Timothy Owens v. American Arbitration Assoc.
670 F. App'x 441 (2016)
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Rule of Law:
Arbitral immunity extends to organizations that sponsor arbitrations and protects all acts within the scope of the arbitral process, including the removal of arbitrators, even if internal procedures are not strictly followed.
Facts:
- Timothy Owens was the president and CEO of Voyager Bank.
- After Voyager Bank terminated Owens, he filed for arbitration against Voyager Bank before the American Arbitration Association (AAA).
- AAA chose a three-member arbitration panel, including Allen Saeks.
- Saeks filed a supplemental disclosure stating he had been 'briefly consulted' by an attorney at his firm about an already resolved matter involving attorneys for both Owens and Voyager Bank.
- No party to the arbitration sought more information about Saeks' disclosures or objected to the arbitration panel at that time.
- The arbitration panel issued an initial award of more than $3 million to Owens.
- Voyager Bank then claimed that Saeks had been more involved in the earlier matter than he had disclosed.
- AAA removed Saeks from the arbitration panel without explanation, without holding a hearing, consulting Saeks, or informing Owens about the procedure for deciding Voyager's claim.
- The two remaining arbitrators then issued a final award in Owens' favor.
Procedural Posture:
- Timothy Owens and Voyager Bank filed cross motions in Hennepin County District Court (a state trial court), one to confirm the arbitration award and one to vacate it.
- The Hennepin County District Court decided to vacate the arbitration award.
- Owens then sued the American Arbitration Association (AAA) in state court for breach of contract, unjust enrichment, tortious interference with contract, and tortious interference with prospective economic advantage.
- AAA removed the case from state court to the United States District Court for the District of Minnesota (a federal trial court).
- The federal district court granted AAA's motion to dismiss Owens' claims, determining they were barred by arbitral immunity.
- Owens, as appellant, appealed the federal district court's dismissal to the United States Court of Appeals for the Eighth Circuit.
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Issue:
Does arbitral immunity protect an arbitration sponsoring organization from liability for claims arising from its removal of an arbitrator from an arbitration panel?
Opinions:
Majority - Per Curiam
Yes, arbitral immunity protects an arbitration sponsoring organization from liability for claims arising from its removal of an arbitrator from an arbitration panel. The court affirmed the district court's dismissal, holding that arbitral immunity extends to organizations that sponsor arbitrations and protects 'all acts within the scope of the arbitral process.' Citing Olson v. Nat'l Ass'n of Sec. Dealers, the court reiterated that immunity is granted to arbitrators because their role is 'functionally equivalent' to that of judges, protecting them from 'undue influence' and the arbitration process 'from attack by dissatisfied litigants.' This broad immunity protects sponsoring organizations from civil liability at all stages of the arbitration process, even if the organization fails to follow its own rules when taking actions within the arbitral process. The Eighth Circuit specifically concluded that the removal of arbitrators is protected by arbitral immunity because it is 'just as much a part of the arbitration process as the appointment of arbitrators,' making Owens' claims barred.
Analysis:
This case reinforces the broad scope of arbitral immunity, extending its protection not only to arbitrators themselves but also to the organizations that sponsor arbitrations and all administrative actions taken within the arbitral process, including the removal of arbitrators. This decision provides significant protection for arbitration organizations, insulating them from liability for procedural errors or dissatisfaction stemming from their administrative actions, even when those actions might seem unfair to a litigant. It underscores the judiciary's commitment to maintaining the integrity and independence of the arbitration process by preventing collateral attacks and encouraging participation without fear of litigation. Future cases will likely cite this precedent to support the application of arbitral immunity to a wide range of administrative decisions made by arbitration sponsoring bodies.
