Fifth Circuit Holds A Party Can Waive the Challenge to the Composition of an Arbitration Panel.

The United States Fifth Circuit Court of Appeals recently issued an opinion on the failure to object to the composition of an arbitration panel that serves as a reminder to properly vet and object to potential arbitrators. Light-Age, Inc. v. Ashcroft-Smith, No. 18-20098, 2019 WL 1856644 (5th Cir. Apr. 25, 2019)

Attorney Clifford Ashcroft-Smith (“Ashcroft-Smith”) provided legal services to Light-Age, Inc. (“Light-Age”). Light-Age refused to pay Ashcroft-Smith’s attorney’s fees, arguing they were excessive. The parties agreed to arbitrate their dispute under the Houston Bar Association’s fee-dispute program that required each arbitration panel consist of three arbitrators, one of whom “shall be a non-lawyer member.”

Ana Davis (“Davis”) was selected as the non-lawyer member of the arbitration panel. Although Davis is not a lawyer, she is the payroll manager for a law firm. Leading up to the arbitration, Davis emailed the parties numerous times using her work email address that identified the name of her law-firm employer in her signature block. Light-Age did not object to Davis being a member of the arbitration panel before the final arbitration hearing. Following the final hearing, the panel awarded Ashcroft-Smith $274,813.58.

The district court confirmed the arbitration award but Light-Age moved to vacate the award on the grounds Davis’ inclusion in the arbitration panel violated the fee-dispute program’s rules. Light-Age claimed it did not discover that Davis was a law-firm employee until after the arbitration hearing.

The Fifth Circuit affirmed the district court’s confirmation of the arbitration award, holding that Light-Age waived its ability to challenge the composition of the arbitration panel by failing to object at the arbitration hearing and without addressing the merits of Light-Age’s argument (i.e., whether a law-firm employee is a “non-lawyer member”). The Fifth Circuit reasoned that “a party to an arbitration waives an objection to an arbitrator’s conflict of interest if the party has constructive knowledge of the conflict at the time of the arbitration hearing but fails to object.” All Light-Age had to do to discover that Davis worked for a law firm was click on the link in her email signature.  Therefore, Light-Age had constructive knowledge of that fact and did not object prior to or at the hearing, thereby waiving the objection.

By: Zachary Farrar

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