The Florida Bar
OPINION 87-10An insurance defense attorney may serve as a non-neutral arbitrator on a tripartite panel in proceedings involving a regular client, provided that the lawyer's relationship with the insurer-party is disclosed and the lawyer is capable, despite the relationship, of serving with integrity and fairness to all concerned.
(July 15, 1988)
(July 15, 1988)
RPC: 4-2.2, 4-8.4
CJC: Canon 3c
Statutes: F.S. 682.13(1)(b)(1987); Florida Arbitration Code
Cases: Finklestein v. Smith , 326 So.2d 39 (Fla. 1st DCA 1976); Lee v. Marcus, 396 So.2d 208 (Fla. 3d DCA 1981)
Misc.: Code of Ethics for Arbitrators of Commercial Disputes
The inquiring attorney often represents a particular insurance company. The attorney asks whether this relationship precludes him from serving as an arbitrator in cases involving that same insurance company but in which he is not representing the company.
Presumably the arbitration procedure employed in cases involving the insurance company is as follows: the insurance company and the claimant each appoint an arbitrator; these two arbitrators appoint a third neutral arbitrator; and the three arbitrators then resolve the dispute, with the neutral arbitrator obviously determining the outcome.
The inquiring attorney's apparently substantial relationship with the insurance company disqualifies him from serving as "an arbitrator appointed as a neutral," F.S. 682.13(1)(b) (1987), in proceedings involving that insurer but does not preclude him from accepting appointment as the insurance company's arbitrator - one of the two non-neutral arbitrators - on a tripartite panel.
Neither the Florida Arbitration Code nor the decisions of Florida's appellate courts require that arbitrators appointed by the disputants to a tripartite panel be impartial. This is made clear in the recent case of Lee v. Marcus , 396 So.2d 208 (Fla. 3d DCA 1981), which quotes the material portions of the Arbitration Code and an earlier decision by the First District Court of Appeal:
As the very nature of the widely employed three-person arbitration panel itself implies, the arbitrators designated by the parties are not intended to be entirely disinterested or impartial. To the contrary, each is expected to be, in the vernacular, no more than unprejudiced on the side of the contestant which has appointed him. As was accurately said in Finklestein v. Smith, 326 So.2d 39, 40 (Fla. 1st DCA 1976),
[a]rbitrators appointed by disputants to a tripartite panel are expected by the disputants and should be understood by the courts to act as partisans only one step removed from the controversy.
The Florida Arbitration Code embodies this view. Section 682.13(1)(b), Florida Statutes (1979), provides that an award shall be vacated when
(b) [t]here was evident partiality by an arbitrator appointed as a neutral or corruption in any of the arbitrators or umpire or misconduct prejudicing the rights of any party.
Since "evident partiality" is pointedly a basis for vacation only in the case of a neutral arbitrator, it is apparent that this provision reflects an understanding of the not disinterested nature of the party-appointed arbitrator.
Accordingly, it has been held, seemingly without exception, that-absent overt corruption or misconduct in the arbitration itself, which is not alleged here-no arbitrator appointed by a party may be challenged on the ground of his relationship to that party.
If neither the legislature nor the courts require impartiality on the part of the arbitrators selected by the parties, it cannot be deemed unethical for a lawyer to accept appointment by a party to which he is partial unless that partiality rises to the level of "corruption" (which is undefined).
This conclusion finds support in the Code of Ethics for Arbitrators in Commercial Disputes, which is a joint product of the American Bar Association and the American Arbitration Association. A reference in the preamble to this code of ethics makes apparent the sponsors' intention that it provide guidance in cases in which the arbitrators are lawyers (... its use is not limited ... to cases in which the arbitrators are lawyers.") Further, the code of ethics acknowledges that there are "many types of tripartite arbitration in which it has been the practice that the two arbitrators appointed by the parties are not considered to be neutral." For these non-neutral arbitrators the code of ethics contains special ethical considerations. The most significant of these are:
1. "Non-neutral arbitrators may be predisposed toward the party who appointed them but in all other respects are obligated to act in good faith and with integrity and fairness."
2. The provisions of the code that proscribe the arbitrator from entering into relationships or acquiring interests that are likely to affect impartiality or create the impression of partiality "are not applicable to nonneutral arbitrators."
3. "Non-neutral party-appointed arbitrators should disclose to all parties, and to the other arbitrators, all interests and relationships which [non-neutral arbitrators or umpires are required to disclose.]" Although disclosure is required, non-neutral arbitrators "are not obligated to withdraw if requested to do so by the party who did not appoint them."
4. "Non-neutral arbitrators should observe all of the obligations [of neutral arbitrators or umpires] to conduct the proceedings fairly and diligently."
This code of ethics is referenced in the comment to the intermediary rule (4-2.2) in the Rules of Professional Conduct: "... a lawyer acting as arbitrator or mediator ... may be subject to applicable codes of ethics, such as the Code of Ethics for Arbitrators in Commercial Disputes...."
The special provisions in the arbitrator code for non-neutral arbitrators are consistent with the applicable ethical principles in the Rules of Professional Conduct. Disclosure of the nature of the lawyer-arbitrator's relationship with the insurance company is necessary to avoid a violation of Rule 4-8.4, which forbids a lawyer to engage in conduct involving dishonesty, fraud, deceit or misrepresentation. Disclosure is the key to the ethical permissibility of a lawyer serving as a non-neutral arbitrator in a proceeding involving a frequent or regular client. All parties and all arbitrators are entitled to know whether any of the arbitrators comes to the proceeding with a biased viewpoint, so that they can adjust their respective positions in accordance with that knowledge in order to ensure the integrity of the proceeding.
The statutory proscription against "corruption" on the part of an arbitrator, whether or not neutral, probably is analogous to the Rule 4-8.4 proscription against conduct prejudicial to the administration of justice. While a lawyer filling the non-neutral arbitrator role is permitted to be somewhat partial, the lawyer is ethically proscribed from taking any action or position that would cause the arbitration proceeding to be unjust. A lawyer should not agree to serve as arbitrator if his financial or other ties to the insurance company are such that they render him unable to serve with integrity and with fairness to all concerned.
As indicated above, the role of neutral arbitrator or umpire is, by its terms, foreclosed to any lawyer whose livelihood is linked to one of the parties or who otherwise has close ties with one of the parties or the parties' counsel. The neutral arbitrator or umpire role is akin to that of judge, with the attendant obligation of recusal for bias. See Canon 3c, Code of Judicial Conduct; F.S. 682.13(1)(b).
The principles expressed in this opinion are equally applicable to plaintiff's attorneys. Such attorneys must disclose their ties, if any, to the claimant and the claimant's counsel and any substantial relationship they may have with or any bias they may have against the insurance company (e.g., pending litigation against the company or recent acrimonious litigation).