In a decision of first impression, the Supreme Court of Virginia in Garofalo v. Di Vincenzo, defined what “evident partiality” means under the Virginia Uniform Arbitration Act (VUAA). The court held that a party seeking to vacate an arbitration award must show that a reasonable person, knowing all relevant facts, would conclude the arbitrator’s conduct signifies obvious bias against that party. Applying this standard, the court affirmed confirmation of a FINRA arbitration award and declined to vacate based on an arbitrator’s undisclosed, attenuated prior connections to one side.
Background
The dispute arose from the sale of a financial advisory business. In 2020, Di Vincenzo sold her firm to Garofalo and his financial services company. The deal provided for an upfront payment and ongoing quarterly payments tied to assets under management. When Garofalo allegedly failed to make those quarterly payments, Di Vincenzo initiated a FINRA arbitration pursuant to the parties’ agreement and FINRA’s mandatory industry arbitration rules. The agreement specified that any enforcement action would proceed in Virginia state or federal court.
FINRA appointed a three-arbitrator panel, including a Virginia attorney and arbitrator who practices in Norfolk. In accordance with FINRA’s disclosure regime, the attorney completed disclosure forms, signed an oath affirming he had no relationships impairing his impartiality, and disclosed numerous professional and community affiliations, including service on the board of a bank. Not disclosed, however, was that several years earlier, that bank had entered into a limited partnership with Lions Bridge under which Lions Bridge provided advisory services to the bank’s clients, used office space in the bank’s building, and was presented internally as a “strategic alliance.” In that context, the attorney introduced the bank’s CEO and later read a prepared introduction for Di Vincenzo before a board-related presentation. The partnership ended after approximately fifteen months.
In December 2021, the FINRA panel unanimously found Garofalo in default under the asset purchase agreement, awarded compensatory damages to Di Vincenzo, and denied Garofalo’s counterclaims. Di Vincenzo moved to confirm the award in the Circuit Court for the City of Richmond, Virginia. Garofalo cross-petitioned to vacate under the VUAA, arguing that the attorney’s nondisclosure of the bank’s prior relationship with Lions Bridge and his introductions of Di Vincenzo demonstrated “evident partiality.” The circuit court rejected that argument, confirmed the award, and the Court of Appeals of Virginia affirmed. The Supreme Court of Virginia granted review to define “evident partiality” under Code § 8.01-581.010(2) and decide whether that standard was met.
Legal Analysis
The court began by emphasizing Virginia’s strong policy favoring arbitration and the extremely narrow scope of judicial review under the VUAA. Code § 8.01‑581.010 sets out exclusive grounds for vacatur, including “evident partiality by an arbitrator appointed as a neutral, corruption in any of the arbitrators, or misconduct prejudicing the rights of any party.” The court stated, vacatur is an “extraordinary remedy” and not a vehicle for relitigating the merits or correcting ordinary legal or factual errors.
Interpreting “evident partiality,” the court relied on contemporary dictionaries and statutory context. “Evident” means clear, manifest, or obvious; “partiality” means an inclination to favor one side over another. Taken together, the phrase describes bias that is clearly apparent, not a speculative or faint appearance of impropriety. The court therefore held that a party seeking vacatur must show that a reasonable person, fully informed of the relevant facts, would conclude the arbitrator’s conduct signifies obvious bias against that party. The test requires concrete circumstances inconsistent with neutrality and does not treat every undisclosed connection as disqualifying.
The court also made clear that mere nondisclosure does not itself justify vacatur. To be material, nondisclosed information must be of a kind that would lead a reasonable person to doubt the arbitrator’s ability to remain impartial. For example, a significant undisclosed financial or business relationship with a party. Brief, remote, or insubstantial contacts generally will not suffice.
Applying this standard, the court found that the attorney’s connections were too attenuated and dated to establish evident partiality. The attorney testified that he did not recall the interactions between the bank’s executives and Di Vincenzo when he accepted the arbitration assignment and therefore did not list them on his FINRA disclosures. His role in introducing executives and Di Vincenzo at internal board-related meetings was characterized as routine corporate formalities, not evidence of a meaningful relationship. The partnership itself was short-lived, produced minimal revenue, and ended roughly five years before the arbitration. There was no evidence the attorney negotiated or managed that relationship. The trial court had credited the attorney’s testimony that he did not recall any connection to Di Vincenzo when he accepted the appointment, and the Supreme Court did not disturb that factual finding. On those facts, a reasonable person would not conclude that attorney was obviously biased in favor of Di Vincenzo.
The court also addressed the role of FINRA’s disclosure and recusal rules. While recognizing that FINRA imposes a high standard, requiring arbitrators to be impartial “in both appearance and in fact,” the court held that institutional rules do not expand the statutory grounds for vacatur. Parties are free to adopt demanding disclosure requirements contractually, but once an award is before a Virginia court, the VUAA alone governs whether vacatur is warranted. An arbitrator’s failure to meet an institutional disclosure standard might be relevant to recusal or internal process, but it does not automatically amount to “evident partiality” under Code § 8.01‑581.010(2).
Our Take
Garofalo v. Di Vincenzo will make it difficult for disappointed parties in Virginia to unwind arbitration awards on the theory of undisclosed arbitrator bias. The court’s “obvious bias” standard, coupled with its insistence on materiality and an objective reasonable-person test, significantly narrows the path for “evident partiality” challenges. Remote, incidental, or forgotten connections, especially in specialized industries where overlapping relationships are common, are unlikely to justify vacatur. The decision should curb post-award “fishing expeditions” into arbitrators’ backgrounds and reinforces the finality that many parties seek when they choose arbitration.
The case also highlights a drafting point that deserves attention at the front end of disputes. The court applied the VUAA standard because the award was before a Virginia court, and the parties’ agreement channeled enforcement there. If parties intend the Federal Arbitration Act’s framework (and accompanying federal case law) to govern vacatur and enforcement, that choice should be clearly stated in the arbitration clause and coordinated with the governing-law and forum-selection provisions.