On February 14, 1974, hundreds of fifth- through eighth-grade students gathered in the Frederick Douglass Academy gym in Harlem. They were there to compete in the first organized Double Dutch competition. It was a formal competition governed by a strict set of detailed written rules.
In the meantime, while enjoying recess on a playground in the Maryland suburbs, I skipped rope with my friends. We didn’t know anything about the written Double Dutch rules, but we knew enough to play fairly. We knew what an “outie” was, how to properly turn the ropes, and when and how to start and stop jumping. Informality did not mean a lack of governing principles. There was a basic common law of the playground. We knew almost instinctively what was not “kosher.” More importantly, we knew that one kid who refused to play by the playground rules could ruin the game for everybody.
The Interplay of the New York Convention and FAA Chapter 1 Standards
I was reminded of playground principles when I read Judge Lewis J. Liman’s opinion in Eletson Holdings, Inc. v. Levona Holdings Ltd., 2026 WL 84510 (S.D.N.Y. Jan. 12, 2026) (“Eletson”). In Eletson, Judge Liman advanced a non-controversial but vital truth: the informality of arbitral rules does not translate into a license to cheat. Even informal rules carry “metes and bounds.” Willful violations of should result in meaningful sanctions.
At issue in Eletson was whether an option to purchase preferred shares in a shipping company had been exercised. The claimants commenced arbitration in New York before JAMS under its Comprehensive Arbitration Rules and Procedures. JAMS Rule 17(a) mandates that parties cooperate in good faith in the voluntary and informal exchange of all non-privileged, relevant documents immediately after commencement.
While the JAMS Rules – like AAA Rules – promote flexibility over the rigidity of the Federal Rules of Civil Procedure, they leave the responsibility to establish boundaries to the discretion of the arbitrator. Following discovery and a multi-day hearing, the arbitrator ruled that the option had been exercised and, inter alia, awarded compensatory and punitive damages exceeding $100 million to the claimants. When the claimants sought to confirm the award under Chapter 2 of the Federal Arbitration Act (FAA) governing non-domestic awards subject to the New York Convention (9 U.S.C. § 207), the respondents moved to vacate the award on the basis of corruption, fraud, or undue means. This triggered a somewhat complicated framework for the district court’s review:
FAA Chapter 2 Jurisdiction: Under 9 U.S.C. § 207, a federal court must confirm a Convention award unless it finds one of the grounds for refusal or deferral of recognition specified in the Convention itself.
FAA Chapter 1 Primary Jurisdiction: Under well-established federal jurisprudence, when an award is rendered in the United States, the court sits in “primary jurisdiction” and possesses the authority to apply its domestic vacatur standards under Chapter 1 of the FAA, specifically 9 U.S.C. § 10.
To achieve vacatur under 9 U.S.C. § 10(a)(1) on the grounds that an award was “procured by corruption, fraud, or undue means,” a moving party faces a heavy statutory burden and must establish three distinct elements by clear and convincing evidence:
- The clear existence of “fraudulent activity”;
- That, even with the exercise of due diligence, the petitioner could not have discovered the fraud prior to the issuance of the award; and
- That the fraud materially related to an issue in the arbitration, meaning there is a clear contractual or factual nexus between the deception and the basis for the arbitrator’s decision.
Anatomy of an Arbitral Deception
In Eletson, the underlying fraud was exposed through subsequent and parallel bankruptcy and litigation proceedings. There, discovery revealed that counsel, the named claimants, and the true clients – the Intervenors, shareholders of Eletson Holdings Inc., who were later sanctioned by the bankruptcy court in a related matter – had systematically suppressed material financial communications in the arbitration proceeding.
The deception unraveled along distinct vectors:
- Suppression of Material Disclosures: Claimants withheld internal communications regarding deal-making and availability of financing options that directly contradicted their core liability arguments.
- Proxy Shell Corporations: Claimants used a network of shell companies to obscure the true ownership and transfer of preferred shares.
