwater v. Nat’l Home Ins. Co., 944 F.2d 190, 192-94 (4th Cir. 1991)
(incorporating AAA rules providing for entry of judgment upon the arbitration award
makes the arbitration binding); Daniel Constr. Co. v. Int’l Union of Operating Eng’rs,
Local 513, 738 F.2d 296, 298-300 (8th Cir. 1984) (collective bargaining agreement
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provided for “final and binding” arbitration). However, the agreement to arbitrate in
the Safety insurance policies contained no such provision. It merely provided:
As a condition precedent to any right of action under this Policy, any
dispute arising out of this Policy shall be submitted to the decision of a
board of arbitration. . . . The members of the board of arbitration shall
be active or retired, disinterested officials of insurance or reinsurance
companies. . . . The board shall make its decision with regard to the
custom and usage of the insurance and reinsurance business.
Dow Corning argues that the “condition precedent” clause confirms the parties
intended non-binding arbitration. Though the clause suggests that arbitration of a
policy dispute will be followed by litigation, and thus is non-binding, like the district
court we do not find this textual clue conclusive. It can also be read as simply
recognizing that even binding arbitration is often followed by litigation, as the Fourth
Circuit construed a similar provision in Rainwater, 944 F.2d at 194:
[The court] read[s] “condition precedent” to some extent as an artifact
left over from the days of hostility toward arbitration. To the extent that
the phrase has meaning, we find that it does not undermine the binding
nature of arbitration, but instead applies to the confirmation process
permitted by [the FAA] or to other litigation in which the arbitration
award would be final but just a sub-text in some larger litigation context.
With the arbitration clause ambiguously silent on this issue, we must determine
whether the parties to these 1983 excess liability insurance policies intended to
contract for binding arbitration. Though evidence of custom and usage among parties
to this type of insurance would be relevant, neither party submitted any such
evidence. Looking more closely at the text of the agreement, we note the policies
require that all three arbitrators be “active or retired, disinterested officials of
insurance or reinsurance companies” and that their decisions be made “with regard
to the custom and usage of the insurance and reinsurance business.” This sounds very
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much like a provision designed for the resolution of technical disputes between an
insurance company and its reinsurer. Here, on the other hand, the provision was
inserted into an excess liability policy, where it applies to coverage disputes between
an insurer and its insured and provides a decidedly pro-insurer “tilt” to the
proceedings. An insured (other than another insurance company) is unlikely to agree
that the results of such a proceeding will be binding, that is, judicially unreviewable
on the merits under the FAA.
Though federal policy favors arbitration, and that normally means binding
arbitration, we know of no federal policy favoring binding arbitration of insurance
coverage disputes. Safety -- which drafted the policies and presumably had greater
knowledge of the custom and practices of excess liability insurers and reinsurers --
presented no extrinsic evidence that binding arbitration was intended and cited no
federal case in which an arbitration agreement entirely silent on this question was
construed as providing for binding arbitration. On this record, we conclude the
excess liability policies provided for mandatory but non-binding arbitration.
2. The district court acknowledged that the “condition precedent” language in
the policies, though ambiguous, suggests that non-binding arbitration was initially
intended. But the court concluded that Dow Corning subsequently agreed to binding
arbitration of this coverage dispute, first in a 1994 settlement agreement dismissing
Safety from a pending multi-insurer coverage suit, and then again in a July 1999
consent order entered in Dow Corning’s Chapter 11 bankruptcy proceeding. In the
settlement agreement, Dow Corning and Safety agreed “to arbitrate all coverage
issues under [the policies]” if negotiations failed to resolve the dispute. The
bankruptcy consent order, entered with the arbitration in process, provided that
Safety’s liability under the policies:
will be fully and finally adjudicated (i) in the existing arbitration action
. . . and/or (ii) in subsequent actions in the appropriate forum addressing
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matters of such insurance coverage and liability not resolved in such
Arbitration and/or addressing enforcement thereof . . . .
We cannot agree that the settlement agreement was “an agreement to engage
in binding arbitration.” It was an agreement to arbitrate under the policies if the
dispute could not be informally resolved. This added nothing to the initial agreement
to engage in mandatory, non-binding arbitration. The peculiar terms of the consent
order present a closer question. It provided that the coverage dispute will be “finally
adjudicated” through the pending arbitration “and/or” subsequent litigation. This
language imperfectly describes a process beginning with mandatory arbitration. The
process as described could be either binding or non-binding from the standpoint of
its enforceability under the FAA. As Dow Corning has consistently argued that the
policies called for non-binding arbitration, we conclude that the consent order, like
the settlement agreement, preserved the parties’ conflicting positions on this issue.
