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In re an Arbitration Between Cook Industries Inc.

decided: September 16, 1971.


Friendly, Chief Judge, and Hays and Oakes, Circuit Judges. Oakes, Circuit Judge (dissenting).

Author: Hays

HAYS, Circuit Judge:

This is an appeal from an order of the United States District Court for the Southern District of New York which denied appellant's motion, made under 9 U.S.C. § 10(b) (1964), to vacate an arbitration award because of the alleged partiality of one of the arbitrators. We affirm.

Appellant is the assignee of Rag. Luigi Gandini Voghera, an Italian firm, which contracted to sell corn to the appellee. A dispute arose with respect to the performance of the contract, and appellant obtained an order of the district court directing the appellee to proceed to arbitration, as provided for in the sales contract, before the arbitration committee of the New York Produce Exchange. Although that committee normally consists of five persons, one was absent and the arbitration proceeded before the remaining four. One of the four arbitrators was Robert R. Anderson, an employee of Cargill Incorporated, the largest United States company in the grain trade. After the arbitrators had ruled unanimously in appellee's favor, appellant brought this action urging that there was "evident partiality" within the meaning of 9 U.S.C. § 10(b) (1964) and Commonwealth Coatings Corp. v. Continental Casualty Co., 393 U.S. 145, 89 S. Ct. 337, 21 L. Ed. 2d 301 (1968), because Anderson's employer, Cargill, had substantial business dealings with appellee, a circumstance which Anderson failed to disclose. We agree with the district court that appellant's position is without merit.

The record in the present case shows that Cargill, and both appellant and appellee, are corn dealers in an industry made up of comparatively few companies. Appellant as well as appellee has done business with Cargill. Many of appellant's employees are former employees of Cargill and knew of its dealings with the appellee. The district court was justified in concluding that appellant was fully aware at the time of the submission to arbitration of the relationship between appellee and Cargill.

Appellant cannot remain silent, raising no objection during the course of the arbitration proceeding, and when an award adverse to him has been handed down complain of a situation of which he had knowledge from the first.

"Where a party has knowledge of facts possibly indicating bias or partiality on the part of an arbitrator he cannot remain silent and later object to the award of the arbitrators on that ground. His silence constitutes a waiver of the objection. See San Carlo Opera Co. v. Conley, D.C.S.D.N.Y. 1946, 72 F. Supp. 825, 833, affirmed 2 Cir., 1947, 163 F.2d 310."

Ilios Shipping & Trading Corp. S. A. v. American Anthracite & Bituminous Coal Corp., 148 F. Supp. 698, 700 (S.D.N.Y.), aff'd per curiam, 245 F.2d 873 (2d Cir. 1957); see also Garfield & Co. v. Wiest, 432 F.2d 849 (2d Cir. 1970), cert. denied, 401 U.S. 940, 91 S. Ct. 939, 28 L. Ed. 2d 220 (1971).

Commonwealth Coatings, supra, is readily distinguishable. In that case "the facts concerning the close business connections between the third arbitrator and the prime contractor were unknown to petitioner and were never revealed to it by [the] arbitrator, by the prime contractor, or by anyone else until after an award had been made." 393 U.S. at 146, 89 S. Ct. at 338.

Moreover, while the Supreme Court in Commonwealth Coatings emphasized the importance of an arbitrator disclosing "to the parties any dealings that might create an impression of possible bias," 393 U.S. at 149, 89 S. Ct. at 339, this court, in giving practical meaning to that principle, has treated the obligation to which arbitrators are subject as being to disclose dealings of which the parties cannot reasonably be expected to be aware, i. e., dealings "not in the ordinary course of * * * business," Garfield & Co. v. Wiest, supra, 432 F.2d at 854. In an attempt to bring itself within the scope of that language appellant alleges in its brief that "there were important and current transactions pending apart from the ordinary business conducted between [Cargill] and [appellee]." We find nothing in the record which suggests the existence of any extraordinary secret deal between appellee and Anderson's employer. Appellant had the burden of showing any such extraordinary dealings and failed to do so. We see no reason for affording it a second chance.

The order of the district court is affirmed.



OAKES, Circuit Judge ...

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