Occidental Exploration and Production Company v. Andes Petroleum Ecuador Limited

The Federal Arbitration Act authorizes vacatur of an award if the arbitrator shows “evident partiality.” 9 U.S.C. §10(a)(2). In Commonwealth Coatings Corp. v. Continental Casualty Co., 393 U.S. 145 (1968), this Court authoritatively interpreted that provision to mean arbitrators “not only must be unbiased but also must avoid even the appearance of bias.” Id. at 150. The Court accordingly vacated an award where an arbitrator failed to disclose a relationship with a party, concluding that the arbitrator “might reasonably be thought biased” based on the failure to disclose alone. Id. at 147, 150. Since then, the Second Circuit has inexplicably concluded that Commonwealth Coatings is not binding precedent. Instead, it has declared the opinion of the Court—joined by six Justices—to be a mere plurality opinion, expressly discarded its standard, and adopted what was essentially the position of the dissenters: Evident partiality exists only if a reasonable person “would have to conclude” that the arbitrator was in fact partial. Morelite Constr. Corp. v. N.Y.C. Dist. Council Carpenters Benefit Funds, 748 F.2d 79, 82-84 (2d Cir. 1984). Remarkably, five other circuits have followed the Second Circuit’s lead, while two continue to correctly adhere to this Court’s opinion. The question presented is: Whether an arbitrator’s failure to disclose a relationship evinces evident partiality if it shows the arbitrator “might reasonably be thought biased,” as Commonwealth Coatings held, or instead only if a reasonable person “would have to conclude” that the arbitrator was actually biased.