Evident Partiality in Contractual Appraisals: Duty to Disclose Pre‑Appointment Case Communications by Prospective Neutral Appraisers

I. Introduction

In Kevin Burke, et al. v. Houston PT BAC Office Limited Partnership (Bank of America), the Supreme Court of Texas addresses the integrity of contractual appraisal processes in high-stakes real estate valuation disputes. Although appraisals are not arbitrations, the Court—at the parties’ own invitation—applies the arbitration-law concept of “evident partiality” to a neutral appraiser appointed under a lease-based valuation clause.

The central question is whether a purported “neutral” appraiser must disclose prior, case-specific communications with one party in which that party:

• interviewed him about the very dispute at issue, and
• told him he would be “at the top of our list” for designation as the neutral appraiser if the process reached that stage.

The trial court confirmed the appraisal and granted summary judgment against the landlords. The court of appeals affirmed, deeming the communications “non-substantive” and immaterial. The Supreme Court reverses, holding that these communications were substantive and material, and that the prospective neutral appraiser had a duty to disclose them. Under the “evident partiality” standard borrowed from arbitration law, nondisclosure of such communications requires that the resulting appraisal determination be set aside.

II. Factual and Procedural Background

A. The Lease and Its Appraisal Mechanism

The dispute arises out of a long-term ground lease for downtown Houston property housing the Bank of America Building, originating in 1972. The lease provides:

• Periodic rent adjustments keyed to the property’s “fair market value.”
• Valuation “as if free and clear of all improvements, encumbrances, and leases.”
• If the parties cannot agree on value, a three-step appraisal process:
  1. Each party selects its own appraiser.
  2. If the two appraisers cannot agree,
  3. They jointly select a third “competent and impartial person” to serve as a neutral.

The landlords (the Burkes and related parties) succeeded to the landlord’s interest; Houston PT BAC Office Limited Partnership (“BAC”) is the tenant.

B. The Rent Adjustment Dispute: The Tunnel Question

A disagreement arose during the first scheduled rent adjustment. The core substantive valuation issue involved the effect of Houston’s downtown tunnel system:

• The landlords’ position: the value of connectivity to the tunnel system—achieved through adjacent land—should be included in the fair-market-value analysis.
• BAC’s position: that connectivity should largely be excluded because of how the lease required the land to be hypothetically valued “free and clear” of improvements and other encumbrances.

Unable to agree, the parties invoked the appraisal process.

C. Party Appraisers and BAC’s Communications with the Future Neutral

The landlords appointed Ronald Little as their appraiser.

BAC interviewed Scott Rando as a potential party appraiser. BAC’s questions were not confined to scheduling or fees; they expressly discussed topics that mapped onto the key valuation issues in the case:

• Qualifications and experience “downtown.”
• Experience with:
  • “improved versus unimproved” properties,
  • “partial block versus full block” properties, and
  • “tunnel connected versus non-tunnel connected” properties.

After the call, Rando emailed BAC, indicating his willingness to serve as BAC’s appraiser:

[W]hen you are ready to hire us, please include Jake … along with appropriate contact information for the other side's expert (Ron Little) so that Jake can meet the 10 day clock and get a meeting set with them. We will craft an engagement letter when I return.

BAC ultimately decided not to hire Rando as its own party appraiser, citing concerns over his ability to meet the lease’s “tight timelines.” Instead, BAC selected Curtis Podlewski as its appraiser. But in that same communication, BAC’s representative told Rando:

[I]t would not surprise me at all if this process were to extend to a third appraiser and based both upon our internal discussions, as well as discussions with our initial appraiser, you will be at the top of our list for that third appraiser designation.

Thus, before Rando ever became the neutral appraiser, (1) BAC discussed the merits-relevant aspects of the valuation dispute with him, and (2) promised he would be BAC’s preferred candidate for neutral if the process advanced to that stage.

D. Selection of the Neutral and the Valuations

As anticipated, the two party appraisers—Little (landlords’ appraiser) and Podlewski (BAC’s appraiser)—did not agree on the property’s fair market value.

• Little valued the land at $14.4 million, including the value of connectivity to adjacent tunnel‑connected land.
• Podlewski valued the land at $8.2 million, excluding that connectivity value.

