Applied Industrial Materials Corp. v. Ovalar Makine Ticaret Ve Sanayi, A.S.

Ovalar Makine Ticaret Ve Sanayi, A.S. (Ovalar) (defendant) and Applied Industrial Materials Corp. (AIMCOR) (plaintiff) entered a commercial contract containing an arbitration agreement. The arbitration agreement explicitly required the arbitrators to disclose any possible conflicts or sources of bias. In 1997 a dispute arose between Ovalar and AIMCOR, and the parties resorted to arbitration. Charles Fabrikant, the president and CEO of Seacor Holdings, was selected as the presiding third arbitrator. After the arbitrators were told that AIMCOR was being purchased by Oxbow Industries, Fabrikant signed a disclosure statement asserting that he had no business relationship with either party and promising to amend the disclosure later if necessary. Fabrikant was made aware of business negotiations between Oxbow and SCF, a branch of Seacor Holdings, and insulated himself from learning more information. Fabrikant did not inform the parties of the potential conflict or his decision not to further investigate. Later, after the arbitrators found Ovalar liable for breach of contract but before damages were decided, it was revealed that Oxbow and SCF had entered into a high-value contract before the arbitration proceedings began. Ovalar asked that Fabrikant recuse himself, and Fabrikant refused. AIMCOR filed in federal district court to confirm the liability award. Ovalar objected, arguing that the award should be vacated because Fabrikant refused to recuse himself. The district court vacated the arbitration award, and AIMCOR appealed.