When two parties bring in an arbitrator to handle their dispute, the arbitrator is supposed to be unbiased and objective. Could a joking comment made during a recent dispute undermine the parties’ trust in that neutrality?

A trial judge decided the remark was not enough to suggest that the arbitrator was biased. The California Court of Appeal disagreed. It is not enough that an arbitrator be impartial, the justices ruled; he or she must avoid any behavior that might create even the perception of impartiality. (Grabowski v. Kaiser Foundation Health Plan.)

Joanna Grabowski filed a claim against Kaiser for medical malpractice. She alleged that the health plan’s physicians had for years failed to diagnose a benign ovarian tumor, discovering it only after it had grown to the size of a melon.

In addition, she said, during the surgery to remove the tumor a portion of her small intestine had become trapped in the incision, leaving her in severe pain.

Kaiser disputed her claim that its doctors should have diagnosed the tumor earlier, or that it was the cause of her symptoms.

Her health plan contract required Grabowski to submit the dispute to arbitration. Over the course of five days, arbitrator Byron Berry heard from both sides. Kaiser was represented by an attorney. Grabowski, a college student, represented herself, accompanied by her mother.

Berry concluded that Grabowski’s tumor could not have been diagnosed earlier, that Kaiser had met the requisite standard of care, and that the young woman’s years-long pain was caused by “her intense engagement in athletics as a pitcher on her college softball teams.” He awarded judgment in favor of Kaiser.

Grabowski, now represented by an attorney, asked the San Diego Superior Court to overturn the award.

Among the evidence she presented was an audio recording. Her mother had been recording the arbitration proceedings on her cell phone, and inadvertently left it on when she and her daughter left the hearing room.

While the women were gone, Berry told Kaiser’s attorney he was surprised by Grabowski’s decision to represent herself in what he described as “one of the bigger…challenges” he’d handled in his long career. Three times in the recording Berry laughs about what he indicates was the young woman’s unwise decision to handle the case herself.

Grabowski told the trial court that Berry’s tone of voice and laughter while “‘yukking it up’ with Kaiser’s counsel” was evidence of his disrespect and disregard for her.

She argued the ex parte communication (that is, communication between a judge or decision-maker and one party to a dispute, out of the presence of the other party) showed bias and therefore was grounds for the court to disqualify Berry.

Kaiser responded that the conversation was not improper because it didn’t involve the merits of the matter being arbitrated, and that the comments did not reflect bias or constitute misconduct.

The trial court concluded that the ex parte communication was indeed improper and unethical. But it said Grabowski had not demonstrated that it had “substantially prejudiced her rights” or influenced the arbitrator’s award in favor of Kaiser. It declined to overturn his decision.

Grabowski appealed. Her arguments were received far more favorably by the higher court.

The appellate justices noted that California law, “in seeking to ensure that a neutral arbitrator serves as an impartial decision-maker, requires the arbitrator to disclose to the parties any grounds for disqualification.”

If the arbitrator fails to do so, “the trial court must vacate the arbitration award,” they emphasized. The statute “leaves no room for discretion.”

They noted that “the arbitrator disclosure rules are strict and unforgiving. And for good reason. Although dispute resolution provider organizations may be in the business of justice, they are still in business. The public deserves and needs to know that the system of private justice that has taken over large portions of California law produces fair and just results from neutral decision-makers.”

An arbitrator must “disclose all matters that could cause a person aware of the facts to reasonably entertain a doubt” about the arbitrator’s neutrality.

Grabowski did not have to prove that Berry was actually biased, they said. The “sole issue” was that Berry failed to disclose his ex parte communication with Kaiser’s attorney.

Not only was the conversation unethical, they said; anyone aware of it would “reasonably entertain a doubt that the arbitrator would be able to be impartial.”

His words showed that the arbitrator had concluded Grabowski was not able to effectively advocate for herself, they said.

The fact that Berry and the health plan’s attorney “shared a hearty laugh at Grabowski’s expense” showed that “the arbitrator plainly felt a connection to Kaiser’s counsel, which made him comfortable enough to violate ethical rules and comment on Kaiser’s opponent.”

The justices ordered the trial court to overturn the arbitration award, and awarded Grabowski her costs on appeal.

By Laurie Murphy