Pursuant to the lease, Little and Podlewski then jointly selected a third, “neutral” appraiser. They chose Scott Rando, unaware of the earlier case-specific communications between BAC and Rando and of BAC’s prior attempt to hire him as a party appraiser in this very dispute.

Rando’s initial valuation came in at $8.7 million. Rando and Podlewski ultimately agreed on a final valuation of $8.475 million, representing the appraisal determination under the lease.

E. Litigation and Lower Court Proceedings

The landlords, dissatisfied with the valuation, filed suit seeking:

• A declaratory judgment about the proper construction of the lease’s valuation provision (particularly about how to treat adjacent tunnel-connected land), and
• Relief from enforcement of the appraisal result.

BAC counterclaimed for enforcement of the $8.475 million valuation. During discovery, BAC disclosed its earlier communications with Rando. The landlords then:

• Added a breach of contract claim, alleging violation of the lease’s requirement that the third appraiser be “impartial,” and
• Added a fraud claim, centered on the nondisclosure of BAC’s communications with Rando.

The landlords’ appraiser, Little, testified that he would not have agreed to Rando’s selection as neutral had he known about the extent of those communications and BAC’s prior attempt to engage Rando as BAC’s appraiser in this very dispute.

BAC moved for summary judgment on the landlords’ claims and sought confirmation of the appraisal valuation. The trial court:

• Granted BAC’s summary judgment motion,
• Confirmed the $8.475 million appraisal valuation, and
• Rejected the landlords’ breach-of-contract and fraud theories.

On appeal, the First Court of Appeals:

• Agreed with the parties that the Texas Arbitration Act (TAA, Chapter 171 of the Civil Practice and Remedies Code) should govern impartiality issues in this contractual appraisal process.
• Applied the TAA’s “evident partiality” standard, drawn from § 171.088(a)(2)(A).
• Held that BAC’s communications with Rando were “non-substantive and [did] not rise to the level of material fact requiring disclosure.”
• Affirmed confirmation of the appraisal and summary judgment on the landlords’ claims.

The landlords petitioned the Supreme Court for review, challenging only the confirmation of the appraisal valuation under the “evident partiality” rubric; they did not pursue review of the adverse ruling on their fraud claim.

III. Summary of the Supreme Court’s Opinion

A. Core Holding

The Supreme Court of Texas holds:

Communications about the case with a potential neutral regarding hiring that neutral as a party-designated appraiser in the matter in dispute must be disclosed to the other party. Failure to disclose such communications constitutes “evident partiality” under the disclosure standard the Court has adopted for arbitrators, warranting reversal of the trial court’s order confirming the appraisal valuation.

More specifically, the Court concludes:

• Assuming—without deciding—that arbitration impartiality standards apply to appraisers (as the parties had urged),
• The undisputed communications between BAC and Rando were substantive and material, not merely logistical, and
• Those communications, viewed objectively, “reasonably create an impression of partiality” and therefore triggered a duty of disclosure that Rando failed to honor.

B. Disposition

• The Court grants the petition for review.
• Without oral argument (Tex. R. App. P. 59.1), it reverses the trial court’s order confirming the appraisal valuation.
• It remands the case to the trial court for further proceedings consistent with its opinion.
• The remainder of the court of appeals’ judgment—specifically its affirmance of summary judgment on the landlords’ fraud claim—remains intact because it was not challenged in the Supreme Court.

IV. Legal Framework

A. Appraisals Are Not Arbitrations—but Neutrality Still Matters

The Court starts by reaffirming a critical distinction:

• Appraisals are not the same as arbitrations.
• An appraisal clause can remain enforceable in circumstances where an arbitration award might be vacated.

The Court cites In re Allstate County Mutual Insurance Co., 85 S.W.3d 193 (Tex. 2002), to emphasize that distinction. Yet it also reaffirms that:

• Appraisers, particularly neutral appraisers, must be impartial.
• If an appraisal is conducted with prejudice or bias, the resulting determination does not bind the parties, who may still seek judicial resolution.

For this principle, the Court draws upon Delaware Underwriters v. Brock, 211 S.W. 779 (Tex. 1919), which in turn quotes Hall v. Western Assurance Co., 32 So. 257 (Ala. 1902), for the proposition that a biased or prejudiced appraisal does not foreclose court recourse.

