Thе appellant, James D. Morrisey, Inc., appeals from the lower court’s order denying its “Petition To Vacate Arbitration Award.” We vacate and remand for proceedings consistent with this opinion.
The facts consist of the following: Appellant, a sub-contractor, entered into two separate agreements with appellee, Grоss Construction Co., Inc.—a general contractor, concerning two phases of a single job. The first contract was signed in August, 1971 (Phase I) and the second was executed in January, 1974 (Phase II).
On December 23, 1976, appellant filed a two count Complaint in Assumpsit against appellee claiming $12,925.00 in Count I and $749.92 in Count II for goods and services delivered to apрellee’s jobsite in the Regency Park Apartments in Philadelphia (Phase II). As with Phase I, Phase II of the work was governed by a written document containing an arbitration provision calling for all controversies arising under the contract to be resolved by means of arbitration. The clause provided in part that: “The rules of the American Arbitration Associаtion shall control and any award rendered in the arbitration shall be binding and conclusive upon the parties and shall not be subject to appeals or retrying by any court. .. . Three arbitrators shall be appointed; Contractor shall designate an arbitrator, Sub-contractor shall designate an arbitrator, and the two arbitrators so chosen shall designate a third.” Thus, when the dispute arose, both sides agreed to submit the matter to binding *153 arbitration, and, in accordance therewith, appellant’s Complaint was discontinued.
On September 1, 1977, appellant filed a demand for arbitration with the American Arbitration Association (AAA). Appellee responded by filing a counterclaim, alleging that $6,907.38 was pаid to the appellant for work that was never performed. In answer, appellant amended its original claim to include a request for an additional $29,697.75. According to appellant, such figure related to monies due it from appellee for services rendered under the August, 1971 agreement (Phase I). In particular, appellant averred appellee owed it: (a) $20,900.00 for retaining work; and (b) $8,797.75 for extra excavation. All parties agree that the added amount sought, albeit relating to work performed in 1971, was not billed to appellee until the third week in November, 1977, which, interestingly enough, came after appellee filed its counterclaim involving Phase II of the job.
After the appellant selected its arbitrator (Robert Lipschutz) and appellee chose its representative (Philip Stein-man), the two arbitrators then decided upon the third panel member (Frederick Milstein). The arbitration hearing was conducted in June of 1978, and the award that was issued, which was a unanimous one, appears in part below:
“1. The claim of [appellant], against [appellee], is allowed in the amount of SEVEN THOUSAND TWO HUNDRED EIGHTY-FOUR DOLLARS AND THIRTY-SIX CENTS ($7,284.36) plus interest at the rate of eight percent (8%) per annum from December 31, 1975.
2. The counterclaim of the [appellee] against the [appellant] is allowed in the amount of FIVE THOUSAND FOUR HUNDRED FIFTY-SEVEN DOLLARS AND THIRTY-SIX CENTS ($5,457.36).
3. Therefore, the [appellee] shall pay to the [appellant] the sum of ONE THOUSAND EIGHT HUNDRED TWENTY-SEVEN DOLLARS ($1,827.00) plus intеrest at the rate of eight percent (8%) per annum from December 31, 1975. . . . ”
*154 The award, as entered, denied appellant’s claim regarding the retainage work. Thus, appellant filed a petition seeking to vacate the aforementioned award on the basis that, inter alia, “[t]he decision was the result of bias” “on the part of one or more of the Arbitrators' so as to totally [sic] deprive [it] of a fair hearing[.]” More precisely, appellant urged, that the third member of the panel (Mr. Milstein) “failed to disclose the fact that he had business dealings with Gross Construction Company, Inc.[,]” and, further, “that he is presently a sub-contractor of Gross Construction Company, Inc.” (Appellant’s “Petition to Vacatе Arbitration Award,” Points 19 and 20) Appellee did not deny these factual allegations. (See “Answer and New Matter of Gross Construction Company, Inc. to Petition to Vacate Arbitration Award,” Points 19 and 20)
After the petition to vacate was filed, arbitrators Milstein and Lipschutz were deposed by the parties. As a result thereof, the following information surfaced: Prior to thе June 6th arbitration, Milstein conceded that he had done, and in fact was continuing to do, subcontracting work for appellee; that this business relationship had existed for some “10 to 15 years or longer.” In fact, Milstein admitted that on the date set for the hearing, his company was “do[ing] . . . subcontracting work in the job that was arbitrated, that is, at the Regency Park Aрartments[.]” Also, he acknowledged that the subcontracting work done at the site for the appellee encompassed “both Phase I and Phase II[.]” Interestingly enough, Milstein, after being assigned as the neutral panelist, stated that his reason for not disclosing his business association with appellee was because “[he] wasn’t asked.” However, Milstein did mаke the other arbitrators aware, during their deliberations, of his business dealings with appellee. 1
*155 The lower court, after the presentation of all the evidence and the hearing of oral argument, denied appellant’s petition. This appeal followed.
