Thomas Kinkade Company v. White

In the late 1990s, Thomas Kinkade Company (Kinkade) (plaintiff) entered into agreements with Nancy and David White (defendants), making the Whites “signature dealers” of Kinkade’s artwork. The agreements required disputes to be resolved through arbitration. In 2002, Kinkade initiated arbitration, alleging that the Whites had failed to pay for artwork. The Whites counterclaimed for fraud. Each party appointed one arbitrator—Kinkade chose Burton Ansell, and the Whites chose Mayer Morganroth—and together they selected Mark Kowalsky as the neutral arbitrator and panel chair. The arbitration, which spanned nearly five years and 50 hearing days, was marred by misconduct. The Whites’ counsel secretly transmitted live-feed hearing transcripts to a former Kinkade employee, who then suggested cross-examination questions in real time. The Whites withheld key financial records for years. After closing arguments in December 2006, Kowalsky ordered additional briefing and directed the Whites to provide further causation and damages evidence, effectively giving them a chance to fix deficiencies in their case. In early 2007, Kowalsky disclosed that his law firm had been hired for lucrative engagements by both Morganroth and David White. Kowalsky refused to disqualify himself. Soon after, Kowalsky allowed the Whites to submit 8,800 pages of previously withheld financial documents as backup for their damage calculations. In May 2008, the panel issued an interim award granting the Whites $567,300 and summarily denying Kinkade’s uncontested breach-of-contract claim. Then, despite language in the interim award suggesting attorney’s fees were denied, Kowalsky ordered a briefing on fees. In February 2009, the panel issued a final award granting the Whites over $1.4 million in damages, fees, costs, and interest. Kinkade filed a petition in federal district court to vacate the award. The court vacated the final award in its entirety due to evident partiality. The Whites appealed.