I recently became aware that, through its budget process, New York State legislators are seeking to amend New York’s arbitration law (contained in its Civil Practice Law and Rules) to, among other things, require that all arbitrators be neutral (i.e. no party arbitrators); require certain disclosures by arbitrators relevant to possible bias; permit vacatur based on a party’s objection to continued service of an arbitrator who discloses facts required to be disclosed (i.e. partiality is presumed); require awards to include findings of fact and conclusions of law; and codify manifest disregard as a statutorily-authorized ground to vacate an award. The amendments also prohibit the “formation and enforcement of mandatory arbitration agreements involving a claim of discrimination, including one based on sexual harassment.” [You can read the proposed amendments here, on pages 189, line 54, through 192, line 43.]
The New York City Bar International Commercial Disputes (ICDC) and Arbitration Committees filed a report (comments) opposing some of the procedural amendments. (The report did not mention the prohibition on pre-dispute agreements to arbitrate discrimination claims.)
If passed, these amendments raise interesting questions of preemption by the Federal Arbitration Act. My own view is that the prohibition of arbitration of a particular kind of claim, i.e., discrimination, is clearly preempted. It is less clear whether the enhancements to arbitrator disclosure rules and arbitrator neutrality are preempted. I do oppose, on policy grounds, the requirement that arbitrators include findings of fact and conclusions of law in their awards, as that will unduly add to the cost of arbitration, and will give rise to additional legal challenges to awards.
As to codifying manifest disregard of the law as a ground for review, the Supreme Court has never held that the FAA’s section 10 grounds for review are applicable in state court, and, even if they are, only grounds that conflict with the purposes of the FAA would be preempted. Since many federal circuits have ruled that manifest disregard of the law is a ground for review within the meaning of section 10(a)(4) (exceeding powers), under that interpretation there is no conflict and thus the codified ground in New York would not be preempted.
However, these issues are complex and far beyond solving through this brief blog post.
If anyone out there has a better sense than I do as to the likelihood of these amendments passing, I would love to hear from you!
(H/T to my LinkedIn connections Jeff Zaino and Steve Skulnick for bringing this to my attention.)