B. Statutory Ground: Texas Arbitration Act and “Evident Partiality”

Because both parties agreed to apply arbitration-neutrality standards to this appraisal, the Court proceeds under the framework of the Texas Arbitration Act (TAA), Tex. Civ. Prac. & Rem. Code ch. 171.

Section 171.088(a)(2)(A) requires a court to vacate an arbitration award if:

“the rights of a party were prejudiced by … evident partiality by an arbitrator appointed as a neutral arbitrator.”

Texas’s key interpretation of “evident partiality” is found in Burlington Northern Railroad Co. v. TUCO, Inc., 960 S.W.2d 629 (Tex. 1997) (“TUCO”), which the Court once again applies and reaffirms here.

Under TUCO and its progeny (including Tenaska Energy, Inc. v. Ponderosa Pine Energy, LLC, 437 S.W.3d 518 (Tex. 2014)):

• Parties are not automatically disqualified as arbitrators merely because of prior business relationships with a party.
• However, “parties must have access to all information which might reasonably affect the arbitrator's partiality.”
• A “prospective neutral arbitrator … exhibits evident partiality if he or she does not disclose facts which might, to an objective observer, create a reasonable impression of the arbitrator's partiality.”
• The problematic conduct is the nondisclosure itself; the complaining party need not prove actual, subjective bias or that the outcome was actually affected.

The Forest Oil Corp. v. El Rucio Land & Cattle Co., 518 S.W.3d 422 (Tex. 2017), decision recognizes a limiting principle: arbitrators need not disclose trivial or immaterial facts; the duty to disclose extends only to matters that are reasonably material to an objective observer’s perception of neutrality.

V. Application of the Evident-Partiality Standard to This Appraisal

A. Materiality and the Nature of the Communications

Applying TUCO’s standard, the Court considers whether BAC’s undisclosed communications with Rando:

1. Went beyond trivial matters such as scheduling and availability, and
2. Might, in the eyes of an objective observer, create a reasonable impression that Rando could be biased in BAC’s favor.

The Court identifies several critical facts:

• Rando discussed with BAC his experience in precisely the categories central to the dispute: improved vs. unimproved, partial vs. full block, and “tunnel connected vs. non-tunnel connected” properties.
• Rando affirmatively proposed to act as BAC’s party appraiser, explicitly referring to the landlords as “the other side,” showing that he initially saw himself aligned with BAC’s side of the dispute.
• BAC, after declining to hire him as its appraiser, expressly told Rando he would be “at the top of our list” for the neutral appraiser role if the matter progressed to that stage.

The Court concludes these were substantive, dispute-specific communications, not mere administrative or logistical exchanges.

B. Why These Communications Created an “Impression of Partiality”

The Court analogizes to TUCO, where a law partner of a party-appointed arbitrator referred significant unrelated business to the neutral while the arbitration was pending, and the neutral failed to disclose that relationship. In TUCO, the referral “might have conveyed an impression of [the neutral arbitrator]'s partiality to a reasonable person,” even though there was no evidence of actual bias.

In this case, the Court considers the impact of:

• Case-specific interviews on the merits-relevant aspects of the valuation dispute.
• Promises of preferred status for the neutral role, tied to the very dispute under consideration.

The Court emphasizes that, unlike TUCO:

• Here, the undisclosed communications were not about unrelated matters; they directly concerned the underlying valuation dispute.
• They occurred before Rando’s appointment as neutral appraiser, but still in the context of the exact same matter.

Such communications, the Court holds, “reasonably create an impression of partiality to an objective observer” and thus are material under the TUCO standard. A neutral decision-maker cannot privately be told by one side: “We have already vetted you on the dispute, and you are our top choice to serve as the neutral,” without disclosing that fact to the other side.

C. Rejection of BAC’s “Mere Scheduling” Characterization

BAC argued that its communications with Rando were no more than “ordinary scheduling discussions.” The Court found that characterization inconsistent with the record:

• The discussion of “improved vs. unimproved,” “partial vs. full block,” and “tunnel connected vs. non-tunnel connected” properties addressed substantive valuation criteria—not just calendar availability.
• Rando’s own email, referring to the landlords as “the other side,” indicated that he understood himself to be engaging with BAC about representing BAC’s side in the dispute.

