## Facts

- Abraham Goldfinger and Leo Lisker, both members of the Diamond Dealers Club (DDC), disputed alleged joint-venture diamond transactions.
- Goldfinger claimed Lisker owed him $500,000; Lisker denied any partnership and any debt.
- Under DDC bylaws, the dispute was arbitrated before a three-member DDC panel over roughly five months.
- The panel awarded Goldfinger $162,976.
- Goldfinger petitioned to confirm the award under CPLR 7510; Lisker cross-moved to vacate under CPLR 7511 for arbitrator misconduct.
- A referee found undisclosed private communications involving the panel chair (Weinman), a DDC member associated with Lisker (Horowitz), and Goldfinger.
- Two communications were central: (1) private discussions between Weinman and Horowitz about aspects of the dispute; and (2) a private discussion between Weinman and Goldfinger about Goldfinger’s earlier settlement posture and the amount sought, undertaken to test Goldfinger’s credibility.
- Lisker did not know of these communications during the arbitration and had no opportunity to respond, challenge, or cross-examine regarding them.

## Issues

1. Whether an undisclosed, substantive ex parte communication between an arbitrator and one party about credibility and the amount in dispute constitutes “misconduct” requiring vacatur under CPLR 7511.

## Decision

- The Court of Appeals of New York reversed the Appellate Division.
- The court denied confirmation of the arbitration award and granted vacatur.
- The court held that, on these facts, the undisclosed private communication between the arbitrator and Goldfinger concerning credibility and the claim amount constituted misconduct under CPLR 7511.

## Legal Principles

- Under CPLR 7511, an arbitration award must be vacated for arbitrator “misconduct” that prejudices a party’s rights.
- Undisclosed ex parte communications between an arbitrator and one party about material issues—especially credibility and the amount in controversy—constitute misconduct because they deny the opposing party notice and a chance to respond.
- Although arbitration is strongly favored and arbitrators may operate with procedural flexibility, the process must remain fair and must avoid conduct that creates an appearance of partiality.
- Any informal fact-gathering latitude does not extend to private, undisclosed inquiries that go to the core merits of the dispute and could reasonably be contested by the opposing party.
- A party need not prove actual outcome-determinative bias where the ex parte contact on material matters itself creates sufficient risk of unfairness and undermines confidence in the tribunal.

## Conclusion

The court vacated the DDC arbitration award because the panel chair’s undisclosed ex parte communication with one party, directed at testing credibility and the validity of the claimed amount, was misconduct under CPLR 7511 that deprived the other party of a fair opportunity to respond and compromised the integrity of the arbitral process.


Matter of Goldfinger v. Lisker, 68 N.Y.2d 225, 500 N.E.2d 857 (N.Y. 1986)