Petition for Writ of Certiorari — Occidental Exploration and Production Company, Petitioner v. Andes Petroleum Ecuador Limited

No. ______

In the

Supreme Court of the United States

________________

OCCIDENTAL EXPLORATION AND PRODUCTION

COMPANY,

Petitioner,

v.

ANDES PETROLEUM ECUADOR LIMITED,

________________

Respondent.

On Petition for Writ of Certiorari to the

United States Court of Appeals

for the Second Circuit

________________

PETITION FOR WRIT OF CERTIORARI

________________

PAUL D. CLEMENT

Counsel of Record

ERIN E. MURPHY

C. HARKER RHODES IV*

ZACHARY J. LUSTBADER*

CLEMENT & MURPHY, PLLC

706 Duke Street

Alexandria, VA 22314

(202) 742-8900

paul.clement@clementmurphy.com

*Supervised by principals of the firm who are

members of the Virginia bar

Counsel for Petitioner

November 9, 2023

QUESTION PRESENTED

The Federal Arbitration Act authorizes vacatur of

an award if the arbitrator shows “evident partiality.”

9 U.S.C. §10(a)(2). In Commonwealth Coatings Corp.

v. Continental Casualty Co., 393 U.S. 145 (1968), this

Court authoritatively interpreted that provision to

mean arbitrators “not only must be unbiased but also

must avoid even the appearance of bias.” Id. at 150.

The Court accordingly vacated an award where an

arbitrator failed to disclose a relationship with a

party, concluding that the arbitrator “might

reasonably be thought biased” based on the failure to

disclose alone. Id. at 147, 150.

Since then, the Second Circuit has inexplicably

concluded that Commonwealth Coatings is not binding

precedent. Instead, it has declared the opinion of the

Court—joined by six Justices—to be a mere plurality

opinion, expressly discarded its standard, and adopted

what was essentially the position of the dissenters:

Evident partiality exists only if a reasonable person

“would have to conclude” that the arbitrator was in

fact partial. Morelite Constr. Corp. v. N.Y.C. Dist.

Council Carpenters Benefit Funds, 748 F.2d 79, 82-84

(2d Cir. 1984). Remarkably, five other circuits have

followed the Second Circuit’s lead, while two continue

to correctly adhere to this Court’s opinion.

The question presented is:

Whether an arbitrator’s failure to disclose a

relationship evinces evident partiality if it shows the

arbitrator “might reasonably be thought biased,” as

Commonwealth Coatings held, or instead only if a

reasonable person “would have to conclude” that the

arbitrator was actually biased.

ii

PARTIES TO THE PROCEEDING

Petitioner is Occidental

Production Company.

Exploration

and

Respondent is Andes Petroleum Ecuador Limited.

iii

CORPORATE DISCLOSURE STATEMENT

Occidental Exploration and Production Company

is an indirect subsidiary of Occidental Petroleum

Corporation, which indirectly owns 100% of

Occidental Exploration and Production Company’s

stock.

iv

STATEMENT OF RELATED PROCEEDINGS

This case arises from and is directly related to the

following proceedings in the U.S. Court of Appeals for

the Second Circuit and the U.S. District Court for the

Southern District of New York:

•

Andes Petroleum Ecuador Ltd. v. Occidental

Exploration and Production Company, No. 213039 (2d Cir.), judgment entered on June 15,

2023; petition for rehearing or rehearing en

banc denied on August 11, 2023.

•

Andes Petroleum Ecuador Ltd. v. Occidental

Exploration and Production Company, No.

1:21-cv-03930 (S.D.N.Y.), judgment entered on

December 2, 2021; judgment affirmed in part

and vacated in part on August 18, 2023.

v

TABLE OF CONTENTS

QUESTION PRESENTED .......................................... i

PARTIES TO THE PROCEEDING ........................... ii

CORPORATE DISCLOSURE STATEMENT ........... iii

STATEMENT OF RELATED PROCEEDINGS ....... iv

TABLE OF AUTHORITIES ..................................... vii

PETITION FOR WRIT OF CERTIORARI ................ 1

OPINIONS BELOW ................................................... 4

JURISDICTION ......................................................... 5

STATUTORY PROVISION INVOLVED ................... 5

STATEMENT OF THE CASE ................................... 5

A. Legal Background ........................................ 5

B. Factual Background ................................... 12

C. Procedural Background .............................. 15

REASONS FOR GRANTING THE PETITION....... 17

I.

There Is An Acknowledged And Entrenched

Circuit Split On The Question Presented ........ 19

II. The Second Circuit’s Approach Is Egregiously

Wrong ................................................................. 26

III. The Question Presented Is Exceptionally

Important ........................................................... 33

CONCLUSION ......................................................... 37

vi

APPENDIX

Appendix A

Summary Order, United States Court

of Appeals for the Second Circuit,

Andes Petroleum Ecuador Ltd. v. Occidental

Expl. & Prod. Co., No. 21-3039 (June 15,

2023)............................................................. App-1

Appendix B

Order, United States Court of Appeals for the

Second Circuit, Andes Petroleum Ecuador

Ltd. v. Occidental Expl. & Prod. Co., No. 213039 (Aug. 11, 2023) .................................... App-9

Appendix C

Order, United States District Court

for the Southern District of New York, Andes

Petroleum Ecuador Ltd. v. Occidental Expl. &

Prod. Co., No. 21-3930 (Nov. 15, 2021) ..... App-10

Appendix D

Relevant Statutory Provision.................... App-21

9 U.S.C. §10(a) ........................................... App-21

vii

TABLE OF AUTHORITIES

Cases

ANR Coal Co. v. Cogentrix of N.C., Inc.,

173 F.3d 493 (4th Cir. 1999).................................. 22

Apperson v. Fleet Carrier Corp.,

879 F.2d 1344 (6th Cir. 1989)................................ 23

Baker Hughes Servs. Int’l, LLC v. Joshi

Techs. Int’l, Inc.,

73 F.4th 1139 (10th Cir. 2023) .............................. 34

Burlington N. R.R. Co. v. TUCO Inc.,

960 S.W.2d 629 (Tex. 1997) ................................... 25

Certain Underwriting Members of Lloyds of

London v. Fla., Dep’t of Fin. Servs.,

892 F.3d 501 (2d Cir. 2018) ................................... 33

Commonwealth Coatings Corp.

v. Cont’l Cas. Co.,

393 U.S. 145 (1968) ... 1, 2, 7, 8, 9, 10, 17, 18, 20, 25,

27, 28, 29, 30, 31, 32, 33, 35

Cooper v. WestEnd Cap. Mgmt., L.L.C.,

832 F.3d 534 (5th Cir. 2016).................................. 23

Dowd v. First Omaha Sec. Corp.,

495 N.W.2d 36 (Neb. 1993) .................................... 23

EHM Prods., Inc.

v. Starline Tours of Hollywood, Inc.,

1 F.4th 1164 (9th Cir. 2021) .................................. 24

Epic Sys. Corp. v. Lewis,

138 S.Ct. 1612 (2018) ............................. 4, 19, 32, 34

First Options of Chi., Inc. v. Kaplan,

514 U.S. 938 (1995) ................................................ 32

viii

Freeman v. Pittsburgh Glass Works, LLC,

709 F.3d 240 (3d Cir. 2013) ....................... 21, 22, 28

Gill v. Whitford,

138 S.Ct. 1916 (2018) ............................................. 29

Hall St. Assocs., L.L.C. v. Mattel, Inc.,

552 U.S. 576 (2008) .................................................. 6

Harper v. Va. Dep’t of Tax’n,

509 U.S. 86 (1993) .................................................. 26

In re Sussex,

781 F.3d 1065 (9th Cir. 2015)................................ 24

James v. City of Boise,

577 U.S. 306 (2016) ................................................ 26

JCI Comm’ns, Inc. v. Int’l Brotherhood of

Electrical Workers, Local 103,

324 F.3d 42 (1st Cir. 2003) .................................... 21

Lamps Plus, Inc. v. Varela,

139 S.Ct. 1407 (2019) ............................................. 33

Marks v. United States,

430 U.S. 188 (1977) .......................................... 28, 31

Mitsubishi Motors Corp.

v. Soler Chrysler-Plymouth, Inc.,

473 U.S. 614 (1985) ........................................ 1, 5, 34

Montez v. Prudential Sec., Inc.,

260 F.3d 980 (8th Cir. 2001).................................. 19

Morelite Constr. Corp. v. N.Y.C. Dist. Council

Carpenters Benefit Funds,

748 F.2d 79 (2d Cir. 1984) .. 3, 10, 11, 17, 20, 21, 27,

30, 31

Moses H. Cone Mem’l Hosp.

