Narayan v. Association of Apartment Owners of Kapalua Bay Condominium.
140 Haw. 75
Haw.2017Background
- Homeowners (Appellants) challenged an AOAO decision and the matter was arbitrated before retired Judge Victoria Marks (neutral). After an adverse award, Appellants sought post-award supplemental disclosures and moved to vacate for evident partiality based on alleged undisclosed connections.
- Appellants identified three categories of undisclosed contacts: (1) the AOAO’s damages expert (Stellmacher) had previously appeared before the Arbitrator; (2) the KSG law firm (connected to unrelated Developer litigation) had retained the Arbitrator in prior matters; and (3) Philip Nerney (AOAO’s governance expert) had previously appeared before the Arbitrator as counsel and in mediation while this arbitration was pending.
- DPR initially provided standard pre-appointment disclosures; it refused a post-award disclosure process. Appellants pursued discovery in the circuit court, deposed the Arbitrator, Nerney, and others, then moved to vacate the award under HRS § 658A-23(a)(2) for evident partiality.
- The circuit court found the Arbitrator had made a reasonable inquiry and that none of the undisclosed contacts were sufficiently direct, substantive, or recent to create a reasonable impression of partiality; it denied vacatur and confirmed the award.
- The Hawai‘i Supreme Court reviewed deference standards (clearly erroneous for factual findings; de novo for pure legal questions) and applied its recent precedents (Nordic and Madamba) to clarify the scope of § 658A-12(b) disclosure duties.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether “substantive nature” of a relationship is relevant to disclosure/partiality | Appellants: court erred by requiring substantial/substantive relationship; any nondisclosed contact that may affect impartiality must be disclosed | AOAO/Arbitrator: only relationships that a reasonable person would view as likely to affect impartiality must be disclosed; trivial/attenuated contacts need not | Court: "substantive nature" is a relevant factor in the objective assessment; undisclosed trivial/attenuated contacts do not require vacatur |
| Whether Arbitrator had duty to disclose prior occasions a listed witness appeared before Arbitrator (Stellmacher) | Appellants: any prior appearance by a witness before the Arbitrator is a relationship requiring disclosure | AOAO: mere prior observation of a witness is not a relationship that would create a reasonable impression of partiality | Held: mere prior appearance/observation alone, without more, is not a disclosure-triggering relationship |
| Whether Arbitrator had duty to disclose prior dealings with an unrelated law firm that retained an expert who later appeared (KSG) | Appellants: KSG’s retention and the overlap with Developer Action could create an appearance of future appointment or favor; must be disclosed | AOAO: KSG’s prior, unrelated retentions are attenuated; speculative future appointments insufficient to require disclosure | Held: retention by KSG in unrelated matters was too attenuated and speculative to create reasonable impression of partiality; no disclosure required |
| Whether Arbitrator had duty to disclose prior dealings with Nerney (prior counsel appearances and a mediation during pendency) | Appellants: Nerney’s recent appearances and summary-judgment result could bias Arbitrator toward Nerney and warrant disclosure | AOAO: prior counsel appearances and an unsuccessful mediation (for Nerney) were not substantive ties creating a reasonable impression of partiality | Held: prior appearances by Nerney, standing alone, were not a relationship that would reasonably suggest partiality; nondisclosure did not warrant vacatur |
Key Cases Cited
- Noel Madamba Contracting LLC v. Romero, 137 Hawai‘i 1, 364 P.3d 518 (Haw. 2015) (clarifies that failure to meet § 658A-12 disclosure obligations by a neutral arbitrator constitutes evident partiality requiring vacatur)
- Nordic PCL Const., Inc. v. LPIHGC, LLC, 136 Hawai‘i 29, 358 P.3d 1 (Haw. 2015) (establishes standards for reasonable inquiry and that nondisclosure can constitute evident partiality)
- Commonwealth Coatings Corp. v. Continental Cas. Co., 393 U.S. 145 (U.S. 1968) (establishes that nondisclosure of relationships creating appearance of bias mandates vacatur)
- Schmitz v. Zilveti, 20 F.3d 1043 (9th Cir. 1994) (distinguishes nondisclosure and actual-bias standards and discusses appearance-based challenges)
- New Regency Prods., Inc. v. Nippon Herald Films, Inc., 501 F.3d 1101 (9th Cir. 2007) (holds long-past, attenuated connections need not be disclosed)
- Valrose Maui, Inc. v. Maclyn Morris, Inc., 105 F. Supp. 2d 1118 (D. Haw. 2000) (vacatur where arbitrator had undisclosed ex parte discussions with party counsel about unrelated mediation appointment)
- Kay v. Kaiser Found. Health Plan, Inc., 119 Hawai‘i 219, 194 P.3d 1181 (Haw. Ct. App. 2008) (arbitrator’s solicitation/receipt of funds from a party during arbitration required disclosure)