The issue, concisely stated, is whether the common law arbitration award should bе vacated due to the fact that one of the arbitrators had an on-going business relationship with one of the party litigants, a point which was never disclosed prior to the entry of the award.
Since the present dispute involves common law arbitration, our scope of review is limited.
Runewicz v. Keystone Insurance Co.,
“ ‘[i]f the appeal is from a common law award, Apрellant, to succeed, must show by clear, precise and indubitable evidence that he was denied a hearing, or that there was fraud, misconduct, corruption or some other irregularity of this nature on the part of the arbitrator which caused *156 him to render an unjust, inequitable or unconscionable award, the arbitrator being the final judge of both law and fact, his award not being subject to disturbance for a mistake of either.’ ” (Citation omitted)
The irregularity mentioned above goes to the process employed in reaching the decision.
Press v. Maryland Casualty Co.,
In Bole, an individual injured in an automobile accident, appellee, submitted a claim to his insurer, Nationwide Insurance Co., appellant. Nationwide refused payment. In accordance with the terms of the insurance policy, which provided for common law arbitration, appellee requested that the issue be submitted to arbitration, with each party choosing a “competent and disinterestеd arbitrator.” Both sides selected an arbitrator, but appellee objected to Nationwide’s choice because the individual, an attorney, had provided legal representation for Nationwide in the past. Despite appellee’s disapproval, the arbitrator refused to disqualify himself, a hearing was conducted and an award was entered in favor of Nationwide.
Appellee’s petition to vacate the award, on the ground that the arbitrator chosen by Nationwide should have disqualified himself, was denied by the lower court. An appeal to this Court,
Bole v. Nationwide Insurance Co.,
It is granted that the parties here, unlike in Bole, did not specifically spell out the requirement in their contracts that they wanted “disinterested” arbitrators to sit in on their dispute. However, we find that by the litigants specifically agreeing that “[t]he rules of the American Arbitration Association shall control ...” the resolution of any claim relating to the contracts, which rules, specifically section 18, request the prospective arbitrator to disclose “any circumstances likely to create a presumption of bias or which he believes might disqualify him as an impartial Arbitrator[,]” 2 to bring the case sub judice within the ambit of Bole.
*158
Moreover, our Supreme Court has acknowledged that in circumstances similar to the case at bar, “several courts ... have required that the arbitrator disclose any potential conflict of interest to the parties.”
Abramovich v. Pennsylvania Liquor Control Board,
*159 “In either of the following сases the court shall make an order vacating the award upon the application of any party to the arbitration:
(a) ...
(b) Where there was evident partiality or corruption on the part of the arbitrators, or any of them. . . . ”
See also Commonwealth Coatings Corp. v. Continental Casualty Co.,
The result we reach today is even more сompelling when one considers that the parties to the contracts “must consent to arbitration as the method of resolving disputes.”
Abramovich v. Pennsylvania Liquor Control Board, supra,
“Because they are the final decision-makers on the law and facts of the case, whose decision is final absent fraud or misconduct, arbitrators under common law stand as judges. Their function is judicial, and their conduct must be robed in judicial impartiality. Without reflecting in any degree upon [the arbitrator’s] honesty or integrity and without deciding to what degree [the] arbitrator^ who was requested to disqualify himself from the panel,] may or may not be partisan, I would hold that his prior professional representation of appellee cast a cloud upon his impartiality. Arbitration is an important function in the law wherein decisions are cloaked with finality. While it is not reasonable to expect to find three arbitrators with no innate or acquired sympathies as to certain cases, it is right to ask, at the least, that each be impartial to the extent of never having been in the employ of any of the litigants. To have a lesser standard would be dishonest to the expectation held by the parties and the needs of justice that a decision will be rendered by disinterested *160 triers of fact and law.” (Emphasis added) (Footnote omitted) Bole v. Nationwide Insurance Co., supra, 238 Pa. Super, at 147,352 A.2d at 479 .
