In Dealer Computer Services, Inc. v Michael Motor Company, No. 11-20053 (5th Cir. Aug. 14, 2012), a contractual dispute between the parties was submitted to arbitration and a unanimous panel found for Dealer Computer Services (DCS). In response, Michael Motor Company (MMC) petitioned the district court to vacate the award, arguing that an arbitrator on the panel was biased. The district court concluded that there was a reasonable impression of partiality and vacated the arbitration award pursuant to section 10(a)(2) of the Federal Arbitration Act (FAA). On appeal, the Fifth Circuit overturned the district court’s decision and remanded for confirmation of the arbitration award.

The arbitration panel consisted of three members, with DCS and MMC each choosing a member and the final member being selected by the two appointed members. The DCS appointed panel member made various disclosures prior to the arbitration hearing. After receiving an adverse outcome in the proceedings, MMC objected to the award by questioning the impartiality of DCS' panel member. In particular, MMC asserted that the DCS panel member did not disclose the fact that she sat on an arbitration panel considering a similar dispute.

DCS contended that MMC had waived its claim of evident partiality under the FAA by failing to properly raise its objection at any time during the arbitration proceedings or before determination of the arbitral award. MMC argued that it did not waive the objection because it did not have actual knowledge of the basis of the objection until after the award was rendered.

The court stated that a party seeking to vacate an arbitration award based on an arbitrator’s evident partiality must generally object during the arbitration proceedings and a failure to do so in a timely manner results in a waiver of the right to object. The court noted that the record indicated that the DCS panel member sufficiently disclosed the potential conflict prior to the hearing. Accordingly, the court concluded that MMC was on notice of the potential conflict and waived the evident partiality objection by failing to make a timely objection during the proceedings. The court held that there was sufficient disclosure for constructive notice of potential bias. Moreover, the court emphasised that MMC had a duty to reasonably investigate information of arbitrators' potential partiality.

This case highlights the parties' duty to reasonably investigate concerns about arbitrator impartiality and the importance of raising concerns about potential bias during the proceedings to avoid waiver of the evident partiality objection.