Accordingly, the Court holds that the communications were “substantive” and not trivial. They therefore fell squarely within the category of information that “might, to an objective observer, create a reasonable impression of [Rando]’s partiality.”

D. Question of Law vs. Question of Fact

The Court acknowledges that:

• The trial court is the arbiter of witness credibility and disputes of fact.
• However, when the material facts are undisputed, whether those facts convey an impression of partiality to a reasonable, objective observer is a question of law.

Here, the relevant communications were contained in undisputed written emails and testimony. The legal impact of those communications on the neutrality analysis is therefore for the court—not a jury—to decide. Under the TUCO framework, the Supreme Court holds that nondisclosure of these communications required vacatur of the valuation.

E. Refusal to Narrow or Overrule TUCO

BAC urged the Court to:

• Narrow its prior holding in TUCO, or
• Overrule TUCO altogether to align Texas law with a more restrictive approach under federal cases applying the Federal Arbitration Act (FAA).

The Court expressly declines either course:

• It reaffirms that Texas’s “reasonable impression of partiality” standard and robust disclosure duty remain in force.
• It sees no reason to revisit that precedent “in a case that does not feature an arbitration agreement,” given that this dispute arises from an appraisal provision and the arbitration framework was applied only because the parties requested it.

F. The USPAP Reference

The lease references the Uniform Standards of Professional Appraisal Practice (USPAP). USPAP requires disclosure of “any current or prospective interest in the subject property or parties involved.” The Court notes this standard but deliberately does not interpret or apply it, because:

• The parties elected to proceed under arbitration-law principles,
• The Court resolves the case as a matter of Texas arbitration doctrine as extended to this appraisal, and
• An authoritative construction of USPAP’s scope is unnecessary to deciding the case.

VI. Precedents Cited and Their Influence

A. Burlington Northern R.R. Co. v. TUCO, Inc., 960 S.W.2d 629 (Tex. 1997)

TUCO is the cornerstone of Texas’s evident-partiality jurisprudence. There, a law partner of a party-appointed arbitrator referred significant legal business to the neutral arbitrator while the arbitration was pending. The neutral failed to disclose that referral. The Court held:

• Neutral arbitrators must disclose not only past relationships but also new and material relationships that arise during the pendency of an arbitration.
• The test is objective: would an objective person reasonably consider the undisclosed facts as giving rise to an impression that the arbitrator might be partial?
• It is the failure to disclose—rather than proof of actual bias—that constitutes “evident partiality.”

In Burke v. Houston PT BAC, the Supreme Court:

• Extends TUCO’s disclosure principles to a contractual appraisal—not just a formal arbitration—because both parties agreed those standards should control.
• Highlights that the undisclosed communications here are, in one sense, even more concerning than the relationship in TUCO, because they:
  • directly concerned the very matter being appraised, and
  • occurred before and during the process of selecting the putative neutral.

B. Tenaska Energy, Inc. v. Ponderosa Pine Energy, LLC, 437 S.W.3d 518 (Tex. 2014)

Tenaska reaffirmed the TUCO disclosure standard and held that apparent bias stemming from an arbitrator’s undisclosed prior relationships with counsel could reach the evident-partiality threshold. It restated the governing test as whether the undisclosed facts “might, to an objective observer, create a reasonable impression of the arbitrator's partiality.”

The Burke Court adopts that articulation explicitly and applies it to the appraisal context—with the critical twist that the undisclosed facts here involved:

• direct pre-appointment communications about the dispute, and
• a party’s expressed plan to nominate the same individual as neutral.

C. Forest Oil Corp. v. El Rucio Land & Cattle Co., 518 S.W.3d 422 (Tex. 2017)

Forest Oil refined the scope of the arbitrator’s disclosure duty by emphasizing that:

• Not every minor or marginal fact requires disclosure.
• The duty extends only to material information.

The court of appeals in Burke leaned on Forest Oil to characterize BAC’s communications with Rando as “non-substantive” and “immaterial.” The Supreme Court flatly rejects that characterization, concluding:

• The communications were not trivial.
• They went directly to Rando’s potential alignment with BAC in this very dispute and to how he would treat contested valuation inputs (e.g., tunnel connectivity).
• Therefore, they were material under the Forest Oil framework and had to be disclosed.

