Status of arbitration award if arbitrator was noticeably drowsy or asleep during the arbitration hearing. Loren Imhoff Homebuilder, Inc. v. Taylor and Cuevas. Supreme Court of Wisconsin (2022), by Hugh Anderson

Summary: Eight months into a residential construction project the homeowners and the contractor were at odds regarding the quality of the work and alleged “discrepancies” in the contractor’s invoices. After an unsuccessful mediation, the dispute was arbitrated. Following a five-day evidentiary hearing, the homeowners objected to the proceedings, complaining that the arbitrator had shown bias toward the contractor, and had repeatedly fallen asleep, including during the presentation of evidence by the homeowners. The arbitrator denied the homeowners’ motion that he recuse himself from the proceedings, and issued an arbitration award of $320,000 in favor of the contractor.

In subsequent circuit court proceedings to enforce the arbitration award, the court took testimony from the parties themselves and from the attorneys who had participated in the arbitration (but apparently not from the arbitrator himself). The circuit court found credible evidence that the arbitrator had “glazed eyes, haziness, drowsiness, and sometimes went into a state of outright sleep.” The circuit court concluded that the homeowners had “satisfied their burden by clear and convincing evidence that the arbitrator so imperfectly executed his power that an [enforceable] award upon the subject was not made.” The circuit court remanded the case for a new arbitration of the dispute with a different arbitrator.

The contractor appealed this decision, to the court of appeals, which reversed, holding that by waiting until the end of the hearing to object, the homeowners had forfeited drowsiness or sleeping by the arbitrator as a basis to vacate the award. The issue was appealed again, this time by the homeowners, resulting in a review by the Wisconsin Supreme Court.

Decision: The Wisconsin Supreme Court held that because the homeowners had raised their objection before the arbitrator issued the award—before the merits of the dispute were decided—the homeowners had not forfeited their right to object.

The policy goals underlying forfeiture are protected and the fairness of the proceeding is preserved. Before the award is issued, the arbitrator can reopen testimony to hear or rehear testimony and to correct any perceived errors without resorting to the appeals process.*** Here, the homeowners raised their objection to the arbitrators sleeping to him before he issued the arbitral award. Even though it was after the evidentiary hearing was completed, there remained the opportunity for the arbitrator to make corrections for his sleeping during the evidentiary hearing. However, he failed to do so. Therefore because the homeowners raise their objection before the issuance of the arbitral award we conclude that the issue was not forfeited and was preserved for review by the circuit court.

In making its decision, the court noted that the rules of the arbitration did not include requirements regarding when to make an objection. By contrast, in judicial proceedings various specific rules may apply, and “case law directs a general rule that failure to contemporaneously object to an issue may result in forfeiture of the argument on appeal….” The greater latitude given to the parties in arbitration is often perceived as a benefit of this form of dispute resolution, allowing more focus on substance and fewer worries about procedural traps: “Arbitration often is selected in order to escape the formalities inherent in a judicial process.”

Comment: Every construction lawyer is lectured at some point by a judge or mediator about the risks of taking a complex technical dispute to a jury: “It’s your client’s right to take this to trial, but I am warning you that you are going to put the jury to sleep.” There has always been less concern on that score in placing a dispute before an arbitrator or arbitration panel, because the arbitrators typically spent their careers in the same industry and shouldn’t find it boring—but in this case we observe that there are always exceptions to the rule.
The case contains a good analysis of forfeiture, waiver, and procedural rights in arbitration.

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