Two recent US Court of Appeals decisions have upheld an arbitrator’s power to exclude evidence.
In Doral Financial Corporation v. Calixto García-Vélez; Carmen T. García-Vélez,22 decided in July 2013, the appellant claimed that the arbitral tribunal engaged in misconduct by refusing to issue broad subpoenas to a third-party because the deadline for such requests had passed. The First Circuit explained that vacatur of an arbitral award on such a ground is only appropriate when the refusal to hear evidence deprived a party of a fair hearing. The appellant was found to have had adequate procedural safeguards such as notice and an opportunity to present evidence. Further, nothing indicated that, had the subpoenas been issued, the outcome of the hearing would have been different. The appellant’s request to vacate the arbitral award was accordingly rejected.
The Second Circuit came to a similar conclusion, also in July 2013, in LJL 33rd Street Associates, LLC v. Pitcairn Properties Inc..23 In the underlying arbitration, the tribunal refused to hear hearsay evidence relating to the valuation of the property at issue. The Court of Appeal noted that while arbitrators are not bound by the rules of evidence on hearsay, they do not necessarily have to hear all hearsay evidence. Arbitrators may exclude such evidence “especially when (a) the evidence could be presented without reliance on hearsay and (b) its hearsay nature is unfairly prejudicial to the adversary.” The court found that the evidence presented to the arbitral tribunal could have been introduced by presenting those making the statements as witnesses that the appellant could cross-examine. Therefore, the court held that it was within the arbitrator’s authority to exclude the hearsay evidence.