Given the fact that Mr. Milstein had an on-going business relationship with the appellee, which included work being done on the jobsite in dispute, we can perceive of no way in which the effectiveness of the arbitration process would have been hampered by the simple requirement that the arbitrator disclose to the parties any dealings that might have created an impression of possible bias. Commonwealth Coatings Corp. v. Continental Casualty Co., supra; see also Abramovich v. Pennsylvania Liquor Control Board, supra; Bole v. Nationwide Insurance Co., supra.
Appellant is entitled to have his claim heard by a panel of arbitrators that is not biased against one litigant and favorable to another, which is not to say that the аrbitrator here was biased, for we need not make such determination in deciding the case. Bole v. Nationwide Insurance Co., supra. Ergo, the decision to keep an arbitrator on a panel that had, or has, business dealings with one of the parties should be made after said information is disclosed to the party affected. Absent such disclosure, the award entered is subject to being overturned. Commonwealth Coatings Corp. v. Continental Casualty Co., supra. Consequently, the award in this case and the order of the lower court in support thereof cannot stand.
Order of the lower court is vacated and the case is remanded to the Court of Common Pleas of Montgomery County for proceedings consistent with this opinion.
Notes
. The effect of Milstein’s disclosure of his familiarity with appellee’s business operation became evident during Mr. Lipschutz’s deposition.
Mr. Lipschutz recalled that the appellant had sought recoupment of monies allegedly due and owing it by the appellee under two contracts. One concerned Phase I of the Regency Park Apart *155 ments—which dealt in part with retainage work and amounted to a dollar value of some $20,000.00, and the other concerned Phase II of the same project. It was appellee’s position, as recounted by Lipschutz, that the claim attendant to Phase I had been incorporated into the price of the Phase II contract. Appellant, on the other hand, contended that the amount owed under the retainage clаim had not been paid and was not built into Phase II.
During the course of the discussion among the arbitrators, Lipschutz stated how Milstein disclosed his past dealings with appellee, and how he (Milstein) opined that “it would have been a practice of Gross” to have included the retainage “in the second Phase contract.” Lipschutz admitted that Milstein’s exрerience with Gross Construction Company “was a factor” in his decision relative to the retainage question. Furthermore, he stated, had Milstein been totally unbiased, he:
“might very possibly have taken a different position on this retainage and what was done, and that was the main thrust of the decision. There’s where most of the money was—in saying ‘Well, they [—the other arbitrators—] couldn’t understand a business practice like that or they could,’ or whatever, and there may have been more discussion that ensued that would have made a more equitable decision, if that’s the proper term to use, it’s hard to get a total neutral, but it may have helped the situation. I approached [the decision] on the basis of fairness and honesty and best intelligence, but that sometimes isn’t the proper answer because if the other two arbitrators were successful subcontractors and leaning in one way, it does somewhat weight the decision.” (R 63)
. The entire section reads as follows:
“Section 18. Disclosure by Arbitrator of Disqualification—At the time of receiving his notice of appointment, the prospeсtive Arbitrator is requested to disclose any circumstances likely to create a presumption of bias or which he believes might disqualify him as an impartial Arbitrator. Upon receipt of such information, the Tribunal Clerk shall immediately disclose it to the parties, who if willing to proceed under the circumstances disclosed, shall, in writing, so advise the Tribunal Clerk. If either party declines to waive the presumptive disqualification, the vacancy thus created shall be filled in accordance with the applicable provisions of this Rule.”
Based on the aforesaid, we consider Milstein remiss in not informing the AAA, upon receipt of his notice of appointment, of the circumstances likely to creаte a presumption of bias, or which might have been interpreted as grounds disqualifying him from serving as an impartial arbitrator.
See Conner [Connor] v. Simpson,
4 Sadler (Pa.) 105,