v. Mercury Constr. Corp.,

460 U.S. 1 (1983) .................................................... 35

ix

Narayan v. Ass’n of Apartment Owners of

Kapalua Bay Condo.,

398 P.3d 664 (Haw. 2017) ...................................... 25

Nationwide Mut. Ins. v. Home Ins.,

429 F.3d 640 (6th Cir. 2005).................................. 23

New Regency Prods., Inc.

v. Nippon Herald Films, Inc.,

501 F.3d 1101 (9th Cir. 2007)................................ 24

Nitro-Lift Techs., L.L.C. v. Howard,

568 U.S. 17 (2012) .................................................. 26

Peoples Sec. Life Ins.

v. Monumental Life Ins.,

991 F.2d 141 (4th Cir. 1993).................................. 22

Ploetz v. Morgan Stanley Smith Barney LLC,

894 F.3d 894 (8th Cir. 2018).................................. 19

Positive Software Sols., Inc.

v. New Century Mortg. Corp.,

476 F.3d 278 (5th Cir. 2007)................ 22, 23, 24, 28

Ramos v. Louisiana,

140 S.Ct. 1390 (2020) ............................................. 27

Rodriguez de Quijas

v. Shearson/Am. Express, Inc.,

490 U.S. 477 (1989) .................................... 18, 27, 29

Schmitz v. Zilveti,

20 F.3d 1043 (9th Cir. 1994).................................. 24

Three S Delaware, Inc.

v. DataQuick Info. Sys., Inc.,

492 F.3d 520 (4th Cir. 2007).................................. 22

x

UBS Fin. Servs., Inc. v. Asociacion de

Empleados del Estado Libre Asociado

de Puerto Rico,

997 F.3d 15 (1st Cir. 2021) ........................ 19, 21, 25

Uhl v. Komatsu Forklift Co.,

512 F.3d 294 (6th Cir. 2008).................................. 23

Univ. Commons-Urbana, Ltd.

v. Universal Constructors Inc.,

304 F.3d 1331 (11th Cir. 2002).................. 25, 35, 36

Constitutional Provision

U.S. Const. art. III, §1 .............................................. 26

Statutes

9 U.S.C. §2 .................................................................. 5

9 U.S.C. §4 .................................................................. 5

9 U.S.C. §5 .................................................................. 5

9 U.S.C. §9 .................................................................. 5

9 U.S.C. §10(a) ........................................................ 1, 6

9 U.S.C. §202 .............................................................. 6

9 U.S.C. §207 .............................................................. 6

Other Authorities

AAA, Commercial Arbitration Rules and

Mediation Procedures, Rule R-17(a) ..................... 13

Convention on the Recognition and

Enforcement of Foreign Arbitral Awards,

June 10, 1958, 21 U.S.T. 2517................................. 6

Edward C. Dawson, Speak Now or Hold

Your Peace: Prearbitration Express Waivers

of Evident-Partiality Challenges,

63 Am. U. L. Rev. 307 (2013) ................................ 20

xi

Alexander Lugo, Miami’s Rise as ‘Global

Metropolis’ Challenges New York as

International Arbitration Hub, Daily Bus.

Rev. (Mar. 31, 2023),

https://tinyurl.com/rbv6ks7y ................................. 34

Merrick T. Rossein & Jennifer Hope,

Disclosure and Disqualification

Standards for Neutral Arbitrators,

81 St. John’s L. Rev. 203 (2007) ............................ 20

Peter B. “Bo” Rutledge & Sawyer M. Bradford,

Supreme Court’s Fractured Ruling on

Enforcing Arbitral Awards Impacts Circuit

Courts, Law.com

(Oct. 25, 2022), https://tinyurl.com/s885ne3m...... 20

PETITION FOR WRIT OF CERTIORARI

The Federal Arbitration Act (“FAA”) balances the

strong interest in conclusive arbitration proceedings

with the equally strong interest in ensuring that those

proceedings comport with the parties’ agreement and

basic principles of fairness. The “emphatic federal

policy in favor of arbitral dispute resolution,”

Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth,

Inc., 473 U.S. 614, 631 (1985), depends on maintaining

that balance, as parties will not agree to arbitrate

absent assurances that they will get the kind of

tribunal and procedures for which they bargained.

In keeping with those principles, this Court has

interpreted the FAA’s provision allowing vacatur for

“evident partiality,” 9 U.S.C. §10(a)(2), as requiring

that arbitrators “not only must be unbiased but also

must avoid even the appearance of bias,” which arises

when an arbitrator “might reasonably be thought

biased against one litigant and favorable to another.”

Commonwealth Coatings Corp. v. Cont’l Cas. Co., 393

U.S. 145, 150 (1968). The Court applied that standard

to hold that an award had to be vacated when an

arbitrator failed to disclose a relationship with a

party. Id. at 149. As it explained, “[w]e can perceive

no way in which the effectiveness of the arbitration

process will be hampered by the simple requirement

that arbitrators disclose to the parties any dealings

that might create an impression of possible bias.” Id.

The opinion for the Court was accompanied by a

concurrence from Justice White, joined by Justice

Marshall, who confirmed that he was “glad to join” the

“majority opinion” in full, but wrote to underscore that

vacatur may not be appropriate “if both parties are

2

informed of the relationship in advance, or if they are

unaware of the facts but the relationship is trivial.”

Id. at 150 (White, J., concurring).

That should have made this an easy case. The

$392 million arbitration award at issue arises out of

an arbitrator’s egregious and decidedly non-“trivial”

violation of disclosure obligations mandated by the

arbitration agreement itself. Petitioner Occidental

Exploration and Production Company (“OEPC”) and

respondent Andes Petroleum Ecuador Limited

(“Andes”) partnered in a project to develop

hydrocarbon resources in Ecuador. As is common in

international ventures, the parties did not leave

dispute resolution to the Ecuadorian courts. Valuing

a forum with both the appearance and reality of

independence and impartiality, the parties chose

arbitration subject to strict, ongoing disclosure

requirements to root out any undisclosed relationships

and so any appearance of partiality.

In blatant and direct violation of those disclosure

obligations, one of the arbitrators concealed for more

than two years that he was simultaneously working

with Andes’ lead counsel as a co-arbitrator in a

concurrent matter—a collaboration that provided

Andes’ counsel with real-time, behind-the-scenes

access to the arbitrator’s views about specific contractlaw issues, amenability to particular strategies, and

procedural preferences. Neither the arbitrator nor

Andes ever disclosed that relationship, even though

the parties’ agreement imposed detailed, extensive,

and ongoing disclosure requirements on both.

The Second Circuit nevertheless found no evident

partiality, but only by ignoring this Court’s

3

precedent—quite literally. According to the Second

Circuit, Commonwealth Coatings is not a binding

decision of this Court. In its view, that opinion—

though designated the opinion of the Court, explicitly

joined by six Justices, and recognized as the majority

opinion by Justice White himself and the dissenters—

conflicts with Justice White’s concurrence, and so

represents the views of only “a plurality of four

[J]ustices.” Morelite Constr. Corp. v. N.Y.C. Dist.

Council Carpenters Benefit Funds, 748 F.2d 79, 82 (2d

Cir. 1984). More inexplicable still, the Second Circuit

somehow deemed itself bound by neither the opinion

of the Court nor the purportedly conflicting concurring

opinion of Justice White. It instead declared itself free

to consider the very question Commonwealth Coatings

decided “on a relatively clean slate”—and proceeded to

explicitly reject the “appearance of bias” standard

Commonwealth Coatings adopted as “too low,” and

instead demand proof that “a reasonable person would

have to conclude that an arbitrator was partial.” Id.

at 83-84 (emphasis added).

That deliberate disregard of a binding majority

opinion of this Court, based solely on a (mis)perceived

conflict between that opinion and an accompanying

concurrence that explicitly joined it, is an astonishing

departure from the fundamental rule of vertical stare

decisis. Unfortunately, that egregious error is not

limited to the Second Circuit; it has become the

prevailing view among the federal courts of appeals,

with five other circuits adopting the Second Circuit’s

precedent-defying approach, while two others follow

this Court’s binding precedent.

