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    Third Circuit Applies Constructive Knowledge Standard And Finds Waiver Of Arbitration Panel Challenge

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    The U.S. Court of Appeals for the Third Circuit has found that post-award objections to an arbitrator were waived because the party had constructive knowledge of the arbitrator’s insufficient disclosure. The court held that a party should be precluded from challenging an award where malfeasance, ranging from conflicts-of-interest to non-disclosures of disciplinary proceedings, could have been reasonably discovered. Since the initial disclosure identified that the arbitrator had been charged with the unauthorized practice of law in connection with a municipal court appearance, the court found that this was enough “alarming information” to compel the parties to do further due diligence. The Third Circuit held that had diligence been conducted after the disclosure, it would likely have discovered the true extent of the concerns about the arbitrator’s character and fitness to serve on the panel, such as a number of other complaints for the unauthorized practice of law, and that the disclosure itself was false. According to the court, a “sore loser” is not permitted to “game the system” and conduct a background investigation on an arbitrator after an award with the sole motivation to seek vacatur. The court’s opinion in Goldman Sachs & Co. v. Athena Venture Partners, L.P., can be found here.

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