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Keywords

arbitrationappealpatentexpert witnessarbitrator
arbitrationpatentcorporationexpert witnessarbitrator

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Lucent Technologies Inc. v. Tatung Co., 379 F.3d 24

Facts

In October 2000, Lucent initiated arbitration against Tatung due to Tatung's failure to pay royalties under their patent licensing agreement. The arbitration panel consisted of three arbitrators, two appointed by the parties and one neutral arbitrator. Tatung later contested the arbitration award, claiming that one arbitrator, J. David Luening, had failed to disclose his prior work as an expert witness for Lucent and that he and another arbitrator had co-owned an airplane, which constituted evident partiality.

In October 2000, Lucent initiated arbitration against Tatung, a Taiwanese corporation, because of Tatung's alleged failure to pay any of the royalties required by their patent licensing agreement with Lucent.

Issue

Did the failure of the arbitrators to disclose certain relationships and prior engagements constitute evident partiality that warranted vacating the arbitration award?

Tatung argues that the court's judgment should be reversed and the award vacated because (1) Tatung never received the disclosure form submitted to the American Arbitration Association (AAA) by arbitrator J. David Luening; (2) Luening's service as an expert witness for Lucent in an unrelated matter constituted “evident partiality” requiring vacatur; and (3) Luening and fellow arbitrator Roger Smith failed to disclose their joint ownership of an airplane between 1974 and 1990.

Rule

Under the Federal Arbitration Act, an arbitration award may be vacated for evident partiality or corruption in the arbitrators. The Supreme Court's decision in Commonwealth Coatings Corp. v. Continental Casualty Co. established that an arbitrator's failure to disclose a material relationship with one of the parties can constitute evident partiality.

Under the Federal Arbitration Act, an arbitration award should be vacated “[w]here there [is] evident partiality or corruption in the arbitrators, or either of them.” 9 U.S.C. § 10(a)(2). In Commonwealth Coatings, the Supreme Court held that an arbitrator's failure to disclose a material relationship with one of the parties can constitute “evident partiality” requiring vacatur of the award.

Analysis

The court found that Luening had disclosed his relationship with Lucent to the AAA, and that his service as an expert witness had ended before he was appointed as an arbitrator. The court also noted that Tatung could have discovered this relationship had it inquired about the disclosure form. The court concluded that the undisclosed co-ownership of an airplane was too insubstantial to warrant vacating the award, and that the relationships did not provide strong evidence of partiality.

The district court rejected Tatung's arguments and confirmed the award. The court found that Luening had in fact disclosed his relationship with Lucent to the AAA and that his service as an expert witness had ended by November 1999, months before being selected as an arbitrator in this matter.

Conclusion

The Court of Appeals affirmed the district court's decision, confirming the arbitration award in favor of Lucent Technologies. The court held that the alleged undisclosed relationships did not constitute evident partiality.

Accordingly, we affirm the judgment of the district court confirming the arbitration award in favor of Lucent.

Who won?

Lucent Technologies Inc. and Lucent Technologies, GRL LLC prevailed in the case because the court found no evidence of bias or partiality that would justify vacating the arbitration award.

The court found that Luening had in fact disclosed his relationship with Lucent to the AAA and that his service as an expert witness had ended by November 1999, months before being selected as an arbitrator in this matter.

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