4

That entrenched circuit split, and the egregious

disregard of this Court’s precedent from which it

stems, readily warrants this Court’s attention.

Instead of respecting the balance set by the FAA and

this Court—insulating arbitration awards from

judicial review on the merits but requiring impartial

and independent arbitrators in accordance with

parties’ agreement—the Second Circuit’s rule sets the

standard for showing arbitrator partiality so high as

to reduce that safeguard to a nullity and render

bargained-for

disclosure

obligations

largely

irrelevant.

The Second Circuit’s approach thus

effectively leaves parties to arbitration agreements

with no means to enforce contractual disclosure

obligations, flouting the basic principle that courts

must “enforce arbitration agreements according to

their terms, including terms that specify with whom

the parties choose to arbitrate their disputes and the

rules under which that arbitration will be conducted.”

Epic Sys. Corp. v. Lewis, 138 S.Ct. 1612, 1621 (2018).

That vitiates the core premise of arbitration, openly

flouts this Court’s binding precedent, and has serious

implications for all who rely on arbitration to fairly

and efficiently resolve their disputes. This Court

should grant certiorari.

OPINIONS BELOW

The Second Circuit’s decision below is not

reported but is available at 2023 WL 4004686 and

reproduced at App.1-8. The district court’s order and

opinion is not reported but is available at 2021 WL

5303860 and reproduced at App.10-20.

5

JURISDICTION

The Second Circuit issued its decision on June 15,

2023, and denied a timely petition for rehearing on

August 11, 2023. This Court has jurisdiction under 28

U.S.C. §1254(1).

STATUTORY PROVISION INVOLVED

The relevant provision of the FAA, 9 U.S.C.

§10(a), is reproduced at App.21.

STATEMENT OF THE CASE

A. Legal Background

1. The FAA defines the legal framework for

judicial review and enforcement of arbitration awards,

which reflects the “emphatic federal policy in favor of

arbitral dispute resolution.” Mitsubishi Motors, 473

U.S. at 631. Among other things, the FAA provides

that arbitration agreements “shall be valid,

irrevocable, and enforceable, save upon such grounds

as exist at law or in equity for the revocation of any

contract,” 9 U.S.C. §2, and it authorizes courts to

compel arbitration in accord with the terms of the

parties’ agreement, id. §4, including the method of

appointing arbitrators provided by their agreement,

id. §5.

The FAA also sets the terms for federal judicial

enforcement of arbitration awards. A party “may

apply to the court … for an order confirming the

award,” and the court “must grant such an order

unless the award is vacated, modified, or corrected” as

prescribed under the FAA. Id. §9. Sections 10 and 11

in turn set out the “exclusive grounds” on which a

court may vacate or modify an arbitration award, Hall

St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 583

6

(2008)—that is, the basic limits the FAA places on

arbitration proceedings to ensure that any resulting

award warrants enforcement. In particular, the FAA

provides that a court may vacate an award where:

(1) “the award was procured by corruption,

fraud, or undue means”;

(2) “there was evident partiality

corruption in the arbitrators”;

or

(3) “the

arbitrators

misconduct”; or

of

were

guilty

(4) “the arbitrators exceeded their powers, or

so imperfectly executed them that a mutual,

final, and definite award … was not made.”

9 U.S.C. §10(a). 1

2. This case involves the second ground for

vacatur under §10 of the FAA: when an arbitrator is

tainted by “evident partiality.” 9 U.S.C. §10(a)(2).

This Court has addressed that provision only once, 55

years ago in Commonwealth Coatings—a decision that

should have resolved this case.

Like this case, Commonwealth Coatings involved

an arbitrator’s failure to disclose a relationship with

an opposing party that called his neutrality into

question.

Commonwealth Coatings was a

subcontractor who sued to recover money it claimed

1 Because this arbitration involved a non-American party, it is

also governed by the New York Convention. See 9 U.S.C. §202;

Convention on the Recognition and Enforcement of Foreign

Arbitral Awards, June 10, 1958, 21 U.S.T. 2517. But when an

award is vacated under 9 U.S.C. §10, it is unenforceable under

the Convention too. See 9 U.S.C. §207; New York Convention art.

V(1)(e).

7

its prime contractor owed it. 393 U.S. at 146. The

dispute was referred to arbitration in accordance with

the parties’ agreement, and a panel of three

arbitrators was appointed. As it turned out, one of

those arbitrators had prior business dealings with the

prime contractor, who had been “[o]ne of his regular

customers” and had paid him “fees of about $12,000

over a period of four or five years” for his services as a

consultant—including on projects involved in the

arbitration. Id. Those prior dealings “were unknown

to [Commonwealth Coatings] and were never revealed

to it by th[e] arbitrator, by the prime contractor, or by

anyone else until after an award had been made.” Id.

Once Commonwealth Coatings learned of that

conflict, it petitioned to vacate the award. The district

court denied the petition, and the court of appeals

affirmed. Id. This Court granted certiorari and

reversed. Id. at 146-50. In an opinion authored by

Justice Black, joined by five other Justices, and

unambiguously reported as “the opinion of the Court,”

the Court framed the question presented as whether

“elementary requirements of impartiality taken for

granted in every judicial proceeding are suspended

when the parties agree to resolve a dispute through

arbitration.” Id. at 145. It concluded that by allowing

courts to vacate awards for “evident partiality,” the

FAA provides “not merely for any arbitration but for

an impartial one.” Id. at 147. That standard, the

Court held, requires avoiding not only actual bias but

“even the appearance of bias”—and so required

vacating the award at hand because the arbitrator’s

failure to disclose his prior relationship with the prime

contractor called his partiality into serious question.

Id. at 147-50.

8

The Court recognized that there was no evidence

the arbitrator “was actually guilty of fraud or bias in

deciding this case,” and it had “no reason, apart from

the undisclosed business relationship, to suspect him

of any improper motives.” Id. at 147 (emphasis

added). But the fact that “neither th[e] arbitrator nor

the prime contractor gave [Commonwealth Coatings]

even an intimation” of their relationship was enough

to show a “manifest violation of the strict morality and

fairness Congress would have expected.” Id. at 14748. Under “the broad statutory language that governs

arbitration proceedings,” and the “evident partiality”

standard in particular, the Court concluded that the

resulting appearance of bias was enough to require

vacatur even absent evidence of actual bias. Id. at

148. That holding, the Court underscored, would

impose no meaningful burden on arbitration

proceedings, as “[w]e can perceive no way in which the

effectiveness of the arbitration process will be

hampered by the simple requirement that arbitrators

disclose to the parties any dealings that might create

an impression of possible bias.” Id. at 149.

The Court closed by noting that both existing

arbitration rules and canons of judicial ethics “rest on

the premise” that a neutral arbiter “not only must be

unbiased but also must avoid even the appearance of

bias.” Id. at 150. The Court accordingly concluded

that Congress has not authorized binding arbitration

by arbitrators who “might reasonably be thought

biased against one litigant and favorable to another.”

Id.

Justice White filed a concurring opinion, joined by

Justice Marshall. In the first line of that opinion,

9

Justice White stated explicitly that he was “glad to

join” Justice Black’s opinion for the Court, which he

later referred to as “the majority opinion”; he simply

wished to add some “additional remarks.” Id. at 150,

151 n.* (White, J., concurring). In particular, Justice

White noted that arbitrators are not “held to the

standards of judicial decorum of Article III judges,”

and are not “automatically disqualified by a business

relationship with the parties before them if both

parties are informed of the relationship in advance,”

or if “the relationship is trivial.” Id. at 150. But like

the opinion of the Court that he joined, Justice White

emphasized that arbitration “is best served by

establishing an atmosphere of frankness at the outset,

through disclosure by the arbitrator,” so that “the

parties are free to reject the arbitrator or accept him

with knowledge of the relationship.” Id. at 151. After

all, parties “are the architects of their own arbitration

process,” and so are entitled to know all the relevant

facts when determining whether an arbitrator is

acceptable. Id. Accordingly, while Justice White

noted that some “undisclosed relationships” may be

“too insubstantial to warrant vacating an award,” he

agreed with the “majority opinion” that the

appearance of bias in the case at hand required

vacating the award even though the arbitrator was in

fact “entirely fair and impartial.” Id. at 151-52 & n.*.

Justice Fortas, joined by Justices Harlan and

Stewart, dissented.