D. Delaware Underwriters v. Brock, 211 S.W. 779 (Tex. 1919) and Hall v. Western Assurance Co., 32 So. 257 (Ala. 1902)

These early cases stand for the proposition that:

• Appraisers, though not arbitrators, are bound by a duty of impartiality.
• If an appraisal process is marred by prejudice or bias, a party is not foreclosed from going to court despite having agreed to an appraisal mechanism.

The Court uses these cases to anchor its statement that:

“Like arbitrators, however, appraisers have an obligation to be impartial.”

These precedents justify importing arbitration-law impartiality principles into the appraisal context here, at least to the extent the parties have chosen to rely on them.

E. In re Allstate County Mutual Insurance Co., 85 S.W.3d 193 (Tex. 2002)

Allstate underscores the structural difference between appraisals and arbitrations and holds that an appraisal clause in an insurance policy does not necessarily invoke the Texas Arbitration Act. The Supreme Court cites Allstate here to:

• Reconfirm that appraisals are not arbitrations as a matter of Texas law.
• Yet note that impartiality remains a requirement in both settings—though the precise legal standards and remedies can differ.

VII. Impact and Implications

A. For Contractual Appraisal Clauses in Texas

This opinion has immediate significance for:

• Long-term commercial leases with rent-reset appraisal mechanisms.
• Property insurance policies containing appraisal clauses.
• Any contract that relies on a three-appraiser structure (two party appraisers plus a neutral) to resolve valuation disputes.

Key takeaways:

• Pre-appointment case communications with potential neutrals are risky if undisclosed.
  • If one side interviews a prospective neutral about the merits of the dispute or discusses a neutral appointment strategy, those interactions may need to be disclosed if that individual later becomes the neutral.
• Promises of preferential neutral selection are material.
  • Telling an appraiser “you will be at the top of our list” for the neutral role in the same matter is not a trivial statement; it implies alignment of interests and familiarity that other parties are entitled to know about.
• Non-disclosure alone may void the appraisal result.
  • Parties do not need to prove that the neutral actually skewed the valuation; the failure to disclose material relationships or communications is itself grounds to set aside the outcome under the evident-partiality framework.

B. For Neutrals: Appraisers, Arbitrators, and Other Experts

The decision sends a strong message to professionals who serve as neutrals in Texas:

• If you have:
  • previously been approached by a party to serve as its expert or appraiser in the same matter, or
  • discussed the substance of the dispute or key valuation issues with one side, especially in a way that suggests alignment,
• You should:
  • explicitly disclose those interactions to all sides before accepting a neutral role;
  • allow the parties to decide whether they still consent to your appointment.

Even apart from any statutory mandate, professionals subject to USPAP and similar ethics codes will see that Texas’s judicial expectations align with a robust culture of disclosure.

C. For Lawyers and Contract Drafters

Attorneys advising on or drafting agreements with appraisal provisions should:

• Clarify the applicable standard for neutrality and disclosure.
  • Parties can expressly incorporate the TUCO standard (or vary from it within legal limits).
  • They can reference USPAP or other professional codes and define consequences of non-compliance.
• Warn clients against unilateral, undisclosed vetting of potential neutrals about the substance of the case.
  • Merely checking a person’s résumé is acceptable.
  • But discussing the merits or promising the neutral role without disclosure creates legal risk.
• Build procedures ensuring transparency in neutral selection.
  • Requiring written disclosures from proposed neutrals.
  • Providing all communications about neutral selection to all parties.

D. TUCO Reaffirmed: Texas Diverges from Narrower Federal Approaches

By refusing to narrow or overrule TUCO, the Court:

• Reaffirms that Texas remains committed to a relatively stringent, disclosure-heavy model of neutral impartiality.
• Signals that even if some federal courts apply a stricter “actual bias” or more demanding evident-partiality test under the FAA, Texas courts will continue to set aside awards or determinations when nondisclosure itself would cause an objective observer to doubt neutrality.

For multi-jurisdictional practitioners, this means that arbitration or appraisal proceedings seated in Texas—or governed by Texas law—will be especially sensitive to nondisclosure issues.

VIII. Complex Concepts Simplified

A. Appraisal vs. Arbitration

• Appraisal: A contract-based mechanism where experts (often real estate appraisers or adjusters) determine the value of property or an amount of loss.
  • Example: Determining the fair market value of leased land for rent-reset purposes.
• Arbitration: A quasi-judicial process where a private decision-maker (or panel) resolves legal disputes, not just factual valuation questions.
  • Example: Arbitrating whether a party breached a contract or owes damages.

