Carlton Fields

CHINESE ARBITRATION AWARD AFFIRMED IN MINERAL COMPANY DISPUTE

June 24, 2015 by Carlton Fields

The court ruled that ACC Resources is bound by an arbitral award issued by the China International Economic & Trade Arbitration Commission (“CIETAC”). The award required the mineral company to pay its supplier, Calbex Mineral Limited the unpaid balance for minerals supplied. ACC argued that the award was made without its knowledge and without offering the company the opportunity to defend itself. ACC also argued that the arbitration award was void because the CIETAC subcommission that initially rendered the award in favor of Calbex had broken away from CIETAC.

The district court held that ACC failed to meet the standards of the New York Convention—which governs the enforceability of international arbitration—by not providing sufficient proof to show that they had not been given notice of the proceedings. Further, the court noted that ACC failed to offer evidence that it knew about the subcommission’s split from CIETAC during the relevant time. ACC also disputed the panel’s failure to forward evidence received in the course of its investigation, but the district court held that ACC did not show prejudice from this violation. Because ACC had not been prejudiced, the arbitral award must stand. Calbex Mineral Ltd. v. ACC Resources Co., L.P., No. 13-276 (USDC W.D. Pa. Mar. 13, 2015).

This post written by Whitney Fore, a law clerk at Carlton Fields in Washington, DC.

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COURT REMANDS ARBITRATION AWARD FOR FURTHER CLARIFICATION WHERE RATIONALE WAS NOT GIVEN

June 23, 2015 by Carlton Fields

In a case involving a dispute over steel production to replace a portion of the Whitestone Bridge spanning New York City’s East River, a federal district court remanded an arbitration award back to the arbitrator. Under the parties’ arbitration agreement, the arbitrator was to issue a reasoned award. However, the arbitrator’s award was a two-page award with the “arbitrator merely list[ing] various categories of monetary damages without explanation as to how he calculated those figures or determined liability.” Under the Southern District of New York standard, a reasoned award is one where the arbitrator presents “something short of findings of fact and conclusions of law but more than a simple result. Where the award offered no more than the damages, the court found that this low standard was not met.

The court chose not to vacate the award, however. Noting that some courts have completely vacated the award where arbiters have ignored the arbitration agreement and exceeded their powers, the court found that the doctrine of functus officio (once the award is made, the duty is done) was inapplicable. Because the arbitrator never completed his duty, the court found that remand to do so was proper. Tully Const. Co. v. Canam Steel Corp., No. 1:13-cv-03037-PGG (USDC S.D.N.Y. Mar. 2, 2015).

This post written by Zach Ludens.

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COURT DISMISSES CHALLENGE OF FINRA ARBITRATION AWARD FOR LACK OF JURISDICTION

June 22, 2015 by Carlton Fields

In a case involving a FINRA arbitration between investors and their financial advisor, Judge Anita S. Brody of the United States District Court for the Eastern District of Pennsylvania found that she did not have the jurisdiction to hear a challenge of the arbitration award. Though FINRA rules may be subject to heavy federal regulation and approval by the SEC, the court found that this was not enough to create a federal question to give the court jurisdiction over the challenge. Instead, the court found that under § 10 of the Federal Arbitration Act, review of an arbitration award with underlying federal questions does not in itself implicate a federal question sufficient for jurisdictional purposes. This is because where there is no merits review, “the substance of the underlying arbitration is generally irrelevant to a district court’s consideration of a motion to vacate.” Instead, the motion to vacate must raise a federal question on its face. The court further held that an argument of manifest disregard of federal law in such an instance was still heard as a claim under § 10 of the Federal Arbitration Act, which is “something of an anomaly in that it does not create any independent federal-question jurisdiction under 28 U.S.C. § 1331 or otherwise.” Accordingly, the court dismissed the case for lack of subject-matter jurisdiction. Goldman v. Citigroup Global Markets Inc., No. 2:12-cv-04469-AB (USDC E.D. Pa. May 19, 2015).

This post written by Zach Ludens.

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COURT CONFIRMS REINSURANCE ARBITRATION AWARD WITHOUT OBJECTION

June 12, 2015 by Carlton Fields

A federal district court has entered judgment confirming an arbitration award entered in favor of Employers Insurance Company of Wausau against Continental Casualty. The dispute arose out of a certificate of casualty facultative reinsurance between the parties. At issue was Continental’s obligation under the certificate with respect to one claim submitted by Wausau. Wausau demanded arbitration with Continental under the certificate and the panel, without hearing oral argument on the parties’ motions for summary adjudication, issued its award. Continental did not object to Wausau’s prejudgment interest calculation on the award nor did it answer Wausau’s petition to confirm the award. By Order dated January 26, 2015, the court confirmed the award and directed the clerk of court to enter judgment thereon. The judgment was entered on February 20, 2015. Employers Insurance Co. of Wausau v. Continental Casualty Co., No. 1:14-CV-09192 (USDC S.D.N.Y. Feb. 20, 2015).

This post written by Renee Schimkat.

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ALABAMA SUPREME COURT REVERSES ARBITRATION AWARD WHERE ARBITER FAILED TO MAKE REQUIRED DISCLOSURES

June 11, 2015 by Carlton Fields

In a case involving a dispute between a not-for-profit corporation administering a self-insured group workers’ compensation fund and their investment advisor and broker-dealer, the Supreme Court of Alabama granted the fund’s motion to vacate an arbitration award in the advisors’ favor. The arbitration was conducted pursuant to FINRA’s rules for arbitration proceedings, which call for the selection of a three-arbitrator panel. However, because the court found that one of the arbiters failed to disclose a potential conflict of interest prior to his selection, it reversed the panel’s award. The arbiter was a vice president and partner in a financial-services firm that had served as a co-underwriter with the advisors on 36 equity and debt issuances, had been codefendants with the advisors in a number of lawsuits, was represented by the same counsel as the advisors, and had involvement with the investment product alleged in this lawsuit. This was enough to constitute a “reasonable impression of partiality” even though the arbiter claimed that he did not know about this relationship on behalf of his firm. Applying the constructive knowledge doctrine, the court found that there was “evident partiality” on the part of the arbiter and reversed the arbitration award under the Federal Arbitration Act. The lower court had refused to disturb the award, necessitating the lower court’s reversal as well. Municipal Workers Compensation Fund, Inc. v. Morgan Keegan & Co., No. 1120532 (Ala. Apr. 3, 2015).

This post written by Zach Ludens.

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