Wallace, R. v. State Farm Mutual Automobile
199 A.3d 1249 (2018)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
A party waives the right to challenge an arbitration award on the grounds of arbitrator bias if they fail to make a timely objection to the arbitrator's participation before or during the arbitration proceedings.
Facts:
- In 2002, Ruth Wallace was injured in an automobile collision with an underinsured motorist while insured by State Farm.
- Wallace's insurance policy with State Farm contained a clause requiring disputes over underinsured motorist coverage to be settled by a three-person arbitration panel.
- After years of delay, during which Wallace failed to name her appointed arbitrator, the trial court appointed Marc Rickles, Esquire as the neutral arbitrator.
- Arbitrator Rickles scheduled an arbitration hearing for Monday, January 19, 2015.
- On Friday, January 16, 2015, Wallace and Allen Feingold, a disbarred attorney, filed a pro se lawsuit against Arbitrator Rickles, State Farm, and others, alleging bad faith and fraud.
- On Sunday, January 18, 2015, Feingold sent a fax to Arbitrator Rickles demanding his recusal from the case.
- On the day of the scheduled hearing, Wallace, her attorney (Elliot Tolan), and her purported arbitrator all failed to appear.
Procedural Posture:
- In 2008, Wallace filed a petition in the Court of Common Pleas of Philadelphia County (trial court) to appoint a neutral arbitrator and compel arbitration against State Farm.
- In 2013, the trial court granted State Farm's petition to appoint a new neutral arbitrator, replacing the previously appointed one.
- On January 19, 2015, the arbitration panel entered an award in favor of State Farm after Wallace and her counsel failed to appear at the hearing.
- Wallace filed a petition in the trial court to set aside the arbitration award.
- The trial court initially granted Wallace's petition, but upon State Farm's motion for reconsideration, it vacated that order.
- On June 30, 2017, the trial court confirmed the arbitration award and entered judgment in favor of State Farm.
- Wallace (Appellant) appealed the trial court's final order to the Superior Court of Pennsylvania, with State Farm as the Appellee.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a party waive their right to challenge an arbitration award on the grounds of arbitrator bias if they fail to object to the arbitrator's participation before or during the arbitration proceedings?
Opinions:
Majority - Strassburger, J.
Yes, a party waives the right to challenge an arbitration award on grounds of bias by failing to object in a timely manner. The court held that to preserve a claim of arbitrator bias for appeal, a party must object to the composition of the panel before or during the arbitration proceedings. The court, citing State Farm Mutual Auto. Ins. Co. v. Dill, emphasized that the burden is on the party requesting recusal to produce evidence of bias, prejudice, or unfairness. In this case, Wallace never formally objected to Arbitrator Rickles’s participation; her counsel admitted he did not ask the trial court for a new arbitrator, request a continuance, or appear at the hearing to object on the record. The fax from Feingold, a disbarred attorney who was not a party or counsel, did not constitute a valid objection by Wallace. The court found Wallace's conduct, particularly the filing of a frivolous, eleventh-hour lawsuit against the arbitrator, to be a shocking attempt to manufacture a basis for recusal. Accordingly, all claims regarding bias were waived.
Analysis:
This decision strongly reinforces the waiver rule concerning arbitrator bias in Pennsylvania, clarifying that a party cannot remain silent about alleged bias and then raise the issue for the first time after receiving an unfavorable award. It establishes that tactical maneuvers, such as filing last-minute lawsuits against an arbitrator to create a conflict of interest, are improper and will not be recognized as a valid basis for recusal or appeal. The ruling solidifies the precedent from Dill, placing the onus squarely on the party alleging bias to make a timely and formal objection during the arbitration process. The court's additional step of imposing sanctions sua sponte serves as a stern warning to counsel against pursuing frivolous appeals based on unpreserved issues or engaging in vexatious litigation tactics.