3. We must next determine the impact of our conclusion that the parties
contracted for non-binding arbitration. The arbitrators doubtless exceeded their
authority in declaring their decision to be binding, because that issue goes to the
scope of their authority. See generally First Options of Chicago, Inc. v. Kaplan, 514
U.S. 938 (1995). In any event, we have concluded their award was non-binding as
a matter of law. This error is grounds for modifying the award by deleting the
offending declaration. See 9 U.S.C. § 11(b). It would also require reversing the
confirmation of an award under 9 U.S.C. § 9, because an award must be binding to
be confirmed under section 9’s highly deferential standard of review. But our
conclusion that the award is non-binding does not warrant vacating the entire award.
See Davis v. Prudential Sec., Inc., 59 F.3d 1186, 1196 (11th Cir. 1995) (vacating part
of an award that exceeded the arbitrators’ authority but confirming remainder of the
award).
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4. There remains a threshold question not addressed by the parties -- whether
our conclusion that the arbitration was non-binding deprives us of jurisdiction to
address Dow Corning’s additional grounds for vacating the entire award under FAA
§ 10. This issue of the FAA’s reach has arisen in the context of agreements to
arbitrate that attempt to prescribe a standard of judicial review that is less deferential
to the arbitrators than that prescribed in FAA § 10. One circuit has held that a
provision calling for expanded review of the merits of an arbitration award is
unenforceable under the FAA. See Bowen v. Amoco Pipeline Co., 254 F.3d 925, 937
(10th Cir. 2001). At least one commentator has gone further and suggested that such
provisions result in agreements that are not sufficiently “final” to be governed by the
FAA. See generally Amy J. Schmitz, Ending a Mud Bowl: Defining Arbitration’s
Finality Through Functional Analysis, 37 GA. L. REV. 123 (2002). This case presents
the issue in a different context. Dow Corning did not ask the district court to review
the merits of the arbitrators’ award, nor did Safety move to confirm the award under
section 9. Thus, the only question is whether the FAA authorizes section 10 review
of a mandatory but non-binding award. We conclude that it does.
Binding arbitration is no doubt the norm under the FAA, but no express
language limits the statute to binding arbitration agreements. Other circuits have held
that the FAA applies to at least some agreements to engage in mandatory, non-
binding arbitration. See United States v. Bankers Ins. Co., 245 F.3d 315, 322 (4th
Cir. 2001); Wolsey, Ltd. v. Foodmaker, Inc., 144 F.3d 1205, 1207-09 (9th Cir. 1998);
Harrison v. Nissan Motor Corp., 111 F.3d 343, 349-50 (3d Cir. 1997). We signaled
a similar view of the statute in UHC Mgmt. Co. v. Computer Sciences Corp., 148
F.3d 992, 997 (8th Cir. 1998), when we commented that this court “will not interpret
an arbitration agreement as precluding the application of the FAA unless the parties’
intent that the agreement be so construed is abundantly clear.”
At different times, both parties asked the district court for relief under sections
4, 5, and 10 of the FAA. While the present appeal will not finally resolve their
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coverage dispute, addressing the additional section 10 issues raised by Dow Corning
will significantly advance the dispute resolution process. The policies provide that
non-binding arbitration is a “condition precedent” to subsequent litigation. Dow
Corning argues that the now-completed arbitration was fundamentally defective and
therefore a nullity. If Dow Corning is correct, the entire award will be vacated,
presumably requiring the parties to again arbitrate the dispute before commencing
litigation. If Dow Corning’s section 10 arguments are rejected, the parties are free
to commence coverage litigation in which the non-binding award will presumably be
given such persuasive weight as the court concludes it deserves. For these reasons,
we conclude we have jurisdiction to decide the additional section 10 issues.
II. The Substitute Arbitrator Issue
Dow Corning argues that the arbitration award must be vacated under 9 U.S.C.
§ 10(a)(4) because the panel exceeded its authority when Safety’s party-arbitrator
resigned and the two remaining panel members directed Safety to appoint a substitute
party-arbitrator. Review of this issue requires further factual background.
The policies provided for a panel of “two arbitrators and an umpire” and
described the selection process in detail:
Each party shall appoint its arbitrator, and the two arbitrators shall
choose an umpire before instituting the hearing. . . . If the two arbitrators
fail to agree upon the appointment of an umpire within four weeks after
their nominations, each of them shall name three, of whom the other
shall decline two and the decision shall be made by drawing lots.
