An NASD arbitration panel entered an award in favor of Wachovia Securities. When the pending case was dismissed, Wachovia filed a separate action for confirmation of the award pursuant to the Federal Arbitration Act. The defendant opposed confirmation on the basis that the FAA requires that a request for confirmation be filed within one year of the date of the award. The Court disagreed, finding that binding Eighth Circuit law held that the one year period was permissive, and not mandatory, and that it would not enforce the bar since Wachovia had moved to confirm the award in the prior action, prior to its dismissal. Wachovia Securities, LLC v. Riddle, Case No. 06-233 (USDC D. Neb. July 26, 2006). The Court noted that there was a conflict on this issue between different panels of the Eighth Circuit.
Court of Appeal vacates arbitration award as being in manifest disregard of law
In an action filed by an insurance agent against John Hancock Mutual Life and two affiliates, Patten v. Signator Insurance Agency, Inc., Case No. 05-1148 (4th Cir. March 13, 2006), the United States Court of Appeals for the Fourth Circuit vacated a District Court decision denying a motion to vacate an arbitration award filed by an insurance agent, finding that the arbitration award failed to draw its essence from the governing arbitration agreement and was made in manifest disregard of law. The Court found that the arbitrator disregarded an unambigous provision in the agreement containing an arbitration clause by implying a one year statute of limitation into the arbitration agreement, where the agreement did not contain any limitation agreement, but an earlier, superceded agreement, did contain a one year limitation provision. Applicable law provided either a three or a six year limitation period.
Court finds no disputed issue as to the application of the "follow the fortunes" doctrine
In an earlier ruling in this case, the Court had held that the “follow the fortunes” doctrine applied to a request for payment under a reinsurance agreement. The Court then granted the reinsurer a six month period of discovery during which it might take discovery on whether the claims made against its reinsured were within either of two exceptions to the “follow the fortunes” doctrine, i.e., that the claims were manifestly outside the scope of the underlying policy, or that the decision to pay the claims had been fraudulent, collusive, or in bad faith. After the discovery period was completed, the reinsured moved for summary judgment, contending that there was no evidence to support the applicability of either exception to the “follow the fortunes” doctrine. The District Court agreed, and granted the reinsured summary judgment. National Union Fire Insurance Co. v. American Re-Insurance Co., Case No. 03-6999, in the United States District Court, Southern District of New York (July 28, 2006).
UK Court issues injunction to stop actions in a United States District Court
At the request of the sole member of a Lloyd's syndicate that is in run-off, the London Commercial Court has issued an injunction to restrain a party to a UK arbitration from seeking to intervene in a related action pending in a United States District Court, in which it would seek to restrain the Claimant in the UK arbitration from proceeding with the UK arbitration. Goshawk Dedicated Ltd. v. ROP Inc., [2006] EWHC 1730 (Queen's Bench Div. Commercial Court July 12, 2006). The Court held that the parties were obligated to arbitrate in the UK, as contractually agreed. This is an interesting example of a jurisdictional conflict between two countries.
Eleventh Circuit strongly endorses finality of arbitration
The United States Court of Appeals for the Eleventh Circuit, in B. L. Harbert International, LLC v. Hercules Steel Co., Case No. 05-11153 (11th Cir. Feb. 28, 2006), in a non-reinsurance case, strongly endorsed the finality of arbitration under the Federal Arbitration Act, by affirming the confirmation of an arbitration award (and the denial of a motion to vacate the award). The Court obviously believed that the Appellant appealed merely because it disagreed with the arbitration decision. The Appellant contended that the arbitration award reflected a manifest disregard for the law, which the Court held was an exceptional circumstance requiring clear evidence that an arbitrator was conscious of the law and deliberately disregarded it. Concluding that the proof did not come close to satisfying this standard, the Court considered imposing sanctions on Appellant for the appeal, voicing a strong disapproval for continuing arbitration proceedings through post-award court challenges.