Arbitration, “de facto corporate immunity,” and the Third Circuit

The New York Times today ran the second part of a special report on arbitration, entitled “Arbitration, a ‘Privatization of the Justice System.'” (Part I, with a cameo by avid hunter and EDPA Judge Schiller, is here.)

The story ends on this depressing note:

After the ruling, Ms. Pierce’s lawyers wrote to Mr. Kalogredis’s arbitration firm questioning his qualifications. The firm, American Health Lawyers Association, responded that it was not its responsibility to verify the “abilities or competence” of its arbitrators.

This brings to mind the recent Third Circuit case of Goldman Sachs v. Athena Venture (here), where the court refused to vacate an arbitration even though one of arbitrators allegedly committed gross misconduct. The opinion criticized the arbitration authority for its “remarkable” failure to investigate the arbitrator once the first evidence of misconduct came to light, but the court confirmed the arbitration award anyway.

And the broader concerns about arbitration’s growth brings to mind the Third Circuit’s unfortunate 2014 ruling in Khazin v. TD Ameritrade (here). That decision has been described by one commentator as extending to whistleblower suits the “trend of courts conferring de facto corporate immunity.”

The Third Circuit is sure to continue to face challenges to the expanding use of arbitration, and it will be interesting to see whether the growing concern about its fairness is reflected in case outcomes.