After initiating the arbitration, Dow Corning appointed Benjamin Schenk as its party-
arbitrator. Safety appointed Jack Nelson as its party-arbitrator. Schenk nominated
three umpire candidates, while Dow Corning informally challenged Nelson’s
qualifications to serve. When Safety would not proceed with Nelson’s status
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unresolved, Dow Corning filed its FAA § 5 motion, urging the district court to choose
an umpire from Schenk’s list because Nelson had not timely nominated three umpires.
The district court denied this motion and we affirmed, instructing the parties “to
select an umpire and get on with the arbitration.” Nelson then nominated three
umpire candidates. Each party-arbitrator struck two of the other’s nominees, and
James Lyon, Nelson’s third nominee, was selected as umpire by an agreed process
akin to a coin flip or to “drawing lots.”
One week later, Nelson resigned as Safety’s party-arbitrator because his current
employer was involved in the management of Dow Corning’s pension assets. Dow
Corning advised umpire Lyon and party-arbitrator Schenk that Nelson’s withdrawal
terminated their authority to hear the dispute. Lyon and Schenk instead ruled that
Safety should appoint a substitute party-arbitrator. Safety named John Hyland as
substitute party-arbitrator. Instead of filing a second FAA § 5 motion challenging
this ruling, Dow Corning agreed to proceed with a “reservation of right” to challenge
the panel’s authority. We view this as a transparent attempt to preserve a threshold
procedural issue in case Dow Corning eventually lost the arbitration on the merits.
On appeal, Dow Corning invokes “the general rule that where one member of
a three-person arbitration panel dies before the rendering of an award and the
arbitration agreement does not anticipate that circumstance, the arbitration must
commence anew with a full panel.” Trade & Transport, Inc. v. Natural Petroleum
Charterers Inc., 931 F.2d 191, 194 (2nd Cir. 1991), followed in Marine Prods. Export
Corp. v. M.T. Globe Galaxy, 977 F.2d 66 (2nd Cir. 1992). But as the district court
recognized, the circumstances in this case distinguished it from those applying the so-
called general rule and justified the panel’s decision to proceed after Safety selected
a substitute party-arbitrator. First, because the substitution occurred before the
substantive arbitration hearing, the substitute party-arbitrator participated fully in the
hearing, the panel’s deliberations, and the preparation of the panel’s decision.
Compare In re Cia de Navagecion Omsil, S.A., 359 F. Supp. 898, 899 (S.D.N.Y.
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1973). Second, the remaining arbitrators made a reasonable decision to allow Safety
to choose its substitute party-arbitrator, the method of selecting party-arbitrators
prescribed in the agreement to arbitrate. Third, as Dow Corning well knew, starting
over would have deprived Safety of its “win” in the umpire selection process. The
Second Circuit recognized in Marine Products, 977 F.2d at 68, that the general rule
does not apply when a vacancy arises after the original panel has “rendered a final
decision on any question.”
Finally, and most importantly, Dow Corning acknowledges that a vacancy in
an arbitration panel may be filled in the manner prescribed in the agreement to
arbitrate. Here, the remaining arbitrators concluded that the agreement authorized
them to proceed with a substitute party-arbitrator. In general, reviewing courts leave
procedural issues for the arbitrators to decide. See El Dorado School Dist. # 15 v.
Continental Cas. Co., 247 F.3d 843, 846-47 (8th Cir. 2001). Dow Corning argues the
panel’s ruling is not entitled to deference because the question concerned their
authority. But even if that is true, the district court was expressly authorized by FAA
§ 5 to construe the arbitration agreement in this regard and to resolve the vacancy
issue in the event the agreement did provide a method for doing so. Yet Dow
Corning failed to file a section 5 motion challenging the panel’s ruling on the
substitution issue. In these circumstances, the district court correctly declined to
vacate the award on this ground. See Brook v. Peak Int’l, Ltd., 294 F.3d 668, 674
(5th Cir. 2002).
III. Umpire Lyon’s Alleged Evident Partiality
Dow Corning next argues that we should vacate the arbitration award under
section 10(a)(2) because umpire Lyon’s conduct before and during the hearing
demonstrated his evident partiality in three respects. We reject these contentions.