- Deposition Inconsistencies: Witness statements presented during the evidentiary hearing were contradicted by subsequently uncovered metadata and email chains.
As Judge Liman noted, the claimants’ conduct crossed the line from aggressive advocacy into an outright assault on the integrity of the proceeding, leaving the court with no choice but to vacate the $100 million award. He wrote:
The informality of the arbitration process should not be confused with the license to willfully violate the disclosure obligations of the arbitral tribunal. Intervenors did not enjoy the liberty to withhold the numerous documents that are most centrally relevant to this case on the pretext that because discovery was informal it was meaningless.
Due Process and Systemic Self-Preservation
This lesson is paramount, particularly in the context of mandatory arbitration. For example, employment arbitration is often not the result of a voluntary choice between parties with equal bargaining power; rather, it is frequently mandated as a condition of employment. When arbitration is mandatory, arbitrators must exercise heightened sensitivity toward the due process rights of the less advantaged party.
This balancing act lies at the heart of the Due Process Protocol for Mediation and Arbitration of Statutory Disputes Arising Out of the Employment Relationship. Promulgated in 1995, the protocol balances efficiency against the fundamental reality that an alternative dispute system is only as good as the adequacy of the facts presented to the decider. It explicitly encourages adequate but limited pre-trial discovery to ensure fairness.
Any dispute system that permits a party to willfully withhold centrally relevant documents without consequences smacks of the Star Chamber that gave rise to the Fifth Amendment. No civilized system of law can permit a tribunal to hear evidence so one-sided that the outcome is predetermined, regardless of the adjudicator’s neutrality. Severe sanctions for rule abuses are a matter of systemic self-preservation. American jurisprudence extends an extraordinary privilege of judicial deference to arbitrators, along with its benefits, which include efficiency and finality. But that privilege can be removed by statute or case law if abused. If alternative dispute resolution is perceived as abusive or lawless, systemic over-correction will inevitably occur, undermining the entire enterprise.
Conclusion: The Neutral as Referee
As arbitrators, our decisions are given great deference, and we generally have the final call as to what is foul and what is fair. It falls squarely on the arbitrator to act not merely as a passive adjudicator, but as a reliable referee who ensures that during the entire arbitral process, all participants color within the lines.
The extraordinary deference extended to arbitral forums is rooted in the foundational legislative history of the Federal Arbitration Act, which seeks to honor the settled expectations of parties who contractually choose a private arena over a traditional courtroom. Yet that bargain – whether it governs a childhood game of Double Dutch or a sophisticated AAA or JAMS proceeding – is predicated on the baseline assumption that consent implies a shared commitment to the rules of engagement. One cannot leverage the flexible informality of an alternative forum to willfully suppress evidence, manipulate discovery, and tilt the playing field. Just as a playground jumper knows they must step out of the ropes the moment they miss a skip, Judge Liman’s ruling reaffirms that structural deception forfeits the right to judicial protection. When a participant actively corrupts the process, the shield of arbitral finality must dissolve, proving that commercial efficiency can never be bought at the price of integrity.
In 2006, tennis began the process of removing human line judges in favor of Hawk-Eye automated line-calling systems. We stand now in a similar liminal moment dominated by artificial intelligence. If human arbitrators fail to protect the procedural integrity of the match, the market may force a transition to a more rigid, automated process. No matter how loose or flexible the parameters of an alternative forum may seem, rules are still rules.
Holly H. Weiss is an arbitrator and mediator focused on resolving employment disputes. She is the founder of HWH Mediation LLC (www.hwhmediation.com) and an adjunct professor at Cardozo Law School. She serves on the National Rosters of Arbitrators and Mediators of the American Arbitration Association and the mediation panels of the Second Circuit Court of Appeals, the Appellate Division of the Supreme Court of New York (First Department), and the District Courts for the Southern and Eastern Districts of New York.