The dissenters repeatedly

expressed their disagreement with “the Court” and

“the Court’s ruling,” without ever suggesting that it

was only a plurality opinion or adverting to Justice

White’s concurring opinion. In the dissenters’ view, a

party seeking to vacate an arbitration award for

10

evident partiality must show actual bias, not just an

appearance of bias.

Id. at 152-55 (Fortas, J.,

dissenting). Because Commonwealth Coatings did not

claim “actual partiality, unfairness, bias, or fraud,”

the dissenters would have confirmed the award.

3. One might think that in a system with clear

rules of vertical stare decisis, the majority opinion of

this Court in Commonwealth Coatings would suffice to

conclusively settle the standard for assessing evident

partiality under the FAA, especially in the context of

failures to disclose. The Second Circuit, however,

thinks otherwise, and its mistaken view has spread to

other circuits.

Sixteen years after Commonwealth Coatings, the

Second Circuit announced in Morelite that it still

considered the issue of “what constitutes ‘evident

partiality’ by an arbitrator” to be an unresolved and

“troublesome question.” 748 F.2d at 82. The court

acknowledged that this Court “attempted to resolve

the issue” in Commonwealth Coatings, but it deemed

that attempt unsuccessful—on the theory that Justice

Black’s opinion for the Court was really written only

“for a plurality of four [J]ustices.” Id. The Second

Circuit admitted (with considerable understatement)

that it “might be thought that Justice Black’s opinion

represents the views of six members of the Court, for

Justice White wrote that he was ‘glad to join my

Brother Black’s opinion.’” Id. at 83 n.3 (quoting

Commonwealth Coatings, 393 U.S. at 150 (White, J.,

concurring)). But in the Second Circuit’s view, Justice

Black’s and Justice White’s opinions were “impossible

to reconcile”—and so it concluded that Justice White

(despite explicitly joining the majority opinion, which

11

was unambiguously reported as the opinion of the

Court) had in fact only “concurred in the result,”

meaning that “much of Justice Black’s opinion must

be read as dicta.” Id. at 82-83 & n.3.

Having converted the binding opinion of the Court

in Commonwealth Coatings into a mere plurality view,

the Second Circuit took another unusual step: Instead

of at least deeming itself bound by Justice White’s

concurrence, it declared itself free to revisit the

question “on a relatively clean slate”—and proceeded

to explicitly reject the “appearance of bias” standard

that Commonwealth Coatings adopted. Id. at 83-84.

In the Second Circuit’s view, the FAA demands a

showing that “a reasonable person would have to

conclude that an arbitrator was partial to one party.”

Id. (emphasis added). In other words, it effectively

demands the showing of actual bias that the

Commonwealth Coatings dissenters would have

required.

Morelite has proven remarkably influential,

presumably because New York is a hub of arbitration

activity. Five other federal courts of appeals—the

First, Third, Fourth, Fifth, and Sixth Circuits—have

since followed its lead, disregarding the “appearance

of bias” standard set by this Court in Commonwealth

Coatings in favor of the higher standard set by the

Second Circuit in Morelite. See infra pp.21-23. The

Ninth and Eleventh Circuits, by contrast, have

resisted the Second Circuit’s innovation and continue

to abide by Commonwealth Coatings. See infra pp.2325.

12

B. Factual Background

1. OEPC is a U.S.-based hydrocarbon exploration

company. In 1999, OEPC entered into an agreement

with an Ecuadorian state-owned oil company to carry

out hydrocarbon development in the Ecuadorian

Amazon region. App.11. OEPC subsequently signed

agreements with a Bermudan company whose interest

in the project was later acquired by Andes, a wholly

owned subsidiary of Chinese state-run oil companies.

C.A.App.23, 30-31. Under the parties’ agreements,

OEPC and Andes would conduct joint operations in

the area, with OEPC retaining a 60% economic

interest and Andes taking a 40% economic interest.

App.11. The parties additionally agreed that if

Ecuador terminated the agreement and OEPC took

legal action against Ecuador, OEPC and Andes would

split costs and any monetary award 60%-40%. App.11.

Ecuador subsequently terminated the agreement,

expropriating all interests in the area, and OEPC and

its parent company Occidental Petroleum Corporation

commenced arbitration against Ecuador before the

International Centre for the Settlement of Investment

Disputes (“ICSID”) seeking to recover the full value of

the expropriated property. App.11-12. The ICSID

tribunal initially sided with OEPC in full, see

Dist.Ct.Dkt.3-1 at ¶28, but on appeal, the annulment

committee scaled back the award. It found that OEPC

could not recover damages for Andes’ 40% interest,

and thus reduced OEPC’s award “from 100% to 60%,”

while making clear that Andes remained free to seek

relief from Ecuador for its 40% interest. Id. ¶¶31-32.

Andes, however, declined to do so. Instead, Andes

demanded that OEPC hand over 40% of the Ecuador

13

recovery, even though that recovery had already been

reduced by 40% precisely to exclude Andes’ 40%

interest. Id. ¶34. That dispute led to the arbitration

at issue here.

2. In crafting their dispute resolution procedures,

the parties valued impartiality and independence

above all else—indeed, their agreement to arbitrate

stemmed in significant part from OEPC’s concerns

that the Ecuadorian courts would not provide an

adequately impartial forum. The parties’ arbitration

agreement reflected this focus on impartiality, setting

forth numerous rules to ensure transparency and

arbitral independence.

Under the agreement, each party would appoint

one arbitrator, and those two arbitrators would then

appoint a third. App.12. Unsurprisingly, the parties’

agreement explicitly mandated that the arbitrators

would at all times be “wholly independent and

impartial.” App.2. The parties reinforced that

requirement by incorporating the American

Arbitration Association (“AAA”) rules, which require

arbitrators, parties, and parties’ counsel to disclose

“any circumstance likely to give rise to justifiable

doubt as to the arbitrator’s impartiality or

independence,” App.2-3, including “any past or

present relationship with the parties or their

representatives,” AAA, Commercial Arbitration Rules

and Mediation Procedures, Rule R-17(a).

The applicable arbitrator disclosure form

expansively described the relationships that must be

disclosed, including “any past or present relationship

with the parties, their counsel, or potential witnesses,

direct or indirect, whether financial, professional,

14

social or of any other kind.” Dist.Ct.Dkt.30-4 at 1.

That disclosure obligation remained ongoing

throughout the arbitration. App.3. In fact, the

parties’ agreement required the arbitrators to execute

an oath acknowledging that the disclosure obligation

was “a continuing obligation throughout [their]

service,” that “any additional direct or indirect contact

[that] arise[s] during the course of the arbitration …

must … be disclosed,” and that “[a]ny doubts should

be resolved in favor of disclosure.” Dist.Ct.Dkt.30-4 at

1.

3. After conducting thorough diligence on several

candidates, OEPC appointed Robert Smit to the

arbitration panel. App.12; see C.A.App.183 ¶19.

During the interview process, Smit disclosed that he

had a “professional connection” to one of Andes’

counsel, Laurence Shore, whose firm had appointed

him as an arbitrator in “an unrelated prior

arbitration.” App.3 (emphasis added). OEPC took a

particular interest in that disclosure and followed up

by asking Smit whether he had any other relationship

with Shore. Smit responded that the prior matter was

“the only [arbitration] I’ve ever done involving

[Shore].”

C.A.App.519.

Once appointed, Smit

executed the arbitrator’s oath, and, recognizing his

obligations, he continually—albeit it turned out

incompletely—updated his disclosures, even as to

relatively trivial matters. See, e.g., Dist.Ct.Dkt.31-2

at 40 (disclosing service as arbitrator in an unrelated

arbitration in which one attorney representing Andes

appeared as counsel).

In March 2021, the panel ruled for Andes. App.13.

The panel did not deny that the earlier tribunal had

15

compensated OEPC for only its 60% interest, or that

Andes remained free to pursue its own 40% interest

from Ecuador. Nevertheless, it concluded that Andes

was entitled to 40% of OEPC’s reduced recovery—

$392 million, plus tens of millions more in

prejudgment interest.

4.

Shortly after the panel issued that

counterintuitive award, OEPC discovered some

startling information: Throughout the arbitration

proceedings, Smit and Andes had been concealing an

ongoing relationship between Smit and Shore.

Beginning in April 2018—mere months after the panel

was constituted—and all the way through mid-2020,

Smit and Shore served together as co-arbitrators on a

separate, undisclosed matter. App.12; Dist.Ct.Dkt.38

at ¶36. That arbitration was conducted confidentially,

so beyond the fact that it too involved a contract

dispute in the energy sector, its details remain largely

unknown to OEPC. Dist.Ct.Dkt.38 at ¶¶22-23 & n.1.

