U.S. Electronics, Inc. v. Sirius Satellite Radio, Inc. (Motion for leave to appeal granted on Nov. 18, 2010)

73 A.D.3d 497 (1st Dep’t 2010)

This appeal addresses the judicial review of arbitration awards and in what instances may a court vacate an arbitration.  The arbitration concerned a contractual dispute between the petitioner and satellite radio company Sirius Satellite Radio, Inc.  By way of background, Sirius and former competitor XM Satellite Radio announced a merger in February 2007.  The merger was subject to the approval of the Federal Communications Commission.

The petitioner in the appeal argued that the chairman of the arbitration panel improperly failed to disclose the relationship between his son, who is a congressman, and Sirius.  The chairman’s son publicly supported the merger between Sirius and XM.

The First Department noted that the chairman should have disclosed his son’s position irrespective of when the petitioner learned of the congressman’s support of the intended merger.  Nevertheless, the First Department held that the petitioner failed to meet its burden of proving by clear and convincing evidence that any impropriety or misconduct of the arbitrator prejudice its rights or the integrity of the arbitration process or award.  It proffered no proof of actual bias or even the appearance of bias on the part of the chairman.

The Court of Appeals will likely address whether the undisclosed facts provided a basis for challenging the arbitration award and set out a bright-line for future matters.