Midwest Generation EME, LLC v. Continuum Chemical Corp.

768 F. Supp. 2d 939, 2010 U.S. Dist. LEXIS 61635, 2010 WL 2517047
CourtDistrict Court, N.D. Illinois
DecidedJune 21, 2010
Docket08 C 7189
StatusPublished
Cited by23 cases

This text of 768 F. Supp. 2d 939 (Midwest Generation EME, LLC v. Continuum Chemical Corp.) is published on Counsel Stack Legal Research, covering District Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Midwest Generation EME, LLC v. Continuum Chemical Corp., 768 F. Supp. 2d 939, 2010 U.S. Dist. LEXIS 61635, 2010 WL 2517047 (N.D. Ill. 2010).

Opinion

AMENDED MEMORANDUM OPINION AND ORDER

JEFFREY COLE, United States Magistrate Judge.

INTRODUCTION

Having prevailed before a unanimous three-member arbitration panel, Midwest Generation EME, LLC (“Midwest”) has moved to confirm the award. Continuum Chemical Corporation (“Continuum”) has filed a petition to vacate the award, based on the “evident partiality” of one of the arbitrators, Stanley Sklar. It is Continuum’s contention that it must be allowed to take limited discovery of Mr. Sklar because it has compelling evidence that Mr, Sklar intentionally concealed from it and its lawyers “a system of referrals and ongoing economic and professional business relationships between [himself], the Construction Law Group at his [then law] firm [Bell, Boyd & Lloyd, where he was a partner from 1995 to 2008], and lawyers in the Construction Law Group of opposing counsel, Schiff Hardin LLP.” (Continuum’s Motion for Leave to Take Limited Discovery at 2). (Continuum’s Amended Brief in Support of Motion to Take Limited Discovery at 7, 9,10).

The Reply Brief in support of the Motion To Take Limited Discovery retreats somewhat from this stark position and subtly recasts the claimed relationship, describing it as one that “rise[s] to the level of a de facto marketing relationship, whose purpose was to market the professional services of those involved.” Id. at 2. Later in the reply brief, the conclusion is that this informal marketing relationship was designed to bolster “the business credentials and to secure future business” of and for Mr. Sklar and lawyers in the Schiff Hardin Construction Law Group. (Reply at 8). The Reply Brief concludes by saying that the alleged “ongoing professional relationships” — which are never specifically analyzed in the briefs — make it “not unreasonable... to think that there was also a reasonable probability that there may have been business referrals and other pecuniary interests between these parties.” (Reply at 8). 1 And of course, these referrals were concealed by the arbitrator.

According to Continuum, it found the Arbitration Panel’s November 2008 award against it so illogical that it “suspected that there must have been some other ‘driving force’ behind the Panel’s decision.” (Reply Brief at 10). And so Continuum investigated publicly available information, which led it to conclude that Mr. Sklar had willfully and illicitly concealed his “marketing relationship” with Schiff, Hardin lawyers. (Reply Brief at 2; see also id. at 7-8). If Continuum’s ultimate conclusions are true, the arbitration process was seriously corrupted. See generally, Commonwealth Coatings Corp. v. Continental Cas. Co., 393 U.S. 145, 147-50, *943 89 S.Ct. 337, 21 L.Ed.2d 301 (1968); Matter of Andros Compania Maritima, S.A. (Marc Rich & Co., A.G.), 579 F.2d 691, 701 (2d Cir.1978); Sun Refining & Marketing Co. v. Statheros Shipping Corp., 761 F.Supp. 293, 299 (S.D.N.Y.), aff'd., 948 F.2d 1277 (2d Cir.1991). “[Ajjudge cannot have a prospective financial relationship with one side yet persuade the other that he can judge fairly in the case.” Pepsico v. McMillen, 764 F.2d 458, 461 (7th Cir.1985). Nor can an arbitrator. “Under a realistic appraisal of psychological tendencies and human weakness,” Withrow v. Larkin, 421 U.S. 35, 47, 95 S.Ct. 1456, 43 L.Ed.2d 712 (1975), where that relationship involves a system of referrals, bias is inherent and inescapable, for “[gjetting and keeping customers, is, of course, the life blood of any business.” Kennedy v. C.I.R., 671 F.2d 167, 176 (6th Cir.1982).

It is Continuum’s contention that Mr. Sklar’s failure to disclose certain professional contacts he had with certain lawyers at Schiff Hardin violated his continuing duty to disclose any circumstance or relationship likely to give rise to “justifiable doubt” as to the arbitrator’s impartiality and which might “reasonably affect impartiality or lack of independence,” Canon II, § A(2) of the AAA Code of Ethics for Arbitrators in Commercial Disputes (emphasis supplied). Continuum contends it is entitled to take limited discovery of Mr. Sklar to prove its claim of “evident partiality” under § 10(a)(2) of the Federal Arbitration Act Evident partiality exists when an arbitrator’s bias is “ ‘direct, definite and capable of demonstration rather than remote, uncertain, or speculative’” Harter v. Iowa Grain Co., 220 F.3d 544, 553-54 (7th Cir.2000); Continuum Reply Brief at 3. It is only when a “reasonable person would ... conclude that an arbitrator was partial” that it can be said that evident partiality has been shown, and an arbitration award should be vacated. Commonwealth Coatings Corp. v. Continental Casualty Co., 393 U.S. 145, 151, 89 S.Ct. 337, 21 L.Ed.2d 301 (1968) (White, J., concurring); Merit Insurance Co. v. Leatherby Insurance Co., 714 F.2d 673 (7th Cir.1983) (Posner, J.).

DISCUSSION

Post-arbitration discovery is rare, and courts have been extremely reluctant to allow it. It is often a “tactic” employed by disgruntled or suspicious parties who, having lost the arbitration, are anxious for another go at it. 2 Not surprisingly, requests to take discovery of arbitrators have been “repeatedly condemned.” See Woods v. Saturn Distribution Corp., 78 F.3d 424, 430 (9th Cir.), cert. dismissed, 518 U.S. 1051, 117 S.Ct. 30, 135 L.Ed.2d 1123 (1996); O.R. Securities, Inc. v. Professional Planning Assocs., Inc., 857 F.2d 742, 748 (11th Cir.1988); Legion Insurance Co. v. Insurance General Agency, Inc., 822 F.2d 541, 543 (5th Cir.1987); Matter of Andros Compania Maritima, S.A. (Marc Rich & Co., A.G.), 579 F.2d 691, 700-702 (2nd Cir.1978). It is only allowed where there is “clear evidence of impropriety.” Woods, 78 F.3d at 430. Accord Lucent Technologies Inc. v. Tatung Co., 379 F.3d 24, 32 (2nd Cir.2004); Lyeth v. Chrysler Corp., 929 F.2d 891, 899 (2nd Cir.1991); Matter of Andros Compania Maritima, S.A. (Marc Rich & Co., A.G.), 579 F.2d at 700-702; Uhl v. Komatsu Forklift Co., Ltd., 466 F.Supp.2d 899, 910 (E.D.Mich.2006), aff'd., Uhl v. Komatsu Forklift Co., Ltd., 512 F.3d 294 (6th Cir. *944 2008); In re EquiMed, Inc., 2005 WL 2850373, *2 (E.D.Pa.2005).

Continuum has struggled with the evidentiary standard that must be met before post-award discovery will be permitted.

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768 F. Supp. 2d 939, 2010 U.S. Dist. LEXIS 61635, 2010 WL 2517047, Counsel Stack Legal Research, https://law.counselstack.com/opinion/midwest-generation-eme-llc-v-continuum-chemical-corp-ilnd-2010.