But this much is clear: For nearly the entirety of the

merits proceedings here, Smit and Shore secretly

maintained a close, direct relationship as coequals in

a confidential arbitration that gave Shore a behindthe-scenes look at Smit’s decision-making process,

inside information on his views about contract

doctrines, and ample opportunity for ex parte

communication,

collegial

discussions,

and

collaborative decision-making.

And while Smit,

Shore, and Andes were duty-bound to disclose that

entanglement to OEPC, none did.

C. Procedural Background

Andes filed a petition in the U.S. District Court

for the Southern District of New York to confirm the

16

award; OEPC opposed and moved to vacate on several

grounds, including evident partiality. App.10. The

case was initially assigned to Judge Woods; three

weeks later, it was reassigned to Judge Broderick;

three months after that, to Judge Cote; and two

months after that, to Judge Hellerstein. The shuffle

ended there: A mere two weeks after being assigned

the matter, and without hearing argument, Judge

Hellerstein confirmed the award and entered

judgment for Andes for over $550 million, including

costs and prejudgment interest. App.4.

OEPC appealed, and the Second Circuit affirmed

in relevant part. The court recognized that the

parties’ agreement and the applicable AAA rules

“required all arbitrators to be ‘wholly independent and

impartial,’” that “[t]he AAA Rules and the arbitrator

oath required by the parties’ agreements mandated

disclosure of ‘any circumstance likely to give rise to

justifiable doubt as to the arbitrator’s impartiality or

independence,’” and that “[t]hese disclosure

obligations continued throughout the arbitration.”

App.2-3. But despite Smit’s blatant violation of those

obligations—which would more than suffice to show

an impermissible appearance of bias under

Commonwealth

Coatings—the

Second

Circuit

concluded that OEPC had not shown evident

partiality under the higher Morelite standard, because

it had not demonstrated that “a reasonable person,

considering all the circumstances, would have to

17

conclude that [Smit] was partial.” App.4 (emphasis in

original). 2

REASONS FOR GRANTING THE PETITION

This case requires this Court’s review. There is

an open and acknowledged circuit split on the question

presented, the majority of the circuits addressing it

have inexplicably downgraded an opinion of this Court

to a plurality opinion, the Second Circuit’s approach is

plainly wrong, and the issue is exceptionally

important. This Court should grant certiorari.

As multiple courts and commentators have

recognized, the circuits are sharply and intractably

divided over the standard for evident partiality under

the FAA. That circuit split should be foreclosed by this

Court’s decision in Commonwealth Coatings, which

held that the standard is an “appearance of bias,”

requiring recusal when an arbitrator “might

reasonably be thought biased.” 393 U.S. at 150. But

the Second Circuit has arrogated to itself the power to

convert Commonwealth Coatings into a “plurality

[opinion] of four [J]ustices,” because two Justices who

expressly joined the Court’s opinion also joined a

concurring opinion that it found difficult to reconcile

with the majority’s—a.k.a. the Court’s—opinion. In

the Second Circuit’s view, evident partiality exists

only when “a reasonable person would have to

conclude that [the] arbitrator was partial.” Morelite,

748 F.2d at 82-84 (emphasis added); see App.4-5.

Remarkably, five other circuits have adopted the

2 The Second Circuit did vacate the district court’s prejudgment

interest award, directing it to “adequately explain its calculation”

on remand. App.7.

18

Second Circuit’s standard, while only two faithfully

read the U.S. Reports and abide by the Court’s opinion

in Commonwealth Coatings. Only this Court can

resolve that open and entrenched conflict over

whether one of its own opinions remains binding. And

only this Court can remind lower courts that the

obligation to follow this Court’s precedents until this

Court reconsiders them, see Rodriguez de Quijas v.

Shearson/Am. Express, Inc., 490 U.S. 477, 484 (1989),

precludes lower courts from reading opinions for the

Court out of existence by deeming them mere plurality

opinions.

The Second Circuit’s approach is blatantly wrong.

Lower courts have no license to disregard the U.S.

Reports, the express statement of Justice White that

he joined the “majority opinion,” or the dissenters’

complaints about “the Court” and “the Court’s ruling,”

based on their own perception that statements in a

concurring opinion—not a concurrence in the

judgment—contradict the majority opinion that

Justices White and Marshall were “glad to join,”

Commonwealth Coatings, 393 U.S. at 150 (White, J.,

concurring). In any event, there is no contradiction

between the Court’s opinion and Justice White’s

concurrence (which presumably explains why he and

Justice Marshall joined both). And even if there were,

that certainly would not justify the Second Circuit’s

decision to adopt a rule that conflicts with both.

The question presented is especially important.

The strong federal policy in favor of arbitration

depends on the ability of parties to get the tribunal

they bargained for, especially in international

arbitration proceedings, where impartiality and

19

independence are essential. That interest cannot

tolerate a circuit split on an issue as basic as the

standard for determining whether a violation of

unambiguous

disclosure

obligations

evinces

impermissible partiality. Nor can it tolerate an

evident-partiality standard so weak as to leave parties

with no remedy at all when an arbitrator violates

explicitly bargained-for disclosure obligations,

contrary to the bedrock rule that courts must “enforce

arbitration agreements according to their terms.”

Epic, 138 S.Ct. at 1621.

The Second Circuit’s

remarkable disregard of this Court’s binding

precedent in adopting its novel standard, moreover, is

itself a matter of grave importance that warrants this

Court’s intervention. This Court should grant the

petition and reverse.

I.

There Is An Acknowledged And Entrenched

Circuit Split On The Question Presented.

Despite the clear command of this Court’s

decision in Commonwealth Coatings, there is an

acknowledged and entrenched circuit split over the

standard for determining whether a failure to disclose

constitutes evident partiality under the FAA. See, e.g.,

UBS Fin. Servs., Inc. v. Asociacion de Empleados del

Estado Libre Asociado de Puerto Rico, 997 F.3d 15, 19

(1st Cir. 2021) (explaining that “[t]he circuits have not

reached a consensus” on the issue and describing the

“circuit split”); Ploetz v. Morgan Stanley Smith Barney

LLC, 894 F.3d 894, 898 (8th Cir. 2018) (reiterating the

“absence of a consensus” on the issue); Montez v.

Prudential Sec., Inc., 260 F.3d 980, 983 (8th Cir. 2001)

(describing the different “approaches adopted by the

different circuits”); see also Edward C. Dawson, Speak

20

Now or Hold Your Peace: Prearbitration Express

Waivers of Evident-Partiality Challenges, 63 Am. U. L.

Rev. 307, 321 (2013) (“The federal circuits have an

acknowledged split over … whether evident partiality

requires a mere appearance of bias or a more robust

reasonableness standard.”); Merrick T. Rossein &

Jennifer Hope, Disclosure and Disqualification

Standards for Neutral Arbitrators, 81 St. John’s L.

Rev. 203, 212 (2007) (“[T]he circuits are split on what

constitutes ‘evident partiality[.]’”); Peter B. “Bo”

Rutledge & Sawyer M. Bradford, Supreme Court’s

Fractured Ruling on Enforcing Arbitral Awards

Impacts Circuit Courts, Law.com (Oct. 25, 2022),

https://tinyurl.com/s885ne3m (recognizing the “deep

circuit split”).

1. The decision below reflects the majority (and

incorrect) side of that split, which rejects

Commonwealth Coatings’ “appearance of bias”

standard—under which an award should be vacated if

the arbitrator “might reasonably be thought biased,”

393 U.S. at 150—in favor of a more stringent test that

requires proof that “a reasonable person, considering

all the circumstances, would have to conclude that an

arbitrator was partial to one side.” App.4. In adopting

that far more stringent standard in Morelite, the

Second Circuit recognized that it requires “something

more” than the “appearance of bias” standard adopted

in Commonwealth Coatings, which the Second Circuit

believed set the bar “too low.” 748 F.2d at 83-84. The

Second Circuit justified that explicit departure from

this Court’s binding precedent by positing that Justice

White failed to realize that his concurring opinion was

“impossible to reconcile” with Justice Black’s opinion

for the Court, hence rendering the latter only the

21

nonbinding views of “a plurality of four [J]ustices.” Id.

at 82-83 & n.3.