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A. Nondisclosure of Another Umpire Nomination. Almost a year after
Safety’s party-arbitrator nominated Lyon to serve as umpire in this case, Safety
nominated Lyon as a potential referee in another breast implant case involving
Bristol-Meyers Squibb Company. Lyon was not chosen to serve in the Bristol-
Meyers arbitration. Dow Corning nonetheless argues that his failure to promptly
disclose the nomination in this proceeding demonstrates evident partiality within the
meaning of section 10(a)(2). The district court rejected this contention, concluding
that (i) Lyon and Safety did not have the type of ongoing relationship that required
disclosure; (ii) the subsequent nomination did not create a conflict or bias,
particularly because Lyon was not chosen to serve; (iii) Dow Corning and Safety had
agreed to an umpire selection process permitting each to nominate umpire candidates
“whose credentials suggest that they would be inclined to favor the nominating
party”; and (iv) Lyon’s insignificant relationship with Safety “has not established an
appearance of, or actual bias.”
We agree with the district court’s reasoning. At the outset of the arbitration
process, arbitrators must disclose “a substantial interest in a firm which has done
more than trivial business with a party.” Commonwealth Coatings Corp. v. Cont’l
Cas. Co., 393 U.S. 145, 151-52 (1968) (White, J., concurring); see Olson v. Merrill
Lynch, Pierce, Fenner & Smith, Inc., 51 F.3d 157, 159 (8th Cir. 1995). Here, when
Lyon was nominated, Dow Corning was aware that Safety had nominated him to
serve in two prior arbitrations, and that he had served in one. The Bristol-Myers
nomination came well after Lyon was chosen as umpire in this case, and he was not
chosen to serve in the Bristol-Myers case. Thus, the non-disclosure does not
“objectively demonstrate such a degree of partiality that a reasonable person could
assume that the arbitrator had improper motives.” ANR Coal Co. v. Cogentrix of N.
C., Inc., 173 F.3d 493, 501 (4th Cir.), cert. denied, 528 U.S. 877 (1999).
Moreover, in this case we doubt that being nominated for other arbitrations is
“more than trivial business” within the meaning of Commonwealth Coatings. When
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the parties agree to arbitration before disinterested persons who have experience in
a specialized business or type of problem, the relatively small number of qualified
arbitrators may make it common, if not inevitable, that parties will nominate the same
arbitrators repeatedly. See Int’l Produce, Inc. v. A/S Rosshavet, 638 F.2d 548, 551-
52 (2nd Cir.), cert. denied, 451 U.S. 1017 (1981) (maritime arbitration); Transit Cas.
Co. v. Trenwick Reins. Co., 659 F. Supp. 1346, 1353-54 (S.D.N.Y. 1987) (insurance
arbitration). “The parties to an arbitration choose their method of dispute resolution,
and can ask no more impartiality than inheres in the method they have chosen.” Delta
Mine Holding Co. v. AFC Coal Props., Inc., 280 F.3d 815, 821 (8th Cir. 2001), cert.
denied, 123 S. Ct. 87 (2002) (quotation omitted). We conclude that Lyon’s failure
to disclose the Bristol-Meyers nomination does not demonstrate evident partiality
within the meaning of section 10(a)(2).
B. Ex Parte Contacts. After the panel held an organizational meeting, it
issued a written summary prohibiting further ex-parte communications between the
party-arbitrators and their respective parties but providing that umpire Lyon “may
discuss administrative matters with an individual arbitrator or counsel when to do
otherwise would be difficult or overly time consuming.” Some months later, Lyon
needed to confer with counsel regarding the scheduling of the arbitration hearing.
Because Safety’s counsel was in trial, Lyon deemed it impracticable to arrange a
telephone conference call and instead talked to each party’s counsel individually.
Lyon first contacted Safety’s counsel. In addition to discussing scheduling issues,
Lyon told counsel that it would expedite the hearing if the parties limited expert
testimony to witnesses having direct experience and education. Lyon then called
Dow Corning’s counsel and again expressed his view that expert testimony should
be limited to witnesses with proper educational background and experience.
Dow Corning then wrote a letter to Lyon stating its belief that his telephone
conversations with counsel individually were improper ex parte contacts and
warranted his resignation. Counsel for Dow Corning and Safety exchanged letters
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with each other and the panel on this issue. Lyon wrote counsel and the other panel
members explaining that the telephone conversations were simply administrative in
nature. Dow Corning alleged that Lyon said he was not interested in testimony
relating to the trigger-of-coverage issue by an expert lacking “clinical or medical
experience,” a position that showed bias in favor of Safety. After further argument
from Dow Corning and Safety, the panel ruled that no member would resign and the
arbitration would continue. Schenk, Dow Corning’s party-arbitrator, wrote
separately, explaining that the “nature of these conversations does not trouble me, as
neither party (nor the other arbitrators) was prejudiced by non-participation.”