In Texas, appraisals do not automatically invoke arbitration statutes, but both processes share a common expectation of neutrality for certain decision-makers.

B. “Neutral” vs. “Party-Appointed” Appraisers

• Party-appointed appraiser: Chosen by one side; often expected to advocate for that side’s view of value within professional and contractual bounds.
• Neutral appraiser: Agreed upon by both parties or by the party-appointed appraisers; expected to be impartial and not favor either side.

Neutral appraisers bear obligations similar to those of neutral arbitrators, especially when parties or courts import arbitration standards.

C. “Evident Partiality”

“Evident partiality” is a statutory ground for vacating an arbitration award—and, in this case, by analogy, an appraisal determination. Under Texas law:

• It means that, to an objective observer, the facts might create a reasonable impression that the neutral is biased toward one side.
• The focus is on what was disclosed and what was not disclosed—not just on whether the decision-maker was actually unfair in their internal thinking.

D. “Material” vs. “Trivial” Information

• Material information: Facts about a neutral’s relationships, communications, or interests that could reasonably affect a party’s evaluation of the neutral’s impartiality.
• Trivial information: Minor or irrelevant details (e.g., passing contact years ago, membership in large professional organizations) that would not reasonably cause concern about bias.

Only material information must be disclosed. Here, the Court finds that pre-appointment, dispute-specific communications and a promise of preferred neutral status are material.

E. Vacatur and Remand

• Vacatur: A court setting aside (invalidating) an arbitration award or other decision; here, the trial court’s confirmation of the appraisal valuation is reversed.
• Remand: Sending a case back to a lower court for further action consistent with the higher court’s opinion.
  • On remand, the trial court might permit litigation of the underlying valuation dispute, potentially order a new appraisal, or consider other remedies consistent with the parties’ contract and the Supreme Court’s instructions.

IX. Unresolved Questions and Future Directions

While the decision is clear in its result, it leaves several important questions open:

• Does this standard apply to all appraisals as a matter of law?
  • The Court expressly “assumes without deciding” that arbitrator impartiality standards apply to appraisers because the parties so agreed.
  • Future cases may need to decide whether TUCO-style disclosure rules apply to appraisals even when parties do not invoke the TAA or arbitration-law frameworks.
• What is the precise boundary of “substantive” communications?
  • This case involves clear, dispute-specific discussions and an explicit preference for neutral appointment.
  • More marginal scenarios—such as generalized professional conversations or historical business contacts—will continue to test the line between material and trivial interactions.
• Interaction with USPAP and professional standards:
  • The lease’s reference to USPAP suggests that appraisers may already have professional disclosure duties.
• Remedial options on remand:
  • This opinion vacates the confirmation of the appraisal but does not dictate the particular remedial path.
  • The trial court may face questions such as whether to order a new appraisal under a different neutral, proceed directly to a judicial valuation, or fashion other relief consistent with the lease.

X. Conclusion

Burke v. Houston PT BAC Office Limited Partnership is a significant clarification of Texas law at the intersection of contractual appraisals and arbitration-style neutrality standards. The Supreme Court holds that when a prospective neutral appraiser has:

• engaged in dispute-specific discussions with one party, and
• been told he will be that party’s preferred choice for neutral,

those facts are material and must be disclosed to the opposing party. The failure to do so constitutes “evident partiality” under the TUCO standard and requires vacatur of the resulting valuation when that individual is later appointed as neutral.

By applying—and reaffirming—its robust disclosure doctrine in this appraisal context, the Court underscores that:

• Neutral decision-makers must err on the side of transparency;
• Parties are entitled to full knowledge of relationships and communications that might reasonably affect perceptions of impartiality; and
• Texas will continue to treat nondisclosure of material information about neutrals as a serious structural defect in dispute-resolution mechanisms, even absent proof of actual bias.

In the broader landscape of Texas law, this opinion strengthens the integrity of contractual valuation processes and sends a clear signal: when a person is asked to act as a neutral, prior case-specific interactions with any party are presumptively disclosable, and silence may be fatal to the validity of the outcome.