On June 26, 2014, the HAWSCT accepted certiorari in Thomas Nishimura et al. v. Gentry Homes, Ltd. et al., SCWC-13-0000137, on the issue of the legal standard for pre-arbitration challenges to the fairness of the arbitrator-selection clause of a contractual arbitration provision.
The underlying case involved a construction defect filed by the Nishimuras against Gentry Homes claiming that defective high-wind protection systems were installed in homes in Ewa Beach. The applicable limited warranty provision contained an arbitration provision that included a provision for the selection of the arbitrator. After granting Gentry Homes’s motion to compel arbitration, the circuit court struck the arbitrator-selection provision because it found that the service designated to make the selection had a financial conflict of interest with Gentry Homes. The circuit court ordered the parties to confer and select a local arbitrations service.
On appeal, the ICA disagreed. According to the ICA, the Nishimuras “were required to present evidence of actual partiality or bias of the arbitration service . . . or the neutral arbitrator selected.” Slip. Op. at 11. However, the Nishimuras challenge the entity designated to make the selection were instead a “generalized attack” on the selector. The ICA also held that the circuit court’s invalidation of the selection clause was premature.
On cert, the Nishimuras argue that the ICA erred in holding that a party must prove that the selection of an arbitrator will “actually or necessarily result in a biased arbitrator” in order to success in a pre-arbitration challenge to what it claimed to be a one-sided contractual clause governing the selection of the arbitrator. According to the Nishimuras, the ICA’s decision conflict with federal law under the Federal Arbitration Act. The Nishimuras also argue that the decision reached by the ICA is “fundamentally unfair” because of the conflict of interest.
The HAWSCT will hear oral arguments on September 4, 2014 at 11:15 am.
The order accepting cert is available here.
The ICA’s Opinion (authored by Judge Foley and joined by Judges Fujise and Leonard) is available here.
The cert application is available here.
The response in opposition to cert is available here.