In most circumstances, the Federal Arbitration Act requires that the losing party move to vacate an arbitration award within three months. However, the Ninth Circuit recently ruled that the three-month timeline can be tolled, especially for something as significant as the chair lying about being a licensed attorney.

In Move, Inc. v. Citigroup Global Markets, Inc., 2016 WL 6543522 (9th Cir. Nov. 4, 2016), Move started a FINRA arbitration against Citigroup, alleging the mismanagement of $131 million. Move expressed its strong desire to have an experienced attorney as chair, given the complexity of the claims. So, it gave top ranking to “James H. Frank,” who certified to FINRA that he had a law degree and was licensed in three states. Mr. Frank then served as the chair of the three person panel, signing a unanimous award denying Move’s claims in December of 2009.

However, the person who served as chair had lied about his qualifications and was not even a licensed attorney. (He was impersonating a retired California attorney.) Move discovered that fact in 2014. (By reading The AmLaw Litigation Daily, which should now use this in its subscription sales pitches.) Move then filed a motion to vacate the arbitration award.

The district court denied the motion, but the Ninth Circuit reversed. First, it held “that the FAA is subject to equitable tolling.” It appears to be the first federal appellate court to reach that result, with the Fifth Circuit having held the opposite in an unpublished case in 1993. Although part of the lure of arbitration is its finality, the court noted “the general pro-arbitration policy relies on the assumption that the forum is fair, and therefore cannot justify special deference to arbitration outcomes in the face of a colorable claim that the forum was unfair in a particular case.” (Citing the 6th Circuit.)

Having concluded that it could address the substance of the vacatur motion, the court then found that the false information about the chairperson’s professional qualifications constituted “misbehavior by which the rights of any party have been prejudiced” and therefore the award should be vacated under Section 10(a)(3). Because Move made clear in the selection process that having an attorney as chair was critical, and the chair was “an impostor,” the parties’ contractual rights to arbitrate before a panel of three qualified FINRA arbitrators was prejudiced and Move “was deprived of a fundamentally fair hearing.” The court was not swayed by arguments that the other two members of the panel had voted for the award as well, noting that “there is simply no way to determine” whether the chair influenced the other panelists.

Although I trust that it is a very unusual case for arbitrators to lie about their qualifications, it may be that their disclosure forms list lesser inaccuracies. What if it was simply that the chair had let his licensure lapse in one of the states? What lessons does this case offer for lesser types of inaccuracies? For advocates, it suggests it is useful to make a clear record of what arbitrator qualifications are important during the selection process, so that if there is a problem you can show prejudice. For arbitrators, it suggests you must be exceedingly careful in the accuracy of the bio you provide. And for arbitration administrators, like JAMS, AAA and FINRA, it shows that having a system for double-checking arbitrator qualifications is very important. It is part of the service you are providing the parties.

In an atmosphere in which a federal judge has blocked the CMS rule precluding arbitration in nursing home agreements, and we have a president-elect who seems likely to roll back the other agency regulations of arbitration, we may see courts policing the fundamental fairness of arbitration proceedings more often. It will be one way to address the public sentiment that arbitration is unfair and stacked in favor of large companies (see this recent editorial by Gretchen Carlson).