## Facts

- Positive Software Solutions, Inc. licensed mortgage-industry software (“LoanForce”) to New Century Mortgage Corp. under a Software Subscription Agreement.
- In renewal negotiations, Positive alleged New Century copied the program and sued for contract and intellectual property-related claims, seeking injunctive relief and damages.
- The district court issued a preliminary injunction and compelled arbitration under AAA rules.
- The parties selected arbitrator Peter Shurn; he stated he had nothing to disclose regarding relationships with either party or counsel.
- After a multi-day hearing, the arbitrator ruled for New Century, dismissed Positive’s claims, and awarded New Century about $1.5 million in attorneys’ fees.
- After the award, Positive learned Shurn and New Century’s counsel, Ophelia S. Camiña, had both represented the same client years earlier in unrelated patent litigation involving many attorneys and firms; they were at different firms and did not interact directly.
- Positive moved to vacate the award under 9 U.S.C. § 10(a)(2), arguing the nondisclosure showed “evident partiality.”

## Issues

1. Whether an arbitrator’s failure to disclose a remote, insubstantial prior professional association with a party’s counsel constitutes “evident partiality” requiring vacatur under 9 U.S.C. § 10(a)(2).
2. Whether “evident partiality” may be established by an appearance of bias alone, without a significant compromising connection.

## Decision

- The en banc Fifth Circuit reversed the district court’s order vacating the arbitration award.
- The court held that the FAA does not require vacatur for nondisclosure of a trivial, attenuated, and remote past association.
- The court rejected an “appearance of bias” standard as sufficient, and required a significant compromising connection from which a reasonable person would have to conclude the arbitrator was partial.
- The case was remanded for the district court to consider other objections to the arbitration award.

## Legal Principles

- Under 9 U.S.C. § 10(a)(2), “evident partiality” is a narrow ground for vacatur and is not satisfied by nondisclosure of insignificant relationships.
- Vacatur is warranted only when a reasonable person would have to conclude the arbitrator was partial, typically based on a significant and compromising relationship or interest.
- Commonwealth Coatings is read through Justice White’s concurrence: arbitrators need not provide exhaustive background histories and are not required to disclose trivial connections.
- Arbitration policy favors finality; expanding vacatur to cover minor nondisclosures would encourage post-award investigations and collateral litigation.

## Conclusion

The Fifth Circuit held that an arbitrator’s nondisclosure of a remote, noninteractive co-counsel association in unrelated prior litigation did not constitute “evident partiality” under the FAA, and it reinstated the arbitration result subject to consideration of other challenges on remand.


Positive Software Sols., Inc. v. New Century Mortg. Corp., 476 F.3d 278 (5th Cir. 2007) (en banc)