Arizona Court of Appeals Affirms Denial of Motion to Annul an Arbitration Award

In Fisher v. USAA Casualty Insurance Company, the Appeals Court of Arizona viewed a case involving Stefanie Fisher, the plaintiff, and USAA Casualty Insurance Company as the defendant. Stefanie and Jeffery Fisher appealed a superior court decision affirming an arbitration award for USAA Casualty Insurance Co. (USAA). The appeals court agrees that the Fishers failed to file an objection in a timely manner, and so their claim is waived and the award is affirmed.

In the summer of 2012, the Fishers experienced two car accidents within one week of each other. Stefanie Fisher, after the accidents, sustained increasingly severe neck and back pains. She received medical treatment and underwent surgery in order to fuse a herniated spinal disc. Stefanie connected the pain to the two car accidents, and she filed an underinsured motorist claim with her insurer, USAA, since the damages she claimed were above the insurance limits of the other drivers.

The Fishers’ attorneys at the time recommended that they use an arbitrator, Alan Goldman, in which USAA agreed. However, it was found that Goldman often served as an arbitrator for Joes, Skelton & Hochuli (JSH), which is a law firm that represents USAA. The Fishers’ counsel expressed their concern of this fact, and they believed that this business relationship with the firm could compromise Goldman’s neutrality. When the counsel suggested that the Fishers settle instead, they decided to go forward with arbitration anyway.

After hearing and examining the evidence and testimony from both sides, Goldman concluded that the low-impact car accidents did not cause Stefanie’s injuries, and so he did not award damages to the Fishers.

In December 2016, the Fishers filed a motion to reconsider with the arbitrator, Goldman. The motion emphasized the evidence presented at the original hearing, but it didn’t state any concerns over the arbitrator’s impartiality. The Fishers also requested that their original counsel address the problem of conflict of interest, which caused them to suddenly terminate their work. The counsel’s motion mentioned that the Fishers were urging them to take action that they believed was “unethical and repugnant.”

In January 2017, the Fishers filed a pro per motion for reconsideration with Goldman and raised the issue of partiality. Following the arbitrator’s denial of that motion, the Fishers received new counsel and filed another motion to vacate the award due to Goldman’s supposed conflicts of interest and failure to disclose. The Fishers also filed a motion to permit discovery of investigating the arbitrator’s possible business relationship with JSH. Goldman did not rule on the two motions, and the Fishers filed a motion to annul the arbitration award with the superior court.

In examining the discovery motion, the court denied the Fishers’ motion by stating that the partiality issue can be waived and that the law doesn’t support giving post-arbitration discovery. As for the motion to reconsider, the court held further dispute that the Fishers had waived their right to challenge Goldman’s supposed bias because they knew he had a relationship with USAA before the arbitration. However, they didn’t object before or during the arbitration hearing. Because of this, the court found that the Fishers failed to prove evidence of partiality, even without a waiver.

First, the court must assert that judicial review of the arbitration award is usually very limited, because Arizona public policy prefers arbitration to win a quick and cheaper disposition of disputes. Also, the court agreed that arbitrators have to disclose any current or past relationships with any of the involved parties to the arbitration agreement or their counsel, if a reasonable person could conclude that this relationship would affect his or her impartiality.

If the objection is made in a timely manner, the superior court can annul an arbitration award if an arbitrator did not properly disclose a significant relationship with another party or counsel. In order for this award to be vacated, the parties must object to possible partiality “within a reasonable period after the person learns or should learn of the undisclosed fact.”

It was agreed that the parties who knew or had reason to know of any partiality should raise an objection with the arbitrator during the arbitration proceeding. The Fishers’ dispute that the superior court was wrong when it ruled that they waived their right to object to Goldman’s alleged partiality. They stated that the arbitrator’s failure to disclose his relationship with JSH disallowed the Fishers the knowledge needed to object on partiality during that timeframe.

This argument did not persuade the court. The Fishers’ opening statement admitted that they knew of a possible relationship between JSH and Goldman before the hearing, yet they decided to continue with the arbitration without raising an objection or asking for any more information about Goldman.

The Fishers also alleged that the court erred in shifting the arbitrator’s burden to disclose his relationship onto them and blamed them for Goldman’s lack of disclosure. Even though Goldman had a duty to disclose any relationships with parties and clients, it was found there was no proof in the record to support the contention that such a relationship exists.

For all of these reasons, our appeals court affirms the superior court’s denial of the motion to vacate the arbitration award. USAA asks for an award of costs and attorneys’ fees, and we award them these damages.