Five other circuits—the First, Third, Fourth,

Fifth, and Sixth—have followed the Second Circuit’s

mistaken lead.

a. The First Circuit first adopted the Morelite

approach in JCI Communications, Inc. v.

International Brotherhood of Electrical Workers, Local

103, 324 F.3d 42 (1st Cir. 2003). Citing Morelite and

cases from the Fourth and Sixth Circuits, the court

stated without further analysis that evident partiality

requires “more than just the appearance of possible

bias” and instead demands that “a reasonable person

would have to conclude that an arbitrator was

partial.” Id. at 51. More recently, the First Circuit

has acknowledged the “circuit split” and reaffirmed

that it has “sided with the circuits” that have followed

Morelite and “implicitly rejected” the contrary

approach of other circuits. UBS Fin. Servs., 997 F.3d

at 19.

b. The Third Circuit has been equally explicit,

agreeing with the courts that have “followed the

Second Circuit’s lead” and “reaffirm[ing]” that evident

partiality requires that “a reasonable person would

have to conclude that [the arbitrator] was partial.”

Freeman v. Pittsburgh Glass Works, LLC, 709 F.3d

240, 252-53 (3d Cir. 2013). The Third Circuit has also

expressly endorsed the Second Circuit’s mistaken

reasoning, agreeing that Justice Black’s opinion for

the Court was “nonbinding” as a “plurality opinion” in

which “only three other [J]ustices joined,” dismissing

Justice White’s explicit statement that he was “glad to

join” the majority, and concluding that Justice White’s

22

concurrence was actually “the holding of the Court” as

“the narrowest grounds for judgment.” Freeman, 709

F.3d at 251-52 & n.10.

c. The Fourth Circuit likewise holds that, “[t]o

establish partiality,” one must show that “a

reasonable person would have to conclude that an

arbitrator was partial.” Three S Delaware, Inc. v.

DataQuick Info. Sys., Inc., 492 F.3d 520, 530 (4th Cir.

2007) (quoting ANR Coal Co. v. Cogentrix of N.C., Inc.,

173 F.3d 493, 500 (4th Cir. 1999)); see also, e.g.,

Peoples Sec. Life Ins. v. Monumental Life Ins., 991 F.2d

141, 146 (4th Cir. 1993) (declaring it “well established

that a mere appearance of bias is insufficient to

demonstrate evident partiality,” and block-quoting

Justice White’s concurrence in Commonwealth

Coatings without even citing the majority opinion).

d. The Fifth Circuit, for its part, provides an

especially remarkable illustration of the split and the

need for this Court’s guidance. In a panel opinion, the

Fifth Circuit initially recognized Commonwealth

Coatings as binding and rejected the Second Circuit’s

attempt to deviate from it—only to have a majority of

the full court vacate that opinion, take the case en

banc, and reach the opposite result. Positive Software

Sols., Inc. v. New Century Mortg. Corp., 476 F.3d 278

(5th Cir. 2007) (en banc). Over a five-judge dissent,

the en banc Fifth Circuit concluded that Justice White

merely “purported to be ‘glad to join’ Justice Black’s

opinion,” and that in reality his joinder was

“magnanimous but significantly qualified,” leaving

the opinion of the Court just a “plurality opinion” after

all. Id. at 281-82. The en banc court accordingly

endorsed the Second Circuit’s approach and explicitly

23

rejected the Ninth Circuit’s contrary view. Id. at 28283; see, e.g., Cooper v. WestEnd Cap. Mgmt., L.L.C.,

832 F.3d 534, 545 (5th Cir. 2016) (evident partiality

requires showing that “a reasonable person would

have to conclude that the arbitrator was partial”).

e. Finally, the Sixth Circuit has also followed

Morelite, relying on Justice White’s concurrence

rather than the majority opinion in Commonwealth

Coatings to hold that evident partiality requires

showing that “a reasonable person would have to

conclude that an arbitrator was partial.” Uhl v.

Komatsu Forklift Co., 512 F.3d 294, 306 (6th Cir.

2008); see Nationwide Mut. Ins. v. Home Ins., 429 F.3d

640, 645 (6th Cir. 2005) (explaining that the Sixth

Circuit has “accepted Morelite’s rejection, as dicta, of

the appearance of bias standard espoused in the

plurality opinion [of] Commonwealth Coatings”);

Apperson v. Fleet Carrier Corp., 879 F.2d 1344, 1358

(6th Cir. 1989) (“agree[ing] with the Morelite court’s

analysis”). In sum, five other circuits have rejected

the standard for evident partiality established in

Commonwealth Coatings in favor of Morelite’s more

demanding “would have to conclude” standard. 3

2. Not every court has followed the Second

Circuit’s mistaken lead. The Ninth and Eleventh

Circuits and a number of state high courts continue to

correctly

apply

the

standard

adopted

by

Commonwealth Coatings, creating an open and

acknowledged split.

3 The Nebraska Supreme Court likewise has “adopt[ed] the

standard enunciated in Morelite.” Dowd v. First Omaha Sec.

Corp., 495 N.W.2d 36, 43 (Neb. 1993).

24

a. The Ninth Circuit examined in detail

application of the evident partiality standard and

Commonwealth Coatings to disclosure failures in

Schmitz v. Zilveti, 20 F.3d 1043 (9th Cir. 1994). It

squarely rejected the “misunderstanding of Justice

White’s concurrence in Commonwealth Coatings” as

the controlling opinion, explaining that Justice Black’s

opinion for the Court “is not a plurality opinion” and

has binding force. Id. at 1045. “Given Justice White’s

express adherence to the majority opinion in

Commonwealth Coatings,” the court explained, “it is

clear that the majority opinion, including its

‘appearance of bias’ language, received at least five

votes.”

Id. at 1047.

And the “most succinct

expression” of that “appearance of bias” standard in

nondisclosure cases, the court held, is that “‘evident

partiality’ is present when undisclosed facts show ‘a

reasonable impression of partiality.’” Id. at 1046. The

Ninth Circuit therefore (correctly) recognized that it

was bound to abide by this Court’s precedent.

The Ninth Circuit has continued to abide by

Commonwealth Coatings ever since. See, e.g., EHM

Prods., Inc. v. Starline Tours of Hollywood, Inc., 1

F.4th 1164, 1173 (9th Cir. 2021) (requiring disclosure

of “any dealings that might create an impression of

possible bias”); In re Sussex, 781 F.3d 1065, 1073-74

(9th Cir. 2015) (“Commonwealth Coatings created a

‘reasonable impression of partiality’ standard[.]”);

New Regency Prods., Inc. v. Nippon Herald Films, Inc.,

501 F.3d 1101, 1105-06 (9th Cir. 2007) (“reasonable

impression of partiality”); see also, e.g., Positive

Software, 476 F.3d at 283 (describing Ninth Circuit’s

approach).

25

b. The Eleventh Circuit likewise has followed

Commonwealth Coatings and its “simple requirement

that arbitrators disclose to the parties any dealing

that might create an impression of possible bias.”

Univ.

Commons-Urbana,

Ltd.

v.

Universal

Constructors Inc., 304 F.3d 1331, 1338 (11th Cir. 2002)

(quoting Commonwealth Coatings, 393 U.S. at 149).

Like the Ninth Circuit, the Eleventh Circuit has

described the standard as whether the undisclosed

facts create a “reasonable impression of partiality,”

which it has equated to “information which would lead

a reasonable person to believe that a potential conflict

exists.” Univ. Commons, 304 F.3d at 1339. And like

the Ninth Circuit, the Eleventh Circuit has not

embraced Morelite’s higher showing that a reasonable

person would have to conclude that the arbitrator was

partial. See, e.g., UBS Fin. Servs., 997 F.3d at 19

(contrasting Morelite with the Ninth and Eleventh

Circuits’ approach).

c. Several state supreme courts also have correctly

adhered to Commonwealth Coatings and rejected

Morelite while acknowledging the conflict. See, e.g.,

Narayan v. Ass’n of Apartment Owners of Kapalua

Bay Condo., 398 P.3d 664, 676 & n.14 (Haw. 2017)

(noting the “split of opinion”); Burlington N. R.R. Co.

v. TUCO Inc., 960 S.W.2d 629, 633-37 (Tex. 1997)

(describing the difference between the Second and

Ninth Circuit’s approaches, canvassing decisions on

both sides, and following the latter).

In short, there is a clear and entrenched circuit

split on the question presented that has repeatedly

been acknowledged by courts and commentators.

