PK Time Group, LLC v. Robert, No. 12 Civ. 8200, 2013 U.S. Dist. LEXIS 104449 (S.D.N.Y. July 23, 2013) [click for opinion]
PK Time Group, LLC, and Cinette Robert had an exclusive-distribution agreement for Swiss watches. After Robert sold the watch manufacturing company to a third party, PK Time claimed a violation of its right of first refusal under the distribution agreement. PK Time initiated arbitration proceedings under the rules of the International Centre for Dispute Resolution ("ICDR"), a division of the American Arbitration Association.
The panel of three arbitrators bifurcated the proceedings, which were to be held in New York City. In the liability phase, the arbitrators issued a partial award in PK Time's favor, finding Robert in breach of the agreement. During the damages phase, the arbitrators considered both parties' demands for discovery. The arbitrators sustained Robert's objections to nine of the fifteen items PK Time sought. At the damages hearing, the arbitrators decided that additional time would be needed to allow the parties to present their cases. A second hearing date was scheduled to take place six months later in London.
Before the issue of damages had been fully heard and decided, PK Time applied to the ICDR for removal of the arbitrators. PK Time argued that the arbitrators had demonstrated bias and had committed misconduct by speaking at a conference in London at which Robert's expert witness also spoke and that was sponsored by the company that employed Robert's expert witness and by making improper discovery rulings. The ICDR denied the application. PK Time then asked the Supreme Court of New York to stay the arbitration. Robert removed the action to the United States District Court for the Southern District of New York.
The district court dismissed PK Time's petition. The court cited the "bright line rule" established by the Second Circuit that the Federal Arbitration Act ("FAA"), 9 U.S.C. § 10, does not allow pre-award removal of an arbitrator. The proper time to argue that the arbitrators were biased, the court noted, is through a motion to vacate the award after the award is issued.
The court also rejected PK Time's argument that the New York choice-of-law provision in the parties' agreement required incorporation of New York procedural law into an action otherwise governed by the FAA.
In addition, the court held that, even if New York procedural law did apply, PK Time failed to demonstrate the arbitrators were biased. The court found that PK Time was speculating about any interaction between the arbitrators and Robert's expert witness. The court noted that "if the courts were to disqualify every arbitrator who has had professional contacts with a party or witness, it would be difficult to maintain the arbitration system." The court stated that PK Time failed to provide any evidence of the arbitrators' bias or partiality, and so interlocutory relief to remove the arbitrators was not warranted.