Parks v. Sombke

• Decision Date: 06 July 1999
• Docket Number: No. 1231,1231
• Citation: 127 Md. App. 245,732 A.2d 907
• Parties: Lola Hughes PARKS v. Myrtle SOMBKE, et vir.
• Court: Court of Special Appeals of Maryland

732 A.2d 907

127 Md. App. 245

Lola Hughes PARKS v. Myrtle SOMBKE, et vir.

No. 1231, Sept. Term, 1998.

Court of Special Appeals of Maryland.

July 6, 1999.

Jeffrey T. Brown (Budow & Noble, P.C., on the brief), Bethesda, for Appellant.

Charles E. Matz (Jacob Matz and Jacob Matz, P.A., Towson, Alfred A. Lacer and Lacer, Sparling, Densford and Reynolds, P.A., Lexington Park, on the brief), for Appellees.

Argued before MOYLAN and DIANE O. LEASURE (specially assigned), and JOHN J. BISHOP, Jr. (Retired, specially assigned), JJ.

DIANE O. LEASURE, Judge (Specially Assigned).

This case arises out of an automobile accident that occurred on March 22, 1993. The appellees, Myrtle Sombke and Harlowe Sombke, filed suit for negligence and loss of consortium. Lola Hughes Parks, appellant, conceded liability and the parties chose to submit the question of damages to binding arbitration. The parties stipulated to a high/low of $150,000.00/$25,000.00. The appellant submitted a list of acceptable arbitrators to the appellees, from which the appellees selected James A. Cleaver, Esquire ("arbitrator").

The arbitration hearing was held on April 10, 1996. The arbitrator issued his opinion on June 27, 1996, awarding Ms. Sombke $66,000.00 in damages, but denying relief to her husband for loss of consortium. The appellees filed a petition to vacate and nullify the arbitration award on the ground that, inter alia, the arbitrator failed to make certain disclosures. In their Motion for Summary Judgment, the appellees asserted that the arbitrator failed to disclose the following: (i) his firm's legal representation of the medical group to which the appellant's expert belonged; (ii) the fact that the arbitrator, a plaintiff's attorney, represented clients against the appellant's insurer, State Farm Insurance Company ("State Farm"); (iii) the fact that the arbitrator and his law firm were insured by State Farm; and (iv) the fact that the arbitrator and his law firm had personal and/or business relationships with two State Farm agents. It is undisputed that the arbitrator failed to make the disclosures about which the appellees complain.

The Circuit Court for Calvert County (the Honorable Warren J. Krug, presiding) granted the appellees' Motion for Summary Judgment, finding that "[t]here were conflicts of the arbitrator that were not disclosed to the parties." Judge Krug vacated the arbitration award and ordered that the issue of damages be submitted for re-arbitration before a different arbitrator to be selected from a new list of arbitrators. It is from the Opinion and Order granting the appellees' Motion for Summary Judgment that the appellant noted a timely appeal.

The following issues, which we have slightly re-worded, were presented to us for review:

1. Whether the trial court erred in adopting the holding in Hartman v. Cooper as the applicable standard for determination of "evident partiality".

2. Whether the trial court could have found, in application of the standard set forth in Wyndham v. Haines, that the appellees did not adduce sufficient evidence to permit a reasonable inference of actual partiality, thereby warranting denial of the Motion for Summary Judgment.

Finding no error, we shall affirm the decision of the lower court. We explain.

The statutory grounds for vacating an arbitrator's award are enumerated in Md. Code (1974, 1998 Repl.Vol.), § 3-224(b) of the Courts & Judicial Proceedings Article which provides, in pertinent part, as follows:

(b) Grounds.—The court shall vacate an award if:

(1) An award was procured by corruption, fraud, or other undue means;

(2) There was evident partiality by an arbitrator appointed as a neutral, corruption in any arbitrator, or misconduct prejudicing the rights of any party ...

....

At issue in this appeal is the arbitrator's duty of disclosure. There is no genuine dispute as to any material fact that the arbitrator did not disclose certain relationships to the parties prior to or during the course of the arbitration proceedings.

The United States Supreme Court addressed the issue of an arbitrator's duty of disclosure in the case of Commonwealth Coatings Corp. v. Continental Casualty Co., 393 U.S. 145, 89 S.Ct. 337, 21 L.Ed.2d 301 (1968), reh'g denied, 393 U.S. 1112, 89 S.Ct. 848, 21 L.Ed.2d 812 (1969), disapproved on other grounds, Aetna Life Ins. Co. v. Lavoie, 475 U.S. 813, 825-26 n. 3, 106 S.Ct. 1580, 89 L.Ed.2d 823 (1986)

