Umbrella of Immunity for Arbitrators: Where Virginia is Now and Where It Needs to Be.

08/13/2018 by Authored by Law Clerk Brent Bickings, with assistance of Attorney Jean Stallard

In 1985, on an ordinary day at the University of South Carolina School of Law, Professor Dennis R. Nolan, a member of the National Academy of Arbitrators, noticed a young man standing outside of his office door.  The stranger approached him and asked whether he was indeed Professor Nolan.  Upon responding in the affirmative, the young man served Professor Nolan with a subpoena to testify in a suit to vacate an award he had granted as an arbitrator.[1]  He was, as one would expect, surprised, then concerned and finally outraged.[2]  As a result, Professor Nolan became a leading voice calling for the need for arbitral immunity.  Some states listened, providing and strengthening legislative protections but not Virginia.  To this date, in Virginia, mediators are granted immunity from civil liability by statute, but not so for arbitrators! [3]  Why is this so, and what can be done about it?

Traditionally, arbitrators have been afforded a level of immunity from civil liability for their non-criminal actions while serving as an arbitrator.  The doctrine of arbitral immunity is an offshoot of judicial immunity, a legal concept that can be traced to two early seventeenth English cases.[4]  The American Arbitration Association (“AAA”), a professional organization governing alternative dispute resolution, publishes rules for six different areas of arbitration.  All six contain the following wording: “Neither the AAA nor any arbitrator in a proceeding under these rules is a necessary or proper party in judicial proceedings relating to the arbitration.”[5]  Protections under the International Dispute Resolution Procedures, also published by the AAA, are even more sweeping.  The procedures state that arbitrators “shall not be liable to any party for any act or omission in connection with any arbitration” and the parties to the arbitration must stipulate that “no arbitrator. . . shall be under any obligation to make any statement about the arbitration, and no party shall seek to make any of these persons a party or witness in any judicial or other proceedings relating to the arbitration.”[6]   However, the Federal Arbitration Act contains no such provision and only four out of the fifty states have included arbitral immunity to varying degrees in their state codes: California, North Carolina, Florida, and Utah.[7]

Virginia has no statutory immunity for arbitrators.  In fact, there have been two unsuccessful attempts in the past 30 years to implement a statutory scheme governing such immunity.  The first occurred in the early 1990s.  In the 1991 Session of the General Assembly, Joint House Resolution No. 435 established a committee to explore non-binding arbitration as an alternative to traditional litigation and a way to alleviate the caseload of the court system.[8]  The ensuing report with its draft legislation included a section on civil immunity which read “An arbitrator shall be immune from civil process or civil liability arising from participation as an arbitrator and for all communications, findings, opinions, and conclusions made in the course of his or her duties as prescribed by this chapter.”[9]  That section has not made it into the Virginia Code to date.

The second attempt occurred about a dozen years later.  Senate Bill 307 of the 2003 session, introduced by Senator John S. Edwards, would have added sections 8.01-581.17 through 8.01-581.046 to the current Uniform Arbitration Act.[10]  Section 8.01-581.30 of the proposed legislation stated that “An arbitrator or an arbitration organization acting in that capacity is immune from civil liability to the same extent as a judge of a court of the Commonwealth acting in a judicial capacity.”[11]  This mirrors the wording in Section 14 of the Revised Uniform Arbitration Act.[12]  The bill was referred to the Committee for the Courts of Justice, was continued, and then left to shrivel and die in the committee docket of failed legislation.

There is little “on point” case law in Virginia state courts, and that which does exist has been unfriendly to the concept of immunity from civil liability for arbitrators.  In 1993, the Circuit Court of Alexandria was tasked with resolving objections to a subpoena to depose the arbitrators in a medical malpractice arbitration.[13]  The arbitrators argued that public policy should prevent these depositions since the arbitrators were “quasi-judicial officers.”[14]  The court allowed the depositions to proceed and stated, “No statutory immunity exists nor is there case law directly granting such immunity.”[15]

The Fourth Circuit has handled arbitral immunity a little differently.  Because North Carolina is one of the four states that grants immunity to arbitrators in court-appointed nonbinding arbitrations by statute, cases that reach the Fourth Circuit from District Courts in North Carolina can apply that immunity.[16]  Maryland cases that reach the Fourth Circuit, even though there is no statutory immunity in the state, do recognize a common law doctrine of arbitral immunity.[17]    Interestingly, in one Virginia bankruptcy case that began in Eastern District of Virginia and was appealed to the Fourth Circuit, the court dismissed claims against an arbitrator based on the doctrine of arbitral immunity because the movant had contractually agreed to be bound by rules governing regular arbitration, one of which granted the arbitrator judicial immunity.[18]

Why is Virginia so reticent to extend the same immunity afforded to mediators to arbitrators?  Perhaps the 1992 report on court-annexed arbitration may give us a clue.  When discussing the differences between mediation and arbitration, the authors pointed out that in mediation, the parties reach a compromise through the non-coercive assistance of the mediator, but the final decision is made by the parties themselves.[19]  In arbitrations, however, the arbitrator decides the outcome and is more susceptible to fraud or abuse.