In the district court, Dow Corning primarily argued that umpire Lyon’s ex parte
contacts were misconduct requiring that the award be vacated under section 10(a)(3).
In support, Dow Corning offered affidavit evidence from a former judge and noted
arbitration expert opining that the ex parte contacts were prejudicial and violated both
the prevailing ethical rules and the panel’s own prohibition. The district court
rejected this contention on the merits, correctly noting that Dow Corning was not
prejudiced by the ex parte contacts because the panel did not later exclude the
extensive expert evidence offered by Dow Corning at the hearing, and that a
departure from the prevailing ethical norms for arbitrators is not grounds for vacating
an award under FAA § 10. See Delta Mine, 280 F.3d at 820. The district court struck
portions of the arbitration expert’s affidavit on the ground that it expressed opinions
on questions of law that were for the court to decide.
Dow Corning recasts this issue on appeal, arguing the ex parte communications
demonstrated Lyon’s evident partiality, contrary to section 10(a)(2), because Lyon
contacted Safety’s counsel first and his position regarding the relevance of expert
testimony favored Safety’s position on the critical trigger-of-coverage issue. In our
view, this contention is without merit because the ex parte contacts, even if arguably
improper, simply do not demonstrate evident partiality. Umpire Lyon had an
“administrative” reason for contacting counsel (to discuss scheduling) and a basis for
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deciding that he needed to contact them one at a time. Thus, his phone calls to
counsel were ex parte communications authorized at the panel’s organizational
meeting. Lyon can be criticized for going beyond scheduling issues and discussing
the scope of expert testimony. But the district court found that he did not solicit ex
parte argument from either attorney, a finding that is not clearly erroneous, and the
court concluded that the conversations “reflect his role as umpire and the attendant
duty to assure that the arbitration proceeded in an efficient manner,” a conclusion
consistent with our decision in Painewebber Group, Inc. v. Zinsmeyer Trusts P’ship,
187 F.3d 988, 995 (8th Cir. 1999), cert. denied, 529 U.S. 1020 (2000).
On appeal, Dow Corning vehemently challenges the district court’s decision
to strike portions of the arbitration expert’s affidavit. But that ruling provides no
basis to reverse the court’s denial of Dow Corning’s motion to vacate. The court
acknowledged the expert’s indisputably distinguished career and expertise but
concluded that it would not consider legal opinions that “attempt to tell the court what
result to reach.” That decision was not an abuse of the court’s substantial discretion
under Rule 702 of the Federal Rules of Evidence. See United States v. Whitted, 11
F.3d 782, 785 (8th Cir. 1993). In addition, giving the expert’s opinions and
conclusions full consideration would not change our view that umpire Lyon’s ex parte
contacts did not demonstrate evident partiality within the meaning of section 10(a)(2).
Thus, striking portions of the affidavit was at most harmless error. See Williams v.
Wal-Mart Stores, Inc., 922 F.2d 1357, 1360 (8th Cir. 1990).
C. Limiting Dow Corning’s Cross-Examination. Dow Corning argues that
Lyon exhibited evident partiality when he limited cross-examination of Safety’s
trigger-of-coverage expert witness, thereby concealing the weaknesses of Safety’s
position from the other panel members. This contention is without merit. Arbitrators
have broad discretion to limit the cross-examination of witnesses at arbitration
hearings. See Delta Mines, 280 F.3d at 823 & n.6; Hoteles Condado Beach, La
Concha & Convention Center v. Union de Tronquistas Local 901, 763 F.2d 34, 38-39
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(1st Cir. 1985). Umpire Lyon was well within his discretion in limiting Dow
Corning’s cross-examination of Safety’s expert while giving Dow Corning wide
latitude to present its affirmative case. Dow Corning has totally failed to establish
that this procedural ruling demonstrated Lyon’s evident partiality within the meaning
of section 10(a)(2).
IV. Conclusion
For the foregoing reasons, we direct the district court to modify its judgment
so as to declare the arbitrators’ decision of August 7 and 8, 2001 non-binding. In all
other respects, the judgment denying Dow Corning’s motion to vacate the arbitrators’
decision is affirmed.
A true copy.
Attest:
CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.
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