. The case arose out of a claim by a subcontractor against the sureties of a prime contractor. The Supreme Court vacated the award of an arbitration panel because a member of the panel had not disclosed that his firm previously had a "sporadic" but "repeated and significant" business relationship with the prime contractor. Id., at 146, 89 S.Ct. 337. The Supreme Court decided the case under the vacation provision of the United States Arbitration Act, 9 U.S.C. § 10, which is virtually identical in substance to the corresponding provision of the Maryland Uniform Arbitration Act. See § 3-224(b)(1) and (2) of the Courts & Judicial Proceedings Article. The Supreme Court stated that it could perceive no way in which the effectiveness of the arbitration process will be hampered by the simple requirement that arbitrators disclose to the parties any dealings that might create an impression of possible bias. Id., at 149, 89 S.Ct. 337. The Supreme Court additionally stated that "[w]e should, if anything, be even more scrupulous to safeguard the impartiality of arbitrators than judges, since the former have completely free rein to decide the law as well as the facts and are not subject to appellate review". Id. The Supreme Court vacated the award even though the petitioner did not accuse the arbitrator in question of being "actually guilty of fraud or bias", and the Supreme Court conceded that the arbitrator had no "improper motives". Id., at 147, 89 S.Ct. 337.

In the Commonwealth Coatings case, the failure to disclose the business relationship was a sufficient basis to warrant vacation of the arbitration award. As Justice White pointed out in his concurring opinion, disclosure is necessary in order to create and maintain the atmosphere of trust and openness that is needed to preserve the integrity and effectiveness of the arbitration process. Id., at 151, 89 S.Ct. 337 (White, J., concurring).

An arbitrator's duty of disclosure has likewise been addressed by the appellate courts in Maryland. The case of McKinney Drilling Co. v. Mach I Ltd. Partnership, 32 Md.App. 205, 359 A.2d 100 (1976), involved a construction dispute in which a contractor sought to vacate an arbitration award in favor of a builder because, inter alia, the arbitrator had not disclosed an ongoing relationship with a concrete supplier of the builder. Id., at 208, 359 A.2d 100. Over objection, the arbitrator permitted the concrete supplier to participate indirectly in the arbitration hearing. Id., at 206-07, 359 A.2d 100. This Court affirmed the vacation of the award and held that the undisclosed relationship with the supplier, together with the participation of the supplier at the hearing, "was sufficient, as a matter of law, to permit the judge to draw a rational inference that the arbitrator was not neutral". Id., at 211-12, 359 A.2d 100.

In Hartman v. Cooper, 59 Md.App. 154, 474 A.2d 959 (1984), cert. denied, 301 Md. 41, 481 A.2d 801 (1984)¹, a unanimous decision of a Health Claims Arbitration Office panel was vacated because a physician on the panel had not disclosed on his panel data sheet that (i) he was, at the time, a defendant in a separate medical malpractice case; and (ii) he had previously testified for the defense in depositions in two other malpractice cases. Hartman, 59 Md.App. at 158-59, 474 A.2d 959. The Hartman Court held, inter alia, that the doctor's failure to disclose relevant information constituted "evident partiality" and reasonably supported an inference of the existence of bias, prejudice or partiality. Hartman, 59 Md.App. at 167, 474 A.2d 959.

Two years after Hartman was decided, the Court of Appeals issued its ruling in Wyndham v. Haines, 305 Md. 269, 503 A.2d 719 (1986)². In Wyndham, medical malpractice claimants filed a petition to vacate the award on the basis of alleged partiality of the arbitration panel chairman. The claimants learned of possible bias on the part of the panel chairman nearly a month before the arbitration hearing. The claimant's counsel unsuccessfully sought disqualification of the chairman prior to the commencement of the arbitration hearing³. An adverse arbitration award was issued against the claimants and they thereafter moved to have the award vacated. The trial court denied this request. The Wyndham, Court found that the claimants offered no proof in furtherance of their allegation of evident partiality; specifically, no affidavit in support of their petition to vacate had been filed as required by Rule 2-311(d)⁴. Wyndham, 305 Md. at 279,503 A.2d 719. The Wyndham Court addressed Hartman, overruling the part of the opinion that stated that a mere appearance of possible bias was sufficient to vacate an arbitration award⁵. In narrowing the standard set forth in Hartman, the Court stated that the establishment of evident partiality requires more than speculation and bald allegations of bias; in other words, the moving party must prove facts sufficient to permit an inference that there was indeed partiality by an arbitrator. Id. The Wyndham Court, however, did not insist on a standard so high as to require a showing of actual bias or proof of improper conduct. John J. Kim & Kathryn A. Turner, Survey: Developments in Maryland Law 1985-1986: VII Health Care, 46 Md. L.Rev. 782, 792 (1987).

In the case sub judice, there is no genuine dispute as to any material fact that the disclosures about which the appellees complain were not made at any time prior to or during the arbitration proceedings. The sole expert evidence submitted by the appellant...