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Media Alerts - James D. Freeman v. Pittsburgh Glass Works, LLC - Third Circuit
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March 8, 2013
  James D. Freeman v. Pittsburgh Glass Works, LLC - Third Circuit
Case Name: James D. Freeman v. Pittsburgh Glass Works, LLC - Third Circuit

Headline: Third Circuit Clarifies Standards for Overturning Arbitration Awards

Area of Law: Arbitration Appeals

Issue(s) Presented: Under the Federal Arbitration Act, when can a district court vacate an arbitrator's award for evident partiality of the arbitrator?

Brief Summary: Freeman sought to vacate an arbitration award that denied his ADEA claim against his former employer, PGW. He asserted that the arbitrator, former Pennsylvania Superior Court Judge Maureen Lally-Green, was "evidently partial" because she failed to disclose that high ranking PGW employees had contributed to her unsuccessful campaign for the Pennsylvania Supreme Court, and that she did not disclose that she co-taught a law school class with an in-house attorney for PGW. The Third Circuit clarified that the standard of evident partiality requires more than just the appearance of bias but that a reasonable person would have to conclude that the arbitrator was biased to one side. The Court affirmed the District Court's rejection of Freeman's claim, noting that Freeman's attorneys had contributed significantly to Lally-Green's campaign themselves and no reasonable person would conclude that she was evidently biased based on the contributions or the co-teaching.

Extended Summary: James D. Freeman ("Freeman") brought a claim for violation of the ADEA against his former employer, PPG Auto Glass (now owned by and referred to as "PGW") in the Western District of Pennsylvania. At the close of discovery, Freeman and PGW agreed to enter into a binding arbitration agreement. Upon notification to the court of their agreement to arbitrate, the court ordered the case to be marked "CLOSED."

Freeman and PGW exchanged lists of potential arbitrators. Former Superior Court of Pennsylvania Judge Maureen Lally-Green ("Lally-Green") appeared on both lists and was selected as the arbitrator. Before being selected, Lally-Green admitted to knowing several persons at Freeman's former employer. The parties dispute whether Lally-Green also disclosed that she had taught a seminar on labor law with an attorney working in-house at Freeman's former employer. Lally-Green ultimately rejected Freeman's age discrimination claim and ruled in favor of PGW.

Three months after receiving notice of Lally-Green's order, Freeman filed a motion in the Western District of Pennsylvania seeking to vacate the arbitration decision. Freeman's motion to vacate alleged Lally-Green failed to disclose facts showing that she was evidently partial in making her decision and that Lally-Green had fraudulently induced Freeman to enter into the arbitration agreement. The District Court denied Freeman's motion because the facts Lally-Green withheld were immaterial and insubstantial. Freeman appealed the denial of his motion to vacate.

The Third Circuit first determined the District Court continued to retain federal-question jurisdiction to hear Freeman's motion to vacate. On appeal, PGW asserted the District Court's order closing the case after it was sent to arbitration acted as a final order and relinquished the District Court's jurisdiction over the case. Without jurisdiction, PGW argued, the District Court lacked the ability to hear Freeman's motion and the Third Circuit was required to remand with instructions to dismiss. The Third Circuit disagreed and held the District Court's order closing the case to function as an administrative closure and not a dismissal. Administrative closings do not act as final orders and the District Court retained jurisdiction to hear Freeman's motion.

Turning to the merits of Freeman's motion vacate, the Third Circuit first defined what is required to make a finding of evident partiality under the Federal Arbitration Act. Returning to a statement first made in the footnotes of an earlier case, the Third Circuit was unequivocal: "An arbitrator is evidently partial only if a reasonable person would have to conclude that she was partial to one side." The Third Circuit made no distinction between cases involving the actual-bias of arbitrators and, as here, cases involving nondisclosure by arbitrators. The applicable standard under the Federal Arbitration Act is whether a reasonable person would conclude that there was partiality to one side.

Applying their holding to the facts, the Third Circuit held no reasonable person would conclude Lally-Green was partial to PGW. Though PGW had recently made campaign contributions to Lally-Green's effort to be elected to the Supreme Court of Pennsylvania, so too had Freeman's lawyers. PGW's contributions to Lally-Green were relatively small in dollar amount, a matter of public record, and were not directly solicited by Lally-Green. Furthermore, the fact that Freeman's attorneys had made larger donations to the same campaign than PGW was particularly persuasive. In light of these facts, no reasonable person could know if Lally-Green was impartial or even which side was favored. Lally-Green's other connections with PGW were insufficient to show evident partiality, and the Third Circuit affirmed the District Court's decision to deny Freeman's motion.

To read the full opinion, please visit http://www.ca3.uscourts.gov/opinarch/122026p.pdf

Panel (if known): Smith, Chagres, and Barry, Circuit Judges

Argument Date: January 16, 2013

Argument Location:

Date of Issued Opinion: March 6, 2013

Docket Number: No. 12-2026

Decided: Affirmed District Court's denial of appellant's motion to vacate.

Case Alert Author: David Herman

Counsel: Bruce C. Fox, Pittsburgh, PA (Appellant)
David S. Becker, Jeffrey J. Mayer, Chicago, IL; Robert B. Cottington, Pittsburgh, PA (Appellee)

Author of Opinion: Judge Smith

Circuit: 3rd Circuit

Case Alert Circuit Supervisor: Professor Susan L. DeJarnatt

    Posted By: Susan DeJarnatt @ 03/08/2013 11:26 AM     3rd Circuit  

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