As Nolan and Abrams wrote: “[R]ecipients of bad news are inclined to blame the messenger, so many a losing party in an arbitration will blame the arbitrator. Some take their anger so far as to sue the arbitrator for breach of contract or for any number of torts. . . Suits and subpoenas against arbitrators threaten to undermine the nation’s most successful form of alternative dispute resolution.”[20]  Benefits of the process of arbitration are multi-fold, and to fully enjoy those benefits, arbitral immunity must be mandatory. This article should be considered as a call to action to provide arbitrators in Virginia with these common-sense protections.

Without statutory or common law protections, arbitrators in the Commonwealth of Virginia should consider incorporating protective language such as is found in Article 38 of the International Dispute Resolution Procedures into their Scheduling Orders, which the parties would then execute.  Article 38 specifies that (i) the arbitrator will not be liable for acts or omissions, except to the extent prohibited by law; (ii) the arbitrator is under no obligation to make a statement about the arbitration proceedings; and (iii) the parties will not seek to make the arbitrator a party or a witness in any judicial or other proceedings relating to the arbitration.   However, incorporating this language into Scheduling Orders will not afford the same protection as a statutory provision.   Hopefully, the Virginia legislature will make a third attempt in the near future to provide arbitrators with appropriate protections, and this time, be successful.

[1] Dennis R. Nolan & Roger I. Abrams, The Arbitrator’s Immunity from Suit and Subpoena, in Arbitration 1987: Proceedings of the 40th Annual Meeting, National Academy of Arbitrators, 149 (Gladys Gruenberg, ed., 1987).

[2] Id.

[3] Va. Code Ann. § 8.01-581.23 (West 1960)

[4] Floyd v. Barker, 77 Eng. Rep. 1305 (1607); The Marshalsea, 77 Eng. Rep. 1027 (1612); see also Dennis R. Nolan and Roger I. Abrams, Arbitral Immunity, 11 Berkeley J. Emp. & Lab. L. 228 (1989).

[5] Commercial Arbitration R-52(b); Construction Industry Arbitration R-54(b); Consumer Arbitration R-49(b); Employment Arbitration R-42(b); Labor Arbitration R-42(a); Optional Appellate Arbitration Rules A-22(b);

[6] International Dispute Resolution Procedures Art. 38.

[7] Cal. Civ. Proc. Code § 1297.119 (West) (applies only to international commercial disputes); N.C. Gen. Stat. § 7A-27.1(e) (West) (applies only to court-ordered nonbinding arbitration); Fla. Stat. Ann. § 44.107(1) (West) (applies to court-ordered nonbinding arbitration and voluntary binding arbitration); and Utah Code Ann. § 78B-6-204(6) (West) (applies to all ADR providers conducting proceedings under the rules of the Judicial Council and the Utah code).

[8] H.D. 34, Rep. of the Joint Subcommittee of the Va. State Bar and the Va. Bar Assoc. Studying Court-Annexed Arbitration (1992), https://rga.lis.virginia.gov/Published/1992/HD34.

[9] Id.

[10] S.B. 307, 2003 Sess. (Va. 2002).

[11] Id.

[12] Revised Uniform Arbitration Act § 14(a) (2000).  That section is based on former Cal. Civ. Proc. Code § 1280.1, which was enacted with an expiration date and not renewed.  See footnote 6 for the current provision only applies to international commercial arbitrations.  Note also that the comments to Section 14 mentions that the proposed legislation draws no distinction between neutral arbitrators and advocates; both are covered.

[13] Petter v. Acevedo, 31 Va. Cir. 7, 11 (Va. Cir. Ct. 1993).

[14] Id.

[15] Id.

[16] See Cecala v. NationsBank Corp., 40 Fed. Appx. 795 (4th Cir. 2002). (The 4th Circuit affirmed the District Court for the Western District of North Carolina; the District Court had found that “damage claims against the. . . Defendants are barred by arbitral immunity. Cecala v. Nationsbank Corp., 2001 WL 36127812, *2 (W.D.N.C. 2001))

[17] Mathis v. Goldberg, 538 F. App’x 310, 311 (4th Cir. 2013) (Plaintiff sought damages from an arbitrator and witness arising out of divorce arbitration proceedings.  The court said the arbitrator was immune from suit because he was acting in a quasi-judicial capacity).

[18] In re A.H. Robins Co., Inc., 219 B.R. 135, 142, 143 (E.D. Va. 1998), aff’d, 166 F.3d 331 (4th Cir. 1998).

[19] H.D. 34, supra note 8.

[20] Dennis R. Nolan & Roger I. Abrams, Arbitral Immunity, 2 Berkeley J. Emp. & Labor Law 229 (June 1989).

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