Particularly given that it stems from disagreement

26

over whether one of this Court’s decisions is binding,

that conflict cries out for this Court’s review.

II. The

Second

Circuit’s

Egregiously Wrong.

Approach

Is

The Second Circuit’s deliberate departure from

Commonwealth Coatings is extraordinarily mistaken.

Its conscious disregard of a majority opinion of this

Court, based on a perceived conflict between that

opinion and a two-Justice concurring opinion that

expressly “joined” the Court’s opinion, violates the

basic principle of vertical stare decisis and sets an

exceptionally dangerous precedent. And the rule it

adopted to displace Commonwealth Coatings renders

even bargained-for disclosure obligations virtually

meaningless.

1. The Constitution vests the federal judicial

power in “one supreme Court”—this Court—and “such

inferior Courts as the Congress may from time to time

ordain and establish.” U.S. Const. art. III, §1. The

hierarchy is unmistakable: On matters of federal law,

this Court is supreme, and the lower courts are

constitutionally bound to follow its decisions. “It is

this Court’s responsibility to say what a federal

statute means, and once the Court has spoken, it is the

duty of other courts to respect that understanding of

the governing rule of law.” James v. City of Boise, 577

U.S. 306, 307 (2016) (per curiam) (brackets omitted)

(quoting Nitro-Lift Techs., L.L.C. v. Howard, 568 U.S.

17, 21 (2012)). When this Court renders a decision, its

ruling “is the controlling interpretation of federal law”

and must be faithfully applied by other courts no

matter what they may think of it. Harper v. Va. Dep’t

of Tax’n, 509 U.S. 86, 97 (1993). In short, “vertical

27

stare decisis is absolute,” and the lower courts “have a

constitutional obligation to follow a precedent of this

Court unless and until it is overruled by this Court.”

Ramos v. Louisiana, 140 S.Ct. 1390, 1416 n.5 (2020)

(Kavanaugh, J., concurring); see also Shearson/Am.

Express, 490 U.S. at 484.

The Second Circuit betrayed that fundamental

principle. Justice Black’s opinion for the Court in

Commonwealth Coatings is just that—an opinion for

the Court, explicitly joined by six Justices—and it

carries all the binding force that designation implies.

That is why this Court’s official reports state that “Mr.

Justice Black delivered the opinion of the Court,” and

label that opinion as such on every page. 393 U.S. at

145, available at https://tinyurl.com/3x5b469k

(format-preserving version). It is why Justice White

himself recognized it as “the majority opinion,” id. at

151 n.* (White, J., concurring), and why the dissenters

dissented from “the Court’s ruling.” The Second

Circuit was no more free to ignore the official reports

of this Court than to ignore the Statutes at Large.

There is simply no justification for its decision to

demote this Court’s opinion to a “plurality of four

[J]ustices,” disregard its binding holdings as mere

“dicta,” and reconsider the issue “on a relatively clean

slate.” Morelite, 748 F.2d at 82-83.

The Second Circuit attempted to justify depriving

Justice Black of his majority by calling his opinion for

the Court “impossible to reconcile” with Justice

White’s concurrence. Id. at 83 n.3. But that was a

decision for Justice White, not the Second Circuit, to

make—and Justice White plainly thought otherwise,

as he declared himself “glad to join” Justice Black’s

28

opinion and wrote an opinion “concurring” with the

majority rather than concurring only in the judgment.

Commonwealth Coatings, 393 U.S. at 150 (White, J.,

concurring). That explicit joinder leaves no room for

the claim that Justice Black’s opinion was anything

other than a binding decision by a six-Justice

majority.

The Second Circuit appears to have relied on a

wholly erroneous version of the Marks rule, under

which “[w]hen a fragmented Court decides a case and

no single rationale explaining the result enjoys the

assent of five Justices, the holding of the Court may be

viewed as that position taken by those Members who

concurred in the judgments on the narrowest

grounds.” Marks v. United States, 430 U.S. 188, 193

(1977); see Positive Software, 476 F.3d at 282 (relying

on Marks to disregard Justice Black’s opinion for the

Court); Freeman, 709 F.3d at 251-52 (same). But

Marks has no application where, as here, a majority of

the Justices do join a single opinion for the Court.

Marks thus comes nowhere near empowering a lower

court to deprive an opinion of the Court of its binding

force by identifying perceived inconsistencies in a

concurring opinion of a Justice who joined the

majority.

The dangerous consequences of the Second

Circuit’s approach are all too easy to see. Allowing

lower courts to decide for themselves whether an

opinion of this Court is sufficiently consistent with

each concurrence to remain binding would largely

destroy the controlling force of any majority opinion

accompanied by a concurrence, effectively leaving to

lower courts “the prerogative of overruling [this

29

Court’s] decisions.” Shearson/Am. Express, 490 U.S.

at 484. Moreover, treating concurrences as controlling

contravenes the basic principle that “[t]he reasoning

of this Court with respect to the disposition of [a] case

is set forth in [the majority] opinion and none other.”

Gill v. Whitford, 138 S.Ct. 1916, 1931 (2018). Both the

stakes and the potential for lower court mischief are

high. More than a third of this Court’s opinions over

the two most recent Terms were accompanied by

concurring opinions, and in more than half of those

cases, the concurring opinions were written or joined

by Justices whose votes were necessary to make a

majority.

2. In all events, there is no conflict between the

Commonwealth Coatings majority opinion and Justice

White’s concurrence (which presumably explains why

Justice White and Justice Marshall had no difficulty

joining both). The majority held that arbitrators “not

only must be unbiased but also must avoid even the

appearance of bias,” and so an award can be vacated if

an arbitrator “might reasonably be thought biased

against one litigant and favorable to another.”

Commonwealth Coatings, 393 U.S. at 150. To that

end, the majority emphasized the obligation to

disclose “any dealings that might create an impression

of possible bias.”

Id. at 149.

Justice White’s

concurrence took no issue with any of that; he simply

observed that vacatur may not be warranted “if both

parties are informed of the relationship in advance, or

if they are unaware of the facts but the relationship is

trivial.” Id. at 150 (White, J., concurring) (emphasis

added). That is entirely consonant with the majority’s

approach, as a disclosed relationship does not carry

the same inherent bias concerns as a concealed one,

30

and a “trivial” relationship is so minor that it cannot

give rise to any appearance of bias.

The Second Circuit posited that the majority

“appeared to impose upon arbitrators the same lofty

ethical standards required of Article III judges,” while

Justice White “made clear the Court was not holding

that arbitrators’ and judges’ ethical [duties] are

coextensive.” Morelite, 748 F.2d at 82. But that

reflects a fundamental misunderstanding of the

majority opinion. To be sure, the majority drew on

analogies to the canons of judicial ethics and the

“elementary requirements of impartiality taken for

granted in every judicial proceeding” to conclude that

arbitrators “must avoid even the appearance of bias.”

393 U.S. at 145, 148-50. But as Justice White pointed

out, none of that means that arbitrators “are to be held

to the standards of judicial decorum of Article III

judges,” as the FAA generally “consign[s] to the

parties, who are the architects of their own arbitration

process,” decisions about what kinds of arbitratorparty relationships they are willing to tolerate. Id. at

150-51 (White, J., concurring). That is particularly

true in commercial arbitration, where parties often

agree ex ante to trade the kind of complete impartiality

expected of judges for practical expertise and

familiarity with industry standards. No one would

want a judge in a dispute about diamonds to own a

diamond store, but parties arbitrating under a

contract for the sale of diamonds might well choose a

panel of diamond merchants who must disclose any

relationships with the parties. There is no conflict in

embracing the appearance-of-impartiality standard

while acknowledging that parties can agree to tolerate

31

relationships that may not pass muster in the judicial

context.

3. Even if Marks analysis were applicable, it still

would not justify the Second Circuit’s decision to

reconsider the question anew and announce an

evident partiality standard that contravenes both the

majority opinion and Justice White’s concurrence.

The Second Circuit openly acknowledged that it was

adopting a standard different from the one chosen by

the Commonwealth Coatings majority, declaring that

it considered the “appearance of bias” standard to be

“too low.” Morelite, 748 F.2d at 83-84. But while it

justified that departure by reference to Justice White’s

concurrence, id. at 82-83, it did not try to devise some

other standard from that concurrence. The Second

Circuit instead concluded that the inconsistency it

perceived between the concurrence Justice White

wrote and the majority opinion he joined freed it to

operate “on a relatively clean slate,” id. at 82-83, and

proceed as if there were no controlling opinion of this

Court. But see Marks, 430 U.S. at 193.

The result is a rule that conflicts not only with the

Commonwealth Coatings majority opinion, but even

with Justice White’s concurrence. Nothing in that

concurrence suggests that the standard for evident

partiality should be limited to the extreme

circumstance where a reasonable person “would have

to conclude that [the] arbitrator was partial.” App.4.

On the contrary, Justice White recognized that the

failure to disclose a relationship that is more than

“trivial” can warrant a finding of evident partiality

even if it is undisputed that the arbitrator “was

entirely fair and impartial.” 393 U.S. at 150-51 & n.*

32

(White, J., concurring). Indeed, he could not have

concurred even in the judgment if he did not share

that view, as he accepted the district court’s finding

that the arbitrator at issue was “entirely fair and

impartial.” Id. at 151 n.*. And while Justice White

noted that some undisclosed relationships may be “too

insubstantial to warrant vacating an award,” id. at

152, his opinion provides no basis for embracing the

dissenting Justices’ view that every undisclosed

relationship falls into that category, no matter how

egregious the disclosure violation, unless it is beyond

reasonable dispute that it rendered the arbitrator

partial.

4.

The Second Circuit’s rule is also flatly

inconsistent with the FAA’s overriding mandate to

“enforce arbitration agreements according to their

terms.”

Epic, 138 S.Ct. at 1621.

Under

Commonwealth Coatings, bargained-for disclosure

obligations matter: When an arbitrator fails to make

a material disclosure required by the parties’ contract,

he “might reasonably be thought biased” and the

award can be challenged on that basis.

Commonwealth Coatings, 393 U.S. at 150. Under

Morelite,

however,

bargained-for

disclosure

obligations are practically meaningless (as this case

illustrates), since a court can always decide later that

a reasonable person would not “have to conclude” the

breach of those bargained-for obligations reflects

partiality.

That cannot be squared with the

foundational principle that arbitration is “a matter of

contract between the parties,” whose contractual

arrangements must be respected. First Options of

Chi., Inc. v. Kaplan, 514 U.S. 938, 943 (1995).

33

In sum, the Second Circuit’s conscious rejection of

this Court’s binding precedent cannot be reconciled

with the fundamental and absolute principle of

vertical stare decisis. Its decision to disregard a

controlling opinion by this Court based on a perceived

conflict between that opinion and an accompanying

concurrence is exceedingly dangerous. Worse still, it

is not even right on its own terms, as the perceived

conflict is entirely of the Second Circuit’s making.

Even if there were any conflict, moreover, that would

hardly empower the Second Circuit to adopt a novel

rule that conflicts with both decisions and most closely

mirrors the dissent. This Court should not allow that

egregious misstep to continue to deprive parties of the

impartial arbitrators for which they bargained.

III. The Question Presented Is Exceptionally

Important.

The FAA’s “first” and “foundational” principle is

that “arbitration is strictly a matter of consent.”

Lamps Plus, Inc. v. Varela, 139 S.Ct. 1407, 1415

(2019). The evident-partiality provision enforces that

principle by reflecting Congress’ recognition that

parties bargain “not merely for any arbitration but for

an impartial one.” Commonwealth Coatings, 393 U.S.

at 147. To be sure, “parties are free to choose for

themselves to what lengths they will go in quest of

impartiality,” as there may be contexts in which

tolerating some degree of entanglement is the best

way to get the “most capable potential arbitrators …

with deep industry connections.”

Certain

Underwriting Members of Lloyds of London v. Fla.,

Dep’t of Fin. Servs., 892 F.3d 501, 507-08 (2d Cir.

2018). But when, as here, parties go out of their way

34

to impose the most stringent of disclosure

requirements—and then express particular concerns

about the precise relationship at issue, see supra

p.14—the “emphatic federal policy in favor of arbitral

dispute resolution,” Mitsubishi Motors, 473 U.S. at

631, depends on providing some recourse when an

arbitrator egregiously violates those obligations.

After all, parties will not agree to arbitrate in the first

place if they cannot even be confident that they will

get the actuality and appearance of impartiality for

which they bargained, as well as the “rigorous[]”

enforcement of their agreement that the FAA

requires. Epic, 138 S. Ct. at 1620.

Recourse for disclosure violations is particularly

critical in international commerce, where both the

federal policy favoring arbitration and the need for

impartiality “appl[y] with special force.” Mitsubishi

Motors, 473 U.S. at 631. Arbitration is regularly

invoked to “avoid the uncertainty, expense, and

potential hostility of a foreign nation’s local courts,”

Baker Hughes Servs. Int’l, LLC v. Joshi Techs. Int’l,

Inc., 73 F.4th 1139, 1142 (10th Cir. 2023). Those

strong federal interests are not served by an evidentpartiality standard that excuses the breach of express

contractual disclosure obligations on the ground that

it is still possible to conclude that the arbitrator might

be unbiased. Nor are they served by uncertainty about

the applicable standard. Yet as things currently

stand, the law in New York and Miami—the top two

international arbitration venues in the country—

differs. See Alexander Lugo, Miami’s Rise as ‘Global

Metropolis’ Challenges New York as International

Arbitration Hub, Daily Bus. Rev. (Mar. 31, 2023),

https://tinyurl.com/rbv6ks7y; cf. Moses H. Cone Mem’l

35

Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)

(recognizing Congress’ efforts to create a uniform

“body of federal substantive law of arbitrability”).

This case vividly illustrates the stark practical

difference between the divergent standards the

circuits have embraced.

The arbitrator here

flagrantly violated his disclosure obligations under

the parties’ agreement, failing to inform OEPC of an

ongoing collaboration with Andes’ lead counsel as coarbitrators in a simultaneous arbitration that

involved many of the same legal doctrines and gave

Andes unique insight into his views about specific

contract-law issues and his amenability to particular

strategies. He did so, moreover, even after OEPC

expressed interest in his relationship with Andes’

counsel, and even as he disclosed much less material

issues, thereby creating the false impression that he

was abiding by his ongoing disclosure obligations.

That readily suffices to establish that an

arbitrator “might reasonably be thought biased.”

Commonwealth Coatings, 393 U.S. at 150; see, e.g.,

Univ. Commons, 304 F.3d at 1341 (“[S]erving as the

decision-maker in one action in which a colleague in

another action represents a party clearly poses the

possibility of bias[.]”). Indeed, the nondisclosure here

was arguably more egregious than the nondisclosure

in Commonwealth Coatings itself. It also, by any

measure, violated the disclosure obligations that

bound this arbitrator under the parties’ arbitration

agreement. Yet under the Second Circuit’s demanding

standard, even that was not enough to show that a

reasonable person “would have to conclude” that the

arbitrator was partial. App.4-5. That outcome acutely

36

demonstrates the real-world impact of the Second

Circuit’s standard and the compelling reasons to reject

it. 4

Finally, the Second Circuit’s radical departure

from this Court’s binding precedent is itself of

significant importance. If a circuit court can write a

decision of this Court out of the U.S. Reports based

solely on a perceived conflict between that opinion and

a concurrence that explicitly joined it, the absolute

rule of vertical stare decisis is in serious peril, and

future concurrences will require careful thought.

Those consequences cannot be squared with the strict

hierarchy of our judicial system, or with this Court’s

centuries-old practice of delivering its binding

decisions in a single opinion of the Court. The Second

Circuit’s disregard of those basic principles confirms

the need for review.

4 The Second Circuit also relied on its own precedent holding

that an arbitrator’s concurrent service with a co-arbitrator on

another arbitration panel does not show partiality. App.5. But

there is a world of difference between simultaneously serving

with a co-arbitrator on another arbitration panel, and (as here)

simultaneously serving with a party’s lead counsel on another

panel. See Univ. Commons, 304 F.3d at 1341. It is one thing to

learn a panel of judges sat together the previous day; it would be

quite another to learn that opposing counsel sat with the judges

the previous day.

37

CONCLUSION

This Court should grant the petition.

Respectfully submitted,

PAUL D. CLEMENT

Counsel of Record

ERIN E. MURPHY

C. HARKER RHODES IV*

ZACHARY J. LUSTBADER*

CLEMENT & MURPHY, PLLC

706 Duke Street

Alexandria, VA 22314

(202) 742-8900

paul.clement@clementmurphy.com

*Supervised by principals of the firm who

are members of the Virginia bar

Counsel for Petitioner

November 9, 2023